**Exhibit 10.3****CANADIAN PLEDGE AND SECURITY AGREEMENT****dated as of March 16, 2006****between****EACH OF THE GRANTORS PARTY HERETO****and****WACHOVIA CAPITAL FINANCE CORPORATION (CANADA),****as the Canadian Agent**
 

 
**TABLE OF CONTENTS**                   **PAGE**           SECTION 1 DEFINITIONS  1    1.1  General Definitions  1    1.2  Definitions; Interpretation  6    1.3  Schedules  7            SECTION 2 GRANT OF SECURITY  7    2.1  Grant of Security  7    2.2  Certain Limited Exclusions  8    2.3  Attachment  8    2.4  Perfection in Quebec  9    2.5  Designation of Collateral Agent as Agent  9            SECTION 3 SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE  9    3.1  Security for Obligations  9    3.2  Continuing Liability Under Collateral  9            SECTION 4 REPRESENTATIONS AND WARRANTIES AND COVENANTS  10    4.1  Generally  10    4.2  Equipment and Inventory  13    4.3  Receivables  14    4.4  Investment Related Property; Investment Related Property Generally   16    4.5  Pledged Equity Interests  18    4.6  Pledged Debt  20    4.7  Further Assurances Respecting Investment Related Property  20    4.8  Material Contracts  21    4.9  Letter of Credit Rights  21    4.10  Intellectual Property  21            SECTION 5 FURTHER ASSURANCES; ADDITIONAL GRANTORS  25    5.1  Further Assurances  25    5.2  Additional Grantors  26            SECTION 6 CANADIAN AGENT APPOINTED ATTORNEY-IN-FACT  27    6.1  Power of Attorney  27    6.2  No Duty on the Part of Canadian Agent or Secured Parties  28            SECTION 7 REMEDIES  28    7.1  Generally  28    7.2  Application of Proceeds  30    7.3  Sales on Credit  31    7.4  Investment Related Property  31    7.5  Intellectual Property  31    7.6  Cash Proceeds  33 

 

-ii-                   **PAGE**           SECTION 8 CANADIAN AGENT  33            SECTION 9 CONTINUING SECURITY INTEREST; TRANSFER OF LOANS  34            SECTION 10 STANDARD OF CARE; CANADIAN AGENT MAY PERFORM  34            SECTION 11 MISCELLANEOUS  35            SCHEDULE 4.1 GENERAL INFORMATION               SCHEDULE 4.2 LOCATION OF EQUIPMENT AND INVENTORY               SCHEDULE 4.4 INVESTMENT RELATED PROPERTY               SCHEDULE 4.6 DESCRIPTION OF LETTERS OF CREDIT               SCHEDULE 4.10 INTELLECTUAL PROPERTY               EXHIBIT A PLEDGE SUPPLEMENT    
 

 
     This **CANADIAN PLEDGE AND SECURITY AGREEMENT**, dated as of March 16, 2006 (this“**Agreement**”), between **EACH OF THE UNDERSIGNED**, whether as an original signatory hereto or as anAdditional Grantor (as herein defined) (each, a “**Grantor**”), and **WACHOVIA CAPITAL FINANCECORPORATION (CANADA)**, as Canadian Agent for the Canadian Secured Parties (as herein defined)(together with its permitted successors in such capacity, the “**Canadian Agent**”).**RECITALS:**     **WHEREAS**, reference is made to that certain Credit and Guaranty Agreement, dated as of the datehereof (as it may be amended, restated, amended and restated, supplemented or otherwise modifiedfrom time to time, the “**Credit Agreement**”), by and among, *inter alios*, Easton-Bell Sports, Inc., aDelaware corporation (the “**Company**”), RBG Holdings Corp., a Delaware corporation, certainAffiliates of the Company, as Canadian Borrowers, certain Affiliates of the Company, as U.S.Guarantors, certain Affiliates of the Canadian Borrowers, as Canadian Guarantors, the Lenders partythereto from time to time, Wachovia Bank, National Association, as Administrative Agent andCollateral Agent and Wachovia Capital Finance Corporation (Canada), an Ontario corporation, asCanadian Agent; and     **WHEREAS**, in consideration of the extensions of credit and other accommodations of the Lendersas set forth in the Credit Agreement each Grantor has agreed to grant security in respect of theCanadian Obligations under the Credit Documents as set forth herein.     **NOW, THEREFORE**, in consideration of the premises and the agreements, provisions and covenantsherein contained, each Grantor and the Canadian Agent agree as follows:**SECTION 1****DEFINITIONS****1.1 General Definitions**     In this Agreement, the following terms shall have the following meanings:     “**Account Debtor**” shall mean each Person who is obligated on a Receivable.     “**Accounts**” shall mean all “accounts” as such term is defined in the PPSA, and shall includeall rights and entitlements of each Grantor to payment for goods sold or leased or for servicesrendered, which are not evidenced by Instruments or Chattel Paper, and whether or not earned byperformance.     “**Additional Grantors**” shall have the meaning assigned in Section 5.2.     “**Agreement**” shall have the meaning set forth in the preamble.     “**Annual Reporting Date**” shall mean the date on which annual financial statements are deliveredby the Company pursuant to Section 5.1(a) of the Credit Agreement.
 

 
- 2 -     “**Assigned Agreements**” shall mean all agreements and contracts to which such Grantor is a partyas of the date hereof, or to which such Grantor becomes a party after the date hereof, including,without limitation, each Material Contract, as each such agreement may be amended, supplemented orotherwise modified from time to time.     “**Bankruptcy Code**” shall mean the *Bankruptcy and Insolvency Act*(Canada), the *Companies’Creditors Arrangement Act*(Canada) and the *Winding-Up and Restructuring Act*(Canada) as now andhereafter in effect, or any successor statutes.     “**Canadian Agent**” shall have the meaning set forth in the preamble.     “**Canadian Secured Parties**” shall mean the Canadian Lenders and the Canadian Agents and shallinclude, without limitation, all former Lenders and Agents to the extent that any CanadianObligations owing to such Persons were incurred while such Persons were Canadian Lenders orCanadian Agent and such Canadian Obligations have not been paid or satisfied in full.     “**Chattel Paper**” shall mean all “chattel paper” as defined in the PPSA.     “**Collateral**” shall have the meaning assigned in Section 2.1.     “**Collateral Account**” shall mean any account established by the Canadian Agent.     “**Collateral Records**” shall mean books, records, ledger cards, files, correspondence, customerlists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes,disks and related data processing software, internet, intranet and extranet sites and similar itemsthat at any time evidence or contain information relating to any of the Collateral or are otherwisenecessary or helpful in the collection thereof or realization thereupon.     “**Collateral Support**” shall mean all property (real or personal) assigned, hypothecated orotherwise securing any Collateral and shall include any security agreement or other agreementgranting a Lien in such real or personal property.     “**Company**” shall have the meaning set forth in the preamble.     “**Copyright Licenses**” shall mean any and all agreements providing for the granting of any rightin or to Copyrights (whether such Grantor is licensee or licensor thereunder) including, withoutlimitation, each agreement referred to in Schedule 4.10 B).     “**Copyrights**” shall mean all Canadian copyrights, including but not limited to copyrights insoftware and databases, whether registered or unregistered, and, with respect to any and all of theforegoing: (i) all registrations and applications therefor including, without limitation, theregistrations and applications referred to in Schedule 4.10(A), (ii) all extensions and renewalsthereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to sue forpast, present and future infringements thereof, and (v) all Proceeds of the foregoing, including,without limitation, licenses, royalties, income, payments, claims, damages and proceeds of suit.     “**Credit Agreement**” shall have the meaning set forth in the recitals.
 

 
- 3 -     “**Deposit Accounts**” shall mean (i) any demand, time, savings, passbook, or similar accountmaintained with a financial institution that is engaged in the business of banking and all accountsand sub-accounts relating to any of the foregoing accounts and (ii) all cash, funds, checks, notes,bills of exchange, acceptances and Instruments from time to time on deposit in any of the accountsor sub-accounts described in clause (i) of this definition.     “**Equipment**” shall mean: (i) all “equipment” as defined in the PPSA, (ii) all machinery,manufacturing equipment, data processing equipment, computers, office equipment, furnishings,furniture, appliances, fixtures and tools (in each case, regardless of whether characterized asequipment under the PPSA) and (iii) all accessions or additions thereto, all parts thereof, whetheror not at any time of determination incorporated or installed therein or attached thereto, and allreplacements therefor, wherever located, now or hereafter existing, including any fixtures.     “**Goods**” (i) shall mean all “goods” as defined in the PPSA and (ii) shall include, withoutlimitation, all Inventory and Equipment (in each case, regardless of whether characterized as goodsunder the PPSA).     “**Grantors**” shall have the meaning set forth in the preamble.     “**Instruments**” shall mean all “instruments” as defined in the PPSA, and shall include allpromissory notes, drafts, bills of exchange or acceptances.     “**Intangibles**” (i) shall mean all “intangibles” as defined in the PPSA, and (ii) shall include,without limitation, all tax refunds, all licenses, permits, concessions and authorizations, allAssigned Agreements and all Intellectual Property (in each case, regardless of whethercharacterized as intangibles under the PPSA).     “**Intellectual Property**” shall mean, collectively, the Copyrights, the Copyright Licenses, thePatents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and theTrade Secret Licenses.     “**Inventory**” shall mean (i) all “inventory” as defined in the PPSA and (ii) all goods held forsale or lease or to be furnished under contracts of service or so leased or furnished, all rawmaterials, work in process, finished goods, and materials used or consumed in the manufacture,packing, shipping, advertising, selling, leasing, furnishing or production of such inventory orotherwise used or consumed in any Grantor’s business; all goods in which any Grantor has aninterest in mass or a joint or other interest or right of any kind; and all goods which arereturned to or repossessed by any Grantor, all computer programs embedded in any goods and allaccessions thereto and products thereof (in each case, regardless of whether characterized asinventory under the PPSA).     “**Investment Related Property**” shall mean all Pledged Equity Interests, Pledged Debt, theCollateral Accounts and certificates of deposit.     “**Lien**” shall mean (i) any lien, hypothec mortgage, pledge, assignment, security interest,charge or encumbrance of any kind (including any agreement to give any of the foregoing, anyconditional sale or other title retention agreement, and any lease in the nature thereof) and anyoption, trust or other preferential arrangement having the practical effect of any of the foregoing
 

 
- 4 -and (ii) in the case of Pledged Equity Interests, any purchase option, call or similar rightof a third party with respect to such Pledged Equity Interests.     “**Material Receivables**” is defined in Section 4.3 hereof.     “**Patent Licenses**” shall mean all agreements providing for the granting of any right in or toPatents (whether such Grantor is licensee or licensor thereunder) including, without limitation,each agreement referred to in Schedule 4.10(D).     “**Patents**” shall mean all Canadian patents and similar industrial property rights, andapplications for any of the foregoing, including, but not limited to: (i) each patent and patentapplication referred to in Schedule 4.10(C) hereto, (ii) all reissues, divisions, continuations,continuations-in-part, extensions, renewals, and re-examinations thereof, (iii) all rightscorresponding thereto throughout the world, (iv) all inventions and improvements described therein,(v) all rights to sue for past, present and future infringements thereof, (vi) all licenses,claims, damages, and proceeds of suit arising therefrom, and (vii) all Proceeds of the foregoing,including, without limitation, licenses, royalties, income, payments, claims, damages, and proceedsof suit.     “**Permitted Sale**” shall mean those sales, transfers or assignments permitted by the CreditAgreement.     “**Pledge Supplement**” shall mean any supplement to this Agreement in substantially the form ofExhibit A.     “**Pledged Debt**” shall mean all Indebtedness owed to such Grantor, including, withoutlimitation, all Indebtedness described on Schedule 4.4(A) under the heading “Pledged Debt”, issuedby the obligors named therein, the instruments evidencing such Indebtedness, and all interest,cash, instruments and other property or proceeds from time to time received, receivable orotherwise distributed in respect of or in exchange for any or all of such Indebtedness.     “**Pledged Equity Interests**” shall mean all Pledged Stock, Pledged Partnership Interests andPledged Trust Interests.     “**Pledged Partnership Interests**” shall mean (as limited by Section 2.2 hereof) all interests inany general partnership, limited partnership, limited liability partnership or other partnershipowned by a Grantor, including, without limitation, all partnership interests listed on Schedule4.4(A) under the heading “Pledged Partnership Interests” and the certificates, if any, representingsuch partnership interests and any interest of such Grantor on the books and records of suchpartnership or on the books and records of any securities intermediary pertaining to such interestand all dividends, distributions, cash, warrants, rights, options, instruments, securities andother property or proceeds from time to time received, receivable or otherwise distributed inrespect of or in exchange for any or all of such partnership interests.     “**Pledged Stock**” shall mean (as limited by Section 2.2 hereof) all shares of Capital Stockowned by such Grantor, including, without limitation, all Capital Stock described on Schedule4.4(A) under the heading “Pledged Stock”, and the certificates, if any, representing such equityinterests and any interest of such Grantor in the entries on the books of the issuer of such equity
 

 
- 5 -interests or on the books of any securities intermediary pertaining to such equity interests,and all dividends, distributions, cash, warrants, rights, options, instruments, securities andother property or proceeds from time to time received, receivable or otherwise distributed inrespect of or in exchange for any or all of such equity interests.     “**Pledged Trust Interests**” shall mean (as limited by Section 2.2 hereof) all interests in aDelaware business trust or other trust including, without limitation, all trust interests listed onSchedule 4.4(A) under the heading “Pledged Trust Interests” and the certificates, if any,representing such trust interests and any interest of such Grantor on the books and records of suchtrust or on the books and records of any securities intermediary pertaining to such interest andall dividends, distributions, cash, warrants, rights, options, instruments, securities and otherproperty or proceeds from time to time received, receivable or otherwise distributed in respect ofor in exchange for any or all of such trust interests.     “**PPSA**” shall mean the *Personal Property Security Act*(Ontario) as in effect from time to time,together with all regulations thereunder.     “**Proceeds**” shall mean: (i) all “proceeds” as defined in the PPSA, and (ii) whatever isreceivable or received when Collateral or proceeds are sold, exchanged, collected or otherwisedisposed of, whether such disposition is voluntary or involuntary.     “**Quarterly Reporting Date**” shall mean the date on which quarterly financial statements aredelivered by the Company pursuant to Section 5.1(b) of the Credit Agreement.     “**Receivables**” shall mean all rights to payment, whether or not earned by performance, forgoods or other property sold, leased, licensed, assigned or otherwise disposed of, or servicesrendered or to be rendered, including, without limitation all such rights constituting or evidencedby any Account, Chattel Paper, Instrument, Intangible, or Investment Related Property together withall of Grantor’s rights, if any, in any goods or other property giving rise to such right topayment and all Collateral Support related thereto and all Receivables Records.     “**Receivables Records**” shall mean (i) all original copies of all documents, instruments orother writings or electronic records or other Records evidencing the Receivables, (ii) all books,correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papersrelating to Receivables, including, without limitation, all tapes, cards, computer tapes, internet,intranet and extranet sites, computer discs, computer runs, record keeping systems and other papersand documents relating to the Receivables, whether in the possession or under the control ofGrantor or any computer bureau or agent from time to time acting for Grantor or otherwise, (iii)all evidences of the filing of financing statements and the registration of other instruments inconnection therewith, and amendments, supplements or other modifications thereto, notices to othercreditors or secured parties, and certificates, acknowledgments, or other writings, including,without limitation, lien search reports, from filing or other registration officers, (iv) allcredit information, reports and memoranda relating thereto and (v) all other written or nonwrittenforms of information related in any way to the foregoing or any Receivable.     “**Record**” shall have the meaning specified in the PPSA.     “**Secured Obligations**” shall have the meaning assigned in Section 3.1.
 

 
- 6 -     “**Securities**” shall mean any stock, units, shares, partnership interests, membership or limitedliability company interests, voting trust certificates, certificates of interest or participationin any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, orother evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, orin general any instruments commonly known as “securities” or any certificates of interest, sharesor participations in temporary or interim certificates for the purchase or acquisition of, or anyright to subscribe to, purchase or acquire, any of the foregoing.     “**Trademark Licenses**” shall mean any and all agreements providing for the granting of any rightin or to Trademarks (whether such Grantor is licensee or licensor thereunder) including, withoutlimitation, each agreement referred to in Schedule 4.10 (F).     “**Trademarks**” shall mean all Canadian trademarks, trade names, corporate names, company names,business names, fictitious business names, Internet domain names, service marks, certificationmarks, logos, elements of package or trade dress of goods or services, other source or businessidentifiers, designs and intangibles of a like nature, all registrations and applications for anyof the foregoing, including, but not limited to: (i) the registrations and applications referred toin Schedule 4.10 (E), (ii) all extensions or renewals of any of the foregoing, (iii) all of thegoodwill of the business connected with the use of and symbolized by the foregoing, (iv) the rightto sue for past, present and future infringement or dilution of any of the foregoing or for anyinjury to goodwill, and (v) all Proceeds of the foregoing, including, without limitation, licenses,royalties, income, payments, claims, damages, and proceeds of suit.     “**Trade Secret Licenses**” shall mean any and all agreements providing for the granting of anyright in or to Trade Secrets (whether such Grantor is licensee or licensor thereunder) including,without limitation, each agreement referred to in Schedule 4.10(G).     “**Trade Secrets**” shall mean all trade secrets and all other confidential or proprietaryinformation and know-how whether or not such Trade Secret has been reduced to a writing or othertangible form, including all documents and things embodying, incorporating, or referring in any wayto such Trade Secret, including but not limited to: (i) the right to sue for past, present andfuture misappropriation or other violation of any Trade Secret, and (ii) all Proceeds of theforegoing, including, without limitation, licenses, royalties, income, payments, claims, damages,and proceeds of suit.**1.2 Definitions; Interpretation**     All capitalized terms used herein (including the preamble and recitals hereto) and nototherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement or, ifnot defined therein, in the PPSA. References to “Sections,” “Exhibits” and “Schedules” shall be toSections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwisespecifically provided. Section headings in this Agreement are included herein for convenience ofreference only and shall not constitute a part of this Agreement for any other purpose or be givenany substantive effect. Any of the terms defined herein may, unless the context otherwiserequires, be used in the singular or the plural, depending on the reference. The use herein of theword “include” or “including”, when following any general statement, term or matter, shall not beconstrued to limit such statement, term or matter to the specific items or matters set forthimmediately following such word or to similar items or matters, whether or not nonlimiting
 

 
- 7 -language (such as “without limitation” or “but not limited to” or words of similar import) isused with reference thereto, but rather shall be deemed to refer to all other items or matters thatfall within the broadest possible scope of such general statement, term or matter. If any conflictor inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shallgovern. Notwithstanding the foregoing, if there is any right or remedy in favor of the CanadianAgent set out in this Agreement or any part thereof which is not set out or provided for in theCredit Agreement, such additional right or remedy shall not constitute a conflict or inconsistency.To the extent any Grantor is permitted to dispose of the Collateral under the Credit Agreement, nonotice or consent shall be required hereunder. All references herein to provisions of the PPSAshall include all successor provisions under any subsequent version or amendment to any Section ofthe PPSA.**1.3 Schedules**     References to any Schedules hereunder shall refer to the Schedules as attached to thisAgreement on the Closing Date as well as to any amendments, supplements or modifications to theinformation contained in such Schedules, including but not limited to, delivery of written noticeby the Company pursuant to Section 5.1(n) of the Credit Agreement and delivery of the annualcollateral verification pursuant to Section 5.1(o) of the Credit Agreement.**SECTION 2****GRANT OF SECURITY****2.1 Grant of Security**     Each Grantor hereby grants to each of the Canadian Agent and the Canadian Secured Parties asecurity interest in and continuing Lien on and pledges and hypothecates up to the amount ofCanadian Dollars $24,000,000 with interest thereon at the rate of 25% per annum, all of suchGrantor’s right, title and interest in, to and under all personal property of such Grantor,including, but not limited to the following, in each case whether now owned or existing orhereafter acquired or arising and wherever located (all of which being hereinafter collectivelyreferred to as the “**Collateral**”): (a) Accounts;  (b) Chattel Paper;  (c) Documents of Title;  (d) Intangibles;  (e) Goods, Inventory and Equipment;  (f) Instruments;  (g) Intellectual Property;  (h) Investment Related Property;
 

 
- 8 - (i) Money;  (j) Receivables and Receivable Records;  (k) to the extent not otherwise included above, all Collateral Records andCollateral Support relating to any of the foregoing; and  (l) to the extent not otherwise included above, all Proceeds, products, accessions,rents and profits of or in respect of any of the foregoing.**2.2 Certain Limited Exclusions**     Notwithstanding anything herein to the contrary, in no event shall the security interest andLien granted under Section 2.1 hereof attach to (1) (a) any Equipment that is subject to a purchasemoney lien or capital lease permitted under the Credit Agreement to the extent the documentsrelating to such purchase money lien or capital lease would not permit such Equipment to be subjectto the security interests created hereby or (b) any property for so long as the grant of suchsecurity interest (i) is prohibited by any applicable law of any Governmental Authority, or (ii)will constitute or result in the abandonment, invalidation, unenforceability, breach or terminationpursuant to the terms of, or a default under, any lease, license, contract or other agreementevidencing or giving rise to such property or, in the case of any Investment Related Property,applicable shareholder or similar agreement, but the Grantor of such security interest and Lienshall hold its interest therein in trust for the Canadian Agent until such time as the consent ofthe other party to such lease, license, contract or other agreement or shareholder or similaragreement is obtained; provided, further, that such security interest shall attach immediately atsuch time as the condition or term causing such abandonment, invalidation, unenforceability,breach, termination or default shall be rendered ineffective (by operation of the PPSA orotherwise) or remedied, and to the extent severable, shall attach immediately to any portion ofsuch lease, license, contract or other agreement or shareholder or similar agreement that does notresult in any of the consequences specified in (1)(b)(i) or (1)(b)(ii) above; (2) the last day ofthe term of any lease (but upon the enforcement of the Canadian Agent’s rights hereunder, theCanadian Agent shall stand possessed of such last day in trust to assign the same to any Personacquiring such term); (3) any Consumer Goods; or (4) Capital Stock in any unlimited liabilitycompany owned by any Grantor or acquired hereafter.     Notwithstanding anything contained herein to the contrary, the Grantors shall not be requiredto take any actions with respect to the property excluded pursuant to this Section 2.2 and none ofthe representations, warranties and covenants contained herein shall be deemed to apply to any suchproperty.**2.3 Attachment**(1) Each Grantor hereby acknowledges that: (a) value has been given; (b) each Grantor has rights inits Collateral (other than Collateral acquired after the date hereof); and (c) it has not agreed topostpone the time for attachment and that attachment shall occur upon the execution of thisAgreement and, in the case of Collateral acquired after the date hereof, when a Grantor has rightstherein.
 

 
- 9 -(2) If a Grantor acquires any certificates evidencing Investment Related Property, not alreadydelivered to the Canadian Agent, after the date hereof, such Grantor will, forthwith upon receiptby such Grantor, deliver to the Canadian Agent such certificates and shall duly endorse in blankthe same for transfer or deliver the same with a duly executed power of attorney in blank.**2.4 Perfection in Quebec**     To the extent applicable, for the purposes of publication (i.e. perfection) of the pledge andhypothecation provided for herein under the laws of the Province of Quebec, the Investment RelatedProperty shall be delivered by the Grantors to and be held by the Canadian Secured Parties, withthe consent of such Grantors, through the Canadian Agent, as agent, mandatary, depositary andcustodian of the Investment Related Property for and on behalf of the Canadian Secured Parties.The Canadian Agent hereby acknowledges having received on the date hereof evidence in writing ofthe pledge and hypothecation created herein, pursuant to the requirements of Article 2705 of the*Civil Code of Quebec*.**2.5 Designation of Collateral Agent as Agent**     The Canadian Agent may from time to time, without notice to the Grantors, designate theCollateral Agent as its agent for the purpose of holding Investment Related Property.**SECTION 3****SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE****3.1 Security for Obligations**     This Agreement secures, and the Collateral is collateral security for, the prompt and completepayment or performance in full when due, whether at stated maturity, by required prepayment,declaration, acceleration, demand or otherwise, including the payment of amounts that would becomedue but for the operation of the Bankruptcy Code, all Canadian Obligations with respect to everyGrantor (the “**Secured Obligations**”).**3.2 Continuing Liability Under Collateral**     Notwithstanding anything herein to the contrary, (i) each Grantor shall remain liable for allCanadian Obligations under the Collateral and nothing contained herein is intended or shall be adelegation of duties to the Canadian Agent or any Secured Party, (ii) each Grantor shall remainliable under each of the agreements included in the Collateral, including, without limitation, anyagreements relating to Pledged Partnership Interests, to perform all of the obligations undertakenby it thereunder all in accordance with and pursuant to the terms and provisions thereof andneither the Canadian Agent nor any Secured Party shall have any obligation or liability under anyof such agreements by reason of or arising out of this Agreement or any other document relatedthereto nor shall the Canadian Agent nor any Secured Party have any obligation to make any inquiryas to the nature or sufficiency of any payment received by it or have any obligation to take anyaction to collect or enforce any rights under any agreement included in the Collateral, including,without limitation, any agreements relating to Pledged Partnership Interests, and (iii) theexercise by the Canadian Agent of any of its rights hereunder
 

 
- 10 -shall not release any Grantor from any of its duties or obligations under the contracts andagreements included in the Collateral.**SECTION 4****REPRESENTATIONS AND WARRANTIES AND COVENANTS****4.1 Generally** (a) Representations and Warranties. Each Grantor hereby represents andwarrants, on the Closing Date and (x) with respect to clauses (i) and (ix) below oneach Credit Date and (y) with respect to all other clauses below, on each AnnualReporting Date, that: (i) it owns the Collateral purported to be owned by it orotherwise has the rights it purports to have in each item of Collateral freeand clear of any and all Liens, rights or claims of all other Persons,including, without limitation, liens arising as a result of such Grantorbecoming bound (as a result of merger or otherwise) as debtor under asecurity agreement entered into by another Person, other than PermittedLiens;  (ii) it has indicated on Schedule 4.1(A): (w) the type oforganization of such Grantor, (x) the jurisdiction of organization of suchGrantor, (y) its organizational identification number, if any and (z) thejurisdiction where the chief executive office or its sole place of businessis (or the principal residence if such Grantor is a natural person), and forthe one-year period preceding the date hereof has been, located;  (iii) the full legal name and any French forms of names ofsuch Grantor is as set forth on Schedule 4.1(A) and it has not done in thefive (5) years prior to the Closing Date, business under any other nameexcept for those names set forth on Schedule 4.1(B);  (iv) except as provided on Schedule 4.1(C), it has not changedits name, jurisdiction of organization, chief executive office or sole placeof business (or principal residence if such Grantor is a natural person) orits corporate structure in any way (e.g., by merger, consolidation, changein corporate form or otherwise) within the five (5) years prior to theClosing Date;  (v) it has not within the five (5) years prior to the ClosingDate become bound (whether as a result of merger or amalgamation orotherwise) as debtor under a security agreement entered into by anotherPerson, which has not heretofore been terminated other than the agreementsidentified on Schedule 4.1(D) hereof;  (vi) (u) upon the filing of all PPSA financing statementsnaming each Grantor as “debtor” and the Canadian Agent as “secured party”and describing the
 

 
- 11 -Collateral in the filing offices set forth opposite such Grantor’s name onSchedule 4.1(E) hereof and other filings delivered by each Grantor, (v) upondelivery of all Instruments, Chattel Paper and certificated Pledged EquityInterests and Pledged Debt, and (w) upon recordation of the securityinterests granted hereunder in Patents, Trademarks and Copyrights in theapplicable intellectual property registries, including the CanadianIntellectual Property Office, the security interests granted to the CanadianAgent hereunder constitute valid and perfected first priority Liens (subjectin the case of priority only to Permitted Liens) on all of the Collateralsubject to such grant; (vii) other than the financing statements filed in favor ofthe Canadian Agent, no effective PPSA financing statement, fixture filing orother instrument similar in effect under any applicable law covering all orany part of the Collateral is on file in any filing or recording officeexcept for (x) financing statements for which proper termination statementshave been delivered to the Canadian Agent for filing and (y) financingstatements filed in connection with Permitted Liens;  (viii) other than the financing statements to be filed in favor of the CanadianAgent or any other actions, filing or notices to be consummated after theClosing Date pursuant to Section 5.14 of the Credit Agreement with respectto the Collateral, no authorization, approval or other action by, and nonotice to or filing with, any Governmental Authority or regulatory body isrequired for either (i) the pledge or grant by any Grantor of the Lienspurported to be created in favor of the Canadian Agent hereunder or (ii) theexercise by Canadian Agent of any rights or remedies in respect of anyCollateral (whether specifically granted or created hereunder or created orprovided for by applicable law), except as may be required, in connectionwith the disposition of any Investment Related Property, by laws generallyaffecting the offering and sale of Securities;  (ix) all information supplied by any Grantor with respect toany of the Collateral (in each case taken as a whole with respect to anyparticular Collateral) is accurate and complete in all material respects;  (x) none of the Collateral constitutes, or is the Proceedsof, minerals, hydrocarbons or the like to be extracted or timber to be cut,growing crops or the unborn young of animals; and  (xi) such Grantor has been duly organized as an entity of thetype as set forth opposite such Grantor’s name on Schedule 4.1(A) solelyunder the laws of the jurisdiction as set forth opposite such Grantor’s nameon Schedule 4.1(A) and remains duly existing as such. Such Grantor has notfiled any documents of continuance in any other jurisdiction.`Notwithstanding anything herein to the contrary, all representations and warrantiescontained in this Agreement to be made by a Grantor on any Annual
 

 
- 12 -`Reporting Date shall be deemed for purposes of Section 3.2(a)(iii) of the CreditAgreement as if made on the most recent Annual Reporting Date (or if no AnnualReporting Date has occurred, then as of the Closing Date) and shall not be broughtdown and made as of any Credit Date to the extent such Credit Date is not theClosing Date or an Annual Reporting Date. (b) Covenants and Agreements. Each Grantor hereby covenants and agreesthat: (i) except for the security interest created by thisAgreement, it shall not create or suffer to exist any Lien upon or withrespect to any of the Collateral, except Permitted Liens, and such Grantorshall defend the Collateral against all Persons at any time claiming anyinterest therein;  (ii) it shall not produce, use or permit to its knowledge anyCollateral to be used in violation of any provision of this Agreement or inany material respect unlawfully or in violation of any applicable statute,regulation, decree, order or ordinance or any policy of insurance coveringthe Collateral;  (iii) it shall not change such Grantor’s name, identity,corporate structure (e.g., by merger, amalgamation, consolidation, change incorporate form or otherwise), type of organization or jurisdiction oforganization or unless it shall have (a) notified the Canadian Agent inwriting, by executing and delivering to the Canadian Agent a completedPledge Supplement, substantially in the form of Exhibit A attached hereto,together with all Supplements to Schedules thereto, at least fifteen (15)days prior to any such change or establishment (unless the Canadian Agentconsents to a shorter period or notice after the fact), identifying such newproposed name, identity, corporate structure, jurisdiction of organizationand providing such other information in connection therewith as the CanadianAgent may reasonably request and (b) taken all actions reasonably requestedby the Canadian Agent to maintain the continuous validity, perfection andthe same or better priority of the Canadian Agent’s security interest in theCollateral intended to be granted and agreed to hereby;  (iv) if the Canadian Agent or any Secured Party gives value toenable Grantor to acquire rights in or the use of any Collateral, it shalluse such value for such purposes and such Grantor further agrees thatrepayment of any Obligation shall apply on a “first-in, first-out” basis sothat the portion of the value used to acquire rights in any Collateral shallbe paid in the chronological order such Grantor acquired rights therein;  (v) it shall not take or permit any action which couldreasonably be expected to materially impair the Canadian Agent’s rights inthe Collateral other than Permitted Sales and the granting of PermittedLiens; and  (vi) it shall not sell, transfer or assign (by operation oflaw or otherwise) any Collateral except as Permitted Sales and the grantingof Permitted Liens.
 

 
- 13 -**4.2 Equipment and Inventory** (a) Representations and Warranties. Each Grantor represents and warrants,on the Closing Date and on each Annual Reporting Date, that: (i) substantially all material Equipment and Inventoryincluded in the Collateral was kept in the possession of salesmen,processors or repairmen in transit or in the ordinary course of businessprovided that with respect to consignee arrangements with the Grantors’customers, the Grantors shall specify locations by client (not by location). (b) Covenants and Agreements. Each Grantor covenants and agrees that: (i) it shall (A) notify the Canadian Agent in writing,contemporaneously with the delivery of the annual financial statements underSection 5.1(c) of the Credit Agreement and at such other times as theCanadian Agent may reasonably request by executing and delivering to theCanadian Agent the annual collateral verification required by Section 5.1(o)of the Credit Agreement or an amendment or supplement to Schedule 4.2, asapplicable, of any Document of Title evidencing any Equipment and Inventoryand (B) take all actions necessary to maintain the continuous validity,perfection and the same or better priority of the Canadian Agent’s securityinterest in the Collateral intended to be granted and agreed to hereby, orto enable the Canadian Agent to exercise and enforce its rights and remedieshereunder, with respect to such Document of Title, Equipment and Inventory;  (ii) it shall keep correct and accurate records of theInventory, as is customarily maintained under similar circumstances byPersons of established reputation engaged in similar business, and in anyevent in conformity with GAAP;  (iii) it shall not deliver any Document of Title evidencingany Equipment and Inventory to any Person other than the issuer of suchDocument of Title to claim the Goods evidenced therefor or the CanadianAgent;  (iv) if any Equipment or Inventory (other than Inventorycovered by clause (vii)) with a value in excess of Canadian Dollars $600,000individually or Canadian Dollars $5,000,000 in the aggregate is inpossession or control of any third party for a period of more than 30 days,each Grantor shall notify the Canadian Agent thereof no later than the nextQuarterly Reporting Date and thereafter, upon reasonable request by theCanadian Agent, each Grantor shall join with the Canadian Agent in notifyingthe third party of the Canadian Agent’s security interest and usecommercially reasonable efforts to obtain an acknowledgment from the thirdparty that it is holding the Equipment and Inventory for the benefit of theCanadian Agent; provided that such notification and acknowledgment shall notbe required to the extent prohibited by a bona fide Contractual Obligationof
 

 
- 14 -such Grantor and such Contractual Obligation was not entered into incontemplation of these requirements; (v) with respect to any item of Equipment in excess ofCanadian Dollars $600,000 individually or Canadian Dollars $5,000,000 in theaggregate which is covered by a certificate of title under a statute of anyjurisdiction under the law of which indication of a security interest onsuch certificate is required as a condition of perfection thereof, upon thereasonable request of the Canadian Agent, (A) provide information withrespect to any such Equipment, (B) execute and file with the registrar ofmotor vehicles or other appropriate authority in such jurisdiction anapplication or other document requesting the notation or other indication ofthe security interest created hereunder on such certificate of title, and(C) deliver to the Canadian Agent copies of all such applications or otherdocuments filed during such calendar quarter and copies of all suchcertificates of title issued during such calendar quarter indicating thesecurity interest created hereunder in the items of Equipment coveredthereby;  (vi) it shall notify the Canadian Agent no later than the nextQuarterly Reporting Date of any Inventory or Equipment in excess of CanadianDollars $600,000 individually or Canadian Dollars $5,000,000 in theaggregate coming in the possession of an issuer of a Document of Titletherefore; and  (vii) if any Inventory in excess of Canadian Dollars$10,000,000 in the aggregate with respect to any one customer of a Grantoror Canadian Dollars $25,000,000 in the aggregate with respect to allcustomers of the Grantors is held by such customer or customers pursuant toa consignment or sale or return arrangement, promptly notify the CanadianAgent of such arrangement and to the extent requested by the Canadian Agent,take such actions as are necessary to perfect the Grantor’s Lien on suchInventory.**4.3 Receivables** (a) Representations and Warranties. Each Grantor represents and warrants,on the Closing Date and on each Credit Date, that: (i) each Material Receivable arose from bona fidetransactions in the ordinary course of business;  (ii) none of the Account Debtors in respect of any MaterialReceivable is the government of the United States, Canada, any agency orinstrumentality thereof, any state, province, territory or municipality orany foreign sovereign; and  (iii) no Material Receivable is evidenced by, or constitutes,an Instrument or Chattel Paper which has not been delivered to, or otherwisesubjected to
 

 
- 15 -the control of, the Canadian Agent to the extent required by, and inaccordance with Section 4.3(c). (b) Covenants and Agreements: Each Grantor hereby covenants and agreesthat: (i) it shall keep and maintain at its own cost and expenseaccurate and complete records of the Receivables, as is customarilymaintained under similar circumstances by Persons of established reputationengaged in similar businesses, and in any event in conformity with GAAP;  (ii) other than in the ordinary course of business and exceptas otherwise provided in subsection (iii) below, upon the occurrence andduring the continuation of an Event of Default, such Grantor shall not (v)amend, modify, terminate or waive any provision of any Receivable in excessof Canadian Dollars $600,000 individually for any invoice or CanadianDollars $5,000,000 in the aggregate for any account (“**Material Receivables**”)in any manner which could reasonably be expected to have a material adverseeffect on the value of such Material Receivable as Collateral, (w) grant anyextension or renewal of the time of payment of any Material Receivable, (x)compromise or settle any dispute, claim or legal proceeding with respect toany Material Receivable for less than the total unpaid balance thereof, (y)release, wholly or partially, any Person liable for the payment thereof, or(z) allow any credit or discount thereon;  (iii) except as otherwise provided in this subsection, eachGrantor may continue to collect all amounts due or to become due to suchGrantor under the Receivables and may exercise each right it may have underany Receivable or Collateral Support, in each case, at its own expense;provided, however, at any time following the occurrence and during thecontinuation of an Event of Default, the Canadian Agent may: (1) direct theAccount Debtors under any Receivables to make payment of all amounts due orto become due to such Grantor thereunder directly to the Canadian Agent; (2)notify, or require any Grantor to notify, each Person maintaining a lockboxor similar arrangement to which Account Debtors under any Receivables havebeen directed to make payment to remit all amounts representing collectionson checks and other payment items from time to time sent to or deposited insuch lockbox or other arrangement directly to the Canadian Agent; and (3)enforce, at the expense of such Grantor, collection of any such Receivablesand to adjust, settle or compromise the amount or payment thereof, in thesame manner and to the same extent as such Grantor might have done. If theCanadian Agent notifies any Grantor that it has elected to collect theReceivables in accordance with the preceding sentence, any payments ofReceivables received by such Grantor shall be forthwith promptly depositedby such Grantor in the exact form received, duly indorsed by such Grantor tothe Canadian Agent if required, in the Collateral Account maintained underthe sole dominion and control of the Canadian Agent, and until so turnedover, all amounts and proceeds (including checks and other instruments)
 

 
- 16 -received by such Grantor in respect of the Receivables or Collateral Supportshall be received for the benefit of the Canadian Agent hereunder and shallbe segregated from other funds of such Grantor and such Grantor shall notadjust, settle or compromise the amount or payment of any MaterialReceivable, or release wholly or partly any Account Debtor or obligorthereof, or allow any credit or discount thereon; (iv) except as it shall determine otherwise in the ordinarycourse of business, it shall use its commercially reasonable efforts to keepin full force and effect any Collateral Support relating to any MaterialReceivable; and  (v) it shall notify the Canadian Agent in writing the nextQuarterly Reporting Date following receipt of any Material Receivable inrespect of which the Account Debtor is the government of the United States,any agency or instrumentality thereof, any state or municipality or anyforeign sovereign. (c) Delivery and Control of Receivables. With respect to any MaterialReceivables that is evidenced by, or constitutes, Chattel Paper or Instruments, eachGrantor shall cause each originally executed copy thereof to be delivered to theCanadian Agent (or its agent or designee) appropriately indorsed to the Canadian Agentor indorsed in blank: (i) with respect to any such Receivables in existence on thedate hereof, on or prior to the date hereof and (ii) with respect to any suchReceivables hereafter arising, such Grantor acquiring rights therein. Any MaterialReceivable not otherwise required to be delivered or subjected to the control of theCanadian Agent in accordance with this subsection (c) shall be delivered or subjectedto such control upon request of the Canadian Agent.**4.4 Investment Related Property; Investment Related Property Generally** (a) Covenants and Agreements. Each Grantor hereby covenants and agreesthat: (i) in the event it acquires rights in any Investment RelatedProperty after the date hereof, it shall deliver to the Canadian Agent, noless frequently than on an annual basis or as otherwise expressly requiredby the Credit Agreement, a completed Pledge Supplement, substantially in theform of Exhibit A attached hereto, together with all Supplements toSchedules thereto, reflecting such new Investment Related Property and allother Investment Related Property. Notwithstanding the foregoing, it isunderstood and agreed that the security interest of the Canadian Agent shallattach to all Investment Related Property immediately upon any Grantor’sacquisition of rights therein and shall not be affected by the failure ofany Grantor to deliver a supplement to Schedule 4.4 as required hereby;  (ii) except as provided in the next sentence, in the eventsuch Grantor receives any dividends, interest or distributions on anyInvestment Related Property, or any securities or other property upon themerger, amalgamation, consolidation, liquidation or dissolution of anyissuer of
 

 
- 17 -any Investment Related Property, then (a) such dividends, interest ordistributions and securities or other property shall be included in thedefinition of Collateral without further action and (b) such Grantor shallpromptly take all steps reasonably requested by the Canadian Agent to ensurethe validity, perfection, priority and, if applicable, control of theCanadian Agent over such Investment Related Property (including, withoutlimitation, delivery thereof to the Canadian Agent) and pending any suchaction such Grantor shall be deemed to hold such dividends, interest,distributions, securities or other property for the benefit of the CanadianAgent and shall segregate such dividends, distributions, Securities or otherproperty from all other property of such Grantor. Notwithstanding theforegoing, so long as no Event of Default shall have occurred and becontinuing, the Canadian Agent authorizes each Grantor to retain all cashdividends and distributions and all payments of interest; (iii) each Grantor consents to the grant by each other Grantorof a Security Interest in all Investment Related Property to the CanadianAgent. (b) Delivery and Control. (i) Each Grantor agrees that with respect to any InvestmentRelated Property in which it currently has rights it shall comply with theprovisions of this Section 4.4(b) on or before the Closing Date (or suchother time period as specified in the Credit Agreement) and with respect toany Investment Related Property hereafter acquired by such Grantor it shallcomply with the provisions of this Section 4.4(b) no later than the nextQuarterly Reporting Date after acquiring rights therein, in each case inform and substance reasonably satisfactory to the Canadian Agent. Withrespect to any Investment Related Property that is represented by acertificate or that is an Instrument it shall cause such certificate orInstrument to be delivered to the Canadian Agent, indorsed in blank. (c) Voting and Distributions. (i) So long as no Event of Default shall have occurred and becontinuing and no notice shall have been given pursuant to clause (ii)below: (1) except as otherwise provided under thecovenants and agreements relating to investment related property inthis Agreement or elsewhere herein or in the Credit Agreement, eachGrantor shall be entitled to exercise or refrain from exercising anyand all voting and other consensual rights pertaining to the InvestmentRelated Property or any part thereof for any purpose not inconsistentin any material respect with the terms of this Agreement or the CreditAgreement; it being understood, however, that neither the voting bysuch Grantor of any Pledged Stock for, or such Grantor’s consent to,the election of directors (or similar governing body) at a regularlyscheduled annual or other meeting of stockholders or
 

 
- 18 -with respect to incidental matters at any such meeting, nor suchGrantor’s consent to or approval of any action otherwise permittedunder this Agreement and the Credit Agreement, shall be deemedinconsistent with the terms of this Agreement or the Credit Agreementwithin the meaning of this Section 4.4(c)(i)(1), and no notice of anysuch voting or consent need be given to the Canadian Agent; and (2) the Canadian Agent shall promptly execute anddeliver (or cause to be executed and delivered) to each Grantor allproxies, and other instruments as such Grantor may from time to timereasonably request for the purpose of enabling such Grantor to exercisethe voting and other consensual rights when and to the extent which itis entitled to exercise pursuant to clause (1) above; (ii) Upon either delivery by any Grantor to the Canadian Agentof written notice that an Event of Default has occurred and is continuing,or delivery by the Canadian Agent or the Administrative Agent to Grantor ofwritten notice that the Event of Default exists: (A) all rights of each Grantor to exercise orrefrain from exercising the voting and other consensual rights which itwould otherwise be entitled to exercise pursuant hereto shall uponnotice to such Grantor by the Canadian Agent, cease and all such rightsshall thereupon become vested in the Canadian Agent who shall thereuponhave the sole right to exercise such voting and other consensualrights; and  (B) in order to permit the Canadian Agent toexercise the voting and other consensual rights which it may beentitled to exercise pursuant hereto and to receive all dividends andother distributions which it may be entitled to receive hereunder: (1)each Grantor shall promptly execute and deliver (or cause to beexecuted and delivered) to the Canadian Agent all proxies, dividendpayment orders and other instruments as the Canadian Agent may fromtime to time reasonably request and (2) each Grantor acknowledges thatthe Canadian Agent may utilize the power of attorney set forth inSection 6.1.**4.5 Pledged Equity Interests** (a) Representations and Warranties. Each Grantor hereby represents andwarrants, on the Closing Date and (x) with respect to clauses (iii) and (iv) below, oneach Credit Date and (y) with respect to all other clauses below, on each AnnualReporting Date, that: (i) Schedule 4.4(A) sets forth under the headings “PledgedStock”, “Pledged Partnership Interests” and “Pledged Trust Interests”respectively, all of the
 

 
- 19 -Pledged Stock, Pledged Partnership Interests and Pledged Trust Interestsowned by any Grantor and such Pledged Equity Interests constitute thepercentage of issued and outstanding shares of stock, percentage ofmembership interests, percentage of partnership interests or percentage ofbeneficial interest of the respective issuers thereof indicated on suchSchedule, all of which is true, accurate and complete as of the Closing Dateor thereafter, as of the Annual Reporting Date; (ii) except as set forth on Schedule 4.4(B), it has notacquired any majority equity interests of another entity or substantiallyall the assets of another entity within the five (5) years prior to theClosing Date;  (iii) it is the record and beneficial owner of the PledgedEquity Interests free of all Liens, rights or claims of other Persons otherthan Permitted Liens and there are no outstanding warrants, options or otherrights to purchase, or shareholder, unitholder, voting trust or similaragreements outstanding with respect to, or property that is convertibleinto, or that requires the issuance or sale of, any Pledged EquityInterests;  (iv) no material consent of any Person including any othergeneral or limited partner, any other member of a limited liability company,any other shareholder, unitholder or any other trust beneficiary isnecessary in connection with the creation, perfection or first prioritystatus (subject to Permitted Liens) of the security interest of the CanadianAgent in any Pledged Equity Interests or the exercise by the Canadian Agentof the voting or other rights provided for in this Agreement or the exerciseof remedies in respect thereof; and  (v) except as otherwise set forth in Schedule 4.4 hereto,none of the Pledged Partnership Interests issued by any Grantor or anySubsidiary thereof are or represent interests in issuers that: (a) areregistered as investment companies or (b) are dealt in or traded onsecurities exchanges or markets. (b) Covenants and Agreements. Each Grantor hereby covenants and agreesthat: (i) other than as permitted under the Credit Agreement,without the prior written consent of the Canadian Agent (which shall not beunreasonably withheld), it shall not vote to enable or take any other actionto: (a) amend or terminate any partnership agreement, limited liabilitycompany agreement, certificate of incorporation, by-laws or otherorganizational documents in any way that adversely affects the validity,perfection or priority of the Canadian Agent’s security interest except forPermitted Liens and Permitted Sales, (b) permit any issuer of any PledgedEquity Interest that is a Grantor or a Subsidiary thereof to issue anyadditional stock, units, partnership interests, limited liability companyinterests or other equity interests of any nature or to issue securitiesconvertible into or granting the right of purchase or exchange for any stockor other equity interest of any nature of such issuer unless such stock orinterests is
 

 
- 20 -pledged hereunder, (c) permit any issuer of any Pledged Equity Interest thatis a Subsidiary to dispose of all or a material portion of their assets, (d)waive any default under or breach of any terms of organizational documentrelating to the issuer of any Pledged Equity Interest or the terms of anyPledged Debt that would individually or in the aggregate cause a MaterialAdverse Effect, or (e) cause any Subsidiary of Holdings that is an issuer ofany Pledged Partnership Interests which are not securities (for purposes ofthe PPSA) on the date hereof to elect or otherwise take any action to causesuch Pledged Partnership Interests to be treated as securities for purposesof the PPSA unless such Grantor notifies the Canadian Agent in writing priorto any such election or action and, in such event, takes all stepsreasonably requested by the Canadian Agent to establish the Canadian Agent’s“control” thereof; (ii) each Grantor consents to the grant by each other Grantorof a security interest in all Investment Related Property to the CanadianAgent and, without limiting the foregoing, consents to the transfer of anyPledged Partnership Interest to the Canadian Agent or its nominee followingthe occurrence and during the continuance of an Event of Default and to thesubstitution of the Canadian Agent or its nominee as a partner in anypartnership or as a member in any limited liability company with all therights and powers related thereto; and  (iii) it shall notify the Canadian Agent in writing, byexecuting and delivering to the Canadian Agent a completed PledgeSupplement, substantially in the form of Exhibit A attached hereto, togetherwith all Supplements to Schedules thereto, promptly if any issuer of PledgedPartnership Interests that is a Grantor or a Subsidiary thereof has notopted for such Pledged Partnership Interests to be treated as securitiesunder the personal property security legislation of any jurisdiction.**4.6 Pledged Debt** (a) Representations and Warranties. Each Grantor hereby represents andwarrants, on the Closing Date and each Annual Reporting Date, that: (i) Schedule 4.4 sets forth under the heading “Pledged Debt”all of the Pledged Debt owned by any Grantor as of the Closing Date orthereafter, as of the Annual Reporting Date and all of such Pledged Debt hasbeen duly authorized, authenticated or issued, and delivered and is thelegal, valid and binding obligation of the issuers thereof and is not indefault and constitutes all of the issued and outstanding inter-companyIndebtedness.**4.7 Further Assurances Respecting Investment Related Property**     If any issuer of any Investment Related Property is located in a jurisdiction outside ofCanada, if requested by the Canadian Agent, each Grantor shall take such additional actions,including, without limitation, causing the issuer to register the pledge on its books and recordsor
 

 
- 21 -making such filings or recordings, in each case as may be reasonably requested by the CanadianAgent, under the laws of such issuer’s jurisdiction to insure the validity, perfection and priorityof the security interest of the Canadian Agent. Upon the occurrence and during the continuance ofan Event of Default, the Canadian Agent shall have the right, without notice to any Grantor, totransfer all or any portion of the Investment Related Property to its name or the name of itsnominee or agent. In addition, the Canadian Agent shall have the right at any time, without noticeto any Grantor, to exchange any certificates or instruments representing any Investment RelatedProperty for certificates or instruments of smaller or larger denominations.**4.8 Material Contracts**     Each Grantor hereby covenants and agrees that in addition to any rights under the Section ofthis Agreement relating to Receivables, upon the occurrence and during the continuation of an Eventof Default, the Canadian Agent may at any time notify, or require any Grantor to so notify, thecounterparty on any Material Contract of the security interest of the Canadian Agent therein. Inaddition, after the occurrence and during the continuance of an Event of Default, the CanadianAgent may upon written notice to the applicable Grantor, notify, or require any Grantor to notify,the counterparty to make all payments under the Material Contracts directly to the Canadian Agent.**4.9 Letter of Credit Rights** (a) Representations and Warranties. Each Grantor hereby represents andwarrants, that: (i) all material letters of credit to which such Grantor hasrights as of the Closing Date and as of each Annual Reporting Date, arelisted on Schedule 4.6; and  (ii) as of each Credit Date, it has obtained the consent ofeach issuer of any material letter of credit to the assignment of theproceeds of the letter of credit to the Canadian Agent. (b) Covenants and Agreements. Each Grantor hereby covenants and agreesthat with respect to any material letter of credit hereafter arising it shall promptlyand in any event within sixty (60) days (or such extended period of time as agreed toby the Canadian Agent) of its obtaining rights in such material letter of credit rightsobtain the consent of the issuer thereof to the assignment of the proceeds of theletter of credit to the Canadian Agent and shall deliver to the Canadian Agent acompleted Pledge Supplement, substantially in the form of Exhibit A attached hereto,together with all Supplements to Schedules thereto.**4.10 Intellectual Property** (a) Representations and Warranties. Except as disclosed in Schedule4.10(H), each Grantor hereby represents and warrants, on the Closing Date and (x) withrespect to clauses (ii) – (ix) below on each Credit Date and (y) with respect toclauses (i) and (x) below, on each Annual Reporting Date, that:
 

 
- 22 - (i) Schedule 4.10 sets forth a true and complete list of (i)all Canadian registrations of and applications for Patents, Trademarks, andCopyrights owned by each Grantor and (ii) all Patent Licenses, TrademarkLicenses, Trade Secret Licenses and Copyright Licenses material to thebusiness of such Grantor as of the Closing Date or thereafter, as of theAnnual Reporting Date;  (ii) it is the owner of the right, title, and interest in andto all material Intellectual Property that it purports to own, and owns orhas the valid right to use all other material Intellectual Property, in eachcase as used in or necessary to conduct its business, free and clear of allLiens, claims, encumbrances and licenses, except for Permitted Liens, thelicenses set forth on Schedule 4.10(B), (D), (F) and (G) and other licensesor sub-licenses entered into in the ordinary course of business;  (iii) each Grantor has performed all acts and has paid allrenewal, maintenance, and other fees and taxes required to maintain each andevery registration and application of material Intellectual Property in fullforce and effect;  (iv) (A) to such Grantor’s knowledge all material IntellectualProperty is valid and enforceable and (B) no holding, decision, or judgmenthas been rendered in any action or proceeding before any court oradministrative authority challenging the validity of such Grantor’s right toregister, or such Grantor’s rights to own or use, any material IntellectualProperty and no such action or proceeding is pending or, to such Grantor’sknowledge, threatened;  (v) all registrations and applications for materialCopyrights, Patents and Trademarks purported to be owned by any Grantor arestanding in the name of each Grantor, and none of the material Trademarks,Patents, Copyrights or Trade Secret Collateral has been licensed by anyGrantor to any affiliate or third party, except as disclosed on Schedule4.10 (B), (D), (F) and (G) as of the Closing Date or, with respect tolicenses entered into after the Closing Date, to the Canadian Agent on thenext Quarterly Reporting Date;  (vi) except as would not have a Material Adverse Effect, eachGrantor uses adequate standards of quality in the manufacture, distribution,and sale of all products sold and in the provision of all services renderedunder or in connection with all Trademark Collateral and has taken allaction reasonably necessary to insure that all licensees of the TrademarkCollateral owned by such Grantor use such adequate standards of quality;  (vii) to such Grantor’s knowledge, the conduct of suchGrantor’s business does not infringe upon or otherwise violate anytrademark, patent, copyright, trade secret or similar intellectual propertyright owned or controlled by a third party in a manner reasonably likely toresult in a Material Adverse Effect; no written claim has been received bysuch Grantor that the use of
 

 
- 23 -any Intellectual Property owned or used by Grantor (or any of its respectivelicensees) violates the asserted rights of any third party that couldreasonably be expected to result in a Material Adverse Effect; (viii) to each Grantor’s knowledge, no third party is infringing upon orotherwise violating any rights in any Intellectual Property owned or used bysuch Grantor, or any of its respective licensees in a manner reasonablylikely to result in a Material Adverse Effect;  (ix) no settlement or consents, covenants not to sue,nonassertion assurances, or releases have been entered into by Grantor orto which Grantor is bound that adversely effect Grantor’s rights to own oruse any Intellectual Property in a manner reasonably likely to result in aMaterial Adverse Effect; and  (x) except as permitted under the Credit Agreement, eachGrantor has not made a previous assignment, sale, transfer or agreementconstituting a present or future assignment, sale, transfer or agreement ofany Intellectual Property disclosed on Schedule 4.10 (A), (B), (C), (D),(E), (F) or (G) that has not been terminated or released. There is noeffective financing statement or other document or instrument now executed,or on file or recorded in any public office, granting a security interest inor otherwise encumbering any material part of the Intellectual Property,other than the financing statements filed in favor of the Canadian Agent oras otherwise disclosed on Schedule 4.10. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees asfollows: (i) it shall not do any act or omit to do any commerciallyreasonable act whereby any of the Intellectual Property which in itsreasonable judgment is material to the business of Grantor may lapse, orbecome abandoned, dedicated to the public, or unenforceable, or which wouldadversely affect the validity, grant, or enforceability of the securityinterest granted therein;  (ii) it shall not, with respect to any Trademarks which arematerial to the business of any Grantor, as determined in its reasonablejudgment, cease the use of any of such Trademarks or fail to maintain thelevel of the quality of products sold and services rendered under any ofsuch Trademark at a level at least substantially consistent with the qualityof such products and services as of the date hereof, and each Grantor shalltake all steps reasonably necessary to insure that licensees of suchTrademarks use such consistent standards of quality;  (iii) it shall, within sixty (60) days following the creationor acquisition of any Copyrightable work which is material to the businessof Grantor, apply to register the Copyright in the Canadian IntellectualProperty Office except
 

 
- 24 -for works with respect to which the Grantor has determined with the exerciseof its commercially reasonable judgment that it shall not so apply; (iv) it shall promptly notify the Canadian Agent if it knowsthat any item of the Intellectual Property that in its reasonable judgmentis material to the business of any Grantor may become (a) abandoned ordedicated to the public or placed in the public domain, (b) invalid orunenforceable, or (c) subject to any adverse determination or development(including the institution of proceedings) in any action or proceeding inthe Canadian Intellectual Property Office, or any court, except as would nothave a Material Adverse Effect;  (v) it shall take all reasonable steps in the CanadianIntellectual Property Office, to pursue any application and maintain anyregistration of each Trademark, Patent, and Copyright owned by any Grantorand material to its business which is now or shall become included in theIntellectual Property including, but not limited to, those items on Schedule4.10 (A), (C) and (E) (as each may be amended or supplemented from time totime), except as would not have a Material Adverse Effect;  (vi) in the event that any Intellectual Property owned by orexclusively licensed to any Grantor that in its reasonable judgment ismaterial to the business of such Grantor is, to such Grantor’s knowledge,infringed, misappropriated, or diluted by a third party, such Grantor shallpromptly take all reasonable actions to stop such infringement,misappropriation, or dilution and protect its rights in such IntellectualProperty (except for such works in respect to which such Grantor hasdetermined in the exercise of its commercially reasonable judgment that itshall not take any action);  (vii) on the Quarterly Reporting Date after a filing orregistration described in clause (i) or (ii) takes place, it shall promptly(but in no event more than thirty (30) days after any Grantor obtainsknowledge thereof) report to the Canadian Agent (i) the filing of anyapplication to register any material Intellectual Property with the CanadianIntellectual Property Office, or provincial or territorial registry orforeign counterpart of the foregoing (whether such application is filed bysuch Grantor or through any agent, employee, licensee, or designee thereof)and (ii) the registration of any Intellectual Property by any such office,in each case by executing and delivering to the Canadian Agent a completedPledge Supplement, substantially in the form of Exhibit A attached hereto,together with all Supplements to Schedules thereto;  (viii) it shall, promptly upon the reasonable request of the Canadian Agent,execute and deliver to the Canadian Agent any document required toacknowledge, confirm, register, record, or perfect the Canadian Agent’sinterest in any part of the Intellectual Property, whether now owned orhereafter acquired;
 

 
- 25 - (ix) except with the prior consent of the Canadian Agent (notto be unreasonably withheld) or with respect to Permitted Liens, eachGrantor shall not execute, and there will not be on file in any publicoffice, any financing statement or other document or instruments, exceptfinancing statements or other documents or instruments filed or to be filedin favor of the Canadian Agent and each Grantor shall not license, grant anyoption, or create or suffer to exist any Lien upon or with respect to thematerial Intellectual Property, except for (A) the Liens created by andunder this Agreement and the other Credit Documents and (B) licenses enteredinto in the ordinary course of business of such Grantor;  (x) it shall hereafter use commercially reasonable efforts soas not to permit the inclusion in any Material Contract to which ithereafter becomes a party of any provision that could or might in any waymaterially impair or prevent the creation of a security interest in, or theassignment of, such Grantor’s rights and interests in any property includedwithin the definitions of any Intellectual Property acquired under suchcontracts, provided that this shall not apply to standard form contractsentered into in the ordinary course of business;  (xi) it shall use proper statutory notice in connection withits use of any Patent, except where the failure to do so would not have aMaterial Adverse Effect; and  (xii) unless otherwise determined in the exercise of businessjudgment, it shall continue to collect, at its own expense, all amounts dueor to become due to such Grantor in respect of the material IntellectualProperty or any portion thereof. Following the occurrence and during thecontinuance of an Event of Default, in connection with such collections,each Grantor may take (and, at the Canadian Agent’s reasonable direction,shall take) such action as such Grantor or the Canadian Agent may deemreasonably necessary to enforce collection of such amounts. Notwithstandingthe foregoing, the Canadian Agent shall have the right at any time followingthe occurrence and during the continuance of an Event of Default, to notify,or require any Grantor to notify, any obligors with respect to any suchamounts of the existence of the security interest created hereby.**SECTION 5****FURTHER ASSURANCES; ADDITIONAL GRANTORS****5.1 Further Assurances** (a) Each Grantor agrees that from time to time, at the expense of such Grantor,that it shall promptly execute and deliver all further instruments and documents, andtake all further action, that the Canadian Agent may reasonably request, in order tocreate and/or maintain the validity, perfection or priority of and protect any securityinterest granted hereby or to enable the Canadian Agent to exercise and
 

 
- 26 -enforce its rights and remedies hereunder with respect to any Collateral. Withoutlimiting the generality of the foregoing, each Grantor shall: (i) file such financing or continuation statements, oramendments thereto, and execute and deliver such other agreements,instruments, endorsements, powers of attorney or notices, as the CanadianAgent may reasonably request, in order to perfect and preserve the securityinterests granted or purported to be granted hereby; and  (ii) take all actions necessary to ensure the recordation ofappropriate evidence of the liens and security interest granted hereunder inthe Intellectual Property with any intellectual property registry in whichsaid Intellectual Property is registered or in which an application forregistration is pending including, without limitation, the CanadianIntellectual Property Office. (b) Each Grantor hereby authorizes the Canadian Agent to file a Record or Records,including, without limitation, financing or continuation statements, and amendmentsthereto, in any jurisdictions and with any filing offices as the Canadian Agent maydetermine, in its sole discretion, are necessary to perfect the security interestgranted to the Canadian Agent herein. Such financing statements may describe theCollateral in the same manner as described herein or may contain an indication ordescription of collateral that describes such property in any other manner as theCanadian Agent may determine, in its sole discretion, is necessary, to ensure theperfection of the security interest in the Collateral granted to the Canadian Agentherein, including, without limitation, describing such property as “**all assets**” or “**allpersonal property**”, whether now owned or hereafter acquired.  (c) Each Grantor hereby authorizes the Canadian Agent to modify this Agreementafter obtaining such Grantor’s approval of or signature to such modification byamending Schedule 4.10 to include reference to any right, title or interest in anyexisting Intellectual Property or any Intellectual Property acquired or developed byany Grantor after the execution hereof or to delete any reference to any right, titleor interest in any Intellectual Property in which any Grantor no longer has or claimsany right, title or interest.**5.2 Additional Grantors**     From time to time subsequent to the date hereof, additional Persons may become parties heretoas additional Grantors (each, an “**Additional Grantor**”), by executing a Counterpart Agreement. Upondelivery of any such Counterpart Agreement to the Canadian Agent, notice of which is hereby waivedby Grantors, each Additional Grantor shall be a Grantor and shall be as fully a party hereto as ifAdditional Grantor were an original signatory hereto. Each Grantor expressly agrees that itsobligations arising hereunder shall not be affected or diminished by the addition or release of anyother Grantor hereunder, nor by any election of the Canadian Agent not to cause any Subsidiary ofCompany to become an Additional Grantor hereunder. This Agreement shall be fully effective as toany Grantor that is or becomes a party hereto regardless of whether any other Person becomes orfails to become or ceases to be a Grantor hereunder.
 

 
- 27 -**SECTION 6****CANADIAN AGENT APPOINTED ATTORNEY-IN-FACT****6.1 Power of Attorney**     To the extent permitted by applicable law, each Grantor hereby irrevocably appoints theCanadian Agent (such appointment being made for consideration and coupled with an interest) as suchGrantor’s attorney-in-fact, with full authority in the place and stead of such Grantor and in thename of such Grantor, the Canadian Agent or otherwise, from time to time, to take any of thefollowing actions: (a) upon the occurrence and during the continuance of any Event of Default, toobtain and adjust insurance required to be maintained by such Grantor or paid to theCanadian Agent pursuant to the Credit Agreement;  (b) upon the occurrence and during the continuance of any Event of Default, to askfor, demand, collect, sue for, recover, compound, receive and give acquittance andreceipts for moneys due and to become due under or in respect of any of the Collateral;  (c) upon the occurrence and during the continuance of any Event of Default, toreceive, endorse and collect any drafts or other instruments, documents and chattelpaper in connection with clause (b) above;  (d) upon the occurrence and during the continuance of any Event of Default, to fileany claims or take any action or institute any proceedings that the Canadian Agent mayreasonably request for the collection of any of the Collateral or otherwise to enforcethe rights of the Canadian Agent with respect to any of the Collateral;  (e) to prepare and file any PPSA financing statements and any amendments theretoagainst such Grantor as debtor;  (f) to prepare, sign, and file for recordation in any intellectual propertyregistry, appropriate evidence of the lien and security interest granted herein in theIntellectual Property in the name of such Grantor as debtor;  (g) upon the occurrence and during the continuance of an Event of Default, to takeor cause to be taken all actions necessary to perform or comply or cause performance orcompliance with the terms of this Agreement, including, without limitation, access topay or discharge taxes or Liens (other than Permitted Liens) levied or placed upon orthreatened against the Collateral, the legality or validity thereof and the amountsnecessary to discharge the same to be determined by the Canadian Agent in its solediscretion, any such payments made by the Canadian Agent to become obligations of suchGrantor to the Canadian Agent, due and payable immediately without demand; and  (h) upon the occurrence and during the continuance of an Event of Default,generally to sell, transfer, pledge, hypothecate, make any agreement with respect to or
 

 
- 28 -otherwise deal with any of the Collateral as fully and completely as though theCanadian Agent were the absolute owner thereof for all purposes, and to do, at theCanadian Agent’s option and such Grantor’s expense, at any time or from time totime, all acts and things that the Canadian Agent deems reasonably necessary toprotect, preserve or realize upon the Collateral and the Canadian Agent’s securityinterest therein in order to effect the intent of this Agreement, all as fully andeffectively as such Grantor might do.**6.2** **No Duty on the Part of Canadian Agent or Secured Parties**     The powers conferred on the Canadian Agent hereunder are solely to protect the interests ofthe Secured Parties in the Collateral and shall not impose any duty upon the Canadian Agent or anySecured Party to exercise any such powers. The Canadian Agent and the Secured Parties shall beaccountable only for amounts that they actually receive as a result of the exercise of such powers,and neither they nor any of their officers, directors, employees or agents shall be responsible toany Grantor for any act or failure to act hereunder, except for their own gross negligence orwilful misconduct.**SECTION 7****REMEDIES****7.1** **Generally** (a) If any Event of Default shall have occurred and be continuing, the CanadianAgent may exercise in respect of the Collateral, in addition to all other rights andremedies provided for herein or otherwise available to it at law or in equity, all therights and remedies of the Canadian Agent on default under the PPSA to collect, enforceor satisfy any Secured Obligations then owing, whether by acceleration or otherwise,and also may to the fullest extent permitted by applicable law pursue any of thefollowing separately, successively or simultaneously: (i) require any Grantor to, and each Grantor hereby agreesthat it shall at its expense and promptly upon request of the Canadian Agentforthwith, assemble all or part of the Collateral as directed by theCanadian Agent and make it available to the Canadian Agent at a place to bedesignated by the Canadian Agent that is reasonably convenient to bothparties;  (ii) enter onto the property owned or leased by any Grantorwhere any Collateral is located and take possession thereof with or withoutjudicial process;  (iii) prior to the disposition of the Collateral, store theCollateral or otherwise prepare the Collateral for disposition in any mannerto the extent the Canadian Agent deems appropriate; and  (iv) without notice except as specified below or under thePPSA, sell, assign, lease, license, sub-license (on an exclusive ornonexclusive basis) or

 

 - 29 -otherwise dispose of the Collateral or any part thereof in one or moreparcels at public or private sale, at any of the Canadian Agent’s offices orelsewhere, for cash, on credit or for future delivery, at such time or timesand at such price or prices and upon such other terms as the Canadian Agentmay deem commercially reasonable. (b) The Canadian Agent or any Secured Party may be the purchaser of any or all ofthe Collateral at any public or private (to the extent to the portion of the Collateralbeing privately sold is of a kind that is customarily sold on a recognized market orthe subject of widely distributed standard price quotations) sale in accordance withthe PPSA and the Canadian Agent, as Canadian Agent for and representative of theSecured Parties, shall be entitled, for the purpose of bidding and making settlement orpayment of the purchase price for all or any portion of the Collateral sold at any suchsale made in accordance with the PPSA, to use and apply any of the Secured Obligationsas a credit on account of the purchase price for any Collateral payable by the CanadianAgent at such sale. Each purchaser at any such sale shall hold the property soldabsolutely free from any claim or right on the part of any Grantor, and each Grantorhereby waives (to the extent permitted by applicable law) all rights of redemption,stay and/or appraisal which it now has or may at any time in the future have under anyrule of law or statute now existing or hereafter enacted. Each Grantor agrees that, tothe extent notice of sale shall be required by law, at least ten (10) days notice tosuch Grantor of the time and place of any public sale or the time after which anyprivate sale is to be made shall constitute reasonable notification. The CanadianAgent shall not be obligated to make any sale of Collateral regardless of notice ofsale having been given. The Canadian Agent may adjourn any public or private sale fromtime to time by announcement at the time and place fixed therefor, and such sale may,without further notice, be made at the time and place to which it was so adjourned.Each Grantor agrees that it would not be commercially unreasonable for the CanadianAgent to dispose of the Collateral or any portion thereof by using Internet, intranetor extranet sites that provide for the auction of assets of the types included in theCollateral or that have the reasonable capability of doing so, or that match buyers andsellers of assets. Each Grantor hereby waives (to the fullest extent permitted byapplicable law) any claims against the Canadian Agent arising by reason of the factthat the price at which any Collateral may have been sold at such a private sale wasless than the price which might have been obtained at a public sale, even if theCanadian Agent accepts the first offer received and does not offer such Collateral tomore than one offeree. If the proceeds of any sale or other disposition of theCollateral are insufficient to pay all the Secured Obligations, Grantors shall beliable for the deficiency and the reasonable fees of any attorneys employed by theCanadian Agent to collect such deficiency. Each Grantor further agrees that a breachof any of the covenants contained in this Section will cause irreparable injury to theCanadian Agent, that the Canadian Agent has no adequate remedy at law in respect ofsuch breach and, as a consequence, that each and every covenant contained in thisSection shall be specifically enforceable against such Grantor, and such Grantor herebywaives (to the fullest extent permitted by applicable law) and agrees not to assert any

 

 - 30-defenses against an action for specific performance of such covenants except for adefense that no default has occurred giving rise to the Secured Obligations becomingdue and payable prior to their stated maturities. Nothing in this Section shall inany way alter the rights of the Canadian Agent hereunder. (c) The Canadian Agent may sell the Collateral without giving any warranties as tothe Collateral. The Canadian Agent may specifically disclaim or modify any warrantiesof title or the like. This procedure will not be considered to adversely affect thecommercial reasonableness of any sale of the Collateral.  (d) The Canadian Agent shall have no obligation to marshal any of the Collateral.  (e) The Canadian Agent may appoint or reappoint by instrument in writing, anyPerson or Persons, whether an officer, employee, agent or other representative of theCanadian Agent or not, to be a receiver or receivers (hereinafter called a “**Receiver**”,which term when used herein shall include a receiver and/or manager and any permutationthereof) of any Collateral of any Grantor (including any interest, income, profits orProceeds therefrom) and may remove any Receiver so appointed and appoint another inhis/her/their stead. Any such Receiver shall, so far as concerns responsibility forhis/her/their acts, be deemed the agent of any Grantor and not the Canadian Agent, andCanadian Agent shall not be in any way responsible for any misconduct, negligence ornon-feasance on the part of any such Receiver, his/her/their servants, agents,employees or other representatives. Subject to the provisions of the instrumentappointing such Receiver, any such Receiver shall have the power to take possession ofthe Collateral, to preserve the Collateral or its value, to carry on or concur incarrying on all or any part of the business of any Grantor and to sell, lease, licence,sub-licence or otherwise dispose of or concur in selling, leasing, licensing,sub-licensing or otherwise disposing of the Collateral. To facilitate the foregoingpowers, any such Receiver may, to the exclusion of all others, including such Grantor,enter upon, use and occupy all premises owned or occupied by such Grantor wherein theCollateral may be situate, maintain Collateral upon such premises, borrow money on asecured or unsecured basis and use the Collateral directly in carrying on suchGrantor’s business or as security for loans or advances to enable the Receiver to carryon such Grantor’s business or otherwise, as such Receiver shall, in its discretion,determine. Except as may be otherwise directed by any Grantor, all money received fromtime to time by such Receiver in carrying out his/her/their appointment shall bereceived in trust for and paid over to the Canadian Agent. Every such Receiver may, inthe discretion of the Canadian Agent, be vested with all or any of the rights andpowers of the Canadian Agent. The Canadian Agent, may, either directly or through itsagents or nominees, exercise any or all powers and rights given to a Receiver by virtueof the foregoing provisions of this Section.**7.2** **Application of Proceeds**     All proceeds received by the Canadian Agent in respect of any sale, any collection from, orother realization upon all or any part of the Collateral shall be applied in full or in part by the

 

 - 31 -Canadian Agent against, the Secured Obligations in accordance with the terms of the CreditAgreement.**7.3** **Sales on Credit**     If the Canadian Agent sells any of the Collateral upon credit, Grantor will be credited onlywith payments actually made by purchaser and received by the Canadian Agent and applied toindebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, theCanadian Agent may resell the Collateral and Grantor shall be credited with proceeds of the sale.**7.4** **Investment Related Property**     Each Grantor recognizes that, by reason of certain prohibitions contained in applicablesecurities laws, the Canadian Agent may be compelled, with respect to any sale of all or any partof the Investment Related Property conducted without prior registration or qualification of suchInvestment Related Property under such securities laws, to limit purchasers to those who willagree, among other things, to acquire the Investment Related Property for their own account, forinvestment and not with a view to the distribution or resale thereof. Each Grantor acknowledgesthat any such private sale may be at prices and on terms less favorable than those obtainablethrough a public sale without such restrictions (including a public offering made pursuant to aregistration statement under applicable securities laws) and, notwithstanding such circumstances,each Grantor agrees that any such private sale shall be deemed to have been made in a commerciallyreasonable manner and that the Canadian Agent shall have no obligation to engage in public salesand no obligation to delay the sale of any Investment Related Property for the period of timenecessary to permit the issuer thereof to register it for a form of public sale requiringregistration under applicable securities laws, even if such issuer would, or should, agree to soregister it. If the Canadian Agent determines to exercise its right to sell any or all of theInvestment Related Property, upon written request, each Grantor shall and shall cause each issuerof any Pledged Stock to be sold hereunder, each partnership and each limited liability company fromtime to time to furnish to the Canadian Agent all such information as the Canadian Agent mayrequest in order to determine the number and nature of interest, shares or other instrumentsincluded in the Investment Related Property which may be sold by the Canadian Agent in exempttransactions under applicable securities laws.**7.5** **Intellectual Property** (a) Anything contained herein to the contrary notwithstanding, upon the occurrenceand during the continuation of an Event of Default: (i) the Canadian Agent shall have the right (but not theobligation) to bring suit or otherwise commence any action or proceeding inthe name of any Grantor, the Canadian Agent or otherwise, in the CanadianAgent’s sole discretion, to enforce any Intellectual Property, in whichevent such Grantor shall, at the request of the Canadian Agent, do any andall lawful acts and execute any and all documents required by the CanadianAgent in aid of such enforcement and such Grantor shall promptly, upondemand, reimburse and indemnify the Canadian Agent as provided in the CreditAgreement hereof in connection with the exercise of its rights under this

 

 - 32 -Section, and, to the extent that the Canadian Agent shall elect not to bringsuit to enforce any Intellectual Property as provided in this Section, eachGrantor agrees to use all reasonable measures, whether by action, suit,proceeding or otherwise, to prevent the infringement or other violation ofany of such Grantor’s rights in the Intellectual Property that is materialto the business by others and for that purpose agrees to diligently maintainany action, suit or proceeding against any Person so infringing as shall benecessary to prevent such infringement or violation; and (ii) the Canadian Agent shall have the right to notify, orrequire each Grantor to notify, any obligors with respect to amounts due orto become due to such Grantor in respect of the Intellectual Property, ofthe existence of the security interest created herein, to direct suchobligors to make payment of all such amounts directly to the Canadian Agent,and, upon such notification and at the expense of such Grantor, to enforcecollection of any such amounts and to adjust, settle or compromise theamount or payment thereof, in the same manner and to the same extent as suchGrantor might have done; (1) all amounts and proceeds (including checks andother instruments) received by Grantor in respect of amounts due tosuch Grantor in respect of the Collateral or any portion thereof shallbe received for the benefit of the Canadian Agent hereunder, shall besegregated from other funds of such Grantor and shall be forthwith paidover or delivered to the Canadian Agent in the same form as so received(with any necessary endorsement) to be held as cash Collateral andapplied as provided by Section 7.6 hereof; and  (2) Grantor shall not adjust, settle or compromisethe amount or payment of any such amount or release wholly or partlyany obligor with respect thereto or allow any credit or discountthereon. (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver,modification, amendment or otherwise, no longer be continuing, (ii) no other Event ofDefault shall have occurred and be continuing, (iii) an assignment or other transfer tothe Canadian Agent of any rights, title and interests in and to the IntellectualProperty shall have been previously made and shall have become absolute and effective,and (iv) the Secured Obligations shall not have become immediately due and payable,upon the written request of any Grantor, the Canadian Agent shall promptly execute anddeliver to such Grantor, at such Grantor’s sole cost and expense, such assignments orother transfer as may be necessary to reassign to such Grantor any such rights, titleand interests as may have been assigned to the Canadian Agent as aforesaid, subject toany disposition thereof that may have been made by the Canadian Agent; provided, aftergiving effect to such reassignment, the Canadian Agent’s security interest grantedpursuant hereto, as well as all other rights and remedies of the Canadian Agent grantedhereunder, shall continue to be in full force and effect; and provided

 

 - 33 -further, the rights, title and interests so reassigned shall be free and clear ofany other Liens granted by or on behalf of the Canadian Agent and the SecuredParties. (c) Solely for the purpose of enabling the Canadian Agent to exercise rights andremedies under this Section 7 and at such time as the Canadian Agent shall be lawfullyentitled to exercise such rights and remedies, each Grantor hereby grants to theCanadian Agent, to the extent it has the right to do so, an irrevocable, nonexclusivelicense (exercisable without payment of royalty or other compensation to such Grantor),subject, in the case of Trademarks, to sufficient rights to quality control andinspection in favor of such Grantor to avoid the risk of invalidation of saidTrademarks, to use, operate under, license, or sublicense any Intellectual Propertynow owned or hereafter acquired by such Grantor, and wherever the same may be located.**7.6** **Cash Proceeds**     Any proceeds of any Collateral received by any Grantor consisting of cash, checks and othernon-cash items received by the Canadian Agent (i) if no Event of Default shall have occurred and becontinuing, shall be turned over to the Grantor and (ii) if an Event of Default shall have occurredand be continuing, may, in the sole discretion of the Canadian Agent, (A) be held by the CanadianAgent for the ratable benefit of the Secured Parties, as collateral security for the SecuredObligations (whether matured or unmatured) and/or (B) then or at any time thereafter may be appliedby the Canadian Agent against the Secured Obligations then due and owing.**SECTION 8****CANADIAN AGENT**     The Canadian Agent has been appointed to act as the Canadian Agent hereunder by the CanadianLenders and, by their acceptance of the benefits hereof, the other Canadian Secured Parties. TheCanadian Agent shall be obligated, and shall have the right hereunder, to make demands, to givenotices, to exercise or refrain from exercising any rights, and to take or refrain from taking anyaction (including, without limitation, the release or substitution of Collateral), solely inaccordance with this Agreement and the Credit Agreement. In furtherance of the foregoingprovisions of this Section, each Canadian Secured Party, by its acceptance of the benefits hereof,agrees that it shall have no right individually to realize upon any of the Collateral hereunder, itbeing understood and agreed by such Canadian Secured Party that all rights and remedies hereundermay be exercised solely by the Canadian Agent for the benefit of Canadian Secured Parties inaccordance with the terms of this Section. The Canadian Agent may resign at any time by givingthirty (30) days’ prior written notice thereof to Canadian Lenders and the Grantors, and theCanadian Agent may be removed at any time with or without cause by an instrument or concurrentinstruments in writing delivered to the Grantors and the Canadian Agent signed by the RequisiteLenders holding more than 50% of the outstanding Commitments under the Credit Agreement. Upon anysuch notice of resignation or any such removal, Requisite Lenders shall have the right, upon five(5) Business Days’ notice to the Canadian Agent, following receipt of the Grantors’ consent (whichshall not be unreasonably withheld or

 

 - 34 -delayed and which shall not be required while an Event of Default exists), to appoint asuccessor Canadian Agent. Upon the acceptance of any appointment as Canadian Agent hereunder by asuccessor Canadian Agent, that successor Canadian Agent shall thereupon succeed to and becomevested with all the rights, powers, privileges and duties of the retiring or removed Canadian Agentunder this Agreement, and the retiring or removed Canadian Agent under this Agreement shallpromptly (i) transfer to such successor Canadian Agent all sums, Securities and other items ofCollateral held hereunder, together with all records and other documents necessary or appropriatein connection with the performance of the duties of the successor Canadian Agent under thisAgreement, and (ii) execute and deliver to such successor Canadian Agent or otherwise authorize thefiling of such amendments to financing statements, and take such other actions, as may be necessaryor appropriate in connection with the assignment to such successor Canadian Agent of the securityinterests created hereunder, whereupon such retiring or removed Canadian Agent shall be dischargedfrom its duties and obligations under this Agreement. After any retiring or removed CanadianAgent’s resignation or removal hereunder as the Canadian Agent, the provisions of this Agreementshall inure to its benefit as to any actions taken or omitted to be taken by it under thisAgreement while it was the Canadian Agent hereunder.**SECTION 9****CONTINUING SECURITY INTEREST; TRANSFER OF LOANS**     This Agreement shall create a continuing security interest in the Collateral and shall remainin full force and effect until the payment in full of all Secured Obligations, the cancellation ortermination of the Commitments and the cancellation or expiration of all outstanding Letters ofCredit, be binding upon each Grantor, its successors and assigns, and inure, together with therights and remedies of the Canadian Agent hereunder, to the benefit of the Canadian Agent and itssuccessors, transferees and assigns. Without limiting the generality of the foregoing, but subjectto the terms of the Credit Agreement, any Lender may assign or otherwise transfer any Loans held byit to any other Person, and such other Person shall thereupon become vested with all the benefitsin respect thereof granted to Lenders herein or otherwise. Upon the payment in full of all SecuredObligations (other than unmatured indemnification obligations), the cancellation or termination ofthe Commitments and the cancellation or expiration of all outstanding Letters of Credit, thesecurity interest granted hereby shall terminate hereunder and of record and all rights to theCollateral shall revert to Grantors. Upon any such termination the Canadian Agent shall, atGrantors’ expense, execute and deliver to Grantors such documents as Grantors shall reasonablyrequest to evidence such termination.**SECTION 10****STANDARD OF CARE; CANADIAN AGENT MAY PERFORM**     The powers conferred on the Canadian Agent hereunder are solely to protect its interest in theCollateral and shall not impose any duty upon it to exercise any such powers. Except for theexercise of reasonable care in the custody of any Collateral in its possession and the accountingfor moneys actually received by it hereunder, the Canadian Agent shall have no duty as to anyCollateral or as to the taking of any necessary steps to preserve rights against prior parties orany other rights pertaining to any Collateral. The Canadian Agent shall be deemed to haveexercised reasonable care in the custody and preservation of Collateral in its possession if

 

 - 35 -such Collateral is accorded treatment substantially equal to that which the Canadian Agentaccords its own property. Neither the Canadian Agent nor any of its directors, officers, employeesor agents shall be liable for failure to demand, collect or realize upon all or any part of theCollateral or for any delay in doing so or shall be under any obligation to sell or otherwisedispose of any Collateral upon the request of any Grantor or otherwise. If any Grantor fails toperform any agreement contained herein, the Canadian Agent may itself perform, or cause performanceof, such agreement, and the expenses of the Canadian Agent incurred in connection therewith shallbe payable by each Grantor under Section 10.2 of the Credit Agreement.**SECTION 11****MISCELLANEOUS**     Any notice required or permitted to be given under this Agreement shall be given in accordancewith Section 10.1 of the Credit Agreement. No failure or delay on the part of the Canadian Agentin the exercise of any power, right or privilege hereunder or under any other Credit Document shallimpair such power, right or privilege or be construed to be a waiver of any default or acquiescencetherein, nor shall any single or partial exercise of any such power, right or privilege precludeother or further exercise thereof or of any other power, right or privilege. All rights andremedies existing under this Agreement and the other Credit Documents are cumulative to, and notexclusive of, any rights or remedies otherwise available. In case any provision in or obligationunder this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity,legality and enforceability of the remaining provisions or obligations, or of such provision orobligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Allcovenants hereunder shall be given independent effect so that if a particular action or conditionis not permitted by any of such covenants, the fact that it would be permitted by an exception to,or would otherwise be within the limitations of, another covenant shall not avoid the occurrence ofa Default or an Event of Default if such action is taken or condition exists. This Agreement shallbe binding upon and inure to the benefit of the Canadian Agent and Grantors and their respectivesuccessors and assigns. No Grantor shall, without the prior written consent of the Canadian Agentgiven in accordance with the Credit Agreement, assign any right, duty or obligation hereunder.This Agreement and the other Credit Documents embody the entire agreement and understanding betweenGrantors and the Canadian Agent and supersede all prior agreements and understandings between suchparties relating to the subject matter hereof and thereof. Accordingly, the Credit Documents maynot be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of theparties. There are no unwritten oral agreements between the parties. This Agreement may beexecuted in one or more counterparts and by different parties hereto in separate counterparts, eachof which when so executed and delivered shall be deemed an original, but all such counterpartstogether shall constitute but one and the same instrument; signature pages may be detached frommultiple separate counterparts and attached to a single counterpart so that all signature pages arephysically attached to the same document.     The parties hereto declare that they require that this Agreement and any related documents bedrawn up and executed in English only; *les parties soussignées déclarent qu’elles exigent que cetacte et tous les documents s’y rattachant soient rédigés en anglais seulement*.

 

 - 36 -     **THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THEFEDERAL LAWS OF CANADA APPLICABLE THEREIN, PROVIDED THAT THE PLEDGE AND HYPOTHECATION GRANTED UNDERSECTION 2.1 ABOVE AND PERFECTION UNDER SECTION 2.4 ABOVE SHALL ONLY BE GOVERNED BY AND CONSTRUED INACCORDANCE WITH THE LAWS OF THE PROVINCE OF QUEBEC IN ORDER TO CREATE A VALID LIEN, PLEDGE ANDHYPOTHEC WITH RESPECT TO INVESTMENT RELATED PROPERTY UNDER THE*****CIVIL CODE OF QUEBEC***.**[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]**

 

 - 37 -**IN WITNESS WHEREOF**, each Grantor and the Canadian Agent have caused this Agreement to be dulyexecuted and delivered by their respective officers thereunto duly authorized as of the date firstwritten above.         RIDDELL, INC.    ALL AMERICAN SPORTS CORPORATION    ALL AMERICAN SPORTS (CANADA) LTD.    MACMARK CORPORATION    RIDMARK CORPORATION    BELL SPORTS, INC.    BELL SPORTS CANADA, INC.    EASTON SPORTS, INC.    CDT NEVADA, INC.    EASTON SPORTS CANADA, INC.    4078624 CANADA, INC.           Per: /s/ Mark Tripp       Name: Mark Tripp      Title:  Secretary of each of the foregoing  

 

 - 38 -         **WACHOVIA CAPITAL FINANCE**    **CORPORATION (CANADA),**    as the Canadian Agent           Per: /s/ Enza Agosta       Name: Enza Agosta      Title:   Vice President  

 

 SCHEDULE 4.1