EX-10.1.1







Exhibit
10.1.1




CERAMIC PROTECTION CORPORATION

as Borrower




- and -




CANADIAN IMPERIAL BANK OF COMMERCE

as Lender, Sole Lead Arranger, Underwriter, Administrative Agent and Bookrunner




- and -




THOSE OTHER FINANCIAL INSTITUTIONS WHICH

HEREAFTER BECOME LENDERS

UNDER THIS AGREEMENT




CREDIT AGREEMENT




September 21, 2004




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	ARTICLE 1

	INTERPRETATION

	1.1

	 	Definitions
	 	 	1	 
	1.2

	 	Headings
	 	 	1	 
	1.3

	 	Subdivisions
	 	 	2	 
	1.4

	 	Number
	 	 	2	 
	1.5

	 	Statutes, Regulations and Rules
	 	 	2	 
	1.6

	 	Monetary References
	 	 	2	 
	1.7

	 	Time
	 	 	2	 
	1.8

	 	Governing Law
	 	 	2	 
	1.9

	 	Enurement
	 	 	2	 
	1.10

	 	Amendments
	 	 	2	 
	1.11

	 	No Waiver
	 	 	2	 
	1.12

	 	Severability
	 	 	3	 
	1.13

	 	Inconsistency
	 	 	3	 
	1.14

	 	Accounting Terms and Principles
	 	 	3	 
	1.15

	 	Schedules
	 	 	3	 
	ARTICLE 2

	DELIVERIES ON CLOSING DATE

	2.1

	 	Deliveries by Borrower
	 	 	3	 
	ARTICLE 3

	CREDIT FACILITIES

	3.1

	 	Extendible Revolving Loan
	 	 	4	 
	3.2

	 	Term Loan
	 	 	4	 
	3.3

	 	Extension of Revolving Period
	 	 	5	 
	3.4

	 	End of Revolving Period
	 	 	7	 
	3.5

	 	Maturity Date
	 	 	7	 
	3.6

	 	Repayments
	 	 	7	 
	3.7

	 	General Right to Prepay and Cancel
	 	 	8	 
	3.8

	 	Mandatory Prepayment Upon Specified Events
	 	 	9	 
	3.9

	 	Use of Proceeds
	 	 	10	 
	3.10

	 	Types of Accommodation
	 	 	10	 






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	3.11

	 	Interest and Fees.
	 	 	11	 
	3.12

	 	Borrowing Base
	 	 	13	 
	ARTICLE 4

	SECURITY

	4.1

	 	Security
	 	 	14	 
	4.2

	 	Sharing of Security
	 	 	14	 
	4.3

	 	Exclusivity of Remedies
	 	 	14	 
	4.4

	 	Form of Security
	 	 	14	 
	4.5

	 	After- Acquired Property
	 	 	15	 
	4.6

	 	Undertaking to Grant Fixed Charge Security
	 	 	15	 
	4.7

	 	Discharge of Security
	 	 	16	 
	ARTICLE 5

	FUNDING AND OTHER MECHANICS

	5.1

	 	Funding of Accommodations
	 	 	16	 
	5.2

	 	Notice Provisions
	 	 	16	 
	5.3

	 	Irrevocability
	 	 	16	 
	5.4

	 	Rollover or Conversion of Accommodations
	 	 	17	 
	5.5

	 	Agent’s Obligations
	 	 	17	 
	5.6

	 	Lenders’ Obligations
	 	 	17	 
	5.7

	 	Exchange Rate Fluctuations
	 	 	17	 
	5.8

	 	Excess Relating to LIBOR and Bankers’ Acceptances
	 	 	18	 
	5.9

	 	Number of Advances
	 	 	18	 
	ARTICLE 6

	CONDITIONS PRECEDENT TO DRAWDOWN

	6.1

	 	Conditions Precedent to Drawdown
	 	 	18	 
	6.2

	 	Hostile Acquisitions
	 	 	19	 
	6.3

	 	Adjustment of Rateable Portion
	 	 	20	 
	6.4

	 	Subsequent Drawdowns
	 	 	20	 
	6.5

	 	Prepayment
	 	 	20	 
	ARTICLE 7

	CALCULATION OF INTEREST AND FEES

	7.1

	 	Records
	 	 	20	 
	7.2

	 	Payment of Interest and Fees
	 	 	21	 
	7.3

	 	Payment of Stamping Fee
	 	 	21	 






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	7.4

	 	Conversion to Another Currency
	 	 	21	 
	7.5

	 	Maximum Rate of Return
	 	 	22	 
	7.6

	 	Waiver of Judgment Interest Act (Alberta)
	 	 	22	 
	7.7

	 	Deemed Reinvestment Not Applicable
	 	 	22	 
	ARTICLE 8

	LETTERS OF CREDIT

	8.1

	 	General
	 	 	22	 
	ARTICLE 9

	GENERAL PROVISIONS RELATING TO LIBOR BASED LOANS

	9.1

	 	General
	 	 	25	 
	9.2

	 	Early Termination of LIBOR Periods
	 	 	25	 
	9.3

	 	Inability to Make LIBOR Based Loans
	 	 	25	 
	ARTICLE 10

	BANKERS’ ACCEPTANCES

	10.1

	 	General
	 	 	26	 
	10.2

	 	Terms of Acceptance by the Lenders
	 	 	26	 
	10.3

	 	BA Equivalent Loans
	 	 	27	 
	10.4

	 	General Mechanics
	 	 	27	 
	10.5

	 	Escrowed Funds
	 	 	28	 
	ARTICLE 11

	INCREASED COSTS

	11.1

	 	Changes in Law
	 	 	29	 
	11.2

	 	Changes in Circumstances
	 	 	30	 
	11.3

	 	Application of Sections 11.1 and 11.2
	 	 	30	 
	11.4

	 	Limitations on Additional Compensation
	 	 	30	 
	ARTICLE 12

	FEES AND EXPENSES

	12.1

	 	Agency Fee
	 	 	31	 
	12.2

	 	Standby Fee
	 	 	31	 
	12.3

	 	Expenses
	 	 	31	 
	ARTICLE 13

	REPRESENTATIONS AND WARRANTIES OF THE BORROWER

	13.1

	 	Representations and Warranties
	 	 	31	 
	13.2

	 	Acknowledgement
	 	 	34	 




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	13.3

	 	Survival and Inclusion
	 	 	35	 
	ARTICLE 14

	COVENANTS OF THE BORROWER

	14.1

	 	Affirmative Covenants
	 	 	35	 
	14.2

	 	Financial Covenants
	 	 	39	 
	MINIMUM FIXED CHARGE COVERAGE RATIO

	14.3

	 	Negative Covenants
	 	 	39	 
	ARTICLE 15

	REORGANIZATION

	15.1

	 	Reorganization
	 	 	42	 
	15.2

	 	Formation of Subsidiaries
	 	 	43	 
	ARTICLE 16

	EVENTS OF DEFAULT

	16.1

	 	Event of Default
	 	 	43	 
	16.2

	 	Remedies
	 	 	46	 
	16.3

	 	Waivers
	 	 	46	 
	ARTICLE 17

	CONFIDENTIALITY

	17.1

	 	Non-Disclosure
	 	 	46	 
	17.2

	 	Exceptions
	 	 	46	 
	17.3

	 	Permitted Disclosures by the Agent or the Lenders
	 	 	47	 
	17.4

	 	Survival
	 	 	47	 
	ARTICLE 18

	ASSIGNMENT

	18.1

	 	Assignment of Interests
	 	 	47	 
	18.2

	 	Assignment by the Lenders
	 	 	47	 
	18.3

	 	Effect of Assignment
	 	 	47	 
	18.4

	 	Participations
	 	 	48	 
	ARTICLE 19

	ADMINISTRATION OF THE CREDIT FACILITY

	19.1

	 	Authorization and Action
	 	 	48	 
	19.2

	 	Procedure for Making Advances
	 	 	49	 
	19.3

	 	Remittance of Payments
	 	 	50	 
	19.4

	 	Redistribution of Payment
	 	 	50	 






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	19.5

	 	Duties and Obligations
	 	 	51	 
	19.6

	 	Prompt Notice to the Lenders
	 	 	52	 
	19.7

	 	Agent and Agent Authority
	 	 	52	 
	19.8

	 	Lenders’ Credit Decisions
	 	 	53	 
	19.9

	 	Indemnification
	 	 	53	 
	19.10

	 	Successor Agent
	 	 	53	 
	19.11

	 	Taking and Enforcement of Remedies
	 	 	54	 
	19.12

	 	Reliance Upon Agent
	 	 	54	 
	19.13

	 	Agent May Perform Covenants
	 	 	54	 
	19.14

	 	No Liability of Agent
	 	 	55	 
	19.15

	 	Nature of Obligations under this Agreement
	 	 	55	 
	19.16

	 	Unanimity
	 	 	55	 
	ARTICLE 20

	MISCELLANEOUS

	20.1

	 	Notices
	 	 	56	 
	20.2

	 	Telephone Instructions
	 	 	57	 
	20.3

	 	No Partnership, Joint Venture or Agency
	 	 	57	 
	20.4

	 	Judgment Currency
	 	 	58	 
	20.5

	 	General Indemnity
	 	 	58	 
	20.6

	 	Further Assurances
	 	 	59	 
	20.7

	 	Waiver of Law
	 	 	59	 
	20.8

	 	Attornment and Waiver of Jury Trial
	 	 	59	 
	20.9

	 	Interest on Payments in Arrears
	 	 	59	 
	20.10

	 	Payments Due on Banking Day
	 	 	60	 
	20.11

	 	Application of Proceeds
	 	 	60	 
	20.12

	 	Whole Agreement
	 	 	61	 
	20.13

	 	Counterparts
	 	 	62	 






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CREDIT AGREEMENT




THIS AGREEMENT made the 21st of September, 2004,




BETWEEN:




CERAMIC PROTECTION CORPORATION

as Borrower




- and-




CANADIAN IMPERIAL BANK OF COMMERCE

as Lender, Sole Lead Arranger, Underwriter, Administrative Agent and Bookrunner




- and -




THOSE OTHER FINANCIAL INSTITUTIONS WHICH

HEREAFTER BECOME LENDERS

UNDER THIS AGREEMENT




PREAMBLE:





	 	 	The Borrower has requested and the Lenders have agreed to establish a senior secured
extendible, revolving facility and a non-revolving term facility, all on the terms and
conditions herein set forth, and CIBC has agreed to act as Agent for the Lenders under such
facilities, all on the terms and conditions and for the purposes set out in this Agreement.





AGREEMENT:





	 	 	In consideration of the covenants and agreements between the Parties contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:





ARTICLE 1

INTERPRETATION





	1.1	 	Definitions. Capitalized words and phrases used in the Documents, the Schedules
hereto and in all notices and communications expressed to be made pursuant to this Agreement
will have the meanings set out in Schedule A, unless otherwise defined in any of the
Documents.
	 
	1.2	 	Headings. Headings, subheadings and the table of contents contained in the Documents
are inserted for convenience of reference only, and will not affect the construction or
interpretation of the Documents.




 









 


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	1.3	 	Subdivisions. Unless otherwise stated, reference herein to a Schedule or to an
Article, Section, paragraph or other subdivision is a reference to such Schedule to this Agreement
or such Article, Section, paragraph or other subdivision of this Agreement. Unless
specified otherwise, reference in Schedule A to a Schedule or to an Article, Section,
paragraph or other subdivision is a reference to such Schedule or Article, Section,
paragraph or other subdivision of this Agreement.
	 
	1.4	 	Number. Wherever the context in the Documents so requires, a term used therein importing the singular will also include the plural and vice versa.
	 
	1.5	 	Statutes, Regulations and Rules. Any reference in the Documents to all or any section
or paragraph or any other subdivision of any Law will, unless otherwise expressly stated,
be a reference to that Law or the relevant section or paragraph or other subdivision
thereof, as such Law may be amended, substituted, replaced or re-enacted from time to
time.
	 
	1.6	 	Monetary References. Whenever an amount of money is referred to in the Documents, such amount will, unless otherwise expressly stated, be in Canadian Dollars.
	 
	1.7	 	Time. Time will be of the essence of the Documents.
	 
	1.8	 	Governing Law. The Documents will be governed by and construed in accordance with
the Law in force in the Province of Alberta from time to time.
	 
	1.9	 	Enurement. The Documents will be binding upon and will enure to the benefit of the
Parties and their respective successors and permitted assigns.
	 
	1.10	 	Amendments. No Document may be amended orally and, subject to Sections 1.1 l(a),
19.16 and 20.1(e), any amendment may only be made by way of an instrument in writing
signed by the Parties.
	 
	1.11	 	No Waiver.






	 	(a)	 	Subject to Sections 1.1 l(c) and 19.16, no waiver by a Party of any provision
or of the breach of any provision of the Documents will be effective unless it is
contained in a written instrument duly executed by an authorized officer or
representative of such Party. Such written waiver will affect only the matter
specifically identified in the instrument granting the waiver and will not extend to
any other matter, provision or breach.
	 
	 	(b)	 	The failure of a Party to take any steps in exercising any right in respect of
the breach or non-fulfillment of any provision of the Documents will not operate as a
waiver of that right, breach or provision, nor will any single or partial exercise
of any right preclude any other or future exercise of that right or the exercise of any
other right, whether in Law or otherwise.
	 
	 	(c)	 	Acceptance of payment by a Party after a breach or non-fulfillment of any provision of the Documents requiring a payment to such Party will constitute a












 


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	 	 	 	waiver of such provision if cured by such payment, but will not constitute a waiver
or cure of any other provision of the Documents.






	1.12	 	Severability. If the whole or any portion of the Documents or the application thereof
to any circumstance will be held invalid or unenforceable to an extent that does not affect
the operation of the Document in question in a fundamental way, the remainder of the
Document in question, or its application to any circumstance other than that to which it
has been held invalid or unenforceable, will not be affected thereby and will be valid and
enforceable to the fullest extent permitted by applicable Law.
	 
	1.13	 	Inconsistency. To the extent that there is any inconsistency or ambiguity between
the provisions of this Agreement and any other Document, the provisions of this Agreement
will govern to the extent necessary to eliminate such inconsistency or ambiguity.
	 
	1.14	 	Accounting Terms and Principles. Except as otherwise expressly provided, all
accounting terms, principles and calculations applicable to the Credit Facilities will be
interpreted, applied and calculated, as the case may be, in accordance with GAAP. The
basis of accounting and all calculations set out in this Agreement will be applied and
made on a consistent basis and will not be changed for the purposes of this Agreement
unless required by GAAP or as agreed to by the Lenders in writing, such agreement not
to be unreasonably withheld. It will be reasonable for the Lenders to withhold their
consent if a proposed change could adversely affect the obligations of the Borrower or
rights of the Lenders under the Documents.
	 
	1.15	 	Schedules. The following are the Schedules which form part of this Agreement:




Schedule A:
Definitions

Schedule B: Commitments

Schedule C: Form of Closing Certificates

Schedule D: Form of Closing Opinion (Borrower’s Counsel)

Schedule E: Form of Request for Offer of Extension

Schedule F: Form of Demand Debenture and Form of Pledge Agreement

Schedule G: Form of Material Subsidiary Guarantee

Schedule H: Form of Notice of Borrowing

Schedule I: Form of Notice of Rollover or Notice of Conversion

Schedule J: List of Subsidiaries and Indebtedness

Schedule K: Form of Compliance Certificate

Schedule L: Form of Instrument of Adhesion

Schedule M: Borrowing Base Certificate




ARTICLE 2

DELIVERIES ON CLOSING DATE





	2.1	 	Deliveries by Borrower.






	 	(a)	 	Closing Date. On the Closing Date, the Borrower will deliver or
cause to be delivered to the Agent for the benefit of the Lenders the following:



















 


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	 	(i)	 	the Borrower’s and, immediately upon completion of the Acquisition, each
Material Subsidiary’s Closing Certificate;
	 
	 	(ii)	 	a Borrowing Base Certificate;
	 
	 	(iii)	 	a certificate of status from the relevant jurisdiction(s) of
incorporation or registration for the Borrower and in respect of Alanx, a
certified copy of the certificate of merger or evidence of filing thereof;
	 
	 	(iv)	 	the Security (except the Collateral Mortgage);
	 
	 	(v)	 	release and undertaking to discharge, in form satisfactory to
the Agent, from the Existing Lender;
	 
	 	(vi)	 	the Closing Opinion;
	 
	 	(vii)	 	the U.S. Counsel Opinion;
	 
	 	(viii)	 	a certified copy of the Acquisition Agreement; and
	 
	 	(ix)	 	the payment of all fees and expenses, including arrangement
fees, which are payable by the Borrower to the Agent and the Lenders, as the
case may be, in connection with the Credit Facilities on or prior to the
Closing Date.






	 	(b)	 	Post-Closing. Within 10 Banking Days of the Closing Date, an executed
copy of the Collateral Mortgage, along with such other documents and opinions as
reasonably required by the Agent.





ARTICLE 3

CREDIT FACILITIES





	3.1	 	Extendible Revolving Loan. Subject to the terms and conditions hereof and effective
on the Closing Date, the Lenders hereby establish the Extendible Revolving Loan in favour
of the Borrower. The Extendible Revolving Loan may be drawn down by the Borrower
during a Revolving Period in Canadian Dollars or the Canadian Dollar Exchange
Equivalent thereof in U.S. Dollars, or any combination thereof, to a maximum of the then
applicable Borrowing Base. The Individual Revolving Loan Commitment Amount of
each of the Lenders is set out in Schedule B.
	 
	3.2	 	Term Loan. Subject to the terms and conditions hereof and effective on the Closing
Date, the Lenders hereby establishes the Term Loan in favour of the Borrower. The
Term Loan is a non-revolving facility and may be drawn down by the Borrower by way
of a single drawing made at Closing and thereafter pursuant to the terms and conditions
of this Agreement. The Term Loan Commitment Amount of each of the Lenders is set
out in Schedule B.

















 





 - 5 - 





	3.3	 	Extension of Revolving Period.






	 	(a)	 	End of First Revolving Period. The first Revolving Period will be
deemed to have commenced on the Closing Date and will end on September 20, 2005.
	 
	 	(b)	 	Extension of Credit.






	 	(i)	 	The Borrower may, provided no Default or Event of Default has
occurred and is continuing, request an Offer of Extension in respect of each
Lender for which there is a Revolving Period at such time (each a “Revolving
Lender”) no later than 90 days but no earlier than 120 days prior to the last
day of the then current Revolving Period in respect of such Revolving Lenders.
Such request shall be made by the Borrower by delivering to the Agent an
executed Request for Offer of Extension and, if not previously delivered, the
most current financial statements and production information required to be
delivered by it hereunder. The Agent shall within 2 Banking Days of receipt
thereof notify the Revolving Lenders of such Request for Offer of Extension and
each Revolving Lender shall notify the Agent and the Borrower as to whether or
not it agrees (in its sole discretion) to such request no later than 30 days
prior to the last day of the then current Revolving Period (the “Notification
Date”); provided that, if a Revolving Lender does not so notify the Agent and
the Borrower on or prior to the Notification Date, such Revolving Lender shall
be deemed to have elected not to agree to such request.
	 
	 	(ii)	 	If the Borrower fails to make a Request for Offer of Extension
within the time provided above, the then current Revolving Period for all
Revolving Lenders will not be followed by a new Revolving Period and will
continue until the Revolving Loan Termination Date.
	 
	 	(iii)	 	If the Majority Revolving Lenders agree to such Request for
Offer of Extension, the Agent shall forthwith deliver to the Borrower an Offer
of Extension. Any such Offer of Extension shall be open for acceptance by the
Borrower until the Banking Day immediately preceding the last day of the then
current Revolving Period. Upon written notice by the Borrower to the Agent
accepting an outstanding Offer of Extension and agreeing to the terms and
conditions specified therein, if any, the Revolving Period, in respect of those
Revolving Lenders agreeing to such an extension, shall be extended to the date
specified in the Offer of Extension subject to the terms and conditions, if
any, specified in such Offer of Extension effective on the date of acceptance
by the Borrower of the Offer of Extension.
	 
	 	(iv)	 	If any Lender that receives notification from the Agent that
the Borrower has made a Request for Offer of Extension, elects not to or is
deemed not to make an Offer of Extension (each a “Non-Agreeing Lender”), the
Agent shall forthwith so advise each of the other Lenders which do agree to
provide an Offer of Extension and each such Lender shall have the right











 



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	 	 	 	(but not the obligation) to purchase the Individual Revolving Loan Commitment Amount of
such Non-Agreeing Lenders (collectively, the “Non-Agreeing Lender Commitment Amount”) for a
purchase price in an amount equal to the Aggregate Principal Amount of the Advances owing
to such Non-Agreeing Lenders under the Extendible Revolving Loan, together with accrued
interest thereon to the date of payment of such principal amount and all other Indebtedness
payable by the Borrower to such Non-Agreeing Lenders under this Agreement and the other
Documents (including all losses, costs and expenses suffered or incurred by the
Non-Agreeing Lenders as a result of complying with this Section 3.3(b) and all amounts
owing to it under Sections 12.3 and 20.5). Each of the other Lenders wishing to exercise
its rights to purchase the Non-Agreeing Lender Commitment Amount (a “Purchasing Lender”)
shall so notify the Borrower, the Agent and each of the other Lenders in writing, and such
Purchasing Lender shall thereupon be obligated to purchase not less than 15 days prior to
the last day of the then current Revolving Period, an amount equal to the Non-Agreeing
Lender Commitment Amount multiplied by such Purchasing Lender’s Rateable Portion of the
Revolving Loan Commitment Amount over the aggregate of all Purchasing Lender’s Rateable
Portion of the Revolving Loan Commitment Amount, or as otherwise agreed to by the Borrower
and all Purchasing Lenders. The Non-Agreeing Lenders, the Purchasing Lenders, the Agent,
the Borrower and each of the other Lenders, if any, shall forthwith duly execute and
deliver any necessary documentation to give effect to such purchase, whereupon the
Non-Agreeing Lenders shall, as of the effective date thereof, be released from its
obligations to the Borrower hereunder and under the other Documents arising subsequent to
such date.
	 
	 	(v)	 	If a Non-Agreeing Lender Commitment Amount is not purchased pursuant to Section
3.3(b)(iv), at the option of the Borrower:






	 	(A)	 	so long as no Event of Default or any Default exists and is continuing, the
Borrower shall repay all Advances (which shall include, for greater certainty, the
face amount of all Banker’s Acceptances and BA Equivalent Loans accepted by such
Non-Agreeing Lender) and other Indebtedness owing hereunder and under the other
Documents to such Non-Agreeing Lender on the Conversion Date and, upon such
repayment, the Non-Agreeing Lender shall cease to be a Lender hereunder and the
Non-Agreeing Lender Commitment Amount shall be terminated; the Revolving Loan
Commitment Amount shall be reduced by the amount of the terminated Non-Agreeing
Lender Commitment Amount, and the Rateable Portion of each remaining Lender shall be
adjusted accordingly; or
















 



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	 	(B)	 	the Non-Agreeing Lender shall, if requested by the Borrower,
assign and transfer such Non-Agreeing Lender Commitment Amount to a
Lender pursuant to Section 18.2;






	 	(vi)	 	A Revolving Period may only be extended pursuant to Section
3.3(b)(i) if the Majority Revolving Lenders agree to provide an Offer of
Extension, and if such Majority Revolving Lenders do not agree to provide an
Offer of Extension, the provisions of Sections 3.3(b)(iv) or 3.3(b)(v) shall
not be applicable and the undrawn portion of the Individual Revolving Loan
Commitment Amounts of all Revolving Lenders shall, effective on the last day of
the then current Revolving Period, be cancelled and such Revolving Lenders’
commitments hereunder shall thereafter be terminated.
	 
	 	(vii)	 	This Section 3.3 shall apply from time to time to permit
successive extensions of the Revolving Period and the Revolving Loan
Termination Date if and for so long as the Majority Revolving Lenders have
agreed in accordance with 

Section 3.3(b)(vi).






	3.4	 	End of Revolving Period. The undrawn portion of any Non-Agreeing Lender
Commitment Amount will be automatically cancelled at 5:00 p.m. (Toronto time) on the last day
of the then current Revolving Period of such Non-Agreeing Lender and on such day all amounts
outstanding hereunder will be repaid and the Extendible Revolving Loan, with respect to a
Non-Agreeing Lender, shall be terminated.
	 
	3.5	 	Maturity Date. Each Advance from a Lender under the Extendible Revolving Loan will
have a Maturity Date which expires on or prior to the Revolving Loan Termination Date
applicable to that Lender.
	 
	3.6	 	Repayments






	 	(a)	 	Extendible Revolving Loan






	 	(i)	 	During Revolving Period. During a Revolving Period,
the Borrower may borrow, repay and re-borrow Advances under the Extendible
Revolving Loan provided that, subject to Sections 3.3 and 5.7, the Canadian
Dollar Exchange Equivalent of the Aggregate Principal Amount of the Extendible
Revolving Loan will at no time exceed the then applicable Borrowing Base.
	 
	 	(ii)	 	Payment on Revolving Loan Termination Date. The
Aggregate Principal Amount of the Extendible Revolving Loan with respect to
any Non-Agreeing Lender, if any, remaining on the Revolving Loan Termination
Date with respect to such Non-Agreeing Lender will be unconditionally and
irrevocably paid by the Borrower in full, together with all accrued but unpaid
interest thereon and all other Indebtedness owing to the Agent in respect of
such Indebtedness to such Non-Agreeing Lender and owing to such Non-Agreeing
Lender under the Documents, if any, on such date.











 



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	 	(iii)	 	Payments to Agent. All payments of the Indebtedness of the
Borrower to the Lenders under the Extendible Revolving Loan will be made by
the Borrower to the Agent for the account of the Lenders under the
Extendible Revolving Loan in accordance with each such Lender’s Rateable
Portions thereof.






	 	(b)	 	Term Loan






	 	(i)	 	During Term. During the Term of the Term Loan, other
than the single drawing made on the Closing Date, the Borrower may, request
Advances under the Term Loan by way of rollovers and conversions by way of the
following:






	 	(A)	 	Prime Rate Loans in Canadian dollars;
	 
	 	(B)	 	U.S. Base Rate Loans in U.S. dollars;
	 
	 	(C)	 	BA’s with terms of 1, 2, 3 or 6 months, subject to availability; and
	 
	 	(D)	 	LIBOR Based Loans with terms of 1, 2, 3 or 6
months, subject to availability.






	 	(ii)	 	Scheduled Principal Repayments. Beginning on April 30,
2005, and on the last Banking Day of each fiscal quarter thereafter, the
Borrower shall make quarterly principal repayments of the Term Loan in the
amount of Cdn. $1,100,000.
	 
	 	(iii)	 	Payment on Term Loan Termination Date. The Aggregate
Principal Amount of the Term Loan remaining on the Term Loan Termination Date
will be unconditionally and irrevocably paid by the Borrower in full, together
with all accrued but unpaid interest thereon and all other Indebtedness owing
to the Agent in respect of such Indebtedness to each Lender on such date.
	 
	 	(iv)	 	Payments to Agent. All payments of the Indebtedness of
the Borrower to the Lenders under the Term Loan will be made by the Borrower
to the Agent for the account of the Lenders under the Term Loan in accordance
with each such Lender’s Rateable Portions thereof.






	3.7	 	General Right to Prepay and Cancel. Subject to Sections 9.2 and 10.5 and with the
same notice required when the Advance to be prepaid was made, the Borrower may at any time
prepay (in minimum amounts of Cdn. $500,000 or U.S. $500,000, as applicable, without premium,
bonus or penalty (provided the Borrower reimburses any breakage funding costs and related
expenses, if any), any or all of the Aggregate Principal Amount under the Credit Facilities
except that (i) a Bankers’ Acceptance under the Credit Facilities will not be paid prior to
its Maturity Date, and (ii) a LIBOR Based Loan may not be paid prior to its Maturity Date
except in accordance with Sections 9.2 and 11.2. All voluntary prepayments made under the Term
Loan will be applied in inverse order of












 



- 9 -





	 	 	maturity beginning first with the amount of the Term Loan remaining at the end of the Term
and then to all remaining scheduled repayments under the Term Loan. At any time during a
Revolving Period, the Borrower may also, upon the Borrower giving the Agent not less than 3
Banking Days prior written notice, cancel (in minimum amounts of Cdn. $500,000 or U.S.
$500,000, as applicable, any undrawn portion of the Revolving Loan Commitment Amount,
including any undrawn portion resulting from a prepayment. Any prepayment or cancellation
will be made pro rata to all Lenders on the basis of each Lender’s Rateable Portion, and
any such prepayment or cancellation and resulting prepayment made to a Non-Agreeing Lender
will result in a permanent reduction of the Individual Revolving Loan Commitment Amount of
any such Non-Agreeing Lender.






	3.8	 	Mandatory Prepayment Upon Specified Events.






	 	(a)	 	The Borrower shall, within 3 Banking Days of notice thereof, pay to the Agent,
on account of the Lenders any excess outstandings under the Extendible Revolving
Loan over the lesser of (A) the Revolving Loan Commitment and (B) the Borrowing Base.
	 
	 	(b)	 	The Borrower shall further pay to the Agent on behalf of the Lenders as a
mandatory prepayment of the Term Loan (in inverse order of maturity):






	 	(i)	 	within 7 Banking Days of receipt thereof, the net proceeds of
any asset dispositions in excess of $100,000, (other than Permitted Sale and
Lease-Back Transactions) of the Borrower or any of its Subsidiaries (other
than sales of inventory in the ordinary course of business), provided that if
any such assets are to be replaced within 60 days of such disposition, the
Borrower may request that such net proceeds be held by the Agent on terms
acceptable to the Lenders and Borrower, in each case acting reasonably, to be
used for such purpose;
	 
	 	(ii)	 	within 5 Banking Days of the closing thereof, 75% of the net
cash proceeds from any equity offering of the Borrower; and
	 
	 	(iii)	 	within 5 Banking Days of receipt thereof, the net cash
proceeds of any property insurance claim (provided that if any such assets are
to be replaced within 90 days of such disposition, the Borrower may request
that such net proceeds be held by the Agent on terms acceptable to the Lenders
and Borrower, in each case acting reasonably, to be used for such purpose).






	 	(c)	 	As a further mandatory prepayment of the aggregate principal amount under the
Term Loan (in inverse order of maturity), the Borrower shall pay to the Agent on behalf
of the Lenders within 60 days of the end of each fiscal quarter, 75% of the Excess Cash
Flow, provided that no such prepayment is required to the extent for any such quarter,
the Borrower achieves a Debt to EBITDA Ratio of less than 1.25:1 for such quarter.












 



- 10 -





	3.9	 	Use of Proceeds.






	 	(a)	 	Extendible Revolving Loan. The Borrower will be entitled, subject to
the provisions hereof dealing with Hostile Acquisitions, to use the proceeds of the
Extendible Revolving Loan for general corporate purposes.
	 
	 	(b)	 	Term Loan. The Borrower will be entitled, subject to the provisions
hereof dealing with Hostile Acquisitions, to use the proceeds of the Term Loan for:






	 	(i)	 	the Acquisition, including, for greater certainty, all amounts
necessary to satisfy the Indebtedness described in 14.4(n) of the Acquisition
Agreement; and
	 
	 	(ii)	 	any other purpose that has been consented to in writing by the
Lenders prior to such use.






	3.10	 	Types of Accommodation






	 	(a)	 	Extendible Revolving Loan. The Borrower may from time to time obtain
under the Extendible Revolving Loan all or one or more of the following types of
Accommodation:






	 	(i)	 	Canadian Dollar Advances. For Advances in Canadian Dollars:






	 	(A)	 	Canadian Prime Rate Loans;
	 
	 	(B)	 	Bankers’ Acceptances; and
	 
	 	(C)	 	Letters of Credit.






	 	(ii)	 	U.S. Dollar Advances. For Advances in U.S. Dollars:






	 	(A)	 	U.S. Base Rate Loans;
	 
	 	(B)	 	LIBOR Based Loans;
	 
	 	(C)	 	Letters of Credit; and
	 
	 	(D)	 	subject to availability, Bankers’ Acceptances.






	 	(b)	 	Term Loan. The Borrower may from time to time obtain under the Term
Loan all or one or more of the following types of Accommodation:






	 	(i)	 	Canadian Dollar Advances. For Advances in Canadian Dollars:






	 	(A)	 	Canadian Prime Rate Loans; and

	 
	 	(B)	 	Bankers’ Acceptances.











 



- 11 -



	 	(ii)	 	U.S. Dollar Advances. For Advances in U.S. Dollars:






	 	(A)	 	U.S. Base Rate Loans;

	 
	 	(B)	 	LIBOR Based Loans; and
	 
	 	(C)	 	subject to availability, Bankers’ Acceptances.






	3.11	 	Interest and Fees.






	 	(a)	 	Interest and Fees under the Extendible Revolving Loan. Interest
and fees payable by the Borrower under the Extendible Revolving Loan will be
applied in the following manner:






	 	(i)	 	each Canadian Prime Rate Loan under the Extendible
Revolving Loan will bear interest at a variable rate per annum equal to the
Canadian Prime Rate plus the applicable margin indicated in the table
below;
	 
	 	(ii)	 	each U.S. Base Rate Loan under the Extendible Revolving
Loan will bear interest at a variable rate per annum equal to the U.S. Base
Rate plus the applicable margin indicated in the table below;
	 
	 	(iii)	 	each LIBOR Based Loan under the Extendible Revolving
Loan will bear interest at a rate per annum equal to the LIBOR plus the
applicable margin indicated in the table below;
	 
	 	(iv)	 	for each Bankers’ Acceptance under the Extendible
Revolving Loan the stamping fee payable by the Borrower on the acceptance
thereof by the Lenders will be calculated at a rate per annum adjusted for
the term to maturity based upon the face amount of the applicable Bankers’
Acceptance equal to the stamping fee indicated in the table below;
	 
	 	(v)	 	a standby fee payable by the Borrower as set forth in
Section 12.2 will be calculated based upon, in respect of the undrawn
amount of the Extendible Revolving Loan from time to time, the applicable
standby fee indicated in the table below;





	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	BA Stamping	 	Commercial	 	 
	 	 	Debt to	 	Prime/US Base	 	Fee and LIBOR	 	Letters of	 	 
	Tier	 	EBITDA Ratio	 	Rate Margin	 	Margin	 	Credit	 	Standby Fee
	I
	 	<1.00:1
	 	    0 bps
	 	150 bps
	 	100 bps
	 	25.0 bps
	II
	 	31.00:1<1.50:1
	 	    0 bps
	 	150 bps
	 	150 bps
	 	30.0 bps
	III
	 	>1.50:1<2.25:1
	 	100 bps
	 	250 bps
	 	250 bps
	 	40.0 bps
	IV
	 	32.25:1<3.00:1
	 	200 bps
	 	350 bps
	 	350 bps
	 	50.0 bps

















 



- 12 -








	 	(b)	 	Interest and Fees under the Term Loan. Interest and fees payable
by the Borrower under the Term Loan will be applied in the following manner:






	 	(i)	 	each Canadian Prime Rate Loan under the Term Loan will
bear interest at a variable rate per annum equal to the Canadian Prime Rate
plus the applicable margin indicated in the table below;
	 
	 	(ii)	 	each U.S. Base Rate Loan under the Term Loan will bear
interest at a variable rate per annum equal to the U.S. Base Rate plus the
applicable margin indicated in the table below;
	 
	 	(iii)	 	each LIBOR Based Loan under the Term Loan will bear
interest at a rate per annum equal to the LIBOR plus the applicable margin
indicated in the table below;
	 
	 	(iv)	 	for each Bankers’ Acceptance under the Term Loan the
stamping fee payable by the Borrower on the acceptance thereof by the
Lenders will be calculated at a rate per annum adjusted for the term to
maturity based upon the face amount of the applicable Bankers’ Acceptance
equal to the stamping fee indicated in the table below;





	 	 	 	 	 	 	 
	 	 	 	 	Prime/US Base Rate	 	 
	Tier	 	Debt to EBITDA Ratio	 	Margin	 	BA and LIBOR
	I

	 	<1.00:1
	 	    0 bps
	 	150 bps
	II

	 	3 1.00:1 < 1.50:1
	 	100 bps
	 	250 bps
	III

	 	31.50:1 < 2.25:1
	 	200 bps
	 	350 bps
	IV

	 	32.25:1 < 3.00
	 	300 bps
	 	450 bps







	 	(c)	 	Acquisition. Notwithstanding the Debt to EBITDA Ratio set forth in
the tables in Sections 3.11(a) and 3.11(b), upon the financial closing of the
Acquisition, the Borrower will be deemed to be at Tier III in such tables until the
Lender receives the Borrower’s quarterly compliance certificate for the fiscal
quarter ended January 31, 2005, upon receipt of which the performance grid pricing
outlined in the tables above shall apply.
	 
	 	(d)	 	Changes in Rates due to change in Ratio. With respect to Advances
made under the Credit Facilities, any increase or decrease in the interest rates on
U.S. Base Rate Loans, Canadian Prime Rate Loans or LIBOR Based Loans outstanding on
the effective date on which a determination of the Debt to EBITDA Ratio, or any other
change to the fees or margins, is made hereunder will apply proportionately to each
such LIBOR Based Loan outstanding on the basis of the number of days











 



- 13 -



	 	 	 	remaining in the term to maturity of each such Advance. The Borrower will pay to
the Agent for the benefit of the Lenders any resulting increase in the LIBOR
applicable to LIBOR Based Loans that are outstanding on the effective date of such
change if the term to maturity of such Advance does not exceed 90 days from such
date. For purposes of this Section 3.11(d) the effective date on which an increase
in the interest rates on U.S. Base Rate Loans, Canadian Prime Rate Loans or LIBOR
Based Loans occurs will be the first day of the month following the delivery by the
Borrower of a Compliance Certificate which evidences a change in the Debt to EBITDA
Ratio or if no such Compliance Certificate is delivered as required herein, on
notice of such change by the Agent to the Borrower.
	 
	 	(e)	 	Borrowing Base Shortfall or Event of Default. Effective immediately
upon receipt by the Borrower of a notice of a Borrowing Base Shortfall or an Event of
Default (the “Effective Date”), the interest rates then applicable to Canadian Prime
Rate Loans, LIBOR Based Loans, U.S. Base Rate Loans and stamping fees on Bankers’
Acceptances will each increase by 200 bps per annum and such increase will remain in
effect for as long as a Borrowing Base Shortfall or Event of Default subsists. An
increase in interest rates or stamping fees as aforesaid arising from a Borrowing Base
Shortfall or Event of Default will on the Effective Date apply proportionately to each
such Advance outstanding on the basis of the number of days remaining in the term to
maturity of each such Advance. The Borrower will pay to the Agent for and on behalf of
the Lenders any resulting increase in stamping fees with respect to outstanding
Bankers’ Acceptances on or prior to the third Banking Day following the Effective
Date. In the event that the Event of Default or Borrowing Base Shortfall no longer
subsists and the Borrower has paid in advance the increased stamping fee for the term
to maturity of a Bankers’ Acceptance, the Lenders will refund the amount of the
increase for the remaining term to maturity of such Advance.






	3.12	 	Borrowing Base






	 	(a)	 	Setting of Borrowing Base. The Borrowing Base under the Extendible
Revolving Loan shall be based on the sum of, without duplication, (i) 75% of Eligible
Accounts Receivable, (ii) 90% of Export Development Canada insured accounts receivable
and (iii) the lesser of (a) 50% of eligible inventory comprised of finished goods
(excluding any work in progress), and (b) $2,000,000.
	 
	 	(b)	 	Meeting with Lenders. The Borrower will meet annually with the Agent
and the Lenders at a time and place mutually acceptable to the Borrower and the Lenders
to review and discuss such matters affecting the Borrower’s and the Material
Subsidiaries’ business as the Agent and the Lenders may request, acting
reasonably.






 











 





 - 14 - 




ARTICLE 4

SECURITY





	4.1	 	Security. The present and future Indebtedness of the Borrower and the Material
Subsidiaries to the Agent and the Lenders under the Extendible Revolving Loan, the Term Loan
and all other Indebtedness of the Borrower or any Material Subsidiary, including without
limitation the Corporate Visa Facility, to the Agent and the Lenders, howsoever arising or
incurred hereunder and under the Documents, will be secured by the following (collectively,
the “Security”):






	 	(a)	 	a demand debenture in the amount of Cdn. $75,000,000 from the Borrower and each
of its Material Subsidiaries together with a pledge thereof (the demand debentures and
the pledges thereof to be substantially in the form of Schedule F), to be registered in
all appropriate jurisdictions;
	 
	 	(b)	 	a guarantee, substantially in the form of Schedule G, from each Material
Subsidiary in favour of the Agent for its own benefit and on behalf of the Lenders,
with respect to the Borrower’s and each other Material Subsidiary’s obligations to the
Agent and the Lenders, under the Documents to which the Borrower or another Material
Subsidiary is a party;
	 
	 	(c)	 	a collateral mortgage (the “Collateral Mortgage”) from the Borrower with
respect to its operating premises in Calgary, Alberta in form satisfactory to the
Agent, in its sole discretion; and
	 
	 	(d)	 	when requested by the Agent in accordance with Section 4.6, such documents and
instruments providing a fixed Lien in accordance with Section 4.6.






	4.2	 	Sharing of Security. The Borrower and the Lenders agree and acknowledge that the
Security is being shared equally among the Lenders to secure Indebtedness of the Borrower
under the Extendible Revolving Loan, the Term Loan, the Corporate Visa Facility and any
hedging transactions with any Lender on a pari passu basis; and that the Agent will hold the
Security for the benefit of the Agent and the Lenders hereunder.
	 
	4.3	 	Exclusivity of Remedies. Nothing herein contained or in the Security now held or
hereafter acquired by the Agent and the Lenders, nor any act or omission of the Agent and the
Lenders with respect to any such Security, will in any way prejudice or affect the rights,
remedies or powers of the Agent and the Lenders with respect to any other security at any time
held by the Agent and the Lenders.
	 
	4.4	 	Form of Security. The Security will be in such form or forms as will be required by
the Agent, acting reasonably, and will be registered in such offices in Canada or the U.S. or
any province or state thereof as the Agent may from time to time reasonably require to protect
the Liens created thereby. Should the Agent determine at any time and from time to time that
the form and nature of the then existing Security is deficient in any way or does not fully
provide the Agent and the Lenders with the Liens and priority to which each is entitled
hereunder, the Borrower will forthwith execute and deliver or cause to be










 



- 15 -


	 	 	executed and delivered to the Agent, at the Borrower’s expense, such amendments to the
Security or provide such new security as the Agent may reasonably request.






	4.5	 	After-Acquired Property. All property acquired by or on behalf of the Borrower or any
Material Subsidiary after the date of execution of the Security which forms part of the
property of the Borrower or any Material Subsidiary (hereafter collectively referred to as
“After-Acquired Property”), will be subject to the Security without any further conveyance,
mortgage, pledge, charge, assignment or other act on the part of the Parties. Without limiting
the effect of the preceding sentence, the Borrower will, or will cause such Material
Subsidiary to, from time to time execute and deliver and the Agent will register, all at the
Borrower’s expense, such instruments supplemental to the Security, in form and substance
satisfactory to the Agent, acting reasonably, as may be necessary or desirable to ensure that
the Security as amended and supplemented constitutes in favour of the Agent and the Lenders an
effective Lien to the extent created by the Security over such After-Acquired Property
as required hereunder, subject only to Permitted Encumbrances which under applicable
Law rank in priority thereto.
	 
	4.6	 	Undertaking to Grant Fixed Charge Security. If the Lenders, acting reasonably,
determine in their sole discretion that there has been a Material Adverse Effect (which for
purposes of this Section 4.6 may include the occurrence of a Borrowing Base Shortfall) and the
Lenders consider it necessary for their adequate protection, the Borrower, at the request of
the Agent, will forthwith grant or cause to be granted to the Agent for the benefit of the
Agent and the Lenders a fixed Lien (subject only to Permitted Encumbrances which
under applicable Law rank in priority thereto) in such of the Borrower’s or any Material
Subsidiary’s property as the Agent will, in its sole discretion, determine as security for all
then present and future Indebtedness of the Borrower to the Agent and the Lenders under the
Credit Facilities. In this connection, the Borrower will:






	 	(a)	 	provide the Agent with such information as is reasonably required by the Agent
to identify the property to be charged pursuant to this Section 4.6;
	 
	 	(b)	 	do all such things as are reasonably required to grant, or cause such Material
Subsidiary to grant, in favour of the Agent and the Lenders, a fixed Lien (subject only
to Permitted Encumbrances which under applicable Law rank in priority thereto) in
respect of such property to be so charged pursuant to this Section 4.6;
	 
	 	(c)	 	provide the Agent with all corporate or partnership resolutions and other
action, as reasonably required, for the Borrower or such Material Subsidiary to grant
the fixed Lien (subject only to Permitted Encumbrances which under applicable Law rank
in priority thereto) in the property identified by the Agent to be so charged;
	 
	 	(d)	 	provide the Agent with such security instruments and other documents which the
Agent, acting reasonably, deems are necessary to give full force and effect to the
provisions of this Section 4.6;
	 
	 	(e)	 	assist the Agent in the registration or recording of such agreements and instruments in such public registry offices in Canada or any province thereof as










 



- 16 -


	 	 	 	the Agent, acting reasonably, deems necessary to give full force and effect to
the provisions of this Section 4.6; and






	 	(f)	 	pay all reasonable costs and expenses incurred by the Agent in
connection with the preparation, execution and registration of all agreements,
documents and instruments, including any amendments to the Security, made in
connection with this Section 4.6.






	4.7	 	Discharge of Security. The Agent and the Lenders will discharge the
Security at the Borrower’s expense forthwith after all of the Borrower’s Indebtedness
under the Credit Facilities has been unconditionally and irrevocably paid or satisfied
in full and each such facility has been cancelled.





ARTICLE 5

FUNDING AND OTHER MECHANICS





	5.1	 	Funding of Accommodations. Subject to Section 5.2 and Article 10, all
Advances requested by the Borrower will be made available by deposit of the applicable
funds (which in the case of Bankers’ Acceptances will be the Net Proceeds) into the
appropriate Borrower’s Account for value on the Banking Day, or the LIBOR Banking Day in
the case of a LIBOR Based Loan, as the case may be, on which the Advance is to take
place.
	 
	5.2	 	Notice Provisions. Drawdowns under the Credit Facilities will be made
available to the Borrower and the Borrower will be entitled under the Credit Facilities
to effect a Rollover or Conversion where permitted hereunder, provided a Notice of
Borrowing or Notice of Rollover or Notice of Conversion, as applicable, is received from
the Borrower by the Agent as follows:






	 	(a)	 	with respect to Advances, other than by way of LIBOR Based Loans, at
least 1 Banking Day prior to such Advance, provided notice is received by the
Agent no later than 12:00 noon (Toronto time) on the second Banking Day
immediately preceding the Drawdown Date or the date of Rollover or Conversion, as
applicable; and
	 
	 	(b)	 	with respect to a Drawdown, Rollover or Conversion of or into a LIBOR
Based Loan, at least 3 LIBOR Banking Days prior to such Advance, provided notice
is received by the Agent no later than 12:00 noon (Toronto time) on the third
LIBOR Banking Day immediately preceding the Drawdown Date or the date of Rollover
or Conversion, as applicable.






Any of the notices referred to in the foregoing paragraphs of this Section 5.2 may,
subject to Section 20.2, be given by the Borrower, at its sole risk, to the Agent by
telephone and in such case will be followed by the Borrower delivering to the Agent on
the same day the written notice required hereunder confirming such instructions.




	5.3	 	Irrevocability. A Notice of Borrowing, Notice of Rollover or Notice of
Conversion when given by the Borrower will be irrevocable and will oblige the Borrower, the Agent
and the Lenders to take the action contemplated herein and therein on the date
specified










 



- 17 -


	 	 	therein, provided that, any such notice will not be binding on a Lender who makes a
determination under Section 11.2.






	5.4	 	Rollover or Conversion of Accommodations.






	 	(a)	 	Subject to Section 5.2, Article 9 and Article 10, the Borrower will be entitled
to effect a Rollover of one type of Accommodation into the same type of
Accommodation or to effect a Conversion of one type of Accommodation into another type
of Accommodation on the terms herein provided.
	 
	 	(b)	 	Subject to Section 9.1(b), if the Borrower fails to give the Agent a duly
completed Notice of Rollover or Notice of Conversion if and as required by Section 5.2,
or if in giving such notice the Borrower fails to provide for the Rollover or
Conversion of all of the Advances then maturing, the Borrower will be deemed to have
irrevocably elected to Convert such maturing Advances, or that part of such maturing
Advances which the Borrower has failed to provide for in such notice, as the case may
be, into a Canadian Prime Rate Loan with respect to a Cdn. Dollar Advance or a U.S.
Base Rate Loan with respect to a U.S. Dollar Advance.
	 
	 	(c)	 	No Conversion of a Bankers’ Acceptance will be made prior to its Maturity Date.






	5.5	 	Agent’s Obligations. Upon receipt of a Notice of Borrowing, Notice of Rollover or
Notice of Conversion with respect to a proposed Advance (other than by way of Bankers’
Acceptances), the Agent will forthwith notify the Lenders of the proposed date on which such
Advance is to take place, of each Lender’s Rateable Portion of such Advance and, if
applicable, of the account of the Agent to which each Lender’s Rateable Portion thereof is to
be credited.
	 
	5.6	 	Lenders’ Obligations. Each Lender will, prior to 12:00 noon (Toronto time) on the
proposed date on which an Advance is to take place (other than by way of Bankers’
Acceptances), credit the account of the Agent specified in the Agent’s notice given pursuant
to Section 5.5 with such Lender’s Rateable Portion of such Advance, and by 1:00 p.m. (Toronto
time) on the same date, the Agent will make available to the Borrower the amount so credited.
	 
	5.7	 	Exchange Rate Fluctuations. Subject to Section 5.8, if as a result of currency
fluctuation the Canadian Dollar Exchange Equivalent of the Aggregate Principal Amount under
the Credit Facilities owing to the Lenders exceeds the lesser of the Borrowing Base and the
Revolving Loan Commitment Amount, with respect to the Extendible Revolving Loan, or the Term
Loan Commitment Amount, with respect to the Term Loan (the
“Excess”), the Borrower will (i) if
the Excess is more than or equal to 3% of the Revolving Loan Commitment Amount or Term
Loan Commitment Amount as applicable, within 3 Banking Days, and (ii) if the Excess is
less than 3% of the Revolving Loan Commitment Amount or Term Loan Commitment Amount, as
applicable, on the earlier of 30 days or the next following Drawdown, Rollover or Conversion,
pay the Excess to the Agent as a Principal Repayment, with respect to the Extendible Revolving
Loan or the Term Loan, as applicable, for the benefit of the Lenders.










 



- 18 -








	5.8	 	Excess Relating to LIBOR and Bankers’ Acceptances. If to pay an Excess it is
necessary to repay an Advance made by way of Bankers’ Acceptance or a LIBOR Based Loan,
prior to the Maturity Date thereof, the Borrower will not be required to repay such Advances
until the Maturity Date applicable thereto, provided, however, that at the request of the
Agent, the Borrower will forthwith pay the Excess to the Agent, for deposit into an escrow
account maintained by and in the name of the Agent for the benefit of the Lenders. The
Excess will be held by the Agent for set-off against future Indebtedness owing by the
Borrower to the Lenders in respect of such Excess, if any, and, pending such application,
such amounts will bear interest for the Borrower’s Account at the rate payable by the Agent
in respect of deposits of similar amounts and for similar periods of time. The deposit of
the Excess by the Borrower with the Agent as herein provided, will not operate as a
repayment of the Aggregate Principal Amount until such time as the Excess is actually paid
to the Lenders as a Principal Repayment.
	 
	5.9	 	Number of Advances. The Borrower will not be entitled to maintain at any time, in
aggregate, more than three outstanding Advances under the Term Loan by way of Bankers’
Acceptances and/or LIBOR Based Loans.





ARTICLE 6

CONDITIONS PRECEDENT TO DRAWDOWN





	6.1	 	Conditions Precedent to Drawdown. The Lenders’ obligation to provide Advances under
the Credit Facilities will be subject to the following conditions precedent being met, unless
waived in writing by the Lenders:






Initial Funding




	 	(a)	 	the Borrower will have complied, or caused to be complied, with the deliveries
required under Section 2.1;
	 
	 	(b)	 	the appropriate Notice of Borrowing, Notice of Rollover or Notice of Conversion
will have been delivered in accordance with the notice provisions provided in Section
5.2;
	 
	 	(c)	 	no Event of Default will have occurred and be continuing;
	 
	 	(d)	 	in the case of any Advances by way of a Drawdown, no Default or Borrowing Base
Shortfall will have occurred and be continuing;
	 
	 	(e)	 	the Security, in form acceptable to the Agent, on behalf of the Lenders, will
be executed and delivered by the Borrower and its Material Subsidiaries, as
applicable;
	 
	 	(f)	 	the Acquisition shall be completed on terms and conditions satisfactory to the
Agent, on behalf of the Lenders;










 



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	 	(g)	 	satisfactory review of the Borrower’s pro-forma balance sheet, giving effect to
the Acquisition, together with a Compliance Certificate providing evidence the
Borrower’s Debt to EBITDA Ratio is less than 3.5:1;
	 
	 	(h)	 	no material adverse change to the property and financial performance of the
Borrower and Alanx;
	 
	 	(i)	 	the shareholders’ equity of the Borrower shall, upon completion of the
Acquisition, not be less than Cdn. $22,000,000;
	 
	 	(j)	 	the Borrower shall have obtained all necessary government and other third
party consents necessary to effect the Transaction;
	 
	 	(k)	 	payment of all fees and expenses payable to CIBC and the Lenders under the
credit documents; and
	 
	 	(1)	 	such other documents as the Agent may reasonably request on behalf of the
Lenders.






Ongoing Funding




	 	(a)	 	the appropriate Notice of Borrowing, Notice of Rollover or Notice of Conversion
will have been delivered in accordance with the notice provisions provided in Section
5.2;
	 
	 	(b)	 	no Event of Default will have occurred and be continuing; and
	 
	 	(c)	 	each representation and warranty of the Borrower contained herein shall be true
and correct.






	6.2	 	Hostile Acquisitions. If the Borrower wishes to utilize, whether directly or
indirectly, Drawdowns to facilitate, assist or participate in a Hostile Acquisition by the
Borrower, any Material Subsidiary or any other Affiliate of the Borrower:






	 	(a)	 	at least 10 Banking Days prior to the delivery to the Agent of a Notice of
Borrowing made in connection with a Hostile Acquisition, the president or chief
financial officer of the Borrower will notify the Agent in writing (who will then
notify the Lenders) of the particulars of the Hostile Acquisition in sufficient detail
to enable each Lender to determine, in each Lender’s sole discretion, whether it will
permit a Drawdown to be utilized for such Hostile Acquisition;
	 
	 	(b)	 	if a Lender decides not to fund an Advance to be utilized for such Hostile
Acquisition, then upon such Lender so notifying the Agent in writing (who will then
notify the Borrower), such Lender will have no obligation to fund such Advance
notwithstanding any other provision of this Agreement to the contrary; and










 



- 20 -








	 	(c)	 	each Lender will use reasonable commercial efforts to notify the Agent in
writing as soon as practicable (and in any event within 2 Banking Days of receipt
of the particulars thereof from the Agent) of its decision whether or not to fund a
proposed Hostile Acquisition.






	6.3	 	Adjustment of Rateable Portion. If a Lender elects not to participate in a Drawdown
for a Hostile Acquisition (a “Non-Participating Lender”), the Drawdown will be reduced by the
Non-Participating Lenders’ Rateable Portion thereof and the allocation among all Lenders who
are not Non-Participating Lenders (each, a “Participating Lender”) of interest and other fees
payable by the Borrower hereunder, including standby fees, will be adjusted so as to reflect
the reduction in the Drawdown, and thereafter the Rateable Portion of each Participating
Lender, for such purposes only, will reflect the Aggregate Principal Amount then funded by
each Participating Lender based on the Aggregate Principal Amount of all Participating Lenders
after taking into account the amount of the requested Drawdown not funded by the
Non-Participating Lender. Notwithstanding the adjustment of the Rateable Portion pursuant to
this Section 6.3, there will be no reduction in the Individual Revolving Loan Commitment
Amount, or the Individual Term Loan Commitment Amount, as applicable, of each
Non-Participating Lender.
	 
	6.4	 	Subsequent Drawdowns. If a Lender is a Non-Participating Lender, subsequent
Drawdowns under the Credit Facilities will be funded first by the Non-Participating Lenders
rateably based on each Non-Participating Lender’s Individual Revolving Loan Commitment Amount
or Individual Term Loan Commitment Amount, as applicable, until the Principal Amounts of all
Lenders are again in proportion to their respective Rateable Portions.
	 
	6.5	 	Prepayment. As an alternative to the provisions of Section 6.4, the Borrower will
also be entitled, subject to the prepayment provisions herein contained but without obligation
to make prepayments to all Lenders under the Credit Facilities, to reduce the Principal Amount
owing to the Participating Lenders under the Credit Facilities until the Principal Amounts
owing to all Lenders are again in proportion to their respective Rateable Portions.





ARTICLE 7

CALCULATION OF INTEREST AND FEES





	7.1	 	Records. The Agent will maintain records, in written or electronic form, evidencing
all Advances and all other Indebtedness owing by the Borrower to the Agent and each Lender
under this Agreement. The Agent will enter in such records, details of all amounts from time
to time owing, paid or prepaid by the Borrower to it hereunder. In addition, each Lender will
maintain records, in written or electronic form, evidencing all Advances and other
Indebtedness owing by the Borrower to such Lender. The information entered in such records
will constitute prima facie evidence of the Indebtedness of the Borrower to the Agent and each
Lender under the Credit Facilities. In the event of a conflict between the records of the
Agent and a Lender maintained pursuant to this Section 7.1, the records of the Agent shall
prevail, absent manifest error.










 



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	7.2	 	Payment of Interest and Fees.






	 	(a)	 	Interest. Except as expressly stated otherwise herein, all Canadian
Prime Rate Loans, U.S. Base Rate Loans and LIBOR Based Loans from time to time
outstanding will bear interest, as well after as before maturity, default and judgment,
with interest on overdue interest, at the applicable rates as prescribed under Section
3.11 or Section 20.9. Interest payable at a variable rate will be adjusted
automatically without notice to the Borrower whenever there is a variation in such
rate.
	 
	 	(b)	 	Calculation of Interest and Stamping Fees. Interest on Canadian Prime
Rate Loans and U.S. Base Rate Loans will accrue and be calculated but not
compounded daily and be payable monthly in arrears on the first Banking Day of each
month for the immediately preceding month, or, after notice to the Borrower, on such
other Banking Day as is customary for the Agent having regard to its then existing
practice. Interest on Canadian Prime Rate Loans and U.S. Base Rate Loans will be
calculated on the basis of a 365 or 366 day year, as applicable, and stamping fees on
Bankers’ Acceptances will be calculated on the basis of a 365 day year.
	 
	 	(c)	 	Interest Act (Canada). For the purposes of the Interest Act (Canada)
and any other applicable Laws which may hereafter regulate the
calculation or computation of interest on borrowed funds, the annual rates of
interest and fees applicable to Canadian Prime Rate Loans, U.S. Base Rate Loans and
Bankers’ Acceptances, respectively, are the rates as determined hereunder multiplied by
the actual number of days in a period of one year commencing on the first day of the
period for which such interest or stamping fee is payable and divided by 365.
	 
	 	(d)	 	LIBOR Based Loans. Interest on LIBOR Based Loans will accrue and be
calculated but not compounded daily and be payable at the end of each applicable LIBOR
Period, provided that, where the LIBOR Period exceeds 3 months, interest will be
calculated and payable every 3 months during the term of the LIBOR Period and on the
last day of the applicable LIBOR Period. Interest on LIBOR Based Loans will be
calculated on the basis of the actual number of days in each LIBOR Period divided by
360. For the purposes of the Interest Act (Canada) and any other applicable Laws, the
annual rates of interest applicable to LIBOR Based Loans are the rates as determined
hereunder multiplied by the actual number of days in a period of one year commencing on
the first day of the period for which such interest is payable and divided by 360.






	7.3	 	Payment of Stamping Fee. The Borrower will pay to the Agent for the account of the
Lenders the applicable stamping fee under Section 3.11 (a) or 3.11(b), as applicable, with
respect to Bankers’ Acceptances on the date of acceptance thereof by the Lenders. Payment of
the stamping fee may be made by way of set-off as provided in Section 10.4.
	 
	7.4	 	Conversion to Another Currency. If the Borrower wishes to Convert any part of an
outstanding Advance from one currency to another currency, the Borrower will, subject 










 



- 22 -


	 	 	to Sections 3.7, 5.4(c) and 9.2, repay to the Agent for the benefit of the Lenders the
amount of such Advance in the initial currency and then re-borrow the applicable amount in
the second currency provided that the Agent has received a Notice of Borrowing in
accordance with Section 5.2.






	7.5	 	Maximum Rate of Return. Notwithstanding any provision herein to the contrary, in no
event will the aggregate “interest” (as defined in section 347 of the Criminal Code (Canada))
payable under this Agreement exceed the maximum effective annual rate of interest on the
“credit advanced” (as defined in that section 347) permitted under that section and, if any
payment, collection or demand pursuant to this Agreement in respect of “interest” (as defined
in that section 347) is determined to be contrary to the provisions of that section 347, such
payment, collection or demand will be deemed to have been made by mutual mistake of the
Borrower and the applicable Lenders and the amount of such payment or collection will be
refunded to the Borrower. For purposes of this Agreement, the effective annual rate of
interest will be determined in accordance with generally accepted actuarial practices and
principles over the term of the Credit Facilities on the basis of annual compounding of the
lawfully permitted rate of interest and, in the event of dispute, a certificate of a Fellow of
the Canadian Institute of Actuaries appointed by the Agent will be prima facie evidence, for
the purposes of such determination.
	 
	7.6	 	Waiver of Judgment Interest Act (Alberta). To the extent permitted by applicable Law,
the provisions of the Judgment Interest Act (Alberta) will not apply to the Documents and are
hereby expressly waived by the Borrower.
	 
	7.7	 	Deemed Reinvestment Not Applicable. For the purposes of the Interest Act (Canada),
the principle of deemed reinvestment of interest will not apply to any interest calculation
under the Documents, and the rates of interest stipulated in this Agreement are intended to be
nominal rates and not effective rates or yields.





ARTICLE 8

LETTERS OF CREDIT





	8.1	 	General






	 	(a)	 	Letters of Credit will be made available by the Revolving Lenders, and each
Letter of Credit (including all documents and instruments required to be presented
thereunder) will be satisfactory in form and substance to each such Revolving Lender.
No Letter of Credit will be issued (or will be renewable at the option of the
beneficiary thereunder) for a term in excess of one year, or will require payment in
any currency other than Canadian Dollars.
	 
	 	(b)	 	As a condition of the issuance of any Letter of Credit, the Borrower will pay
to each such Revolving Lender the issuance fee specified in the table set out in
Section 3.11 (a). The Borrower will also pay to each such Revolving Lender its
customary administrative charges in respect of the issue of such Letter of Credit, the
amendment or transfer of such Letter of Credit, and each drawing made under such Letter
of Credit.










 



- 23 -








	 	(c)	 	The Borrower will pay to such Revolving Lender sufficient funds in Canadian Dollars
immediately on demand by such Revolving Lender, to reimburse such Revolving Lender for any
payment made by it pursuant to such Letter of Credit. If the Borrower does not make any
payment required by the preceding sentence from the proceeds of an Accommodation obtained
under this Agreement or otherwise, such Revolving Lender may (but will not be obliged to),
without receipt of a Notice of Borrowing and irrespective of whether any other applicable
conditions precedent specified herein have been satisfied, and without waiver of the
Default constituted by the Borrower’s failure to make such required payment, make a
Canadian Prime Rate Loan to the Borrower in the amount of such required payment. The
Borrower agrees to accept each such Canadian Prime Rate Loan and hereby irrevocably
authorizes and directs such Revolving Lender to apply the proceeds thereof in payment of
the liability of the Borrower with respect to such required payment.
	 
	 	(d)	 	If any Letter of Credit is outstanding at any time that (i) an Event of Default occurs, (ii)
on the Revolving Loan Termination Date, or (iii) a domestic or foreign court issues any
judgment or order restricting or prohibiting payment by such Revolving Lender under such
Letter of Credit or extending the liability of such Revolving Lender to make payment under
such Letter of Credit beyond the expiry date specified therein, the Borrower will forthwith
upon demand by such Revolving Lender pay to the Agent funds in Canadian Dollars in the amount
of the Advance constituted by such Letter of Credit. Such funds (together with interest
thereon) will be held by the Agent for payment of the liability of the Borrower pursuant to
Section 8.1(i) or otherwise in respect of such Letter of Credit so long as such Revolving
Lender has or may in any circumstance have any liability under such Letter of Credit, and
shall bear interest at the Agent’s then lowest rate payable by it in respect of deposits of
similar amounts and of similar periods of time. Any balance of such funds and interest
remaining at such time as such Revolving Lender does not have and may never have any liability
under such Letter of Credit will nevertheless continue to be held by the Agent, if and so long
as any Default or Event of Default is continuing, as security for the remaining liabilities of
the Borrower hereunder.
	 
	 	(e)	 	The Borrower agrees that none of the Revolving Lenders nor any of their officers, directors,
employees or agents will assume liability for, or be responsible for, the use which may be
made of any Letter of Credit; any acts or omissions of the beneficiary of any Letter of Credit
including the application of any payment made to such beneficiary; the form, validity,
sufficiency, correctness, genuineness or legal effect of any document or instrument relating
to any Letter of Credit which on its face complies with requirements of the Letter of Credit,
even if such document or instrument should in fact prove to be in any respect invalid,
insufficient, inaccurate, fraudulent or forged; the failure of any document or instrument to
bear any reference or adequate reference to any Letter of Credit; any failure to note the
amount of any draft on any Letter of Credit or on any related document or instrument; any
failure of the beneficiary of any Letter of Credit to meet the obligations of such beneficiary
to the Borrower or any other Person other










 



- 24 -


	 	 	 	than such Revolving Lender; any errors, inaccuracies, omissions, interruptions or delays
in transmission or delivery of any messages, directions or correspondence by mail,
facsimile or otherwise, whether or not they are in cipher; any inaccuracies in the
translation of any messages, directions or correspondence or for errors in the
interpretation of any technical terms; or any failure by such Revolving Lender to make
payment under any Letter of Credit as a result of any Law, control or restriction
rightfully or wrongfully exercised or imposed by any domestic or foreign court or
government or government instrumentality or as a result of any other cause beyond the
control of such Revolving Lender or its officers, directors or correspondents; provided
that nothing in this Agreement shall exonerate such Revolving Lender or any of its
officers, directors, employees or agents for their gross negligence or wilful misconduct.
	 
	 	(f)	 	The obligations of the Borrower under this Article 8, with respect to any Letter of Credit
will be absolute, unconditional and irrevocable, and will be performed strictly in accordance
with the terms hereof under all circumstances including any matter referred to in Section
8.1(e), any invalidity of any obligation secured by any Letter of Credit; any incapacity,
disability or lack or limitation of status or of power of the Borrower or the beneficiary of
any Letter of Credit; any lack of validity or enforceability of any Letter of Credit; the
existence of any claim, set- off, defence or other right which the Borrower may have at any
time against any Lender, the beneficiary of any Letter of Credit or any other Person; or any
breach of contract or other dispute between the Borrower and any Lender, the beneficiary of
any Letter of Credit or any other Person.
	 
	 	(g)	 	Each Revolving Lender may accept as complying with the terms of any Letter of Credit any
document or instrument required by such Letter of Credit to be completed, signed, presented or
delivered by or on behalf of any beneficiary thereunder which has been completed, signed,
presented or delivered by a receiver, trustee in bankruptcy, assignee for the benefit of
creditors, secured party or other like Person believed in good faith by such Revolving Lender
to be lawfully entitled to the property of such beneficiary, and such Revolving Lender may
make payments under such Letter of Credit to such Person. The provisions of this Article 8 are
for the sole benefit of the Lenders and may not be relied on by any other Person.
	 
	 	(h)	 	Each Letter of Credit, except as specifically provided therein, and subject to any provision
hereof to the contrary, will be subject to the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce current at the time of issuance of such
Letter of Credit.
	 
	 	(i)	 	For the purpose of calculating the Aggregate Principal Amount and for any other relevant
provision of this Agreement, the amount of Accommodation constituted by any Letter of Credit
will be the maximum amount which the Revolving Lenders may in all circumstances be required
to pay pursuant to the terms thereof.






 











 





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ARTICLE 9

GENERAL PROVISIONS RELATING TO LIBOR BASED LOANS





	9.1	 	General.






	 	(a)	 	The aggregate amount of each Advance by way of a LIBOR Based Loan will be at
least U.S. $1,000,000 and in multiples of U.S. $50,000 for any amount in excess
thereof, and each LIBOR Based Loan will have a term to maturity of 1, 2, 3 or 6 months,
or as otherwise agreed by the Lenders.
	 
	 	(b)	 	If the Borrower elects to Drawdown by way of a LIBOR Based Loan, effect a
Rollover of a LIBOR Based Loan or a Conversion of an Accommodation into a LIBOR Based
Loan, the Borrower will specify in its Notice of Borrowing, Notice of Rollover or
Notice of Conversion, as applicable, the LIBOR Period (which will begin and end on a
LIBOR Banking Day) applicable to such LIBOR Based Loan. If the Borrower fails, as
required hereunder, to select a LIBOR Period for any proposed LIBOR Based Loan, then
the applicable LIBOR Period will be approximately one month as determined by the
Agent.
	 
	 	(c)	 	Any amounts owing by the Borrower in respect of any LIBOR Based Loan which is
not paid at maturity in accordance with this Agreement will, as and from its Maturity
Date, be deemed to be outstanding as a U.S. Base Rate Loan.






	9.2	 	Early Termination of LIBQR Periods. If the early termination of any LIBOR Based
Loan is required hereunder, the Borrower will pay to the Lenders all expenses and
out-of-pocket costs incurred by the Lenders as a result of the early termination of the LIBOR
Based Loan, including expenses and out-of-pocket costs incurred due to early redemption of
offsetting deposits. If in the sole discretion of a Lender, acting reasonably, any such early
termination cannot be effected, the LIBOR Based Loan will not be terminated and the Borrower
will continue to pay interest to the applicable Lenders, at the rate per annum applicable to
such LIBOR Based Loan for the remainder of the applicable LIBOR Period. A written statement
of the Agent as to the aggregate amount of such expenses and out of pocket costs will be prima
facie evidence of the amount thereof.






	9.3	 	Inability to Make LIBOR Based Loans. If, on any date, a Lender determines in good
faith (which determination will be conclusive as between the Parties), that its ability to
make a requested LIBOR Based Loan has become impracticable, impossible or unlawful, or has
otherwise been materially adversely affected, because:






	 	(a)	 	of any change in applicable Law, or in the interpretation or administration
thereof by authorities having jurisdiction in the matter, whether or not having the
force of law;
	 
	 	(b)	 	of any material adverse change in, or the termination of, the London Interbank
Eurodollar Market; or
	 
	 	(c)	 	there exists no adequate or fair measure to ascertain the LIBOR for any LIBOR
Period for the LIBOR Based Loan,










 



- 26 -








then such Lender will give the Borrower and the other Lenders written notice thereof and
thereupon such Lender will have no further obligation with respect to such LIBOR Based
Loan, provided that, the Borrower may elect to Drawdown, effect a Rollover or Conversion of
the amount originally requested by way of such LIBOR Based Loan, into some other type of
Accommodation upon compliance with the applicable notice requirements set out herein.



ARTICLE 10

BANKERS’ ACCEPTANCES





	10.1	 	General. Each bankers’ acceptance draft tendered by the Borrower for acceptance by a
Lender will be a form acceptable to the accepting Lenders, acting reasonably, and the Advance
in respect thereof will be in a principal amount of not less than Cdn. $1,000,000 and in
multiples of Cdn. $100,000 for any amounts in excess thereof, and will, in each case, have
terms of 1, 2, 3 or 6 months, unless otherwise agreed to by the accepting Lenders.






	10.2	 	Terms of Acceptance by the Lenders.






	 	(a)	 	Payment. The Borrower will provide for payment to the Agent for the
benefit of the Lenders of each Bankers’ Acceptance at its maturity, either by payment
of the face amount thereof or, subject to Section 7.4, through the utilization of an
Accommodation in accordance with this Agreement, or through a combination thereof. The
Borrower waives presentment for payment of Bankers’ Acceptances by the Lenders and will
not claim from the applicable Lenders any days of grace for the payment at maturity of
Bankers’ Acceptances. Any amount owing by the Borrower in respect of any Bankers’
Acceptance which is not paid at maturity in accordance with this Agreement, will, as
and from its maturity date, be deemed to be outstanding as a Canadian Prime Rate Loan.
	 
	 	(b)	 	Power of Attorney. To facilitate the procedures contemplated in this
Agreement, the Borrower appoints each Lender from time to time as the attorney-in-fact
of the Borrower to execute, endorse and deliver on behalf of the Borrower drafts or
depository bills in the form or forms prescribed by such Lender for bankers’
acceptances denominated in Canadian Dollars (each such executed draft or depository
bill which has not yet been accepted by a Lender being referred to as a “Draft”). Each
bankers’ acceptance executed and delivered by a Lender on behalf of the Borrower as
provided for in this Section 10.2(b) will be as binding upon the Borrower as if it had
been executed and delivered by a duly authorized officer of the Borrower. The
foregoing appointment will cease to be effective three Banking Days following receipt
by the Lender in question of a notice from the Borrower revoking such appointment
provided that any such revocation will not affect Bankers’ Acceptances previously
executed and delivered by a Lender pursuant to such appointment.










 



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	 	(c)	 	Purchase of BA’s. Each Lender shall purchase from the Borrower for its
own account any Bankers’ Acceptance issued by it for an amount equal to the Discount
Proceeds having regard to the BA Rate applicable to such Lender.
	 
	 	(d)	 	Depository Bills. It is the intention of the Parties that pursuant to
the Depository Bills and Notes Act (Canada) (“DBNA”), all Bankers’ Acceptances accepted
by the Lenders under this Agreement will be issued in the form of a “depository bill”
(as defined in the DBNA), deposited with a “clearing house” (as defined in the DBNA),
including The Canadian Depository for Securities Ltd. or its nominee
CDS & Co. (“CDS”).
In order to give effect to the foregoing, the Agent will, subject to the approval of
the Borrower and the Lenders, establish and notify the Borrower and the Lenders of any
additional procedures, consistent with the terms of this Agreement, as are reasonably
necessary to accomplish such intention, including:






	 	(i)	 	any instrument held by the Agent for purposes of Bankers’
Acceptances will have marked prominently and legibly on its face and within
its text, at or before the time of issue, the words “This is a depository bill
subject to the Depository Bills and Notes Act (Canada)”;
	 
	 	(ii)	 	any reference to the authentication of the Bankers’ Acceptance
will be removed; and
	 
	 	(iii)	 	any reference to the “bearer” will be removed and such
Bankers’ Acceptances will not be marked with any words prohibiting negotiation,
transfer or assignment of it or of an interest in it.






	10.3	 	BA Equivalent Loans. In lieu of accepting bankers’ acceptance drafts on any
Drawdown Date, or any date of Rollover or Conversion, as applicable, each Non-BA Lender will
make a BA Equivalent Loan. Any BA Equivalent Loan will be made on the relevant Drawdown Date,
or any date of Rollover or Conversion, as applicable, and its Maturity Date will be the
Maturity Date of the corresponding Bankers’ Acceptances. The amount of each BA Equivalent Loan
will be equal to: (i) the aggregate face value of corresponding Bankers’ Acceptances that,
but for this Section 10.3, the Non-BA Lender would otherwise be required to accept; (ii)
multiplied by the BA Rate; and (iii) multiplied by the number of days in the term of such BA
Equivalent Loan divided by 365. On the Maturity Date of a BA Equivalent Loan, the Borrower
will pay to the Non-BA Lender an amount equal to the face amount of the Bankers’ Acceptance
which such Non-BA Lender would have accepted in lieu of making a BA Equivalent Loan if it were
not a Non-BA Lender. All provisions of this Agreement with respect to Bankers’ Acceptances
will apply to BA Equivalent Loans provided that stamping fees with respect to a BA Equivalent
Loan will be calculated on the basis of the amount with respect to such BA Equivalent Loan
which the Borrower is required to pay on the Maturity Date.






	10.4	 	General Mechanics.










 



- 28 -








	 	(a)	 	Notice. The Borrower may in the Notice of Borrowing, Notice of
Rollover or Notice of Conversion requesting an Accommodation by way of
Bankers’ Acceptances or by subsequent notice to the Agent, provide the Agent with
information as to the discount proceeds payable by the purchasers of the Bankers’
Acceptances and the party to whom delivery of the Bankers’ Acceptances is to be made
against delivery of such discount proceeds to the Agent for the credit of the
Borrower subject to Section 10.4(c), but if it does not do so, the Borrower will
initiate a telephone call to the Agent by 11:00 a.m. (Toronto time) on the Drawdown
Date or the date of the Rollover or Conversion, as applicable, and provide such
information to the Agent. Any such telephone advice will be at the risk of the
Borrower pursuant to Section 20.2 and will be confirmed by a notice of the Borrower
to the Agent prior to 3:00 p.m. (Toronto time) on the same day.
	 
	 	(b)	 	Rollovers. In the case of a Rollover of maturing Bankers’
Acceptances, each Lender, in order to satisfy the continuing liability of the Borrower
to the Lender for the face amount of the maturing Bankers’ Acceptances, will retain for
its own account the Net Proceeds of each new Bankers’ Acceptance issued by it in
connection with such Rollover and the Borrower will, on the Maturity Date of the
maturing Bankers’ Acceptances, pay to the Agent for the benefit of the Lenders an
amount equal to the difference between the face amount of the maturing Bankers’
Acceptances and the aggregate Net Proceeds of the new Bankers’Acceptances.
	 
	 	(c)	 	Conversion from Accommodation to BA’s. In the case of a Conversion
from a Canadian Prime Rate Loan into an Accommodation by way of Bankers’
Acceptances, each Lender, in order to satisfy the continuing liability of the Borrower
to each Lender for the amount of the Canadian Prime Rate Loan being converted, will
retain for its own account the Net Proceeds of each new Bankers’ Acceptance issued by
it in connection with such Conversion and the Borrower will, on the date of issuance of
the Bankers’ Acceptances pay to the Agent for the benefit of the Lenders an amount
equal to the difference between the amount of the Canadian Prime Rate Loan being
converted (if Conversion is from an Accommodation of a different currency, then based
on the Canadian Dollar Exchange Equivalent thereof where applicable), including any
accrued interest thereon, owing to the Lenders and the Net Proceeds of
such Bankers’ Acceptances.
	 
	 	(d)	 	Conversion from BA’s to Accommodation. In the case of a Conversion of
an Accommodation by way of Bankers’ Acceptances into a Canadian Prime Rate Loan, each
Lender, in order to satisfy the liability of the Borrower to each Lender for the face
amount of the maturing Bankers’ Acceptances, will record the obligation of the Borrower
to it as a Canadian Prime Rate Loan, unless the Borrower provides for payment to the
Agent for the benefit of the Lenders of the face amount of the maturing Bankers’
Acceptance in some other manner acceptable to the Lenders.






	10.5	 	Escrowed Funds. Upon the request of the Agent after the occurrence and during
the continuance of an Event of Default, the Borrower will forthwith pay to the Agent for










 



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	 	 	deposit into an escrow account maintained by and in the name of the Agent for the benefit of
the Lenders, an amount equal to the Lenders’ maximum potential liability under then
outstanding Bankers’Acceptances (the “Escrow Funds”). The Escrow Funds will be held by the
Agent for set-off against future Indebtedness owing by the Borrower to the applicable
Lenders in respect of such Bankers’ Acceptances and pending such application will bear
interest for the Borrower’s Account at the rate payable by the Agent in respect of deposits
of similar amounts and for similar periods of time. If such Event of Default is either
waived or cured in compliance with the terms of this Agreement, then the remaining Escrow
Funds if any, together with any accrued interest to the date of release, will be released to
the Borrower. The deposit of the Escrow Funds by the Borrower with the Agent as herein
provided, will not operate as a repayment of the Aggregate Principal Amount until such time
as the Escrow Funds are actually paid to the Lenders as a Principal Repayment.





ARTICLE 11

INCREASED COSTS





	11.1	 	Changes in Law.






	 	(a)	 	If, after the date hereof, due to either:






	 	(i)	 	the introduction of, or any change in, or in the
interpretation of, any Law, whether having the force of law or not, resulting
in the imposition or increase of reserves, deposits or similar requirements by
any central bank or Administrative Body charged with the administration
thereof; or
	 
	 	(ii)	 	the compliance with any guideline or request from any central
bank or other Administrative Body (including those in respect of capital
adequacy, reserves and liquidity) which a Lender, acting reasonably,
determines that it is required to comply with,






there will be any increase in the cost to such Lender of agreeing to make or
making, funding or maintaining the Credit Facilities, or there will be any
reduction in the effective return to such Lender thereunder, then, subject to
Section 11.1(b), the Borrower will, within 5 Banking Days after being notified by
such Lender of such event, pay to such Lender, quarterly in arrears, that amount
(the “Additional Compensation”) which such Lender, acting reasonably, determines
will compensate it, after taking into account all applicable Taxes, for any such
increased costs or reduced returns incurred or suffered by such Lender.




	 	(b)	 	If Additional Compensation is payable pursuant to Section 11.1 (a), the
Borrower will have the option to prepay any amount of the Credit Facilities owed to the
Lender entitled to receive the Additional Compensation, subject always to Section 10.5
without obligation to make a corresponding prepayment to any other Lender. If the
Additional Compensation relates to outstanding Bankers’ Acceptances under the Credit
Facilities such Lender may require the Borrower to deposit in an interest bearing cash
collateral account with such Lender such amount as may be










 



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necessary to fully satisfy the contingent obligations of such Lender for all
outstanding Bankers’ Acceptances in accordance with the arrangements similar to
those set out in Section 10.5.




	11.2	 	Changes in Circumstances. Notwithstanding anything to the contrary herein or in any
of the other Documents contained, if on any date a Lender determines in good faith, which
determination will be conclusive and binding on the Parties, and provided notice is given to
the other Lenders and to the Borrower that its ability to maintain, or continue to offer any
Accommodation under the Credit Facilities has become unlawful or impossible due to:






	 	(a)	 	any change in applicable Law, or in the interpretation or administration
thereof by authorities having jurisdiction in the matter; or
	 
	 	(b)	 	any material adverse change in or the termination of the London Interbank
Eurodollar Market for Eurodollars; or
	 
	 	(c)	 	the imposition of any condition, restriction or limitation upon such Lender
which is outside of its control,






then in any such case, the Borrower will forthwith repay to such Lender all principal
amounts affected thereby, together with all unpaid interest accrued thereon to the date of
repayment and all other expenses incurred in connection with the termination of any such
Accommodation, including any expenses resulting from the early termination of any LIBOR
Period relating thereto in accordance with Section 9.2, without any obligation to make a
corresponding prepayment to any other Lender. The Borrower may utilize other forms of
Accommodations not so affected in order to make any required repayment and after any such
repayment, the Borrower may elect to re-borrow the amount repaid by way of some other
Accommodation upon complying with applicable requirements thereof.




	11.3	 	Application of Sections 11.1 and 11.2. If a Lender exercises its discretion under
Sections 11.1 or 11.2, then concurrently with a notice from such Lender to the Lenders and the
Borrower requiring compliance with the applicable Section, such Lender will provide the
Borrower (with a copy to the other Lenders) with a certificate in reasonable detail outlining
the particulars giving rise to such notice, confirming that its actions are consistent with
actions concurrently taken by such Lender with respect to similar type provisions affecting
other borrowers of such Lender in comparable circumstances and certifying (with reasonable
supporting detail) the increased costs, if any, payable by the Borrower thereunder, which will
be prima facie proof thereof and binding on the Parties.






	11.4	 	Limitations on Additional Compensation. Sections 11.1 and 11.2 will not apply to a
Lender with respect to any event, circumstance or change of the nature and kind of which such
Lender had actual knowledge on the Closing Date. A Lender will not be entitled to Additional
Compensation to the extent such increase in costs or reduction in return is reflected in or
recovered by an increase in the interest or other amounts payable hereunder (other than
pursuant to Section 11.1). The Borrower will not be obligated to pay any portion of
Additional Compensation accruing under Section 11.1 for any period 










 



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	 	 	prior to the date which is 120 days prior to the date on which the affected Lender gives
notice to the Borrower that such Additional Compensation is so accruing.





ARTICLE 12

FEES AND EXPENSES





	12.1	 	Agency Fee. The Borrower will pay to the Agent, on an annual basis, the agency fee
agreed upon between the Borrower and the Agent on the Closing Date, the amount thereof to be
kept confidential by the Borrower.






	12.2	 	Standby Fee. The Borrower will, effective from and including the Closing Date, pay to
the Agent for the benefit of the Lenders a standby fee from time to time equal to the Basis
Points set forth in the table contained in Section 3.11 (a), calculated on the basis of a 365
day year, multiplied by (i) the Revolving Loan Commitment Amount, less (ii) the Canadian
Dollar Exchange Equivalent of the Aggregate Principal Amount of the Extendible Revolving Loan.
The standby fee will be calculated daily and will be payable quarterly in arrears on the first
day of each quarter for the previous quarter.






	12.3	 	Expenses. The Borrower will pay or reimburse the Agent and the Lenders, as
applicable, for the reasonable out-of-pocket expenses, reasonable legal fees (on a solicitor
and his own client full indemnity basis) and enforcement costs, incurred by the Agent and the
Lenders, as applicable, in connection with the negotiation, preparation, execution and
maintenance of the Documents and the enforcement of their rights and remedies under the
Documents.





ARTICLE 13

REPRESENTATIONS AND WARRANTIES OF THE BORROWER





	13.1	 	Representations and Warranties. The Borrower hereby represents and warrants to
the Lenders as of the Closing Date that:






	 	(a)	 	Incorporation, Organization and Power. The Borrower and each
corporate Material Subsidiary has been duly incorporated and is validly existing under
the Law of its jurisdiction of incorporation and is duly registered to carry on
business in each jurisdiction in which the nature of any business carried on by it or
the character of any property owned or leased by it makes such registration necessary
except where the failure to be so registered could not reasonably be expected to have a
Material Adverse Effect, and the Borrower and each corporate Material Subsidiary has
full corporate power and capacity to enter into and perform its obligations under the
Documents to which it is a party, and to carry on its business as currently conducted.
	 
	 	(b)	 	Authorization and Status of Agreements. Each Document to which the
Borrower or a Material Subsidiary is a party delivered pursuant hereto has been duly
authorized, executed and delivered by it and does not conflict with or contravene or
constitute a default or create a Lien, other than a Permitted Encumbrance, under:










 



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	 	(i)	 	in the case of the Borrower and each corporate Material Subsidiary its
constating documents, by-laws, any resolution of its Directors or any
shareholders’ agreement in respect thereof;
	 
	 	(ii)	 	any agreement or document to which it is a party or by which any of its
property is bound; or
	 
	 	(iii)	 	any applicable Law,






the conflict with, contravention, default under or creation of a Lien of which could
reasonably be expected to have a Material Adverse Effect.




	 	(c)	 	Enforceability. Each of the Documents to which the Borrower or any Material
Subsidiary is a party constitutes a valid and binding obligation of the Borrower or such
Material Subsidiary, as applicable, and is enforceable against it in accordance
with its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or similar statutes affecting the enforcement of
creditors’ rights generally and by general principles of equity.
	 
	 	(d)	 	Litigation. There are no actions, suits or proceedings at Law or before or by any
Administrative Body existing or pending, or to the Borrower’s knowledge threatened, to which
the Borrower or any Material Subsidiary is, or to the Borrower’s knowledge, is threatened to
be made, a party and the result of which, if successful against it, could reasonably be
expected to have a Material Adverse Effect.
	 
	 	(e)	 	Environmental Law. The Borrower and where applicable, each Material
Subsidiary, has in all material respects (i) obtained all permits, licenses and other
authorizations which are required under Environmental Law; and (ii) is in compliance with
Environmental Law and with the terms and conditions of all such permits, licenses and
authorizations.
	 
	 	(f)	 	Environmental Condition of Property. The property or any part thereof owned,
operated or controlled by the Borrower, either directly or through a Material Subsidiary:






	 	(i)	 	is not, to the knowledge of the Borrower, the subject of any outstanding
claim, charge or order from an Administrative Body alleging violation of Environmental
Law or, if subject to any such claim, charge or order, the Borrower, either directly
or through a Material Subsidiary, is taking all such remedial, corrective or other
action required under the claim, charge or order or is diligently and in good faith
contesting the validity thereof; and
	 
	 	(ii)	 	complies, with respect to each of its use and operation, in all material
respects with Environmental Law and with the terms and conditions of all permits,
licenses and other authorizations which are required to be obtained under applicable
Environmental Law.










 



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	 	(g)	 	Title to Properties. The Borrower and where applicable, each Material
Subsidiary, has good and valid title to its material properties, subject only to Permitted
Encumbrances. The Borrower and each Material Subsidiary is entitled to charge its interests
in such properties in favour of the Agent and the Lenders as provided in this Agreement
without the need to obtain the consent of or release from any other Person and such
properties are not held in trust by the Borrower or any such Material Subsidiary for any
other Person.
	 
	 	(h)	 	Financial Condition. The consolidated financial statements of the Borrower previously
delivered to the Agent and the Lenders hereunder, if any, were prepared in accordance with
GAAP and such consolidated financial statements present fairly in all material respects the
Borrower’s and each Material Subsidiary’s financial positions respectively as at the date
thereof.
	 
	 	(i)	 	No Adverse Change. The audited consolidated financial statements of the Borrower for
the fiscal year ended October 31, 2003, were prepared in accordance with GAAP and such
audited consolidated financial statements present fairly in all material respects the
Borrower’s consolidated financial position as at the date thereof and since that date there
has been no Material Adverse Effect.
	 
	 	(j)	 	Information. All factual information heretofore or contemporaneously furnished by or
on behalf of the Borrower or any Material Subsidiary to the Agent or the Lenders in
connection with the Credit Facilities is true and accurate in all material respects and the
Borrower is not aware of any omission of any material fact which renders such factual
information incomplete or misleading in any material way.
	 
	 	(k)	 	No Breach of Orders, Licences or Statutes. Neither the Borrower nor any Material
Subsidiary is in breach of:






	 	(i)	 	any order, approval or mandatory requirement or directive of any
Administrative Body;
	 
	 	(ii)	 	any governmental licence or permit; or
	 
	 	(iii)	 	any applicable Law,






the breach of which could reasonably be expected to have a Material Adverse Effect.




	 	(1)	 	Pension. Neither the Borrower nor any Material Subsidiary has a Pension Plan,
	 
	 	(m)	 	No Default. No Default or Event of Default has occurred and is continuing.
	 
	 	(n)	 	Insurance. The Borrower and each Material Subsidiary has in full force and effect
such policies of insurance in such amounts issued by such insurers of recognized standing
covering the property of the Borrower and each Material Subsidiary in accordance with prudent
industry standards.










 



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	 	(o)	 	Approvals. All regulatory approvals, consents, permits and licenses
necessary for the Borrower and each Material Subsidiary to carry on its business,
as currently carried on, and all approvals and consents necessary for it to enter
into the Documents and perform its obligations thereunder have, in each case, been
obtained and are in good standing except to the extent that failure to so obtain
could not be reasonably expected to have a Material Adverse Effect.
	 
	 	(p)	 	Payment of Taxes. The Borrower and each Material Subsidiary has filed
all tax returns which are required to be filed and has paid all Taxes (including
interest and penalties) which are due and payable, unless such payment is in good
faith disputed, and has made all appropriate provision in respect thereof in
accordance with GAAP, except, in either case, to the extent that a failure to do so
could not reasonably be expected to have a Material Adverse Effect.
	 
	 	(q)	 	Remittances. All of the remittances required to be made by the
Borrower and each Material Subsidiary to the applicable federal, provincial, municipal
or state governments have been made, are currently up to date and there are no
outstanding arrears, except to the extent that a failure to do so could not reasonably
be expected to have a Material Adverse Effect.
	 
	 	(r)	 	Subsidiaries. The Borrower has no Subsidiaries other than as set out
in Schedule J and the jurisdictions of incorporation, the location of their respective
businesses and assets, the trade names of each, if any, used in such locations and the
authorized and issued share or unit capital, as applicable, of the Borrower and each
Material Subsidiary is set forth in Schedule J. The legal and beneficial owners of all
of the issued and outstanding Voting Securities of the Borrower and each of the
Material Subsidiaries is as set out in Schedule J.
	 
	 	(s)	 	Indebtedness and Liens. Neither the Borrower nor any Material
Subsidiary has any Indebtedness, other than Permitted Indebtedness, or Liens on its
property, other than Permitted Encumbrances. Schedule J sets forth all of the material
Indebtedness owed by each of the Borrower and the Material Subsidiaries to any of their
Affiliates and to any other Person and the amount thereof, and such Indebtedness has
not been subject to any Lien, except for Permitted Encumbrances, or assigned or
otherwise transferred (absolutely, contingently, directly, indirectly or otherwise) to
any Person.
	 
	 	(t)	 	Use of Proceeds. The proceeds of any Advances are being used in
accordance with Section 3.7.






	13.2	 	Acknowledgement. The Borrower acknowledges that the Agent and the Lenders are relying
upon the representations and warranties in this Article 13 in making the Credit Facilities
available to the Borrower and that the representations and warranties contained in Section
13.1, will be deemed to be restated in every respect effective on the date each and every
Advance is made except for Advances which are Rollovers or Conversions in which case only
Section 13.1(m) will be deemed to be restated; and effective on the date of any Swap Document
the representation and warranty contained in Section 13.1(m) will










 



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	 	 	be deemed to be restated by the Borrower in favour of the Agent and the Lenders; provided
that if the representation and warranty contained in Section 13.1(i) is deemed to be
repeated at any time after the Borrower is required to deliver annual audited consolidated
financial statements of the Borrower pursuant to Section 14.1(j), then that representation
and warranty will be deemed to be given in respect of the most recent of such annual audited
consolidated financial statements.






	13.3	 	Survival and Inclusion. The representations and warranties in this Article 13 shall
survive until this Agreement has been terminated. All statements, representations and
warranties contained in any Compliance Certificate, Closing Certificates, the Security or in
any instruments delivered by or on behalf of the Borrower or Material Subsidiary pursuant to
this Agreement or any other Document will be deemed to constitute statements, representations
and warranties made by the Borrower to the Agent and the Lenders under this Agreement.





ARTICLE 14

COVENANTS OF THE BORROWER





	14.1	 	Affirmative Covenants. While any Indebtedness under the Credit Facilities is
outstanding or available to the Borrower and except with the written consent of the Lenders,
the Borrower covenants that:






	 	(a)	 	Punctual Payment. The Borrower will pay or cause to be paid all
Indebtedness and other amounts payable under the Documents punctually when due.
	 
	 	(b)	 	Corporate Existence. Except as permitted by Section 15.1, the Borrower
will do or will cause to be done all things necessary to preserve and keep in full
force and effect the Borrower’s and any corporate Material Subsidiary’s existence in
good standing as a corporation under the Law of its jurisdiction of incorporation.
	 
	 	(c)	 	Notice of Event of Default. The Borrower will notify the Agent of the
occurrence of any Default or Event of Default forthwith upon becoming aware thereof and
specify in such notice the nature of the event and the steps taken or proposed to be
taken to remedy the same.
	 
	 	(d)	 	Notice of Legal Proceedings. The Borrower will, forthwith upon becoming
aware thereof, notify the Agent of the commencement of any legal or administrative
proceedings against the Borrower or any Material Subsidiary which, if adversely
determined against the Borrower or any Material Subsidiary could reasonably be expected
to have a Material Adverse Effect.
	 
	 	(e)	 	Notice of Change of Control. The Borrower will, forthwith upon becoming
aware thereof, notify the Agent of any Change of Control.
	 
	 	(f)	 	Notice of Environmental Damage. The Borrower will, forthwith upon
acquiring knowledge thereof, notify the Agent of the discovery of any Contaminant or of
any Release of a Contaminant into the Environment from or upon the land or property
owned (either individually or jointly), operated or controlled by the 










 



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	 	 	 	Borrower or any Material Subsidiary which could reasonably be expected to have a Material
Adverse Effect.






	 	(g)	 	Indemnity of Borrower. The Borrower hereby indemnifies and holds harmless each of
the Agent and the Lenders, including their respective directors, officers, employees and
agents (collectively, the “Indemnified Parties”), for any costs, losses, damages, expenses,
judgments, suits, claims, awards, fines, sanctions and liabilities whatsoever (including any
reasonable costs or expenses of defending or denying the same and the reasonable costs or
expenses of preparing any environmental assessment report or other such reports) suffered or
incurred by an Indemnified Party, arising out of, or in respect of:






	 	(i)	 	the Release of any Contaminant into the Environment from or into any
property, owned, operated or controlled, directly or indirectly, by the Borrower or
otherwise in which the Borrower or any Subsidiary has an interest; and
	 
	 	(ii)	 	the remedial action, if any, required to be taken by the Agent or the
Lenders in respect of any such Release,






except in such cases where and to the extent that such costs, losses, damages, expenses,
judgments, suits, claims, awards, fines, sanctions or liabilities arise from the gross
negligence or wilful misconduct of the Agent or the Lenders, or any of their directors,
officers, employees and agents (in this Section 14.1(g) collectively a “claim”). This
indemnity will survive repayment or cancellation of the Credit Facilities or any part
thereof, including any termination of the other provisions of this Agreement. Other than
for costs and expenses incurred by the Indemnified Parties for investigating, defending or
denying a claim or preparing any necessary environmental assessment report or other reports
in connection with any claim (the reasonable costs thereof to be paid forthwith by the
Borrower on demand therefor), the Indemnified Parties will not request indemnification from
the Borrower unless an Indemnified Party is required by Law, based on the advice of such
Indemnified Party’s counsel, to honour a claim or any part thereof. During the continuation
of an Event of Default, the Indemnified Parties will be entitled, but not obligated, to
negotiate any settlement of a claim in consultation with the Borrower, and any such
settlement will be binding on the Parties, provided that the Borrower will not be liable
for any settlement of any action without its written consent, such consent not to be
unreasonably withheld. Notwithstanding the foregoing, the Borrower, at its option by notice
to the Lenders, may assume carriage at any time of any proceedings giving rise to a claim,
including choice of counsel.




	 	(h)	 	Performance. The Borrower will, and will cause each Material Subsidiary to observe
the terms of and perform its obligations under each of the Documents to which it is a party.










 



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	 	(i)	 	Quarterly Compliance Certificate. Within 45 days after the end of each of the
first three fiscal quarters of the Borrower and within 90 days after the end of each
fiscal year of the Borrower, the Borrower will furnish to the Agent a Compliance
Certificate, along with reasonably detailed calculations with respect to the various
financial covenants of the Borrower described herein.
	 
	 	(j)	 	Financial Statements. As soon as available, and in any event within 45 days after
the end of each of the first three fiscal quarters of the Borrower and within 120 days after
the end of each fiscal year of the Borrower, the Borrower will furnish to the Agent a copy of
its quarterly unaudited consolidated financial statements and with respect to its fiscal year
end, its annual audited consolidated financial statements and the unaudited annual
consolidated financial statements of the Material Subsidiaries.
	 
	 	(k)	 	Budget. Forthwith following approval thereof by the Borrower’s Directors and, in any
event, within 30 days prior to the fiscal year end of the Borrower, the Borrower will furnish
to the Agent a copy of the Borrower’s budget for the next fiscal year.
	 
	 	(l)	 	Borrowing Base Certificate. Within 30 days after the end of each month, the Borrower
will furnish to the Lender a Borrowing Base Certificate.
	 
	 	(m)	 	Performance of Agreements. The Borrower will, and will cause each Material
Subsidiary to, perform its obligations under all agreements relating to its material
property, including payment of rentals, royalties, Taxes or other charges in respect thereof
which are necessary to maintain all such agreements in good standing in all material
respects.
	 
	 	(n)	 	Insurance. The Borrower will, and will cause each Material Subsidiary to, maintain
adequate insurance in respect of its material property, and will provide the Agent with
copies of all insurance policies relating thereto if so requested.
	 
	 	(o)	 	Material Adverse Claims. The Borrower will, and will cause each Material Subsidiary
to, except for Permitted Encumbrances, defend its property from all material adverse claims
where the failure to do so in the opinion of the Lenders, acting reasonably, threatens the
intended priority or validity of the Security as herein provided, or could reasonably be
expected to have a Material Adverse Effect.
	 
	 	(p)	 	Protection of Security. The Borrower will and will cause each Material Subsidiary to
do all things reasonably requested by the Agent to protect and maintain the Security and the
priority thereof in relation to other Persons.
	 
	 	(q)	 	Environmental Audit. If the Agent, acting reasonably, determines that the Borrower’s
or any Material Subsidiary’s obligations or other liabilities in respect of matters dealing
with the protection or contamination of the Environment or the maintenance of health and
safety standards, whether contingent or actual, could reasonably be expected to have a
Material Adverse Effect then, at the request of










 



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the Agent, the Borrower will assist the Agent in conducting an environmental audit of the
property which is the subject matter of such contingent or actual obligations or
liabilities, by an independent consultant selected by the Agent. The reasonable costs of
such audit will be for the account of the Borrower, provided that the Agent will carry out
such audit in consultation with the Borrower to expedite its completion in a
cost-effective manner. Should the result of such audit indicate that the Borrower or a
Material Subsidiary is in breach, or with the passage of time will be in breach, of any
Environmental Law and such breach or potential breach has or could reasonably be expected
to have, in the opinion of the Lenders, acting reasonably, a Material Adverse Effect, and
without in any way prejudicing or suspending any of the rights and remedies of the Agent
and the Lenders under the Documents, the Borrower will forthwith commence and diligently
proceed to rectify or cause to be rectified such breach or potential breach, as the case
may be, and will keep the Agent fully advised of the actions it intends to take and has
taken to rectify such breach or potential breach and the progress it is making in
rectifying same. The Agent will be permitted to retain, for the account of the Borrower
(to the extent such account is reasonable), the services of a consultant to monitor the
Borrower’s or any Material Subsidiary’s compliance with this Section 14.1(q).




	 	(r)	 	Payment of Taxes. The Borrower will, and will cause each Material Subsidiary to,
duly file on a timely basis all Tax returns required to be filed by it, and duly and
punctually pay all Taxes and other governmental charges levied or assessed against it or its
property, except, in either case, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.
	 
	 	(s)	 	Notices and Filings. The Borrower will, on a timely basis, furnish to the Agent (in
sufficient copies for each of the Lenders) all prospectuses, material change reports (except
those filed on a confidential basis, but only for so long as such confidentiality remains in
effect) and press releases filed by the Borrower or any Material Subsidiary with securities
commissions having jurisdiction and other documents distributed by the Borrower to its
shareholders.
	 
	 	(t)	 	Inspection of Property; Books and Records; Discussions. The Borrower will, and will
cause each Material Subsidiary to, maintain books and records of account in accordance with
GAAP and all applicable Law; and permit representatives of the Agent from time to time, at
the Borrower’s expense, to visit and inspect any of its property and to examine and make
abstracts from any of its books and records at any reasonable time during normal business
hours and upon reasonable request and notice, and subject to the Borrower’s health and safety
requirements, and to discuss its business, property, condition (financial or otherwise) and
prospects with its senior officers and (in the presence of such representatives, if any, as
it may designate) with its independent chartered accountants.
	 
	 	(u)	 	Comply with Law and Maintain Permits. The Borrower will, and will cause each
Material Subsidiary to, comply with applicable Laws and obtain and maintain all permits,
licenses, consents and approvals necessary to the ownership of its










 



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	 	 	 	property and to the conduct of its business in each jurisdiction where it carries
on business or owns property, including those issued or granted by Administrative
Bodies, except to the extent failure to do so could not reasonably be expected to
have a Material Adverse Effect.






	 	(v)	 	Other Information. The Borrower will provide to the Agent such other
documentation and information concerning the Borrower, the Material Subsidiaries as
may be requested by the Lenders, acting reasonably, including any internally or
independently prepared environmental assessment reports in the possession of the
Borrower or any Material Subsidiary.
	 
	 	(w)	 	Subsidiary Security. The Borrower will provide prior written notice to
the Agent of it or any Material Subsidiary acquiring or incorporating any new Material
Subsidiary and cause each Material Subsidiary to provide the Agent with a guarantee of
the Borrower’s Indebtedness under the Documents and with the other Security listed in
Section 4.1 in form and substance satisfactory to the Agent within 10 days of any such
Subsidiary becoming a Material Subsidiary, together with all such supporting
documentation and legal opinions as the Agent may reasonably require.






	14.2	 	Financial Covenants. While any Indebtedness under the Credit Facilities is
outstanding or available to the Borrower, the Borrower covenants that:






	 	(a)	 	Debt to EBITDA Ratio. Beginning on October 31, 2004, and as of the last
day of each fiscal quarter thereafter, it will not permit the Debt to EBITDA Ratio to
exceed 3.0:1, reducing to 2.50:1 as of January 31, 2005 and 2.0:1 as of January 31,
2006. For certainty, EBITDA of an entity acquired by the Borrower or any Material
Subsidiary will be included only from the date of any acquisition (and not on a pro
forma basis), including without limitation, the acquisition of Alanx.
	 
	 	(b)	 	Minimum Fixed Charge Coverage Ratio. Beginning on April 30, 2005, and
as of the last day of each fiscal quarter thereafter, it will not permit the Fixed
Charge Coverage Ratio to be less than 1.25:1.
	 
	 	(c)	 	Minimum Shareholders’ Equity. As of the last day of each fiscal
quarter, it will not permit shareholders’ equity (in accordance with GAAP) to be less
than Cdn. $20,000,000 plus Net Income for such period (to the extent it is positive)
and the net proceeds of any equity issuances of the Borrower after the date hereof.






	14.3	 	Negative Covenants. While any Indebtedness under the Credit Facilities is outstanding
or available to the Borrower and except with the written consent of the Lenders:






	 	(a)	 	Limitation on Borrowings, Liens and Distributions. The Borrower will
not, and will not permit the Material Subsidiaries to:






	 	(i)	 	incur Indebtedness, except for Permitted Indebtedness;










 



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	 	(ii)	 	provide or permit a Lien over any of its property, except for Permitted
Encumbrances; or
	 
	 	(iii)	 	make any Distribution, other than Permitted Distributions.






	 	(b)	 	Limitation on Exchange Rate Swap Contracts. The Borrower will not enter into any
contract for the sale, purchase, or exchange or for future delivery of foreign currency
(whether or not the subject currency is to be delivered or exchanged), hedging contract,
forward contract, swap agreement, futures contract, or other foreign exchange protection
agreement or option with respect to any such transaction, designed to hedge against
fluctuations in foreign exchange rates (collectively, the “Exchange Rate Swap Contracts”) if
the term of any such Exchange Rate Swap Contract exceeds the earlier of (i) two years, and
(ii) the Term Loan Termination Date; or if the aggregate amount hedged under all such Exchange
Rate Swap Contracts at any time exceeds 60% of the U.S. Dollar Exchange Equivalent of the
Borrower’s consolidated revenues over the preceding fiscal quarter of the Borrower.
	 
	 	(c)	 	Limitation on Interest Rate Swap Contracts. The Borrower will not enter into any
contract for a rate swap, rate cap, rate floor, rate collar, forward rate agreement, futures
or other rate protection agreement or option with respect to any such transaction, designed to
hedge against fluctuations in interest rates (collectively, the “Interest Rate Swap
Contracts”) if the term of any such Interest Rate Swap Contract exceeds the earlier of (i) two
years, and (ii) the Term Loan Termination Date; or if the aggregate amounts hedged under all
such Interest Rate Swap Contracts exceeds 60% of the Aggregate Principal Amount under each of
the Extendible Revolving Loan and the Term Loan at the end of the previous fiscal quarter of
the Borrower.
	 
	 	(d)	 	Limitation on Commodity Swap Contracts. The Borrower will not enter into any contract
for a commodity swap or other protection agreement or option designed to protect against
fluctuations in commodity prices (which, for greater certainty, includes both physically
and financially settled hedges) (collectively, the “Commodity Swap Contracts”).
	 
	 	(e)	 	Limitation on Hedging Agreements. The Borrower will not enter into or maintain any
Exchange Rate Swap Contract, Interest Rate Swap Contract, Commodity Swap Contract and any
other derivative agreement or other similar agreement or arrangements (collectively, the
“Hedging Agreements”), unless such Hedging Agreement is entered into for hedging purposes only
in the ordinary course of business and not for speculative purposes. The Borrower will not
permit the Material Subsidiaries to enter into any Hedging Agreements for any purpose unless
the Borrower obtains the prior written consent of the Lenders to any such Hedging Agreements.
	 
	 	(f)	 	Change in Constating Documents. The Borrower will not, and will not permit any
Material Subsidiary to, amend any of its constating documents or by-laws, as 










 



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	 	 	 	applicable, in a manner that could materially prejudice the rights and interests of the
Lenders under the Documents.






	 	(g)	 	Mergers, Amalgamation and Consolidations. The Borrower will not, and will cause the
Material Subsidiaries not to, merge, amalgamate or consolidate with another Person except as
permitted under Article 15.
	 
	 	(h)	 	Limitation on Sale and Lease-Back Transactions. Subject to Section 14.3(k), the
Borrower will not, and will not permit Material Subsidiaries to, enter into any arrangement
with any Person providing for the leasing of property from such Person which property has
been or is to be sold or transferred by the Borrower, or any such Material Subsidiary to such
Person (a “Sale and Lease-Back Transaction”), unless the proceeds to the Borrower or such
Material Subsidiary of such sale are at least equal to the fair market value of such property
or at discounted value, as permitted by the Agent, acting reasonably, and provided that the
Canadian Dollar Exchange Equivalent of the Indebtedness of the Borrower, the Material
Subsidiary under all Sale and Lease-Back Transactions does not exceed $500,000 in the
aggregate except for Sale and Lease-Back Transactions where the Borrower, a Material
Subsidiary, as the case may be, utilizes the net proceeds arising therefrom to acquire,
within 120 days, an interest in property substantially similar in nature to the property sold
or transferred; provided however that the Borrower and the Material Subsidiaries may incur an
additional Indebtedness arising under all Sale and Lease-Back Transactions of $500,000, in
the aggregate, if the Borrower obtains the Lenders’ written consent prior to the incurrence
thereof (any Sale and Lease-Back Transaction not prohibited hereby a “Permitted Sale and
Lease-Back Transaction”).
	 
	 	(i)	 	Purchase Money Liens. With the exception of, as in effect on the date hereof, the
Purchase Money Lien granted to Pro-Tech Armored Products of Massachussets, Inc. (as evidenced
by Uniform Commercial Code filing #41947748, as amended) the Borrower will not and will not
permit Material Subsidiaries to permit the Canadian Dollar Exchange Equivalent of its
Indebtedness arising under Purchase Money Liens to exceed $500,000 in the aggregate; provided
however that the Borrower and the Material Subsidiaries may incur an additional Indebtedness
arising under Purchase Money Liens of $500,000, in the aggregate, if the Borrower obtains the
Lenders’ written consent prior to the incurrence thereof.
	 
	 	(j)	 	Change in Business, Name, Location or Fiscal Year. The Borrower will not (i) on a
consolidated basis, change in any material respect the nature of its business or operations
from the nature of its business and operations carried on as of the Closing Date, or (ii)
change its or any Material Subsidiaries’ corporate name, partnership name or trust name, as
applicable, trade name or locations of business from those set forth in Schedule J without
giving the Agent 15 days prior written notice thereof, or (iii) change its fiscal year.
	 
	 	(k)	 	Asset Dispositions. Other than for Permitted Dispositions, the Borrower will not, and
will not permit any Material Subsidiary to, directly or indirectly, make any






 











 





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	 	 	 	sale, exchange, lease, transfer or other disposition of any of its assets to any
Person without the prior written consent of all of the Lenders.
	 
	 	(l)	 	Financial Assistance or Capital Contributions. The Borrower will not,
and will not permit any Material Subsidiary to, (i) provide any guarantee, loans or
other financial assistance to any Person, other than to the Agent, the Borrower or a
Material Subsidiary; and (ii) make any contributions of capital or any other forms of
equity or partnership investment in any Person that is not the Borrower or a Material
Subsidiary.
	 
	 	(m)	 	Material Investments. The Borrower will not, and will not permit any
Material Subsidiary to, make material investments or enter into ventures of a material
nature which are outside the scope of their normal course of business.
	 
	 	(n)	 	Transactions with Affiliates. The Borrower will not, and will not
permit any Material Subsidiary to, except as specifically permitted hereunder, enter
into any transaction, including the purchase, sale or exchange of any property or the
rendering of any services, with any of its shareholders or with any Affiliate, or with
any of its or their directors or officers, or enter into, assume or suffer to exist any
employment, consulting or analogous agreement or arrangement with any such shareholder
or Affiliate or with any of its directors or officers, except a transaction or
agreement or arrangement which is in the ordinary course of business of the Borrower or
a Material Subsidiary and which is upon fair and reasonable terms not less favourable
to the Borrower or a Material Subsidiary than it would obtain in comparable arms-length
transaction; provided that such restriction will not apply, subject to compliance with
Section 14.1(w), to any transaction between the Borrower and a Material Subsidiary or
between Material Subsidiaries.





ARTICLE 15

REORGANIZATION





	15.1	 	Reorganization. The Borrower may and may permit any Material Subsidiary to, from
time to time, amalgamate, merge or consolidate with the Borrower or another Material
Subsidiary, provided that:






	 	(a)	 	no Default or Event of Default will be continuing at the time of such
amalgamation, merger or consolidation and no Default or Event of Default will result
from such amalgamation, merger or consolidation;
	 
	 	(b)	 	prior to or contemporaneously with the consummation of such amalgamation,
merger or consolidation, the Borrower, any such Material Subsidiary and the successor
entity, as applicable, will have executed such instruments and done such things as in
the reasonable opinion of the Agent are necessary or advisable to establish that upon
the consummation of such transaction:






	 	(i)	 	the successor entity will be a corporation incorporated under the Laws of
Canada, the United States of America or one of its provinces, states or










 



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	 	 	 	territories and will have assumed all the covenants and obligations of the
Borrower or the Material Subsidiary, as applicable, under the Documents;
	 
	 	(ii)	 	the Documents, as applicable, will be valid and binding
obligations of the successor entity entitling the Lenders and the Agent, as
against the successor entity, to exercise all of their rights and benefits
thereunder;
	 
	 	(iii)	 	the Lien created by the Security will continue to be a Lien
against the property of the successor entity in substantially the same manner
and to the same extent and priority as existed immediately prior to such
amalgamation, merger or consolidation;
	 
	 	(iv)	 	the rights and benefits afforded or intended to be afforded
the Lenders and the Agent under the Documents are not materially prejudiced;
and
	 
	 	(v)	 	legal opinions in form satisfactory to the Agent confirming
the matters set forth in Sections 15.1(b)(i), (ii) and (iii) are provided by
Borrower’s Counsel and counsel to the Agent; and






	 	(c)	 	no Material Adverse Effect will occur as a result of such amalgamation,
merger or consolidation.





ARTICLE 16

EVENTS OF DEFAULT





	16.1	 	Event of Default. Each of the following events will constitute an Event of
Default:






	 	(a)	 	Failure to Pay. If the Borrower makes default in the due and punctual
payment of any principal amount owing under the Documents, as and when the same becomes
due and payable, whether at maturity or otherwise; or if the Borrower makes default in
the due and punctual payment of interest, fees or other non-principal amounts owing
under the Documents, as when the same become due and payable, whether at maturity or
otherwise and such default continues for a period of 2 Banking Days.
	 
	 	(b)	 	Incorrect Representations. If any representation or warranty made
by the Borrower or a Material Subsidiary in any Document proves to have been incorrect
when so made or deemed to have been repeated as herein provided and such default
continues for a period of 30 days after notice thereof is given to the Borrower by the
Agent.
	 
	 	(c)	 	Breach of Covenants. Except for an Event of Default set out in Section
16.1(a) or elsewhere in this Section 16.1, if the Borrower defaults in the performance
or observance of any covenant, obligation or condition to be observed or performed by
it pursuant to any of the Documents, and such default continues for a period of 30 days
after notice thereof is given to the Borrower by the Agent.










 



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	 	(d)	 	Insolvency. If a judgment, decree or order of a court of competent jurisdiction
is entered against the Borrower or any Material Subsidiary, (i) adjudging the Borrower or
any Material Subsidiary bankrupt or insolvent, or approving a petition seeking its
reorganization or winding-up under the Bankruptcy and Insolvency Act (Canada), the
Companies’ Creditors Arrangement Act (Canada) or any other bankruptcy, insolvency or
analogous Law, or (ii) appointing a receiver, trustee, liquidator, or other Person with
like powers, over all, or substantially all, of the property of the Borrower or any
Material Subsidiary or (iii) ordering the involuntary winding up or liquidation of the
affairs of the Borrower or any Material Subsidiary or (iv) if any receiver or other Person
with like powers is appointed over all, or substantially all, of the property of the
Borrower or any Material Subsidiary, unless, in any such case, such judgment, petition,
order or appointment is stayed and of no effect against the rights of the Lenders within 30
days of its entry.
	 
	 	(e)	 	Winding-Up. If, (i) except as permitted by Section 15.1, an order or a resolution is
passed for the dissolution, winding-up, reorganization or liquidation of the Borrower or any
Material Subsidiary, pursuant to applicable Law, including the Business Corporations Act
(Alberta), or (ii) if the Borrower or any Material Subsidiary institutes proceedings to be
adjudicated bankrupt or insolvent, or consents to the institution of bankruptcy or insolvency
proceedings against it under the Bankruptcy and Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada) or any other bankruptcy, insolvency or analogous Law, or
(iii) the Borrower or any Material Subsidiary consents to the filing of any petition under any
such Law or to the appointment of a receiver, or other Person with like powers, over all, or
substantially all, of the Borrower’s or any Material Subsidiary’s property, or (iv) the
Borrower or any Material Subsidiary makes a general assignment for the benefit of creditors,
or becomes unable to pay its debts generally as they become due, or (v) the Borrower or any
Material Subsidiary takes or consents to any action in furtherance of any of the aforesaid
purposes.
	 
	 	(f)	 	Other Indebtedness. The Borrower or any Material Subsidiary fails to make any payment
of principal or interest in regard to any Indebtedness whatsoever owed by it after the expiry
of any applicable grace period and demand therefor, to any Person, other than the Agent and
any Lender under the Documents, where the outstanding principal amount of such Indebtedness,
in the aggregate, is more than Cdn. $200,000.
	 
	 	(g)	 	Other Defaults. The Borrower or any Material Subsidiary defaults in the observance
or performance of any non-monetary obligation, covenant or condition to be observed
or performed by it pursuant to any agreement to which it is a party or by which any of its
property is bound, where such default could reasonably be expected to have a Material Adverse
Effect and such default continues for a period of 30 days after notice thereof is given to the
Borrower by the Agent.










 



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	 	(h)	 	Adverse Proceedings. The occurrence of any action, suit or proceeding against
or affecting the Borrower or any Material Subsidiary before any court or before any
Administrative Body which, if successful, could reasonably be expected to have a Material
Adverse Effect, unless the action, suit, or proceedings will be contested diligently and
in good faith and, in circumstances where a lower court or tribunal has rendered a
decision adverse to the Borrower or any Material Subsidiary, the Borrower or such Material
Subsidiary is appealing such decision, and has provided a reserve in respect thereof,
adequate in the opinion of the Lenders.
	 
	 	(i)	 	Judgment. A judgment or order is obtained against the Borrower or any Material
Subsidiary for an amount in excess of Cdn. $500,000 in the aggregate which remains
unsatisfied and undischarged for a period of 30 days during which such judgment shall not be
on appeal or execution thereof shall not be effectively stayed.
	 
	 	(j)	 	Material Lien. The property of the Borrower or any Material Subsidiary having a fair
market value in excess of Cdn. $500,000 in the aggregate shall be seized (including by way of
execution, attachment, garnishment or distraint) or any Lien thereon shall be enforced, or
such property shall become subject to any charging order or equitable execution of a court, or
any writ of enforcement, writ of execution or distress warrant with respect to obligations in
excess of Cdn. $500,000 shall exist in respect of the Borrower, any Material Subsidiary, or
such property, or any sheriff; civil enforcement agent or other Person shall become lawfully
entitled to seize or distrain upon any such property under the Civil Enforcement Act
(Alberta), the Workers’ Compensation Act (Alberta), the Personal Property Security Act
(Alberta) or any other applicable Laws whereunder similar remedies are provided, and in any
case such seizure, execution, attachment, garnishment, distraint, charging order or equitable
execution, or other seizure or right, shall continue in effect and not released or discharged
for more than 30 days.
	 
	 	(k)	 	Hedging Agreements. The occurrence of an event of default under any Hedging Agreement
to which the Borrower or a Material Subsidiary is a party, after the expiry of any applicable
grace period thereunder, except where such event of default, in the opinion of the Borrower
and the Lenders, is in the best interest of the Borrower or the applicable Material
Subsidiary.
	 
	 	(1)	 	Cessation of Business. Except as permitted by Section 15.1, the Borrower or any
Material Subsidiary ceases or proposes to cease carrying on business, or a substantial part
thereof, or makes or threatens to make a bulk sale of its property.
	 
	 	(m)	 	Enforceability of Documents. If any material provision of any Document shall at any
time cease to be in full force and effect, be declared to be void or voidable or shall be
repudiated, or the validity or enforceability thereof shall at any time be contested by the
Borrower or any Material Subsidiary or if any Lien constituted pursuant to the Security
ceases to have the priority contemplated in the Documents.










 



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	 	(n)	 	Qualified Auditor Report. If the audited financial statements that are
required to be delivered to the Agent pursuant to
Section 14.1(j) are not
unqualified by the auditor of the Borrower, unless such qualifications could not,
in the opinion of the Lenders, reasonably be expected to have a Material Adverse
Effect.
	 
	 	(o)	 	Change of Control. If a Change of Control occurs and the Lenders have
not consented, in their sole discretion.
	 
	 	(p)	 	Borrowing Base Shortfall. If at any time there exists a Borrowing Base
Shortfall and such Borrowing Base Shortfall is not remedied pursuant to Section
3.8(a).
	 
	 	(q)	 	Material Adverse Effect. If any event shall occur which has a Material
Adverse Effect.






	16.2	 	Remedies. Upon the occurrence of an Event of Default which has not been waived, the
Agent (on the direction of the Lenders) shall forthwith terminate any further obligation to
make Advances and declare all Indebtedness owing under the Credit Facilities together with
unpaid accrued interest thereon and any other amounts owing under the Documents, contingent or
otherwise, to be immediately due and payable, whereupon the Borrower will be obligated without
any further grace period to forthwith pay such amounts and the Agent and the Lenders may
exercise any and all rights, remedies, powers and privileges afforded by applicable Law or
under any and all other instruments, documents and agreements made to assure payment and
performance of the obligations of the Borrower under the Documents.






	16.3	 	Waivers. An Event of Default may only be waived in writing by all of the Lenders.





ARTICLE 17

CONFIDENTIALITY





	17.1	 	Non-Disclosure. All information, including any information relating to a Hostile
Acquisition, other than information that is required by Law to be disclosed by the Party
receiving the information to any Administrative Body, will be held by the Parties in the
strictest confidence and will not be disclosed to any Person, except as provided in Sections
17.2 and 17.3.






	17.2	 	Exceptions. Section 17.1 does not apply to information:






	 	(a)	 	of a Party where that Party consents in writing to its disclosure;
	 
	 	(b)	 	which becomes part of the public domain;
	 
	 	(c)	 	received from a third party without restriction on further disclosure and
without breach of Section 17.1;
	 
	 	(d)	 	developed independently without breach of Section 17.1; or










 



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	 	(e)	 	to the extent required to be disclosed by order or direction of a court or
Administrative Body of competent jurisdiction.






	17.3	 	Permitted Disclosures by the Agent or the Lenders. Information received by the
Agent or a Lender may be disclosed to the Agent or any other Lender, including any financial
institution which desires to become a Lender hereunder and to their respective employees,
auditors, accountants, legal counsel, geologists, engineers and other
consultants and financial advisors retained by the Agent, such Lender or such financial
institution on a need to know basis.
	 
	17.4	 	Survival. The obligations of the Parties under this Article 17 will survive the
termination of this Agreement.





ARTICLE 18

ASSIGNMENT





	18.1	 	Assignment of Interests. Except as expressly permitted under Article 15 and this
Article 18, this Agreement and the rights and obligations hereunder will not be assignable, in
whole or in part, by the Borrower without the prior written consent of all of the Lenders,
such consent not to be unreasonably withheld.
	 
	18.2	 	Assignment by the Lenders. Each Lender will have the right to sell or assign in
minimum portions of Cdn. $2,000,000 (with such Lender, where such sale or assignment is not of
all of such Lender’s Individual Revolving Loan Commitment Amount or Individual Term Loan
Commitment Amount, as applicable, retaining an Individual Revolving Loan Commitment Amount or
Individual Term Loan Commitment Amount, as applicable, of at least Cdn. $2,000,000 such
Lender’s Individual Revolving Loan Commitment Amount or Individual Term Loan Commitment
Amount, as applicable, to one or more Domestic Lenders acceptable to the Borrower and the
Agent provided that at and after the time of the assignment, the Borrower will not be under
any obligation to pay by way of withholding tax or otherwise any greater amount than it would
have been obliged to pay if the Lender had not made an assignment. An assignment fee of $3,500
for each such assignment (other than to an Affiliate of a Lender) will be payable to the Agent
by the assigning Lender. In the event of such sale or assignment, the Borrower, the Agent and
the other Lenders will execute and deliver all such agreements, documents and instruments as
the Agent or Lender may reasonably request to effect and recognize such sale or assignment,
including an Instrument of Adhesion. Notwithstanding the foregoing, no consent of the
Borrower or the Agent will be required if an assignment occurs during a Default or Event of
Default which is continuing.
	 
	18.3	 	Effect of Assignment. To the extent that any Lender sells or assigns any portion of
its Individual Revolving Loan Commitment Amount or Individual Term Loan Commitment Amount, as
applicable, pursuant to Section 18.2 and such new Lender or new Lenders, as the case may be,
has executed and delivered to the Borrower and the Agent an Instrument of Adhesion, such
Lender will be relieved and forever discharged of any and all of its covenants and obligations
under the Documents, except for those set forth in Article 17, in respect of that portion of
its Individual Revolving Loan Commitment Amount or










 



- 48 -


	 	 	Individual Term Loan Commitment Amount, as applicable, so sold or assigned from and after
the date of such Instrument of Adhesion and the Borrower’s recourse under the Documents in
respect of such portion so sold or assigned from and after the date of the Instrument of
Adhesion will be to such new Lender or new Lenders only, as the case may be, and their
successors and permitted assigns.






	18.4	 	Participations. Any Lender may at any time sell to one or more financial
institutions or other Persons (each of such financial institutions and other Persons being
herein called a “Participant”) participating interests in any of the Advances, commitments,
or other interests of such Lender hereunder, provided, however, that:






	 	(a)	 	no participation contemplated in this Section 18.4 will relieve such Lender
from its commitments or its other obligations hereunder or under any other Document;
	 
	 	(b)	 	such Lender will remain solely responsible for the performance
of its commitments and such other obligations as if such participation had not taken
place;
	 
	 	(c)	 	the Agent will continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and each of
the other Documents;
	 
	 	(d)	 	no Participant will have any rights (through a right of consent or approval or
otherwise) to require such Lender to take or refrain from taking any action hereunder
or under any other Document; and
	 
	 	(e)	 	the Borrower will not be required to pay any amount hereunder that is greater
than the amount which it would have been required to pay had no participating interest
been sold.





ARTICLE 19

ADMINISTRATION OF THE CREDIT FACILITY





	19.1	 	Authorization and Action.






	 	(a)	 	Authorization and Action. Each Lender hereby irrevocably appoints and
authorizes the Agent to be its agent in its name and on its behalf and to exercise such
rights or powers granted to the Agent or the Lenders under the Documents to the extent
specifically provided therein and on the terms thereof, together with such powers and
authority as are reasonably incidental thereto. As to any matters not expressly
provided for by the Documents, the Agent will not be required to exercise any
discretion or take any action, but will be required to act or to refrain from acting
(and will be fully indemnified and protected by the Lenders to the greatest extent
permitted by Law in so acting or refraining from acting) upon the instructions of the
Lenders, and such instructions will be binding upon all Lenders, provided however that
the Agent will not be required to take any action which, in the opinion of the Agent,
might expose the Agent to liability in such










 



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	 	 	 	capacity, which could result in the Agent incurring any costs and expenses, or
which is contrary to the spirit and intent of this Agreement.
	 
	 	(b)	 	Lenders’ Determination. Where the provisions of this Agreement provide
that any waiver of or any amendment to any provision of the Documents may be made or
any action, consent or other determination in connection with the Documents may be
taken or given, with the consent or agreement of the Lenders, then any such waiver,
amendment, action, consent or determination so made, so taken or so given with the
consent or agreement of the Lenders will be binding on all of the Lenders and all of
the Lenders will cooperate in all ways necessary or desirable to implement and effect
such waiver, amendment, action, consent or determination.
	 
	 	(c)	 	Deemed Non-Consent. If the Agent delivers a notice to a Lender
requesting advice from such Lender as to whether it consents or objects to any matter
in connection with the Documents, then, except as otherwise expressly provided herein,
if such Lender does not deliver to the Agent its written consent or objection to such
matter within 7 Banking Days of the delivery of such notice by the Agent to such
Lender, such Lender will be deemed not to have consented thereto upon the expiry of
such 7 Banking Day period.






	19.2	 	Procedure for Making Advances.






	 	(a)	 	Pro Rata Advances. Subject to Sections 6.2, 6.3 and 6.4, all Advances
under the Credit Facilities made by the Lenders will be made in accordance with each
Participating Lender’s Rateable Portion of such Advance.
	 
	 	(b)	 	Instructions from Borrower. The Lenders, through the Agent, will
make Advances under the Credit Facilities available to the Borrower as required
hereunder by debiting the account of the Agent to which each Lender’s Rateable Portion
of such Advances have been credited in accordance with Section 5.6 (or causing such
account to be debited) and, in the absence of other arrangements agreed to by the Agent
and the Borrower in writing, by transferring (or causing to be transferred) like funds
in accordance with the instructions of the Borrower as set forth in the Notice of
Borrowing, Notice of Rollover or Notice of Conversion, as the case may be, in respect
of each Advance under the Credit Facilities, provided that the obligation of the Agent
hereunder will be limited to taking such steps as are in keeping with its normal
banking practice and which are commercially reasonable in the circumstances to
implement such instructions, and the Agent will not be liable for any damages, claims
or costs which may be suffered by the Borrower or any of the Lenders and occasioned by
the failure of such funds to reach their designated destination, unless such failure is
due to the gross negligence or willful misconduct of the Agent.
	 
	 	(c)	 	Assumption Respecting Availability. Unless the Agent has been
notified by a Lender within 1 Banking Day prior to an anticipated Advance under the
Credit Facilities that such Lender will not make available to the Agent its Rateable
Portion of such Advance, the Agent may assume, without any enquiry required on










 



- 50 -


	 	 	 	its part, that such Lender has made or will make such portion of the Advance
available to the Agent on the date such Advance is to take place, in accordance
with the provisions hereof and the Agent may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If and to the
extent such Lender will not have so made its Rateable Portion of an Advance under
the Credit Facilities available to the Agent, such Lender agrees to pay to the
Agent, forthwith on demand, such Lender’s Rateable Portion of the Advance and all
reasonable costs and expenses incurred by the Agent in connection therewith
together with interest thereon (at the rate payable thereunder by the Borrower in
respect of such Advance) for each day from the date such amount is made available
to the Borrower until the date such amount is paid to the Agent, provided however,
that if such Lender fails to so pay, the Borrower covenants and agrees that without
prejudice to any rights the Borrower may have against such Lender, it will repay
the amount of such Lender’s Rateable Portion of the Advance (without duplication)
to the Agent for the account of the Agent after receipt of the certificate referred
to below and forthwith after demand therefor by the Agent. The amount payable to
the Agent pursuant hereto will be as set forth in a certificate delivered by the
Agent to such non-paying Lender and the Borrower (which certificate will contain
reasonable details of how the amount payable is calculated) and will be conclusive
and binding, for all purposes, in the absence of manifest error. If such Lender
makes the payment to the Agent as required herein, the amount so paid will
constitute such Lender’s Rateable Portion of the Advance under the Credit
Facilities for purposes of this Agreement. The failure of any Lender to make its
Rateable Portion of the Advance will not relieve any other Lender of its
obligation, if any, hereunder to make its Rateable Portion of the Advance on the
date that such Advance is to take place, but no Lender will be responsible for the
failure of any other Lender to provide its Rateable Portion of any Advance under
the Credit Facilities.






	19.3	 	Remittance of Payments. Forthwith after receipt of any payment by the Borrower
hereunder, the Agent, if and to the extent a Lender is entitled thereto, will remit to such
Lender its Rateable Portion of such payment, provided that, if the Agent, on the assumption
that it will receive on any particular date a payment of principal, interest or fees
hereunder, remits to a Lender its Rateable Portion of such payment and the Borrower fails to
make such payment, each such Lender agrees to repay to the Agent forthwith on demand such
Lender’s Rateable Portion of any such payment, together with all reasonable costs and expenses
incurred by the Agent in connection therewith and interest thereon at the rate and calculated
in the manner customarily applicable to interbank payments for each day from the date such
amount is remitted to such Lender. The exact amount of the repayment required to be made by a
Lender pursuant hereto will be set forth in a certificate delivered by the Agent to such
Lender, which certificate will be conclusive and binding for all purposes in the absence of
manifest error.
	 
	19.4	 	Redistribution of Payment. Each Lender agrees that:






	 	(a)	 	If it exercises any right of counter-claim, set off, bankers’ lien or
similar right with respect to any property of the Borrower or if under applicable Law
it receives a










 



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	 	 	 	secured claim, the security for which is a debt owed by it to the Borrower, it will
apportion the amount thereof proportionately between:






	 	(i)	 	amounts outstanding at such time owed by the Borrower to such
Lender under this Agreement, which amounts will be applied in accordance with
this Section 19.4; and
	 
	 	(ii)	 	amounts otherwise owed to it by the Borrower, provided that any
cash collateral account held by such Lender as collateral for a letter of
credit or bankers’ acceptance (including a Bankers’ Acceptance) issued or
accepted by such Lender on behalf of the Borrower may be applied by such Lender
to such amounts owed by the Borrower to such Lender pursuant to such letter of
credit or in respect of any such bankers’ acceptance without apportionment.






	 	(b)	 	If it receives, through the exercise of a right or the receipt of a secured
claim described in Section 19.4(a) or otherwise, payment of a proportion of the
aggregate amount of principal, interest and fees due to it hereunder which is greater
than the proportion received by any other Lender in respect of the aggregate amount of
principal, interest and fees due in respect of the Credit Facilities (having regard to
the respective proportionate amounts advanced as Advances by each of the Lenders), the
Lender receiving such proportionately greater payment will purchase a participation
(which will be deemed to have been done simultaneously with receipt of such payment) in
that portion of the Extendible Revolving Loan or Term Loan, as applicable, of the other
Lenders so that their respective receipts will be pro rata to their respective Rateable
Portions, provided however that, if all or part of such proportionately greater payment
received by such purchasing Lender will be recovered, such purchase will be rescinded
and the purchase price for such participation will be returned to the extent of such
recovery, but without interest. Such Lender will exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled under this
Section 19.4 to share in the benefits of any recovery on such secured claims.
	 
	 	(c)	 	If it does any act or thing permitted by Sections 19.4(a) or (b), it will
promptly provide full particulars thereof to the Agent.
	 
	 	(d)	 	Except as permitted under Sections 19.4(a) or (b), no Lender will be entitled
to exercise any right of counter-claim, set off, bankers’ lien or similar right without
the prior written consent of the other Lenders.






	19.5	 	Duties and Obligations. The Agent or any of its directors, officers, agents or
employees (and, for purposes hereof, the Agent will be deemed to be contracting as agent for
and on behalf of such Persons) will not be liable to any Lender for any action taken or
omitted to be taken by it under or in connection with the Documents, except for its own gross
negligence or willful misconduct. Without limiting the generality of the foregoing, the
Agent:






 











 





 - 52 - 





	 	(a)	 	may assume that there has been no assignment or transfer by the Lenders of
their rights under the Documents, unless and until the Agent receives a duly executed
Instrument of Adhesion from such Lender;
	 
	 	(b)	 	may consult with counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and will not be liable for any
action taken or omitted to be taken in good faith by it in accordance with or
reliance upon the advice of such counsel, accountants or experts;
	 
	 	(c)	 	will incur no liability under or in respect of the Documents by acting upon any
notice, consent, certificate or other instrument or writing believed by it to be
genuine and signed or sent by the apparently proper Person or by acting upon any
representation or warranty of the Borrower made or deemed to be made
hereunder;
	 
	 	(d)	 	may assume that no Default or Event of Default has occurred and is continuing
unless it has actual knowledge to the contrary; and
	 
	 	(e)	 	may rely, as to any matter of fact which might reasonably be expected to be
within the knowledge of any Person, upon a certificate signed by or on behalf of
such Person.






	 	 	Further, the Agent (i) does not make any warranty or representation to any Lender nor will
it be responsible to any Lender for the accuracy or completeness of the data made available
to any of the Lenders in connection with the Credit Facilities or for any statements,
warranties or representations (whether written or oral) made in connection with the Credit
Facilities, (ii) will not have any duty to ascertain or to enquire as to the performance or
observance of any of the terms, covenants or conditions of the Documents on the part of the
Borrower or to inspect the property (including books and records) of the Borrower, and
(iii) will not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Documents or any other instrument
or document furnished pursuant hereto or thereto.






	19.6	 	Prompt Notice to the Lenders. Notwithstanding any other provision herein, the Agent
agrees to provide to the Lenders, with copies where appropriate, all information, notices
and reports required to be given to the Agent by the Borrower hereunder, promptly upon
receipt of same, excepting therefrom information and notices relating solely to the role of
the Agent hereunder.
	 
	19.7	 	Agent and Agent Authority. With respect to its Rateable Portion of the Commitment
Amount and the Advances made by it as a Lender under the Credit Facilities, as
applicable, the Agent will have the same rights and powers under the Documents as any
other Lender and may exercise the same as though it were not the Agent. The Agent may
accept deposits from, lend money to, and generally engage in any kind of business with
the Borrower, its Subsidiaries, their respective shareholders or any Person owned or
controlled by any of them and any Person which may do business with any of them, all as













 



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	 	 	if the Agent was not serving as Agent, and without any duty or obligation to account
therefor to the Lenders.






	19.8	 	Lenders’ Credit Decisions. It is understood and agreed by each Lender that it has
itself been, and will continue to be, solely responsible for making its own independent
appraisal of and investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of the Borrower and its Material Subsidiaries. Accordingly,
each Lender confirms with the Agent that it has not relied, and will not hereafter rely, on
the Agent (a) to check or inquire on its behalf into the adequacy, accuracy or
completeness of any information provided by the Borrower or any other Person under or
in connection with the Credit Facilities (whether or not such information has been or is
hereafter distributed to such Lender by the Agent) or (b) to assess or keep under review
on its behalf the financial condition, creditworthiness, condition, affairs, status or
nature
of the Borrower or any of its Material Subsidiaries. Each Lender acknowledges that
copies of the Documents have been made available to it for review and each Lender
acknowledges that it is satisfied with the form and substance of the Documents. A
Lender will not make any independent arrangement with the Borrower for the satisfaction
of any Indebtedness owing to it under the Documents without the written consent of the
other Lenders.






	19.9	 	Indemnification. The Lenders hereby agree to indemnify the Agent and its directors,
officers, agents and employees (to the extent not reimbursed by the Borrower) in
accordance with their respective Rateable Portions, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent or its directors, officers, agents and employees
in any way relating to or arising out of the Documents or any action taken or omitted by
the Agent under or in respect of the Documents in its capacity as Agent, provided that no
Lender will be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent’s gross negligence or willful misconduct. Without limiting the generality of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its
Rateable Portion of any reasonable out-of-pocket expenses (including legal fees, on a
solicitor and his own client basis) incurred by the Agent in connection with the
preservation of any right of the Agent or the Lenders under, or the enforcement of, or
legal advice in respect of rights or responsibilities under, the Documents, to the extent
that the Agent is not reimbursed for such expenses by the Borrower. This indemnity will
survive the termination of the other provisions of this Agreement as a separate and
continuing covenant of the Lenders.
	 
	19.10	 	Successor Agent. The Agent may, as hereinafter provided, resign at any time by
giving 30 days’ notice (the “Resignation Notice”) thereof to the Lenders and the Borrower. The
remaining Lenders will forthwith upon receipt of the Resignation Notice unanimously
appoint a successor administrative agent (the “Successor Agent”) to assume the duties
hereunder of the resigning Agent. Upon the acceptance of any appointment as
administrative agent hereunder by a Successor Agent, such Successor Agent will
thereupon succeed to and become vested with all the rights, powers, privileges and duties














 



- 54 -





	      	 	as administrative agent under the Documents of the resigning Agent. Upon such acceptance,
the resigning Agent will be discharged from its further duties and obligations as agent
under the Documents, but any such resignation will not affect such resigning Agent’s
obligations hereunder as a Lender, including for its Rateable Portion of the Commitment
Amount. After the resignation of the Agent as administrative agent hereunder, the
provisions of this Article 19 will continue to enure to its benefit as to any actions taken
or omitted to be taken by it while it was the administrative agent of the Lenders
hereunder. Notwithstanding the foregoing, if the remaining Lenders fail to appoint a
Successor Agent within 30 days of receipt of the Resignation Notice, the resigning Agent
may and with the approval of the Borrower prior to an Event of Default, such approval not
to be unreasonably withheld, appoint a Successor Agent from among the Lenders.






	19.11	 	Taking and Enforcement of Remedies. Except as otherwise provided herein, each
Lender hereby acknowledges that, to the extent permitted by applicable Law, rights and
remedies provided under the Documents to the Lenders are for the benefit of the Lenders
collectively and not severally and further acknowledges that its rights and remedies
thereunder are to be exercised not severally but collectively through the Agent upon the
decision of the Lenders (with the required unanimity as herein provided), regardless of
whether acceleration of Indebtedness hereunder was made, and accordingly,
notwithstanding any of the provisions contained herein, each of the Lenders hereby
covenants and agrees that it will not be entitled to take any action with respect to the
Credit Facilities, including any acceleration of Indebtedness thereunder, but that any such
action will be taken only by the Agent with the prior written direction of the Lenders
(with the required unanimity as herein provided). Notwithstanding the foregoing, in the
absence of written instructions from the Lenders, and where in the sole opinion of the
Agent the exigencies of the situation warrant such action, the Agent may without notice
to or consent of the Lenders take such action on behalf of the Lenders as it deems
appropriate or desirable in the circumstances. Each of the Lenders hereby covenants and
agrees that it has not heretofore and will not seek, take, accept or receive any security
for any of the Indebtedness of the Borrower under the Documents and will not enter into any
agreement with any of the Parties relating in any manner whatsoever to the Credit
Facilities, unless all of the Lenders will at the same time obtain the benefit of any such
security or agreement, as the case may be.
	 
	19.12	 	Reliance Upon Agent. The Borrower will be entitled to rely upon any certificate,
notice or other document or other advice, statement or instruction provided to it by the Agent
pursuant to the Documents, and the Borrower will be entitled to deal with the Agent with
respect to matters under the Documents which the Agent is authorized hereunder to deal
with, without any obligation whatsoever to satisfy itself as to the authority of the Agent
to act on behalf of the Lenders and without any liability whatsoever to the Lenders for
relying upon any certificate, notice or other document or other advice, statement or
instruction provided to them by the Agent, notwithstanding any lack of authority of the
Agent to provide the same.
	 
	19.13	 	Agent May Perform Covenants. If the Borrower fails to perform any covenant on its
part herein contained, the Agent may give notice to the Borrower of such failure and if,














 



- 55 -





	 	 	within 30 days of such notice (or after the expiry of such other time or cure period as may
be required in this Agreement), such covenant remains unperformed, the Agent on behalf of
the Lenders may, in its sole discretion but need not, perform any such covenant capable of
being performed by it and, if the covenant requires the payment or expenditure of money,
the Agent may make such payment or expenditure and all sums so expended will be forthwith
payable by the Borrower to the Agent on behalf of the Lenders and will bear interest at the
Canadian Prime Rate plus 2%.






	19.14	 	No Liability of Agent. The Agent, in its capacity as agent of the Lenders under
the Documents, will have no responsibility or liability to the Borrower or the Lenders on
account of the failure of any Lender to perform its obligations hereunder, or to any
Lender on account of the failure of the Borrower to perform its obligations under the
Documents.
	 
	19.15	 	Nature of Obligations under this Agreement.






	 	(a)	 	Obligations Separate. The obligations of each Lender and the Agent
under this Agreement are separate. The failure of any Lender to carry out its obligations
hereunder will not relieve the other Lenders, the Agent or the Borrower of any of
their respective obligations hereunder.
	 
	 	(b)	 	No Liability for Failure by other Lenders. Neither the Agent nor any
Lender will be liable or otherwise responsible for the obligations of any other Lender
hereunder.






	19.16	 	Unanimity.






	 	(a)	 	Unanimity. Notwithstanding anything herein to the contrary and without
limiting in any way the context of any provision in this Agreement requiring the
consent, approval or action of all Lenders, the following matters will require the
approval, consent or agreement, as the context requires, of all Lenders:






	 	(i)	 	the reduction or forgiveness of any Indebtedness payable by
the Borrower to the Lenders or the Agent under the Documents (which for
certainty does not include prepayments made in accordance with Section 3.7);
	 
	 	(ii)	 	the postponement of any maturity date of any Indebtedness of
the Borrower to the Lenders or the Agent under the Documents;
	 
	 	(iii)	 	the release or discharge of, or any material amendment to,
the Security, or any part thereof, unless otherwise expressly permitted or
provided for in this Agreement;
	 
	 	(iv)	 	any change in the nature of Advances permitted under this
Agreement or any change to Sections 3.4, 3.5, 3.6, 3.9, 3.10, 3.11, 3.12(a),
6.1, 6.2, 7.2, 7.3, and 12.2;
	 
	 	(v)	 	any amendment to this Section 19.16 and Section 17.2; and











 



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	 	(vi)	 	any change to the definitions of “Majority Lenders” or “LIBOR Period”.






	 	(b)	 	Majority Consent. Subject to Section 19.16(a), and the next sentence
of this Section 19.16(b), any waiver of or any amendment to any provision of the
Documents and any action, consent or other determination in connection with the
Documents will bind all of the Lenders if such waiver, amendment, action,
consent or other determination is agreed to in writing by the Majority Lenders. In
any of the Documents, unless an action to be taken by the Lenders is specifically
stated to be taken by the Majority Lenders, such action will be deemed to be taken
by all Lenders.
	 
	 	(c)	 	Lender’s Commitment. The Individual Revolving Loan Commitment Amount or
the Individual Term Commitment of a Lender can only be changed with the
consent of such Lender.





ARTICLE 20

MISCELLANEOUS





	20.1	 	Notices. Unless otherwise provided in the Documents, any notice, consent,
determination, demand or other communication required or permitted to be given or made
thereunder, will be in writing and will be sufficiently given or made if:






	 	(a)	 	left at the relevant address set forth below; or
	 
	 	(b)	 	telecopied or sent by other means of recorded electronic communication; and




if to the Agent, addressed to the Agent at:



Canadian Imperial Bank of Commerce

BCE Place

161 Bay Street, 8th Floor

Toronto, Ontario

M5J 2S8

Facsimile: (416) 956-3830


Attention: Director, Agent Administration



if to CIBC, as Lender, addressed to:



Canadian Imperial Bank of Commerce

855 — 2nd Street S.W., 9th Floor

(East Tower, Bankers Hall)

Calgary, Alberta

T2P 2P2

Facsimile: (403) 221-5779


Attention: Director, Commercial Credit











 



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if to the Borrower or to any Material Subsidiary, addressed to the Borrower at:



Ceramic Protection Corporation

3905 — 32nd Street, N.E.

Calgary, Alberta

T1Y7C1

Facsimile: (403) 735-1001


Attention: Chief Executive Officer





	 	(c)	 	The Parties each covenant to accept service of judicial proceedings arising
under the Documents at its respective address set forth herein.
	 
	 	(d)	 	Any notice or other communication given or made in accordance with this Section
20.1 will be deemed to have been received on the day of delivery if delivered as
aforesaid or on the day of receipt of same by telecopy or other recorded means of
electronic communication, as the case may be, provided such day is a Banking
Day and that such notice is received prior to 12:00 noon local time and, if such
day is not a Banking Day or if notice is received after 12:00 noon local time, on
the first Banking Day thereafter.
	 
	 	(e)	 	Each Party may change its address and facsimile number for purposes of this
Section 20.1 by notice given in the manner provided in this Section 20.1 to the
other Parties.
	 
	 	(f)	 	Any notice given under any of the Documents to the Agent will be deemed to also
be given to and received by the Agent in its capacity as Lender.






	20.2	 	Telephone Instructions. Any verbal instructions given by the Borrower in relation
to this Agreement will be at the risk of the Borrower and neither the Agent nor the Lenders
will have any liability for any error or omission in such verbal instructions or in the
interpretation or execution thereof by the Agent or a Lender, as the case may be, provided
that the Agent or Lender, as the case may be, acted without gross negligence in the
circumstances. The Agent will notify the Borrower of any conflict or inconsistency
between any written confirmation of such verbal instructions received from the Borrower
and the said verbal advice as soon as practicable after the conflict or inconsistency
becomes apparent to the Agent.






	20.3	 	No Partnership, Joint Venture or Agency. Except as expressly provided for herein, the
Parties agree that nothing contained in this Agreement nor the conduct of any Party will
in any manner whatsoever constitute or be intended to constitute any Party as the agent or
representative or fiduciary of any other Party nor constitute or be intended to constitute a
partnership or joint venture among the Parties or any of them, but rather each Party will
be separately responsible, liable and accountable for its own obligations under the
Documents, or any conduct arising therefrom and for all claims, demands, actions and
causes of action arising therefrom. The Parties agree that no Party will have the authority
or represent that it has, or hold itself out as having, the authority to act for or assume
any














 



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	 	 	obligation or responsibility on behalf of any other Party, save and except as may be
expressly provided for in this Agreement.
	 
	20.4	 	Judgment Currency.






	 	(a)	 	Deficiency. If, for the purposes of obtaining judgment in any court or
any other related purpose hereunder, it is necessary to convert an amount due hereunder in
the currency in which it is due (the “Original Currency”) into another currency
(the “Second Currency”), the rate of exchange applicable will be the daily noon
day rate quoted by the Bank of Canada on the relevant date to purchase in
Calgary, Alberta the Original Currency with the Second Currency and includes
any premium and costs of exchange payable by the purchaser in connection with
such purchase. Each Party (the “First Party”) agrees that its obligation in respect
of any Original Currency due from it to the another Party hereunder will,
notwithstanding any judgment or payment in the Second Currency, be discharged
only to the extent that on the Banking Day following the receipt of any sum so
paid in the Second Currency, the other Parties may, in accordance with normal
banking procedures, purchase in the Calgary, Alberta foreign exchange market the
Original Currency with the amount of the Second Currency so paid; and if the
amount of the Original Currency so purchased is less than the amount originally
due in the Original Currency, the First Party agrees that the deficiency will be a
separate and continuing obligation of it, independent from its obligations under
this Agreement, and will constitute in favour of the other Parties a cause of action
which will continue in full force and effect notwithstanding any such judgment, or
order to the contrary, and the First Party agrees, notwithstanding any such
payment or judgment, to indemnify the other Parties against any such loss or
deficiency. The Borrower acknowledges and agrees that any Indebtedness it may
incur or suffer under this Section 20.4(a) will be secured by the Security unless
earlier discharged as provided herein.
	 
	 	(b)	 	Excess. The Lenders through the Agent will pay to the Borrower the
amount, if any, after netting out all amounts due by the Borrower under Section 20.4(a),
which the Lenders may realize in excess of what is owed to them by virtue of the
conversion of the Original Currency into the Second Currency.






	20.5	 	General Indemnity. In addition to any liability of the Borrower to the Lenders
under any other provision hereof, the Borrower will and does hereby indemnify each
Indemnified Party and hold each Indemnified Party harmless against any losses, claims,
costs, damages or liabilities (including reasonable out-of-pocket expenses and reasonable
legal fees on a solicitor and his own client full indemnity basis) incurred by the same as a
result of or in connection with: (a) any cost or expense incurred by reason of the
liquidation or re-deployment in whole or in part of deposits or other funds required by
any Lender to fund any Bankers’ Acceptance or to fund or maintain any Advance as a
result of the Borrower’s failure to complete a Drawdown or to make any payment,
repayment or prepayment on the date required hereunder or specified by it in any notice
given hereunder; (b) subject to permitted or deemed Rollovers and Conversions, the
Borrower’s failure to provide for the payment to the Agent for the account of the Lenders












 




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	 	 	of the full principal amount of each Bankers’ Acceptance on its maturity date; (c) the
Borrower’s failure to pay any other amount, including any interest or fees, due hereunder
on its due date after the expiration of any applicable grace or notice periods; (d) the
prepayment of any outstanding Bankers’ Acceptance before the maturity date of such Bankers’
Acceptance; (e) the Borrower’s repayment or prepayment of a LIBOR Based Loan otherwise than
on the last day of its LIBOR Period; (f) the Borrower’s failure to give any notice required
to be given by it to the Lender hereunder; (g) the failure of a Borrower to make any other
payment due hereunder or under any of the other Documents; (h) any inaccuracy of the
Borrower’s or any Material Subsidiary’s representations and warranties contained in any
Document; (i) any failure of the Borrower or any Material Subsidiary to observe or fulfil
its covenants in any Document; or (j) any cost or expense incurred in relation to any
transaction, including the Acquisition, to be financed in whole or in part with the
proceeds of the Credit Facilities; (k) the occurrence of any Default or Event of Default;
provided that this Section 20.5 will not apply to any losses, claims, costs, damages or
liabilities that arise by reason of the gross negligence or willful misconduct of the
Indemnified Party claiming indemnity hereunder. The provisions of this Section 20.5 shall
survive repayment of the Indebtedness of the Borrower under the Documents.
	 
	20.6	 	Further Assurances. The Borrower will, from time to time forthwith at the Agent’s
request and at the Borrower’s own cost and expense (to the extent reasonable), do, make,
execute and deliver, or cause to be done, made, executed and delivered, all such further
documents, financing statements, financing change statements, assignments, acts, matters
and things which may be reasonably required by the Agent with respect to the Credit
Facilities, the Security or any part thereof and to give effect to any provision of the
Documents.
	 
	20.7	 	Waiver of Law. To the extent legally permitted, the Borrower hereby irrevocably and
absolutely waives the provisions of any applicable Law which may be inconsistent at any
time with, or which may delay or limit in any way, the enforcement of the Documents in
accordance with their terms.






	20.8	 	Attornment and Waiver of Jury Trial. The Parties hereto do hereby irrevocably:






	 	(a)	 	submit and attorn to the non-exclusive jurisdiction of the courts of the
Province of Alberta for all matters arising out of or relating to the Documents or any of the
transactions contemplated thereby; and
	 
	 	(b)	 	to the extent legally permitted, waive any right they may have to, or to apply
for, trial by jury in connection with any matter, action, proceeding, claim or
counterclaim arising out of or relating to the Documents or any of the transactions
contemplated thereby.






	20.9	 	Interest on Payments in Arrears.






	 	(a)	 	Except as otherwise provided in this Agreement, interest will be paid by
the Parties as follows:












 



- 60 -





	 	(i)	 	on amounts for which any Party has actually incurred an
out-of-pocket expense and for which another Party has an obligation under the
Documents to reimburse such amounts to the Party incurring the expenses,
interest will be payable on such amount at the Canadian Prime Rate plus 2%
from and including the day on which the amount was incurred to but excluding
the day on which the amount is reimbursed if, commencing on the date which is
3 Banking Days following a demand for payment of the amount in accordance with
the terms of the Documents, such expense has not been paid; and
	 
	 	(ii)	 	on amounts payable by one Party to another Party under the
Documents where such payment is in default but the non-payment of such amount
has not required an actual out-of-pocket expense by the Party to whom such
payment is due, at the Canadian Prime Rate plus 2% from and including the day
on which the payment was due to, but excluding the day on which the payment is
made whether before or after judgment, but if such payment is a reimbursement
by the Lenders to the Borrower for overpayment by it to the Lenders or is in
respect of an inadvertent underpayment by the Agent, the Lenders or the
Borrower to another Party (based on information provided by such other Party),
such interest will only be calculated from the date which is 3 Banking Days
following a demand for payment by the Party entitled to it.






	 	(b)	 	All interest referred to in this Section 20.9 will be simple interest
calculated daily on the basis of a 365 or 366 day year, as applicable. For the
purposes of the Interest Act (Canada), the annual rates of interest to which such
rates are equivalent are the rates so determined multiplied by the actual number of
days in a period of one year commencing on the first day of the period for which such
interest is payable and divided by 365 or 366, as applicable.






	20.10	 	Payments Due on Banking Day. Whenever any payment hereunder will be due on a
day other than a Banking Day, or in the case of LIBOR Based Loans a LIBOR Banking
Day, such payment will be made on the next succeeding Banking Day, or LIBOR
Banking Day, as applicable, and such extension of time will in such case be included in
the computation of payment of interest thereunder.






	20.11	 	Application of Proceeds. Except as otherwise agreed to by all of the Lenders in
their sole discretion and as otherwise expressly provided hereunder, all payments made by or
on behalf of the Borrower under the Documents, after acceleration pursuant to Section
16.2, will be applied by the Agent in the following order:






	 	(a)	 	in payment of any amounts due and payable by way of recoverable expenses;
	 
	 	(b)	 	in payment of any amounts by way of any fees (other than the stamping fees
referred to in Section 7.3 and standby fees referred to in Article 12);














 



- 61 -





	 	(c)	 	in payment of any amounts due and payable as and by way of interest, the
stamping fees or the standby fees, including any interest on overdue amounts;
	 
	 	(d)	 	in payment of the Aggregate Principal Amount; and
	 
	 	(e)	 	in payment of all other Indebtedness of the Borrower or a Material Subsidiary
under the Documents.






	20.12	 	Whole Agreement. This Agreement and the other Documents constitute the entire
agreement between the Agent and the Lenders on one hand and the Borrower on the other hand,
and cancels and supersedes any other agreements, undertakings, declarations, representations
and warranties, written or verbal among all such Parties in respect of the subject matter of
this Agreement.





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	20.13	 	Counterparts. The Documents may be executed in any number of counterparts
(including by facsimile transmission) and by different Parties in separate counterparts,
each of which when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.




THIS AGREEMENT has been executed effective the date first written.




	 	 	 	 	 
	CERAMIC PROTECTION CORPORATION	 	 
	as Borrower	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Larry G. Moeller
 

Larry G. Moeller
	 	 
	Title:

	 	Secretary-Treasurer, Chairman of the
Board	 	 
	 
	 	 	 	 
	CANADIAN IMPERIAL BANK OF	 	 
	COMMERCE, as Agent and Lender	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Chris Perks
 

Chris Perks
	 	 
	Title:

	 	Director, Commercial Credit	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Carmen Angelescu
 

Carmen Angelescu
	 	 
	Title:

	 	Manager, Commercial Credit	 	 







 











 





SCHEDULE A

CERAMIC PROTECTION CORPORATION

CREDIT AGREEMENT 
DATED
SEPTEMBER 21, 2004




DEFINITIONS



“Accommodation” means an accommodation referred to in Section 3.10.



“Acquisition” means the purchase by the Borrower or its Subsidiary of all of the issued
and outstanding shares of Alanx Wear Solutions, Inc. on or prior to September 21, 2004
pursuant to the terms and conditions of the Acquisition Agreement, provided that for the
purposes of Section 3.12(a), no Acquisition will be deemed to have occurred unless the
purchase is completed in accordance with 6.1(f).



“Acquisition Agreement” means Agreement and Plan of Merger made as of the 3rd day of
September, 2004 between the Borrower, Alanx Acquisition Corp., Allied Resource
Corporation, Alanx Wear Corp. and Alanx Wear Solutions, Inc.



“Additional Compensation” will have the meaning attributed to it in Section 11.1(a).



“Administrative Body” means any domestic or foreign, national, federal, provincial,
state, municipal or other local government or regulatory body and any division, agency,
ministry, commission, board or authority or any quasi-governmental or private body
exercising any statutory, regulatory, expropriation or taxing authority under the
authority of any of the foregoing, and any domestic, foreign or international judicial,
quasi-judicial, arbitration or administrative court, tribunal, commission, board or panel
acting under the authority of any of the foregoing.



“Advance” means, with respect to a Drawdown, Rollover or Conversion:





	(a)	 	in respect of Accommodations other than Bankers’ Acceptances, the
disbursement or
credit of funds to, or to the credit of, the Borrower; or
	 
	(b)	 	in respect of Bankers’ Acceptances, the acceptance by the Lenders of
drafts issued under
this Agreement by the Borrower.




“Affiliate”
means, in relation to any corporation (the “first
corporation”), another
corporation (i) which is a Subsidiary of the first corporation, (ii) of which the first
corporation is a Subsidiary or (iii) which is a Subsidiary of a corporation of which the
first corporation is also a Subsidiary.



“After-Acquired Property” has the meaning attributed to it in Section 4.5.



“Agent” means initially CIBC or any successor to CIBC appointed as administrative agent
pursuant to Section 19.10.











 



- 2 -



“Aggregate Principal Amount” means (i) where the context so requires, the aggregate of the
Principal Amount outstanding from time to time under the Extendible Revolving Loan, including the
face amount of all unmatured Bankers’ Acceptances and outstanding letters of credit issued
thereunder, and (ii) where the context so requires, the aggregate of the Principal Amount
outstanding from time to time under the Term Loan, including the face amount of all unmatured
Bankers’ Acceptances.



“Agreement” or “this Agreement” means the agreement in writing dated the Closing Date between the
Borrower, the Lenders and the Agent entitled “Credit Agreement” inclusive of all Schedules,
including this Schedule A, as amended, confirmed, replaced or restated from time to time and
“hereto”, “hereof”, “herein”, “hereby” and “hereunder”, and similar expressions mean and refer to
the Agreement and, unless the context otherwise requires, not to any particular Article, Section,
paragraph or other subdivision thereof.



“Alanx” means Alanx Wear Solutions, Inc., a corporation duly incorporated under and governed by
the laws of the State of Delaware.



“Available Cash Flow” means for any period:





	(a)	 	the aggregate revenue of the Borrower and the Material Subsidiaries from operations
(including all net proceeds of dispositions) for such period;





less





	(b)	 	its reasonable general and administrative and operating expenses for such period,
including debt service; and
	 
	(c)	 	cash Taxes applicable to such period; and




“BA Equivalent Loan” means Canadian Dollar Accommodations made pursuant to Section 10.3.



“BA Rate” means the rate determined based on (i) in respect of any Lender that is listed in
Schedule I to the Bank Act (Canada), the CDOR Rate at 10:00 am (Toronto time) on the relevant day;
and (ii) in respect of any other Lender the lesser of (a) the Lender’s own quoted BA rate and (b)
the CDOR Rate plus 10 Basis Points.



“Bank Act (Canada)” means the Bank Act, S.C. 1991, c. 46 including the regulations made and, from
time to time, in force under that Act.



“Bankers’ Acceptance” means drafts or bills of exchange in Canadian Dollars drawn by the Borrower
and accepted by a Lender pursuant to the Agreement, or depository bills as defined in the
Depository Bills and Notes Act (Canada) in Canadian Dollars that are signed by the Borrower, made
payable to CDS and accepted by a Lender pursuant to this Agreement.










 



- 3 -



“Banking Day” means any day, other than a Saturday or Sunday, on which Canadian chartered banks
are open for domestic and foreign exchange business in Calgary, Alberta and Toronto, Ontario and,
for transactions involving U.S. Dollars, New York, New York as well.



“Bankruptcy and Insolvency Act (Canada)” means the Bankruptcy and Insolvency Act, R.S.C. 1985, c.
B-3, including the regulations made and, from time to time, in force under that Act.



“Basis Point” or “bps” means one one-hundredth of 1%.



“Borrower” means Ceramic Protection Corporation and its successors and permitted assigns.



“Borrower’s Account” means one or more current accounts maintained by the Borrower at a branch of
the Agent or such other account as may be agreed to by the Agent and the Borrower.



“Borrower’s Counsel” means Burnet, Duckworth & Palmer LLP or another barrister or solicitor or
firm of barristers and solicitors or other lawyers in an appropriate jurisdiction retained by the
Borrower and the Material Subsidiaries.



“Borrowing Base” means, initially, $3,043,444 (as of August 31, 2004) and thereafter, the amount
determined or redetermined by the Lenders in their absolute discretion from time to time provided
that unless the Agent provides notice to the Borrower to the contrary (which notice will indicate
the other Borrowing Base), the Borrowing Base will be the amount calculated on the then current
Borrowing Base Certificate.



“Borrowing Base Certificate” means the certificate of the Borrower substantially in the form of
Schedule M with the blanks completed.



“Borrowing Base Shortfall” means at any time, that amount, if any, by which the Canadian Dollar
Exchange Equivalent of the Aggregate Principal Amount under the Extendible Revolving Loan, exceeds
the Borrowing Base.



“Business Corporations Act (Alberta)” means the Business Corporations Act, R.S.A. 2000, c. B-9, as
amended from time to time, including the regulations made, from time to time, under that Act.



“Canadian
Dollars” or “Canadian $” or “Cdn. $” or “$” each means such currency of Canada which, as
at the time of payment or determination, is legal tender in Canada for the payment of public or
private debts.



“Canadian Prime Rate” means the variable rate of interest quoted by the Agent from time to time as
the reference rate of interest which it employs to determine the interest rate it will charge for
demand loans in Canadian Dollars to its customers in Canada and which it designates as its prime
rate, provided that if such rate of interest is less than the then applicable rate quoted by the
Agent for its 1 month Canadian Dollar bankers’ acceptances plus 100 Basis Points per annum (the
“Floor Rate”), then the Canadian Prime Rate will equal the Floor Rate.










 



- 4 -



“Canadian Prime Rate Loan” means an Advance in Canadian Dollars which bears interest at a rate
based on the Canadian Prime Rate.



“Capital Expenditures” means for any particular period, those expenditures of the Borrower and its
subsidiaries made in connection with the purchase, lease, licence, acquisition, erection,
development, improvement or construction of property of or by such Person (including any such
property acquired pursuant to a capitalized lease obligation) or any other expenditures which are
required to be capitalized in accordance with GAAP.



“Cash Flow” means, at the end of the fiscal quarter of the Borrower, and as determined in
accordance with GAAP on a consolidated basis, the aggregate amount for the last two consecutive
fiscal quarters of the Borrower then ended, multiplied by 2, expressed in Canadian Dollars, of (a)
Net Income, (b) depreciation, depletion and amortization expense, (c) deferred or future income
taxes and (d) other charges to operations not requiring a current cash payment; provided that the
Cash Flow for any period will be adjusted accordingly for acquisitions and divestitures by the
Borrower or any Material Subsidiary made in the applicable period as if such acquisition or
divestiture was made on the first day of such period.



“CDOR Rate” means the average yield to maturity for bankers’ acceptances accepted by a Canadian
Lender quoted on the Reuter’s Canadian Deposit Offered Rate screen, at 10:00 a.m., Toronto, Ontario
time on the applicable date on which an Advance shall take place, for bankers’ acceptances having a
term similar to the term requested for each Bankers’ Acceptance issued pursuant to the applicable
Advance.



“CDS”
has the meaning attributed to it in Section 10.2(d).



“Change of Control” means if, after the Closing Date, any Person, other than the Borrower or a
Material Subsidiary, acquires, directly or indirectly, alone or in concert with other Persons,
over a period of time or at any one time, Voting Securities in the capital of the Borrower or a
Material Subsidiary aggregating in excess of 30% of all of the then issued and outstanding Voting
Securities of the Borrower or such Material Subsidiary as applicable.



“CIBC” means Canadian Imperial Bank of Commerce, a Canadian chartered bank, and its successors and
permitted assigns.



“claim”, for the purposes of Section 14.1(g), has the meaning attributed to it in Section 14.1(g).



“Closing Certificate” means the certificate of the Borrower and each Material Subsidiary
substantially in the forms of Schedule C with the blanks completed.



“Closing Date” means September 21, 2004 or such other date agreed upon in writing between the
Borrower and the Agent.



“Closing Opinion” means the opinion of the Borrower’s Counsel addressed to the Lenders and its
legal counsel substantially in the form of Schedule D with the blanks completed.










 



- 5 -



“Commitment Amount” means the aggregate of the Revolving Loan Commitment Amount and the Term Loan
Commitment Amount.



“Commodity Swap Contracts” has the meaning attributed to it in Section 14.3(d).



“Companies’ Creditors Arrangement Act (Canada)” means the Companies’ Creditors Arrangement Act,
R.S.C. 1985, c. C-36, including the regulations made and, from time to time, in force under that
Act.



“Compliance Certificate” means the certificate of the Borrower substantially in the form of
Schedule K with the blanks completed.



“Contaminants” means those substances, pollutants, wastes and special wastes which are defined as
contaminants, hazardous, toxic, or a threat to public health or to the Environment under any
applicable Environmental Law, including any radioactive materials, urea formaldehyde foam
insulation, asbestos or polychlorinated biphenyls (PCB’s).



“Conversion” means in relation to an Advance, a conversion of an Advance into another type of
Advance made pursuant to this Agreement.



“Conversion Date” means, in respect of each Lender, the last day of the Revolving Period for such
Lender, as any such Revolving Period may be extended pursuant to Section 3.3(b).



“Corporate Visa Facility” means the corporate visa facility to be established in favour of the
Borrower upon CIBC’s customary terms and conditions, on or about the Closing Date.



“Credit Facilities” means the Extendible Revolving Loan and the Term Loan.



“Criminal Code (Canada)” means the Criminal Code, R.S.C. 1985, c. C-46, including the regulations
made and, from time to time, in force under that Act.



“Debt” means all liabilities of the Borrower and its subsidiaries in accordance with GAAP
(including principal portion of capital leases for greater certainty) and, whether or not so
classified under GAAP, any guarantees of financial indebtedness, the face amount of any Letters of
Credit, obligations relative to off-balance sheet financing and any deferred payments owing for
the purchase of capital goods.



“Debt to EBITDA Ratio” means at the end of each fiscal quarter of the Borrower, the ratio of
Maximum Debt to EBITDA as calculated on a rolling four quarter basis.



“Depository Bills and Notes Act (Canada)” or “DBNA” means the Depository Bills and Notes Act
(Canada), S.C. 1998, c. 13, as amended from time to time, including the regulations made and, from
time to time, in force under that Act.



“Default” means any event or condition which, with the giving of notice, lapse of time or upon a
declaration or determination being made (or any combination thereof), would constitute an Event of
Default.










 



- 6 -



“Depreciation and Amortization Expense” means the depreciation and amortization expense of the
Borrower, calculated in accordance with GAAP.



“Director” means a director of the Borrower or a corporate Person, as applicable, and reference to
action by the directors or board of directors when used with respect to the Borrower or such other
corporate Person means action by the directors of the Borrower or such other corporate Person, as
applicable, as a board or, whenever duly empowered, by an executive committee or any other duly
authorized committee of the board.



“Discount Proceeds” means the amount received by the Borrower from the sale of each Bankers’
Acceptance without deduction for any applicable stamping fee paid in respect thereof.



“Distribution” means any:





	(a)	 	payment of any dividend on or in respect of any shares of any class in the capital of the
Borrower or a Material Subsidiary (including any thereof acquired through the exercise
of warrants or rights of conversion, exchange or purchase);
	 
	(b)	 	redemption, retraction, purchase or other acquisition or retirement, in whole or in part, of
shares of any class in the capital of the Borrower or a Material Subsidiary (including any
thereof acquired through the exercise of warrants or rights of conversion, exchange or
purchase);
	 
	(c)	 	payment of principal, interest or other amounts in whole or in part, of any Indebtedness
of the Borrower or a Material Subsidiary for borrowed money (including any
Indebtedness incurred or assumed by the Borrower or a Material Subsidiary pursuant to a
capital lease or operating lease);
	 
	 	 	to (in the case of paragraphs (a) and (c) of this definition) or by or from (in the case of
paragraph (b) of this definition) any shareholder or any Affiliate of a shareholder of the
Borrower or a Material Subsidiary (other than a Lender), whether made or paid in or for
cash, property or both, or
	 
	(d)	 	transfer of any property or the rendering of any services for consideration of less than fair
market value by the Borrower or a Material Subsidiary to any shareholder, or to any
Affiliate of a shareholder, of the Borrower or of a Material Subsidiary (other than the
Borrower in the case of a Material Subsidiary).




“Documents” means the Agreement and any other instruments or agreement entered into by the Parties
relating to the Credit Facilities, including the Security and any document or agreement resulting
from the operation of Section 4.1.



“Domestic Lender” means a Lender which is a Canadian chartered bank or other financial institution
and is a Person that is a resident of Canada for the purposes of the Income Tax Act (Canada).










 



- 7 -



“Draft” has the meaning attributed to it in Section 10.2(b).



“Drawdown” means a borrowing or credit of funds by way of Advances, other than an
Advance by way of Rollover or Conversion.



“Drawdown Date” means the date specified in a Notice of Borrowing as the date on which a
Drawdown will occur and which date will be a Banking Day, and which in the case of a
LIBOR Based Loan will be a LIBOR Banking Day.



“EBITDA” means for any period, Net Income for such period:





	 	(a)	 	increased by the sum of (without duplication) (i) Income
Tax Expense for such
period; (ii) Interest Expense for such period; (iii) Depreciation and
Amortization
Expense for such period; and (iv) non-cash losses incurred during such
period
which, in accordance with GAAP, were required to be accrued for a future
period,
in each case to the extent such amounts were included in the calculation of
Net
Income for such period; and
	 
	 	(b)	 	decreased by(i) all cash payments during such period
relating to losses that were
added back to Net Income under clause (a)(iv) above in determining EBITDA
in
any prior period to be mutually agreed and non-cash gains. For clarity
EBITDA
of an entity acquired will be included only from the date of acquisition.




“Effective
Date” has the meaning attributed to it in Section 3.11(e).



“Eligible Accounts Receivable” means accounts receivable of the Borrower from
creditworthy customers in the U.S. or Canada, aged less than 90 days in each case, as
determined by the Agent in its sole discretion.



“Environment” means all components of the earth, including all layers of the atmosphere,
air, land (including all underground spaces and cavities and all lands submerged under
water), soil, water (including surface and underground water), organic and inorganic
matter and living organisms, and the interacting natural systems that include the
components referred to in this definition.



“Environmental Law” means any Law relating, in whole or in part, to the protection or
enhancement of the Environment, including occupational safety, product liability, public
health, public safety and transportation or handling of dangerous goods.



“Escrow Funds” will have the meaning attributed to it in Section
10.5.


“Event of Default” means an event specified in Section 16.1.



“Excess” has the meaning attributed to it in Section 5.7.













 



- 8 -



“Excess Cash Flow” means Net Income plus depreciation and amortization plus other
non-cash items and deferred income taxes less capital expenditures and scheduled
principal repayments under the Term Loan.



“Exchange Equivalent” means with reference to Canadian Dollars, the amount thereof
expressed in Canadian Dollars, and with reference to any amount (for the purposes of
this definition, the “Original Amount”) expressed in U.S. Dollars (for the purposes of
this definition, the “Original Currency”), the amount expressed in Canadian Dollars on
the date when such amount is being determined as herein provided, required to convert
the Original Amount of the Original Currency at the Noon Rate on the Banking Day
immediately preceding the date such conversion is to be made.



“Exchange Rate Swap Contracts” has the meaning attributed to it in Section 14.3(b).



“Existing Lender” means Commerce Bank, N.A. in its capacity as lender to Alanx in
respect of any Indebtedness.



“Extendible Revolving Loan” means the credit facility established in favour of the
Borrower pursuant to Section 3.1.



“Federal Funds Rate” means, for any day, the rate of interest per annum set forth in the weekly
statistical release designated as H. 15(519), or any successor publication, published by the
Federal Reserve Board (including any such successor, the
“H. 15(519)”) for such day opposite the caption “Federal Funds (Effective)”. If on any relevant day such rate is not yet
published in H.15(519), the rate for such day will be the rate of interest per annum set
forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations
for U.S. Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any successor, the “Composite 3:30 p.m. Quotations”)
for such day under the caption “Federal Funds Effective Rate”. If on any relevant day the
appropriate rate per annum for such day is not yet published in either H.15(519) or the
Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the
rates per annum for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York time) on that day by each of three major brokers of Federal funds
transactions in New York City, selected by the Agent in its sole discretion, acting
reasonably.



“Federal
Reserve Board” or “Federal” means the Board of Governors of the Federal Reserve
System of the United States of America or any successor thereof.



“First Party” has the meaning attributed to it in Section 20.4.



“Fixed Charge Coverage Ratio” means: (i) until the fiscal quarter ending October 31,
2005; the ratio calculated as (a) annualized EBITDA using EBITDA from each fiscal
quarter from and including the fiscal quarter ending January 31, 2005 less estimated
Capital Expenditures and cash taxes for the then current fiscal year divided by the sum
of (b) scheduled principal Debt repayments and Interest Expense in each case on a then
current fiscal year forecasted basis; and (ii) following the fiscal quarter ending
October 31, 2005, the ratio calculated on a rolling 4










 



- 9 -



quarter basis as (a) EBITDA less Capital Expenditures less cash taxes divided by the sum of (b)
scheduled principal Debt repayments and Interest Expense. For clarity, ratio inputs from an entity
acquired will be included only from the date of acquisition.



“Floor Rate” has the meaning attributed to it in the definition of Canadian Prime Rate.



“GAAP” means generally accepted accounting principles which are in effect from time to time in
Canada.



“Hedging Agreements” has the meaning attributed to it in Section 14.3(e).



“Hostile Acquisition” means an acquisition, which is required to be reported to applicable
securities regulatory authorities, of shares of a corporation where the board of directors of that
corporation has not approved such acquisition nor recommended to the shareholders of the
corporation that they sell their shares pursuant to the proposed acquisition.



“includes” means “includes without limitation” and “including” means “including without
limitation”.



“Income Tax Act (Canada)” means the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.),
including the regulations made and, from time to time, in force under that Act.



“Indebtedness” means, without duplication, the aggregate amount of all obligations, liabilities and
indebtedness of a Person which would be classified under GAAP as indebtedness for borrowed money
upon the consolidated balance sheet of such Person, including without duplication, whether or not
so classified, all long-term borrowings, the current portion of long-term borrowings, short-term
borrowings, obligations under capital leases (classified as such under GAAP), obligations under any
Hedging Agreements and all obligations, contingent or otherwise, of any of the foregoing arising
from any guarantee made by such Person in respect of any of the foregoing.



“Indemnified Parties” has the meaning attributed to it in Section 14.1(g).



“Individual Revolving Loan Commitment Amount” means, from time to time, in respect of a Lender,
that portion of the Revolving Loan Commitment Amount which such Lender has severally agreed to
make available to the Borrower in accordance with the terms and conditions of the Agreement,
subject to adjustment pursuant to the terms of the Agreement.



“Individual Term Loan Commitment” means, from time to time, in respect of a Lender, that portion
of the Term Loan Commitment Amount which such Lender has severally agreed to make available to the
Borrower in accordance with the terms and conditions of the Agreement, subject to adjustment
pursuant to the terms of the Agreement.



“Instrument of Adhesion” means an agreement whereby a financial institution becomes a Lender
substantially in the form of Schedule L with the blanks completed.










 




- 10 -



“Interest Expense” means for any particular period, the aggregate amount of interest and
other financing charges, payable by the Borrower and its subsidiaries during such period
with respect to indebtedness including interest, and amortization of discount and
financing fees, commissions, discounts, the interest or time value of money component of
costs related to factoring or securitizing receivables or monetizing inventory and other
fees and charges payable with respect to letters of credit, letters of guarantee and
bankers’ acceptance financing, standby fees, the interest component of capitalized lease
obligations and net payments (if any) pursuant to hedging arrangements involving
interest.



“Interest Rate Swap Contracts” has the meaning attributed to it in Section 14.3(c).



“Interest
Act (Canada)” means the Interest Act, R.S.C. 1985, c. I-15, as amended from
time to time, including the regulations made and, from time to time, in force under that
Act.



“Judgment
Interest Act (Alberta)” means the Judgment Interest Act, R.S.A. 2000, c. J-1,
as amended from time to time, including the regulations made and from time to time in
force under that Act.



“Law”
means all constitutions, treaties, laws, statutes, codes, ordinances, orders, decrees, rules,
regulations and municipal by-laws, whether domestic, foreign or international, any judgments,
orders, writs, injunctions, decisions, rulings, decrees and awards of any Administrative Body,
and any policies, voluntary restraints, practices or guidelines of any Administrative Body, and
including any principles of common law and equity.



“Lenders” means, initially, CIBC and thereafter each Domestic Lender which may become a
Party to this Agreement, as a lender, by executing and delivering to the Agent and to
the Borrower an Instrument of Adhesion, and each of their respective successors and
permitted assigns, and “Lender” means any one of them in such capacity.



“Letter of Credit” means a letter of credit or letter of guarantee issued under the
Extendible Revolving Loan.



“LIBOR” means with respect to each interest period for each LIBOR Loan, an annual
interest rate per annum, expressed on the basis of a 360 day year, equal to the simple
average of the rates which appear on the telerate display referred to as “Screen Page
3750” as designated by the British Bankers Association as of 11:00 a.m. (London, England
time) on the date two LIBOR Banking Days prior to the commencement of such interest
period or if such rates are not available, the average (rounded up to the nearest 1/16
per cent) of the rates per annum at which the leading banks in the London interbank
market offer to the Agent for placing U.S. dollar deposits with the Agent at
approximately 11:00 a.m. (London, England time) on the date two LIBOR Banking Days prior
to the first day of such interest period for a period comparable to such period and in an
amount approximately equal to the LIBOR Loan.



“LIBOR Banking Day” means any Banking Day on which commercial banks are open for
international business (including dealings in U.S. Dollar deposits in the London
interbank market) in London, England.

















 





- 11 -



“LIBOR Based Loan” means an Advance in U.S. Dollars which bears interest at a rate based on the
LIBOR.



“LIBOR Period” means a period of 1, 2, 3 or 6 months selected by the Borrower and readily
available in the London Interbank Eurodollar Market, or such other period as may be agreed to by
the Lenders.



“Lien” means any mortgage, lien, pledge, charge (whether fixed or floating), security interest,
title retention agreement (other than operating leases in respect of tangible personal property
which are not in the nature of financing transactions) or other encumbrance of any kind,
contingent or absolute but excludes any contractual right of set-off created in the ordinary
course of business and any writ of execution, or other similar instrument, arising from a judgment
relating to the non-payment of indebtedness.



“Majority Lenders” means, if there are two or less Lenders, all Lenders, and if there are more
than two Lenders, Lenders holding, in aggregate, at least 66 2/3% of the Aggregate Principal
Amount under the Credit Facilities.



“Majority Revolving Lenders” means, if there are two or less Lenders, all Lenders, and if there
are more than two Lenders, any Revolving Lenders or group of Revolving Lenders holding in
aggregate a minimum of 66 2/3% of the Revolving Loan Commitment Amount of all Revolving Lenders.



“Material Adverse Effect” means a material adverse effect on:





	(a)	 	the financial condition of the Borrower and the Material Subsidiaries, taken as a whole;
	 
	(b)	 	the Borrower’s or a Material Subsidiary’s ability to perform their respective obligations
under the Documents;
	 
	(c)	 	the validity or enforceability of a material provision of the Documents; or
	 
	(d)	 	the property, business, operations or liabilities of the Borrower and the Material
Subsidiaries, taken as a whole.




“Material Subsidiaries” means Alanx, immediately upon completion of the Acquisition, and any other
Subsidiary of the Borrower or whose net tangible assets represent more than 5% of the total net
tangible assets of the Borrower; and “Material Subsidiary” means any one of them.



“Maturity Date” means the date, which must be a Banking Day, or a LIBOR Banking Day with respect to
a LIBOR Based Loan, on which an Advance becomes due and payable by the Borrower, the date on which
a Bankers’ Acceptance matures, or the date on which a BA Equivalent Loan becomes due and payable.



“Net Income” means, for any period, the consolidated net income (loss) of the Borrower for such
period before extraordinary items, calculated in accordance with GAAP.











 




- 12 -



“Net Proceeds” means the amount received by the Borrower from the sale of an Accommodation by way
of Bankers’ Acceptance (or in the case of a BA Equivalent Loan, the amount of such BA Equivalent
Loan), less the applicable stamping fee as provided hereunder in respect of Bankers’ Acceptances.



“Non-Agreeing Lender” has the meaning attributed to it in Section 3.3(b)(iv).



“Non-Agreeing Lender Commitment Amount” has the meaning attributed to it in Section 3.3(b)(iv).



“Non-BA Lender” means a Lender that (i) is not a bank chartered under the Bank Act (Canada); or
(ii) has notified the Agent in writing that it is unwilling or unable to accept bankers’ acceptance
drafts.



“Non-Participating Lender” has the meaning attributed to it in Section 6.3.



“Noon Rate” means, in relation to the conversion of one currency into another currency, the rate
of exchange for such conversion as quoted by the Bank of Canada (or, if not so quoted, the spot
rate of exchange quoted for wholesale transactions made by the Agent at Toronto, Ontario at
approximately noon (Toronto local time)).



“Notice of Borrowing” means, in relation to Advances, a notice by the Borrower to the Agent
substantially in the form of Schedule H with the blanks completed, as applicable.



“Notice of Rollover or Notice of Conversion” means, in relation to Advances, a notice by the
Borrower to the Agent substantially in the form of Schedule I with the blanks completed, as
applicable.



“Notification Date” has the meaning attributed to it in Section 3.3(b)(i).



“Offer of Extension” means a written offer by the Agent, on behalf of the Revolving Lenders other
than the Non-Agreeing Lenders, to the Borrower to extend the Revolving Period to a date up to 364
days from acceptance by the Borrower of such offer, and setting forth the terms and conditions, if
any, on which such extension is offered by the Revolving Lenders and may be accepted by the
Borrower.



“Original Currency” has the meaning attributed to it in Section 20.4.



“Participant” has the meaning attributed to it in Section 18.4.



“Participating Lender” has the meaning attributed to it in Section 6.3.



“Parties” means the Borrower, the Agent and the Lenders and their respective successors and
permitted assigns, and “Party” means any one of the Parties.











 



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“Pension Plan” means any retirement or pension benefit plan that is established by a Person for
the benefit of its employees, that requires such Person to make periodic payments or
contributions.



“Permitted Dispositions” means:





	 	(a)	 	sales of inventory in the ordinary course of business;
	 
	 	(b)	 	dispositions between and among the Borrower and Material Subsidiaries;
	 
	 	(c)	 	Permitted Sale and Lease-Back Transactions; and
	 
	 	(d)	 	subject to the mandatory prepayment provision in Section 3.8, any disposition
of assets where such disposition could not reasonably be expected to have a Material Adverse Effect.




“Permitted Distributions” means any Distribution by a Material Subsidiary to the Borrower or by
the Borrower to a Material Subsidiary or between Material Subsidiaries.



“Permitted Encumbrances” means:





	 	(a)	 	undetermined or inchoate Liens arising in the ordinary course of and incidental
to construction or current operations which have not been filed pursuant to Law
against any of the Borrower or a Material Subsidiary or in respect of which no
steps or proceedings to enforce such Lien have been initiated or which relate to
obligations which are not due or delinquent or if due or delinquent, any Lien
which the Borrower or a Material Subsidiary is in good faith contesting if such
contest involves no risk of loss that could reasonably be expected to have a
Material Adverse Effect and an adequate reserve in accordance with GAAP has
been established by the Borrower;
	 
	 	(b)	 	easements, rights-of-way, servitudes, zoning or other similar rights or
restrictions in respect of land held by the Borrower or any Material Subsidiary (including
rights-of-way and servitudes for railways, sewers, drains, pipelines, gas and water
mains, electric light and power and telephone or telegraph or cable television
conduits, poles, wires and cables) which, either alone or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect;
	 
	 	(c)	 	any Lien or trust arising in connection with worker’s
compensation, unemployment insurance, pension and employment Law;
	 
	 	(d)	 	the right reserved to or vested in any municipality or governmental or other
public authority by the terms of any lease, license, franchise, grant or permit acquired by
the Borrower or a Material Subsidiary, or by any statutory provision to terminate
any such lease, license, franchise, grant or permit or to require annual or other
periodic payments as a condition of the continuance thereof;
















 



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	 	(e)	 	all reservations in the original grant from the Crown of any lands and premises
or any interests therein and all statutory exceptions, qualifications and reservations
in respect of title;
	 
	 	(f)	 	public and statutory Liens not yet due and similar Liens arising by operation
of Law;
	 
	 	(g)	 	the Security;
	 
	 	(h)	 	the interest of any Person under any Purchase Money Lien, subject to
Section 14.3(i); and
	 
	 	(i)	 	any Lien from time to time disclosed by the Borrower to the Agent and
which is consented to by the Lenders.




“Permitted Indebtedness” means, subject at all times to the applicable threshold amounts contained
in the Agreement:





	 	(a)	 	Indebtedness of the Borrower or a Material Subsidiary under the Extendible Revolving Loan, the Term Loan or any of the Documents;
	 
	 	(b)	 	Indebtedness of the Borrower or a Material Subsidiary under the Term Loan Agreement;
	 
	 	(c)	 	Indebtedness arising from a Sale and Lease-Back Transaction, subject to Section 14.3(h);
	 
	 	(d)	 	Indebtedness arising under Purchase Money Liens, subject to Section 14.3(i); and
	 
	 	(e)	 	Indebtedness of the Borrower to any Material Subsidiary, or of any Material Subsidiary to the Borrower or to another Material Subsidiary.




“Person” means an individual, a partnership, a corporation, a company, a trust, an unincorporated
organization, a union, a government or any department or agency thereof (collectively an “entity”)
and the heirs, executors, administrators, successors, or other legal representatives, as the case
may be, of such entity.



“Prime Rate” means a fluctuating rate of interest per annum, expressed on the basis of a year of
365 or 366, as applicable, which is equal at all times to the greater of (i) the rate of interest
most recently announced by the Agent as its prime rate for lending Canadian dollars in Canada; and
(ii) the average rate for 30 day Canadian dollar BAs which appear on the Reuters’ Screen CDOR Page
at 10:00 a.m. Toronto time plus 1.0%.



“Principal Amount” means, (i) where the context requires, in relation to a Lender under the
Extendible Revolving Loan, that portion of the Aggregate Principal Amount which has been advanced
by such Lender; and (ii) where the context so requires, in relation to a Lender under the











 



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Term Loan, that portion of the Aggregate Principal Amount which has been advanced by such Lender.



“Principal Repayment” means the repayment by or for and on behalf of the Borrower to the Lenders
of all or a portion of any principal outstanding to the Lenders under the Credit Facilities.



“Purchase Money Lien” means a Lien, whether given to a vendor, lender or any other Person, securing
indebtedness assumed or incurred as, or to provide, all or part of the purchase price or other
acquisition cost of property, which Lien is limited exclusively to such property and any proceeds
thereof and any extension, renewal, refinancing or replacement thereof.



“Purchasing Lender” has the meaning attributed to it in Section 3.3(b)(iv).



“Rateable Portion” means, with respect to a Lender, the proportion from time to time of the
Individual Revolving Loan Commitment Amount or the Individual Term Loan Commitment Amount of such
Lender and, if at any time there are both Electing Lenders and Non-Electing Lenders, means, with
respect to matters relating solely to each group of Electing Lenders or Non-Electing Lenders, the
Individual Revolving Loan Commitment Amount or the Individual Term Loan Commitment Amount of each
such Electing Lender or Non-Electing Lender, as the case may be, relative to the aggregate
Individual Revolving Loan Commitment Amount or the Individual Term Loan Commitment Amount of all
Electing Lenders or Non-Electing Lenders, as the case may be.



“Release” includes releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping.



“Request for Offer of Extension” means a request by the Borrower for an offer by the Revolving
Lenders to extend the Revolving Period pursuant to Section 3.3(b), substantially in the form of
Schedule E, executed by a senior officer of the Borrower.



“Resignation
Notice” has the meaning attributed to it in
Section 19.10.

“Revolving Lender” has the meaning attributed to it in Section 3.3(b)(i).



“Revolving Loan Commitment Amount” means Cdn. $5,000,000 as such amount may be reduced in
accordance with this Agreement or otherwise increased with the unanimous consent of the Lenders.



“Revolving Loan Termination Date” means, with respect to any Non-Agreeing Lender, the last day of
the Revolving Period then applicable to such Lender.



“Revolving Period” means in respect of each Lender (i) initially, the period commencing upon the
Closing Date and terminating on September 20, 2005, and (ii) each further period of up to 364 days
for which the Revolving Period in respect of a Lender is extended at the request of the Borrower
pursuant and subject to Section 3.3(b).











 



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“Rollover” means, with respect to an Advance:





	(a)	 	in relation to a LIBOR Based Loan, the continuation of all or
any portion of such LIBOR
Based Loan for an additional LIBOR Period subsequent to the initial or any subsequent
LIBOR Period applicable thereto; and
	 
	(b)	 	in relation to maturing Banker’s Acceptances, the issuance of new Bankers’ Acceptances
in respect of all or any portion of such Bankers’ Acceptances at their Maturity Date.




“Sale and Lease-Back Transaction” has the meaning attributed to it in Section 14.3(h).



“Security” has the meaning attributed to it in Section 4.1 and includes any other Lien hereafter
granted by the Borrower to secure the payment of Indebtedness in connection with the Extendible
Revolving Loan, the Operating Loan and Swap Indebtedness.



“Subsidiary” means any Person of which more than 50% of the outstanding Voting Securities are
owned, directly or indirectly by or for the Borrower provided that the ownership of such securities
confers the right to elect at least a majority of the board of directors of such Person, or a
majority of Persons serving similar roles and includes any legal entity in like relationship to a
Subsidiary.



“Successor Agent” has the meaning attributed to it in Section 19.10.



“Taxes” means all taxes of any kind or nature whatsoever including income taxes, capital taxes,
minimum taxes, levies, imposts, stamp taxes, royalties, duties, charges to tax, value added taxes,
commodity taxes, goods and services taxes, and all fees, deductions, compulsory loans,
withholdings and restrictions or conditions resulting in a charge imposed, levied, collected,
withheld or assessed as of the date hereof or at any time in the future by any governmental or
quasi-governmental authority of or within any jurisdiction whatsoever having power to tax,
together with penalties, fines, additions to tax and interest thereon and any instalments in
respect thereof.



“Term” means, where the context requires, the period commencing on the Closing Date and ending on
(i) in relation to the Extendible Revolving Loan, the date that is 364 days from the Closing Date
or the Revolving Loan Termination Date, as applicable; and (ii) in relation to the Term Loan, the
date that is 3 years from the Closing Date.



“Term Loan” means the term loan established in favour of the Borrower pursuant to Section 3.2.



“Term Loan Commitment Amount” means Cdn. $19,500,000 as it may be changed from time to time in
accordance with this Agreement.



“Term Loan Termination Date” means the date that is 3 years from the Closing Date.



“U.S. Base Rate” means a fluctuating rate of interest per annum, expressed on the basis of a year
of 365 or 366, as applicable, which is equal at all times to the greater of (i) the rate of
interest











 



- 17 -



most recently announced by the Agent, as its base rate for lending U.S. dollars in Canada; and
(ii) the Federal Funds Effective Rate plus 1.0%.



“U.S. Base Rate Loan” means an Advance in U.S. Dollars which bears interest at a rate based on the
U.S. Base Rate.



“U.S. Counsel Opinion” means the opinion of the Borrower’s U.S. counsel addressed to the Lenders
and its legal counsel, in form acceptable to the Lenders, in its sole discretion.



“U.S.
Dollars” or “U.S. $” each means such currency of the United States of America which, as at
the time of payment or determination, is legal tender therein for the payment of public or private
debts.



“Voting Securities” means securities of capital stock of any class of any corporation, partnership
units in the case of a partnership or other evidence of ownership serving similar purposes,
carrying voting rights under all circumstances, provided that, for the purposes of this
definition, shares which only carry the right to vote conditionally on the happening of an event
will not be considered Voting Securities, whether or not such event will have occurred, nor will
any securities be deemed to cease to be Voting Securities solely by reason of a right to vote
accruing to securities of another class or classes by reason of the happening of such event.



“Working Capital” means on the last day of any fiscal quarter of the Borrower the excess of current
assets over current liabilities or current liabilities over current assets, as applicable, as shown
on a consolidated balance sheet of the Borrower as at the end of such fiscal quarter and prepared
on a consolidated basis in accordance with GAAP and for the purposes of this definition, current
liabilities will include the current portion of Indebtedness (other than any which is Indebtedness
under the Credit Facilities) which is characterized as a current liability in accordance with GAAP.










 



 


SCHEDULE B

CERAMIC PROTECTION CORPORATION

CREDIT AGREEMENT

DATED SEPTEMBER 21, 2004




COMMITMENTS



Extendible Revolving Loan




	 	 	 
	LENDER	 	INDIVIDUAL REVOLVING LOAN COMMITMENT AMOUNT
	Canadian Imperial Bank of Commerce

	 	Cdn. $5,000,000





Term Loan




	 	 	 
	LENDER	 	INDIVIDUAL TERM LOAN COMMITMENT AMOUNT
	Canadian Imperial Bank of Commerce

	 	Cdn. $19,500,000







-1-