EX-10.1.15






Exhibit 10.1.15




PROTECTIVE PRODUCTS OF AMERICA, INC.
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 HEREUNDER


AMENDED AND RESTATED CREDIT AGREEMENT


January 30, 2009










 



 




TABLE OF CONTENTS




ARTICLE 1

INTERPRETATION




	 	 	 	 	 
	 	 	Page	 
	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 Amendment and Restatement
	 	 	3	 
	1.16 Schedules
	 	 	3	 
	 
	 	 	 	 
	ARTICLE 2
	 	 	 	 
	CREDIT FACILITIES
	 	 	 	 
	2.1 Revolving Loan
	 	 	4	 
	2.2 Maturity Date
	 	 	4	 
	2.3 Repayments
	 	 	4	 
	2.4 General Right to Prepay and Cancel
	 	 	4	 
	2.5 Mandatory Prepayment Upon Specified Events
	 	 	5	 
	2.6 Use of Proceeds
	 	 	5	 
	2.7 Types of Accommodation
	 	 	5	 
	2.8 Interest and Fees
	 	 	6	 
	2.9 Borrowing Base
	 	 	6	 
	 
	 	 	 	 
	ARTICLE 3
	 	 	 	 
	SECURITY
	 	 	 	 




-i-









 




TABLE OF CONTENTS
(continued)




	 	 	 	 	 
	 	 	Page	 
	3.1 Security
	 	 	6	 
	3.2 Sharing of Security
	 	 	7	 
	3.3 Exclusivity of Remedies
	 	 	7	 
	3.4 Form of Security
	 	 	7	 
	3.5 After-Acquired Property
	 	 	7	 
	3.6 Undertaking to Grant Fixed Charge Security
	 	 	8	 
	3.7 Discharge of Security
	 	 	8	 
	 
	 	 	 	 
	ARTICLE 4
	 	 	 	 
	FUNDING AND OTHER MECHANICS
	 	 	 	 
	4.1 Funding of Accommodations
	 	 	9	 
	4.2 Notice Provisions
	 	 	9	 
	4.3 Irrevocability
	 	 	9	 
	4.4 Agent’s Obligations
	 	 	9	 
	4.5 Lenders’ Obligations
	 	 	9	 
	4.6 Exchange Rate Fluctuations
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 5
	 	 	 	 
	CONDITIONS PRECEDENT TO DRAWDOWN
	 	 	 	 
	5.1 Conditions Precedent to Drawdown
	 	 	10	 
	 
	 	 	 	 
	ARTICLE 6
	 	 	 	 
	CALCULATION OF INTEREST AND FEES
	 	 	 	 
	6.1 Records
	 	 	10	 
	6.2 Payment of Interest and Fees
	 	 	10	 
	6.3 Conversion to Another Currency
	 	 	11	 
	6.4 Maximum Rate of Return
	 	 	11	 
	6.5 Waiver of Judgment Interest Act (Alberta)
	 	 	11	 
	6.6 Deemed Reinvestment Not Applicable
	 	 	11	 
	 
	 	 	 	 
	ARTICLE 7
	 	 	 	 
	INCREASED COSTS
	 	 	 	 
	7.1 Changes in Law
	 	 	11	 
	7.2 Changes in Circumstances
	 	 	12	 
	7.3 Application of Sections 9.1 and 9.2
	 	 	12	 




-ii-









 




TABLE OF CONTENTS
(continued)




	 	 	 	 	 
	 	 	Page	 
	7.4 Limitations on Additional Compensation
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 8
	 	 	 	 
	FEES AND EXPENSES
	 	 	 	 
	8.1 Agency Fee
	 	 	13	 
	8.2 Expenses
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 9
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF THE BORROWER
	 	 	 	 
	9.1 Representations and Warranties
	 	 	13	 
	9.2 Acknowledgement
	 	 	17	 
	9.3 Survival and Inclusion
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 10
	 	 	 	 
	COVENANTS OF THE BORROWER
	 	 	 	 
	10.1 Affirmative Covenants
	 	 	17	 
	10.2 Financial Covenants
	 	 	22	 
	10.3 Negative Covenants
	 	 	22	 
	 
	 	 	 	 
	ARTICLE 11
	 	 	 	 
	EVENTS OF DEFAULT
	 	 	 	 
	11.1 Event of Default
	 	 	24	 
	11.2 Remedies
	 	 	28	 
	11.3 Waivers
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 12
	 	 	 	 
	CONFIDENTIALITY
	 	 	 	 
	12.1 Non-Disclosure
	 	 	28	 
	12.2 Exceptions
	 	 	28	 
	12.3 Permitted Disclosures by the Agent or the Lenders
	 	 	28	 
	12.4 Survival
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 13
	 	 	 	 
	ASSIGNMENT
	 	 	 	 
	13.1 Assignment of Interests
	 	 	29	 
	13.2 Assignment by the Lenders
	 	 	29	 
	13.3 Effect of Assignment
	 	 	29	 
	13.4 Participations
	 	 	29	 




-iii-









 




TABLE OF CONTENTS
(continued)




	 	 	 	 	 
	 	 	Page	 
	ARTICLE 14
	 	 	 	 
	ADMINISTRATION OF THE CREDIT FACILITY
	 	 	 	 
	14.1 Authorization and Action
	 	 	30	 
	14.2 Procedure for Making Advances
	 	 	31	 
	14.3 Remittance of Payments
	 	 	32	 
	14.4 Redistribution of Payment
	 	 	32	 
	14.5 Duties and Obligations
	 	 	33	 
	14.6 Prompt Notice to the Lenders
	 	 	34	 
	14.7 Agent and Agent Authority
	 	 	34	 
	14.8 Lenders’ Credit Decisions
	 	 	34	 
	14.9 Indemnification
	 	 	34	 
	14.10 Successor Agent
	 	 	35	 
	14.11 Taking and Enforcement of Remedies
	 	 	35	 
	14.12 Reliance Upon Agent
	 	 	36	 
	14.13 Agent May Perform Covenants
	 	 	36	 
	14.14 No Liability of Agent
	 	 	36	 
	14.15 Nature of Obligations under this Agreement
	 	 	36	 
	14.16 Unanimity
	 	 	36	 
	 
	 	 	 	 
	ARTICLE 15
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	15.1 Notices
	 	 	37	 
	15.2 Telephone Instructions
	 	 	39	 
	15.3 No Partnership, Joint Venture or Agency
	 	 	39	 
	15.4 Judgment Currency
	 	 	39	 
	15.5 General Indemnity
	 	 	40	 
	15.6 Further Assurances
	 	 	40	 
	15.7 Waiver of Law
	 	 	41	 
	15.8 Attornment and Waiver of Jury Trial
	 	 	41	 
	15.9 Interest on Payments in Arrears
	 	 	41	 
	15.10 Payments Due on Banking Day
	 	 	42	 
	15.11 Application of Proceeds
	 	 	42	 




-iv-









 






TABLE OF CONTENTS
(continued)







	 	 	 	 	 
	 	 	Page	 
	15.12 Whole Agreement
	 	 	42	 
	15.13 Counterparts
	 	 	43	 




-v-









 



 




AMENDED AND RESTATED CREDIT AGREEMENT




          THIS AMENDED AND RESTATED CREDIT AGREEMENT made as of January 30, 2009,




AMONG:




PROTECTIVE PRODUCTS OF AMERICA, INC.

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 AMENDED AND RESTATED CREDIT AGREEMENT




PREAMBLE:




     The Borrower has requested and the Lenders have agreed to establish a senior secured
revolving loan 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.










 



- 2 -








	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 1.11(a),
14.16 and 15.1(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 9.1(c) and 14.16, 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	 	Amendment and Restatement.






	 	(a)	 	This Agreement is an amendment and restatement of the Credit Agreement and not
a novation of the Credit Agreement. This Agreement reflects amendments to the Credit
Agreement and has been restated solely for the purposes of reflecting amendments to the
Credit Agreement which the Lenders, the Agent and the Borrower have agreed upon. All
references to the Credit Agreement or similar references contained in the Documents
delivered prior to the effective date of this Agreement, including without limitation
in the Security, shall be deemed to include references to this Agreement without
further amendment to those Documents. The Borrower confirms that each of the foregoing
Documents, including without limitation any delivered under the Credit Agreement,
remains in full force and effect.






	1.16	 	Schedules. The following are the Schedules which form part of this Agreement:




Schedule A: Definitions

Schedule B: Commitments

Schedule C: Form of Debenture Pledge Agreement

Schedule D: Form of Demand Debenture Agreement

Schedule E: Form of Material Subsidiary Guarantee

Schedule F: Form of General Security Agreement

Schedule G: Form of Deposit Account Control Agreement










 



- 4 -



Schedule H: Form of Notice of Borrowing

Schedule I: Material Adverse Changes

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

CREDIT FACILITIES





	2.1	 	Revolving Loan. Subject to the terms and conditions hereof and effective on the
Closing Date, the Lenders hereby establish the Revolving Loan in favour of the Borrower. The
Revolving Loan may be drawn down by the Borrower during the 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.
	 
	2.2	 	Maturity Date. Each Advance from a Lender under the Revolving Loan will have a
Maturity Date which expires on or prior to the Revolving Loan Termination Date applicable to
that Lender.
	 
	2.3	 	Repayments






	 	(a)	 	Revolving Loan






	 	(i)	 	During Revolving Period. During the Revolving Period,
the Borrower may borrow, repay and re-borrow Advances under the Revolving Loan
provided that, subject to Section 4.6, the Canadian Dollar Exchange Equivalent
of the Aggregate Principal Amount of the 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 Revolving Loan remaining on the Revolving
Loan Termination Date, if any, 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 or any Lender under the Documents, if
any, on such date.
	 
	 	(iii)	 	Payments to Agent. All payments of the Indebtedness
of the Borrower to the Lenders under the Revolving Loan will be made by the
Borrower to the Agent for the account of the Lenders under the Revolving Loan
in accordance with each such Lender’s Rateable Portions thereof.






	2.4	 	General Right to Prepay and Cancel. The Borrower may at any time prepay (in minimum
amounts of Cdn. $500,000 or U.S. $500,000, as applicable, (except for prepayments pursuant to
section 2.5(b)(v)) without premium, bonus or penalty, any or all










 



- 5 -








of the Aggregate Principal Amount under the
Credit Facilities. Any prepayment or
cancellation will be made pro rata to all
Lenders on the basis of each Lender’s Rateable
Portion.




	2.5	 	Mandatory Prepayment.






	 	(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 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 Revolving Loan:






	 	(i)	 	within 7 Banking Days of receipt thereof, the net proceeds of
any asset dispositions in excess of $100,000, (other than sales of inventory in
the ordinary course of business and Permitted Sale and Lease-Back Transactions)
of the Borrower or any of its Subsidiaries;
	 
	 	(ii)	 	within 5 Banking Days of the closing thereof, 100% 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;
	 
	 	(iv)	 	within 5 Banking Days of closing thereof, 100% of the net cash
proceeds from any permitted debt issuance; and
	 
	 	(v)	 	not later than 15 days after the end of each of each month (if
such day is not a Banking Day, then the next following Banking Day), the
Borrower shall prepay the Revolving Loan, in an aggregate principal amount
equal to 100% of Excess Cash Flow for such month less the aggregate amount of
all funds received by the Agent pursuant to the Deposit Account Control
Agreement during such month.






	2.6	 	Use of Proceeds.






	 	(a)	 	Revolving Loan. The Borrower will be entitled to use the proceeds of
the Revolving Loan for general corporate purposes.






	2.7	 	Types of Accommodation






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






	 	(i)	 	Canadian Dollar Advances. For Advances in Canadian
Dollars, Canadian Prime Rate Loans.










 



- 6 -








	 	(ii)	 	U.S. Dollar Advances. For Advances in U.S. Dollars,
U.S. Base Rate Loans.






	2.8	 	Interest and Fees.






	 	(a)	 	Interest on the Revolving Loan. Each Canadian Prime Rate Loan under
the Revolving Loan will bear interest at a variable rate per annum equal to the
Canadian Prime Rate plus 650 bps. Each U.S. Base Rate Loan under the Revolving Loan
will bear interest at a variable rate per annum equal to the U.S. Base Rate plus 650
bps.
	 
	 	(b)	 	Borrowing Base Shortfall or Event of Default. Effective immediately
upon receipt by the Borrower of a notice of a Borrowing Base Shortfall or the
occurrence of an Event of Default other than the Specified Defaults as defined in the
Forbearance Agreement (the “Effective Date”), the interest rates then applicable to
Canadian Prime Rate Loans and U.S. Base Rate Loans 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.
	 
	 	(c)	 	U.S. Base Rate and Canadian Prime Rate Loans. Notwithstanding anything
else contained herein, Advances made under the Revolving Loan shall only be by Canadian
Prime Rate Loan or U.S. Base Rate Loan.






	2.9	 	Borrowing Base.






	 	(a)	 	Setting of Borrowing Base. The Borrowing Base under the Revolving Loan
shall be based on the sum of, without duplication, (i) 75% of Eligible Accounts
Receivable (including U.S. Federal Government receivables aged more than 90 days),
(ii) 90% of Export Development Canada insured accounts receivable and (iii) the lesser
of (a) 50% of eligible inventory comprised of raw materials and finished goods
(excluding work-in-progress), and (b) 40% of the Revolving Loan Commitment Amount.
	 
	 	(b)	 	Meeting with Lenders. The Borrower will meet with the Agent and the
Lenders at such time or times as the Agent may request, 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.





ARTICLE 3

SECURITY





	3.1	 	Security. The present and future Indebtedness of the Borrower and the Material
Subsidiaries to the Agent and the Lenders under the Revolving Loan and all other Indebtedness
of the Borrower or any Material Subsidiary, to the Agent and the Lenders, howsoever arising or
incurred hereunder and under the Documents, will be secured by the following (collectively,
the “Security”):










 



- 7 -








	 	(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 C and Schedule D), to
be registered in all appropriate jurisdictions;
	 
	 	(b)	 	a guarantee, substantially in the form of Schedule E, 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)	 	general security agreements from the Borrower and each Material Subsidiary in
favour of the Agent for its own benefit and on behalf of the Lenders, substantially in
the form of Schedule F;
	 
	 	(d)	 	the Deposit Account Control Agreements delivered pursuant to the Forbearance
Agreement, substantially in the form of Schedule G; and
	 
	 	(e)	 	when requested by the Agent in accordance with Section 3.6, such documents and
instruments providing a fixed Lien in accordance with Section 3.6.






	3.2	 	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 Revolving Loan, on a pari passu basis; and that the Agent will hold the Security for
the benefit of the Agent and the Lenders hereunder.
	 
	3.3	 	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.
	 
	3.4	 	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 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.
	 
	3.5	 	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










 



- 8 -


	 	 	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.
	 
	3.6	 	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 3.6 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 3.6;
	 
	 	(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 3.6;
	 
	 	(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 3.6;
	 
	 	(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 or in
the United States or any state thereof as the Agent, acting reasonably, deems necessary
to give full force and effect to the provisions of this Section 3.6; 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 3.6.






	3.7	 	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










 



- 9 -


	 	 	Facilities has been unconditionally and irrevocably paid or satisfied in full and each such
facility has been cancelled.





ARTICLE 4

FUNDING AND OTHER MECHANICS





	4.1	 	Funding of Accommodations. Subject to Section 4.2, all Advances requested by the
Borrower will be made available by deposit of the applicable funds into the appropriate
Borrower’s Account for value on the Banking Day on which the Advance is to take place.
	 
	4.2	 	Notice Provisions. Drawdowns under the Credit Facilities will be made available to
the Borrower provided a Notice of Borrowing is received from the Borrower by the Agent 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.
	 
	 	 	Any of the notices referred to in the foregoing paragraphs of this Section 4.2 may, subject
to Section 15.2, 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.
	 
	4.3	 	Irrevocability. A Notice of Borrowing 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 therein, provided that, any such notice will not be binding
on a Lender who makes a determination under Section 7.2.
	 
	4.4	 	Agent’s Obligations. Upon receipt of a Notice of Borrowing with respect to a
proposed Advance, 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.
	 
	4.5	 	Lenders’ Obligations. Each Lender will, prior to 12:00 noon (Toronto time) on the
proposed date on which an Advance is to take place, credit the account of the Agent specified
in the Agent’s notice given pursuant to Section 4.4 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.
	 
	4.6	 	Exchange Rate Fluctuations. 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 (the “Excess”), the Borrower will, within 3 Banking Days, pay the Excess to the Agent
as a Principal Repayment of the Revolving Loan, for the benefit of the Lenders.






 











 





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ARTICLE 5

CONDITIONS PRECEDENT TO DRAWDOWN





	5.1	 	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:
	 
	 	 	Ongoing Funding






	 	(a)	 	the appropriate Notice of Borrowing will have been delivered in accordance with
the notice provisions provided in Section 4.2;
	 
	 	(b)	 	no Event of Default, other than Specified Defaults (as defined in the
Forbearance Agreement), will have occurred and be continuing; and
	 
	 	(c)	 	each representation and warranty of the Borrower contained herein shall be true
and correct, except to the extent such representation and warranty may be rendered
untrue by the existence of the Specified Defaults (as defined in the Forbearance
Agreement).





ARTICLE 6

CALCULATION OF INTEREST AND FEES





	6.1	 	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 6.1, the records of the Agent shall
prevail, absent manifest error.






	6.2	 	Payment of Interest and Fees.






	 	(a)	 	Interest. Except as expressly stated otherwise herein, all Canadian
Prime Rate Loans and U.S. Base Rate 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 2.8 or Section
15.9. 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. 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










 



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	 	 	 	 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.
	 
	 	(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 and U.S. Base Rate Loans, 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 is payable
and divided by 365.






	6.3	 	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, 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 4.2.
	 
	6.4	 	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.
	 
	6.5	 	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.
	 
	6.6	 	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 7

INCREASED COSTS





	7.1	 	Changes in Law.






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










 



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	 	(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 7.1(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 7.1(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 without obligation to make a
corresponding prepayment to any other Lender.






	7.2	 	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)	 	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, 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.






	7.3	 	Application of Sections 7.1 and 7.2. If a Lender exercises its discretion under
Sections 7.1 or 7.2, then concurrently with a notice from such Lender to the Lenders and the










 



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	 	 	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.
	 
	7.4	 	Limitations on Additional Compensation. Sections 7.1 and 7.2 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 7.1). The Borrower will not be obligated to pay any portion of Additional
Compensation accruing under Section 7.1 for any period 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 8

FEES AND EXPENSES





	8.1	 	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.
	 
	8.2	 	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 (the “Expenses”). All such Expenses shall be added to the Principal Amount of the
Revolving Loan and deemed to be Advances hereunder, and shall bear interest at the applicable
rate of the Revolving Loan from time to time as set out in Section 2.8. Notwithstanding the
foregoing, except for any interest payable to the applicable third party, no Expense(s) shall
bear interest at the applicable rate of the Revolving Loan until 5 Banking Days after delivery
of an invoice with respect to such Expense(s) has been delivered by the Agent to the Borrower
in the manner set out in Section 15.1.





ARTICLE 9

REPRESENTATIONS AND WARRANTIES OF THE BORROWER





	9.1	 	Representations and Warranties. The Borrower hereby represents and warrants to the
Lenders that:






	 	(a)	 	Incorporation, Organization and Power. The Borrower and each corporate
Material Subsidiary has been duly incorporated and is validly existing under the










 



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	 	 	 	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:






	 	(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
	 
	 	(i)	 	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.










 



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	 	(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.






	 	(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 unaudited consolidated financial statements of
the Borrower for the fiscal quarter ended September 30, 2008, 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 except as
disclosed in Schedule I.
	 
	 	(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:










 



- 16 -








	 	(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.
	 
	 	(l)	 	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 other than as disclosed in the Forbearance Agreement.
	 
	 	(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.
	 
	 	(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.










 



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	 	(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 2.8.






	9.2	 	Acknowledgement. The Borrower acknowledges that the Agent and the Lenders are
relying upon the representations and warranties in this Article 9 in making the Credit
Facilities available to the Borrower and that the representations and warranties contained in
Section 9.1, will be deemed to be restated in every respect effective on the date each and
every Advance is made; provided that if the representation and warranty contained in Section
9.1(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 10.1(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.
	 
	9.3	 	Survival and Inclusion. The representations and warranties in this Article 9 shall
survive until this Agreement has been terminated. All statements, representations and
warranties contained in any Compliance Certificate, Closing Certificates, the Security, the
Forbearance Agreement 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 10

COVENANTS OF THE BORROWER





	10.1	 	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. 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
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










 



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	 	 	 	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 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 10.1(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










 



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	 	 	 	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.
	 
	 	(i)	 	Monthly Compliance Certificate. Within 10 Banking Days after the end
of each month, the Borrower will furnish to the Agent a Compliance Certificate,
including an update of the Projections to show actual results for that month as
compared to forecast along with reasonably detailed calculations with respect to the
various financial covenants of the Borrower set out herein and in the Forbearance
Agreement.
	 
	 	(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, together with updated Projections, 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. In addition, but
without duplication, to the foregoing, as soon as available, and in any event within 15
days after the end of each of each month (if such day is not a Banking Day, then the
next following Banking Day), the Borrower will furnish to the Agent a copy of its
monthly unaudited consolidated financial statements, and will provide the Agent with
updates satisfactory to the Agent acting reasonably on its process, prospects, terms,
and the prospective parties through which the Borrower intends to refinance the
Indebtedness hereunder. Notwithstanding the foregoing, any restatement of the
unaudited consolidated financial statements together with updated Projections delivered
to the Agent for the fiscal quarter ended September 30, 2008 with respect to a
writedown of goodwill of the Borrower and its Material Subsidiaries shall not be a
breach of this Section 10.1(j).
	 
	 	(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.










 



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	 	(l)	 	Borrowing Base Certificate. Every Wednesday prior to 4:00 p.m. EST,
the Borrower will furnish to the Agent 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 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










 



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	 	 	 	services of a consultant to monitor the Borrower’s or any Material Subsidiary’s
compliance with this Section 10.1(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 (including those filed on a confidential basis) 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
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, or 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 3.1 in form and substance satisfactory to the Agent within 10 days of any such
Subsidiary becoming a Material Subsidiary, together










 



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	 	 	 	with all such supporting documentation and legal opinions as the Agent may
reasonably require.






	10.2	 	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. As of September 30, 2007, and on the last day of
each fiscal quarter thereafter, it will not permit the Debt to EBITDA Ratio to exceed
3.75:1.
	 
	 	(b)	 	Minimum Shareholders’ Equity. Beginning on June 30, 2006, and as of
the last day of each fiscal quarter thereafter, it will not permit shareholders’ equity
(in accordance with GAAP) to be less than Cdn. $50,000,000 plus 50% of Net Income after
June 30, 2006 (to the extent it is positive) and 50% of the net proceeds of any equity
issuances of the Borrower after that date.
	 
	 	(c)	 	Minimum Current Ratio. As of September 30, 2007, and on the last day
of each fiscal quarter thereafter, it will not permit the Current Ratio to be less than
1.0:1.






	10.3	 	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 and Capital
Expenditures. The Borrower will not, and will not permit the Material Subsidiaries
to:






	 	(i)	 	incur Indebtedness, except for Permitted Indebtedness;
	 
	 	(ii)	 	provide or permit a Lien over any of its property, except for
Permitted Encumbrances;
	 
	 	(iii)	 	make any Distribution, other than Permitted Distributions; or
	 
	 	(iv)	 	incur any Capital Expenditures, other than (i) Capital
Expenditures approved by the Lenders and (ii) the U.S. $800,000 expenditure of
the Borrower for the construction of a firing range as contemplated in the Cash
Projections (as defined in the Forbearance Agreement).






	 	(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”).
	 
	 	(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










 



- 23 -


	 	 	 	transaction, designed to hedge against fluctuations in interest rates (collectively,
the “Interest Rate Swap Contracts”).
	 
	 	(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”). 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.
	 
	 	(g)	 	Mergers, Amalgamation and Consolidations. The Borrower will not, and
will cause the Material Subsidiaries not to, merge, amalgamate or consolidate with
another Person.
	 
	 	(h)	 	Limitation on Sale and Lease-Back Transactions. The Borrower will not,
and will not permit any of the 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 are applied to permanently repay the Indebtedness of the Borrower under
the Revolving Loan.
	 
	 	(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 Massachusetts,
Inc. (as evidenced by Uniform Commercial Code filing #41947748, as amended) the
Borrower will not and will not permit Material Subsidiaries to permit the aggregate
Canadian Dollar Exchange Equivalent of its Indebtedness arising under Purchase Money
Liens to exceed $500,000 in the aggregate.
	 
	 	(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
October 31, 2008, or (ii) change its or any Material Subsidiaries’ corporate name,
partnership name or trust name, as applicable, trade name or locations of business










 



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	 	 	 	from those set forth in Schedule J without giving the Agent 30 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 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 10.1(w), to any transaction between the Borrower and a Material Subsidiary or
between Material Subsidiaries.
	 
	 	(o)	 	Acquisitions. The Borrower will not, and will not permit any Material
Subsidiary to, enter into any transaction involving the acquisition of any property,
other than inventory in the ordinary course of the business of the Borrower or the
Material Subsidiary, except with the prior written consent of the Lenders in their sole
and unfettered discretion.





ARTICLE 11

EVENTS OF DEFAULT





	11.1	 	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






 











 





- 25 -





	 	 	 	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
11.1(a) or elsewhere in this Section 11.1, 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.






	 	(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 in respect of the
reorganization or winding-up of the Borrower or any Material Subsidiary under the
Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act
(Canada), the United States Bankruptcy Code 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) 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 commences 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), the United States
Bankruptcy Code 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











 



- 26 -







	 	 	 	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.






	 	(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), the Uniform
Commercial Code or any other applicable Laws of any jurisdiction whereunder similar
remedies are provided, and in any case such seizure, execution, attachment,
garnishment,










 



- 27 -








	 	 	 	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.






	 	(l)	 	Cessation of Business. 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.






	 	(n)	 	Qualified Auditor Report. If the audited financial statements that are
required to be delivered to the Agent pursuant to Section 10.1(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 2.5.






	 	(q)	 	Material Adverse Effect. If any event shall occur which has a Material
Adverse Effect.






	 	(r)	 	Failure to Secure Takeout Financing. If the Borrower fails to provide
the Agent by August 8, 2008 with (i) a final inventory appraisal report prepared by
Great American Group (“GAG”), and (ii) a copy of a firm commitment letter for the
provision of a takeout financing of the Borrower in an amount no less than all of the
current obligations owing hereunder to be drawn down on or before October 17, 2008, or
if at any time the Borrower becomes aware that such commitment letter will not be
obtained by August 8, 2008 or such takeout financing will not be available to be drawn
down on or before October 17, 2008.






	 	(s)	 	Failure to Obtain Marine Corps Contract. If the Borrower fails to
provide the Agent by August 8, 2008 with a copy of an executed copy of the Marine Corps
Contract, or if at any time the Borrower becomes aware that such Marine Corps Contract
will not be obtained by August 8, 2008.










 



- 28 -








	11.2	 	Remedies. Upon the occurrence of an Event of Default which has not been waived, the
Agent (on the direction of the Lenders) may 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.






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





ARTICLE 12

CONFIDENTIALITY





	12.1	 	Non-Disclosure. All information 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 12.2 and 12.3.






	12.2	 	Exceptions. Section 12.1 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 12.1;
	 
	 	(d)	 	developed independently without breach of Section 12.1; or
	 
	 	(e)	 	to the extent required to be disclosed by order or direction of a court or
Administrative Body of competent jurisdiction or in order to enforce the rights of the
Agent or the Lenders under any of the Documents.






	12.3	 	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.






	12.4	 	Survival. The obligations of the Parties under this Article 12 will survive the
termination of this Agreement.










 



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ARTICLE 13

ASSIGNMENT





	13.1	 	Assignment of Interests. 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.






	13.2	 	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 retaining an Individual
Revolving Loan Commitment Amount of at least Cdn. $2,000,000 such Lender’s Individual
Revolving Loan Commitment Amount 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.






	13.3	 	Effect of Assignment. To the extent that any Lender sells or assigns any portion of
its Individual Revolving Loan Commitment Amount pursuant to Section 13.2 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
12, in respect of that portion of its Individual Revolving Loan Commitment Amount 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.






	13.4	 	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 13.4 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;










 



- 30 -








	 	(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 14

ADMINISTRATION OF THE CREDIT FACILITY





	14.1	 	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 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











 



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the Agent to such Lender, such Lender will be deemed not to have consented thereto
upon the expiry of such 7 Banking Day period.




	14.2	 	Procedure for Making Advances.






	 	(a)	 	Pro Rata Advances. 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 4.5 (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 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 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











 



- 32 -







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.




	14.3	 	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.






	14.4	 	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 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 14.4; and






	 	(ii)	 	amounts otherwise owed to it by the Borrower.






	 	(b)	 	If it receives, through the exercise of a right or the receipt of a secured
claim described in Section 14.4(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











 



- 33 -







	 	 	 	Revolving Loan 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 14.4 to share
in the benefits of any recovery on such secured claims.
	 
	 	(c)	 	If it does any act or thing permitted by Sections 14.4(a) or (b), it will
promptly provide full particulars thereof to the Agent.






	 	(d)	 	Except as permitted under Sections 14.4(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.






	14.5	 	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:






	 	(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









 



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	 	 	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.
	 
	14.6	 	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.






	14.7	 	Agent and Agent Authority. With respect to its Rateable Portion of the Revolving
Loan 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 if the Agent was not
serving as Agent, and without any duty or obligation to account therefor to the Lenders.






	14.8	 	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.






	14.9	 	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










 



- 35 -








	 	 	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.
	 
	14.10	 	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 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 Revolving Loan Commitment Amount. After the
resignation of the Agent as administrative agent hereunder, the provisions of this Article 14
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.






	14.11	 	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










 



- 36 -








	 	 	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.
	 
	14.12	 	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.






	14.13	 	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,
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%.






	14.14	 	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.





14.15 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.






	14.16	 	Unanimity.










 



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	 	(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 2.4);






	 	(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 2.2, 2.3, 2.6, 2.7, 2.8, 2.9(a), 5.1, 6.2,
and 9.2;






	 	(v)	 	any amendment to this Section 14.16 and Section 12.2; and






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






	 	(b)	 	Majority Consent. Subject to Section 14.16(a), and the next sentence
of this Section 14.16(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
of a Lender can only be changed with the consent of such Lender.





ARTICLE 15

MISCELLANEOUS





	15.1	 	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











 



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if to the Agent, addressed to the Agent at:



Canadian Imperial Bank of Commerce

199 Bay Street

Commerce Court West, 6th Floor

Toronto, ON M5L 1A2



Facsimile:       (416) 214-8749



Attention:       General Manager, Special Loans



if to CIBC, as Lender, addressed to:



Canadian Imperial Bank of Commerce

199 Bay Street

Commerce Court West, 6th Floor

Toronto, ON M5L 1A2



Facsimile:       (416) 214-8749



Attention:       General Manager, Special Loans



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



Protective Products of America, Inc.

1649 Northwest 136th Avenue

Sunrise, Florida

USA 33323



Facsimile:       (954) 846-8306



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
15.1 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.










 



- 39 -








	 	(e)	 	Each Party may change its address and facsimile number for purposes of this
Section 15.1 by notice given in the manner provided in this Section 15.1 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.






	15.2	 	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.






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






	15.4	 	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











 



- 40 -







	 	 	 	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 15.4(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
15.4(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.






	15.5	 	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 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) 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; (c) 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 15.5 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 15.5 shall survive repayment of the Indebtedness of the Borrower under the Documents.






	15.6	 	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.










 



- 41 -








	15.7	 	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.






	15.8	 	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.






	15.9	 	Interest on Payments in Arrears.






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






	 	(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 15.9 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










 



- 42 -








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.




	15.10	 	Payments Due on Banking Day. Whenever any payment hereunder will be due on a day
other than a Banking Day such payment will be made on the next succeeding Banking Day and such
extension of time will in such case be included in the computation of payment of interest
thereunder.






	15.11	 	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 11.2,
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 payable by way of any fees;






	 	(c)	 	in payment of any amounts due and payable as and by way of interest, 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.






	15.12	 	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.





[The remainder of this page has been intentionally left blank]















 



- 43 -








	15.13	 	Counterparts. The Documents may be executed in any number of counterparts
(including by facsimile or other electronic 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.




PROTECTIVE PRODUCTS OF AMERICA, INC.
as Borrower



	 	 	 	 	 
	By:

	 	/s/ Stephen Giordanella
 

	 	 
	Name:

	 	Stephen Giordanella	 	 
	Title:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jason Williams
 

	 	 
	Name:

	 	Jason Williams	 	 
	Title:

	 	Chief Financial Officer	 	 






CANADIAN IMPERIAL BANK OF

COMMERCE, as Agent and Lender




	 	 	 	 	 
	By:
	 	/s/ J.S. McMurray 	 	 
	 

	 	 

Authorized Officer

J.S. McMurray

General Manager
	 	 
	 
	 	 	 	 
	By:
	 	/s/ Doug Brown 	 	 
	 

	 	 

Authorized Officer

Doug Brown

General Manager
	 	 







 












 






SCHEDULE A

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




DEFINITIONS



“Accommodation” means an accommodation referred to in Section 2.7.



“Additional Compensation” will have the meaning attributed to it in Section 7.1(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 in respect of Accommodations, the disbursement or
credit of funds to, or to the credit of, 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 3.5.



“Agent” means initially CIBC or any successor to CIBC appointed as administrative agent pursuant to
Section 14.10.



“Aggregate Principal Amount” means, the aggregate of the Principal Amount outstanding from time to
time under the Revolving Loan.



“Agreement” or “this Agreement” means the agreement in writing dated the date hereof between the
Borrower, the Lenders and the Agent entitled “ Amended and Restated 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.



“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.











 



- 2 -




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



“Borrower” means Protective Products of America, Inc. 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.



“Borrowing Base” means the amount determined or redetermined by the Lenders in their sole and
unfettered 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 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.



“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, and includes, without limitation, the U.S.
$800,000 expenditure of the Borrower for the construction of a firing range as contemplated in the
Cash Projections (as defined in the Forbearance Agreement).









 



- 3 -



“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 10.1(g), has the meaning attributed to it in Section 10.1(g).



“Closing Certificate” means any certificate of the Borrower or any Material Subsidiary delivered to
the Agent from time to time.



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



“Commodity Swap Contracts” has the meaning attributed to it in Section 10.3(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).



“Credit Agreement” means the credit agreement dated as of September 21, 2004, as amended, restated,
amended and restated, supplemented or otherwise modified from time to time to the date hereof,
between Ceramic Protection Corporation (the former name of the Borrower), as borrower, and CIBC, as
administrative agent, and CIBC and those other financial institutions from time to time party
thereunder.



“Credit Facilities” means the Revolving 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.



“Current Assets” means all assets of the Borrower on a consolidated basis which under GAAP would be
classified as current assets.



“Current Liabilities” means all liabilities of the Borrower on a consolidated basis which under
GAAP would be classified as current liabilities.











 



- 4 -



“Current Ratio” means, at any time, the ratio of Current Assets to Current Liabilities, in each
case as at such time.



“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 Debt
to EBITDA as calculated on a rolling four quarter basis.



“Deposit Account Control Agreement” means a deposit account control agreement delivered pursuant to
the Forbearance Agreement in respect of the Borrower or any Material Subsidiary in respect of any
operating bank accounts of the Borrower or any Material Subsidiary.



“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.



“Depreciation and Amortization Expense” means the consolidated 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.



“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);
	 
	(d)	 	management, consulting or similar fee or any bonus payment or comparable payment;










 



- 5 -


	(e)	 	gift or gratuity (except to an Affiliate or any officer, director, employee or shareholder of
an Affiliate), other than any gift or gratuity that is in the ordinary course of the
Borrower’s or Material Subsidiary’s business, as applicable;
	 
	 	 	to (in the case of paragraphs (a), (c), (d) and (e) 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
	 
	(e)	 	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 this Agreement and any other instrument or agreement entered into by the Parties
relating to the Credit Facilities, including the Security, the Forbearance Agreement and any
document or agreement delivered pursuant to the Forbearance Agreement, including the Deposit
Account Control Agreements, and any document or agreement resulting from the operation of Section
3.1.



“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).



“Drawdown” means a borrowing or credit of funds by way of Advances.



“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.



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





	 	(a)	 	increased by the sum of (without duplication) (i) income tax expenses 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.




“Effective Date” has the meaning attributed to it in Section 2.8(b).










 



- 6 -



“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.



“Event of Default” means an event specified in Section 11.1.



“Excess” has the meaning attributed to it in Section 4.6.



“Excess Cash Flow” means, for any period, the following, determined on a consolidated basis: Net
Income plus (a) Depreciation and Amortization Expense, (b) other non-cash items and (c) deferred
income taxes less Capital Expenditures approved by the Lenders.



“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 10.3(b).



“Expenses” has the meaning attributed to it in Section 8.2.



“Federal Funds Effective 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










 



- 7 -



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 15.4.



“Forbearance Agreement” means the forbearance agreement entered into as of the dated hereof among
CIBC, the Borrower and each Material Subsidiary.



“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 10.3(e).



“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 10.1(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.



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



“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










 



- 8 -



securitizing receivables or monetizing inventory and other fees and charges payable with respect to
letters of credit and letters of guarantee financing, 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 10.3(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.



“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.



“Marine Corps Contract” means the supply contract between PPI and the United States Marine Corps
for the provision by PPI of certain products and services in relation to Modular Tactical Vests
under MTV Bridge Contract M67854-07-D-3065 in an amount of approximately U.S. $22,500,000.



“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;










 



- 9 -


	(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 those Subsidiaries set out in Schedule J hereto and any other
Subsidiary of the Borrower 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 on which an Advance becomes due and
payable by the Borrower.



“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.



“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.



“Original Currency” has the meaning attributed to it in Section 15.4.



“Participant” has the meaning attributed to it in Section 13.4.



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



“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 2.5, any disposition of assets
where such disposition could not reasonably be expected to have a Material Adverse Effect.










 



- 10 -






“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;
	 
	 	(d)	 	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;
	 
	 	(e)	 	public and statutory Liens not yet due and similar Liens arising by operation
of Law;
	 
	 	(f)	 	the Security;
	 
	 	(g)	 	the interest of any Person under any Purchase Money Lien, subject to Section
10.3(i); and
	 
	 	(h)	 	any Lien from time to time disclosed by the Borrower to the Agent and which is
consented to by the Lenders.










 



- 11 -






“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 Revolving Loan
or any of the Documents;
	 
	 	(b)	 	Indebtedness arising from a Sale and Lease-Back Transaction, subject to
Section 10.3(h);
	 
	 	(c)	 	Indebtedness arising under Purchase Money Liens, subject to Section 10.3(i);
	 
	 	(d)	 	Indebtedness of the Borrower to any Material Subsidiary, or of any Material
Subsidiary to the Borrower or to another Material Subsidiary; and
	 
	 	(e)	 	Subordinated Debt.




“Permitted Sale and Lease-Back Transaction” has the meaning attributed to it in Section 10.3(h).



“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.



“PPI” means Protective Products International Corp., a corporation duly organized under the laws of
the State of Florida.



“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, in relation to a Lender under the Revolving 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.



“Projections” means the Borrower’s forecasted consolidated: (a) balance sheets and (b) statement of
operations, for the following twelve months in the form delivered to the Agent in November 2008,
modified to show such projections on a month by month basis, together with appropriate supporting
details and a statement of underlying assumptions.



“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










 



- 12 -



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.



“Rateable Portion” means, with respect to a Lender, the proportion from time to time of the
Individual Revolving Loan Commitment Amount of such Lender.



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



“Resignation Notice” has the meaning attributed to it in Section 14.10.



“Revolving Loan” means the credit facility established in favour of the Borrower pursuant to
Section 2.1.



“Revolving Loan Commitment Amount” means, as of the date hereof, $11,000,000, or as such amount may
be reduced in accordance with this Agreement or otherwise with unanimous consent of the Lenders.



“Revolving Loan Termination Date” means March 31, 2009.



“Revolving Period” means the period terminating on the Revolving Loan Termination Date.



“Sale and Lease-Back Transaction” has the meaning attributed to it in Section 10.3(h).



“Security” has the meaning attributed to it in Section 3.1 and includes any other Lien hereafter
granted by the Borrower to secure the payment of Indebtedness in connection with the Revolving
Loan.



“Subordinated Debt” means any Indebtedness subordinated to the Revolving Loan and any other
obligations owing from time to time under the Documents, on terms acceptable to the Lenders in
their sole discretion.



“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 14.10.



“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,










 



- 13 -



together
with penalties, fines, additions to tax and interest thereon and any instalments in respect
thereof.



“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 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. 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

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




COMMITMENTS




Revolving Loan




	 	 	 	 	 
	 	 	INDIVIDUAL REVOLVING LOAN	 	 
	LENDER	 	COMMITMENT AMOUNT	 	 
	Canadian Imperial Bank of Commerce

	 	Cdn. $9,000,000
	 	 
















 





SCHEDULE C

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF DEBENTURE PLEDGE AGREEMENT





THIS AGREEMENT dated the [•] day of [•].


Description of Floating Charge Demand Debenture




	 	 	 	 	 
	Principal Sum:

	 	Cdn. $75,000,000
	 	 
	 
	Date: [•]
	 	 	 	 






PREAMBLE:





	A.	 	Protective Products of America, Inc., as borrower (the “Borrower”), Canadian Imperial Bank of
Commerce and those other financial institutions who from time to time become lenders
thereunder (collectively, the “Lenders”) and Canadian Imperial Bank of Commerce, as
administrative agent for the Lenders (in such capacity, together with its successors and
assigns in such capacity, the “Agent”) are parties to a Credit Agreement dated as September
21, 2004 between Ceramic Protection Corporation (the former name of the Borrower), as
borrower, and CIBC, as administrative agent, and CIBC and those other financial institutions
from time to time party thereunder (such Credit Agreement, as it may be amended, restated,
amended and restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”).
	 
	B.	 	[•] is a body corporate formed under the laws of [•] and has agreed to grant to the Agent,
for its own benefit and on behalf of the Lenders a security interest over the Collateral in
accordance with the terms of this Debenture Pledge Agreement.
	 
	C.	 	[•] (the “Debtor”) created and issued a Demand Debenture (the “Debenture”) to the Agent for
its own benefit and on behalf of the Lenders.
	 
	D.	 	The Lenders have agreed to share the Security, including, without limitation, this Debenture,
on a pari passu basis with each other pursuant to Section 3.2 of the Credit Agreement.





AGREEMENT:




               For good and valuable consideration, the receipt and sufficiency of which are acknowledged by
the Debtor, the Debtor agrees with the Agent, for its own benefit and on behalf of the Lenders, as
follows:


1. Definitions. Capitalized words and phrases used but not otherwise defined in this
Agreement have the meanings set out in the Credit Agreement.










 



 




- 2 -



2. Pledge. The Debtor hereby grants a security interest in and deposits with and pledges
to the Agent the Debenture to be held by the Agent, for its own benefit and on behalf of the
Lenders, as general and continuing collateral security for the payment and performance of all
present and future obligations (absolute or contingent, matured or otherwise) of the Debtor to the
Agent and the Lenders under or relating to the Credit Documents (as defined in the Debenture) to
which the Debtor is a party (including, without limitation, under or pursuant or relating to the
Security Interest (as such term is defined in the Debenture)), (collectively, the “Obligations”).



3. Realization on Debenture. The Agent will not, nor will it be entitled to, demand
payment pursuant to the Debenture or enforce the Liens constituted thereby unless and until the
Agent will be entitled or obligated to do so pursuant to the provisions of the Credit Documents,
but thereafter the Agent, as agent for the Lenders, may at any time exercise and enforce all of the
rights and remedies of a holder of the Debenture in accordance with and subject to the Credit
Documents, as if the Agent was the absolute owner thereof and any such right or remedy may be
exercised separately or in combination with, and will be in addition to and not in substitution
for, any other right or remedy of the Agent however created, provided that the Agent will not be
bound to exercise any such right or remedy.



4. Agent and Lenders Not Bound. Subject to the requirements of applicable Law and the
provisions of the Credit Documents, the Agent and the Lenders will not be bound under any
circumstances to realize upon the Debenture and will not be responsible to the Debtor for any loss
occasioned by any sale or other dealing with the Debenture or by the retention of or failure to
sell or otherwise deal with the same.



5. Application of Proceeds. The proceeds of or any other amount received pursuant to the
Debenture will be applied on account of the Obligations without prejudice to the Agent’s or any
Lender’s claim upon the Debtor for any deficiency. Subject to the requirements of the Debenture,
the Credit Documents and applicable Law any surplus will be paid over to the Debtor.



6. Acknowledgement. The Debtor agrees and acknowledges that the Security Interest and the
Collateral are being shared on a pari passu basis between the Lenders and this Debenture is being
held by the Agent for its own benefit and on behalf of the Lenders.



7. Recourse. The Agent will not be obliged to exhaust its recourse against the Debtor, any
other Person or any other Security it may hold with respect to the Obligations before realizing
upon or otherwise dealing with the Debenture in such manner as the Agent sees fit. The Agent may
grant extensions of time or other indulgences, take and give up securities, accept compositions,
grant releases and discharges and otherwise deal with the Debtor and with other parties, sureties
or securities as it may see fit, without prejudice to the liability of the Debtor in respect of the
Debenture.



8. Interest and Fees. Notwithstanding the stated interest rate per annum in the Debenture,
payment by the Debtor of the relevant fees and interest for any period in respect of the
Obligations at the current rate at which the Obligations bear interest for such period will be
deemed to be payment in satisfaction of the interest payment for the same period under the
Debenture.










 



- 3 -



9. No Merger. The Debenture will not operate by way of merger of any of the Obligations
and no judgment recovered by the Agent will operate by way of merger of or in any way affect the
security of the Debenture which is in addition to and not in substitution for any other Security
now or hereafter held by the Agent with respect to the Obligations.



10. Paramountcy. Notwithstanding the form and terms of the Debenture and the provisions of
this Agreement, (a) the Agent will not claim or realize an amount under or in respect of the
Debenture in excess of the aggregate Obligations, from time to time, of the Debtor to the Agent and
the Lenders and (b) the provisions of the Debenture and this Agreement are subject to the
provisions of the Credit Documents relating to the subject matter thereof. If there are any
inconsistencies or ambiguities between the terms of the other Credit Documents and the Debenture or
this Agreement, then the terms of the other Credit Documents will govern in all respects to the
extent necessary to eliminate such express inconsistencies or ambiguities.



11. Payment and Satisfaction. The Agent will, when required by the Credit Documents, at
the request of the Debtor, deliver up the Debenture to the Debtor and the Agent will, at the
written request and sole expense of the Debtor, execute and deliver to the Debtor releases,
discharges and such other instruments as will be required to effectively release the Security
Interest (as defined in the Debenture) and reassign and reconvey the Collateral (as defined in the
Debenture) to the Debtor.



12. Successors and Assigns. The provisions of this Agreement will be binding upon and
enure to the benefit of the Agent, each Lender and the Debtor and their respective successors and
assigns permitted by the Credit Documents.



13. Governing Law. This Agreement will be governed by and construed in accordance with the
Laws of the Province of Alberta and the Laws of Canada applicable therein without giving effect to
the conflict of law principles thereof.



14. Attornment. For the purposes of all legal proceedings, the parties hereto each hereby
submit to the jurisdiction of the courts of the Province of Alberta and this Agreement will be
deemed to have been performed in the Province of Alberta and the courts of the Province of Alberta
will have jurisdiction to entertain any action arising under this Agreement. Notwithstanding the
foregoing, nothing herein will be construed nor operate to limit the right of the Agent or any
Storm Lender to commence any action relating hereto in any other jurisdiction, nor to limit the
right of the courts of any other jurisdiction to take jurisdiction over any action or matter
relating hereto.



15. Statutory Waivers. To the fullest extent permitted by Law, the Debtor waives all of
the rights, benefits and protections given by the provisions of any existing or future statute
which imposes limitations upon the powers, rights or remedies of a secured party or upon the
methods of realization of security, including, without limitation, any seize or sue or
anti-deficiency statute or any similar provisions of any other statute. The Debtor waives the
right to receive from the Agent or the Lenders a copy of any notices of registration or recordation
of this Agreement, including, without limitation, any security notice, caveat, financing statement,
financing change statement or other statement or document filed or registered at any time in
respect of this










 



- 4 -



Agreement, or any verification statement or other statement or document issued by
any registry that confirms or evidences registration or recordation of or relates to this
Agreement.



16. Notice. Any notice, demand, consent, approval or other communication from the Debtor
to the Agent, or vice versa, will be in writing and will be sufficiently given or made if given in
the manner prescribed in the Credit Documents.



17. Time of Essence. Time will be of the essence in this Agreement.




EXECUTION:




               THIS AGREEMENT has been executed effective the date first written above.



	 	 	 	 	 
	 	[•]	 
	 
	 	Per:  	 	 
	 	Name: 	 
	 	Title 	 
	 
	 	ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN BY:



CANADIAN IMPERIAL BANK OF COMMERCE, as Agent for and on behalf of the Lenders

 	 
	 	Per:  	 	 
	 	Name:  	 	 
	 	Title 	 
	 
	 	Per:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 










 



 




SCHEDULE D

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF DEMAND DEBENTURE




	 	 	 
	Agent and
	 	 
	Address:

	 	CANADIAN IMPERIAL BANK OF COMMERCE,
	 

	 	in its capacity as Agent as defined below,
	 

	 	BCE Place
	 

	 	161 Bay Street, 8th Floor
	 

	 	Toronto, Ontario
	 

	 	M5J 2S8
	 
	 	 
	Date: [•]
	 	 





PREAMBLE:





	A.	 	Protective Products of America, Inc., as borrower (the “Borrower”), Canadian Imperial Bank of
Commerce and those other financial institutions who from time to time become lenders
thereunder (collectively, the “Lenders”) and Canadian Imperial Bank of Commerce, as
administrative agent for the Lenders (in such capacity, together with its successors and
assigns in such capacity, the “Agent”) are parties to a Credit Agreement dated as September
21, 2004 between Ceramic Protection Corporation (the former name of the Borrower), as
borrower, and CIBC, as administrative agent, and CIBC and those other financial institutions
from time to time party thereunder (such Credit Agreement, as it may be amended, restated,
amended and restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”).
	 
	B.	 	[•] is a body corporate formed under the laws of the state of [•] and has agreed to grant to
the Agent, for its own benefit and on behalf of the Lenders a guarantee in respect of the
obligations of the Borrower under the Credit Documents (as defined herein).
	 
	C.	 	To secure the payment and performance of the Principal Sum, [•] (the “Debtor”) has agreed to
grant to the Agent, for its own benefit and on behalf of the Lenders, a security interest over
the Collateral in accordance with the terms of this Debenture.
	 
	D.	 	The Lenders have agreed to share the Security, including, without limitation, this Debenture,
on a pari passu basis with each other pursuant to Section 3.2 of the Credit Agreement.
	 
	E.	 	Capitalized words and phrases used but not otherwise defined in this Debenture will have the
meanings set out in the Credit Agreement.










 



- 2 -







ARTICLE 1

PROMISE TO PAY





	1.1	 	The Debtor, for value received, hereby acknowledges itself indebted and promises to pay ON
DEMAND to or to the order of Canadian Imperial Bank of Commerce, as Agent for its own benefit
and on behalf of the Lenders from time to time or any subsequent holder or holders of this
Debenture, the Principal Sum set out below in lawful money of Canada at such place as the
Agent, from time to time, may designate by notice in writing to the Debtor, and to pay
interest thereon from the date of demand at the rate set out below in like money at the same
place on the last day of each month following demand and, should the Debtor at any time make
default in payment of any principal or interest, to pay interest both before and after default
and judgment on the amount in default at the same rate in like money at the same place on the
same dates.





ARTICLE 2

PRINCIPAL SUM





	2.1	 	The “Principal Sum” is Canadian $75,000,000.





ARTICLE 3

INTEREST RATE





	3.1	 	The “Interest Rate” will be a nominal rate per annum equal to 21% per annum.





ARTICLE 4

SECURITY





	4.1	 	As general and continuing collateral security for the due payment of the Principal Sum,
interest and all other monies payable hereunder or from time to time secured hereby and as
security for the performance and observance of the covenants and agreements on the part of the
Debtor herein contained, the Debtor hereby mortgages and charges to and in favour of the Agent
for and on behalf of the Lenders, as and by way of a first floating charge, all of the
Debtor’s present and after-acquired real property and grants to and in favour of the Agent for
and on behalf of the Lenders a first priority security interest in and to all of the Debtor’s
present and after-acquired personal property, tangible and intangible; in each case, of every
nature and kind and wherever situate. In this Debenture, the mortgages, charges and security
interests hereby constituted are called the “Security Interest” and the subject matter of the
Security Interest is called the “Collateral”.
	 
	4.2	 	Until the Security Interest becomes enforceable, the Debtor, subject to the terms of the
Credit Agreement, the Security and the other documents, instruments and agreements entered
into pursuant thereto (the “Credit Documents”), may dispose of or deal with the Collateral in
the ordinary course of its business and for the purpose of carrying on the same, so that
purchasers thereof or parties dealing with the Debtor take title thereto free and clear of the
Security Interest. In the event of any such disposition in the ordinary










 



- 3 -


	 	 	course of business, the Agent will, at the written request of the Debtor which will include
a certificate of the Debtor stating that such Collateral is being dealt with or disposed of
in accordance with this Section 4.2, release its Security Interest over the Collateral which
has been disposed.
	 
	4.3	 	The Security Interest will not extend or apply to the last day of the term of any lease of
real property or agreement therefor, but upon the enforcement of the Security Interest, the
Debtor will stand possessed of such last day in trust to assign the same at the direction of
the Agent to any Person acquiring such term.
	 
	4.4	 	The Debtor confirms that value has been given, that the Debtor has rights in the Collateral,
and that the Debtor and the Agent, for and on behalf of the Lenders, have not agreed to
postpone the time for attachment of the Security Interest to any of the Collateral. In
respect of Collateral which is acquired after the date of execution hereof, the time for
attachment will be the time when the Debtor acquires such Collateral.
	 
	4.5	 	The Agent is the party entitled to receive all amounts payable hereunder and to give a
discharge hereof.
	 
	4.6	 	The Security Interest does not and will not extend to, and the Collateral will not include,
any agreement, right, franchise, licence or permit (the “Contractual Rights”) to which the
Debtor is a party or of which the Debtor has the benefit, to the extent that the creation of
the Security Interest would constitute a breach of the terms of or permit any Person to
terminate the Contractual Rights, but the Debtor will hold its interest therein in trust for
the Agent and will assign such Contractual Rights to the Agent forthwith upon obtaining the
consent of the other party or parties thereto.
	 
	4.7	 	The Debtor agrees and acknowledges that the Security Interest and the Collateral are being
shared on a pari passu basis between the Lenders and this Debenture is being held by the Agent
for its own benefit and on behalf of the Lenders.





ARTICLE 5

ENFORCEMENT





	5.1	 	Remedies. Subject to the terms of the Credit Documents, upon the occurrence and
during the continuance of any Event of Default, the Agent will be entitled to exercise any of
the remedies specified below:






	 	(a)	 	Receiver. The Agent may appoint by instrument in writing one or more
receivers, managers or receiver/ manager for the Collateral or the business and
undertaking of the Debtor pertaining to the Collateral (the “Receiver”). Any such
Receiver will have, in addition to any other rights, remedies and powers which a
Receiver may have at Law, in equity or by statute, the rights and powers set out in
clauses (b) through (d) in this Section 5.1. In exercising such rights and powers, any
Receiver will act as and for all purposes will be deemed to be the agent of the Debtor
and neither the Agent nor any Lender will be responsible for any act or










 



- 4 -


	 	 	 	default of any Receiver. The Agent may remove any Receiver and appoint another from
time to time. No Receiver appointed by the Agent need be appointed by, nor need its
appointment be ratified by, or its actions in any way supervised by, a court.
	 
	 	(b)	 	Power of Sale. Any Receiver may sell, consign, lease or otherwise dispose of
any Collateral by public auction, private tender, private contract, lease or deferred
payment with or without notice, advertising or any other formality, all of which are
hereby waived by the Debtor. Any Receiver may, at its discretion establish the terms
of such disposition, including terms and conditions as to credit, upset, reserve bid or
price. All payments made pursuant to such dispositions will be credited against the
Principal Sum only as they are actually received. Any Receiver may buy in, rescind or
vary any contract for the disposition of any Collateral and may dispose of any
Collateral without being answerable for any loss occasioned thereby. Any such
disposition may take place whether or not the Receiver has taken possession of the
Collateral.
	 
	 	(c)	 	Pay Liens and Borrow Money. Any Receiver may pay any liability secured by any
actual or threatened Lien against any Collateral. Any Receiver may borrow money for
the maintenance, preservation or protection of any Collateral or for carrying on any of
the business or undertaking of the Debtor pertaining to the Collateral and may grant
Liens in any Collateral (in priority to the Security Interest or otherwise) as security
for the money so borrowed. The Debtor will forthwith upon demand reimburse the
Receiver for all such payments and borrowings and such payments and borrowings will be
secured hereby and will be added to the money hereby secured and bear interest at the
rate set forth in Section 3.1 hereof.
	 
	 	(d)	 	Dealing with Collateral. Any Receiver may seize, collect, realize, dispose of,
enforce, release to third parties or otherwise deal with any Collateral in such manner,
upon such terms and conditions and at such time as it deems advisable, including
without limitation:






	 	(i)	 	to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral;
	 
	 	(ii)	 	to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with 

Section 5.1(d)(i);
	 
	 	(iii)	 	to file any claims or take any action or institute any
proceedings which the Agent may deem to be necessary or desirable for the
collection of the Collateral or to enforce compliance with the terms and
conditions of any contract or any account; and










 



- 5 -


	 	(iv)	 	to perform the affirmative obligations of the Debtor hereunder
(including all obligations of the Debtor pursuant to this Debenture and the
Credit Documents.)






	 	(e)	 	Carry on Business. The Agent or any Receiver may carry on, or concur in the
carrying on of, any or all of the business or undertaking of the Debtor and enter on,
occupy and use (without charge by the Debtor) any of the premises, buildings, plant and
undertaking of, or occupied or used by, the Debtor.
	 
	 	(f)	 	Right to Have Court Appoint a Receiver. The Agent may, at any time, apply to a
court of competent jurisdiction for the appointment of a Receiver, or other official,
who may have powers the same as, greater or lesser than, or otherwise different from,
those capable of being granted to a Receiver appointed by the Agent pursuant to this
Debenture.
	 
	 	(g)	 	Agent May Exercise Rights of a Receiver. In lieu of, or in addition to,
exercising its rights, remedies and powers under clauses (a), (f) and (h) of this
Section 5.1, the Agent has, and may exercise, any of the rights and powers which are
capable of being granted to a Receiver appointed by the Agent pursuant to this
Debenture.
	 
	 	(h)	 	Retention of Collateral. The Agent may elect to retain any Collateral in
satisfaction of the Principal Sum. The Agent may designate any part of the Principal
Sum to be satisfied by the retention of particular Collateral which the Agent considers
to have a net realizable value approximating the amount of the designated part of the
Principal Sum, in which case only the designated part of the Principal Sum will be
deemed to be satisfied by the retention of the particular Collateral.
	 
	 	(i)	 	Limitation of Liability. Neither the Agent nor any Lender will be liable or
accountable for any failure to take possession of, seize, collect, realize, dispose of,
enforce or otherwise deal with any Collateral and none of them will be bound to
institute proceedings for any such purposes or for the purpose of reserving any rights,
remedies and powers of the Agent, the Debtor or any other Person in respect of any
Collateral. If any Receiver or the Agent takes possession of any Collateral, neither
the Agent nor any Receiver will have any liability as a mortgagee in possession or be
accountable for anything except actual receipts.
	 
	 	(j)	 	Extensions of Time. Following the occurrence and during the continuance of any
Event of Default, the Agent may grant renewals, extensions of time and other
indulgences, accept compositions, grant releases and discharges, and otherwise deal or
fail to deal with the Debtor, debtors of the Debtor, guarantors, sureties and others
and with any Collateral as the Agent may see fit, all without prejudice to the
liability of the Debtor to the Agent or the Agent’s rights, remedies and powers under
this Debenture or under any other Credit Documents.










 



- 6 -








	 	(k)	 	Validity of Sale. No Person dealing with the Agent or any Receiver, or with
any officer, employee, agent or solicitor of the Agent or any Receiver will be
concerned to inquire whether the Security Interests have become enforceable, whether
the right, remedy or power of the Agent or the Receiver has become exercisable, whether
the Principal Sum remaining outstanding or otherwise as to the proprietary or
regularity of any dealing by the Agent or the Receiver with any Collateral or to see to
the application of any money paid to the Agent or the Receiver, and in the absence of
fraud on the part of such Person such dealings will be deemed, as regards such Person,
to be within the rights, remedies and powers hereby conferred and to be valid and
effective accordingly.
	 
	 	(l)	 	Effect of Appointment of Receiver. As soon as the Agent takes possession of
any Collateral or appoints a Receiver, all powers, functions, rights and privileges of
the Debtor including, without limitation, any such powers, functions, rights and
privileges which have been delegated to directors, officers of the Debtor or committees
with respect to such Collateral will cease, unless specifically continued by the
written consent of the Agent or the Receiver.
	 
	 	(m)	 	Time for Payment. If the Agent demands payment of the Principal Sum that is
payable on demand or if the Principal Sum is otherwise due by maturity or acceleration,
it will be deemed reasonable for the Agent to exercise its remedies immediately if such
payment is not made, and any days of grace or any time for payment that might otherwise
be required to be afforded to the Debtor at Law or in equity is hereby irrevocably
waived.
	 
	 	(n)	 	No Implied Waiver. The rights of the Lenders and the Agent (whether arising
under this Debenture, any other Credit Document, any other agreement or at law or in
equity) will not be capable of being waived or varied otherwise than by an express
waiver or variation in writing, and in particular any failure to exercise or any delay
in exercising any of such rights will not operate as a waiver or variation of that or
any other such right; any defective or partial exercise of any of such rights will not
preclude any other or further exercise of that or any other such right, and no act or
course of conduct or negotiation on the part of any Lenders or the Agent or on its
behalf will in any way preclude any Lenders or the Agent from exercising any such right
or constitute a suspension or any variation of any such right.
	 
	 	(o)	 	Rights Cumulative. The rights, remedies and powers conferred by this Section
5.1 are in addition to, and not in substitution for, any other rights, remedies or
powers that the Agent or any Lender may have under this Debenture, at Law, in equity,
by or under the Personal Property Security Act (Alberta) or by any other statute or
agreement. The Agent may proceed by way of any action, suit or other proceeding at law
or in equity and no right, remedy or power of the Agent or any Lender will be exclusive
of or dependent on any other. The Agent or any Lender may exercise any of their
rights, remedies or powers separately or in combination and at any time










 



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	5.2	 	Application of Amounts Received. The proceeds of or any other amount from time to
time received by the Agent or the Receiver will be applied as follows: first, to the payment
in full of all reasonable fees of the Agent and all out-of-pocket costs, fees and expenses
(including, without limitation, reasonable legal fees on a solicitor and his own client full
indemnity basis) incurred by the Agent and any Receiver or other enforcement agent appointed
by the Agent or a court of competent jurisdiction, as the case may be, in connection with the
collection or enforcement of the Principal Sum owed to the Lenders, the enforcement of the
Security Interest or the preservation of the Collateral; second, in payment to the Agent of
the Principal Sum and other amounts payable hereunder; and third, the balance, if any, will be
paid, subject to applicable Law, to the Debtor.
	 
	5.3	 	Deliver Possession. If the Agent or any Receiver exercises its rights herein to take
possession of the Collateral, the Debtor will upon request from the Agent or any such
Receiver, assemble and deliver possession of the Collateral at such place or places as
directed by the Agent or any such Receiver.
	 
	5.4	 	Release. If the Debtor pays to the Agent the balance of the Principal Sum
(including, without limitation, all amounts forming part thereof) with interest thereon as set
forth in this Debenture and any and all other amounts that are payable to the Agent on or in
relation to the repayment thereof, then the Agent will, at the written request and sole
expense of the Debtor, reassign and reconvey the Collateral to the Debtor and release the
Security Interest.





ARTICLE 6

WAIVER





	6.1	 	The Debtor hereby covenants and agrees with the Agent and the Lenders that:






	 	(a)	 	The Land Contracts (Actions) Act (Saskatchewan) will have no application to any
action as defined therein, with respect to the Credit Documents; and
	 
	 	(b)	 	The Limitation of Civil Rights Act (Saskatchewan) will have no application to






	 	(i)	 	the Credit Documents;
	 
	 	(ii)	 	any Lien for the payment of money made, given created or
contemplated by the Credit Documents;
	 
	 	(iii)	 	any agreement or instrument renewing or extending or
collateral to the Credit Documents or renewing or extending or collateral to
any Lien referred to or mentioned in subparagraph (b)(ii)(i) of this Section
6.1; or
	 
	 	(iv)	 	the rights, powers or remedies of the parties under the Credit
Documents or Lien, agreement or instrument referred to or mentioned in
subparagraphs (b)(ii) or (b)(iii) of this Section 6.1.










 



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ARTICLE 7

ATTORNEY IN FACT





	7.1	 	The Debtor hereby irrevocably constitutes and appoints the Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent’s discretion, for the purpose of
carrying out the terms of this Debenture, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Debenture and which the Debtor being required to take or
execute has failed to take or execute. The Debtor hereby ratifies all that said attorneys
will lawfully do or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and will be irrevocable until the Principal Sum has been
unconditionally and irrevocably paid and performed in full. The Debtor also authorizes the
Agent, at any time and from time to time, to execute any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral in connection with the
sale provided for in Section 5.1(b) hereof.





ARTICLE 8

EXPENSES





	8.1	 	The Debtor agrees to pay the Agent forthwith on demand all reasonable costs, charges and
expenses, including, without limitation, all reasonable legal fees (on a solicitor and his own
client full indemnity basis), incurred by the Agent in connection with the administration,
recovery or enforcement of payment of any amounts payable hereunder whether by realization or
otherwise. All such sums will be secured hereby and will be added to the money hereby secured
and bear interest at the rate set forth in Section 3.1 hereof.





ARTICLE 9

PLEDGE OF DEBENTURE





	9.1	 	This Debenture may be assigned, deposited or pledged by the Debtor as security for its
present and future obligations. This Debenture will not be deemed to have been redeemed by
reason of the account of the Debtor having ceased to be in debit while this Debenture was so
assigned, deposited or pledged and no payment will reduce the amount owing or payable under
this Debenture unless specifically appropriated to and noted on this Debenture by the Agent at
the time of payment.





ARTICLE 10

PRESENTMENT





	10.1	 	The Debtor hereby expressly waives demand for payment, presentment, protest and notice of
dishonour of this Debenture. Any failure or omission by the Agent to present this Debenture
for payment, protest or provide notice of dishonour will not invalidate or










 



- 9 -


	 	 	adversely affect in any way any demand for payment or enforcement proceeding taken under
this Debenture.





ARTICLE 11

ENUREMENT AND ASSIGNMENT





	11.1	 	The provisions of this Debenture will be binding upon the Debtor and its successors and will
enure to the benefit of the Agent and each Lender and their respective successors and assigns.
Subject to the terms of the Credit Documents, the Debtor will not assign this Debenture
without the Agent’s prior written consent.





ARTICLE 12

GOVERNING LAW





	12.1	 	This Debenture will be governed by and construed in accordance with the Laws of the Province
of Alberta and the Laws of Canada applicable therein, without giving effect to the conflict of
law principles thereof. Without prejudice to the ability of the Agent or any Lender to
enforce this Debenture in any other proper jurisdiction, the Debtor hereby irrevocably submits
and attorns to the jurisdiction of the courts of the Province of Alberta, or any appellate
courts thereof, for the purposes of this Debenture.





ARTICLE 13

SEVERABILITY





	13.1	 	If any portion of this Debenture or the application thereof to any circumstance will be held
invalid or unenforceable by a court of competent jurisdiction from which no further appeal has
or is taken, to an extent that does not affect in a fundamental way the operation of this
Debenture, the remainder of the provision in question, or its application to any circumstance
other than that to which it has been held invalid or unenforceable, and the remainder of this
Debenture will not be affected thereby and will be valid and enforceable to the fullest extent
permitted by applicable Law.





ARTICLE 14

CONSENT AND WAIVER





	14.1	 	No consent or waiver by the Agent will be effective unless made in writing and signed by an
authorized officer of the Agent.





ARTICLE 15

NOTICE





	15.1	 	Any notice, demand, consent, approval or other communication from the Debtor to the Agent, or
vice versa, will be in writing and will be sufficiently given or made if given in the manner
prescribed in the Credit Documents.










 



- 10 -







ARTICLE 16

INCONSISTENCY





	16.1	 	To the extent that there is any inconsistency or ambiguity between the provisions of this
Debenture and the other Credit Documents, the provisions of the Credit Agreement will govern
to the extent necessary to eliminate such inconsistency or ambiguity.





ARTICLE 17

RECEIPT OF COPY





	17.1	 	The Debtor acknowledges receipt of an executed copy of this Debenture. The Debtor waives the
right to receive any amount that it may now or hereafter be entitled to receive (whether by
way of damages, fine, penalty, or otherwise) by reason of the failure of the Agent to deliver
to the Debtor a copy of any financing statement or any statement issued by any registry that
confirms registration of a financing statement relating to this Debenture.




THIS DEBENTURE executed at ___, ___effective the date first written
above.




	 	 	 	 	 
	 	[•]

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
















 





SCHEDULE E

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF MATERIAL SUBSIDIARY GUARANTEE





			
	TO:	 	CANADIAN IMPERIAL BANK OF COMMERCE,

in its capacity as Agent as defined below

BCE Place

161 Bay Street, 8th Floor

Toronto, Ontario

M5J 2S8





PREAMBLE:





	A.	 	Protective Products of America, Inc., as borrower (the “Borrower”), Canadian Imperial Bank of
Commerce and those other financial institutions who from time to time become lenders
thereunder (collectively, the “Lenders”) and Canadian Imperial Bank of Commerce, as
administrative agent for the Lenders (in such capacity, together with its successors and
assigns in such capacity, the “Agent”) are parties to a Credit Agreement dated as September
21, 2004 between Ceramic Protection Corporation (the former name of Protective Products of
America, Inc.), as borrower, and CIBC, as administrative agent, and CIBC and those other
financial institutions from time to time party thereunder (such Credit Agreement, as it may be
amended, restated, amended and restated, supplemented or otherwise modified from time to time,
the “Credit Agreement”).
	 
	B.	 	[•] (hereinafter, the “Guarantor”) is a body corporate formed under the laws of [•] and has
agreed to guarantee the Obligations (as hereinafter defined) of the Borrower.
	 
	C.	 	It is in the interest of the Guarantor that the Credit Facilities are and continue to be
extended to the Borrower and therefore the Guarantor has agreed to execute and deliver this
Guarantee.




Capitalized terms used in this Guarantee and which are not otherwise defined herein shall, for all
purposes, have the same meaning given to such terms in the Credit Agreement.




AGREEMENT:




     For good and valuable consideration, the receipt and sufficiency of which are hereby
conclusively acknowledged by the Guarantor, the Guarantor hereby agrees in favour of the Agent as
follows:


1. Defined Terms. In this Guarantee, capitalized words and phrases which are not otherwise
defined have the respective meanings given to such terms in the Credit Agreement. In addition, the
term “Credit Documents” when used herein means the Credit Agreement, the Security and any other
documents, instruments or agreements entered into pursuant thereto.










 



- 2 - 



2. Guarantee. The Guarantor hereby unconditionally and irrevocably guarantees the prompt
payment and performance to the Agent forthwith upon demand by the Agent, following a demand by the
Agent, of all indebtedness, liabilities and obligations of any kind whatsoever (whether direct or
indirect, joint or several, absolute or contingent, matured or unmatured) which the Borrower has
from time to time incurred or is under or may hereafter incur or be under to the Agent under, in
connection with or with respect to the Credit Documents (collectively, the “Obligations”). All
amounts payable by the Guarantor hereunder will be paid to Agent at the address of Agent shown
above or as otherwise directed in writing by Agent. Any amounts payable by the Guarantor under
this Guarantee which are not paid forthwith upon demand therefor by Agent will bear interest from
the date of such demand at the rate or rates applicable to the corresponding Obligations.



3. Continuing, Unconditional and Absolute Guarantee. The obligations of the Guarantor
under this Guarantee are continuing, unconditional and absolute and, without limiting the
generality of the foregoing, will not be released, discharged, diminished, limited or otherwise
affected by (and the Guarantor hereby consents to or waives, as applicable, to the fullest extent
permitted by applicable law):





	 	(a)	 	any extension, other indulgence, renewal, settlement, discharge, compromise,
waiver, subordination or release in respect of any Obligation, security, Person or
otherwise;
	 
	 	(b)	 	any waiver, modification, restatement or amendment of or supplement to any
Credit Document or the Obligations, including any increase or decrease in the
principal, the rates of interest or other amounts payable thereunder;
	 
	 	(c)	 	any change in the time, manner or place of payment of or in any other term of
any Credit Document or the Obligations, or the failure on the part of the Borrower to
carry out any of its Obligations under any Credit Document;
	 
	 	(d)	 	any impossibility, impracticability, frustration of purpose, illegality, force
majeure or act of government;
	 
	 	(e)	 	any release, non-perfection or invalidity of any direct or indirect security
for any Obligation;
	 
	 	(f)	 	any change in the existence, structure, constitution, name, objects, powers,
business, control or ownership of the Borrower or any other Person, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the Borrower or any
other Person or its assets;
	 
	 	(g)	 	the existence of any claim, set-off or other rights which the Guarantor may
have at any time against the Borrower, Agent or any other Person, whether in connection
herewith or any unrelated transactions;










 



- 3 - 








	 	(h)	 	any invalidity, illegality or unenforceability relating to or against the
Borrower or any provision of applicable law purporting to prohibit the payment by the
Borrower of the principal or interest under the Obligations;
	 
	 	(i)	 	any limitation, postponement, prohibition, subordination or other restriction
on the rights of Agent to receive payment of the Obligations;
	 
	 	(j)	 	any release, substitution or addition of any cosigner, endorser or other
guarantor of the Obligations;
	 
	 	(k)	 	any defence arising by reason of any failure of Agent to make any presentment,
demand for performance, notice of non-performance, protest, and any other notice,
including notice of all of the following: acceptance of this Guarantee, partial payment
or non-payment of all or any part of the Obligations and the existence, creation, or
incurring of new or additional Obligations;
	 
	 	(l)	 	any defence arising by reason of any failure of Agent to proceed against the
Borrower or any other Person, to proceed against, apply or exhaust any security held
from the Borrower or any other Person for the Obligations, to proceed against, apply or
exhaust any security held from the Guarantor or any other Person for this Guarantee or
to pursue any other remedy in the power of Agent whatsoever;
	 
	 	(m)	 	any law which provides that the obligation of a guarantor must neither be
larger in amount nor in other respects more burdensome than that of the principal
obligation or which reduces a guarantor’s obligation in proportion to the principal
obligation;
	 
	 	(n)	 	any defence arising by reason of any incapacity, lack of authority, or other
defence of the Borrower or any other Person, or by reason of any limitation,
postponement, prohibition on Agent’s right to receive payment of the Obligations or any
part thereof, or by reason of the cessation from any cause whatsoever of the liability
of the Borrower or any other Person with respect to all or any part of the Obligations,
or by reason of any act or omission of Agent or others which directly or indirectly
results in the discharge or release of the Borrower or any other Person or all or any
part of the Obligations or any security or guarantee therefor, whether by contract,
operation of law or otherwise;
	 
	 	(o)	 	any defence arising by reason of any failure by Agent to obtain, perfect or
maintain a perfected or prior (or any) security interest in or lien, security interest,
charge or other encumbrance (a “Lien”) upon any property of the Borrower or any other
Person, or by reason of any interest of Agent in any property, whether as owner thereof
or the holder of a security interest therein or Lien thereon, being invalidated,
voided, declared fraudulent or preferential or otherwise set aside, or by reason of any
impairment by Agent of any right to recourse or collateral;
	 
	 	(p)	 	any defence arising by reason of the failure of Agent to marshal any assets;










 



- 4 - 








	 	(q)	 	any defence based upon any failure of Agent to give to the Borrower or the
Guarantor notice of any sale or other disposition of any property securing any or all
of the Obligations or any guarantee thereof, or any defect in any notice that may be
given in connection with any sale or other disposition of any such property, or any
failure of Agent to comply with any provision of applicable law in enforcing any Lien
upon any such property, including any failure by Agent to dispose of any such property
in a commercially reasonable manner;
	 
	 	(r)	 	any dealing whatsoever with the Borrower or other Person or any security,
whether negligently or not, or any failure to do so;
	 
	 	(s)	 	any defence based upon or arising out of any bankruptcy, insolvency,
reorganization, moratorium, arrangement, readjustment of debt, liquidation or
dissolution proceeding commenced by or against the Borrower or any other Person,
including any discharge of, or bar against collecting, any of the Obligations, in or as
a result of any such proceeding; or
	 
	 	(t)	 	any other act or omission to act or delay of any kind by the Borrower, Agent or
any other Person or any other circumstance whatsoever, whether similar or dissimilar to
the foregoing, which might, but for the provisions of this Section 3, constitute a
legal or equitable discharge, limitation or reduction of the Guarantor’s obligations
hereunder (other than the irrevocable and unconditional payment in full of all of the
Obligations).





     The foregoing provisions apply (and the foregoing waivers will be effective) even if the
effect of any action (or failure to take action) by Agent is to destroy or diminish the Guarantor’s
subrogation rights, the Guarantor’s right to proceed against the Borrower for reimbursement, the
Guarantor’s right to recover contribution from any other guarantor or any other right or remedy.


4. Release of Obligations. This Guarantee will remain in full force and effect until the
Obligations are irrevocably and unconditionally performed and paid in full.



5. Validity of Agreements. The Guarantor will not contest or otherwise challenge the
legality, validity or enforceability of any term, condition or other provision contained in the
Credit Documents. The Guarantor represents to Agent that it is familiar with and consents to the
terms and conditions of the Credit Documents.



6. Assumption of Authority. Agent is entitled to assume, notwithstanding any investigation
by or on behalf of Agent, the power and authority of the officers, directors, agents or other
Persons acting or purporting to act on behalf of the Borrower or the Guarantor, and any Obligations
made or created in reliance upon the exercise of such power or authority will be guaranteed
hereunder.



7. Recourse against Borrower. Agent is not required to exhaust its recourse against the
Borrower, any other guarantor or other Person or under any other security or other guarantee before
being entitled to payment from the Guarantor under this Guarantee.










 



- 5 - 



8. Settlement of Accounts. Any account settled or stated between Agent and the Borrower
will be accepted by the Guarantor as prima facie evidence, subject to manifest error, that the
amount thereby appearing due by the Borrower to Agent is so due.



9. No Waiver. No delay on the part of Agent in exercising any of its options, powers or
rights, or partial or single exercise thereof, will constitute a waiver thereof. No waiver of any
of Agent’s rights hereunder, and no modification or amendment of this Guarantee, will be deemed to
be made by Agent unless the same will be in writing, duly signed by Agent and the Guarantor, and
each such waiver, if any, will apply only with respect to the specific instance involved, and will
in no way impair the rights of Agent or the liabilities of the Guarantor to Agent in any other
respect at any other time.



10. Guarantee of all Credit Obtained; Indemnity. All moneys and credits in fact borrowed
or obtained by the Borrower from Agent under the Credit Documents will be deemed to form part of
the Obligations notwithstanding any incapacity, disability or lack or limitation of status or power
of the Borrower or of the directors, officers, employees, partners or agents thereof, or that the
Borrower may not be a legal entity, or any irregularity, defect or informality in the borrowing or
obtaining of such moneys or credits. If any amount in respect of the Obligations is not
recoverable from the Guarantor hereunder on the basis of a guarantee, then, notwithstanding any
other provision hereof, the Guarantor will indemnify and save harmless Agent from and against any
and all losses, damages, costs, expenses or liabilities suffered or incurred by Agent resulting or
arising from or relating to any failure of the Borrower to unconditionally and irrevocably pay in
full or fully perform the Obligations as and when due provided that the amount of such
indemnification shall not exceed the amount of such Obligations and any amounts due and owing
hereunder.



11. Stay of Acceleration. If acceleration of the time for payment, or the liability of the
Borrower to make payment, of any amount specified to be payable by the Borrower in respect of the
Obligations is stayed, prohibited or otherwise affected upon the insolvency, bankruptcy,
reorganization or winding-up of the Borrower or any moratorium affecting the payment of the
Obligations, all such amounts otherwise subject to acceleration or payment will nonetheless be
deemed for all purposes of this Guarantee to be and to become due and payable by the Borrower and
will be payable by the Guarantor hereunder forthwith on demand by Agent.



12. Reinstatement. If, at any time, all or any part of any payment previously applied by
AGENT to any Obligation is or must be rescinded or returned by Agent for any reason whatsoever
(including the insolvency, bankruptcy, or reorganization of the Borrower), such Obligation will,
for the purpose of this Guarantee, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence, notwithstanding such application by Agent, and
this Guarantee will continue to be effective or be reinstated, as the case may be, as to such
Obligation, all as though such application by Agent had not been made.



13. Assignment and Postponement. All present and future indebtedness and liability of the
Borrower to the Guarantor is hereby assigned by the Guarantor to Agent and postponed to the
Obligations and all moneys received by the Guarantor in respect thereof will be received in trust
for and, unless prior written authorization from Agent to the contrary will have been obtained by
the Guarantor, will be paid over to Agent upon demand by Agent. If Agent receives from the










 



- 6 - 



Guarantor a payment or payments in full or on account of the liability of the Guarantor hereunder,
the Guarantor will not be entitled to claim repayment against the Borrower until Agent’s claims
against the Borrower have been irrevocably and unconditionally paid in full. In case of
liquidation, winding up or bankruptcy of the Borrower (whether voluntary or involuntary) or any
composition with creditors or scheme of arrangement, Agent will have the right to rank for its full
claims and receive all dividends or other payments in respect thereof in priority to the Guarantor
until the claims of Agent have been irrevocably and unconditionally paid in full, and the Guarantor
will continue to be liable hereunder for any balance which may be owing to Agent by the Borrower.
In the event of the valuation by Agent of any of its security and/or the retention thereof by
Agent, such valuation and/or retention will not, as between Agent and the Guarantor, be considered
as a purchase of such security, or as payment or satisfaction of the Obligations or any part
thereof. The foregoing provisions of this Section 13 will not in any way limit or lessen the
liability of the Guarantor under any other section of this Guarantee.



14. No Subrogation. Notwithstanding any payment made by the Guarantor under this Guarantee
or any set off or application of funds of the Guarantor by Agent, the Guarantor will have no right
of subrogation to, and waives, to the fullest extent permitted by law, any right to enforce any
remedy which Agent now has or may hereafter have against the Borrower, until all of the Obligations
have been irrevocably and unconditionally paid in full; and until that time, the Guarantor waives
any benefit of, and any right to participate in, any security, whether real or personal property,
now or hereafter held by Agent for the Obligations.



15. Foreign Currency Obligations. The Guarantor will make payment relative to each
Obligation in the currency (the “Original Currency”) in which the Borrower is required to pay such
Obligation. If the Guarantor makes payment relative to any Obligation to Agent in a currency (the
“Other Currency”) other than the Original Currency (whether voluntarily or pursuant to an order or
judgment of a court or tribunal of any jurisdiction), such payment will constitute a discharge of
the liability of the Guarantor hereunder in respect of such Obligation only to the extent of the
amount of the Original Currency which Agent is able to purchase at Calgary, Alberta with the amount
it receives on the date of receipt. If the amount of the Original Currency which Agent is able to
purchase is less than the amount of such currency originally due to it in respect to the relevant
Obligation, the Guarantor will indemnify and save Agent harmless from and against any loss or
damage arising as a result of such deficiency. This indemnity will constitute an obligation
separate and independent from the other obligations contained in this Guarantee, will give rise to
a separate and independent cause of action, will apply irrespective of any indulgence granted by
Agent and will continue in full force and effect notwithstanding any judgment or order in respect
of any amount due hereunder or under any judgment or order.



16. Taxes and Set-off by Guarantor. All payments to be made by the Guarantor hereunder
will be made without set-off or counterclaim and without deduction for any taxes, levies, duties,
fees, deductions, withholdings, restrictions or conditions of any nature whatsoever. If at any
time any applicable law, regulation or international agreement requires the Guarantor to make any
such deduction or withholding from any such payment, the sum due from the Guarantor with respect to
such payment will be increased to the extent necessary to ensure that, after the making of such
deduction or withholding, Agent receives a net sum equal to the sum which it would have received
had no deduction or withholding been required.










 



- 7 - 



17. Payment of Expenses; Indemnification. The Guarantor will pay on demand, and will
indemnify and save Agent harmless from, any and all liabilities, costs and expenses (including
out-of-pocket legal fees and expenses on a solicitor and his own client full indemnity basis and
any sales, goods and services or other similar taxes payable to any government, regulatory or
administrative agency or with respect to any such liabilities, costs and expenses) (a) incurred by
Agent in the preparation, registration, administration or enforcement of this Guarantee, (b) with
respect to, or resulting from, any failure or delay by the Guarantor in performing or observing any
of its obligations under this Guarantee, or (c) incurred by Agent in performing or observing any of
the other covenants of the Guarantor under this Guarantee.



18. Additional Security. This Guarantee is in addition and without prejudice to any
security of any kind (including other guarantees) now or hereafter held by or for the benefit of
Agent and any other rights or remedies that Agent might have.



19. Governing law; Attornment. This Guarantee will be governed by and construed in
accordance with the laws of the Province of Alberta and the laws of Canada applicable therein,
without giving affect to the conflict of law principles thereof. Without prejudice to the ability
of Agent to enforce this Guarantee in any other proper jurisdiction, the Guarantor irrevocably
submits and attorns to the non-exclusive jurisdiction of the courts of the Province of Alberta, or
any appellate court thereof, for the purposes of this Guarantee.



20. Successors and Assigns. The provisions of this Guarantee will be binding upon and
enure to the benefit of Agent and its successors and assigns and will be binding upon the Guarantor
and its successors. The Guarantor’s obligations hereunder will not be assigned or delegated. Agent
may from time to time, and without notice to or the consent of the Guarantor, assign or transfer
all or any of the Obligations or any interest therein in accordance with the Credit Documents and,
notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof,
any such Obligation or part thereof so transferred or assigned will remain an “Obligation” for the
purposes of this Guarantee and any immediate and successive assignee or transferee of any
Obligation or any interest therein will, to the extent of the interest so assigned or transferred,
be entitled to the benefit of, and the right to enforce, this Guarantee.



21. Time. Time will be of the essence in this Guarantee.



22. Severability. If any portion of this Guarantee or the application thereof to any
circumstance will be held invalid or unenforceable by a court of competent jurisdiction from which
no further appeal has or is taken, to an extent that does not affect in a fundamental way the
operation of this Guarantee, the remainder of the provision in question, or its application to any
circumstance other than that to which it has been held invalid or unenforceable, and the remainder
of this Guarantee will not be affected thereby and will be valid and enforceable to the fullest
extent permitted by applicable law.



23. Notice. All notices, demands, offers, consents and other instruments and
communications to be made or given pursuant to this Guarantee will be in writing and may be made or
given by personal delivery or by transmittal by telecopier or other electronic means of
communication addressed to the respective parties as follows:










 



- 8 - 




To Agent:



Canadian Imperial Bank of Commerce

BCE Place

199 Bay Street

Commerce Court West, 6th Floor

Toronto, Ontario

M5L 1A2

Telecopier:     (416) 214-8749

Attention:      General Manager, Special Loans




To the Guarantor:



[•]

[•]

[•]

Telecopier: [•]

Attention: [•]




With a copy to:



[•]

[•]

[•]

[•]



Attention: [•]



or to such other address or telecopy number as any party may from time to time notify the other in
accordance with this Section 23. Any notice, demand, offer, consent, instrument or other
communication made or given by personal delivery or by telecopier or other electronic means of
communication during normal business hours at the place of receipt on a Banking Day will be
conclusively deemed to have been made or given at the time of actual delivery or transmittal, as
the case may be, on such Banking Day. Any notice, demand, offer, consent, instrument or other
communication made or given by personal delivery or by telecopier or other electronic means of
communication after normal business hours at the place of receipt or otherwise than on a Banking
Day will be conclusively deemed to have been made or given at 11:00 a.m. (Toronto time) on the
first Banking Day following actual delivery or transmittal, as the case may be.



24. Borrower’s Financial Condition. The Guarantor is fully aware of the financial
condition of the Borrower.



25. Negotiated Document. This Guarantee is the result of negotiations between the
Guarantor and Agent and have been reviewed by counsel to the Guarantor and Agent and is the product
of both the Guarantor and Agent. Accordingly, this Guarantee is not to be construed against Agent
merely because of its involvement in this Guarantee’s preparation.










 



- 9 - 



26. Interpretation. The division of this Guarantee into sections and paragraphs, and the
insertion of headings, is for convenience of reference only and will not affect the construction or
interpretation of this Guarantee. Unless the context otherwise requires, words importing the
singular include the plural and vice versa, and words importing gender include all genders. When
used in this Guarantee, the word “including” (or includes) means “including (or includes) without
limitation”.



27. Receipt of Copy. The Guarantor acknowledges receipt of an executed copy of this
Guarantee. The Guarantor waives the right to receive any amount that it may now or hereafter be
entitled to receive (whether by way of damages, fine, penalty or otherwise) by reason of the
failure of Agent to deliver to the Guarantor a copy of any financing statement or any statement
issued by any registry that confirms registration of a financing statement relating to this
Guarantee.




     THIS GUARANTEE executed effective the [•] day of [•], [•].



	 	 	 
	 

	 	[•]
	 
	 	 
	 

	 	By:
	 

	 	 

	 

	 	Name:
	 

	 	Title:













 



 




SCHEDULE F

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF GENERAL SECURITY AGREEMENT










 



 


SCHEDULE G

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF DEPOSIT ACCOUNT CONTROL AGREEMENT











 



 




SCHEDULE H

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF NOTICE OF BORROWING




	 	 	 
	TO:

	 	CANADIAN IMPERIAL BANK OF COMMERCE (“CIBC”)
	 
	Re:

	 	PROTECTIVE PRODUCTS OF AMERICA, INC. — Amended and Restated Credit Agreement made as of January 30, 2009 (as amended, restated, amended and restated, supplemented or modified from time to time, the “Amended and Restated Credit Agreement”).





1. THE DRAWDOWN DATE IS THE                     DAY OF                    , 200                    .



2. Pursuant to Section 4.2 of the Amended and Restated Credit Agreement, the undersigned hereby
irrevocably requests that the following Accommodations under the Revolving Loan be made available:




Canadian Dollars




	 	 	 	 	 
	TYPE OF ACCOMMODATION

	 	PRINCIPAL AMOUNT
	 	TERM
	 

	 	 
	 	 
	 
	 	 	 	 
	Canadian Prime Rate Loan

	 	 

	 	N/A






U.S. Dollars




	 	 	 	 	 
	TYPE OF ACCOMMODATION

	 	PRINCIPAL AMOUNT
	 	TERM
	 

	 	 
	 	 
	 
	 	 	 	 
	U.S. Base Rate Loans

	 	 

	 	N/A





3. No Default or Event of Default has occurred and is continuing immediately prior to delivery of
this Notice of Borrowing and No Default or Event of Default shall occur immediately after this
Drawdown except as set out on Schedule “A” attached hereto.



4. Each representation and warranty of the Borrower contained in the Credit Agreement are true and
correct, except to the extent such representation and warranty may be rendered untrue by the
existence of Specified Defaults (as defined in the Forbearance Agreement).



5. Capitalized terms used herein and not otherwise defined herein have the meanings given to them
by the Amended and Restated Credit Agreement.










 



- 2 - 




     DATED this                    
day of                     ,
200                    ,
at                     ,
                    .



	 	 	 	 	 	 	 
	 	 	PROTECTIVE PRODUCTS OF AMERICA, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 












 



- 3 - 


SCHEDULE “A”

TO THE NOTICE OF BORROWING

DATED                                        





 











 





SCHEDULE I

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




MATERIAL ADVERSE CHANGES



The September 30, 2008 write-off associated with the discontinued operations of Ceramic Protection
Corporation of America.










 



 




SCHEDULE J

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




LIST OF SUBSIDIARIES AND INDEBTEDNESS




Subsidiaries of the Borrower




Ceramic Protection Corporation of America (Delaware)

Protective Products International Corp. (Florida)

CPC Holding Corporation of America (Delaware)

Protective Products of North Carolina, LLC (North Carolina)




Material Subsidiaries of the Borrower




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Location of	 	 	 	Authorized	 	 
	Material	 	Jurisdiction of	 	Chief	 	Location of	 	Share or	 	Issued Share or
	Subsidiaries	 	Incorporation	 	Executive	 	Business and	 	Partnership	 	Partnership
	Legal Name	 	or Formation	 	Office	 	Assets	 	Capital	 	Capital
	Ceramic Protection
Corporation of
America

	 	Delaware
	 	Florida
	 	Delaware, North
Carolina and
Florida
	 	 	3,320,200	 	 	2,160,676 Class A
common shares 




7,200 Class B
common shares
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Protective Products
International Corp.

	 	Florida
	 	Florida
	 	Delaware, North
Carolina and
Florida
	 	 	1,000	 	 	200 common shares
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	CPC Holding
Corporation of
America

	 	Delaware
	 	Florida
	 	Delaware, North
Carolina and
Florida
	 	 	1,000	 	 	1,000 common shares
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Protective Products
of North Carolina,
LLC

	 	North Carolina
	 	Florida
	 	Delaware, North
Carolina and
Florida
	 	 	N/A	 	 	N/A






Material Indebtedness



1. Indebtedness arising under the Credit Agreement;










 



 - 2 - 



2. U.S. $5,100,000 in principal of 12% Notes due September 2009 issued pursuant to a Subordinated
Debenture; and



3. U.S. $6,000,000 in principal 10% Notes due March 2011 issued pursuant to a Subordinated
Convertible Debenture.










 



 




SCHEDULE K

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF COMPLIANCE CERTIFICATE




	 	 	 
	TO:

	 	CANADIAN IMPERIAL BANK OF COMMERCE (“CIBC”)
	 
	 	 
	Re:

	 	PROTECTIVE PRODUCTS OF AMERICA, INC. - Amended and Restated Credit
Agreement made as of January 30, 2009 between Protective Products of
America, Inc. (the “Borrower”) and CIBC, as lender and agent (the
“Agent”) (as amended, restated, supplemented or otherwise modified
from time to time, the “Amended and Restated Credit Agreement”)






     This Compliance Certificate is delivered pursuant to Section 10.1(i) of the Amended and Restated Credit Agreement.



     I,                     , am the duly appointed [insert name of officer] of the
Borrower and hereby certify in such capacity for and on behalf of the Borrower, and not in my
personal capacity and without assuming any personal liability whatsoever, after making due inquiry:




	 	(a)	 	This Compliance Certificate applies to the month ending                     ,                     .
	 
	 	(b)	 	I am familiar with and have examined the provisions of the Amended and Restated
Credit Agreement and I have made such reasonable investigations of corporate records
and inquiries of other officers and senior personnel of the Borrower and each of its
Material Subsidiaries as I have deemed necessary for purposes of this Compliance
Certificate.
	 
	 	(c)	 	Based on the foregoing, no Default or Event of Default has occurred and is
continuing except as set out on Exhibit 1 attached hereto.
	 
	 	(d)	 	The Debt to EBITDA Ratio for the month ended                     ,                     , is
                    , as calculated and presented on Exhibit 2 hereto.
	 
	 	(e)	 	The shareholders’ equity (in accordance with GAAP) of the Borrower for the
month ended                     ,                      is $                    .
	 
	 	(f)	 	The Current Ratio for the month ended                     ,                     , is                     ,
as calculated and presented on Exhibit 3 hereto.
	 
	 	(g)	 	The Excess Cash Flow for the month ended                     ,                     , is
                    , as calculated and presented on Exhibit 4 hereto.










 



 - 2 - 








	 	(h)	 	The update of the Projections to show actual results for the month to which
this Compliance Certificate is delivered as compared to forecast, including an update
of the Projections to show actual results for the month ended                     ,                     ,
as compared to forecast for the month ended                     ,                     , is as calculated
and presented on Exhibit 5 hereto. The Projections are based upon estimates and
assumptions stated therein, all of which Borrower believes to be reasonable and fair in
light of current conditions and current facts known to the Borrower and, as of the
delivery of this Compliance Certificate, reflect the Borrower’s good faith and
reasonable estimates of its future financial performance, including future projections
of Excess Cash Flow, and of the other information projected therein for the period set
forth therein.
	 
	 	(i)	 	The Borrower’s Net Income for the month ended                     ,                     , is
                    , as calculated and presented on Exhibit 6 hereto.
	 
	 	(j)	 	The Borrower has no Subsidiaries other than [list Subsidiaries here].





     Capitalized terms used herein and not otherwise defined herein have the meanings given to them
by the Amended and Restated Credit Agreement.



     Dated at
                     this                    
day of                     , 200     .



	 	 	 	 	 	 	 
	 	 	PROTECTIVE PRODUCTS OF AMERICA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 













 



 




EXHIBIT 1

TO THE COMPLIANCE CERTIFICATE

DATED                    




DEFAULTS OR EVENTS OF DEFAULT










 



 - 2 - 


EXHIBIT 2

TO THE COMPLIANCE CERTIFICATE

DATED                    




DEBT TO EBITDA RATIO










 



 




EXHIBIT 3

TO THE COMPLIANCE CERTIFICATE

DATED                    




CURRENT RATIO










 



 - 2 - 


EXHIBIT 4

TO THE COMPLIANCE CERTIFICATE

DATED                    




EXCESS CASH FLOW










 



 - 3 - 


EXHIBIT 5

TO THE COMPLIANCE CERTIFICATE

DATED                    



PROJECTIONS









 



 - 4 - 




EXHIBIT 6

TO THE COMPLIANCE CERTIFICATE

DATED                    



NET INCOME










 



 




SCHEDULE L

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009



FORM OF INSTRUMENT OF ADHESION



	 	 	 
	TO:

	 	CANADIAN IMPERIAL BANK OF COMMERCE (“CIBC”), as Agent
	 
	 	 
	AND TO:

	 	PROTECTIVE PRODUCTS OF AMERICA, INC.
	 
	 	 
	RE:

	 	Amended and Restated Credit Agreement dated as of January 30, 2009
(as amended, restated, supplemented or otherwise modified from
time to time, the “Amended and Restated Credit Agreement”) between
Protective Products of America, Inc. (collectively, the
“Borrower”), as borrower, and CIBC, and those other financial
institutions who from time to time become lenders thereunder
(collectively, the “Lenders”) and CIBC, as agent for the Lenders






     Unless otherwise indicated, words and phrases defined in the Amended and Restated Credit
Agreement have the same meanings when used herein.




	1.	 	[Name of new lender] (the “Assignee”) acknowledges that its proper officers have received and
reviewed a copy of the Amended and Restated Credit Agreement and the other Documents and
further acknowledges the provisions of the Amended and Restated Credit Agreement and the other
Documents.
	 
	2.	 	The Assignee desires to become a Lender under the Amended and Restated Credit Agreement.
[Name of assigning lender] (the “Assignor”) has agreed to and does hereby sell, assign and
transfer to the Assignee an interest in the Credit Facilities equal to the commitment as
defined and calculated in paragraph 4 below, and accordingly, the Assignee has agreed to
execute this Instrument of Adhesion and deliver an original of it to the Agent, and a copy to
each of the Lenders and the Borrower.
	 
	3.	 	The Assignee, by its execution and delivery of this Instrument of Adhesion, agrees that from
and after the date hereof it will be a Lender under the Amended and Restated Credit Agreement
and agrees to be bound by and to perform, where required, all of the terms, conditions and
covenants of the Amended and Restated Credit Agreement and the other Documents applicable to a
Lender, but its liability to make Advances will be limited to its share of such Advances based
upon its commitment identified in paragraph 4 below subject to the provisions of the Amended
and Restated Credit Agreement.
	 
	4.	 	The Assignee confirms that its Individual Revolving Loan Commitment Amount under the Amended
and Restated Credit Agreement will be as follows:




[State amount thereof in Canadian Dollars or U.S. Dollars, as applicable.]










 



 - 2 - 





	5.	 	The Assignee agrees to assume all liabilities and obligations of the Assignor as Lender under
the Amended and Restated Credit Agreement and the other Documents to the extent of the
Assignee’s commitment as provided for herein and the Assignor is hereby released and
discharged from such obligations and liabilities to the same extent but only in respect of
such obligations and liabilities arising from and after the time this Instrument of Adhesion
becomes effective pursuant to the terms of the Amended and Restated Credit Agreement.
	 
	6.	 	Notices will be given to the Assignee in the manner provided for in the Amended and Restated
Credit Agreement at the following address:





	 	 	 
	[*]
	 	 
	 
	 	 
	Attention: 

Telecopier:

	 	[*]

[*]





This Instrument of Adhesion will be binding upon the Assignee and its successors and permitted
assigns.




Dated this                      day of                     , 20                    .




	 	 	 	 	 	 	 
	 	 	[NAME OF ASSIGNEE]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 






*            *            *



The Assignor hereby acknowledges the above Instrument of Adhesion and agrees that its Individual
Revolving Loan Commitment Amount is reduced by an amount equal to the commitment assigned to the
Assignee hereby.




Dated this                      day of                     , 20                    .



	 	 	 	 	 	 	 
	 	 	[NAME OF ASSIGNOR]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 






*            *            *










 



 - 3 - 



The Agent hereby agrees to accept the Assignee as a Lender under the Amended and Restated Credit
Agreement and hereby acknowledges the above Instrument of Adhesion.




	 	 	 	 	 	 	 
	 	 	CANADIAN IMPERIAL BANK OF COMMERCE	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 





The Borrower hereby agree to accept the Assignee as a Lender under the Amended and Restated Credit
Agreement and hereby acknowledge the above Instrument of Adhesion.




	 	 	 	 	 	 	 
	 	 	PROTECTIVE PRODUCTS OF AMERICA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 












 



 - 4 - 


SCHEDULE M

PROTECTIVE PRODUCTS OF AMERICA, INC.

AMENDED AND RESTATED CREDIT AGREEMENT

DATED JANUARY 30, 2009




FORM OF BORROWING BASE CERTIFICATE




	 	 	 
	TO:

	 	CANADIAN IMPERIAL BANK OF COMMERCE (“CIBC”)
	 
	 	 
	Re:

	 	PROTECTIVE PRODUCTS OF AMERICA, INC. - Amended and Restated Credit
Agreement made as of January 30, 2009 between Protective Products of
America, Inc., as Borrower (the “Borrower”), and CIBC, as lender and
agent (as amended, restated, supplemented or otherwise modified from
time to time, the “Amended and Restated Credit Agreement”)






          This Borrowing Base Certificate is delivered pursuant to Section 10.1(1) of the Amended and Restated Credit Agreement.



          I,                     , am the duly appointed [insert name of officer] of the
Borrower and hereby certify in such capacity for and on behalf of the Borrower, and not in my
personal capacity and without assuming any personal liability whatsoever, after making due inquiry:




	 	(a)	 	This Borrowing Base Certificate applies to the week of                     ,                     .
	 
	 	(b)	 	75% of the Eligible Accounts Receivable of the Borrower (including U.S. Federal
Government receivables aged more than 90 days) as of the date hereof is Cdn. $
                    , as presented in Exhibit 1 hereto.
	 
	 	(c)	 	90% of the Export Development Canada insured accounts receivable of the
Borrower as of the date hereof is Cdn. $                     , as presented in Exhibit 2
hereto.
	 
	 	(d)	 	50% of the value of eligible inventory comprised of raw materials and finished
goods (excluding any work in progress) of the Borrower as of                      is Cdn.
$                    , as presented in Exhibit 3 hereto.
	 
	 	(e)	 	The Borrowing Base under the Revolving Loan is Cdn. $                    
                    , as calculated and presented in Exhibit 4 hereto.












 



 




     Capitalized terms used herein and not otherwise defined herein have the meanings given to them
by the Amended and Restated Credit Agreement.



          Dated at                     ,                      this      
day of                    , 200     .



	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 













 



 




EXHIBIT 1




ELIGIBLE ACCOUNTS RECEIVABLE











 



 




EXHIBIT 2




EDC ACCOUNTS RECEIVABLE











 



 




EXHIBIT 3




ELIGIBLE INVENTORY











 



 




EXHIBIT 4




BORROWING BASE





-1-