Exhibit 10.4

Execution Version

 

 

CANADIAN PLEDGE AND SECURITY AGREEMENT

Dated as of November 30, 2012

from

ATD ACQUISITION CO. V INC.

TRIWEST TRADING (CANADA) LTD.

to

BANK OF AMERICA, N.A.,

as Administrative Agent and Collateral Agent

 

 

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Table of Contents

 

              Page   ARTICLE I. DEFINITIONS      Section 1.1.    Terms Defined
in Credit Agreement      - 1 -      Section 1.2.    Terms Defined in the PPSA   
  - 2 -      Section 1.3.    Terms Generally      - 2 -      Section 1.4.   
Definitions of Certain Terms Used Herein      - 2 -    ARTICLE II. GRANT OF
SECURITY INTEREST    ARTICLE III. REPRESENTATIONS AND WARRANTIES      Section
3.1.    Title, Perfection and Priority      - 7 -      Section 3.2.    Type and
Jurisdiction of Organization, Organizational and Identification Numbers      - 8
-      Section 3.3.    Principal Location      - 8 -      Section 3.4.   
Collateral Locations      - 8 -      Section 3.5.    Bailees, Warehousemen, Etc
     - 8 -      Section 3.6.    Exact Names      - 8 -      Section 3.7.   
Chattel Paper      - 9 -      Section 3.8.    Accounts and Chattel Paper      -
9 -      Section 3.9.    Inventory      - 9 -      Section 3.10.    Intellectual
Property      - 10 -      Section 3.11.    No Financing Statements or Security
Agreements      - 10 -      Section 3.12.    Pledged Collateral      - 10 -     
Section 3.13.    Perfection Certificate      - 10 -    ARTICLE IV. COVENANTS   
  Section 4.1.    General      - 11 -   

 

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  Section 4.2.    Delivery of Pledged Collateral      - 12 -      Section 4.3.
   Uncertificated Securities      - 12 -      Section 4.4.    Securities
Entitlements      - 12 -      Section 4.5.    Partnership of Limited Liability
Company      - 12 -      Section 4.6.    Control      - 12 -      Section 4.7.
   Pledged Collateral      - 13 -      Section 4.8.    Intellectual Property   
  - 13 -      Section 4.9.    Insurance      - 14 -      Section 4.10.   
Collateral Access Agreements      - 14 -    ARTICLE V. REMEDIES      Section
5.1.    Remedies      - 15 -      Section 5.2.    Grantors’ Obligations Upon
Default      - 16 -      Section 5.3.    Grant of Intellectual Property License
     - 16 -      Section 5.4.    Concerning a Receiver      - 17 -    ARTICLE
VI. ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY      Section 6.1.    Account
Verification      - 18 -      Section 6.2.    Authorization for Secured Party to
Take Certain Action      - 18 -      Section 6.3.    PROXY      - 19 -     
Section 6.4.    NATURE OF APPOINTMENT; LIMITATION OF DUTY      - 19 -    ARTICLE
VII. GENERAL PROVISIONS      Section 7.1.    Waivers      - 19 -      Section
7.2.    Limitation on Agent’s and Secured Party’s Duty with Respect to the
Collateral      - 20 -      Section 7.3.    Compromises and Collection of
Collateral      - 21 -      Section 7.4.    Secured Party Performance of Debtor
Obligations      - 21 -      Section 7.5.    No Waiver; Amendments; Cumulative
Remedies      - 21 -   

 

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  Section 7.6.    Limitation by Law; Severability of Provisions      - 21 -     
Section 7.7.    Reinstatement      - 21 -      Section 7.8.    Benefit of
Agreement      - 22 -      Section 7.9.    Survival of Representations      - 22
-      Section 7.10.    Taxes and Expenses      - 22 -      Section 7.11.   
Additional Subsidiaries      - 22 -      Section 7.12.    Headings      - 22 -
     Section 7.13.    Termination or Release      - 22 -      Section 7.14.   
Entire Agreement      - 23 -      Section 7.15.    CHOICE OF LAW      - 23 -   
  Section 7.16.    Consent to Jurisdiction      - 23 -      Section 7.17.   
WAIVER OF JURY TRIAL      - 24 -      Section 7.18.    Indemnity      - 24 -   
  Section 7.19.    Counterparts      - 24 -      Section 7.20.    Gender and
Number      - 24 -      Section 7.21.    Judgment Currency      - 24 -     
Section 7.22.    Mortgages      - 24 -    ARTICLE VIII. NOTICES      Section
8.1.    Sending Notices      - 24 -      Section 8.2.    Change in Address for
Notices      - 25 -    ARTICLE IX. THE AGENT   

 

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EXHIBITS:

 

Schedule 1    Excluded Accounts Exhibit A    Location, Chief Executive Office,
Type of Organization, Jurisdiction of Organization and Organizational
Identification Number Exhibit B    Bailees, Warehousemen and Third Party
Possessors of Collateral Exhibit C    [Intentionally Deleted] Exhibit D   
Intellectual Property Exhibit E    [Intentionally Deleted] Exhibit F    Pledged
Collateral Exhibit G    PPSA Filing Offices Exhibit H    Form of Joinder
Exhibit I    Form of Collateral Access Agreement

 

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CANADIAN PLEDGE AND SECURITY AGREEMENT

This CANADIAN PLEDGE AND SECURITY AGREEMENT (as amended, amended and restated,
supplemented or otherwise modified from time to time, this “Security Agreement”)
is entered into as of November 30, 2012, by and among ATD ACQUISITION CO. V
INC., a corporation incorporated under the laws of Canada (together with its
successors and permitted assigns, the “Initial Canadian Borrower”); TRIWEST
TRADING (CANADA) LTD., a corporation incorporated under the laws of Canada
(together with its successors and permitted assigns, “Triwest”); the Subsidiary
Parties from time to time party hereto (collectively with the Initial Canadian
Borrower and Triwest, the “Grantors” and each a “Grantor”); and BANK OF AMERICA,
N.A., a national banking association, in its capacity as administrative agent
for the lenders party to the Credit Agreement referred to below and in its
capacity as collateral agent for the Secured Parties (in such capacities,
together with its successors in such capacities, the “Agent”).

PRELIMINARY STATEMENTS

WHEREAS, the Grantors are subsidiaries of AMERICAN TIRE DISTRIBUTORS, INC., a
Delaware corporation (the “Company”), and the Company, certain of the other Loan
Parties, certain of the Lenders, Bank of America, N.A., as administrative agent,
and certain other Persons thereto are parties to that certain Fifth Amended and
Restated Credit Agreement, dated as of May 28, 2010 (as amended, restated,
modified or supplemented prior to the date hereto, the “Existing Credit
Agreement”);

WHEREAS, the Grantors, the Company, the other Loan Parties, the Agent, the
Lenders and certain other parties are entering into that certain Sixth Amended
and Restated Credit Agreement, dated as of the date hereof (as amended,
restated, modified or supplemented after the date hereof, the “Credit
Agreement”), which amends and restates in its entirety the Existing Credit
Agreement;

WHEREAS, pursuant to the Canadian Transaction, it is contemplated that the
Initial Canadian Borrower shall amalgamate, after the date hereof, with Triwest,
with the continuing entity bearing the name of Triwest and becoming a Canadian
Borrower under the Credit Agreement; and

WHEREAS, the Grantors are entering into this Security Agreement for the purpose
of inducing the Lenders to amend and restate, and to extend credit to the
Borrowers under, the Credit Agreement and to secure each Grantor’s Secured
Obligations, including in the case of each Grantor that is a Loan Guarantor, its
obligations under the Loan Guaranty.

ACCORDINGLY, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1. Terms Defined in Credit Agreement . All capitalized terms used
herein (including terms used in the preamble and preliminary statements) and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.

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Section 1.2. Terms Defined in the PPSA. Terms defined in the PPSA that are not
otherwise defined in this Security Agreement or the Credit Agreement are used
herein as defined in the PPSA.

Section 1.3. Terms Generally. The rules of construction and other interpretive
provisions specified in Section 1.03 of the Credit Agreement shall apply to this
Security Agreement, including terms defined in the preamble and preliminary
statements hereto.

Section 1.4. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the preamble and preliminary
statements above, the following terms shall have the following meanings:

“Account” shall have the meaning set forth in the PPSA.

“After-acquired Debt” shall have the meaning set forth in the definition of
“Pledged Collateral”.

“After-acquired Shares” shall have the meaning set forth in the definition of
“Pledged Collateral”.

“Am-Pac” means Am-Pac Tire Dist. Inc., a California corporation.

“Article” means a numbered article of this Security Agreement, unless another
document is specifically referenced.

“Canadian Transaction” means, collectively, the acquisition by the Initial
Canadian Borrower of all of the issued and outstanding shares of the share
capital of Triwest and the subsequent amalgamation of the Initial Canadian
Borrower with Triwest, with the continuing entity bearing the name of Triwest
and becoming a Canadian Borrower under the Credit Agreement.

“Chattel Paper” shall have the meaning set forth in the PPSA.

“Collateral” shall have the meaning set forth in Article II.

“Collateral Access Agreement” means a landlord waiver or other agreement,
substantially in the form attached hereto as Exhibit I or such other form as
shall be reasonably satisfactory to the Agent, entered into between the Agent
and any third party (including any bailee, consignee, customs broker, or other
similar Person) in possession of any Collateral or any landlord of any premises
where any Collateral is located.

“Collateral Report” means any certificate (including any Borrowing Base
Certificate), report or other document delivered by any Grantor to the Agent
with respect to the Collateral pursuant to any Loan Document.

“Control” shall mean “control” as such term is understood under the PPSA, the
STA or any other similar law of any other jurisdiction.

“Copyrights” means, with respect to any Grantor, all of such Grantor’s right,
title, and interest in and to the following: (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright
registrations, and copyright applications; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages, and payments now or hereafter due
and/or payable under any of the

 

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foregoing, including, without limitation, damages or payments for past or future
infringements for any of the foregoing; (d) the right to sue for past, present,
and future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.

“Deposit Account” shall mean any demand, time, savings, checking, passbook,
deposit, collection, lock-box, or other similar account maintained with any
financial institution but excludes investment property and any account evidenced
by an instrument.

“Document” shall have the meaning ascribed to the term “document of title” in
the PPSA.

“Equipment” shall have the meaning set forth in the PPSA.

“Excluded Accounts” means all accounts set forth on Schedule 1 hereto.

“Excluded Assets” means

(a) (i) any interest in leased real property of any Grantor and (ii) any
interest in fee-owned real property of a Grantor if the greater of its cost and
book value is less than $2,500,000;

(b) the last day of the term of any lease or sublease or any agreement for a
lease or sublease, now held or hereafter acquired by any Grantor in respect of
real property, but the applicable Grantor shall stand possessed of any such last
day upon trust to assign and dispose of it as the Agent may direct;

(c) at any date, any Equipment or other assets or property of a Grantor which is
subject to, or secured by, a Capital Lease Obligation or other debt obligation
if and to the extent that (i) such Capital Lease Obligation or debt obligation
was incurred pursuant to Section 6.01(e) or (f) of the Credit Agreement or is
owed to a Person who is not a Grantor or a Restricted Subsidiary and the
agreements or documents granting or governing such Capital Lease Obligation or
debt obligation prohibit, or require any consent or establish any other
conditions for, or would or could be terminated, abandoned, invalidated,
rendered unenforceable, or would be breached or defaulted under such agreement
or document, because of an assignment thereof, or a grant of a security interest
therein, by a Grantor and (ii) such restriction described in clause (i) above
relates only to the asset or assets acquired by such Grantor and attachments and
accessions thereto, improvements thereof or substitutions therefor; provided
that all proceeds paid or payable to any Grantor from any sale, transfer or
assignment or other voluntary or involuntary disposition of such assets and all
rights to receive such proceeds shall be included in the Collateral to the
extent not otherwise required to be paid to the holder of any Capital Lease
Obligations or debt obligations secured by such assets;

(d) pledges and security interests prohibited by, or requiring any consent of
any Governmental Authority pursuant to, applicable law, rule or regulation;

(e) Excluded Equity Interests and Excluded Accounts;

(f) any rights or interest of a Grantor in any property or assets or under any
agreement, contract, License, lease, Instrument, document or other General
Intangible or, in the case of any Investment Property (other than with respect
to Equity Interests which are not Excluded Equity Interests), under any
applicable equity holder or similar agreement (referred to solely for purposes
of this clause (f) as a “Contract”) to the extent such Contract by the terms of
a restriction in favor of a Person who is not a Grantor, or any requirement of
law, rule or regulation, prohibits, or requires any consent or

 

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establishes any other condition for, or could or would be terminated, abandoned,
invalidated, rendered unenforceable, or would be breached or defaulted under,
because of an assignment thereof or a grant of a security interest therein by a
Grantor; provided that (i) rights to payment under any such Contract otherwise
constituting an Excluded Asset shall be included in the Collateral to the extent
permitted thereby or by the PPSA and (ii) all proceeds paid or payable to any
Grantor from any sale, transfer or assignment of such Contract and all rights to
receive such proceeds shall be included in the Collateral;

(g) any property as to which the Agent and a Canadian Borrower reasonably agree
in writing that the cost or other consequences (including material adverse tax
consequences as reasonably determined by such Canadian Borrower) of obtaining a
security interest or perfection thereof are excessive in relation to the benefit
to the Secured Parties of the security to be afforded thereby;

(h) (x) any Intellectual Property, including any United States intent-to-use
trademark applications, in relation to which any applicable law or regulation,
or any agreement with a domain name registrar or any other person entered into
by a Grantor in the ordinary course of business and existing on the date hereof,
prohibits the creation of a security interest therein, or constitutes a breach
or default under or results in the termination of or gives rise to any right of
acceleration, modification or cancellation, or would otherwise invalidate such
Grantor’s right, title or interest therein and (y) any of the Grantors’ rights
under the trademarks and service marks known as “ATD ONLINE,” “AUTOEDGE,”
“HEAFNET,” “TIREBUYER.COM,” “TIRE PROS,” “XPRESS PERFORMANCE” and “WHEEL
WIZARD”;

(i) consumer goods; and

(j) any proceeds and products arising from the sale, lease, assignment or
disposition of any of the foregoing Excluded Assets unless such proceeds or
products would otherwise constitute Collateral.

“Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.

“General Intangible” shall have the meaning ascribed to the term “intangible” in
the PPSA.

“Goods” shall have the meaning set forth in the PPSA.

“Grantors” shall have the meaning set forth in the introductory paragraph
hereto.

“Instrument” shall have the meaning set forth in the PPSA.

“Intellectual Property” means, with respect to any Grantor, all intellectual and
similar property of every kind and nature now owned or hereafter acquired by
such Grantor, including Patents, Copyrights, Trademarks and all related
documentation and registrations and all additions, improvements or accessions to
any of the foregoing.

“Inventory” shall have the meaning set forth in the PPSA and shall include,
without limitation, (a) all goods intended for sale or lease or for display or
demonstration, (b) all work in process, and (c) all raw materials and other
materials and supplies of every nature and description used or which might be
used in connection with the manufacture, packing, shipping, advertising,
selling, leasing or furnishing of goods or services or otherwise used or
consumed in the conduct of business.

“Investment Property” shall have the meaning set forth in the PPSA.

 

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“Licenses” means, with respect to any Grantor, all of such Grantor’s right,
title, and interest in and to (a) any and all written licensing agreements or
similar arrangements in and to its owned (1) Patents, (2) Copyrights, or
(3) Trademarks, (b) all income, royalties, damages, claims, and payments now or
hereafter due or payable under and with respect thereto, including, without
limitation, damages and payments for past and future breaches thereof, and
(c) all rights to sue for past, present, and future breaches thereof.

“Patents” means, with respect to any Grantor, all of such Grantor’s right,
title, and interest in and to: (a) any and all patents and patent applications;
(b) all inventions and improvements described and claimed therein; (c) all
reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof; (d) all income, royalties, damages, claims, and
payments now or hereafter due or payable under and with respect thereto,
including, without limitation, damages and payments for past and future
infringements thereof; (e) all rights to sue for past, present, and future
infringements thereof; and (f) all rights corresponding to any of the foregoing
throughout the world.

“Perfection Certificate” means the perfection certificate dated as of the date
hereof, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Responsible Officer of Triwest.

“Pledged Collateral” means collectively, (a) all of the Equity Interests
described on Exhibit F issued by the entities named therein and all other Equity
Interests required to be pledged under Section 5.11 of the Credit Agreement (the
“After-acquired Shares”) and (b) the promissory notes, Chattel Paper and
Instruments evidencing Indebtedness in excess of $2,500,000 owed to the Grantors
(other than such promissory notes, Chattel Paper and Instruments that are
Excluded Assets) described on Exhibit F and issued by the entities named and all
other Indebtedness owed to any Grantor hereafter and required to be pledged
pursuant to Section 5.11 of the Credit Agreement (the “After-acquired Debt”), in
each case as such Exhibit may be amended pursuant to Section 5.11 of the Credit
Agreement.

“PPSA” means the Personal Property Security Act (Ontario) and the regulations
promulgated thereunder, as amended from time to time, provided if validity,
perfection and effect of perfection and non-perfection of the Agent’s security
interest in or Lien on any Collateral is governed by the personal property
security laws of any jurisdiction other than Ontario, PPSA shall mean those
personal property security laws (including the Civil Code of Quebec) in such
other jurisdiction for the purposes of the provisions hereof relating to such
validity, perfection, and effect of perfection and non-perfection and for the
definitions related to such provisions, as from time to time in effect.

“Receivables” means the Accounts, Chattel Paper, Documents, Investment Property,
Instruments and any other rights or claims to receive money that are General
Intangibles or that are otherwise included as Collateral.

“Section” means a numbered section of this Security Agreement, unless another
document is specifically referenced.

“Secured Parties” means collectively (a) the Lenders, (b) the Agent, (c) each
Issuing Bank, (d) each counterparty to any Swap Agreement with a Loan Party the
obligations under which constitute Secured Swap Obligations, (e) each Swingline
Lender, (f) the beneficiaries of each indemnification obligation undertaken by
any Loan Party under any Loan Document, (g) each Person providing Banking
Services which constitute Banking Services Obligations and (h) the successors
and permitted assigns of each of the foregoing.

“Security” shall have the meaning set forth in the STA.

 

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“STA” means the Securities Transfer Act, 2006 (Ontario) or, to the extent
applicable, similar legislation of any other jurisdiction, as amended from time
to time.

“Stock Rights” means all dividends, instruments or other distributions and any
other right or property which any Grantor shall receive or shall become entitled
to receive for any reason whatsoever with respect to, in substitution for or in
exchange for any Pledged Collateral, any right to receive an Equity Interest
constituting Collateral and any right to receive earnings, in which such Grantor
now has or hereafter acquires any right, issued by an issuer of such Equity
Interest.

“Subsidiary Parties” means each Canadian Subsidiary that becomes a party to this
Security Agreement as a Subsidiary Party (including as an additional Canadian
Borrower) after the date hereof in accordance with Section 7.11 herein and
Section 5.11 of the Credit Agreement.

“Trademarks” means, with respect to any Grantor, all of such Grantor’s right,
title, and interest in and to the following: (a) all trademarks (including
service marks), trade names, trade dress, and trade styles and the registrations
and applications for registration thereof and the goodwill of the business
symbolized by the foregoing; (b) all Licenses of the foregoing, whether as
licensee or licensor; (c) all renewals of the foregoing; (d) all income,
royalties, damages, and payments now or hereafter due or payable with respect
thereto, including, without limitation, damages, claims, and payments for past
and future infringements thereof; (e) all rights to sue for past, present, and
future infringements of the foregoing, including the right to settle suits
involving claims and demands for royalties owing; and (f) all rights
corresponding to any of the foregoing throughout the world.

ARTICLE II.

GRANT OF SECURITY INTEREST

Each Grantor hereby pledges, assigns and grants to the Agent, on behalf of and
for the benefit of the Secured Parties, and to secure the prompt and complete
payment and performance of all of such Grantor’s Secured Obligations, a security
interest in all of its right, title and interest in, to and under all of the
following personal property and other assets, whether now owned by or owing to,
or hereafter acquired by or arising in favor of, such Grantor (including under
any trade name or derivations thereof), and regardless of where located (all of
which are collectively referred to as the “Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

(iii) all Intellectual Property;

(iv) all Documents;

(v) all Equipment;

(vi) all fixtures;

(vii) all General Intangibles;

(viii) all Goods;

 

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(ix) all Instruments;

(x) all Inventory;

(xi) all Investment Property;

(xii) all Deposit Accounts;

(xiii) all cash or other property deposited with the Agent or any Lender or any
Affiliate of the Agent or any Lender or which the Agent, for its benefit and for
the benefit of the other Secured Parties, or any Lender or such Affiliate is
entitled to retain or otherwise possess as collateral pursuant to the provisions
of this Security Agreement or any of the Loan Documents or any agreement
relating to any letter of credit;

(xiv) all books, records, files, correspondence, computer programs, tapes, disks
and related data processing software which contain information identifying or
pertaining to any of the foregoing or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof; and

(xv) any and all accessions to, substitutions for and replacements, products and
cash and non-cash proceeds of the foregoing (including any claims to any items
referred to in this definition and any claims against third parties for loss of,
damage to or destruction of any or all of the Collateral or for proceeds payable
under or unearned premiums with respect to policies of insurance) in whatever
form, including cash, negotiable instruments and other instruments for the
payment of money, Chattel Paper, security agreements and other documents.

Notwithstanding the foregoing or anything herein to the contrary, in no event
shall the “Collateral” include, or the security interest attach to, any Excluded
Asset.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

The Grantors, jointly and severally, represent and warrant to the Agent, for the
benefit of the Secured Parties, that:

Section 3.1. Title, Perfection and Priority. (a) Each Grantor has good and valid
rights in, or the power to transfer, the Collateral which it has purported to
grant a security interest hereunder, free and clear of all Liens except for
Liens permitted under Section 4.1(e), and has full power and authority to grant
to the Agent the security interest in such Collateral pursuant hereto. This
Security Agreement creates in favor of the Agent for the benefit of the Secured
Parties a valid security interest in the Collateral granted by each Grantor. No
consent or approval of, registration or filing with, or any other action by any
Governmental Authority is required for the grant of the security interest
pursuant to this Security Agreement, except (i) such as have been obtained or
made and are in full force and effect and (ii) for filings necessary to perfect
Liens created pursuant to the Loan Documents.

(b) Subject to the limitations set forth in clause (c) of this Section 3.1, the
security interests granted pursuant to this Security Agreement (i) will
constitute valid perfected security interests

 

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in the Collateral in favor of the Agent, on behalf of and for the benefit of the
Secured Parties, to secure the prompt and complete payment and performance of
all of the Grantor’s Secured Obligations, upon (A) in the case of Collateral in
which a security interest may be perfected by filing a financing statement under
the PPSA (or similar legislation) of any jurisdiction, the filing of financing
statements naming each Grantor as “debtor” and the Agent as “secured party” and
describing the Collateral in the applicable filing offices as set forth in
Exhibit G hereto, (B) in the case of Instruments, Chattel Paper and certificated
Securities, the earlier of the delivery thereof to the Agent (or its
non-fiduciary agent or designee) and the filing of the financing statements
referred to in clause (A), (C) in the case of Collateral constituting
Intellectual Property, the earlier of the filing of the financing statements
referred to in clause (A) (except in the case of Copyrights) and the completion
of the filing, registration and recording of a fully executed intellectual
property security agreement in the Canadian Intellectual Property Office, and/or
(D) in the case of Deposit Accounts, upon the entering into of Blocked Account
Agreements and (ii) are prior to all other Liens on the Collateral other than
Liens permitted under Section 4.1(e) having priority over the Agent’s Lien
either by operation of law or otherwise.

(c) Notwithstanding anything to the contrary herein, no Grantor shall be
required to perfect the security interests created hereby by any means other
than (i) filings pursuant to the PPSA or similar legislation of any other
jurisdiction in which the Collateral may be located from time to time,
(ii) filings with the Canadian Intellectual Property Office with respect to
Intellectual Property, (iii) in the case of Collateral that constitutes Chattel
Paper, Instruments or certificated Securities, in each case, to the extent
included in the Collateral and required by Sections 4.2 and 4.4 herein, delivery
to the Agent to be held in its possession in the United States or Ontario,
provided that if delivery is made to the Agent in the United States, such
Grantor is, or shall become, party the U.S. Security Agreement and (iv) in the
case of Deposit Accounts, executing Blocked Account Agreements, to the extent
required by Section 2.21 of the Credit Agreement.

Section 3.2. Type and Jurisdiction of Organization, Organizational and
Identification Numbers. The type of entity of each Grantor, its jurisdiction of
organization, the organizational number issued to it by its jurisdiction of
organization and its federal employer identification number, in each case as of
the date hereof, are set forth on Exhibit A.

Section 3.3. Principal Location. Each Grantor’s mailing address and the location
of its place of business (if it has only one) or its chief executive office (if
it has more than one place of business), in each case as of the date hereof, is
disclosed on Exhibit A.

Section 3.4. Collateral Locations. Each location where Collateral is located as
of the date hereof (except for Inventory in transit) is listed on Exhibit A. All
of said locations are owned by a Grantor except for locations (i) that are
leased by a Grantor as lessee and designated in Part III(b) of Exhibit A and
(ii) at which Inventory is held in a public warehouse or is otherwise held by a
bailee or on consignment as designated in Part III(c) of Exhibit A.

Section 3.5. Bailees, Warehousemen, Etc. Exhibit B hereto sets forth a list, as
of the date hereof, of each bailee, warehouseman and other third party in
possession or control of any Inventory in excess of $2,500,000 of any Grantor
(except for Inventory in transit) and specifies as to each bailee, warehouseman
or other third party the value of the Inventory, at cost, possessed or
controlled by such bailee, warehouseman or other third party.

Section 3.6. Exact Names. As of the date hereof, the name in which each Grantor
has executed this Security Agreement is the exact name as it appears in such
Grantor’s organizational documents, as amended, as filed with such Grantor’s
jurisdiction of organization. No Grantor has, during the past five years prior
to the date hereof, been known by or used any other corporate, trade or
fictitious name, or been a party to any merger or consolidation, except as
disclosed in the Perfection Certificate.

 

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Section 3.7. Chattel Paper. Exhibit C lists all Chattel Paper with a stated
amount in excess of $2,500,000 of each Grantor as of the date hereof.

Section 3.8. Accounts and Chattel Paper.

(a) The names of the obligors, amounts owing, due dates and other information
with respect to each Grantor’s Accounts and Chattel Paper that are Collateral
have been correctly stated in all material respects, at the time furnished, in
the records of such Grantor relating thereto and in all invoices and each
Collateral Report with respect thereto furnished to the Agent by such Grantor
from time to time.

(b) With respect to Accounts of the Grantors, except as specifically disclosed
on the most recent Collateral Report, (i) all such Accounts represent bona fide
sales of Inventory or rendering of services to Account Debtors in the ordinary
course of the applicable Grantor’s business and are not evidenced by a judgment,
Instrument or Chattel Paper; (ii) to the best of such Grantor’s knowledge, there
are no offset rights, claims or disputes existing or asserted with respect
thereto and no Grantor has made any agreement with any Account Debtor for any
extension of time for the payment thereof, any compromise or settlement for less
than the full amount thereof, any release of any Account Debtor from liability
therefor, or any deduction therefrom except a discount or allowance allowed by a
Grantor in the ordinary course of its business for prompt payment and disclosed
to the Agent; (iii) to the knowledge of such Grantor, there are no facts, events
or occurrences that in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
such Grantor’s books and records and any invoices, statements and the most
recent Collateral Report with respect thereto; (iv) no Grantor has received any
notice of proceedings or actions that are threatened or pending against any
Account Debtor that might result in any material adverse change in such Account
Debtor’s financial condition; and (v) no Grantor has knowledge that any Account
Debtor is unable generally to pay its debts as they become due.

(c) In addition, with respect to all Accounts of the Grantors, except as
specifically disclosed on the most recent Collateral Report, the amounts shown
on all invoices, statements and the most recent Collateral Report with respect
thereto are actually and absolutely owing to a Grantor as indicated thereon and
are not in any way contingent.

Section 3.9. Inventory. With respect to any Inventory of the Grantors and that
is scheduled or listed on the most recent Collateral Report, (a) such Inventory
(other than Inventory in transit) is located at one of the Grantors’ locations
set forth on Exhibit A, (b) the Grantors have good, indefeasible and
merchantable title to such Inventory and such Inventory is not subject to any
Lien or security interest or document whatsoever except for the Lien granted to
the Agent, for the benefit of the Secured Parties, and except for Liens
permitted under Section 6.02 of the Credit Agreement, (c) such Inventory is not
subject to any licensing, patent, royalty, trademark, trade name or copyright
agreement with any third party that would, upon sale or other disposition of
such Inventory by the Agent in accordance with the terms hereof, infringe the
rights of such third-party, violate any contract with such third party, or cause
the Agent to incur any liability with respect to payment of royalties other than
royalties incurred pursuant to sale of such Inventory under the current
licensing agreement related thereto, (d) to the best of such Grantor’s
knowledge, such Inventory has been produced in accordance with applicable labour
and employment laws and (e) to the best of such Grantor’s knowledge, the
completion of manufacture, sale or other disposition of such Inventory by the
Agent following an Event of Default shall not require the consent of any Person
and shall not constitute a breach or default under any contract or agreement to
which any Grantor is a party or to which such Inventory is subject.

 

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Section 3.10. Intellectual Property. As of the date hereof, no Grantor has any
interest in, or title to, any United States or Canadian federal registered or
applied for Patent, Trademark or Copyright except as set forth on Exhibit D.

Section 3.11. No Financing Statements or Security Agreements. As of the date
hereof, no Grantor has filed or consented to the filing of any financing
statement or security agreement naming a Grantor as debtor and describing all or
any portion of the Collateral that has not lapsed or been terminated except
(a) for financing statements or security agreements naming the Agent on behalf
of the Secured Parties as the secured party and (b) as permitted by
Sections 4.1(e) and 4.1(f).

Section 3.12. Pledged Collateral.

(a) Exhibit F sets forth a complete and accurate list, as of the date hereof, of
all of the Pledged Collateral and, with respect to any Pledged Collateral
constituting any Equity Interest, the percentage of the total issued and
outstanding Equity Interests of the issuer represented thereby. As of the date
hereof, each Grantor is the legal and beneficial owner of the Pledged Collateral
listed on Exhibit F as being owned by it, free and clear of any Liens, except
for the security interest granted to the Agent for the benefit of the Secured
Parties hereunder and Liens permitted under Section 6.02 of the Credit
Agreement. Each Grantor further represents and warrants that, as of the date
hereof, (i) all Pledged Collateral constituting an Equity Interest has been (to
the extent such concepts are relevant with respect to such Pledged Collateral)
duly authorized and validly issued by the issuer thereof and are fully paid and
non-assessable, (ii) with respect to any certificates delivered to the Agent (or
its non-fiduciary agent or designee) representing an Equity Interest, such
certificates are Securities as defined in the STA as a result of actions by the
issuer or otherwise, and (iii) to the best of its knowledge, any Pledged
Collateral that represents Indebtedness owed to any Grantor has been duly
authorized, authenticated or issued and delivered by the issuer of such
Indebtedness, is the legal, valid and binding obligation of such issuer and such
issuer is not in default thereunder.

(b) As of the date hereof, (i) none of the Pledged Collateral has been issued or
transferred in violation of the securities registration, securities disclosure
or similar laws of any jurisdiction to which such issuance or transfer may be
subject and (ii) none of the Pledged Collateral is subject to any option, right
of first refusal, shareholders agreement, charter or by-law provisions or
contractual restriction of any nature that might prohibit, impair, delay or
otherwise affect the pledge of such Pledged Collateral hereunder, the sale or
disposition thereof pursuant hereto or the exercise by the Agent of rights and
remedies hereunder.

(c) Except as set forth on Exhibit F, as of the date hereof, and except for any
Indebtedness represented by the Intercompany Note, none of the Pledged
Collateral which represents Indebtedness owed to a Grantor is subordinated in
right of payment to other Indebtedness or subject to the terms of an indenture.

Section 3.13. Perfection Certificate. The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects as of the date thereof.

 

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ARTICLE IV.

COVENANTS

From the date hereof, and thereafter until the Termination Date, each Grantor
agrees that:

Section 4.1. General.

(a) Collateral Records. Each Grantor will maintain complete and accurate books
and records in accordance with the requirements of Section 5.06(a) of the Credit
Agreement.

(b) Authorization to File Financing Statements; Ratification. Each Grantor
hereby authorizes the Agent to file, and if requested will deliver to the Agent,
all financing statements, financing change statements, discharges and other
documents and take such other actions as may from time to time be requested by
the Agent in order to maintain a perfected security interest in and, if
applicable, Control of, the Collateral to the extent required by Section 3.1.
Any financing statement or financing change statement filed by the Agent may be
filed in any filing office in any applicable Canadian jurisdiction and may
(i) describe the Collateral in the same manner as described herein or may
contain an indication or description of collateral that describes such property
in any other manner such as “all assets” or “all personal property, whether now
owned or hereafter acquired” of such Grantor or words of similar effect as being
of an equal or lesser scope or with greater detail, and (ii) contain any other
information required by the applicable PPSA for the sufficiency or filing office
acceptance of any financing statement or financing change statement, including
(A) whether such Grantor is an organization, the type of organization and any
organization identification number issued to such Grantor and (B) in the case of
a financing statement filed as a fixture filing, a sufficient description of
real property to which the Collateral relates. Each Grantor also agrees to
furnish any such information to the Agent promptly upon request. Each Grantor
also ratifies its authorization for the Agent to have filed in any Canadian
jurisdiction any initial financing statements, financing changes statements,
discharges or amendments thereto if filed prior to the date hereof.

(c) Further Assurances. Each Grantor will, if reasonably requested by the Agent,
(i) take or cause to be taken such further actions in accordance with
Section 5.11 of the Credit Agreement, (ii) take such other actions as the Agent
reasonably deems appropriate under applicable law or to evidence or perfect its
Lien on any Collateral, or otherwise to give effect to the intent of this
Security Agreement and (iii) defend the security interests created hereby and
priority thereof against the claims and demands not expressly permitted by the
Loan Documents of all Persons whomsoever.

(d) Disposition of Collateral. No Grantor will sell, lease, transfer or
otherwise dispose of the Collateral except for sales, leases, transfers and
other dispositions specifically permitted under Section 6.05 of the Credit
Agreement.

(e) Liens. No Grantor will create, incur, or suffer to exist any Lien on the
Collateral except (i) the security interest created by this Security Agreement,
and (ii) Liens permitted by Section 6.02 of the Credit Agreement.

(f) Other Financing Statements. No Grantor will authorize the filing of any
financing statement naming it as debtor covering all or any portion of the
Collateral, except to cover security interests as permitted by Section 4.1(e).

(g) Change of Name, Etc. Each Grantor agrees to furnish to the Agent prompt
written notice of any change in: (i) such Grantor’s legal name; (ii) the
location of such Grantor’s chief executive office, registered office and its
principal place of business; (iii) such Grantor’s organizational legal entity
designation or jurisdiction of incorporation or formation; or (iv) such
Grantor’s organizational identification number assigned to it by its
jurisdiction of incorporation or formation.

(h) Exercise of Duties. Anything herein to the contrary notwithstanding, (a) the
exercise by the Agent of any of the rights hereunder shall not release any
Grantor from any of its duties or

 

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obligations under the contracts and agreements included in the Collateral and
(b) no Secured Party shall have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this Security Agreement
or any other Loan Document, nor shall any Secured Party be obligated to perform
any of the obligations or duties of any Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.

Section 4.2. Delivery of Pledged Collateral.

(a) Each Grantor will promptly deliver to the Agent (or its non-fiduciary agent
or designee) upon execution of this Security Agreement, or immediately upon
acquiring future Pledged Collateral, all certificates or instruments, if any,
representing or evidencing the Pledged Collateral, together with duly executed
instruments of transfer or assignments in blank. Each delivery of Pledged
Collateral (including any After-acquired Shares and After-acquired Debt) after
the date hereof shall be accompanied by a schedule describing the securities
theretofore and then being pledged hereunder, which shall be attached hereto as
part of Exhibit F hereto and made a part hereof; provided, that the failure to
attach any such schedule hereto shall not affect the validity of such pledge of
such securities. Each schedule so delivered shall supplement any prior schedules
so delivered.

(b) Without limiting the foregoing, if any of the Collateral consists of
certificated securities, the Grantors shall immediately deliver to the Agent any
and all such documents, agreements (including securities pledge agreements) and
any and all certificates representing such and other materials (including
effective endorsements) as may be required from time to time in the opinion of
the Agent, to provide the Agent with control over all certificated securities in
the manner provided under section 23 of the STA, and at the request of the
Agent, will cause all certificated securities to be registered in the name of
the Agent or as the Agent may direct.

Section 4.3. Uncertificated Securities. If any Grantor has or hereafter acquires
Collateral consisting of uncertificated securities, it shall deliver to the
Agent any and all such documents, agreements and other materials as may be
required from time to time in the opinion of the Agent, to provide the Agent
with control over all such Collateral in the manner provided under section 24 of
the STA.

Section 4.4. Securities Entitlements. If any Grantor has or hereafter acquires
Collateral consisting of security entitlements or creates Collateral consisting
of one or more securities accounts, it shall deliver to the Agent any and all
such documents, agreements and other materials as may be required from time to
time, in the opinion of the Agent, to provide the Agent with control over all
such Collateral in the manner provided under sections 25 and 26 of the STA and
section 1(2)(e) of the PPSA.

Section 4.5. Partnership of Limited Liability Company. If any Grantor has or
hereafter acquires Collateral consisting of an interest in a partnership or
limited liability company, it shall take all steps necessary, in the opinion of
the Agent to ensure that such property is and remains a security for the
purposes of the STA.

Section 4.6. Control. The Grantors shall not cause or permit any Person other
than the Agent to have control of any Investment Property constituting part of
the Collateral, other than control in favour of a depositary bank or securities
intermediary which has subordinated its Lien to the Lien of the Agent pursuant
to documentation in form and substance satisfactory to the Agent.

 

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Section 4.7. Pledged Collateral.

(a) Registration in Nominee Name; Denominations. The Agent (or its non-fiduciary
agent or designee), on behalf of the Secured Parties, shall hold certificated
Pledged Collateral in the name of the applicable Grantor, endorsed or assigned
in blank or in favor of the Agent. Following the occurrence and during the
continuance of an Event of Default, each Grantor will promptly give to the Agent
(or its non-fiduciary agent or designee) copies of any notices or other
communications received by it with respect to Pledged Collateral registered in
the name of such Grantor. Following the occurrence and during the continuance of
an Event of Default, the Agent (or its non-fiduciary agent or designee) shall at
all times have the right to exchange the certificates representing Pledged
Collateral for certificates of smaller or larger denominations for any purpose
consistent with this Security Agreement.

(b) Exercise of Rights in Pledged Collateral.

(i) Without in any way limiting the foregoing and subject to clause (ii) below,
each Grantor shall have the right to exercise all voting rights or other rights
relating to the Pledged Collateral for all purposes not inconsistent with this
Security Agreement, the Credit Agreement or any other Loan Document; provided,
however, that no vote or other right shall be exercised or action taken which
would reasonably be expected to have the effect of materially and adversely
impairing the rights of the Agent in respect of the Pledged Collateral.

(ii) Each Grantor will permit the Agent (or its non-fiduciary agent or designee)
at any time after the occurrence and during the continuance of an Event of
Default, without written notice, to exercise all voting rights or other rights
relating to Pledged Collateral, including, without limitation, exchange,
subscription or any other rights, privileges, or options pertaining to any
Equity Interest or Investment Property constituting Pledged Collateral as if it
were the absolute owner thereof.

(iii) Each Grantor shall be entitled to receive and retain any and all Stock
Rights to the extent and only to the extent that such Stock Rights are permitted
by, and otherwise paid or distributed in accordance with, the terms and
conditions of the Credit Agreement, the other Loan Documents and applicable law;
provided, however, that any non-cash Stock Rights that would constitute Pledged
Collateral, whether resulting from a subdivision, combination or
reclassification of the outstanding Equity Interests of the issuer of any
Pledged Collateral or received in exchange for Pledged Collateral or any part
thereof, or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Pledged Collateral, and, if received
by any Grantor, shall not be commingled by such Grantor with any of its other
funds or property but shall be held separate and apart therefrom, shall be held
in trust for the benefit of the Secured Parties and shall be forthwith delivered
to the Agent (or its non-fiduciary agent or designee) in the same form as so
received (with any necessary endorsement or instrument of assignment). The
proviso to the first sentence of this clause (iii) shall not apply to dividends
between or among the Company and the other Loan Parties only of property subject
to a perfected security interest under this Security Agreement; provided that
the Company notifies the Agent in writing, specifically referring to this
Section 4.7, at the time of such dividend and takes any actions the Agent
reasonably specifies to ensure the continuance of its perfected security
interest in such property under this Security Agreement

Section 4.8. Intellectual Property. (a) Upon the occurrence and during the
continuance of an Event of Default, each Grantor will use commercially
reasonable efforts to obtain all consents and approvals necessary or appropriate
for the assignment to or for the benefit of the Agent of any License held by
such Grantor in order to enforce the security interests granted hereunder.

 

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(b) Each Grantor shall in its reasonable business judgment notify the Agent
promptly if it knows or reasonably expects that any application or registration
relating to any Patent, Trademark or Copyright (now or hereafter existing)
included in the Collateral and material to the conduct of such Grantor’s
business may become abandoned or dedicated, or of any material adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the Canadian Intellectual
Property Office or any court) regarding such Grantor’s ownership of any such
material registered or applied for Patent, Trademark or Copyright, its right to
register the same, or to keep and maintain the same.

(c) In the event that any Grantor, either directly or through any agent,
employee, licensee or designee, files an application for the registration of any
material Patent, Trademark or Copyright with the Canadian Intellectual Property
Office, such Grantor will, concurrently with any delivery of financial
statements pursuant to Sections 5.01(a) and 5.01(b) of the Credit Agreement,
provide the Agent written notice thereof, and, upon request of the Agent, such
Grantor shall promptly execute and deliver any and all security agreements or
other instruments as the Agent may reasonably request to evidence the Agent’s
security interest in such Patent, Trademark or Copyright, and the General
Intangibles of such Grantor relating thereto or represented thereby.

(d) Each Grantor shall take all actions necessary or reasonably requested by the
Agent to maintain and pursue each material application, to obtain the relevant
registration and to maintain the registration of each of the Patents, Trademarks
and Copyrights (now or hereafter existing) material to the conduct of such
Grantor’s business, except in cases where, in the ordinary course of business
consistent with past practice, such Grantor reasonably decides to abandon, allow
to lapse or expire any Patent, Trademark or Copyright, including the filing of
applications for renewal, affidavits of use, affidavits of non-contestability
and, if consistent with good business judgment, to initiate opposition and
interference and cancellation proceedings against third parties.

(e) Each Grantor shall, unless it shall reasonably determine that a Patent,
Trademark or Copyright is not material to the conduct of its business, promptly
notify the Agent and shall, if consistent with good business judgment, promptly
sue for infringement, misappropriation or dilution of such material Patent,
Trademark or Copyright and to recover any and all damages for such infringement,
misappropriation or dilution, or shall take such other actions as are
appropriate under the circumstances in its reasonable business judgment to
protect such Patent, Trademark or Copyright.

(f) Nothing in this Security Agreement shall prevent any Grantor from disposing
of, discontinuing the use or maintenance of, failing to pursue, or otherwise
allowing to lapse, terminate or put into the public domain, any of its
Collateral constituting Intellectual Property to the extent permitted by the
Credit Agreement if such Grantor determines in its reasonable business judgment
that such discontinuance is desirable in the conduct of its business.

Section 4.9. Insurance. All insurance policies required under Section 5.10 of
the Credit Agreement shall name the Agent (for the benefit of the Agent and the
other Secured Parties) as lender’s loss payee or, upon request by Agent, as
additional insured, as applicable, and shall contain lender’s loss payable
clauses or mortgagee clauses, through endorsements in form and substance
satisfactory to the Agent.

Section 4.10. Collateral Access Agreements. To the extent required by the Credit
Agreement, each Grantor shall use commercially reasonable efforts to obtain a
Collateral Access Agreement, from the lessor of each of its leased warehouse and
distribution facilities, and the bailee, warehouseman or other third party with
respect to any warehouse or other location, in each case where Collateral is
stored or located.

 

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ARTICLE V.

REMEDIES

Section 5.1. Remedies. Upon the occurrence and during the continuance of an
Event of Default:

(a) the Agent may (and at the direction of the Required Lenders, shall) exercise
any or all of the following rights and remedies:

(i) those rights and remedies provided in this Security Agreement, the Credit
Agreement or any other Loan Document; provided that this Section 5.1(a) shall
not be understood to limit any rights available to the Agent and the Secured
Parties prior to an Event of Default;

(ii) those rights and remedies available to a secured party under the PPSA
(whether or not the PPSA applies to the affected Collateral) or under any other
applicable law (including, without limitation, any law governing the exercise of
a bank’s right of setoff or bankers’ Lien) when a debtor is in default under a
security agreement;

(iii) give notice of sole control or any other instruction under any Blocked
Account Agreement, Collateral Access Agreement or any other control or similar
agreement and take any action provided therein with respect to the applicable
Collateral;

(iv) without notice (except as specifically provided in Section 7.1 or elsewhere
herein), demand or advertisement of any kind to any Grantor or any other Person,
enter the premises of any Grantor where any Collateral is located (through
self-help and without judicial process) to collect, receive, assemble, process,
appropriate, sell, lease, assign, grant an option or options to purchase or
otherwise dispose of, deliver, or realize upon, the Collateral or any part
thereof in one or more parcels at public or private sale or sales (which sales
may be adjourned or continued from time to time with or without notice and may
take place at such Grantor’s premises or elsewhere), for cash, on credit or for
future delivery without assumption of any credit risk, and upon such other terms
as the Agent may deem commercially reasonable;

(v) appoint by instrument in writing a receiver (which term as used in this
Security Agreement includes an interim receiver, and a receiver and manager) or
agent of all or any part of the Collateral and removing or replacing from time
to time any receiver or agent;

(vi) institute proceedings in any court of competent jurisdiction for the
appointment of a receiver of all or any part of the Collateral; and

(vii) concurrently with written notice to the Grantors, transfer and register in
its name or in the name of its nominee the whole or any part of the Pledged
Collateral, to exchange certificates or instruments representing or evidencing
Pledged Collateral for certificates or instruments of smaller or larger
denominations, to exercise the voting and all other rights as a holder with
respect thereto, to collect and receive all Stock Rights that any Grantor may be
entitled to receive in connection therewith and to otherwise act with respect to
the Pledged Collateral as though the Agent was the outright owner thereof.

 

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(b) Each Grantor acknowledges and agrees that the compliance by the Agent, on
behalf of the Secured Parties with any applicable state, provincial, territorial
or federal law requirements in connection with a disposition of the Collateral
will not be considered to adversely affect the commercial reasonableness of any
sale of the Collateral.

(c) The Agent shall have the right upon any public sale or sales and, to the
extent permitted by law, upon any private sale or sales, to purchase for the
benefit of the Agent and the Secured Parties, the whole or any part of the
Collateral so sold, free of any right of equity redemption, which equity
redemption each Grantor hereby expressly releases.

(d) Until the Agent is able to effect a sale, lease, transfer or other
disposition of Collateral, the Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving Collateral or the value of the Collateral, or for any
other purpose deemed appropriate by the Agent.

(e) Notwithstanding the foregoing, neither the Agent nor the Secured Parties
shall be required to (i) make any demand upon, or pursue or exhaust any of their
rights or remedies against, the Grantors, any other obligor, guarantor, pledgor
or any other Person with respect to the payment of the Grantor’s Secured
Obligations or to pursue or exhaust any of their rights or remedies with respect
to any Collateral therefor or any direct or indirect guarantee thereof,
(ii) marshal the Collateral or any guarantee of the Grantor’s Secured
Obligations or to resort to the Collateral or any such guarantee in any
particular order, or (iii) effect a public sale of any Collateral.

(f) Each Grantor recognizes that the Agent may be unable to effect a public sale
of any or all the Pledged Collateral and may be compelled to resort to one or
more private sales thereof. Each Grantor also acknowledges that any private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private. The Agent shall
be under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit any Grantor or the issuer of the Pledged
Collateral to register such securities for public sale under applicable state,
provincial, territorial or federal securities laws, even if any Grantor and the
issuer would agree to do so (it being acknowledged and agreed that no Grantor
shall have any obligation hereunder to do so).

Section 5.2. Grantors’ Obligations Upon Default. Upon the written request of the
Agent after the occurrence and during the continuance of an Event of Default,
each Grantor will:

(a) assemble and make available to the Agent the Collateral and all books and
records relating thereto at any place or places reasonably specified by the
Agent, whether at such Grantor’s premises or elsewhere; and

(b) permit the Agent, by the Agent’s representatives and agents, to enter,
occupy and use any premises where all or any part of the Collateral, or the
books and records relating thereto, or both, are located, to take possession of
all or any part of the Collateral or the books and records relating thereto, or
both, to remove all or any part of the Collateral or the books and records
relating thereto, or both, and to conduct sales of the Collateral, without any
obligation to pay any Grantor for such use and occupancy.

Section 5.3. Grant of Intellectual Property License. For the purpose of enabling
the Agent to exercise the rights and remedies under this Article V upon the
occurrence and during the continuance of an Event of Default, at such time as
the Agent shall be lawfully entitled to exercise such

 

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rights and remedies, each Grantor hereby (a) grants to the Agent, for the
benefit of the Agent and the Secured Parties, an irrevocable nonexclusive
license (exercisable without payment of royalty or other compensation to such
Grantor) to use, license or sublicense any intellectual property rights now
owned or hereafter acquired by such Grantor, wherever the same may be located,
and including in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof; provided, however that such licenses to
be granted hereunder with respect to Trademarks shall be subject to the
maintenance of quality standards with respect to the goods and services on which
such Trademarks are used sufficient to preserve the validity of such Trademarks;
and provided further that the Agent shall have no greater rights than those of
any such Grantor under such license or sublicense; and (b) irrevocably agrees
that, at any time and from time to time following the occurrence and during the
continuance of an Event of Default, the Agent may sell any Grantor’s Inventory
directly to any Person, including without limitation Persons who have previously
purchased any Grantor’s Inventory from such Grantor and in connection with any
such sale or other enforcement of the Agent’s rights under this Security
Agreement, may (subject to any restrictions contained in applicable third party
licenses entered into by a Grantor) sell Inventory which bears any Trademark
owned by or licensed to any Grantor and any Inventory that is covered by any
Copyright owned by or licensed to such Grantor and the Agent may finish any work
in process and affix any relevant Trademark owned by or licensed to any Grantor
and sell such Inventory as provided herein. The use of the license granted
pursuant to clause (a) of the preceding sentence by the Agent may be exercised,
at the option of the Agent, only upon the occurrence and during the continuance
of an Event of Default; provided, however, that any permitted license,
sublicense or other transaction entered into by the Agent in accordance herewith
shall be binding upon each Grantor notwithstanding any subsequent cure of an
Event of Default.

Section 5.4. Concerning a Receiver.

(a) Any receiver appointed by the Agent shall be vested with all rights and
remedies which could have been exercised by the Agent in respect of the Grantors
or the Collateral and such other powers and discretions as are granted in the
instrument of appointment and any supplemental instruments. The choice of
receiver and its remuneration are within the sole and unfettered discretion of
the Agent.

(b) Any receiver appointed by the Agent shall act as agent for the Agent for the
purposes of taking possession of the Collateral, but otherwise and for all other
purposes (except as provided below), as agent for the Grantors. The receiver may
sell, lease, or otherwise dispose of Collateral as agent for the Grantors or as
agent for the Agent as the Agent may determine in its discretion, to the extent
consistent with the rights of the Agent set out in this Security Agreement. The
Grantors agree to ratify and confirm all actions of the receiver acting as agent
for such Grantor, and to release and indemnify the receiver in respect of all
such actions.

(c) The Agent, in appointing or refraining from appointing any receiver, shall
not incur any liability to the receiver, the Grantors or otherwise and is not
responsible for any misconduct or negligence of such receiver.

(d) All expenses, costs and charges incurred by or on behalf of the Agent in
connection with the appointment of a receiver under this Security Agreement
shall be borne by the Grantors, are payable on demand and shall be added to and
form part of the Secured Obligations.

 

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ARTICLE VI.

ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

Section 6.1. Account Verification. The Grantors acknowledge that (i) prior to an
Event of Default, at the reasonable request of the Agent, the Grantors shall
(either accompanied by the Agent or at the Agent’s direction), and (ii) after
the occurrence and during the continuance of an Event of Default, the Agent may
in its own name, or in the name of such Grantor, communicate with the Account
Debtors of such Grantor to verify with such Persons the existence, amount, terms
of, and any other matter reasonably relating to the Accounts owing by such
Account Debtor to such Grantor (including any Instruments, Chattel Paper,
payment intangibles and/or other Receivables that are Collateral relating to
such Accounts).

Section 6.2. Authorization for Secured Party to Take Certain Action.

(a) Each Grantor hereby (i) authorizes the Agent, at any time and from time to
time in the sole discretion of the Agent (1) to execute on behalf of such
Grantor as debtor and to file financing statements or financing change
statements necessary or desirable in the Agent’s reasonable discretion to
perfect and to maintain the perfection and priority of the Agent’s security
interest in the Collateral, including, without limitation, to file financing
statements or financing change statements permitted under Section 4.1(b) and
(2) to file a carbon, photographic or other reproduction of this Security
Agreement or any financing statement or financing change statement with respect
to the Collateral as a financing statement or financing change statement and to
file any other financing statement, or financing change statement (which would
not add new collateral or add a debtor) in such offices as the Agent in its
reasonable discretion deems necessary or desirable to perfect and to maintain
the perfection and priority of the Agent’s security interest in the Collateral,
including, without limitation, to file financing statements or financing change
statements permitted under Section 4.1(b) and (ii) appoints, effective upon the
occurrence and during the continuance of an Event of Default, the Agent as its
attorney in fact (1) to discharge past due taxes, assessments, charges, fees or
Liens on the Collateral (except for such Liens as are specifically permitted by
Section 6.02 of the Credit Agreement), (2) to endorse and collect any cash
proceeds of the Collateral and to apply the proceeds of any Collateral received
by the Agent to the Secured Obligations as provided herein or in the Credit
Agreement or any other Loan Document, (3) to demand payment or enforce payment
of the Receivables in the name of the Agent or any Grantor and to endorse any
and all checks, drafts, and other instruments for the payment of money relating
to the Receivables, (4) to sign any Grantor’s name on any invoice or bill of
lading relating to the Receivables, drafts against any Account Debtor of such
Grantor, assignments and verifications of Receivables, (5) to exercise all of
any Grantor’s rights and remedies with respect to the collection of the
Receivables and any other Collateral, (6) to settle, adjust, compromise, extend
or renew the Receivables, (7) to settle, adjust or compromise any legal
proceedings brought to collect Receivables, (8) to prepare, file and sign any
Grantor’s name on a proof of claim in bankruptcy or similar document against any
Account Debtor of such Grantor, (9) to prepare, file and sign any Grantor’s name
on any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables, (10) to change the address for delivery of mail
addressed to any Grantor to such address as the Agent may designate and to
receive, open and dispose of all mail addressed to such Grantor, and (11) to use
information contained in any data processing, electronic or information systems
relating to Collateral; and each Grantor agrees to reimburse the Agent for any
reasonable payment made or any reasonable documented expense incurred by the
Agent in connection with any of the foregoing, in accordance with the provisions
Section 9.03 of the Credit Agreement; provided that, this authorization shall
not relieve any Grantor of any of its obligations under this Security Agreement
or under the Credit Agreement.

 

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(b) All acts of said attorney or designee are hereby ratified and approved by
the Grantors. The powers conferred on the Agent, for the benefit of the Agent
and Secured Parties, under this Section 6.2 are solely to protect the Agent’s
interests in the Collateral and shall not impose any duty upon the Agent or any
Secured Party to exercise any such powers.

Section 6.3. PROXY. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS,
EFFECTIVE UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
THE AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION 6.2 ABOVE)
WITH RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGED
COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT
TO VOTE ANY SUCH PLEDGED COLLATERAL, THE APPOINTMENT OF THE AGENT AS PROXY AND
ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS,
PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL WOULD BE
ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS,
CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH
PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED COLLATERAL ON THE RECORD BOOKS OF
THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED
COLLATERAL OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT.

Section 6.4. NATURE OF APPOINTMENT; LIMITATION OF DUTY. THE APPOINTMENT OF THE
AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY
AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 7.13. NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, NEITHER THE AGENT, NOR ANY SECURED PARTY, NOR ANY OF
THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED
HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY
FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT TO THE EXTENT SUCH DAMAGES
ARE ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT
SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.

ARTICLE VII.

GENERAL PROVISIONS

Section 7.1. Waivers. Each Grantor hereby waives notice of the time and place of
any public sale or the time after which any private sale or other disposition of
all or any part of the Collateral may be made. To the extent such notice may not
be waived under applicable law, any notice made shall be deemed reasonable,
unless applicable law requires otherwise, if sent to the Grantors, addressed as
set forth in Article VIII, at least ten days prior to (i) the date of any such
public sale or (ii) the time after which any such private sale or other
disposition may be made. To the maximum extent permitted by applicable law, each
Grantor waives all claims, damages, and demands against the Agent or any Secured
Party arising out of the repossession, retention or sale of the Collateral
(after the occurrence

 

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of and during the continuance of an Event of Default), except such as arise
solely out of the gross negligence or willful misconduct of the Agent or such
Secured Party as finally determined by a court of competent jurisdiction. To the
extent it may lawfully do so, each Grantor absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert against
the Agent or any Secured Party, any valuation, stay, appraisal, extension,
moratorium, redemption or similar laws and any and all rights or defenses it may
have as a surety now or hereafter existing which, but for this provision, might
be applicable to the sale of any Collateral (after the occurrence of and during
the continuance of an Event of Default), made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Security Agreement, or otherwise. Except as otherwise specifically provided
herein, each Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.

Section 7.2. Limitation on Agent’s and Secured Party’s Duty with Respect to the
Collateral. The Agent shall have no obligation to clean-up or otherwise prepare
the Collateral for sale. The Agent and each Secured Party shall use reasonable
care with respect to the Collateral in its possession or under its control.
Neither the Agent nor any Secured Party shall have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of the Agent or such Secured Party, or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. To the extent that applicable law imposes duties on the
Agent to exercise remedies, after the occurrence and during the continuance of
an Event of Default, in a commercially reasonable manner, each Grantor
acknowledges and agrees that it would be commercially reasonable for the Agent
(i) to fail to incur expenses deemed significant by the Agent to prepare
Collateral for disposition or otherwise to transform raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, (iii) to fail to exercise collection remedies against
Account Debtors or other Persons obligated on Collateral or to remove Liens on
or any adverse claims against Collateral, (iv) to exercise collection remedies
against Account Debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as a Grantor, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature,
(viii) to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements at the Grantors’ cost to
insure the Agent against risks of loss, collection or disposition of Collateral
or to provide to the Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by the
Agent, to obtain the services of other brokers, investment bankers, consultants
and other professionals to assist the Agent in the collection or disposition of
any of the Collateral. Each Grantor acknowledges that the purpose of this
Section 7.2 is to provide non-exhaustive indications of what actions or
omissions by the Agent would be commercially reasonable in the Agent’s exercise
of remedies against the Collateral, after the occurrence and during the
continuance of an Event of Default, and that other actions or omissions by the
Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 7.2. Without limitation upon the foregoing,
nothing contained in this Section 7.2 shall be construed to grant any rights to
any Grantor or to impose any duties on the Agent that would not have been
granted or imposed by this Security Agreement or by applicable law in the
absence of this Section 7.2.

 

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Section 7.3. Compromises and Collection of Collateral. Each Grantor and the
Agent recognize that setoffs, counterclaims, defenses and other claims may be
asserted by obligors with respect to certain of the Receivables, that certain of
the Receivables may be or become uncollectible in whole or in part and that the
expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect
to a Receivable. In view of the foregoing, each Grantor agrees that the Agent
may at any time and from time to time, if an Event of Default has occurred and
is continuing, compromise with the obligor on any Receivable, accept in full
payment of any Receivable such amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Agent shall be
commercially reasonable so long as the Agent acts in good faith based on
information known to it at the time it takes any such action.

Section 7.4. Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, following the occurrence and during the continuance of an
Event of Default, the Agent may perform or pay any obligation which any Grantor
has agreed to perform or pay under this Security Agreement and such Grantor
shall reimburse the Agent for any amounts paid by the Agent pursuant to this
Section 7.4. Each Grantor’s obligation to reimburse the Agent pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.

Section 7.5. No Waiver; Amendments; Cumulative Remedies. No failure or delay by
the Agent or any Secured Party in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Agent and
the Secured Parties hereunder are cumulative and are not exclusive of any rights
or remedies that they would otherwise have. No waiver of any provision of this
Security Agreement or consent to any departure by any Secured Party therefrom
shall in any event be effective unless in writing signed by the Agent with the
concurrence or at the direction of the Lenders required under Section 9.02 of
the Credit Agreement, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.

Section 7.6. Limitation by Law; Severability of Provisions. All rights, remedies
and powers provided in this Security Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
law, and all the provisions of this Security Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they shall not render this
Security Agreement invalid, unenforceable or not entitled to be recorded or
registered, in whole or in part. Any provision in this Security Agreement that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of this Security Agreement are declared to be severable.

Section 7.7. Reinstatement. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
such Grantor’s assets, and shall continue to be effective or be reinstated, as
the case may be, if at any time payment and performance of the Secured
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Secured Obligations, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.

 

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Section 7.8. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of each Grantor, the
Agent and the Secured Parties and their respective successors and permitted
assigns (including all Persons who become bound as a debtor to this Security
Agreement), except that no Grantor shall have the right to assign its rights or
delegate its obligations under this Security Agreement or any interest herein,
without the prior written consent of the Agent. No sales of participations,
assignments, transfers, or other dispositions of any agreement governing the
Secured Obligations or any portion thereof or interest therein shall in any
manner impair the Lien granted to the Agent, for the benefit of the Agent and
the Secured Parties, hereunder.

Section 7.9. Survival of Representations. All representations and warranties of
each Grantor contained in this Security Agreement shall survive the execution
and delivery of this Security Agreement.

Section 7.10. Taxes and Expenses. To the extent required by Section 9.03 of the
Credit Agreement, each Grantor jointly and severally agrees to (i) pay any taxes
payable or ruled payable by any provincial, territorial, state or federal
authority in respect of this Security Agreement, together with interest and
penalties, if any, and (ii) reimburse the Agent for any and all reasonable
documented out-of-pocket expenses paid or incurred by the Agent in connection
with the preparation, execution, delivery, administration, collection and
enforcement of this Security Agreement and in the audit, analysis,
administration, collection, preservation or sale of the Collateral (including
the expenses and charges associated with any periodic or special audit of the
Collateral). Any and all costs and expenses incurred by any Grantor in the
performance of actions required pursuant to the terms hereof shall be borne
solely by such Grantor.

Section 7.11. Additional Subsidiaries. Pursuant to and in accordance with
Section 5.11 of the Credit Agreement, each Grantor shall cause (i) each Canadian
Subsidiary (other than any Excluded Subsidiary) formed or acquired after the
date of this Security Agreement in accordance with the terms of the Credit
Agreement and (ii) any Canadian Subsidiary that was an Excluded Subsidiary but
has ceased to be an Excluded Subsidiary, to enter into this Security Agreement
as a Subsidiary Party as promptly thereafter as reasonably practicable (but in
no event to exceed ninety (90) days after such formation or acquisition or such
longer period as may be agreed to by the Agent in writing. Upon execution and
delivery by the Agent and such Subsidiary of an instrument in the form of
Exhibit H hereto, such Subsidiary shall become a Subsidiary Party hereunder with
the same force and effect as if originally named as a Subsidiary Party herein.
The execution and delivery of any such instrument shall not require the consent
of any other Loan Party hereunder. The rights and obligations of each Loan Party
hereunder shall remain in full force and effect notwithstanding the addition of
any new Loan Party as a party to this Security Agreement.

Section 7.12. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.

Section 7.13. Termination or Release.

(a) This Security Agreement shall continue in effect until the Termination Date.

(b) A Subsidiary Party shall automatically be released from its obligations
hereunder and the security interests created hereunder in the Collateral of such
Subsidiary Party shall be automatically released upon the consummation of any
transaction permitted pursuant to the Credit Agreement, as a result of which
such Subsidiary Party ceases to be a Subsidiary.

 

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(c) Upon any sale, lease, transfer or other disposition by any Grantor of any
Collateral that is permitted under Section 4.1(d) to any Person that is not
another Grantor or, upon the effectiveness of any written consent to the release
of the security interest granted hereby in any Collateral pursuant to
Section 9.02 of the Credit Agreement, the security interest in such Collateral
shall be automatically released.

(d) The security interests granted hereunder on any Collateral, to the extent
such Collateral is comprised of property leased to a Loan Party, shall be
automatically released upon termination or expiration of such lease, pursuant to
Section 9.02 of the Credit Agreement.

(e) The Agent may, in its discretion, release the Lien on Collateral as provided
in Section 9.02 of the Credit Agreement.

(f) In connection with any termination or release pursuant to paragraph (a),
(b), (c), (d), or (e) above, the Agent shall promptly execute and deliver to any
Grantor, at such Grantor’s expense, all financing change statements and similar
documents that such Grantor shall reasonably request to evidence such
termination or release. Any execution and delivery of documents pursuant to this
Section 7.13 shall be without recourse to or representation or warranty by the
Agent or any Secured Party. Without limiting the provisions of Section 7.18, the
Company shall reimburse the Agent upon demand for all reasonable and documented
costs and out of pocket expenses, including the fees, charges and expenses of
counsel, incurred by it in connection with any action contemplated by this
Section 7.13.

Section 7.14. Entire Agreement. This Security Agreement, together with the other
Loan Documents, embodies the entire agreement and understanding between each
Grantor and the Agent relating to the Collateral and supersedes all prior
agreements and understandings, oral or written, between any Grantor and the
Agent relating to the Collateral.

Section 7.15. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL
LAWS OF CANADA APPLICABLE THEREIN.

Section 7.16. Consent to Jurisdiction.

(a) Each Grantor hereby irrevocably and unconditionally submits to the
non-exclusive jurisdiction of the courts of the province of Ontario, in any
action or proceeding arising out of or relating to this Security Agreement, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding shall be heard and determined in such province. Each
Grantor agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.

(b) Each Grantor hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Security Agreement in any court referred to
in clause (a) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

 

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(c) Each Grantor irrevocably consents to service of process in the manner
provided for notices in Section 8.1 herein. Nothing in this Security Agreement
or in any other Loan Document will affect the right of the Agent or any Secured
Party to serve process in any other manner permitted by law.

Section 7.17. WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH GRANTOR
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION.

Section 7.18. Indemnity. Each Grantor hereby agrees to indemnify and hold the
Agent, the other Secured Parties, and their respective Related Parties harmless
from, any and all losses, claims, damages, penalties, liabilities, and related
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any Secured Party is a party
thereto) imposed on, incurred by or asserted against the Agent or the Secured
Parties, or their respective Related Parties, in any way relating to or arising
out of this Security Agreement, to the extent the Grantor would be required to
do so pursuant to Section 9.03 of the Credit Agreement.

Section 7.19. Counterparts. This Security Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed counterpart of a
signature page of this Security Agreement by facsimile or other electronic
transmission shall be effective as delivery of a manually executed counterpart
of this Security Agreement.

Section 7.20. Gender and Number. Any reference in this Security Agreement to
gender includes all genders and words importing the singular include the plural
and vice versa.

Section 7.21. Judgment Currency. If, for the purposes of obtaining or enforcing
judgment in any court or for any other purpose hereunder or in connection
herewith, it is necessary to convert a sum due hereunder in any currency into
another currency, such conversion shall be carried out to the extent and in the
manner provided in Section 9.21of the Credit Agreement.

Section 7.22. Mortgages. In the case of a conflict between this Security
Agreement and the Mortgages with respect to Collateral that is real property
(including fixtures), the Mortgages shall govern. In all other conflicts between
this Security Agreement and the Mortgages, this Security Agreement shall govern.

ARTICLE VIII.

NOTICES

Section 8.1. Sending Notices. All notices, requests and demands pursuant hereto
shall be made in accordance with Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Grantor shall be given to it in care
of the Borrower Agent at the Borrower Agent’s address set forth in Section 9.01
of the Credit Agreement.

 

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Section 8.2. Change in Address for Notices. Each of the Grantors, the Agent and
the Lenders may change the address or facsimile number for service of notice
upon it by a notice in writing to the other parties.

ARTICLE IX.

THE AGENT

Bank of America, N.A. has been appointed Agent for the Lenders hereunder
pursuant to Article VIII of the Credit Agreement. It is expressly understood and
agreed by the parties to this Security Agreement that any authority conferred
upon the Agent hereunder is subject to the terms of the delegation of authority
made by the Lenders to the Agent pursuant to the Credit Agreement, and that the
Agent has agreed to act (and any successor Agent shall act) as such hereunder
only on the express conditions contained in such Article VIII. Any successor
Agent appointed pursuant to Article VIII of the Credit Agreement shall be
entitled to all the rights, interests and benefits of the Agent hereunder.

[Remainder of page intentionally left blank; signatures begin on following
page.]

 

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IN WITNESS WHEREOF, each Grantor and the Agent have executed this Security
Agreement as of the date first above written.

 

GRANTORS: ATD ACQUISITION CO. V INC. By:  

/s/ William E. Berry

Name:  

William E. Berry

Title:  

President & CEO

 

TRIWEST TRADING (CANADA) LTD. By:  

/s/ William E. Berry

Name:  

William E. Berry

Title:  

President & CEO

 

AGENT: BANK OF AMERICA, N.A., as Agent By:  

/s/ Seth Benefield

Name:   Seth Benefield Title:   Senior Vice President

Canadian Pledge and Security Agreement

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SCHEDULE 1

Excluded Accounts

Nil.

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EXHIBIT A

Type of Organization, Jurisdiction of Organization, Organizational
Identification

Number, Federal Employer Identification Number, Chief Executive Office,
Locations

I. The corporate name, jurisdiction of organization, organizational
identification number and federal employer identification number of each Grantor
is as follows:

 

Grantor

  

Jurisdiction of Organization

  

Organizational Identification Number

ATD Acquisition Co. V Inc.

   Canada    Corporation No. 8351562 (Canada)

Triwest Trading (Canada) Ltd.

   Canada    Corporation No. 0705861-1-R (Canada)

II. Each Grantor’s mailing address and the location of its place of business (if
it has only one) or its chief executive office (if it has more than one place of
business), is as follows:

 

ATD Acquisition Co. V Inc.

  

c/o CSC North America, Inc.

45 O’Connor Street

Suite 1600

Ottawa, ON

K1P 1A4

Triwest Trading (Canada) Ltd.

  

16408 - 121A Avenue

Edmonton, AB

T5V 1J9

III. (a) Each location that is owned by a Grantor where Collateral is located as
of the date hereof (except for Inventory in transit) is as follows:

Nil.

(b) Each location that is leased by a Grantor where Collateral is located as of
the date hereof (except for Inventory in transit) is as follows:

 

Address

  

City

  

Province/ State

  

Zip/ Postal Code

Building A – Unit 109

26868 56th Avenue

   Langley    BC    V4W 1N9

#102 5498 – 267 St.

   Langley    BC    V4W 3S8

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Address

  

City

  

Province/State

  

Zip/ Postal Code

256 2nd Avenue

   Prince George    BC    V2L 4V7

1644 1st Avenue

   Prince George    BC    V2L 2Y9

1021 Waddington Drive

   Vernon    BC    V1T 9E2

921 Waddington Drive

   Vernon    BC    V1T 9E2

16408 – 121A Avenue N.W.

   Edmonton    AB    T5V 1J9

11749 – 180 Street

   Edmonton    AB    T5S 2J2

5018 – 68th Avenue S.E.

(Alternatively described as 4770, 5150, and 5160 – 68th Avenue S.E. or 4990,
5160 68th Avenue S.E.)

   Calgary    AB    T2C 4N8

5366 – 55th Street S.E.

   Calgary    AB    T2C 3G9

226 Edson Street

   Saskatoon    SK    S7J 0P9

310 6th Avenue

   Regina    SK    S4N 5A4

1450 Wall Street

   Winnipeg    MB    R3E 2S3

1425 Whyte Avenue

   Winnipeg    MB    R3E 1V7

1695 Meyerside Drive

   Mississauga    ON    L5T 1B9

1705 Meyerside Drive |

   Mississauga    ON    L5T 1B9

400 – 1100 Polytek Street

   Ottawa    ON    K1J 0B3

90 rue de Rotterdam

   Saint-Augustin-de-Desmaures    QC    G3A 1S9

150 rue Brossard

   Delson    QC    J5B 1X1

Unit #1 – 755 Foley Avenue

   Bathurst    NB    E2A 4W7

Unit 5 – 1940 Hall Court Bathurst Industrial Park

   Bathurst    NB    E2A 4W7

500 Main Street

   Bathurst    NB    E2A 1B4

175 Beaverbrook Street

   Moncton    NB    E1C 9S4

175b Beaverbrook Street

   Moncton    NB    E1C 9S4

21 McCurdy Avenue

   Dartmouth    NS    B3B 1C4

191 Joseph Zatzman Drive

   Dartmouth    NS    B3B 1M5

(c) Each location where Collateral is held in a public warehouse or is otherwise
held by a bailee or on consignment as of the date hereof (except for Inventory
in transit) is as follows:

Nil.

Canadian Pledge and Security Agreement

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EXHIBIT B

Bailees, Warehousemen and Third Party Possessors of Collateral

The following bailees, warehouseman and other third parties are in possession or
control of Inventory of a Grantor (except for Inventory in transit):

 

Name and Address of Party

  

Nature of Relationship

  

Value of Inventory

  

Owner of Inventory

Nil.

                          

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EXHIBIT C

[Intentionally Deleted]

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EXHIBIT D

Intellectual Property Registrations and Applications

 

I. Patents and Patent Applications

 

Patent

  

Owner

  

Federal

Registration No.

Nil.

                 

 

II. Trademark Registrations and Applications

 

Trademark

  

Owner

  

Federal

Registration No.

Nil.

                 

 

III. Copyright Registrations

 

Copyright

  

Owner

  

Federal

Registration No.

Nil.

                 

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EXHIBIT E

[Intentionally Deleted]

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EXHIBIT F

Pledged Collateral

Equity Interests:

 

Name of Issuer

  

Record Owner

  

Percentage of Total Issued and

Outstanding Equity Interests

Nil.

     

Indebtedness Owing to Grantors:

ATD Acquisition Co. V Inc. loan to Triwest Trading (Canada) Ltd., bearing
interest at 12% per annum, with no fixed terms of repayment, and unsecured. The
shareholder has agreed to provide twelve months’ written notice prior to calling
the loan balance. Principal balance (2011) of $19,448,580.

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EXHIBIT G

PPSA Filing Offices

Alberta

British Columbia

Manitoba

New Brunswick

Nova Scotia

Ontario

Quebec

Saskatchewan

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EXHIBIT H

Form of Joinder

FORM OF

JOINDER AGREEMENT

THIS JOINDER AGREEMENT (this “Supplement”), to the Canadian Pledge and Security
Agreement dated as of                 , 2012 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Security Agreement”),
among ATD ACQUISITION CO. V INC., a corporation incorporated under the laws of
Canada (together with its successors and permitted assigns, the “Initial
Canadian Borrower”); TRIWEST TRADING (CANADA) LTD., a corporation incorporated
under the laws of Canada (together with its successors and permitted assigns,
“Triwest”); the Subsidiary Parties from time to time party thereto (collectively
with the Initial Canadian Borrower and Triwest, the “Grantors” and each a
“Grantor”); and BANK OF AMERICA, N.A., a national banking association, in its
capacity as administrative agent for the lenders party to the Credit Agreement
referred to below and in its capacity as collateral agent for the Secured
Parties (in such capacities, together with its successors in such capacities,
the “Agent”).

Reference is made to the Sixth Amended and Restated Credit Agreement dated as
                , 2012 (as further amended, amended and restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”), by and among
the Grantors, AMERICAN TIRE DISTRIBUTORS, INC., a Delaware corporation (the
“Company”), the other Loan Parties, each subsidiary of the Company from time to
time party thereto, the Lenders from time to time parties thereto, and Bank of
America, N.A., as Agent.

Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement and the Security
Agreement, as applicable, as referred to therein.

The Grantors have entered into the Security Agreement for the purpose of
inducing the Lenders to amend and restate, and to extend credit to the Borrowers
under, the Credit Agreement and to secure each Grantor’s Secured Obligations,
including in the case of each Grantor that is a Loan Guarantor, its obligations
under the Loan Guaranty. Section 7.11 of the Security Agreement and Section 5.11
of the Credit Agreement provide that (i) additional Canadian Subsidiaries (other
than Excluded Subsidiaries) and (ii) any Canadian Subsidiary that was an
Excluded Subsidiary but has ceased to be an Excluded Subsidiary may become
Subsidiary Parties under the Security Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary (the “New
Subsidiary”) is executing this Supplement in accordance with the requirements of
the Credit Agreement or at the request of the Company to become a Subsidiary
Party under the Security Agreement.

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

SECTION 1. In accordance with Section 7.11 of the Security Agreement, the New
Subsidiary by its signature below becomes a Subsidiary Party and Grantor under
the Security Agreement with the same force and effect as if originally named
therein as a Subsidiary

 

2

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Party and the New Subsidiary hereby (a) agrees to all the terms and provisions
of the Security Agreement applicable to it as a Subsidiary Party and Grantor
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Grantor thereunder are true and correct on and as of
the date hereof. In furtherance of the foregoing, the New Subsidiary, as
security for the payment and performance in full of such New Subsidiary’s
Secured Obligations, does hereby create and grant to the Agent, its successors
and assigns, for the benefit of the Secured Parties, their successors and
assigns, a security interest in and Lien on all of the New Subsidiary’s right,
title and interest in all of the following Collateral:

(i) all Accounts;

(ii) all Chattel Paper;

(iii) all Intellectual Property;

(iv) all Documents;

(v) all Equipment;

(vi) all fixtures;

(vii) all General Intangibles;

(viii) all Goods;

(ix) all Instruments;

(x) all Inventory;

(xi) all Investment Property;

(xii) all Deposit Accounts;

(xiii) all cash or other property deposited with the Agent or any Lender or any
Affiliate of the Agent or any Lender or which the Agent, for its benefit and for
the benefit of the other Secured Parties, or any Lender or such Affiliate is
entitled to retain or otherwise possess as collateral pursuant to the provisions
of this Security Agreement or any of the Loan Documents or any agreement
relating to any letter of credit;

(xiv) all books, records, files, correspondence, computer programs, tapes, disks
and related data processing software which contain information identifying or
pertaining to any of the foregoing or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof; and

(xv) any and all accessions to, substitutions for and replacements, products and
cash and non-cash proceeds of the foregoing (including any claims to any items

 

3

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referred to in this definition and any claims against third parties for loss of,
damage to or destruction of any or all of the Collateral or for proceeds payable
under or unearned premiums with respect to policies of insurance) in whatever
form, including cash, negotiable instruments and other instruments for the
payment of money, Chattel Paper, security agreements and other documents.

Notwithstanding the foregoing or anything herein to the contrary, in no event
shall the “Collateral” include, or the security interest attach to, any Excluded
Asset.

Each reference to a “Grantor” in the Security Agreement shall be deemed to
include and be a reference to the New Subsidiary.

SECTION 2. The New Subsidiary represents and warrants to the Agent and the other
Secured Parties that this Supplement has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.

SECTION 3. This Supplement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. Delivery of an executed counterpart of a signature page of this
Supplement by facsimile or other electronic transmission shall be as effective
as delivery of a manually executed counterpart of this Supplement.

SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth
on Schedule I attached hereto is a true and correct schedule of the location of
any and all Collateral of the New Subsidiary, (b) set forth on Schedule II
attached hereto is a true and correct schedule of all the Pledged Collateral of
the New Subsidiary, (c) set forth on Schedule III attached hereto is a true and
correct schedule of all Patents, Trademarks and Copyrights of the New Subsidiary
and (d) set forth under its signature hereto, is the true and correct legal name
of the New Subsidiary, its jurisdiction of formation and the location of its
chief executive office.

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

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE
THEREIN.

SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

4

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SECTION 8. All communications and notices hereunder shall be in writing and
given as provided in Section 8.1 of the Security Agreement.

SECTION 9. The New Subsidiary agrees to reimburse the Agent for its reasonable
documented out-of-pocket expenses in connection with this Supplement, including,
without limitation, the reasonable fees, other charges and disbursements of
counsel for the Agent.

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

 

[NAME OF NEW SUBSIDIARY] By  

 

  Name:   Title: Legal Name: Jurisdiction of Formation: Location of Chief
Executive office: BANK OF AMERICA, N.A., as Agent By  

 

  Name:   Title:

 

5

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Schedule I

to the Joinder Agreement to the

Canadian Pledge and Security Agreement

LOCATION OF COLLATERAL

 

Description

  

Location

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Schedule II

to the Joinder Agreement to the

Canadian Pledge and Security Agreement

PLEDGED COLLATERAL

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Schedule III

to the Joinder Agreement to the

Canadian Pledge and Security Agreement

INTELLECTUAL PROPERTY RIGHTS

PATENT AND PATENT APPLICATIONS

 

Patent

  

Owner

  

Federal Registration No.

                             

TRADEMARK REGISTRATIONS AND APPLICATIONS

 

Trademark

  

Owner

  

Federal Registration No.

                             

COPYRIGHT REGISTRATIONS

 

Copyright

  

Owner

  

Federal Registration No.

                             

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EXHIBIT I

Form of Collateral Access Agreement

FORM OF

COLLATERAL ACCESS AGREEMENT

THIS COLLATERAL ACCESS AGREEMENT (this “Access Agreement”) is made and entered
into between Bank of America, N.A., together with any successor agent (the
“Agent”), as agent for the lenders (collectively, the “Lenders”), and
                    , a                      (hereinafter referred to as
“Landlord”) and affects that real (immovable) property described on Exhibit A
attached hereto and incorporated herein by this reference commonly known as
                     (the “Premises”).

Landlord is the lessor of the Premises pursuant to the provisions of that
certain Lease (the “Lease”), dated                 , between Landlord and
                    , a                      corporation (the “Tenant”), as
tenant.

The Agent, as agent for the Lenders, has, together with the Lenders, entered
into that certain Sixth Amended and Restated Credit Agreement dated as of
                , 2012 (the same as it may be further amended, amended and
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) with, among others, the Tenant pursuant to which the Lenders have
made or propose to make certain loans, extensions of credit or other financial
accommodations to or for the benefit of the Tenant and under which the Tenant
may incur obligations to the Lenders (all such loans and obligations now
existing or hereafter arising together with interest thereon and other fees and
charges in connection therewith being herein referred to as the “Secured
Obligations”). The Secured Obligations are to be secured by, among other things,
all inventory, accounts, general intangibles (incorporeals) and other personal
(movable) property of the Tenant and the proceeds thereof (collectively, the
“Collateral”).

The parties hereto agree as follows:

1. As between Agent and Landlord, neither Agent nor any Lender shall have any
right, title or interest in or to (a) the security deposit, if any, and any rent
which shall have been or which shall be paid by the Tenant to Landlord under and
in accordance with the Lease (other than any portions thereof which shall be
returned to Tenant in accordance with the Lease), or (b) the fixtures which are
not readily removable trade fixtures (e.g., overhead doors and building systems,
including HVAC, plumbing, electrical or sprinkler systems or related fixtures),
and such items shall not constitute Collateral.

2. Landlord acknowledges and agrees that certain items constituting Collateral
are or are to be located at, and may be affixed to, the Premises or improvements
thereon.

3. The Collateral shall be and remain personal (movable) property
notwithstanding the manner of their annexation to the Premises, their
adaptability to the uses and purposes for which the Premises are used, or the
intentions of the party making the annexation.

 

2

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4. Any rights which Landlord may claim to have in and to the Collateral, no
matter how arising, shall be subject and subordinate to the rights, interests,
hypothecs, and liens of Agent therein and Landlord hereby grants to Agent
priority and preference and rank with respect thereto.

5. Landlord consents to the storage and installation of the Collateral on the
Premises and grants to Agent a license, as set forth below, to enter on to the
Premises to do any or all of the following with respect to the Collateral:
assemble, have appraised, display, sever, remove, maintain, prepare for sale or
lease, repair, lease, remove, transfer and/or sell (via one or more public
auctions or private sales).

6. Upon the occurrence of any default, event of default, breach of any covenant
or agreement in the Lease or other event or condition which would entitle
Landlord and as a result of which Landlord intends to exercise any right, power
or remedy thereunder (collectively, a “Lease Default”), and prior to the
exercise of any right to terminate the Lease, or the exercise of any other
remedies under the Lease, the Landlord will notify the Agent of such Lease
Default pursuant to this notice provision at the address set forth below. The
notice agreed to be given herein by the Landlord to the Agent will be in writing
and sent by registered or certified mail, return receipt requested, to the
address set forth below or at such other address as the Agent may specify by
written notice to the Landlord at the address set forth below:

 

If to Agent:  

Bank of America, N.A.

      

300 Galleria Parkway, Suite 800

    

Atlanta, Georgia 30339

    

Attn: Portfolio Manager

   If to Landlord:  

 

    

 

    

 

     Attn:   

 

  

7. Agent shall have the right and license to occupy the Premises for the
purposes described above, for a period not to exceed ninety (90) days (the
length of such period being at Agent’s discretion), following Landlord’s placing
Agent in possession of the Premises. Agent shall pay to Landlord, periodically,
a daily license fee equivalent to one-thirtieth (1/30th) of the monthly rental
provided for in the Lease between Landlord and Tenant without the Agent or any
Lender incurring any other obligations as lessee under the Lease; provided,
however, that the Agent shall pay the cost of utilities and its pro rata share
of taxes during its occupation of the Premises. Any extensions of the foregoing
90-day period shall be with the written consent of Landlord and at the same
rate.

8. All structural and cosmetic damage to the Premises caused by the removal of
the Collateral shall be repaired to the reasonable satisfaction of Landlord by
Agent at its expense. Agent shall indemnify and hold harmless Landlord for
personal injury or property damage claims arising out of the Agent’s entry or
its removal of Collateral arising from such entry.

 

3

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9. This Access Agreement shall continue until such time as all of Tenant’s
obligations to Agent and the Lenders, and expenses (including, without
limitation, reasonable attorneys fees) incurred in connection therewith, have
been paid and all covenants and conditions as more specifically enumerated in
the Credit Agreement have been fully performed.

10. This Access Agreement shall be governed and controlled by and interpreted
under the laws of the Province of              and shall inure to the benefit of
and be binding upon the successors, heirs and assigns of the parties hereto,
including, without limitation, any successor Agent.

Dated:                 , 20    

 

LANDLORD:

                        , a                        By  

 

  Title:  

 

 

AGENT:

     

Bank of America, N.A., as Agent for the Lenders

  By  

 

  Title:  

 

 

4

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EXHIBIT A

to the Form of Collateral Access Agreement

to the Canadian Pledge and Security Agreement

DESCRIPTION OF PROPERTY