Loan Agreement Dated March 15, 2004



 




Discussion Draft: March 12, 2004 4:56 PM


EXHIBIT 4.19


LOAN AGREEMENT




between




AINSWORTH LUMBER CO. LTD.




as the Borrower




and




GMAC COMMERCIAL FINANCE CORPORATION – CANADA




as Agent and as a Lender




dated as of




March 15, 2004





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	1. DEFINITIONS
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	1.2 Accounting Terms
	 	 	1	 
	1.3 Interpretation
	 	 	1	 
	1.4 References
	 	 	2	 
	1.5 Interest and Fee Calculations and Payments
	 	 	2	 
	1.6 Interest Act (Canada)
	 	 	3	 
	2. LOANS AND LETTERS OF CREDIT
	 	 	3	 
	2.1 Total Facility
	 	 	3	 
	2.2 Revolving Loans
	 	 	3	 
	2.3 Letters of Credit
	 	 	11	 
	2.4 Continuation and Conversion Elections
	 	 	19	 
	2.5 BA Equivalent Loans
	 	 	20	 
	3. INTEREST AND OTHER CHARGES
	 	 	20	 
	3.1 Interest
	 	 	20	 
	3.2 Default Rate
	 	 	21	 
	3.3 Unused Line Fee
	 	 	21	 
	3.4 Maximum Interest Rate
	 	 	21	 
	3.5 Agency Fee
	 	 	22	 
	4. PAYMENTS AND PREPAYMENTS
	 	 	22	 
	4.1 Revolving Loans
	 	 	22	 
	4.2 Place and Form of Payments; Extension of Time
	 	 	22	 
	4.3 Application and Reversal of Payments
	 	 	22	 
	4.4 Indemnity for Returned Payments
	 	 	23	 
	4.5 Funding Losses
	 	 	23	 
	4.6 Currency
	 	 	24	 
	4.7 Payments as Revolving Loans
	 	 	24	 
	4.8 Taxes
	 	 	24	 
	4.9 Mandatory Prepayments
	 	 	25	 
	5. LENDERS’ BOOKS AND RECORDS; MONTHLY STATEMENTS
	 	 	25	 
	6. COLLATERAL
	 	 	26	 
	6.1 Grant of Agent’s Liens
	 	 	26	 
	6.2 Perfection and Protection of Agent’s Liens
	 	 	27	 
	6.3 Location of Collateral
	 	 	28	 
	6.4 Title to, Liens on and Sale and Use of Collateral
	 	 	28	 
	6.5 Appraisals
	 	 	28	 
	6.6 Access and Examination
	 	 	29	 
	6.7 Insurance and Condemnation
	 	 	30	 
	6.8 Collateral Reporting
	 	 	31	 







 









 






	 	 	 	 	 
	6.9 Accounts
	 	 	32	 
	6.10 Collection of Accounts; Payments
	 	 	34	 
	6.11 Inventory
	 	 	35	 
	6.12 Right to Cure
	 	 	36	 
	6.13 Power of Attorney
	 	 	36	 
	6.14 Agent’s Rights, Duties and Liabilities
	 	 	37	 
	7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
	 	 	37	 
	7.1 Books and Records
	 	 	37	 
	7.2 Financial Information
	 	 	38	 
	7.3 Notices to Agent
	 	 	40	 
	8. GENERAL WARRANTIES AND REPRESENTATIONS
	 	 	41	 
	8.1 Authorization, Validity and Enforceability of this Agreement and the Loan Documents
	 	 	42	 
	8.2 Validity and Priority of Agent’s Liens
	 	 	42	 
	8.3 Organization and Qualification
	 	 	42	 
	8.4 Corporate Name; Prior Transactions
	 	 	43	 
	8.5 Subsidiaries and Affiliates
	 	 	43	 
	8.6 Financial Statements and Projections
	 	 	43	 
	8.7 Capitalization
	 	 	43	 
	8.8 Solvency
	 	 	43	 
	8.9 Debt
	 	 	43	 
	8.10 Distributions
	 	 	44	 
	8.11 Title to Property
	 	 	44	 
	8.12 Adequate Assets
	 	 	44	 
	8.13 Real Property; Leases
	 	 	44	 
	8.14 Trade Names
	 	 	44	 
	8.15 Litigation
	 	 	44	 
	8.16 Restrictive Agreements
	 	 	44	 
	8.17 Labour Disputes
	 	 	45	 
	8.18 Environmental Laws
	 	 	45	 
	8.19 No Violation of Law
	 	 	47	 
	8.20 No Default
	 	 	47	 
	8.21 Plans
	 	 	47	 
	8.22 Taxes
	 	 	48	 
	8.23 Aboriginal Claims
	 	 	48	 
	8.24 Event of Default
	 	 	49	 
	8.25 Authority to Incur Debts
	 	 	49	 
	8.26 No Material Adverse Change
	 	 	49	 
	8.27 Disclosure
	 	 	49	 
	8.28 Workers’ Compensation
	 	 	49	 
	8.29 Real Estate
	 	 	49	 
	8.30 Material Agreements
	 	 	50	 
	9. AFFIRMATIVE AND NEGATIVE COVENANTS
	 	 	50	 
	9.1 Taxes and Other Obligations
	 	 	50	 







 









 






	 	 	 	 	 
	9.2 Corporate Existence and Good Standing
	 	 	51	 
	9.3 Compliance with Law and Agreements
	 	 	51	 
	9.4 Maintenance of Property and Insurance
	 	 	51	 
	9.5 Environmental Laws
	 	 	52	 
	9.6 Plans
	 	 	53	 
	9.7 Mergers, Consolidations, Acquisitions or Sales
	 	 	53	 
	9.8 Distributions; Capital Changes
	 	 	53	 
	9.9 Transactions Affecting Collateral or Obligations
	 	 	54	 
	9.10 Guarantees
	 	 	54	 
	9.11 Debt
	 	 	54	 
	9.12 Prepayment
	 	 	54	 
	9.13 Transactions with Affiliates
	 	 	54	 
	9.15 Business Conducted
	 	 	55	 
	9.16 Liens
	 	 	55	 
	9.17 New Subsidiaries
	 	 	55	 
	9.18 Restricted Investments
	 	 	55	 
	9.19 Minimum Availability
	 	 	55	 
	9.20 Fixed Charge Ratio
	 	 	55	 
	9.21 Reorganization, Amalgamation and Change of Control
	 	 	56	 
	9.22 Purchase Agreement
	 	 	56	 
	9.23 Fiscal Year
	 	 	56	 
	9.24 Further Assurances
	 	 	56	 
	10. CLOSING; CONDITIONS TO LENDING
	 	 	56	 
	10.1 Representations and Warranties; Covenants; Events
	 	 	56	 
	10.2 Closing Date Conditions
	 	 	57	 
	10.3 Release of Proceeds; Drawdown Date
	 	 	58	 
	10.4 Termination of Liens
	 	 	59	 
	10.5 Deliberately Left Blank
	 	 	59	 
	10.6 Closing Fee
	 	 	59	 
	10.7 Payment of Fees and Expenses
	 	 	59	 
	10.8 Required Approvals
	 	 	59	 
	10.9 No Material Adverse Change
	 	 	60	 
	10.10 Proceedings
	 	 	60	 
	11. DEFAULT; REMEDIES
	 	 	60	 
	11.1 Events of Default
	 	 	60	 
	11.2 Remedies
	 	 	63	 
	12. TERM AND TERMINATION
	 	 	65	 
	13. AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
	 	 	65	 
	13.1 Amendments and Waivers
	 	 	65	 
	13.2 Assignments; Participations
	 	 	66	 
	14. THE AGENT
	 	 	66	 







 









 






	 	 	 	 	 
	14.1 Agent
	 	 	67	 
	14.2 Agent’s Responsibility
	 	 	68	 
	14.3 Agent’s Duties
	 	 	69	 
	14.4 Protection of Agent
	 	 	70	 
	14.5 Authorized Waivers, Variations and Omissions
	 	 	71	 
	14.6 Capacity as Agent
	 	 	71	 
	14.7 Certain Rights of the Agent
	 	 	71	 
	14.8 Collateral Matters
	 	 	72	 
	14.9 Restrictions on Actions by Lenders; Sharing of Payments
	 	 	73	 
	16. MISCELLANEOUS
	 	 	73	 
	16.1 Cumulative Remedies; No Prior Recourse to Collateral
	 	 	73	 
	16.2 No Implied Waivers
	 	 	74	 
	16.3 Severability
	 	 	74	 
	16.4 Governing Law
	 	 	74	 
	16.5 Consent to Jurisdiction and Venue; Service of Process
	 	 	74	 
	16.6 Waiver of Jury Trial, Etc.
	 	 	75	 
	16.7 Survival of Representations and Warranties
	 	 	75	 
	16.8 Other Security and Guarantees
	 	 	75	 
	16.9 Fees and Expenses
	 	 	76	 
	16.10 Waiver of Notices
	 	 	77	 
	16.11 Binding Effect; Assignment
	 	 	77	 
	16.12 Modification
	 	 	77	 
	16.13 Counterparts
	 	 	77	 
	16.14 Right of Set-Off
	 	 	77	 
	16.15 Inability to Determine Rates
	 	 	78	 
	16.16 Precedence
	 	 	78	 
	16.17 Confidentiality
	 	 	78	 
	16.18 Illegality
	 	 	79	 
	16.19 Increased Costs
	 	 	79	 
	16.20 Judgment Currency
	 	 	80	 
	16.21 Notices
	 	 	81	 
	16.22 Indemnity of the Agent and the Lenders by the Obligors
	 	 	82	 
	16.23 Limitation of Liability
	 	 	83	 
	16.24 Captions
	 	 	83	 
	16.25 Language
	 	 	83	 







 









 





LOAN AGREEMENT, dated as of March 15, 2004, between GMAC COMMERCIAL FINANCE
CORPORATION – CANADA, a Canadian corporation, with offices at 150 York Street,
Suite 1314, Toronto, ON M5H 3S5, for itself as a Lender and as Agent, each
Person that becomes a Lender hereunder from time to time, and Ainsworth Lumber
Co. Ltd., a British Columbia company (the “Borrower”), with offices at 3194
Bentall IV, 1055 Dunsmuir Street, Vancouver B.C. V7X 1L3 and the corporations
named on the signature pages hereof as Guarantors (the “Guarantors”).




W I T N E S S E T H



WHEREAS the Borrower has requested that the Lenders provide to the Borrower a
revolving credit facility available by way of loans and letters of credit in an
amount not exceeding $50,000,000 to provide for the ongoing working capital
requirements of the Borrower;



AND WHEREAS the Lenders have agreed to grant such facilities upon and subject
to the terms hereof;



NOW THEREFORE, in consideration of the mutual conditions and agreements set
forth in this Agreement and for good and valuable consideration, the receipt of
which is hereby acknowledged, the Borrower, the Agent (as hereinafter defined)
and the Lenders hereby agree as follows:





	1.	 	DEFINITIONS






	1.1	 	Definitions




Capitalized terms used herein and in the other Loan Documents shall, unless
otherwise provided herein or in the other Loan Documents (as the case may be),
have the meanings specified in Schedule 1 hereto (which is hereby made a part
of this Agreement).





	1.2	 	Accounting Terms




Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given in accordance with
GAAP, and all financial computations hereunder shall be computed, unless
otherwise specifically provided herein, in accordance with GAAP as consistently
applied and using the same method for inventory valuation as used in the
preparation of the Financial Statements.





	1.3	 	Interpretation




In this Agreement, (a) the singular includes the plural and vice versa, (b) “in
writing” or “written” includes printing, typewriting, or any electronic means
of communication capable of being visibly reproduced at the point of reception,
including telex, telecopy and telegraph, (c) the headings, the table of
contents, the Articles and the Sections are inserted for convenience only and
are to be ignored in construing this Agreement, (d) a document, notice, note,
bill of exchange or other instrument shall be deemed to have been validly
signed and executed if it has been





 









 








signed by either an original signature or a
facsimile signature or stamp, and (e) all references to amounts of money shall,
unless otherwise indicated, be references to Canadian Dollars.





	1.4	 	References




Any reference made in this Agreement to:





	(a)	 	“Agent” or “Lender” shall so be construed as to include its
successors and permitted assigns;
	 
	(b)	 	A time of day is, unless otherwise stated, a reference to
Toronto time;
	 
	(c)	 	Sections, Articles, Exhibits or Schedules is, unless
otherwise indicated, a reference to Sections and Articles of this
Agreement and to Exhibits and Schedules to this Agreement, as the
case may be. The provisions of each Exhibit and Schedule shall
constitute provisions of this Agreement as though repeated at length
herein;
	 
	(d)	 	A “fiscal quarter” means, in relation to an Obligor, one of
the four (4) consecutive periods in each Fiscal Year each of three
(3) months in duration;
	 
	(e)	 	The phrase “Agreement” means this Loan Agreement as it may be
amended, revised, restated or replaced from time to time and unless
otherwise expressly provided herein, (i) references to agreements
(including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and
other modifications are not prohibited by the terms of any Loan
Document, (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting
the statute or regulation and (iii) all references in any Loan
Documents to a “credit agreement” between the Borrower, Agent and
the Lenders shall be deemed to be a reference to this Loan
Agreement;
	 
	(f)	 	This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent,
the Borrower and the other parties, and are the products of all
parties. Accordingly, they shall not be construed against the
Lenders or the Agent merely because of the Agent’s or Lenders’
involvement in their preparation; and
	 
	(g)	 	all references to parties herein shall unless otherwise
expressly provided, include each such party’s successors and
permitted assigns.






	1.5	 	Interest and Fee Calculations and Payments




Unless otherwise stated wherever in this Agreement reference is made to a rate
of interest or fee “per annum” or a similar expression is used, such interest
or fee will be calculated on the basis of a calendar year of three hundred and
sixty-five (365) days or three hundred and sixty-six (366) days, as the case
may be. Calculations of interest shall be made using the nominal rate method





-2-









 







of calculation, and will not
be calculated using the effective rate method of calculation or on any other basis that gives effect to the principle of deemed
reinvestment of interest. All payments of interest to be made hereunder will
be paid both before and after maturity and before and after
default and/or judgment, if any, until payment thereof, and interest will
accrue on overdue interest, if any.





	1.6	 	Interest Act (Canada)




For the purposes of this Agreement, whenever interest or a fee to be paid
hereunder is to be calculated on the basis of any other period of time that is
less than a calendar year, the yearly rate of interest or the yearly fee to
which the rate determined pursuant to such calculation is equivalent is the
rate so determined multiplied by the actual number of days in the calendar year
in which the same is to be ascertained and divided by such other period of
time, as the case may be.





	2.	 	LOANS AND LETTERS OF CREDIT






	2.1	 	Total Facility




Subject to all of the terms and conditions of this Agreement, the Lenders agree
to make available a total credit facility of up to $50,000,000 for the
Borrower’s use from time to time during the term of this Agreement. This
credit facility shall consist of a revolving line of credit consisting of
Revolving Loans and Letters of Credit as described in Sections 2.2 and 2.3.





	2.2	 	Revolving Loans






	(a)	 	Amounts. Subject to the terms and conditions of this
Agreement and relying upon each of the representations and
warranties of the Borrower and the Guarantors set forth in each of
the Loan Documents, each Lender severally, but not jointly, agrees
to make Loans and issue Letters of Credit to the Borrower, at any
time and from time to time on and after the Closing Date and until
the Maturity Date, in an aggregate principal amount at any time
outstanding not to exceed (except for GMAC CF with respect to
Non-Rateable Loans and except for the Agent with respect to Agent
Advances) such Lender’s Pro Rata Share of the lesser of (x) the
Borrowing Base in effect at such time and (y) the Maximum Revolving
Credit Line, consisting of Revolving Loans and Letters of Credit as
described in Sections 2.2 and 2.3 hereof, respectively (the
“Revolving Credit Facility”). The Lenders, however, in their
unanimous discretion, may elect to exceed the limits of the
Availability of the Borrower on one or more occasions, but if they
do so, neither the Agent nor the Lenders shall be deemed thereby to
have changed the limits of the Availability of the Borrower or to be
obligated to exceed the limits of the Availability of the Borrower
on any other occasion. If, at any time, the unpaid balance of the
Revolving Loans plus the L/C Reserve exceeds the Borrowing Base, or
the unpaid balance of the Revolving Loans plus the aggregate face
amount of all Letters of Credit exceeds the Maximum Revolving Credit
Line, then the Lenders may refuse to make or otherwise restrict
Revolving Loans and/or Letters of Credit on such terms as the
Lenders determine until such excess has




-3-









 






	 	 	been eliminated and the
Borrower shall immediately repay to the Agent, for the account of
the Lenders, in accordance with their respective Pro Rata Shares, an
amount equal to such excess, subject to the Agent’s authority, in
its sole discretion, to make Agent Advances pursuant to the terms
of Section 2.2(h).
	 
	(b)	 	Notice of Borrowing. Subject to paragraph (g) below,
whenever the Borrower desires to borrow revolving loans under this
Section 2.2 (the “Revolving Loans”), the Borrower shall deliver to
the Agent a written request substantially in the form of Exhibit G-5
hereto (a “Notice of Borrowing”) signed by an authorized officer of
the Borrower, no later than, in the case of the Revolving Credit
Facility (i) 11:00 a.m. (Toronto time) on the requested Drawdown
Date, in the case of requests for Prime Rate Loans or (ii) 10:00
a.m. (Toronto time) two (2) Business Days prior to the requested
Drawdown Date in the case of requests for BA Equivalent Loans. The
Notice of Borrowing shall, with respect to any Loans requested,
specify (i) the requested Drawdown Date (which shall be a Business
Day), (ii) the aggregate amount of the requested Loans, (iii)
whether the Loans requested are to be Prime Rate Loans or BA
Equivalent Loans, and (iv) if the requested Loans are to be BA
Equivalent Loans, the requested BA Equivalent Interest Period. In
lieu of delivering the above-described Notice of Borrowing, the
Borrower may give the Agent telephonic notice of such request by the
required time; provided, however, that such telephonic notice shall
be confirmed in writing by delivery to the Agent (A) promptly and in
any event by no later than 12:00 noon (Toronto time) on the same day
of a telecopy of a Notice of Borrowing which has been signed by an
authorized officer of the Borrower, and (B) only if requested by the
Agent, of a Notice of Borrowing containing the original signature of
an authorized officer of the Borrower, delivered by the Borrower to
the Agent to be received by the Agent no later than the next
Business Day such notice is given. Unless otherwise agreed with the
Agent, in the event that the terms of any confirmatory Notice of
Borrowing referred to in the proviso contained in the immediately
preceding sentence shall conflict with the telephonic notice with
respect to which it was delivered, the terms of such telephonic
notice shall govern and the Agent at all times shall be entitled to
rely on such telephonic evidence, regardless of whether any such
written confirmation is received by the Agent.
	 
	(c)	 	Reliance upon Authority. On or prior to the Closing Date and
thereafter prior to any change with respect to any of the
information contained in the following clauses (i) and (ii), the
Borrower shall deliver to the Agent a writing setting forth (i) the
account(s) to which the Agent is authorized to transfer the proceeds
of the Loans requested by the Borrower pursuant to this Section 2.2,
and (ii) the names of the officers authorized to request Loans on
behalf of the Borrower, and shall provide the Agent with a specimen
signature of each such officer. The Agent shall be entitled to rely
conclusively on such officer’s authority to request Loans on behalf
of the Borrower, the proceeds of which are to be transferred to any
of the accounts specified by the Borrower pursuant to the
immediately preceding sentence, until the Agent receives written
notice to the contrary. The Agent shall




-4-









 






	 	 	have no duty to verify the
identity of any individual representing himself as one of the
officers authorized by the Borrower to make such requests on its
behalf.
	 
	(d)	 	No Liability. The Agent shall not incur any liability to the
Borrower as a result of acting upon any notice referred to in
Sections 2.2(b) and (c), which notice the Agent believes in good
faith to have been given by an officer duly authorized by the
Borrower to request Loans on its behalf or for otherwise acting in
good faith under this Section 2.2, and the crediting of Loans to the
Borrower’s deposit account, or transmittal to such Person as the
Borrower shall direct, shall conclusively establish the obligation
of the Borrower to repay such Revolving Loans as provided herein.
Nothing herein shall, however, release or be deemed to release the
Agent in respect of its gross negligence or wilful misconduct.
	 
	(e)	 	Notice Irrevocable. Except to the extent otherwise permitted
to the contrary pursuant to the provisions of Section 15.15, any
Notice of Borrowing (or telephonic notice in lieu thereof) made
pursuant to Section 2.2(b) shall be irrevocable and the Borrower
shall be bound to borrow the funds requested therein in accordance
therewith.
	 
	(f)	 	Deliberately Left Blank.
	 
	(g)	 	Overdraft Loans. In the event that the accounts of the
Borrower are opened and maintained with a Lender, whenever a cheque
or other item is presented for payment against such account in an
amount greater than the then available balance in such account (an
“Overdraft Loan”), such presentation shall be deemed to constitute a
Notice of Borrowing for a Loan on the date of such notice in the
amount of such Overdraft Loan, bearing interest by reference to the
Prime Rate.
	 
	(h)	 	Agent’s Election. Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to Section
2.2(b), the Agent shall elect, in its discretion, (i) to have the
terms of Section 2.2(i) apply to such requested Borrowing, or (ii)
to request GMAC CF to make a Non-Rateable Loan pursuant to the terms
of Section 2.2(j) in the amount of the requested Borrowing;
provided, however, that if GMAC CF declines in its sole discretion
to make a Non-Rateable Loan pursuant to Section 2.2(j), the Agent
shall elect to have the terms of Section 2.2(i) apply to such
requested Borrowing.
	 
	(i)	 	Making of Revolving Loans.






	(i)	 	In the event that the Agent shall elect to have
the terms of this Section 2.2(i) apply to a requested
Borrowing as described in Section 2.2(h), then promptly after
receipt of a Notice of Borrowing or telephonic notice pursuant
to Section 2.2(b), the Agent shall notify the Lenders by
telecopy, telephone or other similar form of transmission of
the requested Borrowing. Each Lender shall make the amount of
such Lender’s Pro Rata Share of the requested Borrowing
available to the




-5-









 






	 	 	Agent in immediately available funds, to such
account of the Agent as the Agent may designate, not later
than 10:00 a.m. (Toronto time) on the Drawdown Date applicable
thereto. After the Agent’s receipt of the
proceeds of such Revolving Loans, the Agent shall make the
proceeds of such Revolving Loans available to the Borrower on
the applicable Drawdown Date by transferring same day funds
equal to the proceeds of such Revolving Loans received by the
Agent to the account of the Borrower, designated in writing
by the Borrower and acceptable to the Agent; provided,
however, that the amount of Revolving Loans so made on any
date shall in no event exceed the Availability on such date.
	 
	(ii)	 	Unless the Agent receives notice from a Lender on
or prior to the Closing Date or, with respect to any Borrowing
after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Lender will not make
available as and when required hereunder to the Agent for the
account of the Borrower the amount of that Lender’s Pro Rata
Share of the Borrowing, the Agent may assume that each Lender
has made such amount available to the Agent in immediately
available funds on the Drawdown Date and the Agent may (but
shall not be so required), in reliance upon such assumption,
make available to the Borrower on such date a corresponding
amount. If and to the extent any Lender shall not have made
its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made
available to the Borrower such amount, that Lender shall on
the Business Day following such Drawdown Date make such amount
available to the Agent, together with interest at the rate
then applicable to Prime Rate Loans for each day during such
period. A notice by the Agent submitted to any Lender with
respect to amounts owing under this subsection shall be
conclusive, absent manifest error. If such amount is so made
available, such payment to the Agent shall constitute such
Lender’s Revolving Loan for all purposes of this Agreement.
If such amount is not made available to the Agent on the
Business Day following the Drawdown Date, the Agent will
notify the Borrower of such failure to fund and, upon demand
by the Agent, the Borrower shall pay such amount to the Agent
for the Agent’s account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate
per annum equal to the Interest Rate applicable at the time to
the Revolving Loans comprising such Borrowing. The failure of
any Lender to make any Revolving Loan on any Drawdown Date
(any such Lender, prior to the cure of such failure, being
hereinafter referred to as a “Defaulting Lender”) shall not
relieve any other Lender of any obligation hereunder to make a
Revolving Loan on such Drawdown Date, but no Lender shall be
responsible for the failure of any other Lender to make the
Revolving Loan to be made by such other Lender on any Drawdown
Date.
	 
	(iii)	 	The Agent shall not be obligated to transfer to
a Defaulting Lender any payments made by the Borrower to the
Agent for the Defaulting Lender’s




-6-









 






	 	 	benefit; nor shall a
Defaulting Lender be entitled to the sharing of any payments
hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by the Agent. The Agent may
hold and, in
its discretion, re-lend to the Borrower the amount of all
such payments received or retained by it for the account of
such Defaulting Lender. Any amounts so re-lent to the
Borrower shall bear interest at the rate applicable to Prime
Rate Loans and for all other purposes of this Agreement shall
be treated as if they were Revolving Loans, provided,
however, that for purposes of voting or consenting to matters
with respect to the Loan Documents and determining Pro Rata
Shares, such Defaulting Lender shall be deemed not to be a
“Lender”. Until a Defaulting Lender cures its failure to
fund its Pro Rata Share of any Borrowing (A) such Defaulting
Lender shall not be entitled to any portion of the Unused
Line Fee and (B) the Unused Line Fee shall accrue in favour
of the Lenders which have funded their respective Pro Rata
Shares of such requested Borrowing and shall be allocated
among such performing Lenders rateably based upon their
relative Commitments. This Section shall remain effective
with respect to such Lender until such time as the Defaulting
Lender shall no longer be in default of any of its
obligations under this Agreement. The terms of this Section
shall not be construed to increase or otherwise affect the
Commitment of any Lender, or relieve or excuse the
performance by the Borrower of its duties and obligations
hereunder.
	 
	(iv)	 	At the Borrower’s request, the Agent or an
Eligible Assignee reasonably acceptable to the Agent and the
Borrower shall have the right (but not the obligation) to
purchase from any Defaulting Lender, and each Defaulting
Lender shall, upon such request, sell and assign to the Agent
or such Eligible Assignee, all of the Defaulting Lender’s
outstanding Commitments hereunder. Such sale shall be
consummated promptly after the Agent has arranged for a
purchase by the Agent or an Eligible Assignee pursuant to an
Assignment and Acceptance, and at a price equal to the
outstanding principal balance of the Defaulting Lender’s
Loans, plus accrued interest and fees, without premium or
discount.






	(j)	 	Making of Non-Rateable Loans.






	(i)	 	In the event the Agent shall elect, with the
consent of GMAC CF, to have the terms of this Section 2.2(j)
apply to a requested Borrowing as described in Section 2.2(h),
GMAC CF shall make a Revolving Loan in the amount of such
Borrowing (any such Revolving Loan made solely by GMAC CF
pursuant to this Section 2.2(j) being referred to as a
“Non-Rateable Loan” and such Revolving Loans being referred to
collectively as “Non-Rateable Loans”) available to the
Borrower on the Drawdown Date applicable thereto by
transferring same day funds to an account of the Borrower,
designated in writing by the Borrower and acceptable to the
Agent. Each Non-Rateable Loan shall be subject to all the
terms and conditions applicable to other Revolving Loans
except that all payments




-7-









 






	 	 	thereon shall be payable to GMAC CF
solely for its own account (and for the account of the holder
of any participation interest with respect to such
Non-Rateable Loan). The Agent shall not request GMAC CF to
make any Non-Rateable Loan if (A) the Agent shall have received
written notice from any Lender that one or more of the
applicable conditions precedent set forth in Section 10 will
not be satisfied on the requested Drawdown Date for the
applicable Borrowing, or (B) the requested Borrowing would
exceed the Availability on such Drawdown Date. The Agent
shall not otherwise be required to determine whether the
applicable conditions precedent set forth in Section 10 have
been satisfied or the requested Borrowing would exceed the
Availability on the Drawdown Date applicable thereto prior to
making, in its sole discretion, any Non-Rateable Loan.
	 
	(ii)	 	The Non-Rateable Loans shall be secured by the
Agent’s Liens in and to the Collateral, shall constitute
Revolving Loans and Obligations hereunder, and shall bear
interest at the rate applicable to the Revolving Loans from
time to time.






	(k)	 	Agent Advances.






	(i)	 	Subject to the limitations set forth in the
provisos contained in this Section 2.2(k), the Agent is hereby
authorized by the Borrower and the Lenders, from time to time
in the Agent’s sole discretion, (A) after the occurrence and
during the continuance of a Default or an Event of Default, or
(B) at any time that any of the other applicable conditions
precedent set forth in Section 9.23 have not been satisfied,
to make Prime Rate Loans to the Borrower on behalf of the
Lenders which the Agent deems necessary or desirable (1) to
preserve or protect the Collateral, or any portion thereof,
(2) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (3) to pay
any other amount chargeable to the Borrower pursuant to the
terms of this Agreement, including costs, fees and expenses as
described in Section 15.9 (any of the advances described in
this Section 2.2(k) being hereinafter referred to as “Agent
Advances”); provided, that the Required Lenders may at any
time revoke the Agent’s authorization contained in this
Section 2.2(k) to make Agent Advances, any such revocation to
be in writing and to become effective prospectively upon the
Agent’s receipt thereof and that the principal amount of Agent
Advances outstanding shall not be permitted to exceed
$5,000,000;
	 
	(ii)	 	The Agent Advances shall be repayable on demand
and secured by the Agent’s Liens in and to the Collateral,
shall constitute Revolving Loans and Obligations hereunder,
and shall bear interest at the rate applicable to Prime Rate
Loans from time to time. The Agent shall notify the Borrower
and each Lender in writing of each such Agent Advance.




-8-









 












	(l)	 	Settlement. It is agreed that each Lender’s funded portion
of the Revolving Loans is intended by the Lenders to be equal at all
times to such Lender’s Pro Rata Share of the outstanding Revolving
Loans. Notwithstanding such agreement, the Agent,
GMAC CF, and the other Lenders agree (which agreement shall not be
for the benefit of or enforceable by the Borrower) that in order to
facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Revolving Loans, the
Non-Rateable Loans and the Agent Advances shall take place on a
periodic basis in accordance with the following provisions:






	(i)	 	The Agent shall request settlement (“Settlement”)
with the Lenders on at least a weekly basis, or on a more
frequent basis if so determined by the Agent, (A) on behalf of
GMAC CF, with respect to each outstanding Non-Rateable Loan,
(B) for itself, with respect to each Agent Advance, and (C)
with respect to collections received, in each case, by
notifying the Lenders of such requested Settlement by
telecopy, telephone or other similar form of transmission, no
later than 11:00 a.m. (Toronto time) on the date of such
requested Settlement (the “Settlement Date”). Each Lender
(other than GMAC CF, in the case of Non-Rateable Loans and the
Agent in the case of Agent Advances) shall make the amount of
such Lender’s Pro Rata Share of the outstanding principal
amount of the Non-Rateable Loans and Agent Advances with
respect to which Settlement is requested available to the
Agent, to such account of the Agent as the Agent may
designate, not later than 1:00 p.m. (Toronto time), on the
Settlement Date applicable thereto, which may occur before or
after the occurrence or during the continuation of a Default
or an Event of Default and whether or not the applicable
conditions precedent set forth in Section 10 have then been
satisfied. Such amounts made available to the Agent shall be
applied against the amounts of the applicable Non-Rateable
Loan or Agent Advance and, together with the portion of such
Non-Rateable Loan or Agent Advance representing GMAC CF’s Pro
Rata Share thereof, shall constitute Revolving Loans of such
Lenders. If any such amount is not made available to the
Agent by any Lender on the Settlement Date applicable thereto,
the Agent shall (A) on behalf of GMAC CF, with respect to each
outstanding Non-Rateable Loan, and (B) for itself, with
respect to each Agent Advance be entitled to recover such
amount on demand from such Lender together with interest
thereon at the Interest Rate then applicable to the Revolving
Loans.
	 
	(ii)	 	Notwithstanding the foregoing, not more than one
(1) Business Day after demand is made by the Agent (whether
before or after the occurrence of a Default or an Event of
Default and regardless of whether the Agent has requested a
Settlement with respect to a Non-Rateable Loan or Agent
Advance), each other Lender (A) shall irrevocably and
unconditionally purchase and receive from GMAC CF or the
Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such Non-Rateable Loan
or Agent Advance equal to such Lender’s Pro Rata Share




-9-









 






	 	 	of such Non-Rateable Loan or Agent Advance and (B) if Settlement has
not previously occurred with respect to such Non-Rateable
Loans or Agent Advances, upon demand by GMAC CF or Agent, as
applicable, shall pay to GMAC CF or Agent, as applicable, as the purchase price of
such participation an amount equal to 100% of such Lender’s
Pro Rata Share of such Non-Rateable Loans or Agent Advances.
If such amount is not in fact made available to the Agent by
any Lender, the Agent shall be entitled to recover such
amount on demand from such Lender together with interest
thereon at the Interest Rate then applicable to Prime Rate
Loans.
	 
	(iii)	 	From and after the date, if any, on which any
Lender purchases an undivided interest and participation in
any Non-Rateable Loan or Agent Advance pursuant to clause (ii)
preceding, the Agent shall promptly distribute to such Lender,
such Lender’s Pro Rata Share of all payments of principal and
interest and all proceeds of Collateral received by the Agent
in respect of such Non-Rateable Loan or Agent Advance.
	 
	(iv)	 	Between Settlement Dates, the Agent, to the
extent no Agent Advances are outstanding, may pay over to GMAC
CF any payments received by the Agent, which in accordance
with the terms of this Agreement would be applied to the
reduction of the Revolving Loans, for application to GMAC CF’s
Revolving Loans including Non-Rateable Loans. If, as of any
Settlement Date, collections received since the then
immediately preceding Settlement Date have been applied to
GMAC CF’s Revolving Loans (other than to Non-Rateable Loans or
Agent Advances in which such Lender has not yet funded its
purchase of a participation pursuant to Section 2.2(l)(ii)
above), as provided for in the previous sentence, GMAC CF
shall pay to the Agent for the account of the Lenders, to be
applied to the outstanding Revolving Loans of such Lenders, an
amount such that each Lender shall, upon receipt of such
amount, have, as of such Settlement Date, its Pro Rata Share
of the Revolving Loans. During the period between Settlement
Dates, GMAC CF with respect to Non-Rateable Loans, the Agent
with respect to Agent Advances, and each Lender with respect
to the Revolving Loans other than Non-Rateable Loans and Agent
Advances, shall be entitled to interest at the applicable rate
or rates payable under this Agreement on the actual average
daily amount of funds employed by GMAC CF, the Agent and the
other Lenders.
	 
	(v)	 	Unless the Agent has received written notice from
a Lender to the contrary, the Agent may assume that the
applicable conditions precedent set forth in Section 10 have
been satisfied and the requested Borrowing will not exceed
Availability on any Drawdown Date for a Revolving Loan or
Non-Rateable Loan.






	(m)	 	Notation. The Agent shall record on its books the principal
amount of the Revolving Loans owing to each Lender, including the
Non-Rateable Loans owing




-10-









 






	 	 	to GMAC CF, and the Agent Advances owing to
the Agent, from time to time. In addition, each Lender is
authorized, at such Lender’s option, to note the date and amount of
each payment or prepayment of principal of such Lender’s Revolving
Loans in its books and records, including computer records, such
books and records constituting presumptive evidence, absent
manifest error, of the accuracy of the information contained
therein.
	 
	(n)	 	Lenders’ Failure to Perform. All Revolving Loans (other than
Non-Rateable Loans and Agent Advances) shall be made by the Lenders
simultaneously and in accordance with their Pro Rata Shares. It is
understood that (i) no Lender shall be responsible for any failure
by any other Lender to perform its obligation to make any Revolving
Loans hereunder, nor shall any Commitment of any Lender be increased
or decreased as a result of any failure by any other Lender to
perform its obligation to make any Revolving Loans hereunder, (ii)
no failure by any Lender to perform its obligation to make any
Revolving Loans hereunder shall excuse any other Lender from its
obligation to make any Revolving Loans hereunder, and (iii) the
obligations of each Lender hereunder shall be several, not joint and
several.






	2.3	 	Letters of Credit






	(a)	 	Agreement to Issue or Cause to Issue. Subject to the terms
and conditions of this Agreement, and in reliance upon the
representations and warranties of the Borrower herein set forth, the
Agent, upon the Borrower’s written request, agrees, (A) to cause
Letters of Credit to be issued for the Borrower’s account or (B) to
provide credit support or enhancement or otherwise confirm payment
(any such credit support, enhancement or payment confirmation being
referred to as “Credit Support”) to the Letter of Credit Issuer in
accordance with this Section 2.3 from time to time during the term
of this Agreement.
	 
	(b)	 	Amounts; Outside Expiration Date. The Agent shall not have
any obligation to take steps to issue or cause to be issued any
Letter of Credit or provide any Credit Support if: (i) the maximum
face amount of the requested Letter of Credit or for which Credit
Support is requested, plus the aggregate undrawn face amount of all
outstanding Letters of Credit under the Revolving Credit Facility is
greater than the Unused Letter of Credit Subfacility at such time;
or (ii) the maximum face amount of the requested Letter of Credit or
for which Credit Support is requested, and all commissions, fees,
and charges due from the Borrower in connection with the opening
thereof, would cause the Availability to be exceeded at such time,
or the unpaid Revolving Loans plus the aggregate undrawn face amount
of all outstanding Letters of Credit due from the Borrower, to
exceed the Maximum Revolving Credit Line Limit. All reasonable and
customary payments made and expenses incurred by the Letter of
Credit Issuer and/or Agent pursuant to or in connection with the
Letters of Credit, including applicable fees and expenses, will be
charged to the Borrower’s loan account as Revolving Loans.




-11-









 






	(c)	 	Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent herein provided,
the obligation of the Agent to issue or cause to be issued any
Letter of Credit or to provide any Credit Support is subject to the
following conditions precedent having been satisfied in a manner
satisfactory to the Agent:






	(i)	 	The Borrower shall have delivered to Letter of
Credit Issuer, at such times and in such manner as such Letter
of Credit Issuer may prescribe, an application in form and
substance satisfactory to such Letter of Credit Issuer of the
Letter of Credit for the issuance of the Letter of Credit and
such other documents as may be reasonably required pursuant to
the terms thereof, and the form and terms of the proposed
Letter of Credit shall be satisfactory to the Letter of Credit
Issuer and the Agent; and
	 
	(ii)	 	As of the date of issuance, no order of any
court, arbitrator or Public Authority shall purport by its
terms to enjoin or restrain banks generally from issuing
letters of credit of the type and in the amount of the
proposed Letter of Credit, and no law, rule or regulation
applicable to banks generally and no request or directive
(whether or not having the force of law) from any Public
Authority with jurisdiction over banks generally shall
prohibit, or request that the proposed Letter of Credit Issuer
refrain from, the issuance of letters of credit generally or
the issuance of such Letters of Credit.






	(d)	 	Issuance of Letters of Credit.






	(i)	 	Request for Issuance. The Borrower shall give
the Agent three (3) Business Days’ prior written notice of the
Borrower’s request for the issuance of a Letter of Credit.
Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of
issuance of such requested Letter of Credit, whether such
Letter of Credit may be drawn in a single or in partial draws,
the date on which such requested Letter of Credit is to expire
(which date shall be a Business Day), the purpose for which
such Letter of Credit is to be issued, and the beneficiary of
the requested Letter of Credit. The Borrower shall attach to
such notice the proposed form of the Letter of Credit that the
Agent is requested to cause to be issued.
	 
	(ii)	 	Responsibilities of the Agent; Issuance. The
Agent shall determine, as of the Business Day immediately
preceding the requested effective date of issuance of the
Letter of Credit set forth in the notice from the Borrower
pursuant to Section 2.3(d)(i), (A) the amount of the
applicable Unused Letter of Credit Subfacility and (B) the
Availability as of such date. If (i) the amount of the
requested Letter of Credit is not greater than the Unused
Letter of Credit Subfacility and (ii) the amount of such
requested Letter of Credit and all commissions, fees, and
charges due from the




-12-









 






	 	 	Borrower in connection with the opening
thereof would not exceed the Availability, the Agent shall, so
long as the other conditions hereof are
met, cause the Letter of Credit Issuer to issue the requested
Letter of Credit on such requested effective date of
issuance.
	 
	(iii)	 	Notice of Issuance. On each Settlement Date,
the Agent shall give notice to each Lender of the issuance of
all Letters of Credit issued since the last Settlement Date.
	 
	(iv)	 	No Extensions or Amendment. The Agent shall not
be obligated to cause the Letter of Credit Issuer to extend or
amend any Letter of Credit issued pursuant hereto unless the
requirements of this Section 2.3 are met as though a new
Letter of Credit were being requested and issued. With
respect to any Letter of Credit which contains any “evergreen”
or automatic renewal provision, each Lender shall be deemed to
have consented to any such extension or renewal unless any
such Lender shall have provided to the Agent, not less than
thirty (30) days prior to the last date on which the
applicable issuer can in accordance with the terms of the
applicable Letter of Credit decline to extend or renew such
Letter of Credit, written notice that it declines to consent
to any such extension or renewal; provided that if all of the
requirements of this Section 2.3 are met and no Default or
Event of Default exists, no Lender shall decline to consent to
any such extension or renewal.






	(e)	 	Payments Pursuant to Letters of Credit.






	(i)	 	Payment of Letter of Credit Obligations. The
Borrower agrees immediately upon demand to reimburse the
Letter of Credit Issuer for any draw under any Letter of
Credit and the Agent for the account of the Lenders upon any
payment pursuant to any Credit Support, and to pay the Letter
of Credit Issuer the amount of all other obligations and other
amounts payable to such Letter of Credit Issuer under or in
connection with any Letter of Credit immediately when due,
irrespective of any claim, setoff, defence or other right
which the Borrower may have at any time against such issuer or
any other Person.
	 
	(ii)	 	Revolving Loans to Satisfy Reimbursement
Obligations. Each drawing under any Letter of Credit shall
constitute a request by the Borrower to the Agent for a
Borrowing of a Prime Rate Loan in the amount of such drawing.
The Drawdown Date with respect to such Borrowing shall be the
date of such drawing. The amount of any drawing under a
Letter of Credit denominated in a currency other than Canadian
Dollars shall be converted into Canadian Dollars at the
Agent’s spot buying rate in New York, New York as at
approximately noon (Toronto time) on the date of such drawing.






	(f)	 	Participations.




-13-









 












	(i)	 	Purchase of Participations. Immediately upon
issuance of any Letter of Credit in accordance with Section
2.3(d), each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or
warranty, an undivided interest and participation equal to
such Lender’s Pro Rata Share of the face amount of such Letter
of Credit or the Credit Support provided through the Agent to
the Letter of Credit Issuer, if not the Agent, in connection
with the issuance of such Letter of Credit (including all
obligations of the Borrower with respect thereto, and any
security therefor or guarantee pertaining thereto).
	 
	(ii)	 	Sharing of Reimbursement Obligation Payments.
Whenever the Agent receives a payment from the Borrower on
account of reimbursement obligations in respect of a Letter of
Credit or Credit Support as to which the Agent has previously
received for the account of the Letter of Credit Issuer
thereof payment from a Lender pursuant to Section
2.3(e)(e)(ii), the Agent shall promptly pay to such Lender
such Lender’s Pro Rata Share of such payment from the
Borrower. Each such payment shall be made by the Agent on the
Business Day on which the Agent receives immediately available
funds paid to such Person pursuant to the immediately
preceding sentence, if received prior to 11 a.m. (Toronto
time) on such Business Day and otherwise on the next
succeeding Business Day.
	 
	(iii)	 	Documentation. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any Letter of
Credit, Credit Support for any Letter of Credit, reimbursement
agreements executed in connection therewith, applications for
any Letter of Credit, and such other documentation as may
reasonably be requested by such Lender.
	 
	(iv)	 	Obligations Irrevocable. The obligations of each
Lender to make payments to the Agent with respect to any
Letter of Credit or with respect to its participation therein
or with respect to any Credit Support for any Letter of Credit
or with respect to the Revolving Loans made as a result of a
drawing under a Letter of Credit and the obligations of the
Borrower for whose account the Letter of Credit or Credit
Support was issued to make payments to the Agent, for the
account of the Lenders, shall be irrevocable, not subject to
any qualification or exception whatsoever, including any of
the following circumstances:






	1.	 	any lack of validity or
enforceability of this Agreement or any of the other
Loan Documents;
	 
	2.	 	the existence of any claim, setoff,
compensation, defence or other right which the Borrower
may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may
be acting), any Lender, the Agent, the issuer of such
Letter of Credit, or any other Person, whether in
connection with this




-14-









 






	 	 	Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions
(including any underlying transactions between the
Borrower or any other Person and the beneficiary named
in any Letter of Credit);
	 
	3.	 	any draft, certificate or any other
document presented under the Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or
inaccurate in any respect;
	 
	4.	 	the surrender or impairment of any
security for the performance or observance of any of the
terms of any of the Loan Documents;
	 
	5.	 	the occurrence of any Default or
Event of Default; or
	 
	6.	 	the failure of the Borrower or the
Guarantors to satisfy the applicable conditions
precedent set forth in Section 10.






	 	 	
(g) Recovery or Avoidance of Payments. In the event any payment
by or on behalf of the Borrower received by the Agent with respect
to any Letter of Credit or Credit Support provided for any Letter of
Credit and distributed by the Agent to the Lenders on account of
their respective participations therein is thereafter set aside,
avoided or recovered from the Agent in connection with any
receivership, liquidation or bankruptcy proceeding, the Lenders
shall, upon demand by the Agent, pay to the Agent their respective
Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by the Agent
upon the amount required to be repaid by it.
	 
	(h)	 	Indemnification; Exoneration; Power of Attorney.






	(i)	 	Indemnification. In addition to amounts payable
as elsewhere provided in this Section 2.3, the Borrower hereby
agrees to protect, indemnify, pay and save the Lenders, Letter
of Credit Issuer and the Agent harmless from and against any
and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable legal fees) which
any Lender, Letter of Credit Issuer or the Agent (other than
GMAC CF in its capacity as Letter of Credit Issuer) may incur
or be subject to as a consequence, direct or indirect, of the
issuance of any Letter of Credit or the provision of any
Credit Support or enhancement in connection therewith, other
than as a result of its gross negligence or wilful misconduct.
The agreement in this Section 2.3(h)(i) shall survive payment
of all Obligations. Nothing contained in this Agreement is
intended to limit the Borrower’s rights, if any, with respect
to the Letter of Credit Issuer which arise as a result of the
letter of credit application and related documents executed by
and between the Borrower and the Letter of Credit Issuer.
	 
	(ii)	 	Assumption of Risk by the Borrower. As among the
Borrower, the Lenders, and the Agent, the Borrower assumes all
risks of the acts and




-15-









 






	 	 	omissions of, or misuse of any of the Letters of Credit by,
the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, except to
the extent the result of its own gross negligence or wilful
misconduct, the Lenders and the Agent shall not be
responsible for: (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document
submitted by any Person in connection with the application
for and issuance of and presentation of drafts with respect
to any of the Letters of Credit, even if it should prove to
be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason;
(C) the failure of the beneficiary of any Letter of Credit to
comply duly with conditions required in order to draw upon
such Letter of Credit; (D) errors, omissions, interruptions,
or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (E) errors in interpretation of technical
terms; (F) any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any
Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of
the proceeds of any drawing under such Letter of Credit; or
(H) any consequences arising from causes beyond the control
of the Lenders or the Agent, including any act or omission,
whether rightful or wrongful, of any present or future de
jure or de facto Public Authority. None of the foregoing
shall affect, impair or prevent the vesting of any rights or
powers of the Agent or any Lender under this Section 2.3(h).
Nothing contained in this Agreement is intended to limit the
Borrower’s rights, if any, with respect to the Letter of
Credit Issuer which arise as a result of the letter of credit
application and related documents executed by and between the
Borrower and the Letter of Credit Issuer.
	 
	(iii)	 	Exoneration. In furtherance and extension, and
not in limitation, of the specific provisions set forth above,
any action taken or omitted by the Agent or any Lender under
or in connection with any of the Letters of Credit or any
related certificates, if taken or omitted in good faith, shall
not put the Agent or any Lender under any resulting liability
to the Borrower or relieve the Borrower of any of its
obligations hereunder to any such Person. Nothing contained
in this Agreement is intended to limit the Borrower’s rights,
if any, with respect to the Letter of Credit Issuer which
arise as a result of the letter of credit application and
related documents executed by and between the Borrower and the
Letter of Credit Issuer.
	 
	(iv)	 	Indemnification by Lenders. The Lenders agree to
indemnify the Letter of Credit Issuer (to the extent not
reimbursed by the Borrower and without limiting the
obligations of the Borrower hereunder) rateably in accordance




-16-









 






	 	 	with their respective Pro Rata Shares, for any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including
attorneys’ fees) or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted
against the Letter of Credit Issuer in any way relating to or
arising out of any Letter of Credit or the transactions
contemplated thereby or any action taken or omitted by the
Letter of Credit Issuer under any Letter of Credit or any
Loan Document in connection therewith; provided that no
Lender shall be liable for any of the foregoing to the extent
it arises from the gross negligence or wilful misconduct of
the Person to be indemnified. Without limitation of the
foregoing, each Lender agrees to reimburse the Letter of
Credit Issuer promptly upon demand for its Pro Rata Share of
any costs or expenses payable by the Borrower to the Letter
of Credit Issuer, to the extent that the Letter of Credit
Issuer is not promptly reimbursed for such costs and expenses
by the Borrower. The agreement contained in this Section
shall survive payment in full of all Obligations.
	 
	(v)	 	Power of Attorney. In connection with all
Inventory financed by Letters of Credit, the Borrower hereby
appoints the Agent, or the Agent’s designee, as its attorney,
with full power and authority: (a) to sign and/or endorse the
Borrower’s name upon any warehouse or other receipts; (b) to
sign the Borrower’s name on bills of lading and other
negotiable and non-negotiable documents; (c) to clear
Inventory through customs in the Agent’s or the Borrower’s
name, and to sign and deliver to customs officials powers of
attorney in the Borrower’s name for such purpose; (d) to
complete in the Borrower’s or the Agent’s name, any order,
sale, or transaction, obtain the necessary documents in
connection therewith, and collect the proceeds thereof; and
(e) to do such other acts and things as are necessary in order
to enable the Agent to obtain possession or control of the
Inventory and to obtain payment of the Obligations. Neither
the Agent nor its designee, as the Borrower’s attorney, will
be liable for any acts or omissions, nor for any error of
judgment or mistakes of fact or law, except for the Agent’s or
such designee’s gross negligence or wilful misconduct. This
power, being coupled with an interest, is irrevocable until
all Obligations have been paid and satisfied.
	 
	(vi)	 	Account Party. The Borrower hereby authorizes
and directs any Letter of Credit Issuer to name the Borrower
as the “Account Party” therein and to deliver to the Agent
(and, of which, the Agent shall provide a copy to the
Borrower) all instruments, documents and other writings and
property received by the Letter of Credit Issuer pursuant to
the Letter of Credit, and to accept and rely upon the Agent’s
instructions and agreements with respect to all matters
arising in connection with the Letter of Credit or the
application therefor.
	 
	(vii)	 	Control of Inventory. In connection with all
Inventory financed by Letters of Credit, the Borrower will, at
the Agent’s request, instruct all suppliers,




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	 	 	carriers, forwarders, customs brokers, warehouses or others
receiving or holding cash, cheques, Inventory, documents or
instruments in which the Agent holds a Lien to deliver them
to the Agent and/or subject to the Agent’s order, and if they
shall come into the Borrower’s possession, to deliver them,
upon request, to the Agent in their original form. The
Borrower shall also, at the Agent’s request, designate the
Agent as the consignee on all bills of lading and other
negotiable and non-negotiable documents.






	(i)	 	Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of Section 2.3(b) and Section 12, any
Letter of Credit or Credit Support is outstanding upon the
termination of this Agreement, then upon such termination the
Borrower shall deposit with the Agent, for the rateable benefit of
the Agent and the Lenders, with respect to each Letter of Credit or
Credit Support then outstanding, as the Required Lenders, in their
discretion shall specify, either (A) a standby letter of credit (a
“Supporting Letter of Credit”) in form and substance satisfactory to
the Agent, issued by an issuer satisfactory to the Agent in an
amount equal to the greatest amount for which such Letter of Credit
or such Credit Support may be drawn plus any fees and expenses
associated with such Letter of Credit or such Credit Support, under
which Supporting Letter of Credit the Agent is entitled to draw
amounts necessary to reimburse the Agent and the Lenders for
payments to be made by the Agent and the Lenders under such Letter
of Credit or Credit Support and any fees and expenses associated
with such Letter of Credit or Credit Support, or (B) cash in amounts
necessary to reimburse the Agent and the Lenders for payments made
by the Agent or the Lenders under such Letter of Credit or such
Credit Support and any fees and expenses associated with such Letter
of Credit. Such Supporting Letter of Credit or deposit of cash
shall be held by the Agent, for the rateable benefit of the Agent
and the Lenders, as security for, and to provide for the payment of,
the aggregate undrawn amount of such Letters of Credit or such
Credit Support remaining outstanding.
	 
	(j)	 	Compensation for Letters of Credit.






	(i)	 	Letter of Credit Fee. The Borrower agrees to pay
to the Agent, for the account of the Lenders, in accordance
with their respective Pro Rata Shares, for each Letter of
Credit issued or Credit Support at its request, a commission
(the “L/C Fee”) in an amount equal to the Applicable Margin
applicable to BA Equivalent Loans on the face amount of such
Letter of Credit, provided, however, that if any Event of
Default occurs, then, from and after the date such Event of
Default occurs until it is cured, or the Letter of Credit
cancelled, as the case may be, the L/C Fee shall be the fee
otherwise applicable plus the Default Rate. The L/C Fee will
be payable monthly, in arrears, on the first Business Day of
each month commencing in the month following the Issue Date of
the Letter of Credit.
	 
	(ii)	 	Issuer Fees and Charges. In addition to the L/C
Fee referred to above, the Borrower shall, in connection with
any Letter of Credit issued at its




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	 	 	request, pay to the Letter of Credit Issuer of any Letter of
Credit (for its own account), such customary fees and other
charges as are charged for letters of credit issued by it,
including, without limitation, fronting fees, its standard
fees for issuing, administering, amending, renewing,
processing, paying and cancelling letters of credit and all
other standard fees associated with issuing or servicing
letters of credit, as and when assessed.






	2.4	 	Continuation and Conversion Elections.






	(a)	 	The Borrower may, upon irrevocable written notice to the
Agent in accordance with Section 2.4(b):






	(i)	 	elect, as of any Business Day, in the case of
Prime Rate Loans, to convert any such Loan (any part thereof
in any amount not less than $500,000 or that is in an integral
multiple of $500,000 in excess thereof) into a BA Equivalent
Loan or, as of any Business Day at the end of any Interest
Period applicable thereto, in the case of BA Equivalent Loans,
to convert any such Loan (or any part thereof) into a Prime
Rate Loan;
	 
	(ii)	 	elect, as of the last day of the applicable
Interest Period, to continue any BA Equivalent Loans having
Interest Periods expiring on such day (or any part thereof in
an amount not less than $500,000 or that is in an integral
multiple of $500,000 in excess thereof);




provided, that if at any time the aggregate amount of BA Equivalent Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $500,000 such BA Equivalent Loans shall
automatically convert into Prime Rate Loans.





	(b)	 	The Borrower shall deliver a notice of
conversion/continuation (“Notice of Continuation/Conversion”) in the
form of Exhibit G-6 to be received by the Agent not later than 10:00
a.m. (Toronto time) at least two (2) Business Days in advance of the
Continuation Date or Conversion Date, as the case may be, if the
Loans are to be converted into or continued as BA Equivalent Loans
and otherwise by 10:00 a.m. on the Continuation Date or Conversion
Date, as the case may be, if the Loans are to be converted into
Prime Rate Loans and specifying:






	(i)	 	the proposed Continuation Date or Conversion
Date, as the case may be;
	 
	(ii)	 	the type and aggregate amount of Loans to be
converted or renewed;
	 
	(iii)	 	the type of Loans resulting from the proposed
conversion or continuation; and
	 
	(iv)	 	in the case of conversions into or continuances
of BA Equivalent Loans, the duration of the requested Interest
Period provided that if the notice shall fail to specify the
duration of the Interest Period, such Interest Period shall be
one month.




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	(c)	 	If upon the expiration of any Interest Period applicable to
BA Equivalent Loans, the Borrower has failed to deliver a Notice of
Conversion/Continuation on a timely basis in respect of such
Interest Period to be applicable to BA Equivalent Loans or if any
Default or Event of Default then exists, the Borrower shall be
deemed to have elected to convert such BA Equivalent Loans into
Prime Rate Loans effective as of the expiration date of such
Interest Period.
	 
	(d)	 	The Agent will promptly notify each Lender of its receipt of
a Notice of Conversion/Continuation. All conversions and
continuations shall be made rateably according to the respective
outstanding principal amounts of the Loans with respect to which the
notice was given held by each Lender.
	 
	(e)	 	During the existence of a Default or Event of Default, the
Borrower may not elect to have a Loan converted into or continued as
a BA Equivalent Loan.
	 
	(f)	 	After giving effect to any conversion or continuation of
Loans, there may not be more than three (3) different Interest
Periods in effect hereunder.






	2.5	 	BA Equivalent Loans




BA Equivalent Loans may be drawn down by the Borrower at any time and from time
to time in a minimum principal amount of $500,000 and for terms of one (1), two
(2), three (3) or six (6) months by irrevocable written notice of its intention
to make a Drawdown given to the Agent not later than 12:00 noon (Toronto time)
two (2) Business Days prior to the Drawdown Date. Notwithstanding anything to
the contrary herein, at no time shall the Borrower request or be permitted to
have outstanding any BA Equivalent Loans having Interest Periods expiring after
the Maturity Date.





	3.	 	INTEREST AND OTHER CHARGES






	3.1	 	Interest




The Borrower shall pay the Agent, for the account of the Lenders, in accordance
with their respective Pro Rata Shares, interest on the unpaid principal balance
of the Loans made to it at a fluctuating (except for BA Rate) per annum rate
equal to:





	(a)	 	in the case of Prime Rate Loans, the Prime Rate in effect
from time to time plus the Applicable Margin per annum;
	 
	(b)	 	in the case of BA Equivalent Loans, the BA Rate plus the
Applicable Margin per annum.






	 	 	Each change in the Prime Rate shall be reflected in the foregoing interest
rates as of the effective date of such change. All interest under this Section
3.1 will be payable in arrears to the Agent, for the account of the Lenders, in
accordance with their respective Pro Rata Shares, on each Interest Payment Date
for such Loan, for the period from and including the Drawdown Date or the
preceding Conversion Date, Rollover Date or Interest Payment Date of such Loan,
as the




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	 	 	 case may be, for such Loan to but excluding such Interest Payment Date
and shall be calculated on the principal amount of the Loan outstanding during such period and on the
actual number of days elapsed.






	3.2	 	Default Rate




If any Event of Default occurs, then, from the date such Event of Default
occurs until it is cured or is otherwise no longer continuing, or until all
Obligations are paid and performed in full, as the case may be, the Borrower
will be obligated to pay interest on the unpaid principal balances of its Loans
at a per annum rate 2% greater than the Interest Rate otherwise specified
herein and applicable thereto (the “Default Rate”).





	3.3	 	Unused Line Fee




For every month during the term of this Agreement and until all Obligations
have been paid and performed in full, the Borrower shall pay to the Agent, for
the account of the Lenders, in accordance with their respective Pro Rata
Shares, a fee (the “Unused Line Fee”) in an amount equal to the Unused Line Fee
Percentage per annum, multiplied by the amount by which (x) the Maximum
Revolving Credit Line exceeds (y) the sum of (i) the average closing daily
balance outstanding of the Revolving Loans during such month and, (ii) the face
amount of Letters of Credit and Credit Support. The Unused Line Fee shall be
calculated on the basis of a year of three hundred and sixty-five (365) or
three hundred and sixty-six (366), as applicable, days and the actual days
elapsed and shall be payable on the first Business Day (unless extended to up
to the fifth Business Day by the Agent in its discretion) of each month with
respect to the prior month.





	3.4	 	Maximum Interest Rate




In no event shall any Interest Rate provided for hereunder exceed the
maximum rate legally chargeable by any Lender under applicable law for such
Lender with respect to loans of the type provided for hereunder (the “Maximum
Rate”). If, in any month, any interest rate, absent such limitation, would
have exceeded the Maximum Rate, then the interest rate for that month shall be
the Maximum Rate, and, if in future months, that interest rate would otherwise
be less than the Maximum Rate, then that interest rate shall remain at the
Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this Section 3.4, have been paid or accrued if the interest rate otherwise set
forth in this Agreement had at all times been in effect, then the Borrower
shall, to the extent permitted by applicable law, pay the Agent, for the
account of the Lenders, an amount equal to the excess of (a) the lesser of (i)
the amount of interest which would have been charged if the Maximum Rate had,
at all times, been in effect or (ii) the amount of interest which would have
accrued had the interest rate otherwise set forth in this Agreement, at all
times, been in effect over (b) the amount of interest actually paid or accrued
under this Agreement. In the event that a court of competent jurisdiction
determines that the Agent and/or any Lender has received interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be deemed
received on account of, and shall





-21-









 







automatically be applied to reduce, the
Obligations other than interest, in the inverse order of
maturity, and if there are no Obligations outstanding, the Agent and/or
such Lender shall refund to the Borrower such excess.





	3.5	 	Agency Fee




The Borrower agrees to pay the Agent, for the sole account of the Agent, an
agency fee of $50,000 payable annually by the Borrower to the Agent, for the
sole account of the Agent, on the Closing Date and each anniversary thereof
during the Term, which fee shall be fully earned on payment.





	4.	 	PAYMENTS AND PREPAYMENTS






	4.1	 	Revolving Loans




The Borrower shall repay the outstanding principal balance of the Revolving
Loans, plus all accrued but unpaid interest thereon and all fees payable
hereunder payable by it, upon the termination of this Agreement for any reason.
In addition, and without limiting the generality of the foregoing, the
Borrower shall pay to the Agent, for the account of the Lenders, in accordance
with their respective Pro Rata Shares, on demand, the amount by which (i) the
unpaid principal balance of the Revolving Loans plus the L/C Reserve at any
time exceeds the Borrowing Base or (ii) the unpaid balance of Revolving Loans
plus the L/C Reserve at any time exceeds the Maximum Revolving Credit Line, at
such time.





	4.2	 	Place and Form of Payments; Extension of Time




All payments of principal, interest, premium and other sums due to the Lenders
shall be made to the Agent, for the account of the Lenders, in accordance with
their respective Pro Rata Shares at the Agent’s address set forth in or
specified pursuant to Section 15.21. Except as otherwise expressly provided
herein, and except for Proceeds received directly by the Agent or the Lenders,
all such payments shall be made in immediately available funds on the date
specified herein. If any payment of principal, interest, premium or other sum
to be made hereunder becomes due and payable on a day other than a Business
Day, the due date of such payment shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the applicable interest
rate during such extension. Payments received by the Agent before 3:00 p.m. on
a Business Day will be given value on that Business Day. All payments received
by the Agent after 3:00 p.m. will be given value on the next following Business
Day.





	4.3	 	Application and Reversal of Payments






	 	 	Principal and interest payments shall be apportioned rateably among the Lenders
(according to the unpaid principal balance of the Loans to which such payments
relate held by each Lender) and payments of the fees shall, as applicable, be
apportioned rateably among the Lenders. All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific
Loans, or not constituting payment of specific fees, and all proceeds of
Accounts or other Collateral received by the Agent, shall be applied, rateably,
subject to the provisions of this Agreement, first, to pay any fees,
indemnities or expense reimbursements then due to the Agent




-22-









 






	 	 	from the Borrower;
second, to pay any fees or expense reimbursements then due to the Lenders from
the Borrower; third, to pay interest due in respect of all Revolving Loans,
including Non-Rateable Loans and Agent Advances; fourth, to pay or prepay principal of the
Non-Rateable Loans and Agent Advances; fifth, to pay or prepay principal of the
Revolving Loans (other than Non-Rateable Loans and Agent Advances) and unpaid
reimbursement obligations in respect of Letters of Credit; and sixth, to the
payment of any other Obligation due to the Agent or any Lender by the Borrower.
Notwithstanding anything to the contrary contained in this Agreement, unless
so directed by the Borrower, or unless an Event of Default has occurred and is
continuing, neither the Agent nor any Lender shall apply any payments which it
receives to any BA Equivalent Loan, except (a) on the expiration date of the
Interest Period applicable to any such BA Equivalent Loan, or (b) in the event,
and only to the extent, that there are no outstanding Prime Rate Loans. The
Agent shall promptly distribute to each Lender, pursuant to the applicable wire
transfer instructions received from each Lender in writing, such funds as it
may be entitled to receive, subject to a settlement delay as provided for in
Section 2.2(l). The Agent and the Lenders shall have the continuing and
exclusive right to apply and reverse and reapply any and all such proceeds and
payments to any portion of the Obligations.






	4.4	 	Indemnity for Returned Payments





     If after receipt of any payment which is applied to the payment of all or
any part of the Obligations, the Agent or any Lender is for any reason
compelled to surrender such payment or proceeds to any Person because such
payment or application of proceeds is invalidated, declared fraudulent, set
aside, determined to be void or voidable as a preference, impermissible setoff,
or a diversion of trust funds, or for any other reason, then the Obligations or
part thereof intended to be satisfied shall be revived and continued and this
Agreement shall continue in full force as if such payment or proceeds had not
been received by the Agent or such Lender and the Borrower shall be liable to
pay to the Agent and the Lenders, and hereby does indemnify the Agent and the
Lenders and hold the Agent and the Lenders harmless for the amount of such
payment or proceeds surrendered. The provisions of this Section 4.4 shall be
and remain effective notwithstanding any contrary action which may have been
taken by the Agent or any Lender in reliance upon such payment or application
of proceeds, and any such contrary action so taken shall be without prejudice
to the Agent’s and the Lenders’ rights under this Agreement and shall be deemed
to have been conditioned upon such payment or application of proceeds having
become final and irrevocable. The provisions of this Section 4.4 shall survive
the termination of this Agreement.




	4.5	 	Funding Losses




Without limitation to Section 15.9, the Borrower shall reimburse the Agent, for
the account of the Lenders, in accordance with their respective Pro Rata
Shares, and hold the Agent and the Lenders harmless from any loss or expense
which such Lender or the Agent sustains or incurs as a consequence of:





	(a)	 	the failure of the Borrower to borrow, continue or convert a
BA Equivalent Loan after the Borrower has given (or is deemed to
have given) a Notice of Borrowing or a notice of conversion or
continuation; and




-23-









 






	(b)	 	the prepayment or other payment (including after acceleration
thereof) of any BA Equivalent Loan on a day that is not the last day
of the relevant Interest Period,




including any such loss or expense arising from the liquidation or
re-employment of funds obtained by it to maintain its BA Equivalent Loans or
from fees payable to terminate the deposits from which such funds were
obtained. The Borrower shall also pay any customary administrative fees
charged by any Lender in connection with the foregoing.





	4.6	 	Currency




All Obligations shall be payable to the Agent in the currency in which they are denominated.





	4.7	 	Payments as Revolving Loans




All payments of principal, interest, reimbursement obligations in connection
with Letters of Credit, fees, premiums and other sums payable hereunder,
including all reimbursement for expenses pursuant to Section 15.9, may, at the
option of the Agent, in its sole discretion, subject only to the terms of this
Section 4.7, be paid from the proceeds of, or charged to the Borrower’s account
as, Revolving Loans made hereunder under the Revolving Credit Facility, whether
made following a request by the Borrower pursuant to Section 2.2 or a deemed
request as provided in this Section 4.7. The Borrower hereby irrevocably
authorizes the Agent to make Revolving Loans for the purpose of paying
principal, interest, reimbursement obligations in connection with Letters of
Credit, fees, premiums and other sums payable hereunder, including reimbursing
expenses pursuant to Section 15.9, and agrees that all such Revolving Loans so
made shall be deemed to have been requested by it pursuant to Section 2.2, as
of the date of the aforementioned notice.





	4.8	 	Taxes






	 	 	Any and all payments by the Borrower to each Lender or the Agent
under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding, for any Taxes.
In addition, the Borrower shall pay all Other Taxes.

	 
	 	 	The Borrower agrees to indemnify and hold harmless each Lender
and the Agent for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by any Lender or the Agent as a
result of the transactions contemplated by this Agreement and any
liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within thirty (30)
days after the date such Lender or the Agent makes written demand
therefor.

	 
	 	 	If the Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:





-24-









 












	 	 	the sum payable to the Agent or Lender shall be
increased as necessary so that after making all required
deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this
Section) such Lender or the Agent, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions or withholdings been made;

	 
	 	 	the Borrower shall make such deductions and
withholdings;

	 
	 	 	the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority
in accordance with applicable law; and

	 
	 	 	without duplication of amounts paid under clause (i), the Borrower
shall also pay to each Lender or the Agent for the account of
such Lender, at the time interest is paid, all additional
amounts which the respective Lender specifies as necessary to
preserve the after-tax yield such Lender would have received
if such Taxes or Other Taxes had not been imposed.







	 	 	Notwithstanding anything in this Section 4.8, the Borrower shall not be
required to pay to the Agent or any Lender any greater amount on
account of Taxes or Other Taxes required to be withheld in
connection with any payment required to be made hereunder than the
Borrower would have otherwise had to pay hereunder had GMAC CF been
the recipient or beneficiary of the payment.

	 
	 	 	Within thirty (30) days after the date of any payment by the Borrower of
Taxes or Other Taxes, the Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Agent.







	4.9	 	Mandatory Prepayments




In addition to any mandatory prepayment provided for elsewhere herein, the
Borrower obligated in respect thereof shall repay the entire unpaid principal
balance of the Revolving Loans and all other Obligations, including all accrued
but unpaid interest and any other amounts payable hereunder, upon the earlier
to occur of (i) the Maturity Date and (ii) the termination of this Agreement in
accordance with the terms hereof.





	5.	 	LENDERS’ BOOKS AND RECORDS; MONTHLY STATEMENTS





     The Borrower agrees that the Agent’s books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom,
and shall constitute prima facie (absent error in the Agent’s books) proof
thereof, irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Agent will provide to the Borrower a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate, and binding on
the Borrower and an account stated (except for reversals and reapplications of
payments made as provided in Section 4.3 and




-25-









 




corrections of errors discovered
by the Agent), unless the Borrower notifies the Agent in writing to the
contrary within thirty (30) days after such statement is rendered. In the
event a timely written notice of objection is given by the Borrower, only the
items to which exception is expressly made will be considered to be disputed by
the Borrower.





	6.	 	COLLATERAL






	 	6.1	 	Grant of Agent’s Liens






	 	(a)	 	Without limitation to any other provision hereof or the Loan
Documents, as security for all Obligations of the Borrower, the
Obligors shall, prior to or on the Closing Date, grant to the Agent
(for the benefit of itself and the Lenders) and on the date of
making each subsequent Loan or issuing any Letter of Credit on
behalf of the Borrower, the Agent (for the benefit of itself and the
Lenders) shall hold, a continuing first-ranking (subject only to
Permitted Liens) and perfected and duly registered security interest
in, lien on, hypothec of and assignment of, all Receivables
Collateral and Inventory of the Obligors, now owned or hereafter
acquired, and the Proceeds thereof (including without limitation,
all spare parts inventory, all moneys, securities and other property
and the Proceeds thereof, now or hereafter held or received by, or
in transit to, the Agent or any of the Lenders from or for the
Obligors, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, including, without limitation, all of the
Obligors’ deposit accounts and cash in possession of, or under the
control of Agent, Lenders or any of their respective Affiliates),
and all books, records, ledger cards, data processing records,
computer software, licences, marks, trademarks and other property
and other general intangibles at any time evidencing or relating to
the Receivables Collateral or Inventory, (all of the foregoing,
together with any other Property of the Obligors in which the Agent
and/or any of the Lenders may at any time be granted a Lien, being
herein collectively referred to as the “Collateral”). The Agent and
the Lenders shall have all of the rights of a secured party with
respect to the Collateral under the PPSA and the other laws of
British Columbia, Alberta, Ontario and of any other applicable
jurisdiction.
	 
	 	(b)	 	All Loans and Letters of Credit shall be coterminous on the
Maturity Date (which shall not, for greater certainty, require that
Letters of Credit have the same maturity dates), cross-defaulted,
cross-guaranteed, and cross-collateralized. All Obligations and
Guaranteed Obligations shall be secured by the Collateral. The
Agent may, in its sole discretion (subject only to its obligations,
if any, to the Lenders as herein provided), exchange, waive or
release any of the Collateral and, upon the occurrence of an Event
of Default which is continuing or during the exercise by the Agent
and/or the Lenders of its and their rights as provided in Section
11.2, (i) apply Collateral and direct the order or manner of sale
thereof as the Agent may determine, and (ii) settle, compromise,
collect or otherwise liquidate any Collateral in any manner, subject
to compulsory provisions of law, all without affecting the
Obligations or the Agent’s and/or Lenders’ right to take any other
action with respect to any other Collateral.




- 26 -









 












	 	6.2	 	Perfection and Protection of Agent’s Liens




Each of the Obligors shall, at its own expense, perform, do, execute and
deliver all steps, acts, things and documents as may be requested by the Agent
at any time to register, file, signify,
publish, perfect, maintain, protect and enforce the Agent’s Liens including,
without limitation, at the request of the Agent:





	 	(a)	 	executing, registering and recording of the Loan Documents
and executing and filing financing or continuation statements or
applications for registration or publication, and amendments
thereof, in form and substance satisfactory to the Agent;
	 
	 	(b)	 	delivering to the Agent the originals of all instruments,
documents, chattel paper and all other Collateral of which the Agent
determines it should have physical possession in order to perfect
and protect the Agent’s Liens therein, duly endorsed or assigned to
the Agent without restriction;
	 
	 	(c)	 	delivering to the Agent warehouse receipts covering any
portion of the Collateral located in warehouses and for which
warehouse receipts are issued;
	 
	 	(d)	 	upon and during the continuance of an Event of Default or
upon the exercise by the Agent and/or the Lenders of its and their
rights under Section 11.2, transferring Inventory to warehouses
designated by the Agent;
	 
	 	(e)	 	placing notations on the Obligors’ books of account to
disclose the Agent’s Liens;
	 
	 	(f)	 	delivering to the Agent all letters of credit in respect of
Receivables on which any of the Obligors is named beneficiary; and
	 
	 	(g)	 	taking such other steps as are deemed necessary by the Agent
to maintain the Agent’s Liens and the priority thereof.




To the extent permitted by applicable law, the Agent may file, without the
Obligors’ signature, one or more financing statements or registration
disclosing the Agent’s Liens. Each of the Obligors agrees that a carbon,
photographic, photostatic or other reproduction of any Loan Document or of a
financing statement is sufficient as a financing statement.



If any Collateral having a value in the aggregate in excess of $150,000 is at
any time in the possession or control of any consignee, warehouseman, bailee or
any of the Obligors’ agents or processors, then such Obligor shall notify the
Agent thereof. From time to time, the Obligor shall, upon the Agent’s request,
execute and deliver confirmatory written instruments pledging or hypothecating
to the Agent the Collateral, but any Obligor’s failure to do so shall not
affect or limit the Agent’s Liens or the Agent’s and/or Lenders’ other rights
in and to the Collateral. So long as this Agreement is in effect and until all
Obligations have been fully satisfied, the Agent’s Liens shall continue in full
force and effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Availability or as the basis for any advance, loan,
extension of credit, or other financial accommodation).




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	 	6.3	 	Location of Collateral




Each Obligor represents and warrants to the Agent and each of the Lenders that
as at the Closing Date: Exhibit D hereto is a correct and complete list of each
Obligor’s chief executive office, the
location of its books and records, the locations of the Collateral and, in the
case of any Collateral not located at premises owned by an Obligor, the purpose
for which the Collateral is at such location and the locations of all of its
other places of business; and Exhibit D correctly identifies any of such
facilities and locations that are not owned by and registered in the name of an
Obligor and sets forth the names of the owners and lessors or sub-lessors of,
and, to the best of the Obligor’s knowledge, the holders of any mortgages on,
such facilities and locations. Each Obligor covenants and agrees that it will
not (a) maintain any Collateral at any location other than those listed on
Exhibit D unless otherwise consented to in writing by the Agent, or (b) change
the location of its head office and chief place of business, unless it gives
the Agent at least thirty (30) days’ prior written notice thereof and executes,
delivers, registers, signifies and publishes any and all financing statements
and other documents that the Agent reasonably requests in connection therewith.





	 	6.4	 	Title to, Liens on and Sale and Use of Collateral




Each Obligor (as to itself only) represents and warrants to the Agent and each
of the Lenders and agrees with the Agent and each of the Lenders that:





	 	(a)	 	all Collateral is and will continue to be owned by the
Obligors free and clear of all Liens whatsoever, except for the
Agent’s Liens and other Permitted Liens;
	 
	 	(b)	 	the Agent’s Liens will not be subject to any prior Lien
except for Permitted Liens, if any;
	 
	 	(c)	 	the Obligors will use, store, and maintain the Collateral
with all reasonable care and will use its Collateral for lawful
purposes only; and
	 
	 	(d)	 	none of the Obligors will, without the Agent’s prior written
approval, sell or dispose of or permit the sale or disposition of
any of its Collateral, except for sales of Inventory in the ordinary
course of business. The inclusion of Proceeds in the Collateral
shall not be deemed the Agent’s and/or Lenders’ consent to any sale
or other disposition of its Collateral except as expressly permitted
herein.






	 	6.5	 	Appraisals.




Without limitation to any other terms hereof, including Section 6.11, the
Borrower shall, at its expense and upon the Agent’s request, provide the Agent,
at the Agent’s request, with appraisals or updates thereof of any or all of the
Collateral from an appraiser satisfactory to the Agent, prepared on a basis
satisfactory to the Agent. Prior to the occurrence of an Event of Default, the
Agent shall not request any such appraisal more frequently than once every
twelve (12) months and only if, at the time of such request, there are Net
Borrowings. For greater certainty, the Agent may request or undertake
appraisals or updates thereof of any or all of the Collateral more frequently
if such appraisals or updates are completed at the Agent’s expense.




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	 	6.6	 	Access and Examination






	 	(a)	 	The Agent, accompanied by any Lender which so elects, may at
all reasonable times, upon reasonable notice, during regular
business hours (and at any time
when a Default or Event of Default exists and is continuing) have
access to, examine, audit, make extracts from or copies of and
inspect any or all of the Borrower’s or any Guarantor’s records,
files, and books of account and the Collateral, and discuss the
Borrower’s or any Guarantor’s affairs with the Borrower’s or any
Guarantor’s senior officers and senior management. The Borrower
and each Guarantor will deliver to the Agent any instrument
necessary for the Agent to obtain records from any service bureau
maintaining records for the Borrower or any Guarantor. The Agent
may, and at the direction of the Required Lenders shall, at any
time when a Default or Event of Default exists, and at the
Borrower’s expense, make copies of all of the Borrower’s or any
Guarantor’s books and records, or require the Borrower or Guarantor
to deliver such copies to the Agent. The Agent may, without
expense to the Agent, use such of the Borrower’s or any Guarantor’s
respective trademarks, make and other intellectual property rights
personnel, supplies, and Real Estate as may be necessary for
maintaining or enforcing the Agent’s Liens. The Agent shall have
the right, at any time, in the Agent’s name or in the name of a
nominee of the Agent, to verify the validity, amount or any other
matter relating to the Accounts, Inventory, or other Collateral, by
mail, telephone, or otherwise.
	 
	 	(b)	 	The Borrower and each Guarantor hereby consents that the
Agent and each Lender may issue and disseminate to the public
general information describing the credit accommodation entered into
pursuant to this Agreement, limited to the name and address of the
Borrower and each Guarantor, a general description of the Borrower’s
and each Guarantor’s business, the amount of the Maximum Revolving
Credit Line and that the credit accommodation is a revolving loan
facility, and may use the Borrower’s or any Guarantor name in
advertising and other promotional material.
	 
	 	(c)	 	Each Lender severally agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of
all financial information of the Borrower and Guarantors and of all
other information which is identified as “confidential” or “secret”
by the Borrower and Guarantors and provided to the Agent or such
Lender by or on behalf of the Borrower and Guarantors, under this
Agreement or any other Loan Document, except to the extent that such
information (i) was or becomes generally available to the public
other than as a result of disclosure by the Agent or such Lender, or
(ii) was or becomes available on a non-confidential basis from a
source other than the Borrower and Guarantors, provided that such
source is not bound by a confidentiality agreement with the Borrower
and Guarantors known to the Agent or such Lender; provided, however,
that the Agent and any Lender may, to the extent reasonably
required, disclose such information (1) at the request or pursuant
to any requirement of any Public Authority to which the Agent or
such Lender is subject or in connection with an examination of the
Agent or such Lender by any such Public Authority;




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	 	 	 	(2) pursuant to
subpoena or other court process; (3) when required to do so in
accordance with the provisions of any applicable Requirement of Law;
(4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any
bankruptcy proceeding) to which the Agent,
any Lender or their respective Affiliates may be party; (5) to the
extent reasonably required in connection with the exercise of any

remedy hereunder or under any other Loan Document; (6) to the
Agent’s or such Lender’s independent auditors, accountants,
attorneys and other professional advisors (who shall be bound to
the same standard of care as each Lender); (7) to any prospective
Participant or Assignee under any Assignment and Acceptance, actual
or potential, provided that such prospective Participant or
Assignee agrees to keep such information confidential to the same
extent required of the Agent and the Lenders hereunder, and that,
if prior to the occurrence of an Event of Default, the Agent or
such Lender has obtained the prior written consent of the Borrower,
which consent shall not be unreasonably withheld; (8) as expressly
permitted under the terms of any other document or agreement
regarding confidentiality to which the Borrower and Guarantors are
party or deemed party with the Agent or such Lender; and (9) to its
Affiliates (who shall be bound to the same standard of care as each
Lender).






	 	6.7	 	Insurance and Condemnation






	 	(a)	 	The Borrower and each of the Guarantors shall maintain, with
financially sound and reputable insurers having a rating acceptable
to the Agent in its reasonable discretion, and, for greater
certainty, covering all Inventory, Equipment and Real Estate of the
Borrower and Guarantors, insurance against loss or damage by fire
with extended coverage; theft, burglary, pilferage and loss in
transit; public liability and third party property damage; larceny,
embezzlement or other criminal liability; business interruption;
public liability and third party property damage; and such other
hazards or of such other types as is customary for Persons engaged
in the same or similar business, as the Agent, in its discretion, or
acting at the direction of the Required Lenders, shall specify, in
amounts, and under policies acceptable to the Agent and the Required
Lenders.
	 
	 	(b)	 	The Borrower and each of the Guarantors shall cause the
Agent, for the rateable benefit of the Agent and the Lenders, to be
named as loss payee or additional insured in each policy insuring
the Inventory Collateral, in a manner acceptable to the Agent. Each
such policy of insurance shall contain a clause or endorsement
requiring the insurer to give not less than thirty (30) days’ prior
written notice to the Agent in the event of cancellation of the
policy for any reason whatsoever. All premiums for such insurance
shall be paid by the Borrower and Guarantors when due, and
certificates of insurance and, if requested by the Agent or any
Lender, photocopies of the policies, shall be delivered to the
Agent, in each case in sufficient quantity for distribution by the
Agent to each of the Lenders. If the Borrower or any Guarantor
fails to procure such insurance or to pay the premiums therefor when
due, the Agent may, and at the direction of the Required Lenders
shall, do so from the proceeds of Revolving Loans.




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	 	(c)	 	The Borrower and each of the Guarantors shall promptly notify
the Agent and the Lenders of any loss, damage, or destruction to the
Collateral or any other material property of the Borrower or
Guarantors with a value in excess of $300,000, whether or not
covered by insurance. The Agent is hereby authorized to collect
all insurance proceeds in respect of Inventory Collateral, directly
and after deducting from such proceeds the reasonable expenses, if
any, incurred by the Agent in the collection or handling thereof,
the Agent shall apply such proceeds, rateably, to the reduction of
the Obligations in the order provided for in Section 4.3.
Notwithstanding the foregoing, the Borrower or a Guarantor, as
applicable, shall be entitled to utilize proceeds of insurance
payable in connection with loss or damage to Inventory Collateral
to repair, rebuild or replace such property provided (i) the loss,
damage, or destruction could not reasonably be expected to give
rise to a Material Adverse Effect, and (ii) the aggregate proceeds
payable in respect of such loss do not exceed $300,000.
	 
	 	(d)	 	The Borrower and each of the Guarantors shall, immediately
upon learning of the institution of any proceeding for the
condemnation, expropriation or other taking of any of its Collateral
or other material property, notify the Agent of the pendency of such
proceeding, and agrees that the Agent may participate in any such
proceeding, and the Borrower and each of the Guarantors from time to
time will deliver to the Agent all instruments reasonably requested
by the Agent to permit such participation.
	 
	 	(e)	 	The Agent is hereby authorized to collect the proceeds of any
condemnation or expropriation claim or award relating to Collateral,
directly, and after deducting from such proceeds the reasonable
expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall apply such proceeds, rateably, to
the reduction of the Obligations in the order provided for in
Section 4.3.






	 	6.8	 	Collateral Reporting




The Borrower shall provide the Agent (for itself and each of the Guarantors)
with the following documents at the following times in form satisfactory to the
Agent:





	 	(a)	 	Monthly (by the 20th Calendar Day of the next following
month):






	 	(i)	 	a borrowing base report in form satisfactory to
the Agent, including:
	 
	 	(ii)	 	summary aging of accounts receivable by customer,
reconciled to the general ledger and listing ineligibles;
	 
	 	(iii)	 	inventory reports at cost, by category and
location, and reconciled to the general ledger, and listing
ineligibles;
	 
	 	(iv)	 	summary accounts payable agings by vendor
(including a report on all Closing Date payables which
continue to be outstanding if any); and




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	 	(v)	 	GST, PST and other sales and excise tax summary
reports (including copies of all filings and remittances in
respect thereof).






	 	(b)	 	promptly upon written request of the Agent, such other
reports or items or more frequent reporting as Agent shall request
in the exercise of its reasonable
discretion from time to time, if there are Net Borrowings at the
time of such request.
	 
	 	(c)	 	certificates of a senior officer of the applicable Obligor
certifying the accuracy and completeness of the foregoing.




If any of the Obligors’ records or reports of Collateral are prepared by an
accounting service or other agent, the applicable Obligor hereby authorizes
such Person to deliver such records, reports and related documents to the
Agent. The Agent shall, promptly upon any request by a Lender, provide copies
of any of the foregoing reports to such Lender.





	 	6.9	 	Accounts






	 	(a)	 	The Borrower and each Guarantor hereby represents and
warrants to the Agent and the Lenders, with respect to the Accounts,
that: (i) each existing Account represents, and each future Account
will represent, a bona fide sale or lease and delivery of goods by
the Borrower or the Guarantors, or rendition of services by the
Borrower or the Guarantors, in the ordinary course of the Borrower’s
or any Guarantor’s business; (ii) each existing Account is, and each
future Account will be, for a liquidated amount payable by the
Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without
any set-off, compensation, deduction, defence, or counterclaim
except those known to the Borrower or the Guarantors and disclosed
to the Agent pursuant to this Agreement; (iii) no payment will be
received with respect to any Account, and no credit, discount (other
than discount terms for prompt payment in accordance with the
Obligor’s normal business practices), or extension, or agreement
therefor in excess of $300,000 in the aggregate at any time will be
granted on any Account, except as reported to the Agent and the
Lenders in accordance with this Agreement; (iv) each copy of an
invoice delivered to the Agent by the Borrower or the Guarantors
will be a genuine copy of the original invoice sent to the Account
Debtor named therein; and (v) all goods described in any invoice
representing a sale of goods will have been delivered to the Account
Debtor and all services of the Borrower or the Guarantors described
in each invoice will have been performed. The Agent acknowledges
and consent to the extension of credit by the Borrower to Lytton
Lumber Ltd. in an amount not to exceed $500,000 on terms not to
exceed 120 days.
	 
	 	(b)	 	Neither the Borrower nor the Guarantors shall re-date any
invoice or sale or make sales on extended dating beyond that
customary in the Borrower’s or Guarantors’ business or extend or
modify any Account except extensions or modifications in the
ordinary course of business involving Accounts having an aggregate
value not exceeding $250,000 and not material in the aggregate and
disclosed to the Agent.




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	 	 	 	If the Borrower or any Guarantor becomes
aware of any matter adversely affecting the collectibility of any
Account or the Account Debtor therefor involving an amount greater
than $150,000, including information regarding the Account Debtor’s
creditworthiness, the Borrower will promptly so advise the Agent.
	 
	 	(c)	 	Neither the Borrower nor the Guarantors shall accept any note
or other instrument (except a cheque or other instrument for the
immediate payment of money) with respect to any Account without the
Agent’s written consent which consent will not be unreasonably
withheld, provided that the Borrower and Guarantors without Agent’s
consent may accept notes or other instruments not to exceed $150,000
individually and in the aggregate together with all other notes or
instruments evidencing unpaid Accounts outstanding not to exceed the
principal amount of $300,000 at any one time. Any such note or
instrument shall be considered as evidence of the Account and not
payment thereof and, upon request, the Borrower or the Guarantors
shall deliver such instrument to the Agent, endorsed by the Borrower
or any Guarantor, as applicable, to the Agent in a manner
satisfactory in form and substance to the Agent. Regardless of the
form of presentment, demand, notice of dishonour, protest and notice
of protest with respect thereto, the Borrower or any Guarantor, as
applicable, shall remain liable thereon as endorser until such
instrument is paid in full.
	 
	 	(d)	 	The Borrower and each of the Guarantors shall notify the
Agent promptly of all disputes and claims in excess of $300,000 with
any Account Debtor, and agrees to settle, contest, or adjust such
dispute or claim at no expense to the Agent or any Lender. No
discount, credit or allowance shall be granted to any such Account
Debtor without the Agent’s prior written consent, except for
discounts, credits and allowances made or given in the ordinary
course of the Borrower’s or any Guarantor’s business when no Event
of Default exists hereunder. The Borrower and each of the
Guarantors shall send the Agent a copy of each credit memorandum in
excess of $150,000 as soon as issued. The Agent may at all times
when an Event of Default exists hereunder, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms
which the Agent or the Required Lenders, as applicable, shall
consider advisable and, in all cases, the Agent will credit the
Borrower’s loan account with the net amounts received by the Agent
in payment of any Accounts.
	 
	 	(e)	 	If an Account Debtor returns any Inventory to the Borrower or
a Guarantor when no Event of Default exists, then the Borrower or
Guarantor, as applicable, shall promptly determine the reason for
such return and shall issue or cause to be issued a credit
memorandum to the Account Debtor in the appropriate amount. The
Borrower or Guarantor shall promptly report to the Agent any return
involving an amount in excess of $150,000. Each such report shall
indicate the reasons for the returns and the locations and condition
of the returned Inventory. In the event any Account Debtor returns
Inventory to the Borrower or a Guarantor when an Event of Default
exists, the Borrower or Guarantor, as applicable, upon the request
of the Agent, shall: (i) hold the returned Inventory in trust for
the Agent; (ii)




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	 	 	 	segregate all returned Inventory from all of its
other property; (iii) dispose of the returned Inventory solely
according to the Agent’s written instructions; and (iv) not issue
any credits or allowances with respect thereto without the Agent’s
prior written consent. All returned Inventory shall be subject to
the Agent’s Liens thereon. Whenever any Inventory is returned, the
related Account shall be
deemed ineligible to the extent of the amount owing by the Account
Debtor with respect to such returned Inventory.






	 	6.10	 	Collection of Accounts; Payments






	(a)  	(i)	 	 Each Obligor agrees to establish, on or prior to the
Closing Date (or such later date as may from time to time be
consented to by the Agent, the “Deadline”), a system (the “Cash
Dominion System”) of depository accounts (together with accounts
opened from time to time pursuant to clause (ii) hereof “Payment
Accounts”) into which each such Obligor shall promptly deposit or
cause to be deposited all cash proceeds of collections of Accounts
and from other Collateral (collectively, “Cash Proceeds”) received
by it or any other Person on its behalf. Each Obligor represents
that on or prior to the Closing Date, all the bank accounts
maintained by them with any banks or financial institutions as of
Closing Date into which Cash Proceeds are deposited are listed on
Exhibit O. Each Obligor further agrees (I) to execute and deliver
to the Agent with respect to each such Payment Account maintained by
it on or prior to the Deadline, a blocked account agreement in form
satisfactory to the Agent (collectively, the “Collection Account
Agreements”), and (II) with the co-operation of the Agent, to cause
the banks (“Depository Banks”) with which the Payment Accounts are
maintained to execute and deliver to the Agent on or prior to the
Deadline, a Collection Account Agreement.
	 
	 	(ii)	 	Each Obligor agrees that it shall not open a bank
or similar account after the Closing Date into which Cash
Proceeds are deposited unless the relevant Depository Bank and
such Obligor shall have executed and delivered a Collection
Account Agreement, if required pursuant to clause (i) hereof,
with respect to such Payment Account.
	 
	 	(iii)	 	Notwithstanding the establishment of the Cash
Dominion System, until the Agent notifies any Obligor to the
contrary, the Obligor shall make collection of its Accounts
and other Collateral for the benefit of the Agent and whether
or not an Event of Default has occurred, any Cash Proceeds
(including, without limitation, in payment of any Account or
in payment for any Inventory or otherwise) that are not
received and deposited directly into a Payment Account, when
collected by any Obligor, shall be promptly deposited by the
Obligor in a Payment Account, in the form received, except for
its endorsement when required, and until so turned over, shall
be deemed to be held by the Obligor as mandatory of and in
trust for the Agent and as the Agent’s property, and shall be
held separately from the Obligor’s other funds.




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	 	(iv)	 	Notwithstanding anything to the contrary herein,
the terms of the Collection Account Agreements of the Obligors
shall provide that the Agent shall have, at all times that a
Cash Dominion Event has occurred and is continuing, the right
and shall exercise the right to exercise
exclusive control over the Payment Accounts of the Obligors
and all funds are to be wire transferred to the Agent daily.
The Agent shall notify the Depository Banks promptly on a
Cash Dominion Event ceasing to exist. The Agent shall
promptly pay to the Borrower any amounts collected from the
Collection Account not required to be applied to the
Obligations.
	 
	 	(v)	 	The Agent or the Agent’s designee may, at any
time after the occurrence of any Event of Default which is
continuing or upon the exercise by the Agent and/or the
Lenders of its and their rights under Section 11.2, register
notice of the Agent’s Liens (to the extent it has not already
done so), signify Accounts or otherwise notify obligors that
the Accounts have been assigned to the Agent and/or Lenders
and of the Agent’s Liens therein, and may collect them
directly and charge the reasonable collection costs and
expenses to the Borrower’s loan account as a Revolving Loan.
At the Agent’s request, each Obligor shall execute and deliver
to the Agent such documents as the Agent shall require to
grant the Agent access to any post office box in which
collections of Accounts are received.
	 
	 	(vi)	 	Without limiting the generality of the foregoing,
if sales of Inventory are made for cash, the Borrower shall
immediately deliver to the Payment Account the identical
cheques, cash, or other forms of payment which such Obligor
receives.






	 	(b)	 	All Payments received by the Agent on account of Accounts or
as Proceeds of other Collateral will be the Agent’s sole property
and will be credited promptly to the Borrower’s loan account
(conditional upon final collection) upon receipt.







	 	6.11	 	Inventory




Except for any Inventory which has been duly reported to the Agent as obsolete,
each Obligor (as to itself only) represents and warrants to the Agent and each
of the Lenders and agrees with the Agent and each of the Lenders that all of
the Inventory is and will be held for sale or lease, or be furnished in
connection with the rendition of services, or consumed or used by the Obligor,
in the ordinary course of the Obligor’s business, and is and will be fit for
such purposes. Each Obligor will keep the Inventory in good and marketable
condition, except for damaged, defective or obsolete goods arising in the
ordinary course of the Obligor’s business. The Obligors will not, without the
prior written consent of the Agent, acquire or accept any Inventory on
consignment or approval or on any title retention, conditional sale or similar
basis. Each Obligor will maintain an inventory reporting system at all times.
Each Obligor will conduct periodic physical cycle counts of the Inventory and
shall supply the Agent and each of the Lenders with a report setting forth in
reasonable detail all variances and reporting the value of such Inventory
(valued at the lower of cost or market value). Based on the aforesaid periodic
Inventory reports and the reporting of the value of the Inventory therein, the
Agent, in the exercise of its good faith credit




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discretion, may reduce the
percentages to be multiplied by the value of Eligible Inventory as set out in
the definition of Availability should there be a change in the mix of the
Inventory which impacts adversely the fair market value or net orderly
liquidation value thereof. Following the occurrence of any Event of Default
which is continuing or upon the exercise by the Agent and/or
the Lenders of its and their rights under Section 11.2, each Obligor shall
conduct and report on such additional physical Inventory counts as the Agent
may request. Except as has been reported to the Agent in accordance with
Section 6.8(a)(i) hereof, no Obligor will sell any of its Inventory on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment
(except consigned Inventory having a value not exceeding $300,000 in the
aggregate and at any consignee location in excess of $200,000 and providing
same in such circumstances has been reported to the Agent in the Obligors’
reports given pursuant to Section 6.8), or other repurchase or return basis and
each consignment of Inventory shall when in excess of $200,000 at any consignee
location be pursuant to documentation satisfactory to Agent (including
consignment agreements, consignee waiver and acknowledgements, and Lien filings
in favour of the Agent) and the Obligor shall have perfected and rendered
opposable its security interest in, or reservation of ownership of the
consigned Inventory and assigned such registrations to the Agent.



No Obligor has any Inventory acquired on, or will in the future acquire any
Inventory on approval or on a conditional sale, title retention, consignment or
similar basis unless written notice thereof has been provided to the Agent
prior to or within ten (10) days of receipt thereof, provided that an Obligor
may have in its possession Inventory owned by another Obligor.





	 	6.12	 	Right to Cure




The Agent may, in its sole discretion, and shall, at the direction of the
Required Lenders, pay any amount or do any act required of any Obligor
hereunder or requested by the Agent and/or Lenders to preserve, protect,
maintain or, upon the occurrence of an Event of Default and exercise by the
Agent and Lenders of their rights under Section 11.2 hereof, enforce the
Obligations, the Collateral or the Agent’s Liens, and which the Obligor fails
to pay or do, including, without limitation, payment of any judgment against
the Obligor any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord’s or processor’s claim, and any other Lien upon
or with respect to the Collateral. All payments that the Agent and/or Lenders
make under this Section and all reasonable out-of-pocket costs and expenses
that the Agent and/or Lenders pay or incur in connection with any action taken
by it hereunder shall be charged to the Borrower’s loan account as a Revolving
Loan (in which case the provisions of Section 4.7 shall apply thereto). Any
payment made or other action taken by the Agent and/or Lenders under this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed thereafter as herein provided.





	 	6.13	 	Power of Attorney




The Borrower and each Guarantor hereby appoints the Agent and the Agent’s
designee as the Borrower’s and such Guarantor’s attorney, with power, following
a Cash Dominion Event: (a) to endorse the Borrower’s or any Guarantor’s name
on any cheques, notes, acceptances, money orders, or other forms of payment or
security that come into the Agent’s or any Lender’s possession; (b) to sign the
Borrower’s or any Guarantor’s name on any invoice, bill of lading,




- 36 -









 







warehouse
receipt or other document of title relating to any Collateral, on drafts
against customers, on assignments of Accounts, on notices of assignment,
financing statements, registration documents and other public records and to
file any such financing statements and other registration documents by
electronic means with or without a signature as authorized or
required by applicable law or filing procedure; (c) so long as any Event of
Default has occurred and is continuing, to notify the post office authorities
to change the address for delivery of the Borrower’s or any Guarantor’s mail to
an address designated by the Agent and to receive, open and dispose of all mail
addressed to the Borrower or any Guarantor; (d) to send requests for
verification of Accounts to customers or Account Debtors; (e) to clear
Inventory financed with a Letter of Credit through customs in the Borrower’s or
any Guarantor’s name, the Agent’s name or the name of the Agent’s designee, and
to sign and deliver to customs officials powers of attorney in the Borrower’s
or any Guarantor’s name for such purpose; and (f) to do all things reasonably
necessary to carry out this Agreement. The Borrower and each Guarantor
ratifies and approves all acts of such attorney. None of the Lenders or the
Agent nor their attorneys will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law except for their gross negligence
or wilful misconduct. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.





	 	6.14	 	Agent’s Rights, Duties and Liabilities





          The Borrower and each Guarantor assumes all responsibility and liability
arising from or relating to the use, sale or other disposition of the
Collateral. The Obligations shall not be affected by any failure of the Agent
or any Lender to take any steps to perfect the Agent’s Liens or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release the Borrower or any Guarantor from any of the Obligations. Following
the occurrence and continuation of an Event of Default, the Agent may (but
shall not be required to), and at the direction of the Required Lenders shall,
without notice to or consent from the Borrower or any Guarantor, sue upon or
otherwise collect, extend the time for payment of, modify or amend the terms
of, compromise or settle for cash, credit, or otherwise upon any terms, grant
other indulgences, extensions, renewals, compositions, or releases, and take or
omit to take any other action with respect to the Collateral, any security
therefor, any agreement relating thereto, any insurance applicable thereto, or
any Person liable directly or indirectly in connection with any of the
foregoing, without discharging or otherwise affecting the liability of the
Borrower or any Guarantor for the Obligations or under this Agreement or any
other agreement now or hereafter existing between the Agent and/or any Lender
and the Borrower and/or any Guarantor.




	7.	 	BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES






	 	7.1	 	Books and Records




Each Obligor shall maintain at all times, correct and complete books, records
and accounts in which complete, correct and timely entries are made of its
transactions in accordance with GAAP consistent with those applied in the
preparation of the Financial Statements delivered prior to the Closing Date.
Each Obligor shall, by means of appropriate entries, reflect in such accounts
and in all Financial Statements adequate liabilities and reserves for all taxes
and adequate provision for depreciation and amortization of Property and bad
debts, all in accordance




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with GAAP. Each Obligor shall maintain at all times
books and records pertaining to the Collateral in such detail, form and scope
as the Agent shall reasonably require, including, without limitation, records
of:





	 	(a)	 	all payments received and all credits and extensions granted
with respect to the Accounts;
	 
	 	(b)	 	the return, rejection, repossession, stoppage in transit,
loss, damage, or destruction of any Inventory; and
	 
	 	(c)	 	all other dealings affecting the Collateral.






	 	7.2	 	Financial Information




Each Obligor shall promptly furnish to the Agent or its agents all such
financial information as the Agent shall reasonably request, and notify its
auditors and accountants that the Agent is authorized, to obtain such
information directly from them. Without limiting the foregoing, the Obligor
will furnish to the Agent, in such detail as the Agent shall request, the
following:





	 	(a)	 	As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, consolidated audited
and consolidating unaudited balance sheets and statements of
operations, cash flows, and stockholders’ equity for the Obligor and
their consolidated Subsidiaries and the accompanying notes thereto,
setting forth in each case in comparative form figures for the
previous Fiscal Year, all in reasonable detail, fairly presenting
the financial position and the results of operations of the Obligor
and their consolidated Subsidiaries, each as at the date thereof
and for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be examined in accordance with
generally accepted auditing standards by and accompanied by a report
thereon, unqualified as to scope, of independent public accountants
selected by the Obligor, and satisfactory to the Agent.
	 
	 	(b)	 	As soon as available, but in any event not later than
forty-five (45) days after the close of each fiscal quarter,
consolidated and consolidating unaudited balance sheets of the
Obligors and their consolidated Subsidiaries at the end of such
fiscal quarter, and consolidated and consolidating unaudited
statements of operations, cash flows and consolidated stockholders’
equity for the Obligors and their consolidated Subsidiaries for such
fiscal quarter and for the period from the beginning of the fiscal
year to the end of such quarter and, regarding the statements of
operations for such fiscal quarter, together with the accompanying
analysis, all reasonable detail, fairly presenting the financial
position and results of operation of the Obligors and their
consolidated Subsidiaries as at the date thereof, and for such
fiscal quarter, prepared in accordance with GAAP consistent with the
audited Financial Statements required pursuant to Section 7.2(a).
Such statements shall be certified to be correct by the principal
financial officer or principal accounting officer of the Obligors,
subject to normal year-end adjustments.




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	 	(c)	 	As soon as available, but in any event not later than thirty
(30) days after the end of each month, consolidated and
consolidating unaudited balance sheets and statement of cash flows
of the Obligors and their consolidated Subsidiaries as at
the end of such month, and unaudited statements of operations of
the Obligors and their consolidated Subsidiaries for such month and
for the period from the beginning of the Fiscal Year to the end of
such month, all in reasonable detail, fairly presenting the
financial position and results of operation of the Obligors and
their consolidated subsidiaries, as at the date thereof and for
such periods, and prepared in accordance with GAAP consistent with
the audited Financial Statements required pursuant to Section
7.2(a). Such statements shall be certified to be correct by the
principal financial officer or principal accounting officer of the
respective Obligors subject to normal year-end and quarterly
adjustments.
	 
	 	(d)	 	With each of the annual audited and monthly unaudited
Financial Statements delivered pursuant to Sections 7.2(a) and
7.2(b) a certificate substantially in the form of Exhibit G-4 of the
principal financial or principal accounting officer of the Obligors
(i) setting forth in reasonable detail the calculations required to
establish that each of the Obligors was in compliance with its
covenants set forth in Sections 9.18 to 9.19 during the period
covered in such Financial Statements and as at the end thereof, and
(ii) stating that, except as explained in reasonable detail in such
certificate, (A) all of the representations and warranties of the
Obligors contained in this Agreement and the other Loan Documents
are correct and complete as at the date of such certificate as if
made at such time, (B) each of the Obligors is, at the date of such
certificate, in compliance with all of its covenants and agreements
in this Agreement and the other Loan Documents, and (C) no Event of
Default then exists or existed during the period covered by such
Financial Statements. If such certificate discloses that a
representation or warranty is not correct or complete, or that a
covenant has not been complied with, or that an Event or Event of
Default existed or exists, such certificate shall set forth what
action such Obligor has taken or proposes to take with respect
thereto.
	 
	 	(e)	 	No sooner than ninety (90) days and no less than thirty (30)
days prior to the beginning of each Fiscal Year, consolidated and
consolidating projected balance sheets, statements of operations and
statements of cash flows for the Obligors and their consolidated
Subsidiaries, on an annual basis, and, as at the end of, and for
each month of such Fiscal Year, all certified by the principal
financial officer or principal accounting officer of the Obligors.
	 
	 	(f)	 	Promptly after filing with the pension commission or
administrator or other Public Authority, a copy of each annual
report, or other filing or notice filed with respect to each Plan of
any Obligor.
	 
	 	(g)	 	Copies of all returns, proxy statements, financial statements
and reports and documents filed with any securities commission,
stock exchange or similar Public Authority.




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	 	(h)	 	Promptly upon request after filing with any Public Authority
(including the PCO and Canada Customs and Revenue Agency), a copy of
each annual report or other
filing, valuation or notice filed with respect to any Plan and a
copy of any tax return filed by it.
	 
	 	(i)	 	At the Agent’s request, a copy of each tax return filed by
each Obligor.
	 
	 	(j)	 	Such additional information as the Agent may from time to
time reasonably request regarding the financial and business affairs
of any Obligor or any of its or their Subsidiaries.




The Agent agrees that it shall not request any such information directly from
the auditors or accountants of the Obligor unless it has failed to obtain such
information from the Obligor in a timely manner.





	 	7.3	 	Notices to Agent




Each Obligor shall notify the Agent in writing, and provide to the Agent copies
of any pertinent notices, correspondence or writings received or issued in
respect thereof, and all particulars thereof reasonably requested by the Agent,
of the following matters at the following times:





	 	(a)	 	Promptly after becoming aware thereof, any Default or Event
of Default.
	 
	 	(b)	 	Promptly after becoming aware thereof, the assertion by the
holder of any capital stock or equity of the Obligor or of any
Funded Debt in a principal amount in excess of $2,000,000 that a
default exists with respect thereto or that an Obligor is not in
compliance with the terms thereof; or the threat or commencement by
such holder of any enforcement action because of such asserted
default or non-compliance.
	 
	 	(c)	 	Promptly after becoming aware thereof, any pending or
threatened action, suit, proceeding, or counterclaim by any Person,
or any pending or threatened investigation by a Public Authority
which in all cases could reasonably give rise to a Material Adverse
Effect.
	 
	 	(d)	 	Promptly after becoming aware thereof, any other event or
circumstance which could reasonably have or could reasonably have
had a Material Adverse Effect.
	 
	 	(e)	 	Promptly after becoming aware thereof, any pending or
threatened strike, work stoppage, unfair labour practice claim, or
other labour dispute affecting any Obligor or any of its or their
Subsidiaries which could reasonably have or could reasonably have
had a Material Adverse Effect.
	 
	 	(f)	 	Promptly after becoming aware thereof, any violation or
alleged violation of any law, statute, regulation, or ordinance of a
Public Authority applicable to any Obligor or any of its or their
Subsidiaries, or its or their respective Properties which could
reasonably give rise to a Material Adverse Effect.




- 40 -









 






	 	(g)	 	Promptly after becoming aware thereof any violation or
alleged violation by any Obligor or any of its or their Subsidiaries

of Environmental Laws which could
reasonably give rise to a Material Adverse Effect; or, promptly
upon its receipt thereof, any Action Request, Violation Notice, or
any other notice that any Obligor or any of its or their
Subsidiaries receives from a Public Authority asserting that an
Obligor or any of its or their Subsidiaries is or may not be in
compliance with Environmental Laws or that its compliance is being
investigated, in any case which could reasonably have a Material
Adverse Effect; or, promptly upon becoming aware of same, any
violation of any Environmental Law that any Obligor or any of its
or their Subsidiaries reports in writing or is required to report
under any Environmental Law in writing (or for which any written
report supplemental to any oral report is made) to any federal,
provincial, state or local environmental agency or other Public
Authority to the extent same could reasonably have a Material
Adverse Effect.
	 
	 	(h)	 	Any change in any Obligor’s name, Fiscal Year, jurisdiction
of incorporation or establishment, jurisdictions of operation, head
office, chief place of business or location from which Accounts are
invoiced or paid or form of organization, at least thirty (30) days
prior thereto (or such lesser period as the Agent may in its
discretion agree).
	 
	 	(i)	 	Any Termination Event with respect to a Plan, within ten (10)
days after becoming aware thereof, accompanied by any materials
required to be filed with any Public Authority (including the PCO)
with respect thereto; promptly after any Obligor’s receipt thereof,
any notice received by any Obligor concerning the imposition of any
withdrawal liability with respect to a Plan; the establishment of
any Plan not existing at the Closing Date, or the commencement of
contributions by any Obligor to any Plan to which any Obligor was
not contributing at the Closing Date, within ten (10) days after
such event occurs; or promptly after becoming aware thereof, any
other event or condition regarding a Plan or any Obligor’s or a
Related Company’s compliance with all applicable laws (including,
the Pension Benefits Standards Act of British Columbia) relating to
the establishment or administration of any Plan which could
reasonably give rise to a Material Adverse Effect:




Each notice given under this Section shall describe the subject matter thereof
in reasonable detail, and shall set forth the action that an Obligor has taken
or proposes to take with respect thereto.





	8.	 	GENERAL WARRANTIES AND REPRESENTATIONS.





     Each Obligor warrants and represents to and covenants with the Agent and
the Lenders, at all times until all Obligations have been satisfied, that,
except as hereafter disclosed to the Agent and the required Lenders in writing
and except for updates thereto to reflect changes expressly permitted to be
made pursuant to this Agreement and made in compliance with all terms of this
Agreement:



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	 	8.1	 	Authorization, Validity and Enforceability of this Agreement and
the Loan Documents




Each Obligor has the power and authority to execute, deliver, and perform this
Agreement and the other Loan Documents to which it is party, to incur the
Obligations or Guaranteed Obligations (as applicable), and to grant the Agent’s
Liens. Each Obligor has taken all necessary corporate action to authorize its
execution, delivery, and performance of this Agreement and the other Loan
Documents to which it is party. No consent, approval, or authorization of, or
declaration or filing with, any Public Authority, and no consent of any other
Person, is required in connection with any Obligor’s execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is
party, except for those already duly obtained. Each of this Agreement and the
other Loan Documents has been duly executed and delivered by the Obligor to the
extent a party thereto, and constitutes the legal, valid and binding obligation
of the Obligor enforceable against it in accordance with its terms (subject to
applicable bankruptcy, insolvency, and similar laws affecting creditors’
rights, and the discretion of courts as to the granting of equitable remedies
such as specific performance and injunction without defence, setoff,
compensation or counterclaim. Each Obligor’s execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is party
do not, and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any Lien
upon the Property of any Obligor or any of its or their Subsidiaries (except as
contemplated by this Agreement and the other Loan Documents) by reason of the
terms of (a) any contract, hypothec, mortgage, lien, lease, agreement,
indenture, or instrument to which any Obligor or any of its or their
Subsidiaries is a party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to any Obligor or any of
its or their Subsidiaries, or (c) the certificate or articles of incorporation,
amendment, continuation or amalgamation, or by-laws of any Obligor or any of
its or their Subsidiaries or any shareholders agreement affecting it or its
Property (or declaration having a like effect).





	 	8.2	 	Validity and Priority of Agent’s Liens




The provisions of this Agreement and the other Loan Documents create legal and
valid Liens on all the Collateral in the Agent’s and Lenders’ favour, and when
all proper filings, recordings, publications, registrations and other actions
necessary to perfect, render opposable and maintain such Liens have been made
or taken, such Liens will constitute perfected, opposable, duly registered,
published and continuing Liens on all the Collateral, having priority over all
other Liens on the Collateral (except Permitted Liens), and all claims of other
creditors, securing all the Obligations and Guaranteed Obligations, and
enforceable against the Obligor (subject to applicable bankruptcy, insolvency,
and similar laws affecting creditors’ rights, and the discretion of courts as
to the granting of equitable remedies such as specific performance and
injunction.





	 	8.3	 	Organization and Qualification




Each of the Obligors is duly incorporated or amalgamated, as the case may be,
and organized, and validly existing and in good standing under the laws of the
jurisdiction of its incorporation or amalgamation, as the case may be. Each
Obligor is qualified to do business, and is in good standing in each
jurisdiction in which qualification is necessary in order for it to own or
lease its Property and conduct its business, and has all requisite power and
authority to conduct its




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business and to own its Property, except to the extent as may not reasonably be
expected to give rise to any Material Adverse Effect.





	 	8.4	 	Corporate Name; Prior Transactions




None of the Obligors has during the five (5) years preceding the Closing Date
been known by or used any other corporate or business name, or been a party to
any amalgamation, merger or consolidation, or acquired all or substantially all
of the assets of any Person or acquired any of its or their Property out of the
ordinary course of business, except as set forth on Exhibit E.





	 	8.5	 	Subsidiaries and Affiliates




Exhibit F is a correct and complete list of the name and relationship to the
Obligor of each and all of the Obligors’ Subsidiaries and other Affiliates.
Each Subsidiary is (a) duly incorporated and organized, and validly existing in
good standing under the laws of its jurisdiction of incorporation set forth on
Exhibit F, and (b) qualified to do business, and in good standing in the
jurisdictions set forth opposite its name on Exhibit F, which are the only
jurisdictions in which such qualification is necessary in order for it to own
or lease its Property and conduct its business.





	 	8.6	 	Financial Statements and Projections






	 	(a)	 	The Borrower has delivered to the Agent its audited
consolidated balance sheets and related statements of operations,
cash flows and stockholders’ equity as at December 31, 2003 and for
the Fiscal Year then ended. Such financial statements are attached
hereto as Exhibit G-1. All such financial statements have been
prepared in accordance with GAAP.
	 
	 	(b)	 	The Latest Projections represent the Obligors’ best estimate
of the Obligors’ consolidated future financial performance for the
periods set forth therein. The Latest Projections have been
prepared on the basis of the assumptions set forth therein, which
the Obligors believe are fair and reasonable in light of current and
reasonably foreseeable business conditions as at the date of
presentation.






	 	8.7	 	Capitalization




Each Obligor’s authorized and issued capital stock is described in Exhibit N.





	 	8.8	 	Solvency




Each Obligor is Solvent prior to and after giving effect to the making and
incurring of each Loan and each Letter of Credit.





	 	8.9	 	Debt




None of the Obligors has any Debt except (a) the Obligations, (b) Debt set
forth in the most recent Financial Statements delivered to the Agent, or the
notes thereto, (c) the 2004 Notes, (d) tax obligations (including deferred
taxes), trade payables and other contractual obligations




- 43 -









 







arising in the ordinary course of business as carried on by the Borrower since
the date of such Financial Statements, and (e) Debt created in accordance with
Sections 9.8 and 9.11.





	 	8.10	 	Distributions




No Distribution has been declared, paid, or made upon or in respect of any
shares or other securities of or equity interests in any Obligor except as
expressly permitted hereby.





	 	8.11	 	Title to Property




Except for Permitted Liens, and except for Property which an Obligor leases,
each Obligor has good, indefeasible, and merchantable title to all of its
Property required to carry on its business as presently constituted, including
all the Collateral and the other assets reflected on the most recent Financial
Statements delivered to the Agent, except as disposed of since the date thereof
in the ordinary course of business and as expressly permitted hereby.





	 	8.12	 	Adequate Assets




Each Obligor individually and in the aggregate possesses adequate assets for
the conduct of its and their business.





	 	8.13	 	Real Property; Leases




Exhibit D hereto is a correct and complete list, of all Real Estate owned by
each Obligor, all leases and subleases of Real Estate by any Obligor, as lessee
or sublessee. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect, and no material
default by any party to any such lease or sublease exists.





	 	8.14	 	Trade Names




All trade names or styles under which any Obligor sells Inventory or create
Accounts or to which instruments in payment of Accounts may be made payable,
are listed on Exhibit E hereto.





	 	8.15	 	Litigation




Except as set forth on Exhibit J, there is no pending or, to the best of any
Obligor’s current actual knowledge, threatened action, suit, proceeding, or
counterclaim by any Person, or investigation by any Public Authority, or any
basis for any of the foregoing, which may give rise to any Material Adverse
Effect.





	 	8.16	 	Restrictive Agreements





     No Obligor is a party to any contract or agreement, or subject to any charter
or other corporate restriction, which affects its ability to execute, deliver,
and perform the Loan Documents and repay the Obligations or which could
reasonably be expected to give rise to any Material Adverse Effect.



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	 	8.17	 	Labour Disputes




Except as set forth in Exhibit K, (a) there is no collective bargaining
agreement or other labour contract covering employees of any Obligor or any of
its Subsidiaries; (b) except as noted above, to the best of the Obligors’
senior management’s current actual knowledge, no union or other labour
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of any Obligor, or any of its or their
Subsidiaries or for any similar purpose, which organization or recognition
could reasonably have or could reasonably have had a Material Adverse Effect;
(c) there is no pending or, to the best of the Obligors’ senior management’s
current actual knowledge, threatened strike, slowdown, work stoppage, unfair
labour practice claims, or other labour dispute against or affecting any
Obligor or any of its or their Subsidiaries or their respective employees which
could reasonably have or could reasonably have had a Material Adverse Effect;
(d) there are no outstanding claims of any kind or nature nor any outstanding
assessment against any Obligor or any of its or their Subsidiaries arising out
of The Act Respecting Industrial Accidents and Occupational Diseases (Worker’s
Compensation), The Occupational Health and Safety Act of 1970 and all other
applicable federal, provincial, and state laws governing occupational health
and safety which could reasonably be expected to give rise to any Material
Adverse Effect; and (e) there are no known infractions by any Obligor or any of
its or their Subsidiaries under The Act Respecting Occupational Health and
Safety or The Occupational Health and Safety Act of 1970 or any other
applicable federal, provincial, or state laws governing occupational health and
safety which could reasonably be expected to give rise to any Material Adverse
Effect.





	 	8.18	 	Environmental Laws





Except as otherwise disclosed in Exhibit I:





	 	(a)	 	The Borrower and each of the Guarantors have complied in all
material respects with all Environmental Laws and neither the
Borrower nor any Guarantor nor any of its presently owned Real
Estate or immovable or real property presently in its charge,
management or control or presently conducted operations, nor its
previously owned Real Estate or immovable or real property
previously in its charge, management or control or prior operations,
is subject to any material enforcement order from or material
liability agreement with any Public Authority or private Person, to
which the Borrower or such Guarantor is or could reasonably be
subject, respecting (i) compliance with any Environmental Law or
(ii) any potential liabilities and costs or remedial action arising
from the Release or threatened Release of a Contaminant.
	 
	 	(b)	 	The Borrower and each of the Guarantors have obtained all
material permits necessary for their current operations under
Environmental Laws, and all such permits are in good standing and
the Borrower and each of the Guarantors are in material compliance
with all material terms and conditions of such permits.
	 
	 	(c)	 	Neither the Borrower nor any of the Guarantors, nor, to the
best of the Borrower’s or any Guarantor’s knowledge, any of its
predecessors in interest, has in material violation of applicable
law stored, treated or disposed of any hazardous waste.




- 45 -









 






	 	(d)	 	Neither the Borrower nor any of the Guarantors has received
any material summons, complaint, order or similar written notice
indicating that it is not currently in compliance with, or that any
Public Authority is investigating its compliance with, any
Environmental Laws or that it is or may be liable to any other
Person as a result of a Release or threatened Release of a
Contaminant.
	 
	 	(e)	 	To the best of the Borrower’s and each Guarantor’s knowledge,
none of the present or past operations of the Borrower or any of the
Guarantors is the subject of any investigation by any Public
Authority evaluating whether any material remedial action is needed
to respond to a Release or threatened Release of a Contaminant.
	 
	 	(f)	 	Neither the Borrower nor any of the Guarantors has entered
into any negotiations or settlement agreements with any Person
(including the prior owner of its property) imposing material
obligations or liabilities on the Borrower or any of the Guarantors
with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim.
	 
	 	(g)	 	None of the Inventory manufactured, distributed or sold by
the Borrower or any of the Guarantors contains asbestos containing
material.
	 
	 	(h)	 	No Environmental Lien has attached to the Real Estate and the
Real Estate and the Collateral is free:






	 	(i)	 	from contamination by, or threat of, a Release,
discharge or emission of any Contaminant,
	 
	 	(ii)	 	of underground storage tanks containing any
Contaminant, asbestos — containing materials, polychlorinated
biphenyls, land fills, land disposals, and dumps, and
	 
	 	(iii)	 	of any Environmental Claims;






	 	(i)	 	Neither the Borrower nor any of the Guarantors has filed any
notice under any federal, provincial, state or local law, including
any Environmental Law, indicating past or present treatment, storage
or disposal of a Contaminant or reporting an actual or threatened
spill or release of a Contaminant into the environment;
	 
	 	(j)	 	Neither the Borrower nor any of the Guarantors has any
contingent liability of which it or they have current actual
knowledge in connection with any Release of any Contaminant;
	 
	 	(k)	 	Neither the Borrower nor any of the Guarantors generates,
transports, treats or disposes of any Contaminant except in
compliance in all material respects with applicable laws;




- 46 -









 






	 	(l)	 	Neither the Borrower nor any of the Guarantors has disposed
of a material amount of any Contaminant by placing it in or on the
ground of any of the Borrower’s or any of the Guarantor’s Property
or the Real Estate; and
	 
	 	(m)	 	There are no material Environmental Claims affecting the
Borrower or any of the Guarantors.






	 	8.19	 	No Violation of Law




None of the Obligors or any of its or their Subsidiaries is in violation of any
law, statute, regulation, ordinance, judgment, order or decree applicable to it
which violation could give rise to a Material Adverse Effect.





	 	8.20	 	No Default




None of the Obligors or any of its or their Subsidiaries is in default with
respect to any Debt, Lien, note, indenture, loan agreement, mortgage, lease,
deed, security instrument or agreement or other agreement to which it is a
party or bound, which default could give rise to a Material Adverse Effect.





	 	8.21	 	Plans






	 	(a)	 	None of the Obligors, any of its or their Subsidiaries or any
Related Company has any Plan other than those listed on Exhibit L
hereto, and all monthly and other payments in respect of such Plans
which are pension plans (on account of contributions, special
contributions or unfunded liability or solvency deficiencies) or
otherwise are accurately set for in Exhibit L;
	 
	 	(b)	 	No Plan has been terminated or partially terminated or is
insolvent or in reorganization, nor have any proceedings been
instituted to terminate, in whole or in part, or reorganize any
Plan, except to an extent which could not reasonably be expected to
give rise to a Material Adverse Effect;
	 
	 	(c)	 	None of the Obligors, any of its or their Subsidiaries or any
Related Company has ceased to participate (in whole or in part) as a
participating employer in any Plan which is a pension plan or has
withdrawn from any Plan which is a pension plan in a complete or
partial withdrawal, nor has a condition occurred which if continued
would result in a complete or partial withdrawal;
	 
	 	(d)	 	None of the Obligors, any of its or their Subsidiaries or any
Related Company has any unfunded liability on windup or withdrawal
liability, including contingent withdrawal or windup liability, to
any Plan or any solvency deficiency in respect of any Plan;
	 
	 	(e)	 	None of the Obligors, any of its or their Subsidiaries or any
Related Company has any unfunded liability on windup or any
liability in respect of any Plan (including to the PCO) other than
for required insurance premiums or contributions or remittances
which have been paid, contributed and remitted when due;




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	 	(f)	 	Each of the Obligors and each of its and their Subsidiaries
have made all contributions to their Plans required by law or the
terms thereof to be made by it when due, and it and they are not in
arrears in the payment of any contribution, payment, remittance or
assessment or in default in filing any reports, returns, statements,
and similar documents in respect of the Plans required to be made or
paid by them pursuant to any Plan, any law, act, regulation,
directive or order or any employment, union, pension, deferred
profit sharing, benefit, bonus or other similar agreement or
arrangement, except to an extent which could not reasonably be
expected to give rise to a Material Adverse Effect;
	 
	 	(g)	 	None of the Obligors or any of its or their Subsidiaries are
liable or, to the best of their knowledge, alleged to be liable, to
any employee or former employee, director or former director,
officer or former officer or other Person resulting from any
violation or alleged violation of any Plan, any fiduciary duty, any
law or agreement in relation to any Plan or have any unfunded
pension or like obligations or solvency deficiency (including any
past service or experience deficiency funding liabilities), other
than accrued obligations not yet due, for which they have made full
provision in their books and records;
	 
	 	(h)	 	All vacation pay, bonuses, salaries and wages, to the extent
accruing due, are properly reflected in the Obligors’ and/or its or
their Subsidiaries’ books and records;
	 
	 	(i)	 	Without limiting the foregoing, all of the Obligors’ and each
of their respective Subsidiaries’ Plans are duly registered where
required by, and are in compliance and good standing in all material
respects under, all applicable laws, acts, statutes, regulations,
orders, directives and agreements, including, without limitation,
the Income Tax Act of Canada, the Pensions Benefits Standards Act of
British Columbia and the Pension Benefits Act of Ontario, any
successor legislation thereto, and other applicable laws of any
jurisdiction;
	 
	 	(j)	 	No Person has made any application for a funding waiver or
extension of any amortization period in respect of any Plan;
	 
	 	(k)	 	There has been no prohibited transaction or violation of any
fiduciary responsibilities with respect to any Plan; and
	 
	 	(l)	 	There are no outstanding or pending or threatened
investigations, claims, suits or proceedings in respect of any Plans
(including to assert rights or claims to benefits) that could give
rise to a Material Adverse Effect.






	 	8.22	 	Taxes




Each of the Obligors and their Subsidiaries have filed all tax returns and
other reports which they were required by law to file on or prior to the date
hereof, and have, subject to the proviso contained in Section 9.1(b), paid all
taxes, assessments, fees, and other governmental charges, and penalties and
interest, if any, against them or their Property, income, or franchise, that
are due and payable. Each income tax return was accurate in all material
respects.




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	 	8.23	 	Aboriginal Claims




There are no existing or anticipated aboriginal land or other claims, or claims
resolution processes, which could reasonably be excepted to result in a
Material Adverse Effect.





	 	8.24	 	Event of Default




No Event of Default has occurred and is continuing.





	 	8.25	 	Authority to Incur Debts




None of the Obligors are or will be in consequence of the execution, delivery
or performance of any of the Loan Documents or the consummation of the
transactions therein provided, in breach of any regulation under any national,
federal, state or provincial law, act, statute or regulation limiting their
ability to incur indebtedness for money borrowed or to secure payment of same
or to provide financial assistance, directly or indirectly, by means of a loan,
guarantee or otherwise.





	 	8.26	 	No Material Adverse Change




No material adverse change has occurred in any Obligor’s Property, business,
operations, or condition (financial or otherwise) since December 31, 2003,
being the date of the Financial Statements delivered to the Agent.





	 	8.27	 	Disclosure




None of the representations or warranties made by the Borrower or any Guarantor
in the Loan Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of the Borrower or
any Guarantor in connection with the Loan Documents or to the Ontario
Securities Commission or the U.S. Securities Exchange Commission, contains any
untrue statement of a material fact or omits any material fact necessary to be
stated therein to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when
made or delivered.





	 	8.28	 	Workers’ Compensation




None of the Obligors, or any of its or their Subsidiaries has any unpaid
workers’ compensation or like obligations except as are being incurred, and
paid on a current basis in the ordinary course of business, and there are no
proceedings, claims, actions, orders or investigations of any Public Authority
relating to worker’s compensation outstanding, pending or, to their knowledge,
threatened relating to them or any of their employees or former employees which
could reasonably be expected to have a Material Adverse Effect.





	 	8.29	 	Real Estate






	 	(a)	 	No part of the Real Estate has been condemned, taken or
expropriated by any federal, state, provincial, municipal or any
other competent authority and no alteration, repair, improvement or
other work has been ordered or directed to be




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	 	 	 	done or performed to or in respect of such property by any federal,
provincial, state, municipal or any other competent authority;
	 
	 	(b)	 	There is nothing owing in respect of the Real Estate
including any of its leasehold property (to the extent any Obligor
is or may be liable for same) to any municipality or to any
corporation or commission owning or operating a public utility for
water, gas, electrical power or energy, steam or hot water or for
the use thereof or for the fittings, machines, apparatus, meters or
other things leased in respect thereof or for any work or service
performed for any such corporation or commission in connection with
such public utilities, except current charges and Permitted Liens,
except to an extent which could not reasonably be expected to give
rise to a Material Adverse Effect;
	 
	 	(c)	 	All real property taxes including local improvement rates,
have been paid to date in respect of the Real Estate, except to an
extent which could not reasonably be expected to give rise to a
Material Adverse Effect;
	 
	 	(d)	 	No Inventory is located at any leased Premises except as
indicated in Exhibit D and at locations permitted under Section 6.3.






	 	8.30	 	Material Agreements





     Exhibit H hereto sets forth as of the Closing Date all material agreements
and contracts to which the Borrower or any of the Guarantors is a party or is
bound as of the date hereof. For purposes of the preceding sentence, material
means any agreement or contract the breach or termination of which could
reasonably be expected to give rise to a Material Adverse Effect.




	9.	 	AFFIRMATIVE AND NEGATIVE COVENANTS




Each Obligor covenants that, except as otherwise consented to by the Agent, so
long as any of the Obligations remain outstanding or this Agreement is in
effect (it being agreed that where any act or thing is to be done or not to be
done or permitted by any Subsidiary of an Obligor the applicable Obligor shall
cause such Subsidiaries to do the act or thing or not to do or permit the act
or thing, as the case may be):





	 	9.1	 	Taxes and Other Obligations




Each Obligor shall, and shall cause each of its Subsidiaries to:





	 	(a)	 	File when due all tax returns and other reports which it is
required to file, pay or provide for the payment, on or prior to the
time when due or delinquent, of all taxes, fees, assessments, and
other governmental charges against it or upon its Property, income
and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all
such items, and shall provide to the Agent, upon request,
satisfactory evidence of its timely compliance with the foregoing;
and




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	 	(b)	 	Pay when due all Obligations and Guaranteed Obligations and,
subject to any restrictions thereof as herein provided, any other
Debt or indebtedness owed by it, and all valid claims of material
men, mechanics, carriers, warehouse men, landlords, processors and
other like Persons and paid on a timely basis all other indebtedness
owned by it that perform and discharge in a timely manner all its
covenants and obligations hereunder and under the Loan Documents
and, subject to any restrictions thereon as herein provided, all
other obligations undertaken by it; provided, however that the
Obligors and its and their Subsidiaries need not pay any tax, fee,
assessment, governmental charge, or Debt, or perform or discharge
any other obligation, that it has disclosed (with all particulars
required by the Agent) in writing to the Agent and that is
contesting in good faith by appropriate proceedings diligently
pursued provided that to the extent so required under GAAP it has
established reserves therefor satisfactory to the Agent and Lenders
and that no Lien has arisen or been asserted.







	 	9.2	 	Corporate Existence and Good Standing




Each Obligor shall, and shall, cause each of its Subsidiaries to, maintain its
corporate existence and its qualification and good standing in all
jurisdictions necessary to conduct its business and own its Property, shall
obtain and maintain, and shall cause each of its Subsidiaries to obtain and
maintain, all licenses, permits, franchises and governmental authorizations
necessary to conduct its business and own its Property, and shall properly
maintain, and shall cause each of its Subsidiaries to maintain, all of its
books, records and accounts in accordance with GAAP.





	 	9.3	 	Compliance with Law and Agreements




Each Obligor shall, and shall cause each of its Subsidiaries to, comply with
the terms and provisions of each judgment, law, statute, rule, and governmental
regulation applicable to it, and each hypothec, mortgage, lien, lease,
indenture, order, instrument, agreement or document to which it is or they are
a party or by which it is or they are bound, shall obtain and maintain all
licences, permits, franchises and governmental authorizations necessary to own
its property and to conduct its business as conducted on Closing Date, except,
in each case, to the extent that non-compliance with the foregoing is not
reasonably likely to give rise to a Material Adverse Effect. The Obligors
shall not modify, amend or alter their certificate or articles of incorporation
other than in a manner which does not adversely affect the rights of the
Lenders or the Agent. Compliance with law and agreements; maintenance of
licences.





	 	9.4	 	Maintenance of Property and Insurance




Each Obligor shall, and shall cause each of its Subsidiaries to:





	 	(a)	 	Maintain all of its Property necessary and useful in its and
their businesses in the ordinary course in good operating condition
and repair, ordinary wear and tear excepted; and
	 
	 	(b)	 	In addition to the insurance required by Section 6.7,
maintain with financially sound and reputable insurers such other
insurance with respect to its Property and business against
casualties and contingencies of such types and in such amounts




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	 	 	 	as is customary for Persons of established reputation engaged in
the same or a similar business and similarly situated, naming the
Agent at its request, as additional insured under each such policy.






	 	9.5	 	Environmental Laws




Each of the Obligors shall conduct, and shall cause each of its and their
Subsidiaries to conduct, its and their business in compliance in all material
respects with all Environmental Laws applicable to it, including, without
limitation, those relating to the Obligors’ or such Subsidiary’s generation,
handling, use, storage and disposal of Materials of Environmental Concern. The
Obligors shall take, and shall cause its and their Subsidiaries to take, prompt
and appropriate action to respond to any non-compliance or alleged
non-compliance with Environmental Laws, and shall regularly report to the Agent
on such response. Without limiting the generality of the foregoing, whenever
any Obligor gives notice to the Agent pursuant to Section 7.3(g) and the Agent
so requests, the Obligors shall, at the applicable Obligor’s expense:





	 	(a)	 	Cause an independent environmental engineer acceptable to the
Agent in its reasonable discretion to conduct such tests of the site
where the non-compliance or alleged non-compliance with
Environmental Laws has occurred, and prepare and deliver to the
Agent a report setting forth the results of such tests, a proposed
plan for responding to any environmental problems described therein,
and an estimate of the costs thereof; and
	 
	 	(b)	 	Provide to the Agent a supplemental report of such engineer
whenever the scope of the environmental problems, or the Obligor’s,
and any other Person’s response thereto or the estimated costs
thereof, shall change. Such reports shall also be addressed to the
Agent and the Lenders and shall, as requested by the Agent, set out
the results of such engineers’ review of, inter alia:






	 	(i)	 	the internal policies and procedures of the
Obligor or any Subsidiary, as the case may be, relating to
environmental regulatory compliance to ensure that all
appropriate steps are being taken by or on behalf of the
Obligor or any Subsidiary, as the case may be, to comply with
all applicable requirements of Environmental Laws;
	 
	 	(ii)	 	progress of compliance satisfaction, capital
expenditures required to effect remedial steps and compliance
deficiencies;
	 
	 	(iii)	 	all other environmental audit reports which the
Obligor or any Subsidiary, as the case may be, or any
predecessor has commissioned in the normal conduct of its
business; and
	 
	 	(iv)	 	all environmental reports which have been
commissioned by or made available to an Obligor or any
Subsidiary, as the case may be, in connection with new
acquisitions, and the engineers’ report and recommendations on
results of tests performed or samples taken by it during the
course of its review, irregularities or steps which may be
taken




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	 	 	 	to ensure continued compliance, as well as such other matters
as a Borrower and/or the Agent may reasonably request from
time to time.






	 	9.6	 	Plans




Each Obligor shall cause each of its and their Subsidiaries’ Plans to be duly
qualified and administered in all respects in compliance with, as applicable,
the Pension Benefits Standards Act of British Columbia and all applicable laws
(including regulations, orders and directives), and the terms of the Plans and
any agreements relating thereto. The Obligors shall ensure that it and its and
their Subsidiaries:





	 	(a)	 	Have no unfunded, solvency, or deficiency on windup liability
and no accumulated funding deficiency (whether or not waived) or any
amount of unfunded benefit liabilities in respect of any Plan,
including any Plan to be established and administered by it or them;
	 
	 	(b)	 	All amounts required to be paid by it or them are paid when
due;
	 
	 	(c)	 	No liability upon it or them or Lien on any of its or their
Property arises or exists in respect of any Plan;
	 
	 	(d)	 	Make all required contributions to any Plan when due;
	 
	 	(e)	 	Not engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that could
reasonably be expected to result in liability.






	 	9.7	 	Mergers, Consolidations, Acquisitions or Sales




None of the Obligors or any of its or their Subsidiaries shall, in one or a
series of transactions, carry on business through any other Person, enter into
any partnership, joint venture, co-venture or other similar combination, other
than the Permitted Joint Ventures, or enter into any transaction of
amalgamation, merger, acquisition, reorganization, or consolidation, or,
subject to Sections 6.4 and 6.12 hereof, transfer, sell, assign, lease or
otherwise dispose of all or any part of its Property, or, wind up, liquidate or
dissolve, or cease to carry on business or agree to do any of the foregoing,
except as is necessary to complete the Steen Reorganization.





	 	9.8	 	Distributions; Capital Changes




Neither the Borrower nor any of the Guarantors shall (i) directly or indirectly
declare or make, or incur any liability to make, any Distribution, except
Distributions (a) to the Borrower or any Guarantor by its Subsidiaries, or (b)
by the Borrower in respect of payments required to be made in respect of the
Notes, or (ii) make any change in its capital structure which could reasonably
be expected to have a Material Adverse Effect. Subject to the foregoing, no
Obligor shall directly or indirectly, declare, make or pay, or incur any
liability to make or pay, any Distribution or, subject to Section 9.13 hereof,
any other payment to any Affiliate of any Obligor, in cash or property, on
account of repayments of, indebtedness, lease or rental payments, payments for
management or other services or otherwise.




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	 	9.9	 	Transactions Affecting Collateral or Obligations




None of the Obligors or any of its or their Subsidiaries shall enter into any
transaction or otherwise cause, permit or suffer to occur or exist any event or
condition which has resulted in or could reasonably be expected to give rise to
a Material Adverse Effect.





	 	9.10	 	Guarantees




None of the Obligors or any of its Subsidiaries shall make, issue, or become
liable on any Guarantee, except (a) Guarantees in favour of the Agent and/or
Lenders; (b) Guarantees in respect of the Notes; (c) endorsements of
instruments for deposit in the ordinary course of business; and (d) other
Guarantees for Debt permitted pursuant to Section 9.11.





	 	9.11	 	Debt




None of the Obligors or any of its or their Subsidiaries shall incur or
maintain any Debt other than:





	 	(a)	 	The Obligations;
	 
	 	(b)	 	Tax obligations not otherwise giving rise to any Event of
Default hereunder (including deferred taxes), trade payables and
contractual obligations to suppliers and customers and other Persons
incurred in the ordinary course of business by each of the Obligors;
	 
	 	(c)	 	Trade payables incurred in the ordinary course of business,
non-Capital Leases and other contractual obligations arising in the
ordinary course of business;
	 
	 	(d)	 	Debt secured by PMSIs, and Debt pursuant to Capital Leases of
Property, Equipment and other assets (provided the aggregate for all
Obligors of payments of such Debt does not exceed $5,000,000 in the
aggregate for each Fiscal Year);
	 
	 	(e)	 	Debt in connection with loans and Distributions permitted
under Section 9.8;
	 
	 	(f)	 	Debt in respect of the Notes and the Guarantees issued
pursuant thereto.






	 	9.12	 	Prepayment




None of the Obligors or any of its or their Subsidiaries shall voluntarily
prepay any Debt unless (a) there has not occurred an Event of Default which is
continuing, (b) such prepayment shall not cause an Event of Default and (c)
there are not, and after giving effect to such prepayment there will not be,
Net Borrowings.





	 	9.13	 	Transactions with Affiliates




Except as set forth below, neither the Borrower nor any of the Guarantors shall
(a) sell, transfer, distribute, or pay any money or property, including, but
not limited to, any fees or expenses of any nature (including, but not limited
to, any fees or expenses for management services), to any




- 54 -









 







Affiliate, other than a Permitted Joint Venture or (b) lend or advance money or
property to any Affiliate, other than a Permitted Joint Venture, or (c) at any
time there are, or would be as a result of such investment, Net Borrowings,
invest in (by capital contribution or otherwise) or purchase or repurchase any
stock or indebtedness, or any property, of any Affiliate, or (d) become liable
on any Guarantee of the indebtedness, dividends, or other obligations of any
Affiliate. Notwithstanding the foregoing, the Borrower and the Guarantors may
engage in sale transactions with the other Affiliates on credit and other terms
no less favourable to the Borrower and the Guarantors than would be obtained in
comparable arm’s length transactions with a third party who is not an Affiliate
and provided that the aggregate indebtedness of all other Affiliates to the
Obligors shall not exceed at any time $500,000.





	 	9.14	 	Business Conducted




None of the Obligors or any of its and their Subsidiaries shall engage,
directly or indirectly, in any business other than the businesses in which the
Obligors and its and their Subsidiaries are engaged in on the Closing Date and
businesses reasonably related or ancillary thereto.





	 	9.15	 	Liens




None of the Obligors or any of its or their Subsidiaries shall create, incur,
assume, or permit to exist any Lien on any Property now owned or hereafter
acquired by any of them, except Permitted Liens.





	 	9.16	 	New Subsidiaries




None of the Obligors or any of its or their wholly-owned Subsidiaries shall,
directly or indirectly, organize or acquire any wholly-owned Subsidiary unless
such newly organized or acquired Subsidiary has become a party has provided to
the Agent and the Lenders a Guarantee and security over its Collateral, and
related opinions of legal counsel, all in form and substance acceptable to the
Agent.





	 	9.17	 	Investments




None of the Obligors or any of its Subsidiaries shall make any Investments
other than Permitted Investments.





	 	9.18	 	Minimum Availability




The Obligors, on a consolidated basis, shall maintain at all times Availability
of not less than $5,000,000.





	 	9.19	 	Fixed Charge Ratio




The Obligors, on a consolidated basis, will maintain at all times, either (a) a
Fixed Charge Ratio of not less than 1.0 to 1.0 (tested monthly in arrears), or
(b) Availability of not less than $10,000,000.





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     9.20 Reorganization, Amalgamation and Change of Control



None of the Obligors or any of its or their Subsidiaries shall wind-up,
liquidate or dissolve its business, affairs or assets or enter into any
transaction of reorganization, amalgamation, merger, consolidation or permit
any change in its ownership or control that will cause, in the case of the
Borrower, the Ainsworth Family to, at any time, without the prior written
consent of the Agent, reduce or otherwise dispose of their respective interest
in the common stock of the Borrower, except for such reductions or dispositions
which do not cause the Ainsworth Family to cease to have at any time,
individually or together, directly or indirectly, through one or more
wholly-owned Subsidiaries, securities of any class or classes of the Borrower
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions)
of the Borrower.




     9.21 Note Indentures.



The Borrower will not amend any provision of any of the Note Indentures where
such amendment could reasonably be expected to have a Material Adverse Effect,
without the Agent’s prior written consent.




     9.22 Fiscal Year



Neither the Borrower nor any of the Guarantors shall change its Fiscal Year.




     9.23 Further Assurances



Each of the Obligors shall execute and deliver, or cause to be executed and
delivered, to the Agent such documents and agreements, and such additional
instruments of security, and shall take or cause to be taken, or do or cause to
be done, such actions and things, as the Agent may, from time to time in its
reasonable discretion, request to carry out the terms and conditions of this
Agreement and the other Loan Documents, and in order to better register,
perfect, render opposable and protect the priority of the Agent’s Liens over
all other Liens.




10. CLOSING; CONDITIONS TO LENDING




The Lenders will not be obligated to make or continue any Loans or obtain or
issue any Letters of Credit or Credit Support and the Borrower shall not
request any Drawdown of any Loan or issuance of any Letter of Credit unless the
following conditions (which will, until the Closing Date, constitute conditions
precedent and, thereafter, and whether or not any Loans have been made without
compliance with any of the conditions unless the same have been expressly
permanently waived, continuing conditions) have been satisfied in a manner
satisfactory to the Agent:




     10.1 Representations and Warranties; Covenants; Events



The Obligors’ representations and warranties contained in this Agreement and
the other Loan Documents shall be correct and complete; each Obligor shall have
performed and complied with all covenants, agreements, and conditions contained
herein and in the other Loan Documents




- 56 -









 








which are required to have been performed or complied with; and there shall
exist no Default or Event of Default.




     10.2 Closing Date Conditions



The Agent, subject to paragraph (f) below, shall have received three (3) copies
of each of the following on or prior to the Closing Date, and shall continue to
hold an original of each of the following, in form and substance satisfactory
to the Agent and Lenders and Agent’s counsel:





	(a)	 	this Agreement duly executed by the Borrower;
	 
	(b)	 	certified copies of the articles or certificates of
amalgamation and amendments, if applicable, of the Borrower, its
borrowing by-laws and resolutions of its board of directors
authorizing its execution, delivery and performance of this
Agreement and the Loan Documents to be signed by it;
	 
	(c)	 	evidence satisfactory to the Agent and Lenders and the
Agent’s counsel that each of the representations and warranties
herein is true and accurate, the Borrower is in compliance with all
of its covenants and obligations herein, no Event of Default has
occurred, and there has not occurred any material adverse change in
the business, operations, property, profits or prospects of the
Borrower since December 31, 2003;
	 
	(d)	 	security agreements in respect of Receivables Collateral and
Inventory (the “Security Agreements”) by the Borrower, on terms
satisfactory to the Agent;
	 
	(e)	 	the Collection Account Agreements;
	 
	(f)	 	each of the other Loan Documents, including the documents
listed in Exhibit M, in form and substance satisfactory to the
Agent;
	 
	(g)	 	evidence satisfactory to the Agent that the 2004 Note
Transaction has closed;
	 
	(h)	 	the favourable opinion of the Borrower’s counsel and local
counsel as required by the Agent and Lenders, addressed to the Agent
and each of the Lenders and Agent’s counsel, such opinions to
address the status and formation of the Borrower and its
qualification to carry on business in each jurisdiction where it
does so, the due authorization, execution, delivery and
enforceability (subject to usual and acceptable qualifications) in
accordance with their terms of all Loan Documents and otherwise in
form and scope satisfactory to the Agent, the Lenders and Agent’s
counsel; and
	 
	(i)	 	the Agent’s customary agreements, including all documents,
instruments, financial statements, consents, evidences of corporate
authority, certificates, insurance certificates and such other
writings to confirm and effectuate the lending transactions and the
matters referred to herein as may be required by the Agent and its
counsel, all duly executed and/or delivered by the Borrower, and the
Lenders and the Agent are satisfied therewith.




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     10.3 Release of Proceeds; Drawdown Date



On the Closing Date, the following shall have been completed to the
satisfaction of the Agent and Lenders:





	(a)	 	all necessary legislative, regulatory, governmental, and
other third party approvals, notices, consents and permits including
as necessary to grant and perform the Loan Documents and carry on
the Borrower’s business shall have been given and obtained by the
Borrower, such approvals, notices, consents and permits not to
contain any terms or conditions which the Agent and Lenders consider
to be materially adverse to the Borrower and evidence thereof shall
have been furnished to the Agent and Lenders;
	 
	(b)	 	the Borrower shall have delivered evidence satisfactory to
the Agent and Lenders that, immediately after the Closing Date and
making of the initial Loans and issuance of any Letter of Credit and
after ensuring that all of the Borrower’s Debts are current,
Availability will not be less than $20,000,000, and the Borrower
shall have sufficient Availability to enable it to meet all debt
amortization requirements and to observe and perform all terms
hereof and of the other Loan Documents;
	 
	(c)	 	all registrations and filings in respect of the Loan
Documents shall have been made on or before the Closing Date under
the PPSA in all jurisdictions that the Agent’s counsel shall
determine to be necessary or appropriate (at the expense of the
Borrower), it being understood and agreed that the Agent shall be
entitled to make (at the expense of the Borrower) all such further
registrations and filings in respect of the Loan Documents, after
the Closing Date, and until all Obligations of the Obligors have
been paid and performed in full, as the Agent shall consider
necessary or appropriate;
	 
	(d)	 	the Agent shall have reviewed and shall be satisfied with the
insurance policies maintained by the Borrower, and all terms thereof
(including risks and amounts of coverage) and the insurers, it being
understood and agreed that, with respect to any such policy
concerning risks to inventory Collateral, the Agent shall be named
as loss payee as its interest may appear and first mortgagee and
that all such policies shall contain the standard mortgagee
endorsement clauses in favour of the Agent, certificates (pursuant
to endorsements satisfactory to the Agent in its discretion) on each
of such policies of the Borrower;
	 
	(e)	 	the Agent shall be satisfied with the results of all personal
property and other searches and enquiries conducted in respect of
the Borrower and its property and assets as the Agent’s counsel may
require including, without limitation, under the PPSA and estoppels
letters (to confirm the amounts secured by any existing encumbrances
and the Collateral covered thereby) shall be received by the Agent
as may be required by the Agent in its discretion;




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	(f)	 	the Agent and Lenders shall be satisfied that there are no
judgments outstanding, and no legal or administrative proceedings
(including in any court arbitrator or
any Public Authority) pending or threatened except as expressly
permitted hereunder which could reasonably be expected to give rise
to a Material Adverse Effect;
	 
	(g)	 	the Agent and Lenders shall be satisfied with all
environmental matters impacting on the Borrower;
	 
	(h)	 	the Agent and Lenders shall have completed all due diligence
which they consider necessary or appropriate in their discretion in
regard to the Borrower and its properties, assets, books and
records, operations, prospects and condition (financial and
otherwise), including, without limitation, in regard to past and
ongoing compliance with Environmental Laws union and labour
relations and pension matters, and the Agent and Lenders shall be
satisfied in its discretion that the Borrower is adequately
capitalized, that the fair saleable value of the Borrower’s assets
will exceed its liabilities at closing, and that the Borrower will
have sufficient working capital to pay its Debts as they become due;





     10.4 Termination of Liens



The Agent shall have received duly executed financing change statements,
discharges and other instruments, or evidence thereof, in form and substance
satisfactory to the Agent, as shall be necessary to terminate and discharge and
satisfy all Liens other than Permitted Liens on the Property of the Obligors.




     10.5 Deliberately Left Blank



     10.6 Closing Fee



The Borrower shall have paid in full all closing fees agreed with GMAC CF.




     10.7 Payment of Fees and Expenses



The Borrower shall have paid all reasonable fees and expenses of the Agent’s
counsel, Ogilvy Renault, and all special local counsel retained and all other
fees and expenses of the Agent and the Lenders incurred in connection with any
of the Loan Documents and the transactions contemplated thereby.




     10.8 Required Approvals



The Agent and Lenders shall have received certified copies of all consents or
approvals of any Public Authority or other Person which the Agent and/or
Lenders determine is required in connection with the transactions contemplated
by this Agreement.




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     10.9 No Material Adverse Change



There shall have occurred no material adverse change in any of the Obligors’
Property, business, operations, prospects or financial condition since December
31, 2003.




     10.10 Proceedings



All proceedings to be taken in connection with the transactions contemplated by
this Agreement and all Loan Documents and other documents, instruments,
guarantees and other assignments incident hereto or contemplated in connection
herewith (whether or not forms thereof are annexed hereto as Exhibits), shall
be satisfactory in form and substance to the Agent and Lenders and their
counsel.




11. DEFAULT; REMEDIES




     11.1 Events of Default



It shall constitute an event of default (“Event of Default”) if any one or more
of the following shall occur for any reason:





	(a)	 	any failure to pay the principal of or interest on any of the
Obligations when due, whether upon demand or otherwise;
	 
	(b)	 	any representation or warranty made by any Obligors in this
Agreement, any of the other Loan Documents, any Financial Statement,
or any certificate furnished by any Obligors at any time to the
Agent and/or Lenders shall prove to be untrue as of the date on
which made;
	 
	(c)	 	default shall occur in the observance or performance by the
Obligors of any of the covenants and agreements contained in
Sections 6.1 to 6.12, 7.2(a) to (e), 7.3, 9.4, 9.7, 9.8, 9.10, 9.11,
9.12, 9.13, and 9.15 to 9.20 of this Agreement or any of the other
Loan Documents shall terminate (other than in accordance with its
terms or the terms hereof or with the written consent of the Agent
and/or Lenders) or become void or unenforceable without the written
consent of the Agent and/or Lenders;
	 
	(d)	 	default shall occur in the observance or performance by the
Obligors of any of the covenants and agreements contained in this
Agreement, the Loan Documents, or any other agreement entered into
at any time to which any Obligors and the Agent and/or any of the
Lenders are party other than those referred to in paragraph (c)
above, which is not remedied within thirty (30) days of written
notice to do so;
	 
	(e)	 	any default shall occur in the payment of any principal,
interest or premium with respect to any other Debt in an outstanding
principal amount in excess of $1,000,000 or under any agreement or
instrument under or pursuant to which any such Debt may have been
issued, created, assumed, or guaranteed by any Obligor and such
default shall continue for more than the period of grace, if any,
therein




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	 	 	specified, or if any such Debt shall be declared due and
payable prior to the stated maturity thereof or if any Obligor
otherwise defaults in the performance of any term or condition of
such Debt relating to a Permitted Lien;
	 
	(f)	 	any Obligor shall: (i) file a voluntary petition in
bankruptcy or file a voluntary petition or an answer or file any
proposal or notice of intention to file a proposal,
or file any application or otherwise commence any action or
proceeding seeking reorganization, arrangement, consolidation or
readjustment of its debts or securities, or which seeks to stay or
has the effect of staying, any creditors, or for any other relief
under the Bankruptcy and Insolvency Act of Canada (“BIA”), or the
Companies’ Creditors Arrangement Act of Canada, or under any other
bankruptcy, insolvency, liquidation, winding up, corporate or
similar statute or law, provincial, state or federal, now or
hereafter existing, or consent to, approve of or acquiesce in, any
such petition, proposal, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, monitor,
liquidator, sequestrator, custodian or trustee (whether or not on
an interim or permanent basis) or similar officer for it or for all
or any part of its Property; (iii) make an assignment for the
benefit of creditors; or (iv) be unable generally to pay its debts
as they become due or if an act of bankruptcy occurs under the BIA;
	 
	(g)	 	an involuntary petition or proposal shall be filed or an
action or proceeding otherwise commenced seeking reorganization,
arrangement, consolidation or readjustment of any Obligor’s debts or
securities or for any other relief under the BIA, the Companies’
Creditors Arrangement Act of Canada, or under any other bankruptcy,
insolvency, liquidation, winding up, corporate or similar statute or
law, provincial, state or federal, now or hereafter existing unless
(A) such proceeding is discharged within a period of sixty (60)
days, (B) until discharged is being actively and diligently
contested in good faith, and any relief or remedies upon or against
any Obligor’s Collateral have been stayed, (C) has not given rise to
any Material Adverse Effect, and (D) has not otherwise resulted in
any adjudication or declaration of bankruptcy or any of the events
referred to in paragraph (f);
	 
	(h)	 	a receiver, assignee, liquidator, administrator,
sequestrator, custodian, trustee, monitor or similar official
(whether or not on an interim or permanent basis) for any Obligor or
for all or any part of the Collateral shall be appointed
involuntarily; or an execution, writ of seizure and sale,
sequestration or extent or any other process of any court, shall be
issued or levied against any part of the Collateral of any Obligor
or shall otherwise be enforceable against any Obligor or a distress
or analogous process is levied upon any part of the Collateral of
any Obligor;
	 
	(i)	 	any Obligor, without the prior consent of the Agent, shall
file a certificate of dissolution or like process under applicable
law or shall be liquidated, dissolved or wound-up or shall commence
or shall have commenced against it any action or proceeding for
dissolution, winding-up, administration or liquidation (A) which has
not been discharged within sixty (60) days or (B) which is not being
actively




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	 	 	and diligently contested in good faith or (C) any relief or
remedies upon any Obligor’s Collateral have not been stayed or (D)
which has given rise to any Material Adverse Effect or (E) which has
resulted in any adjudication or declaration, or shall take any
corporate action in furtherance thereof or if any Obligor abandons
all or any part of its Collateral the abandonment of which could
reasonably be expected to have a Material Adverse Effect or ceases
or threatens to cease to carry on business;
	 
	(j)	 	all or any part of the Collateral of any Obligor shall be
nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such Collateral, or if any
Obligor, shall be assumed by any Public Authority or any court of
competent jurisdiction at the instance of any Public Authority,
except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect, which
has resulted in or may result in a Material Adverse Effect;
	 
	(k)	 	any Guarantee of the Obligations shall be terminated (other
than by the Agent), revoked or declared void or invalid;
	 
	(l)	 	one or more final judgments for the payment of money or final
assessments (which are no longer appealable) of Canada Customs and
Revenue Agency aggregating in excess of $1,000,000 (whether or not
covered by insurance) shall be rendered against any Obligor and such
judgment or assessment is not paid and discharged within thirty (30)
days (provided until discharged, all relief or remedies have been
stayed and further provided such judgment or assessment has not
given rise to a Material Adverse Effect);
	 
	(m)	 	any loss, theft, damage or destruction of any item or items
of Collateral occurs which has given or could reasonably be expected
to give rise to a Material Adverse Effect;
	 
	(n)	 	if any Obligor violates any Environmental Law which results
in an Action Request, Violation Notice or other notice or control
order, cancellation of any license or certificate or approval, that
could reasonably be expected to have a Material Adverse Effect;
	 
	(o)	 	any event or condition shall occur or exist with respect to a
Plan that could, in the Lenders’ good faith judgment, subject any
Obligor to any tax, penalty or other liabilities under the Pension
Benefits Act of Ontario or any other applicable laws which could
reasonably be expected to give rise to a Material Adverse Effect;
	 
	(p)	 	the Borrower ceases to be the registered and beneficial owner
of 100% of the issued and outstanding shares of the Guarantor or
there shall have occurred a Change of Control;
	 
	(q)	 	if any of the leases and subleases described in Exhibit D
proves not to be or ceases to be valid and enforceable to the extent
same could reasonably be likely to give rise to a Material Adverse
Effect;




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	(r)	 	there is filed against any Obligor any civil or criminal
action, suit or proceeding under any federal, provincial or state
racketeering, proceeds of crime or money laundering statute, which
action, suit or proceeding (1) is not dismissed within one hundred
twenty (120) days, and (2) could reasonably be expected to result in
the confiscation or forfeiture or any portion of the Collateral the
loss of which could reasonably be expected to give rise to a
Material Adverse Effect;
	 
	(s)	 	there occurs a Material Adverse Effect; or
	 
	(t)	 	for any reason other than the failure of the Agent to take
any action available to it to maintain the opposability or the
perfection of the Agent’s Liens, pursuant to the Loan Documents, any
Loan Document ceases to be in full force and effect or any Lien with
respect to any material portion of the Collateral intended to be
secured thereby ceases to be, or is not, valid, perfected,
opposable, published, registered and prior to all other Liens (other
than Permitted Liens) or is terminated (other than by the Agent),
revoked or declared void.





     11.2 Remedies




	(a)	 	If an Event of Default has occurred and is continuing or the
Agent has previously exercised its rights under clause (iv) and/or
(v) below pursuant to this Section 11.2(a), the Agent may, in its
discretion, and shall, at the direction of the Required Lenders, do
one or more of the following at any time or times and in any order,
without notice to or demand on the Borrower: (i) reduce the Maximum
Revolving Credit Line, or the advance rates against Eligible
Accounts and/or Eligible Inventory used in computing the Borrowing
Base, or reduce one or more of the other elements used in computing
the Borrowing Base; (ii) restrict the amount of or refuse to make
Revolving Loans; (iii) restrict or refuse to provide Letters of
Credit or Credit Support; (iv) terminate the Commitments and this
Agreement; (v) declare any or all Obligations and/or Guaranteed
Obligations to be immediately due and payable; provided, however,
that upon the occurrence of any Event of Default described in
Sections 11.1(f), 11.1(g), 11.1(h) or 11.1(i), the Commitments shall
automatically and immediately expire and all Obligations and
Guaranteed Obligations shall automatically become immediately due
and payable without notice or demand of any kind; and (vi) pursue
its other rights and remedies under the Loan Documents and
applicable law and equity.
	 
	(b)	 	If an Event of Default has occurred and is continuing or the
Agent has exercised its rights under clause (iv) and/or (v) of
Section 11.2(a): (i) the Agent shall have for the benefit of the
Lenders, in addition to all other rights of the Agent and the
Lenders, the rights and remedies of a secured party under applicable
law (including, without limitation, the PPSA) in the jurisdiction
where the Collateral is located and all rights and remedies provided
for in the Loan Documents; (ii) the Agent may, at any time, take
possession of the Collateral and keep it on the Borrower’s or any
Guarantor’s premises, at no cost to the Agent or any Lender, or
remove any part of it to such other place or places as the Agent may
desire, or the Borrower or any Guarantor shall, upon the Agent’s
demand, at the Borrower’s




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	 	 	cost, assemble the Collateral and make it
available to the Agent at a place convenient to the Agent; and (iii)
the Agent may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion, and
may, postpone or adjourn any sale of the Collateral by an announcement at the
time and place of sale or of such postponed or adjourned sale
without giving a new notice of sale. Without in any way requiring
notice to be given in the following manner, the Borrower and each
of the Guarantors agrees that any notice by the Agent of sale,
disposition or other intended action hereunder or in connection
herewith, whether required by the PPSA or otherwise, shall
constitute reasonable notice to the Borrower and Guarantors if such
notice is mailed by registered or certified mail, return receipt
requested, postage prepaid, or is delivered personally against
receipt, at least fifteen (15) days prior to such action to the
Borrower’s address specified in or pursuant to Section 15.21. If
any Collateral is sold on terms other than payment in full at the
time of sale, no credit shall be given against the Obligations
until the Agent or the Lenders receive payment, and if the buyer
defaults in payment, the Agent may resell the Collateral without
further notice to the Borrower or any Guarantor. In the event the
Agent seeks to take possession of all or any portion of the
Collateral by judicial process, the Borrower and each of the
Guarantors irrevocably waives: (A) the posting of any bond, surety
or security with respect thereto which might otherwise be required;
(B) any demand for possession prior to the commencement of any suit
or action to recover the Collateral; and (C) any requirement that
the Agent retain possession and not dispose of any Collateral until
after trial or final judgment. The Borrower and each of the
Guarantors agrees that the Agent has no obligation to preserve
rights to the Collateral or marshal any Collateral for the benefit
of any Person. The Agent is hereby granted a license or other
right to use, without charge, the Borrower’s and each Guarantor’s
labels, patents, copyrights, name, trade secrets, trade names,
trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral,
and the Borrower’s and Guarantors’ rights under all licenses and
all franchise agreements shall inure to the Agent’s benefit for
such purpose. The proceeds of sale shall be applied first to all
expenses of sale, including legal fees, and then to the
Obligations. The Agent will return any excess to the Borrower and
Guarantors and the Borrower shall remain liable for any deficiency.
	 
	(c)	 	If an Event of Default has occurred and is continuing or the
Agent has exercised its rights under clause (iv) and/or (v) of
Section 11.2(a), to the maximum extent permitted by law the Borrower
and each of the Guarantors hereby waives all rights to notice and
hearing prior to the exercise by the Agent of the Agent’s rights to
repossess the Collateral without judicial process or to reply,
attach or levy upon the Collateral without notice or hearing.




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12. TERM AND TERMINATION



Subject to any earlier demand for payment upon the occurrence of an Event of
Default, the term of this Agreement shall be the period from the Closing Date
to end on the Maturity Date (the “Term”). The Borrower may terminate the
Revolving Credit Facilities at any time during the Term if:





	(a)	 	it gives the Agent sixty (60) days prior written notice of
termination;
	 
	(b)	 	it pays the Early Termination Fee;
	 
	(c)	 	it pays and performs all of its Obligations on or prior to
the effective date of termination; and
	 
	(d)	 	it shall immediately arrange for the cancellation and return
of all Letters of Credit then outstanding.





Notwithstanding the termination of this Agreement, until all Obligations are
paid and performed in full, the Obligors shall remain bound by the terms of
this Agreement and under the Loan Documents and shall not be relieved of any of
their Obligations and Guaranteed Obligations, as applicable, and the Agent
and/or Lenders shall retain all their rights and remedies hereunder and under
the Loan Documents (including, without limitation, in all then existing and
after-arising Collateral). Partial terminations of the Revolving Credit
Facility are not permitted.




13. AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS




     13.1 Amendments and Waivers.



        No amendment or waiver of any provision of this Agreement or any other
Loan Document, and no consent with respect to any departure by the Borrower or
any of the Guarantors therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by the Agent upon the written
authorization of the Required Lenders) and the Borrower or such Guarantor, as
applicable, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless approved in
writing by all the Lenders and in writing between the Borrower and Guarantors
and the Agent, do any of the following:




	(a)	 	increase or extend the Commitment of any Lender;
	 
	(b)	 	postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or
other amounts due to the Lenders (or any of them) hereunder or under
any other Loan Document;
	 
	(c)	 	reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder
or under any other Loan Document;




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	(d)	 	change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the
Lenders or any of them to take any action hereunder;
	 
	(e)	 	increase any of the percentages set forth in the definition
of the Borrowing Base;
	 
	(f)	 	amend this Section or any provision of this Agreement
providing for consent or other action by all Lenders;
	 
	(g)	 	release Collateral other than as permitted by Sections 14.1
and 14.2(b);
	 
	(h)	 	change the definition of “Required Lenders”; or
	 
	(i)	 	increase the Maximum Revolving Credit Line, the maximum
amount of advances to be made based on Eligible Inventory, and the
Unused Letter of Credit Subfacility; and
	 
	(j)	 	grant any express release of a Guarantor from its Guaranteed
Obligations.





provided, however, that the Agent may, in its sole discretion and
notwithstanding the limitations contained in clause (e) above and any other
terms of this Agreement, make Revolving Loans (including Agent Advances)
provided that, in the case of Agent Advances, Agent Advances shall not exceed
any limits in amounts and circumstances described in Section 2.2 and; provided
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Agent, affect the rights or duties of the Agent under this
Agreement or any other Loan Document; provided, further, that unless a matter
expressly requires the consent or agreement of all of the Lenders or the
Required Lenders (such as above-provided) then references to the Lenders’
consent or instructions means the consent or instructions of the Required
Lenders.




     13.2 Assignments; Participations.




	(a)	 	Any of the Lenders (an “Assignor”) may assign, in whole or in
part, such Lender’s Commitment to any other Person (whether or not a
Lender) (an “Assignee”), provided, if prior to the occurrence of an
Event of Default, the Assignor has the prior consent of the
Borrower, such consent not to be unreasonably withheld and provided
there shall be no more than three Lenders at any one time prior to
an Event of Default.
	 
	(b)	 	Any assignment contemplated by Clause 13.2(a) hereof shall be
executed in the form set forth in Exhibit P (an “Assignment and
Acceptance”) hereto forming part hereof (with such amendments
thereto as the Assignor, the Assignee and the Agent may agree to,
from time to time, without any necessity of consent thereto from the
Borrower or any Obligor) and the Assignor shall then pay to the
Agent (for the Agent’s own account) an assignment fee of $3,500.00.
Upon such assignment becoming effective, the Assignee shall become a
Lender and shall benefit from the rights and be liable to the
obligations of the Assignor proportionately to the assigned
Commitment (or assigned portion of the Commitment) and, to the same
extent, the Assignor shall be released from its




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	 	 	obligations. The
Assignor and the Assignee shall be liable for all expenses incurred
by the Agent in connection with such assignment.
	 
	(c)	 	No partial assignment of a Commitment may be made if the
residual amount of the Commitment of the Assignor or if the total
Commitment of the Assignee is less than 20% of all of the Maximum
Revolving Credit Line.
	 
	(d)	 	Concurrently with any assignment of a Commitment in favour of
an Assignee which is not, at the time of the assignment, a Lender,
all of the Guarantors shall reiterate and confirm their respective
guarantees in favour of such Assignee.
	 
	(e)	 	Provided that an assignment is made in accordance with the
provisions of Clauses (a) through (d) of this Section, such
assignment shall not require, under any circumstances whatsoever,
the consents of any or all of the Borrower or any other Obligor, all
of whom shall be deemed, in advance, to have completely consented
and acquiesced to such assignment(s) for all purposes.
	 
	(f)	 	The provisions of Clauses (a) through (d) of this Section
shall not apply to a participation which any Lender may grant to any
other Person, provided that such participation does not result in
the release of any obligations of such Lender towards the Borrower
hereunder or in any direct obligation of the Borrower towards such
participant.





14. THE AGENT




     14.1 Agent



Each Lender hereby irrevocably appoints GMAC CF as Agent (including any
successor agent as herein provided and including any person to whom the Agent
may delegate (but only with the consent of the Lenders if not to an affiliate
of the Agent or, with respect to appraisal functions, a recognized appraiser)
duties or responsibilities as permitted by Section 14.2(h), the “Agent”) to act
as its agent in connection with this Agreement, the other Loan Documents and
the matters contemplated hereunder and thereunder, and authorizes irrevocably
the Agent to exercise such rights, powers and discretions as are delegated to
the Agent pursuant to this Agreement and the other Loan Documents together with
all such rights, powers and discretions as are incidental hereto or thereto.
The Agent shall have only those duties and responsibilities which are expressly
specified in this Agreement and the other Loan Documents, and it may perform
such duties by or through its agents or employees. This Agreement shall not
place the Agent under any fiduciary duties in respect of any Lender or any
other Person, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term “agent” in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. The Agent and any other
Person to whom an Agent may delegate duties or responsibilities as permitted
under Section 14.2(h) shall enjoy the same




- 67 -









 








benefits, rights and protections as those provided to the Agent under this Article mutatis mutandis. Each Lender
hereby irrevocably appoints and constitutes the Agent its true and lawful
attorney, with full power of substitution, for the purposes of carrying out any
of the terms hereof, collecting or enforcing any of the Obligations and
exercising any of the rights and remedies of the Lenders hereunder and under
the other Loan Documents, including, without limitation, for the purposes of
signing any documents necessary to perfect, register, publish, render
opposable, maintain, subject to Section 14.2(b), release or discharge the
Agent’s Liens or any of the Loan Documents, and instituting any actions or proceedings. The Agent shall not be
liable for any acts or omissions or errors of judgment or mistakes of fact or
law in its exercise of the foregoing power, except resulting from its gross
negligence or wilful default.




     14.2 Agent’s Responsibility



The Agent may:





	(a)	 	assume that:






	(i)	 	any representation made by any Obligor in or in
connection with any of the Loan Documents, any notice or other
document, instrument or certificate is true;
	 
	(ii)	 	no Default has occurred; and
	 
	(iii)	 	none of the Obligors is in breach of or in
default under its obligations under any of the Loan Documents;






	(b)	 	unless the Agent has actual knowledge or actual notice to the
contrary, assume that each parties’ address is that identified with
its signature below until it has received from such party a notice
designating some other office of such party as its address and act
upon any such notice until the same is superseded by a further such
notice;
	 
	(c)	 	engage and pay for the advice or services of any lawyers,
accountants or other experts whose advice or services may to it seem
necessary, expedient or desirable and rely upon any advice so
obtained;
	 
	(d)	 	unless the Agent has actual knowledge or actual notice to the
contrary, rely as to matters of fact which might reasonably be
expected to be within the knowledge of an Obligor upon a statement
signed by or on behalf of an Obligor;
	 
	(e)	 	rely upon any writing, resolution, notice, consent,
certificate, affidavit, letter, fax, telex, telephone message,
statement, conversation, communication or document believed by it to
be genuine and correct and believed to have been signed, sent or
made by a proper Person;
	 
	(f)	 	refrain from exercising any right, power or discretion vested
in it under the Loan Documents or otherwise refrain from taking any
action unless and until it first receives the advice or concurrence
of the Lenders and, if requested, it is




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	 	 	specifically indemnified to its satisfaction by all Lenders against any and all liability or
expense which may be incurred by it by reason of taking or
continuing to take such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Lenders;
	 
	(g)	 	refrain from exercising any right, power or discretion vested
in it which would or might in its opinion be contrary to any law of
any jurisdiction or any directive or otherwise render it liable to
any Person, and may do anything which is in its opinion necessary to
comply with any such law or directive;
	 
	(h)	 	delegate (without any further consent of the Applicable
Obligors, any Lender or any other Person if to an affiliate of the
Agent or, with respect to appraisal functions, recognized appraiser)
to such other Person, such duties and responsibilities as it shall
determine to be appropriate in respect of dealings with or relating
to the Obligors or any other Person or any Collateral and such
delegated Person shall be entitled to all of the benefits and powers
of the Agent relating to such delegated functions and the Agent
shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care
unless the conduct of the Agent has been grossly negligent or
constitutes wilful misconduct;
	 
	(i)	 	retain for its own benefit, and without liability to account
for, any fee or other sum due and payable to it for its own account;
and
	 
	(j)	 	provide any advisory or other ancillary banking services to
any party (including any Affiliate thereof) to this Agreement
provided same do not conflict with the Agent’s express duties
hereunder.





     14.3 Agent’s Duties



The Agent shall:





	(a)	 	promptly upon receipt thereof, inform each Lender of the
contents of (and, if requested, provide a copy to such Lender of)
any notice, document, request or other information received by it in
its capacity as Agent hereunder from any Obligor or any Lender;
	 
	(b)	 	promptly notify each Lender of the occurrence of any Default
or Event of Default, provided, however, that the Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default
or Event of Default, unless the Agent shall have received written
notice from a Lender or an Obligor referring to this Agreement,
describing such Default or Event of Default and stating that such
notice is a “notice of default”;




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	(c)	 	each time any Obligor requests the prior written consent of
the Lenders, use its best efforts to obtain and communicate to such
Obligor the response of the Lenders in a reasonable and timely
manner having due regard to the nature and circumstances of the
request;
	 
	(d)	 	subject to the foregoing provisions of this Article and
Article 13, take such actions with respect to any Default or Event
of Default as may be requested by the Lenders, provided, however,
that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the
Lenders; and
	 
	(e)	 	if so instructed by the Lenders, and subject to being
indemnified to its satisfaction by all Lenders, do and perform the
things contemplated in Sections 6 and 11, or refrain from exercising
any right, power or discretion vested in it under the Loan Documents
or any document incidental thereto.





     14.4 Protection of Agent



Notwithstanding anything to the contrary expressed or implied herein, the Agent
shall not:





	(a)	 	be bound to enquire as to:






	(i)	 	whether any representation made by any Obligor or
any other Person in or in connection with the Loan Documents
or any document incidental thereto is true;
	 
	(ii)	 	the occurrence or otherwise of any Default;
	 
	(iii)	 	the performance by any Obligor or any other
Person of its obligations under any of the Loan Documents or
any document incidental thereto (including any obligations in
respect of insurance);
	 
	(iv)	 	any breach of or default by any Obligor or any
other Person under the Loan Documents or any document
incidental thereto; or
	 
	(v)	 	the use or application by any Obligor of any of
the proceeds of any of the Loans;






	(b)	 	be bound to account to any Lender for any sum or the profit
element of any sum received by it for its own account as herein
provided;
	 
	(c)	 	be bound to disclose to any Person any information relating
to any Obligor if such disclosure would or might in its opinion
constitute a breach of any law or regulation or be otherwise
actionable at the suit of any Person;
	 
	(d)	 	be under any obligation to inspect any Collateral or any
other Property, books or records of any Obligor or any of its or
their Subsidiaries or Affiliates;




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	(e)	 	accept any responsibility for the accuracy and/or
completeness of any information supplied in connection herewith or
for the legality, validity, effectiveness, genuineness, sufficiency,
adequacy or enforceability of the Loan Documents, any Loan, any
Letter of Credit or any document incidental hereto or thereto and
the Agent shall be under no liability to any Lender as a result of
taking or omitting to take any action in relation to the Loan
Documents, any Loan or any document incidental hereto or thereto
save in the case of gross negligence or wilful misconduct, and each
of the Lenders agrees that it will not assert or seek to assert
against any director, officer, employee, affiliate or agent of the
Agent any claim it might have against any of them in respect of the
matters referred to in this Section 14.4; or
	 
	(f)	 	have any obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by the Obligors or is
cared for, protected or insured or has been encumbered, or that the
Agent’s Liens have been properly or sufficiently or lawfully
created, perfected, rendered opposable, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity,
or to continue exercising, any of the rights, authorities and powers
granted or available to the Agent pursuant to this Agreement or
pursuant to any of the Loan Documents, it being understood and
agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent’s own interest
in the Collateral in its capacity as one of the Lenders and that the
Agent shall have no duty or liability whatsoever to any Lender as to
any of the foregoing.





     14.5 Authorized Waivers, Variations and Omissions



If so authorized in writing by the Lenders, the Agent may grant waivers,
consents, and with the agreement of the Borrower vary the terms of or amend
this Agreement and do or omit to do all such acts and things in connection
herewith or therewith.




     14.6 Capacity as Agent



In performing its functions and duties under this Agreement, the Agent shall
act solely as the agent of the Lenders and shall not assume, and shall not be
deemed to have assumed, any obligation as agent or trustee for the Obligors or
any other Person. The Agent shall be under no liability or responsibility of
any kind to the Obligors, any Lender or to any other Person arising out of or
in relation to any failure or delay in performance or breach by any Lender or
Lenders, as the case may be, by the Obligors or any other Person pursuant to or
in any way in connection with this Agreement. For greater certainty, the term
“Agent” includes each Agent to whom any rights, powers or functions of Agent
may be delegated.




     14.7 Certain Rights of the Agent



Without limitation to any other provision hereof, the Agent may request
instructions from the Lenders at any time. If the Agent requests instructions
from the Lenders with respect to any




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action or inaction, the Agent shall be
entitled to await instructions from the Lenders before such action or inaction
and shall be entitled to request and obtain an indemnity of all Lenders
satisfactory to the Agent against all costs, liability and expenses which Agent
may suffer or incur in connection with such matters.




     14.8 Collateral Matters




	(a)	 	Each Lender authorizes the Agent to enter into the Loan
Documents to which it is a party, for the benefit of the Lenders.
Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders’ Liens in
assets which can be perfected only by possession. Should any
Lender (other than the Agent) obtain possession of any such
Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent’s request therefor shall deliver such
Collateral to the Agent or in accordance with the Agent’s
instructions. Each Lender authorizes and directs the Agent to
enter into this Agreement and the other Loan Documents relating to
the Collateral, for the benefit of the Agent and the Lenders. Each
Lender agrees that any action taken by the Agent or Lenders in
accordance with the terms of this Agreement or the other Loan
Documents relating to the Collateral, and the exercise by the Agent
or the Lenders of their respective powers set forth therein or
herein, together with such other powers that are reasonably
incidental thereto, shall be deemed authorized by and binding upon
all of the Lenders. Notwithstanding the provisions of this Section
(a), without notice to or consent from any Lender, the Agent may
take any action it considers, in its sole discretion, necessary or
advisable to perfect and maintain the perfection of the Agent’s
Liens.
	 
	(b)	 	The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release any Agent’s Lien upon
any Collateral (i) upon the termination of the Commitments and
payment and satisfaction in full by the Borrower of all Loans and
reimbursement obligations in respect of Letters of Credit and Credit
Support, and the termination of all outstanding Letters of Credit
(whether or not any of such obligations are due) and all other
Obligations; (ii) constituting Collateral being sold or disposed of
if the applicable Obligor certifies to the Agent that the sale or
disposition is made in compliance with Section 9.7 (and the Agent
may rely conclusively on any such certificate, without further
inquiry); or (iii) constituting Collateral in which the Borrower and
Guarantors owned no interest at the time the Lien was granted or at
any time thereafter. Except as provided above or hereunder, the
Agent will not release any of the Agent’s Liens without the prior
written authorization of the Required Lenders. Upon request by the
Agent or the Borrower at any time, the Lenders will confirm in
writing the Agent’s authority to release any Agent’s Liens upon
particular types or items of Collateral pursuant to this Section
14.8.
	 
	(c)	 	Upon receipt by the Agent of any authorization to the extent
required pursuant to Section 14.8(a) from the Lenders of the Agent’s
authority to release any Agent’s Liens upon particular types or
items of Collateral, and upon at least five (5) Business Days prior
written request by the Borrower, the Agent shall (and is




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	 	 	hereby irrevocably authorized by the Lenders to) execute such documents as
may be necessary to evidence the release of the Agent’s Liens upon
such Collateral; provided, however, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent’s
opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such
Liens without recourse or warranty, and (ii) such release shall not
in any manner discharge, affect or impair the Obligations or any
Liens (other than those expressly being released) upon (or
obligations of the Borrower in respect of) all
interests retained by the Borrower or any Guarantor, including the
proceeds of any sale, all of which shall continue to constitute
part of the Collateral.





     14.9 Restrictions on Actions by Lenders; Sharing of Payments.




	(a)	 	Each of the Lenders agrees that it shall not, without the
express consent of the Agent, and that it shall, to the extent that
it is lawfully entitled to do so, upon the request of the Agent,
set-off or compensate against the Obligations, any amounts owing by
such Lender to an Obligor or any accounts of an Obligor now or
hereafter maintained with such Lender. Each of the Lenders further
agrees that it shall not, unless specifically requested to do so by
the Agent, take or cause to be taken any action, including, without
limitation, any demand for payment or commencement of any legal or
equitable proceedings, against an Obligor or otherwise to foreclose
or enforce its hypothecary rights in respect of any Lien on, or
otherwise enforce any security interest in, or hypothecation of, any
of the Collateral, the purpose of which is, or could be, to give
such Lender any preference or priority against the other Lenders
with respect to the Collateral.
	 
	(b)	 	If at any time or times any Lender shall receive (i) by
payment, foreclosure, set-off or otherwise, any Proceeds of
Collateral or any payments with respect to the Obligations of an
Obligor to such Lender arising under, or relating to, this Agreement
or the other Loan Documents, except for any such Proceeds or
payments received by such Lender from the Agent pursuant to the
terms of this Agreement, or (ii) payments from the Agent in excess
of such Lender’s rateable portion of all such distributions by the
Agent, such Lender shall promptly turn the same over to the Agent in
kind, and with such endorsements as may be required to negotiate the
same to the Agent or in same day funds, as applicable, for the
account of the Agent and the Lenders and for application to the
Obligations in accordance with the applicable provisions of this
Agreement.





15. MISCELLANEOUS




     15.1 Cumulative Remedies; No Prior Recourse to Collateral



The enumeration herein or in the Loan Documents of the Agent’s and/or Lenders’
rights and remedies is not intended to be exclusive, and such rights and
remedies are in addition to and not by way of limitation of any other rights or
remedies that the Agent and/or Lenders may have under the PPSA of each
jurisdiction where any Collateral may be located, or other applicable law or
the Loan Documents. The Agent and/or Lenders shall have the right, in its and
their sole





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discretion, to determine which rights and remedies are to be
exercised and in which order. The exercise of one right or remedy shall not
preclude the exercise of any others, all of which shall be cumulative. The
Agent and/or Lenders may, without limitation, proceed directly against any or
all Obligors to collect the Obligations or Guaranteed Obligations without any
prior recourse to the Collateral.




     15.2 No Implied Waivers



No act, failure or delay by the Agent and/or Lenders shall constitute a waiver
of any of its rights and remedies. No single or partial waiver by the Agent
and/or Lenders of any provision of this Agreement or any other Loan Document,
or of breach or default hereunder or thereunder or of any right or remedy which
the Agent and/or Lenders may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Agent and/or
Lenders shall affect its rights to require strict performance of this
Agreement.




     15.3 Severability



If any provision of this Agreement shall be prohibited or invalid under the
applicable law of any jurisdiction, such prohibition or invalidity shall not
invalidate the remainder of this Agreement in such jurisdiction or this
Agreement as a whole in any other jurisdiction provided however that, if the
Agent and/or Lenders determine as a result of any such prohibition or
invalidity that the Agent and/or Lenders have lost any material benefit of or
right under this Agreement, then an Event of Default shall be deemed to have
occurred whereupon the Agent and/or Lenders may exercise any of its right or
remedies as provided in Section 11.2 hereof.




     15.4 Governing Law



This Agreement shall be deemed to have been made in the Province of Ontario,
and shall be governed by and interpreted in accordance with the laws of such
province.




     15.5 Consent to Jurisdiction and Venue; Service of Process



If applicable, each Obligor agrees that, in addition to any other courts that
may have jurisdiction under applicable laws or rules, any action or proceeding
to enforce or arising out of this Agreement or any of the other Loan Documents
may be commenced in the courts of the Province of Ontario, and each Obligor
consents and submits in advance to such jurisdiction and agrees that venue will
be proper in such courts on any such matter. The choice of forum set forth in
this Section shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Agreement to
enforce the same, in any appropriate jurisdiction.




The Borrower and each other Obligor hereby waives personal service of any and
all process upon it and consents that all such service of process may be made
by facsimile transmission or regular mail directed to the attention of Borrower
at its address set forth in Section 15.21 and service so made shall be deemed
to be completed five (5) days after the same shall have been so deposited in
the mail postage prepaid. Nothing contained herein shall affect the right of
Agent or the Lenders to serve legal process by any other manner permitted by
law.




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     15.6 Waiver of Jury Trial, Etc.



EACH OBLIGOR HEREBY WAIVES TRIAL BY JURY, RIGHTS OF SET-OFF, COMPENSATION, AND
THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION IN ANY COURT WITH RESPECT
TO, IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE
COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO,
OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE OBLIGOR AND THE
AGENT AND/OR ANY OF THE LENDERS EXCEPT FOR SUCH SET-OFFS AND COUNTERCLAIM
WHICH, IF NOT ASSERTED IN ANY SUCH LITIGATION, COULD NOT OTHERWISE BE BROUGHT
OR ASSERTED AND PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BE CONSTRUED AS
A WAIVER OF ANY RIGHT WHICH THE OBLIGORS MAY HAVE TO ASSERT CLAIMS OR CAUSES OF
ACTION AGAINST THE AGENT OR ANY LENDER IN SEPARATE PROCEEDINGS. THE OBLIGORS,
THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. EACH OBLIGOR HEREBY WAIVES NOTICE OF INTENT TO ACCELERATE AND
ACCELERATION EXCEPT WHERE REQUIRED BY MANDATORY PROVISIONS OF LAW OR BY THE
TERMS OF THIS AGREEMENT. EACH OBLIGOR CONFIRMS THAT THE FOREGOING WAIVERS ARE
INFORMED AND FREELY MADE.




     15.7 Survival of Representations and Warranties



All of the Obligors’ representations and warranties contained in this Agreement
shall survive the execution, delivery and acceptance thereof by the parties,
notwithstanding any investigation by the Agent and/or Lenders or its or their
agents.




     15.8 Other Security and Guarantees



The Agent and/or Lenders may, without notice or demand, and without affecting
any Obligor’s obligations hereunder, from time to time: (a) take from any
Person and hold collateral (other than the Collateral) for the payment of all
or any part of the Obligations (provided in the case of a Lender that same is
delivered to the Agent to be held for the benefit of the Lenders as herein
provided), and exchange, enforce or release such collateral or any part
thereof; and (b) accept and hold any endorsement or guarantee of payment of all
or any part of the Obligations (provided in the case of a Lender that same is
delivered to the Agent to be held for the benefit of the Lenders as herein
provided), and release or substitute any such endorser or guarantor, or any
Person who has given any Lien in any other collateral as security for the
payment of all or any




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part of the Obligations, or any other Person in any way
obligated to pay all or any part of the Obligations.




     15.9 Fees and Expenses



The Borrower shall pay to Agent on demand all reasonable costs and expenses
that Agent pays or incurs in connection with the negotiation, preparation or
consummation of this Agreement and the other Loan Documents and all costs and
expenses that the Agent pays or incurs in connection with the administration,
enforcement, and termination of this Agreement and the other Loan Documents,
including, without duplication and without limitation the following items:





	(a)	 	costs and expenses (including taxes and insurance premiums)
required to be paid by Borrower or any Obligor under any of the Loan
Documents that are paid or incurred by the Agent and/or the Lenders;
	 
	(b)	 	fees or charges paid or incurred by the Agent and/or the
Lenders in connection with the Agent and/or the Lenders’
transactions with Borrower or any Obligor hereunder;
	 
	(c)	 	costs and expenses incurred by the Agent and/or the Lenders
in the disbursement of funds to Borrower (by wire transfer or
otherwise);
	 
	(d)	 	costs and expenses paid or incurred by the Agent and/or the
Lenders to correct any Event of Default or enforce any provision of
the Loan Documents or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale
or advertising to sell the Collateral or any portion thereof;
	 
	(e)	 	costs and expenses of all examination and appraisal of the
books, records and Collateral of Borrower or any Obligor by the
Agent’s staff auditors or third party professionals and/or
evaluators designated by the Agent, which shall be conducted at such
intervals as the Agent, from time to time, determines; provided,
prior to the occurrence of an Event of Default, the Agent shall not
initiate such examinations more frequently than once in every twelve
month period if there are no Net Borrowings at the time such
examinations are initiated, or four (4) times in every twelve month
period, if there are Net Borrowings at the time such examinations
are initiated;
	 
	(f)	 	costs and expenses of third party claims or any other suit
paid or incurred by the Agent and/or the Lenders in enforcing or
defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or any relationship between the
Agent and/or the Lenders and Borrower or any Obligor;
	 
	(g)	 	costs and expenses of converting any foreign currency to
Canadian Dollars (or vice-versa); and,




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	(h)	 	the Agent’s and/or the Lenders’ reasonable attorneys’ fees
and expenses incurred in advising, structuring, drafting,
administering, amending, terminating, enforcing, defending or
concerning the Loan Documents or these credit facilities.





     15.10 Waiver of Notices



Unless otherwise expressly provided herein, each Obligor waives, to the maximum
extent permitted by law, but subject to compulsory provision of law,
presentment, protest and notice of demand or dishonour and protest as to any
instrument, as well as any and all other notices to which it might otherwise be
entitled. No notice to or demand on the Obligors which the Agent and/or
Lenders may elect to give shall entitle the Obligors to any or further notice
or demand in the same, similar or other circumstances.




     15.11 Binding Effect; Assignment



The provisions of this Agreement shall be binding upon and inure to the benefit
of the respective representatives, successors and assigns of the parties
hereto; provided, however, that no interest herein may be assigned by the
Obligors without the prior written consent of the Lenders. The Lenders shall
have the right to assign or participate all or any portion of the Obligations
or the Revolving Credit Facility or any interest therein as provided for in
Section 13.2 hereof.




     15.12 Modification



This Agreement and the other Loan Documents are intended by the Obligors and
the Agent and the Lenders to be the final, complete, and exclusive expression
of the agreement between them. This Agreement supersedes any and all prior
oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of
this Agreement shall be made, except by a written agreement signed by the
Borrower and a duly authorized officer of the Agent and Lenders.




     15.13 Counterparts



This Agreement may be executed in any number of counterparts, and by the Agent,
the Lenders and the Obligors in separate counterparts, each of which shall be
an original, but all of which shall together constitute one and the same
agreement.




     15.14 Right of Set-Off



Whenever an Event of Default exists, any of the Lenders is hereby authorized at
any time, and from time to time, to the fullest extent permitted by law, to
set-off, compensate and apply to the Obligations any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by any of the Lenders or any affiliate of any of
the Lenders to or for the credit or the account of the Borrower against any and
all of its Obligations, whether or not then due and payable. Such Lender
agrees promptly to notify the Borrower after any such set-off, compensation and
application made by any of the Lenders, provided that the failure to give such
notice shall not affect the validity of such set-off and application.




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     15.15 Inability to Determine Rates



If the Agent determines that for any reason adequate and reasonable means
do not exist for determining the BA Equivalent Rate for any requested Interest
Period with respect to a proposed BA Equivalent Loan, or that the BA Equivalent Rate for any
requested Interest Period with respect to a proposed BA Equivalent Loan does
not adequately and fairly reflect the cost to the Lenders of funding such Loan,
the Agent will promptly so notify the Borrower and each Lender. Thereafter,
the obligation of the Lenders to make or maintain BA Equivalent Loans hereunder
shall be suspended until the Agent revokes such notice in writing. Upon
receipt of such notice, the Borrower may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Borrower does
not revoke such Notice, the Lenders shall make, convert or continue the Loans,
as proposed by the Borrower, in the amount specified in the applicable Notice
submitted by the Borrower, but such Loans shall be made, converted or continued
as Prime Rate Loans instead of BA Equivalent Loans.




     15.16 Precedence



In the event that any provisions of the Loan Documents (other than this
Agreement) (the “Conflicted Agreements”) contradict or are otherwise incapable
of being construed in conjunction with the provisions of this Agreement, the
provisions of this Agreement shall take precedence over those contained in the
Conflicted Agreements and, in particular, if any act of any Obligor is
expressly permitted under this Agreement but is prohibited under the Conflicted
Agreements, any such act shall be permitted under this Agreement and shall be
deemed to be permitted under the Conflicted Agreements.




     15.17 Confidentiality



Except as otherwise provided herein, the Agent and the Lenders agree to take
customary and reasonable precautions to maintain the confidentiality of all
information in connection with this Agreement, the Loan Documents, and other
information respecting the Borrower and/or its accounts and business with the
Agent and/or Lenders, provided to the Agent and/or Lenders by the Obligors or
otherwise known to the Agent and/or Lenders (the “Customer Information”). The
Obligors acknowledge and agree that the Agent and Lenders may to the extent
necessary for the administration and enforcement of this Agreement disclose
from time to time Customer Information to other offices and branches of the
Agent and/or any of the Lenders and to the Agent’s and/or any Lender’s
subsidiaries and affiliates, in Canada or anywhere outside Canada. The
Obligors further consent to the disclosure of Customer Information by the Agent
and/or any of the Lenders, or any such subsidiary or affiliate of the Agent
and/or any of the Lenders (i) at the request of any governmental, regulatory or
other similar agency or authority having jurisdiction over the Agent and/or any
of the Lenders or such subsidiary or affiliate, (ii) pursuant to subpoena or
other court process or to the extent required in connection with any litigation
between the Agent and/or any of the Lenders, and any Obligor; (iii) when
otherwise required to do so in accordance with applicable law.




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     15.18 Illegality




	(a)	 	If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in
the interpretation or administration of any Requirement of Law, has
made it unlawful, or that any central bank or other Public Authority
has asserted that it is unlawful, for any Lender or its applicable
lending office to make BA Equivalent Loans, then, on notice thereof
by that Lender to the Borrower through the Agent, any obligation of that
Lender to make BA Equivalent Loans shall be suspended until that
Lender notifies the Agent and the Borrower that the circumstances
giving rise to such determination no longer exist.
	 
	(b)	 	If a Lender determines that it is unlawful to maintain any
LIBOR Loan or BA Equivalent Loan the Borrower shall, upon its
receipt of notice of such fact and demand from such Lender (with a
copy to the Agent), prepay in full such BA Equivalent Loans of that
Lender then outstanding, together with interest accrued thereon,
either on the last day of the Interest Period thereof, if that
Lender may lawfully continue to maintain such BA Equivalent Loans to
such day, or immediately, if that Lender may not lawfully continue
to maintain such BA Equivalent Loans. No payment shall be due under
Section 4.5 upon prepayment of BA Equivalent Loans pursuant to or as
a result of the circumstances described in the preceding sentence.
If the Borrower is required to so prepay any BA Equivalent Loans,
then concurrently with such prepayment, the Borrower shall borrow
from the affected Lender, in the amount of such repayment, a Prime
Rate Loan.





     15.19 Increased Costs




	(a)	 	If any Lender determines that due to either (i) the
introduction of or any change in the interpretation of any law or
regulation or (ii) the compliance by that Lender with any guideline
or request from any central bank or other Public Authority (whether
or not having the force of law), there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or
maintaining any BA Equivalent Loans, then the Borrower shall be
liable for, and shall from time to time, upon demand (with a copy of
such demand to be sent to the Agent), pay to the Agent for the
account of such Lender, additional amounts as are sufficient to
compensate such Lender for such increased costs.
	 
	(b)	 	If any Lender shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central
bank or other Public Authority charged with the interpretation or
administration thereof, or (iv) compliance by such Lender or any
corporation or other entity controlling such Lender with any Capital
Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by such Lender or any
corporation or other entity controlling such Lender and (taking into
consideration such Lender’s or such corporation’s or




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	 	 	other entity’s policies with respect to capital adequacy and such Lender’s desired
return on capital) determines that the amount of such capital is
increased as a consequence of its Commitments, loans, credits or
obligations under this Agreement, then, upon demand of such Lender
to the Borrower through the Agent, the Borrower shall pay to such
Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender for such increase.
	 
	(c)	 	If the Borrower is required to pay additional amounts to the
Agent for the account of any Lender pursuant to this Section 15.19,
the Lender will, at the Borrower’s sole expense and at the
Borrower’s request, use its reasonable commercial efforts to limit
the incidence of such amounts, including seeking recovery for itself
and for the account of the Borrower by appealing any assessment. If
the Lender subsequently recovers all or part thereof, it will repay
an equal amount to the Borrower. For greater certainty, it is
acknowledged that if the circumstances giving rise to the
requirement to pay such additional amounts are also attributable, in
part, to dealings between the Lender and its other customers, the
obligation of the Borrower under this Section 15.19 to provide
compensation therefor will not arise unless the Lender, as a general
practice, also requires compensation therefor from such other
customers and will not exceed the amount that is directly
proportionate to the extent to which such circumstances are
attributable to the Borrower.





     15.20 Judgment Currency



If for the purpose of obtaining judgment in any court 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 applied shall be that at which, in accordance with normal banking
procedures, the Lender could purchase in the Toronto foreign exchange market,
the Original Currency with the Second Currency on the date two (2) Business
Days preceding that on which judgment is given. The Borrower agrees that its
obligation in respect of any Original Currency due from it hereunder shall,
notwithstanding any judgment or payment in such other currency, be discharged
only to the extent that, on the Business Day following the date the Lender
receives payment of any sum so adjudged to be due hereunder in the Second
Currency, the Lender may, in accordance with normal banking procedures,
purchase, in the Toronto 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 or could have been so purchased is less than the amount
originally due in the Original Currency, the Borrower agrees as a separate
obligation and notwithstanding any such payment or judgment to indemnify the
Lender against such loss. The term “rate of exchange” in this Section 15.20
means the spot rate at which the Lender, in accordance with normal practices,
is able on the relevant date to purchase the Original Currency with the Second
Currency, and includes any premium and costs of exchange payable in connection
with such purchase.




- 80 -









 








     15.21 Notices



Except as otherwise provided herein, all notices, demands and requests
that any party is required or elects to give to any other shall be in writing,
or by a telecommunications device capable of creating a written record, and any
such notice shall become effective (a) upon personal delivery thereof,
including, but not limited to, delivery by overnight courier service, or (b) in
the case of notice by such a telecommunications device, when properly
transmitted (or if after 4:00 p.m., on the next Business Day), in each case
addressed to the party to be notified as follows:




	 	 	 	 	 
	 	 	If to the Agent or to GMAC CF:
	 
	

	 	 	 	GMAC Commercial Finance Corporation
- Canada
	

	 	 	 	150 York Street
	

	 	 	 	Suite 1314
	

	 	 	 	Toronto, Ontario M5H 3S5
	 
	

	 	 	 	Attention: Michael Mann
	

	 	 	 	Telecopier No.: (416) 365-9493
	 
	 	 	 	 
	 	 	with a copy to:
	 
	

	 	 	 	GMAC Commercial Finance LLC
	

	 	 	 	1290 Avenue of the Americas, 3rd Floor
	

	 	 	 	New York, NY 10104
	 
	

	 	 	 	Attention: Marline Alexander-Thomas
	

	 	 	 	Telecopier No.: 212-884-7692
	

	 	 	 	Telephone No.: 212-884-7013
	 
	 	 	 	 
	 	 	and (except for routine correspondence) to:
	 
	

	 	 	 	Kevin Morley
	

	 	 	 	Ogilvy Renault
	

	 	 	 	77 King Street West
	

	 	 	 	Suite 2100
	

	 	 	 	Toronto, Ontario M5K 1H1
	 
	

	 	 	 	Telecopier No.: (416) 216-3930
	 
	 	 	 	 
	 	 	If to the Borrower or any Guarantor:
	 
	

	 	 	 	c/o Ainsworth Lumber Co. Ltd.
	

	 	 	 	3194 Bentall IV
	

	 	 	 	1055 Dunsmuir Street
	

	 	 	 	Vancouver, British Columbia V7X 1L3







- 81 -









 






	 	 	 	 	 
	

	 	 	 	Attention: Chief Financial Officer
	

	 	 	 	Telecopier No.: (604) 661-3201







or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.




     15.22 Indemnity of the Agent and the Lenders by the Obligors.




	(a)	 	Each Obligor agrees to defend, indemnify and hold the Agent,
and each Lender and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an
“Indemnified Person”) harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements
(including all reasonable fees, expenses and disbursements of
Agent’s counsel and any other legal counsel engaged by the Agent or
Agent’s counsel) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement
of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by
any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement, any other
Loan Document, or the Loans or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the “Indemnified Liabilities”); provided,
that the Obligors shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities to the
extent resulting from the wilful misconduct or gross negligence of
such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
	 
	(b)	 	Each Obligor agrees to indemnify, defend and hold harmless
the Agent and the Lenders from any loss or liability directly or
indirectly arising out of the use, generation, manufacture,
production, storage, release, threatened release, discharge,
disposal or presence of a Contaminant or other hazardous substance
relating to the Borrower’s or any Guarantor’s operations, business
or property. This indemnity will apply whether the hazardous
substance is on, under or about the Borrower’s or any Guarantor’s
property or operations or property leased to the Borrower or any
Guarantor. The indemnity includes but is not limited to costs,
charges, expenses and disbursements (including all reasonable fees,
expenses and disbursements of Agent’s counsel and any other legal
counsel engaged by the




- 82 -









 






	 	 	Agent or Agent’s counsel). The indemnity
extends to the Agent and the Lenders, their parents, affiliates,
subsidiaries and all of their directors, officers, employees,
agents, successors, attorneys and assigns. “Hazardous Substances”
means any substance, material or waste that is or becomes designated
or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant”
or a similar designation or regulation under any federal,
provincial, state or local law (whether under common law, statute,
regulation or otherwise) or judicial or administrative
interpretation of such, including petroleum or natural gas. This
indemnity will survive repayment of all other Obligations. The
foregoing indemnity will not extend to liabilities resulting from
the Agent’s or Lenders’ gross negligence or wilful misconduct.





     15.23 Limitation of Liability.



        NO CLAIM MAY BE MADE BY THE BORROWER, ANY OTHER OBLIGOR, ANY LENDER OR
OTHER PERSON AGAINST THE AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS,
OFFICERS, EMPLOYEES, OR AGENTS OF ANY OF THEM FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF
CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER,
EACH OTHER OBLIGOR AND EACH LENDER HEREBY WAIVES, RELEASES AND AGREES NOT TO
SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT
KNOWN OR SUSPECTED TO EXIST IN ITS FAVOUR, EXCEPT AS A RESULT OF GROSS
NEGLIGENCE OR WILFUL MISCONDUCT.



     15.24 Captions.



        The captions contained in this Agreement are for convenience of reference
only, are without substantive meaning and should not be construed to modify,
enlarge, or restrict any provision.



     15.25 Language



        The parties herein have expressly requested that this Agreement and all
related documents be drawn up in the English language. À la demande expresse
des parties aux présentes, cette convention et tout document y afférent ont été
rédigés en langue anglaise.



[SIGNATURE PAGES FOLLOW]




- 83 -









 








     IN WITNESS WHEREOF, the parties have entered into this Agreement effective
as of the date first above written.



	 	 	 	 	 
	Borrower:	 	AINSWORTH LUMBER CO. LTD.
	 	 	 	 	 
	

	 	By:	 	/s/ Robert Allen
	

	 	 	 	

	

	 	Name:	 	Robert Allen
	

	 	Title:	 	Chief Financial Officer
	 
	 	 	 	 
	 
	 	 	 	 
	Agent:	 	GMAC COMMERCIAL
FINANCE CORPORATION - CANADA
	 	 	 	 	 
	

	 	By:	 	/s/ Gregg C. Wise
	

	 	 	 	

	

	 	Name:	 	Gregg C. Wise
	

	 	Title:	 	Authorized Representative
	 
	 	 	 	 
	 
	 	 	 	 
	Lender:	 	GMAC COMMERCIAL
FINANCE CORPORATION - CANADA
	 
	 	 	 	 
	 	 	 	 	 
	Commitment in Revolving Credit
Facility: $50,000,000
	 	By:	 	/s/ Gregg C. Wise
	 	 	 	 	

	Pro Rata Share: 100%
	 	Name:	 	Gregg C. Wise
	

	 	Title:	 	Authorized Representative








 










 





SCHEDULES AND EXHIBITS




to the




LOAN AGREEMENT




between




AINSWORTH LUMBER CO. LTD.




as the Borrower




and




GMAC COMMERCIAL FINANCE
CORPORATION – CANADA




as Agent and as a Lender




dated as of




March 15, 2004





 









 










List of Schedules and Exhibits




	 	 	 
	Schedule 1

	 	Definitions
	 
	Exhibit A

	 	Permitted Liens
	 
	Exhibit B

	 	[Intentionally Blank]
	 
	Exhibit C

	 	[Intentionally Blank]
	 
	Exhibit D

	 	Locations
	 
	Exhibit E

	 	Names of Obligors and Trade Styles
	 
	Exhibit F

	 	Subsidiaries and Affiliates and jurisdiction of incorporation
and qualification
	 
	Exhibit G

	 	Financial Statements and Projections
	 
	

	 	- Exhibit G-1          Financial Statements
	 
	

	 	- Exhibit G-2          Projections
	 
	

	 	- Exhibit G-3          [Intentionally Blank]
	 
	

	 	- Exhibit G-4          Form of Certificate
	 
	

	 	- Exhibit G-5          Notice of Borrowing
	 
	

	 	- Exhibit G-6          Notice of Continuation/Conversion
	 
	Exhibit H

	 	Material Agreements
	 
	Exhibit I

	 	Environmental Matters
	 
	Exhibit J

	 	Litigation
	 
	Exhibit K

	 	Collective Bargaining Agreements and Labour Disputes
	 
	Exhibit L

	 	Pension
	 
	Exhibit M

	 	Additional Documents to be Delivered
	 
	Exhibit N

	 	Capital Stock and Registered and Beneficial Ownership
	 
	Exhibit O

	 	Bank Accounts
	 
	Exhibit P

	 	Form of Assignment and Acceptance







 









 






SCHEDULE 1




Definitions




     “2004 Notes” means those notes, in a maximum aggregate principal amount of
U.S.$210,000,000, issued by the Borrower pursuant to an indenture dated March
3, 2004 among the Borrower and The Bank of New York, as trustee.



     “2004 Note Transaction” means the transactions pursuant to which the 2004
Notes are issued, certain of the Senior Secured Notes are purchased by the
Borrower, and the Senior Secured note indentures are amended, all as
contemplated in the confidential offering memorandum of the Borrower dated
February 27, 2004, and all having the effect of reducing the outstanding
principal amount of the Notes to an amount no more than U.S.$215,000,000.



     “Account” means an Obligor’s right to payment for a sale or lease and/or
delivery of goods or rendition of services.



     “Account Debtor” means each Person obligated in any way on or in
connection with an Account.



     “Action Request” means any request received by any Obligor or any of its
Subsidiaries from any Public Authority under any Environmental Law whereby such
Public Authority requests that it take action or steps or do acts or things in
respect of any property or assets in its charge, management or control to
remediate a matter which is not or is alleged not to be in compliance with all
Environmental Laws.



     “Affiliate” means: (a) any Person which, directly or indirectly, controls,
is controlled by or is under common control with any Obligor; (b) any Person
which beneficially owns or holds, directly or indirectly, 10% or more of any
class of voting stock or equity interest (including partnership interests) of
any Borrower; (c) any Person, 10% or more of any class of the voting stock (or
if such Person is not a corporation, 10% or more of the equity interest,
including partnership interests) of which is beneficially owned or held,
directly or indirectly, by any Borrower or (d) any Person related within the
meaning of the Income Tax Act of Canada to any such Person and includes any
“Affiliate” within the meaning specified in the Canada Business Corporations
Act on the date hereof. The term control (including the terms “controlled by”
and “under common control with”), means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
the Person in question.



     “Agent” means GMAC CF and its assignees and Persons designated by it, in
its capacity as agent for itself and the Lenders.



     “Agent Advances” has the meaning specified in Section 2.2(k).



     “Agent’s Liens” means collectively the Liens granted to the Agent and/or
Lenders in the Collateral pursuant to this Agreement, the other Loan Documents,
or any other agreement or instrument now or hereafter granted and/or entered
into.



 









 





     “Ainsworth Family” means, collectively, Brian E. Ainsworth, D. Allen
Ainsworth, Catherine E. Ainsworth, D. Michael Ainsworth, Douglas I. Ainsworth,
David Ainsworth, Susan Ainsworth, and blood relations of any of them.



     “Applicable Margin” means the following percentages per annum, in the case
of Prime Rate Loans, 0.5%; and (b) in the case of BA Equivalent Loans, 2.0%.



     “Assignee” has the meaning specified in Section 13.2(a).



     “Assignment and Acceptance” has the meaning specified in Section 13.2(b).



     “Assignor” has the meaning specified in Section 13.2(a).



     “Audit Fee” has the meaning specified in Section 15.9.



     “Availability” means, in respect of the Borrower: (a) the lesser at any
point in time of: (i) the Maximum Revolving Credit Line; (ii) the sum of (A)
85% of Eligible Accounts, plus (B) the lesser of (y) 65% of the lower of cost
or fair market value of Eligible Inventory and (z) 85% of the net orderly
liquidation value of Eligible Inventory; less (b) without duplication and as
determined by the Lender in the exercise of its good faith credit discretion
(including duplication for amounts in respect of Liens or otherwise to the
extent such amounts have been taken into account in determining Eligible
Inventory or Eligible Accounts): (i) a reserve established for all amounts
secured by any Liens, choate or inchoate, which rank or are capable of ranking
in priority to the Agent’s and/or Lenders’ Liens, including without limitation,
any such amounts due and not paid for vacation pay, any such amounts due and
not paid under any legislation relating to workers’ compensation or to
unemployment insurance, all amounts deducted or withheld and not paid and
remitted under the Income Tax Act of Canada, all amounts currently or past due
and not contributed, remitted or paid to any Plan or under the Canada Pension
Plan, the Pension Benefits Act or any similar legislation; (ii) a reserve in an
amount determined by the Lender from time-to-time in respect of such portion of
the Accounts as represents a sales or excise tax or goods and services tax;
(iii) a reserve for all claims, charges and Liens, including in respect of
rent, storage, processing and/or transport costs which have arisen or may
arise, in respect of Inventory at premises not owned by the Borrower unless a
waiver and access agreement satisfactory to the Lender shall have been received
(to the extent such Inventory is Eligible Inventory); (iv) all other reserves
which the Lender in the exercise of its good faith credit discretion deems
necessary or desirable to maintain with respect to the Borrower, including,
without limitation, in respect of any amounts which the Lender may be obligated
to pay in the future for the account of the Borrower (the foregoing amount
calculated by deducting (b) from (a) being hereinafter referred to as the
“Borrowing Base”), less (c) the sum of: (i) the unpaid balance of Revolving
Loans at that time; and (ii) the L/C Reserve provided, however, that each of
the reserves under clause (b) shall be established (or not), and the amount
thereof determined, by the Lender in the exercise of its good faith credit
discretion and further provided that there shall be no duplication in the
matters referenced in clauses (b) and (c) above.



- 2 -









 





     “BA Equivalent Interest Period” means, with respect to each BA Equivalent
Loan, the period selected by the Borrower hereunder and being of one (1), two
(2), three (3) or six (6) months’ duration, in each case commencing on the
Drawdown Date, Conversion Date or Rollover Date with respect to the Drawdown or
Rollover of or Conversion into such BA Equivalent Loan; provided that in any
case the last day of each BA Equivalent Interest Period shall also be the first
day of the next Interest Period and further provided that the last day of each
BA Equivalent Interest Period shall be a Business Day and if the last day of a
BA Equivalent Interest Period selected by the Borrower is not a Business Day,
the Borrower shall be deemed to have selected a BA Equivalent Interest Period
the last day of which is the Business Day next following the last day of the BA
Equivalent Interest Period otherwise selected, unless such next following
Business Day falls in the next calendar month in which event the Borrower shall
be deemed to have selected a BA Equivalent Interest Period the last day of
which is the Business Day next preceding the last day of the BA Equivalent
Interest Period otherwise selected and further provided that the last BA
Equivalent Interest Period hereunder shall expire on or prior to the Maturity
Date (or, after any renewal of this Agreement as herein provided, the expiry
date of any Renewal Term).



     “BA Equivalent Loan” means a Loan in Canadian Dollars in minimum amounts
of principal of not less than CDN$500,000 and increments of CDN$500,000 made by
the Lenders to the Borrower hereunder pursuant to a Drawdown, Rollover or
Conversion, on which interest is payable under Section 3.1(b).



     “BA Rate” means, for the Interest Period of each BA Equivalent Loan, the
rate of interest per annum equal to the annual rate of interest quoted on the
Business Day which is the first day of such Interest Period quoted on Reuters
Service Page CDOR (or such other page as is a replacement page for such
bankers’ acceptances) as of approximately 10:00 a.m. (Toronto time) on such
Business Day as being the rate of interest of The Toronto-Dominion Bank for
bankers’ acceptances in Canadian dollars for a face amount similar to the
amount of the applicable BA Equivalent Loan and for a term similar to the
applicable BA Equivalent Interest Period.



     “Borrower” has the meaning specified in the preambles and includes their
successors and permitted assigns.



     “Borrowing” means a borrowing hereunder consisting of Revolving Loans made
by the Lenders to the Borrower or by GMAC CF in the case of a borrowing funded
by Non-Rateable Loans or by the Letter of Credit Issuer in the case of a
borrowing consisting of Letters of Credit or by the Agent in the case of a
borrowing consisting of an Agent Advance.



     “Borrowing Base” has the meaning specified in the definition of
Availability.



     “Business Day” means any day that is not a Saturday, Sunday, or day on
which banks in Toronto, Ontario are required or permitted to close.



- 3 -









 





     “Canadian Dollars” or “CDN Dollars” or “CDN$” means lawful currency of
Canada.



     “Capital Adequacy Regulation” means any guideline, request or directive of
any central bank or other Public Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.



     “Capital Expenditures” means all payments due or accruing due (whether or
not paid) during a Fiscal Year in respect of the cost (including expenditures
on materials, contract labour and direct labour, but excluding expenditures
properly chargeable to repairs and maintenance in accordance with GAAP) of any
fixed asset or improvement, or replacement, substitution, or addition thereto,
which have a useful life of more than one (1) year, including, without
limitation, those arising in connection with the direct or indirect acquisition
of such assets by way of increased product or service charges or offset items
or in connection with Capital Leases.



     “Capital Lease” means any lease of Property that, in accordance with GAAP,
should be reflected as a liability on the consolidated balance sheet of the
Obligors.



     “Cash Dominion Event” means any of (i) any Revolving Loans to the Borrower
are outstanding or (ii) an Event of Default has occurred and is continuing.



     “Cash Dominion System” has the meaning specified in Section 6.10.



     “Cash Proceeds” has the meaning specified in Section 6.10.



     “Closing Date” means the date of this Agreement.



     “Collateral” has the meaning specified in Section 6.1(a).



     “Collection Account Agreements” has the meaning specified in Section 6.10.



     “Commitment” means, at any time with respect to a Lender, the principal
amount set forth beside such Lender’s name under the heading “Commitment” on
the signature pages of this Agreement or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.2, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
13.2, and “Commitments” means, collectively, the aggregate amount of the
commitments of all of the Lenders.



     “Consolidated Net Tangible Assets” means the total amount of assets of any
Person on
consolidated basis, including deferred pension costs, after deducting therefrom
(i) all current liabilities (excluding any indebtedness classified as a current
liability), (ii) all goodwill, trade names, trademarks, patents, unamortized
debt discount and financing costs and all other like intangible assets and
(iii) appropriate adjustments on account of minority interests of other Persons
holding shares of the Subsidiaries of such Person, all as set forth in the most
recent



- 4 -









 




balance sheet of such Person and its consolidated Subsidiaries (but, in
any event, as of a date within 150 days of the date of determination) and
computed in accordance with generally accepted accounting principles.




     “Contaminant” means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated
biphenyls (“PCBs”), or any hazardous or toxic constituent of any such substance
or waste.



     “Continuation” means a continuation of a BA Equivalent Loan pursuant to
the provisions of Section 2.4.



     “Continuation Date” means the date on which a Continuation takes place,
which date shall be a Business Day.



     “Conversion” means the conversion of a Loan pursuant to the provisions of
Section 2.4.



     “Conversion Date” means the date notified to the Agent by the Borrower in
accordance with Section 2.4 as being the date on which the Borrower has elected
to convert one type of Loan into another type of Loan and which shall be a
Business Day.



     “Credit Support” has the meaning specified in Section 2.3(a).



     “Deadline” has the meaning specified in Section 6.10.



     “Debt” means, without duplication, all liabilities, obligations and
indebtedness of any Borrower to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, and including, without in any way limiting the generality
of the foregoing: (i) any Obligor’s liabilities and obligations to trade
creditors; (ii) all Obligations; (iii) all obligations and liabilities of any
Person secured by any Lien on any Obligor’s Property, even though an Obligor
shall not have assumed or become liable for the payment thereof; provided,
however, that if such obligations and liabilities are limited in recourse to
such Property such obligations and liabilities shall be included in Debt only
to the extent of the lesser of the obligations and liabilities and the book
value of such Property as would be shown on a balance sheet of an Obligor
prepared in accordance with GAAP; (iv) all obligations or liabilities created
or arising under any Capital Lease or conditional sale or other title retention
agreement with respect to Property used or acquired by an Obligor even if the
rights and remedies of the lessor, seller or lender thereunder are limited to
repossession of such Property; provided, however, that all such obligations and
liabilities which are limited in recourse to such Property shall be included in
Debt only to the extent of the book value of such Property as would be shown on
a consolidated balance sheet of the Obligor prepared in accordance with GAAP;
(v) all accrued and unfounded pension fund and other employee benefit plan
obligations and liabilities not



- 5 -









 




satisfied by the investments held by the
pension fund; (vi) all obligations and liabilities under Guarantees; and (vii)
deferred taxes.




     “Default” means any event or condition which, with notice, the passage of
time, the observance of any other formality, or any combination thereof, would
constitute an Event of Default and includes, for the purposes hereof, an Event
of Default.



     “Default Rate” has the meaning specified in Section 3.2.



     “Defaulting Lender” has the meaning specified in Section 2.2(i)(ii).



     “Depository Banks” has the meaning specified in Section 6.10.



     “Distribution” means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of Property (including any
purchases, retractions, redemptions or other transactions made out of its
treasury) in respect of capital stock of such corporation, other than
distributions in capital stock of the same class; or (b) the redemption or
other acquisition of any capital stock of such corporation.



     “Drawdown” means the drawdown of a Loan to be made pursuant to Article 2.



     “Drawdown Date” means the date (being a Business Day) on which a Drawdown
is made.



     “Early Termination Fee” means a fee calculated as follows:




	(a)	 	if termination occurs on or before the first (1st) date which
is eighteen (18) months from the Closing Date, the sum of $500,000;
or
	 
	(b)	 	if termination occurs there after, nil.





     “EBITDA” means, for any period of time, the Obligors’ net income
(determined on a consolidated basis), before non-cash gains or losses and
before all other extraordinary gains, plus the sum of (a) net income tax
expense deducted by the Obligors in determining net income for such period, as
determined in accordance with GAAP and reported on the Financial Statements for
such period, (b) the depreciation and amortization expense deducted by the
Obligors and Obligors in determining net income for such period, as determined
in accordance with GAAP and reported on the Financial Statements for such year,
and (c) interest expense of the Obligors deducted in determining net income for
such period, as determined in accordance with GAAP and reported on the
Financial Statements for such period.



     “Eligible Accounts” means the aggregate of the Net Face Amount of all
Accounts created by the Obligors in the ordinary course of business which the
Agent, in its sole discretion, determines to be acceptable for purposes of
advances hereunder. Without limiting the Agent’s discretion, the following
shall not be Eligible Accounts:



- 6 -









 






	(a)	 	except as otherwise permitted by the Agent or this Agreement,
Accounts which are outstanding for a period exceeding the lesser of
(i) 30 days immediately following the due date (under normal
industry terms), or (ii) 60 days immediately following the earlier
of (A) delivery of the relevant Inventory or performance of the
relevant services, or (B) the date of the relevant invoice;
	 
	(b)	 	Accounts in respect of which the Agent (if specifically
requested by the Agent) has not been provided with both (i) the
Account Debtor’s purchase order therefor and (ii) proof of delivery
of the merchandise and/or services forming the object thereof, both
in form and substance satisfactory to the Agent;
	 
	(c)	 	any portion of any Accounts (to the extent not already
deducted in arriving at the Net Face Amount thereof) which may
reduce the amount of such Accounts and/or may be deducted therefrom
by the relevant Account Debtor including, without limitation, all
discounts, rebates, allowances, credits or any other deductions
applicable thereto;
	 
	(d)	 	Accounts which are owed by an Account Debtor to which the
Obligor is indebted, but only to the extent to which the Obligor is
indebted in any way, or to the extent to which the Account Debtor
has made or asserted, or the Obligor has otherwise reported, any
right of set-off, compensation, counterclaim, offset, discount,
allowance, charge-back, rebate payable or contra claim by the
Account Debtor, unless the Account Debtor has entered into an
agreement acceptable to the Agent to waive all such rights; or if
the Account Debtor thereunder has disputed liability or made any
claim with respect to any other Account due from such Account
Debtor; but in each such case only to the extent of such
indebtedness, setoff, charge-back, counterclaim, offset,
compensation, discount, allowance, rebate, dispute, or claim; or any
Accounts to the extent of any unapplied credits;
	 
	(e)	 	Accounts owed by an Account Debtor which is an employee or an
Affiliate of the Obligor, or which is an Intercompany Account;
	 
	(f)	 	Accounts with respect to which goods are placed on a
consignment, guaranteed sale, “bill and hold”, sale or return, sale
on approval, or other terms by reason of which the payment by the
Account Debtor may be conditional;
	 
	(g)	 	Accounts which represents a re-billed (unless the previous
account has been cancelled and replaced and the re-bill is dated the
date of the replaced Account for aging purposes) or redated account;
	 
	(h)	 	Accounts owed by an Account Debtor if 50% or more of the
aggregate dollar amount of outstanding Accounts owed at such time by
such Account Debtor thereon is classified as ineligible under clause
(a) hereof;




- 7 -









 






	(i)	 	Accounts, the collection of which the Agent, in its
reasonable credit judgment, believes to be doubtful by reason of the
Account Debtor’s financial condition;
	 
	(j)	 	Accounts with respect to which goods have not been shipped
and billed to the Account Debtor, the services have not been
performed and accepted by the Account Debtor or does otherwise not
represent a final sale;
	 
	(k)	 	Accounts that represent progress payments or other advance
billings that are due prior to the completion of performance by
Obligor of the subject contract for goods or services;
	 
	(l)	 	Accounts with respect to which any of the representations,
warranties, covenants, and agreements contained in Article 6 are not
or have ceased to be complete and correct or have been breached;
	 
	(m)	 	Accounts owing by any Account Debtor which is either (i) a
federal, provincial, state or municipal government or any agency or
entity thereof, or (ii) situated outside of Canada or the United
States of America, unless otherwise expressly agreed to in writing
by the Agent and then on such terms and conditions as the Agent may,
in its discretion, determine; and,
	 
	(n)	 	Accounts which are the object of any dispute, to the extent
of such dispute (if such extent is clearly ascertainable).





     “Eligible Assignee” means (a) a bank, finance company or other lender
(together with its Affiliates or branches), having total assets in excess of
$1,000,000,000; (b) any Lender listed on the signature page of this Agreement;
(c) any Affiliate (including a branch) of any Lender; and (d) if an Event of
Default exists, any Person acceptable to the Agent in its good faith credit
discretion.



     “Eligible Inventory” means Inventory which is either (i) landed, duty
paid, located in Canada and in possession of an Obligor, or (ii) to be imported
by Borrower or any Obligor into Canada and has been shipped under outstanding
Letters of Credit, both consisting of (A) first quality finished goods owned by
Borrower or any Credit Party and held for sale in the ordinary course of the
Obligor’s business, (B) raw materials for such finished goods, which are in
good condition and readily saleable, and (C) in the process of being converted
from raw materials goods (ie. work in progress) which is, in the Agent’s sole
determination, readily saleable and not customized to a particular customer’s
specifications, all of which the Agent, in its sole discretion, determines to
be acceptable for purposes of advances hereunder. Without limiting the Agent’s
discretion, the following shall not be Eligible Inventory:




	(a)	 	Inventory held on consignment or not otherwise owned by an
Obligor with good, valid and marketable title thereto;




- 8 -









 






	(b)	 	Inventory which is of a type no longer sold by an Obligor or
used or consumed by the Obligor in the ordinary course of its
business;
	 
	(c)	 	Inventory which is encumbered in favour of any Person
whatsoever other than the Agent;
	 
	(d)	 	Inventory which is damaged or consists of goods returned or
rejected by an Account Debtor;
	 
	(e)	 	subject to (C) above, Inventory which is in the process of
being converted from raw material into finished goods, commonly
known as “work in progress”;
	 
	(f)	 	Inventory which is, in the Agent’s reasonable determination,
obsolete or slow moving, unmarketable, a restrictive custom item, a
component not forming part of finished goods, spare parts, packing,
shipping and storage materials, supplies used or consumed in
Obligor’s business, “bill and hold” goods, defective goods or
“seconds”; and,
	 
	(g)	 	Inventory which is located at any warehouse or any other
location not owned by the Obligor unless (i) such Inventory is the
object of the Agent’s Liens, and (ii) the owner of such warehouse or
other location has executed and delivered a waiver of Lien and
access agreement in form and substance satisfactory to the Agent.





     “Environmental Claims” means, with respect to any Person, any notice of
violation or alleged violation, or notification that it, or any of its
Subsidiaries is potentially responsible for investigation or cleanup of
environmental conditions, demand letter, complaint, order, citation, action
request, violation notice or other written notice with regard to any alleged or
actual violation of any Environmental Laws affecting it or any Collateral.



     “Environmental Laws” means all federal, provincial, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directives, decisions, policies, guidelines,
licenses, authorizations, decrees, orders and permits of, and agreements with,
any Public Authority, in each case relating to environment, health, safety and
land use matters, or the manufacture, processing, distribution, use, treatment,
storage, disposal, packaging, labelling, transport, handling, containment,
clean up or remediation of any Contaminant, in each case to the extent
applicable to the Obligor any Guarantor or the Real Estate.



     “Environmental Lien” means a Lien in favour of any Public Authority or any
other Person for (i) any liability under any Environmental Laws, or (ii)
damages arising from, or costs incurred by such Public Authority in response
to, a release, discharge or emission or threatened release, discharge or
emission of a Material of Environmental Concern.



- 9 -









 





     “Event of Default” has the meaning specified in Section 11.1.



     “Existing Joint Ventures” means the High Level Joint Venture, Sk7ain
Ventures Ltd. and Bridge River Logging, Tugus Timber Ltd. and Prince George
Hardwood Ltd..



     “Facility Usage” means, with respect to any month, the quotient, expressed
as a percentage, of (a) the sum of (i) the average closing daily balance
outstanding of the Revolving Loans during such month and, (ii) the face amount
of Letters of Credit and Credit Support, divided by (b) the Maximum Revolving
Credit Line.



     “Financial Statements” means, according to the context in which it is
used, the financial statements of each of the Obligors attached hereto as
Exhibit G-1, and any other financial statements required to be given to the
Agent and Lenders pursuant to this Agreement. Any such financial statements
which this Agreement requires be audited, shall be so audited by any one of
Ernst & Young, PriceWaterhouseCoopers, KPMG or Deloitte & Touche or such other
auditor as approved by the Agent.



     “Fiscal Year” means each of the Obligor’s and the Guarantors’ fiscal year
for financial accounting purposes, which will end on December 31.



     “Fixed Charge Ratio” means, for any period, as tested for the Obligors on
a consolidated basis monthly on a rolling six (6) month basis, the ratio of (A)
the consolidated EBITDA, less Capital Expenditures (except to the extent that
such Capital Expenditures are directly and specifically financed by Persons
other than Lenders); to (B) the sum of (i) all interest paid or payable within
the applicable period by the Obligors, (ii) all amounts paid or payable within
the applicable period by the Obligors as principal payments under Capital
Leases, (iii) all capital repayments within the applicable period by the
Obligors of any portion of Funded Debt (other than the Revolving Loans), (iv)
all income taxes or taxes on capital paid or payable within the applicable
period by the Obligors, and (v) all dividends, share redemptions, share
retractions or other corporate distributions declared, made and/or paid within
the applicable period by the Borrower.



     “Funded Debt” means Debt of the Obligors for borrowed money and Capital
Lease obligations except Debt among the Obligors.



     “GAAP” means at any particular time with respect to the Obligor, generally
accepted accounting principles as in effect at such time in Canada consistently
applied, provided, however, that, if employment of more than one principle
shall be permissible at such time in respect of a particular accounting matter,
“GAAP” shall refer to the principle which is then employed by the applicable
Obligor with the concurrence of its independent public or chartered
accountants, who are acceptable to the Agent provided further that, for the
purposes of determining compliance with the financial covenants herein, “GAAP”
means GAAP as at the date hereof.



- 10 -









 





     “GMAC
CF” means GMAC Commercial Finance Corporation – Canada.



     “Guarantee” by any Guarantor or any Person means all obligations of such
Person which in any manner directly or indirectly guarantee or assure, or in
effect guarantee or assure, or indemnify and/or save harmless any Person in
respect of the payment or performance of any proceeding, claim, liability,
indebtedness, dividend or other obligation of any other Person (the “guaranteed
obligations”), or to assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any Property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease Property or to purchase any Debt or equity
securities or other Property or services.



     “Guaranteed Obligations” means the obligations of any Guarantor to the
Agent and the Lenders pursuant to the Guarantee required to be delivered
pursuant to Section 9.16.



     “Guarantors” means, collectively, the Subsidiaries of the Borrower which
have provided a Guarantee and security, as required pursuant to Section 9.16,
and “Guarantor” means any of them.



     “High Level Joint Venture” means the joint venture between the Borrower
and Grant Forest Products Corp. for the ownership and operation of the oriented
strand board production facility at High Level, Alberta, conducted through
Footner Forest Products Ltd., pursuant to a memorandum of understanding between
such parties dated December 9, 1999.



     “Intercompany Accounts” means all assets and liabilities, however arising,
which are due to any Obligor from, which are due from any Obligor to, or which
otherwise arise from any transaction by any Obligor with, any Affiliate.



     “Interest Payment Date” means, with respect to each Loan, the earlier of
(a) the date of repayment of the principal of such Loan, (b) the Conversion
Date or Rollover Date of such Loan, (c) with respect to BA Equivalent Loans the
last day of each applicable Interest Period, and (d) with respect to Prime Rate
Loans and BA Equivalent Loans, the first day of each succeeding month after the
making of such Loan.



     “Interest Period” means a BA Equivalent Interest Period.



     “Interest Rate” means each or any of the interest rates set forth in
Section 3.1, including the Default Rate set forth in Section 3.2.



     “Inventory” means all of the Obligors’ now owned and hereafter acquired
inventory, goods and merchandise, wherever located, to be furnished under any
contract of service or held for sale or lease, finished goods, returned goods,
and materials and supplies, including spare



- 11 -









 




parts, of any kind, nature or
description which are or might be used or consumed in the Obligors’ business or
used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and such other personal
property, and all documents of title or other documents representing them.




     “Issue Date” means the Business Day upon which the Letter of Credit Issuer
issues a Letter of Credit at the request of the Obligor under and in accordance
with Section 2.3.



     “Latest Projections” means: (a) on the Closing Date and thereafter until
the Agent and Lenders receive new projections pursuant to Section 7.2(e), the
projections of the Obligors consolidated balance sheets, statements of
operations, and statements of cash flows on an annual basis and on a
month-by-month basis for the first six (6) months after the Closing Date and on
an annual basis for each year thereafter to and including December 31, 2003
attached hereto as Exhibit G-2; and (b) thereafter, the projections most
recently received by the Agent and Lenders pursuant to Section 7.2(e).



     “L/C Fee” has the meaning specified in Section 2.3(j).



     “L/C Reserve” means in respect of the Obligor, a reserve equal to 100% of
the undrawn amount of Letters of Credit issued on behalf of the Obligor.



     “Lenders” means, as of the date hereof, GMAC CF, and, subsequent to the
date hereof, such other financial institutions, together with their respective
successors and assigns, which become a party hereto as a lender by virtue of an
assignment under Clause 13.2(a) hereof, and “Lender” means any of them.



     “Letter of Credit” means a CDN$ letter of credit (in conformity with the
Uniform Customs and Practice for Documentary Credits) or standby letter of
credit or letter of guarantee having an expiry date not later than the earlier
of (i) the Maturity Date, and (ii) three hundred and sixty-five (365) days from
the Issue Date thereof.



     “Letter of Credit Issuer” means GMAC CF or any other financial institution
and acceptable to the Agent in its discretion that issues any Letter of Credit
under this Agreement.



     “Lien” means: (a) any interest in Property securing an obligation owed to,
or a claim by, a Person, whether such interest is based on the common law,
statute, or contract, and including without limitation, a security interest,
hypothec, prior claim, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes or from any law; and (b) to the
extent not included under clause (a), (i) any rights of repossession or similar
rights of unpaid suppliers, (ii) any reservation, exception, encroachment,
easement, servitude, right-of-way, covenant, condition, restrictment, lease or
other title exception or encumbrance affecting Property, and (iii) any other
lien, charge, privilege, secured claim, title retention, garnishment right,
deemed trust, encumbrance or other



- 12 -









 




right affecting Property, choate or
inchoate, whether or not crystallized or fixed, whether or not for amounts due
or accruing due, arising by any statute or law of any jurisdiction, at common
law, in equity or by any agreement.




     “Loan Documents” means this Agreement, the Security Agreements, the
Collection Account Agreements, and each of the documents listed in Exhibit M
and all other agreements, instruments and documents heretofore, now or
hereafter entered into with or granted to the Agent and/or Lenders evidencing,
securing, guaranteeing or otherwise relating to any Obligations, the
Collateral, the Agent’s Liens or any other aspect of the transactions
contemplated by this Agreement.



     “Loans” means, collectively, all loans and advances provided for in
Article 2.



     “Material Adverse Effect” means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower and the Guarantors, taken
as a whole, or the Collateral, taken as a whole, (b) a material impairment of
the ability of the Borrower or any Guarantor to perform under any Loan Document
to which it is a party and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Borrower or any Guarantor of any Loan Document to which it is a
party.



     “Materials of Environmental Concern” means any chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, asbestos,
polychlorinated biphenyls, urea-formaldehyde insulation, petroleum or petroleum
products.



     “Maturity Date” means the date which is five (5) years from the Closing
Date.



     “Maximum Rate” has the meaning specified in Section 3.4.



     “Maximum Revolving Credit Line” means $50,000,000 as the same may be
reduced in accordance with Section 11 of the Loan Agreement.



     “Net Borrowings” means that the amount of Revolving Loans outstanding plus
the L/C Reserve exceeds the amount of cash then listed on the balance sheet of
the Borrower.



     “Net Face Amount” means the gross amount of any Account less all discounts
(which shall be determined by the Agent, in its discretion, where optional
terms are given), returns, allowances, credits and/or reductions at any time
applicable, taken or allowed and shall, under no circumstances whatsoever,
exceed the amount actually owing by the Account Debtor.



     “Non-Rateable Loan” and “Non-Rateable Loans” have the meaning specified in
Section 2.2(j).



     “Note Indentures” means, collectively, the indentures governing the 2004
Notes and each of the Senior Secured Notes.



- 13 -









 





     “Notes” means the outstanding Senior Secured Notes and the 2004 Notes and
notes for unsecured debt issued by the Borrower subsequent to the Closing Date,
the proceeds of which are used to purchase or otherwise repay the then
outstanding principal amount of the Notes, and which is issued on terms no less
favourable to the Agent and the Lenders than the Notes.



     “Notice of Borrowing” has the meaning specified in Section 2.2



     “Notice of Continuation/Conversion” has the meaning specified in Section
2.4.



     “Obligations” means all present and future loans, advances, liabilities,
obligations, covenants, duties and debts owing by any Obligor to the Agent
and/or any of the Lenders, under this Agreement or any other Loan Document,
whether or not evidenced by any note or other instrument or document, whether
arising from an extension of credit, opening of a letter of credit, loan,
guarantee, indemnification or otherwise, whether direct or indirect, absolute,
matured or contingent, due or to become due, now existing or hereafter arising,
created or incurred, primary or secondary, as principal or guarantor and
including, without limitation, all interest, charges, expenses, fees, legal
fees, filing fees and any other sums chargeable to any Obligor hereunder, under
another Loan Document, or under any other agreement or instrument with the
Agent or GMAC CF. “Obligations” includes, without limitation, the principal of
and interest on all Loans, all debts, liabilities, and obligations now or
hereafter owing from the Obligors to the Agent or the applicable Lender under
or in connection with the Letters of Credit.



     “Obligors” means the Borrower and the Guarantors, and “Obligor” means any
one of them.



     “Other Taxes” means any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents.



     “Overdraft Loan” has the meaning specified in Section 2.2(g).



     “Payment Accounts” has the meaning specified in Section 6.10.



     “PCO” means the Pension Commission of Ontario and any Person succeeding to
the functions thereof and includes the Superintendent under such statute and
any other Public Authority empowered or created by the Pension Benefits Act of
Ontario, and any Person responsible for performing similar or analogous
functions in any other relevant jurisdiction.



     “Permitted Investments” means any of the following:




	(a)	 	any Investment in an Obligor;
	 
	(b)	 	any Investment in Cash Equivalents;




- 14 -









 






	(c)	 	any Investment by an Obligor in any Person, if as a result of
such Investment:






	(i)	 	such Person becomes a Guarantor; or
	 
	(ii)	 	such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the
Borrower or a Guarantor;






	(d)	 	any Investment made as a result of the receipt of non-cash
consideration from an asset sale permitted hereunder;
	 
	(e)	 	any acquisition of assets, shares, interests, participations,
rights or other equivalents (however designated) in any Person or
other securities solely in exchange for the issuance of shares, or
warrants, options or other rights to acquire shares (but excluding
any debt securities), of the Borrower;
	 
	(f)	 	any Investments received in compromise of claims, settlements
of debts or disputes or satisfaction of judgments relating to
obligations of such persons incurred in the ordinary course of trade
creditors or customers that were incurred in the ordinary course of
business, including pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of any trade
creditor or customer;
	 
	(g)	 	currency or interest rate swaps, or other financial
derivative instruments in the ordinary course of business and not
for speculative purposes;
	 
	(h)	 	an Investment by an Obligor in a Permitted Joint Venture;
provided that the aggregate amount of all Investments made pursuant
to this clause (8) does not exceed US$3.0 million at any one time
outstanding; and
	 
	(i)	 	other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (8)
since the date of the indenture, not to exceed 5% of the
Consolidated Net Tangible Assets of the Borrower.





     “Permitted Joint Venture” means the Existing Joint Ventures and any joint
venture arrangement created by an Obligor, the primary purpose of which is to
obtain fiber to supply the operations of an Obligor, provided that the Obligor
own at least 40% of the equity interest in such arrangement.



     “Permitted Liens” means, without in any way subordinating any of the
Agent’s Liens to the following: (a) Liens for taxes not yet payable or Liens
for taxes being contested in good faith and by proper proceedings diligently
pursued, in any case ranking subordinate to the Liens of the



- 15 -









 




Agent and Lenders
and provided that a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor on the applicable Financial
Statements, that a stay of enforcement of any such Lien is in effect and that
no Event of Default has occurred in consequence thereof; (b) Liens in favour of
the Agent and/or any of the Lenders; (c) PMSIs expressly permitted to be
outstanding in accordance with Section 9.11; (d) Liens as described in Exhibit
A hereto.




     “Person” means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, Public
Authority, or any other entity.



     “Plan” means any pension or other employee benefit plan and which is: (a)
a plan maintained by any Obligor or any Related Company; (b) a plan to which
any Obligor or any Related Company contributes or is required to contribute;
(c) a plan to which any Obligor or any Related Company was required to make
contributions at any time during the five (5) calendar years preceding the date
of this Agreement; or (d) any other plan with respect to which any Obligor or
any Related Company has incurred or may incur liability, including contingent
liability, either to such plan or to any Person, administration or Public
Authority, including the PCO.



     “PMSI” means a purchase money security interest as defined in the PPSA in
connection with the purchase or construction of new Property (other than
Collateral), including plant, improvements and Equipment, to the extent limited
to the new Property purchased or constructed and securing an amount not
exceeding the purchase price or construction cost of such new Property and
provided (i) such interest is perfected as of the date hereof or, (ii) with
respect to which, all actions and matters required under the PPSA in order to
enjoy the priorities of a “purchase money security interest” provided for in
the PPSA have been complied with or (iii) such interest is subordinate to the
Agent’s Liens.



     “PPSA” means the Personal Property Security Act of Ontario (or any
successor statute) or similar legislation of any other jurisdiction the laws of
which are required by such legislation to be applied in connection with the
issue, perfection, enforcement, validity or effect of security interests.



     “Premises” means the lands, together with all buildings, improvements, and
fixtures thereon and all tenements, hereditament, and appurtenances belonging
or in any way appertaining thereto as described in Exhibit D, and which
constitutes all of the immovable and real Property in which any Obligor has any
interests on the Closing Date.



     “Prime Rate” means the rate of interest publicly announced from time to
time by The Toronto-Dominion Bank as its reference rate of interest for loans
made in Canadian Dollars to Canadian customers and designated as its “prime”
rate. It is a rate set by The Toronto-Dominion Bank based upon various factors
including The Toronto-Dominion Bank’s costs and desired return, general
economic conditions and other factors and is used as a reference point for
pricing



- 16 -









 




some loans. However, The Toronto-Dominion Bank may price loans at,
above or below such announced rate.




     “Prime Rate Loan” means a Loan in Canadian Dollars made by the Lenders to
the Obligor hereunder pursuant to a Drawdown, Rollover or Conversion, on which
interest is payable under Section 3.1(a).



     “Pro Rata Share” means, with respect to a Lender, a fraction (expressed as
a percentage), the numerator of which is the amount of such Lender’s Commitment
and the denominator of which is the sum of the amounts of all of the Lenders’
Commitments, or if no Commitments are outstanding, a fraction (expressed as a
percentage), the numerator of which is the amount of Obligations owed to such
Lender under the Revolving Credit Facility, and the denominator of which is the
aggregate amount of the Obligations owed to the Lenders under the Revolving
Credit Facility, in each case giving effect to a Lender’s participation in
Non-Rateable Loans and Agent Advances.



     “Proceeds” means all products and proceeds of any Collateral, and all
proceeds of such proceeds and products, including, without limitation, all cash
and credit balances, all payments under any indemnity, warranty, or guarantee
payable with respect to any Collateral, all proceeds of fire or other insurance
relating to the Collateral, and all money and other Property obtained as a
result of any claims against third parties or any legal action or proceeding
with respect to Collateral.



     “Property” means any interest in any kind of property or asset, whether
real, personal or mixed, moveable or immoveable, tangible or intangible.



     “Public Authority” means the government of any country or sovereign state,
or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation, commission, tribunal,
committee, board or other instrumentality of any of the foregoing and includes,
without limitation, any pension board.



     “Real Estate” means all of the present and future interests of the
Obligors, as owner, lessee, or otherwise, in the Premises, including, without
limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof.



     “Receivables Collateral” means all of the Obligors’ now owned and
hereafter arising or acquired Accounts (whether or not earned by performance or
passage of time), including Accounts owed to any Obligor by any of its
Subsidiaries or Affiliates, together with all interest, late charges,
penalties, collection fees, and other sums which shall be due and payable in
connection with any Account; accounts, contract rights, chattel paper,
instruments, documents, general intangibles and all forms of obligations owing
to any Obligor (including, without limitation, in respect of loans, advances,
and extensions of credit by any Obligor to its Subsidiaries and Affiliates);
guarantees, letters of credit and other security for any of the
foregoing;
goods represented by or the sale, lease or delivery of which gave rise to any
of the


- 17 -









 





foregoing; merchandise returned to or repossessed by any Obligor and
rights of stoppage in transit, replevin and reclamation; and other rights or
remedies of an unpaid vendor, lien or secured party.




     “Release” means a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant
into the indoor or outdoor environment or into or out of any Real Estate or
other property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater or Real Estate or other property.



     “Related Company” means any corporation which would be treated as a single
employer for the purposes of any Plan or which is an “employer” or “related
employer” or “participating employer” for the purposes of any Plan.



     “Required Lenders” means at any time lenders whose pro rata shares
aggregate more than 50%, as such percentage is determined under the definition
of Pro Rata Share set forth herein.



     “Requirement of Law” means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Public Authority, in each case applicable to or binding upon the Person or any
of its property or to which the Person or any of its property is subject.



     “Revolving Credit Facility” has the meaning specified in Section 2.2(a).



     “Revolving Loans” has the meaning specified in Section 2.2(b).



     “Senior Secured Notes” means, collectively, (a) the 12.5% senior secured
notes of the Borrower outstanding pursuant to an indenture dated as of July 10,
1997 among the Borrower, the Original Guarantor and The Bank of New York, as
trustee, as amended by a First Supplemental Indenture dated as of February 14,
2001 and a Second Supplemental Indenture dated as of December 21, 2001, and (b)
the 13.875% senior secured notes of the Borrower outstanding pursuant to an
indenture dated as of December 21, 2001 among the Borrower, the Original
Guarantor and The Bank of Nova Scotia Trust Company of New York, as trustee.



     “Settlement” and “Settlement Date” have the meanings specified in Section
2.2(i).



     “Solvent” means when used with respect to any Person that at the time of
determination: (a) the assets of such Person, at a fair valuation, are in
excess of the total amount of its debts (including contingent liabilities); and
(b) the present fair saleable value of its assets is greater than its probable
liability on its existing debts as such debts become absolute and matured;
and(c) it is then able and expects to be able to pay its debts (including
contingent debts and other commitments) as they mature; and (d) it has capital
sufficient to carry on its business as conducted and as proposed to be
conducted. For purposes of determining whether a Person is



- 18 -









 




Solvent, the amount
of any contingent liability shall be computed as the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.




     “Steen Reorganization” means the transaction or series of transactions
whereby the Borrower and Steen River Forest Products Ltd. completes the wind-up
of Steen River Forest Products Ltd. into the Borrower.



     “Subsidiary” means any corporation of which more than 50% of the
outstanding securities of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of
the corporate directors (or Persons performing similar functions), is at the
time, directly or indirectly through one or more intermediaries, owned by any
Obligor.



     “Taxes” means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by each Lender’s
net income, capital or net worth by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Agent, as the
case may be, is organized or maintains a lending office.



     “Term” has the meaning specified in Article 12.



     “Termination Event” means: (a) the withdrawal of any Obligor or any
Related Company from a Plan during a plan year; or (c) the filing of a notice
of intent to terminate a Plan or the treatment of a Plan amendment as a
termination; or (d) any issuance of a notice of proposal to windup any Plan or
notice of proposal to appoint an administrator for any Plan; or (e) the
institution of proceedings by any Public Authority to terminate or have a
trustee appointed to administer a Plan; or (f) any other event or condition
which might constitute grounds for the termination of, winding up or the
appointment of a trustee to administer, any Plan.



     “Unused Letter of Credit Subfacility” means an amount equal to $30,000,000
minus the sum of (a) 100% of the aggregate undrawn amount of all outstanding
Letters of Credit plus (b) without duplication, the aggregate unpaid
reimbursement obligations with respect to all Letter of Credit.



     “Unused Line Fee” has the meaning specified in Section 3.3.



     “Unused Line Fee Percentage” means the following percentages:



	 	 	 	 	 
	Facility Usage	Unused Line Fee Percentage
	£25%
	 	 	0.625	%
	>25%
but £ 50%
	 	 	0.5	%
	>50%
	 	 	0.45	%







- 19 -









 






     “Violation Notice” means any notice received by any Obligor from any
Public Authority under any Environmental Law that the applicable Obligor or any
of its property and assets is not in compliance with the requirements of any
Environmental Law.



     “U.S. Dollars” or “U.S.$” means lawful currency of the United States of
America.




- 20 -










 





EXHIBIT A




Permitted Liens





	(a)	 	Liens in favour of the Borrower or another Obligor;
	 
	(b)	 	Liens securing Debt related to letters of credit, interest
rate swap or other financial derivative instruments entered into in
the ordinary course of business and not for speculative purposes;
provided, that such Liens are only secured by specifically pledged
cash or cash equivalents with a market value not exceeding 105% of
the relevant Debt;
	 
	(c)	 	Liens on property existing at the time of acquisition of the
property by an Obligor, provided (i) such Liens were in existing at
the time of contemplation of the acquisition and (ii) such Liens do
not extend to the Collateral;
	 
	(d)	 	Liens on the equity interest of Permitted Joint Ventures
owned by an Obligor securing Debt of such Permitted Joint Venture
not otherwise prohibited by the Loan Agreement;
	 
	(e)	 	Undetermined or inchoate Liens, rights of distress and
charges incidental to current operations which have not at such time
been filed or exercised and of which the Agent has been given
notice, and for which satisfactory reserves have been established,
or which relate to obligations not due or payable or if due, the
validity of which is being contested diligently and in good faith by
appropriate proceedings by that Person,
	 
	(f)	 	a general security agreement between Ainsworth and Grant
securing the obligations of Ainsworth or its subsidiaries under the
High Level Memorandum of Agreement or similar documents relating to
the High Level Joint Venture, provided such general security
interest was fully subordinate to the Liens of the Agent and the
Lenders, on terms satisfactory to the Agent, acting reasonably; and
	 
	(g)	 	Other Liens approved by the Required Lenders.




 









 











EXHIBIT B




[Intentionally Blank]




 









 








EXHIBIT C




[Intentionally Blank]




 









 








EXHIBIT D




LOCATIONS




 









 








EXHIBIT E




NAMES OF OBLIGORS AND TRADE STYLES




 









 








EXHIBIT F




SUBSIDIARIES AND AFFILIATES AND

JURISDICTION OF INCORPORATION AND QUALIFICATION




 









 








EXHIBIT G




FINANCIAL STATEMENTS AND PROJECTIONS




 









 








EXHIBIT G-1




FINANCIAL STATEMENTS




 









 








EXHIBIT G-2




PROJECTIONS




 









 








EXHIBIT G-4




FORM OF CERTIFICATE




	 	 	 
	TO:

	 	GMAC Commercial Finance Corporation
– Canada, as agent
(the “Agent”), for itself as Lender and the other Lenders under the
Loan Agreement (as defined below)
	 
	 	 
	RE:

	 	Ainsworth Lumber Co. Ltd. (the “Borrower”)
	

	 	[Monthly/Quarterly/Annual] Financial Statements
	 
	 	 
	DATED:
	 	•







     This Certificate is furnished in accordance with the requirements of the
loan agreement dated as of March 15, 2004 (as amended, restated, modified,
supplemented, renewed or replaced from time to time, the “Loan Agreement”)
entered into between the Borrower, the Agent and the Lenders, and is subject to
the terms and conditions of the Loan Agreement:



     The undersigned, the Chief Financial Officer of the Borrower hereby
certifies to the Lender, without personal liability, based on my examination of
the attached financial statements that:




	1.	 	This Certificate is given in respect of [Monthly/Quarterly/Annual]
financial statements.
	 
	2.	 	The attached financial statements are complete and accurate.
	 
	3.	 	All representations and warranties made by the Borrower in the Loan
Agreement and all other Loan Documents are correct and complete as of the
date hereof, as if made as of the date hereof [except as described in the
schedule appended hereto].
	 
	4.	 	Each of the Obligors is, as of the date hereof, in compliance with all of
the covenants and agreements in the Loan Agreement and all other the Loan
Documents [except as described in the schedule appended hereto].
	 
	5.	 	Either:
	 
	 	 	An Event of Default has not occurred.
	 
	 	 	or
	 
	 	 	An Event of Default has occurred as described in the schedule appended
hereto.
	 
	 	 	(delete inapplicable)




 









 







	6.	 	The calculations appended hereto, in relation to requirements or
restrictions imposed by Section 9.18 and 9.19 of the Loan Agreement :
	 
	 	 	either






	(a)	 	Demonstrate that the Borrower is in full compliance with
those requirements or restrictions
	 
	or
	 
	(b)	 	Demonstrate that the Borrower is not in full compliance with
the requirements or restrictions as more particularly set out in the
calculations appended as Schedule                    .
	 



	 	 	(delete inapplicable) (append calculations for the Sections noted).
	 
	 	 	The foregoing is hereby certified to and in accordance with
the terms of the Loan Agreement.







	 	 	 	 	 
	 	Per:	 	 	 
	 	 	 	
	 
	 	Name:	 	 	 
	 	Title: 	 	Chief Financial Officer




-2-









 






	 	 	 	 	 



EXHIBIT G-5




NOTICE OF BORROWING




	 	 	 
	TO:

	 	GMAC Commercial Finance Corporation — Canada, as agent
(the “Agent”), for itself as Lender and the other
Lenders under the Loan Agreement (as defined
below)
	 
	 	 
	RE:

	 	Ainsworth Lumber Co. Ltd.
	 
	 	 
	DATED:
	 	•







     The undersigned, Ainsworth Lumber Co. Ltd. (the “Borrower”), refers to the
Loan Agreement dated as of March 15, 2004, by and between the Borrower, the
Agent and the Lenders (as amended, restated, modified, supplemented, renewed or
replaced from time to time, the “Loan Agreement”), and gives notice pursuant to
Section 2.2 thereof that the Borrower requests a Drawdown under the Loan
Agreement, and, in that connection set forth below the information relating to
such Drawdown (the “Proposed Drawdown”) as required by Section 2.2(b) of the
Loan Agreement. All capitalized terms defined in the Loan Agreement and not
otherwise defined herein have the same meaning as in the Loan Agreement.




	1.	 	The Drawdown Date of the Proposed Drawdown, being a Business
Day, is: •
	 
	2.	 	The aggregate amount of the Proposed Drawdown is: $•
	 
	3.	 	The Proposed Drawdown is requested to a made as a [Prime Rate Loan/BA
Equivalent Loan].





[In the case of a BA Equivalent Loan:




	4.	 	The requested BA Equivalent Interest Period for the Proposed Drawdown is
[one/two/three/six] months. ]





     The undersigned hereby certifies for and on behalf of the Borrower,
without personal liability, that (a) the representations and warranties of the
Borrower contained in the Loan Agreement and other Loan Documents are correct
and complete as though made on and as of the date hereof and (b) no Event of
Default has occurred and is continuing or would result from the making of the
Proposed Drawdown.


	 	 	 	 	 
	 	 	 	AINSWORTH LUMBER CO. LTD.
	 	Per:	 	 	 
	 	 	 	
	 
	 	Name:	 	 	 
	 	Title: 	 	 	 





 









 






	 	 	 	 	 



EXHIBIT G-6




NOTICE OF CONTINUATION/CONVERSION





	 	 	TO: GMAC Commercial Finance Corporation – Canada, as agent
(the “Agent”), for itself as Lender and the other
Lenders under the Loan Agreement (as defined
below)
	 
	 	 	RE: Ainsworth Lumber Co. Ltd.
	 
	 	 	DATED:      •





     The undersigned, Ainsworth Lumber Co. Ltd. (the “Borrower”), refers to the
Loan Agreement dated as of March 15, 2004, by and between the Borrower, the
Agent and the Lenders (as amended, restated, modified, supplemented, renewed or
replaced from time to time, the “Loan Agreement”), and gives notice pursuant to
Section 2.4 thereof that the Borrower requests a [Continuation/Conversion] of
[Prime Rate Loans/BA Equivalent Loans] under the Loan Agreement, and, in that
connection set forth below the information relating to such
[Continuation/Conversion] as required by Section 2.4(b) of the Loan Agreement.
All capitalized terms defined in the Loan Agreement and not otherwise defined
herein have the same meaning as in the Loan Agreement.




	5.	 	The proposed [Continuation Date/Conversion Date], being a Business Day
[and, in the case of BA Equivalent Loans to be converted or continued, is
the last day of the applicable Interest Period], is: •
	 
	6.	 	The aggregate amount of [Prime Rate Loans/BA Equivalent Loans] to be
converted to [BA Equivalent Loans/ Prime Rate Loans] is: $•





or:




	7.	 	The aggregate amount of BA Equivalent Loans to be continued is: $•
	 
	8.	 	The [Prime Rate Loans/BA Equivalent Loans] are to be converted to [BA
Equivalent Loans/ Prime Rate Loans].





[In the case of conversion to or continuation of BA Equivalent Loans:




	9.	 	The requested BA Equivalent Interest Period for the proposed
[Continuation/Conversion] is [one/two/three/six] months. ]




 









 











     The undersigned hereby certifies for and on behalf of the Borrower,
without personal liability, that (a) the representations and warranties of the
Borrower contained in the Loan Agreement and other Loan Documents are correct
and complete as though made on and as of the date hereof and (b) no Event of
Default has occurred and is continuing or would result from the making of the
proposed Continuation/Conversion.


	 	 	 	 	 
	 	AINSWORTH LUMBER CO. LTD.
	 
	 	Per:	 	 	 
	 	 	 	
	 
	 	Name:	 	 	 
	 	Title: 	 	 	 




-2-









 






	 	 	 	 	 



EXHIBIT H




MATERIAL AGREEMENTS




 









 








EXHIBIT I




ENVIRONMENTAL MATTERS




 









 








EXHIBIT J




LITIGATION




 









 








EXHIBIT K




COLLECTIVE BARGAINING AGREEMENTS




AND LABOUR DISPUTES




 









 








EXHIBIT L




PENSION




 









 








EXHIBIT M




ADDITIONAL DOCUMENTS TO BE DELIVERED





	1.	 	Security Agreement re: Receivables, Collateral & Inventory






	2.	 	Collection Account Agreement






	3.	 	Telephonic Transmission Agreement






	4.	 	Wire Transfer Agreement






	5.	 	Funds Transfer Telephone Instruction Authorization






	6.	 	Letter of Credit Agreement




 









 











EXHIBIT N




CAPITAL STOCK AND REGISTERED




AND BENEFICIAL OWNERSHIP OF SUBSIDIARIES




 









 








EXHIBIT O




BANK ACCOUNTS




 









 








EXHIBIT P




FORM OF ASSIGNMENT AND ACCEPTANCE




	 	 	 
	TO:

	 	GMAC COMMERCIAL FINANCE
CORPORATION – CANADA, as agent
(the “Agent”), for itself as Lender and the other
Lenders under the Loan Agreement (as defined
below)
	 
	 	 
	AND TO:

	 	AINSWORTH LUMBER CO. LTD.







     WHEREAS Ainsworth Lumber Co. Ltd. (the “Borrower”), GMAC Commercial
Finance Corporation — Canada and such other banks or financial institutions as
may become lenders from time to time, as lenders, (the “Lenders”) and GMAC
Commercial Finance Corporation — Canada, as agent, (the “Agent”) entered into a
Loan Agreement dated as of March 15, 2004 (as amended, restated, modified,
supplemented, renewed or replaced from time to time, the “Loan Agreement”);



     AND WHEREAS pursuant to and in accordance with Sections 13.2 of the Loan
Agreement the undersigned Lender may assign or transfer to another Person all
or a rateable portion of all its right, benefits and obligations under the Loan
Agreement, provided, if prior to the occurrence of an Event of Default, such
Lender has the prior consent of the Borrower, such consent not to be
unreasonably withheld. No assignment (other than an assignment of all of the
assigning Lender’s rights, benefits and obligations under the Loan Agreement)
shall be for, or shall result in such Lender holding a Commitment of less than
20% of the Maximum Revolving Credit Line;



     AND WHEREAS the undersigned Lender (the “Assignor”) wishes to assign and
to transfer to • (the “Assignee”) certain of the rights, benefits and
obligations of the Assignor under the Loan Agreement specified herein;



     NOW THEREFORE in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Assignor and the Assignee agree as follows:



1. All capitalized terms defined in the Loan Agreement and not otherwise
defined herein have the same meaning as in the Loan Agreement.



2. The Assignor with respect to the Commitment, being •% of the principal
amount of outstanding Loans made by such Lender as of the date hereof, in any
case, or if such Commitment should have terminated, $•, assigns and transfers
to the Assignee •% of the rights, benefits and obligations of the Assignor
(being $•) of the principal amount of the Assignor’s Commitment (collectively
the “Transferred Rights, Benefits and Obligations”).




 









 








3. The Assignee, upon payment of the agreed amount therefor to the Assignor in
immediately available funds as such parties shall have agreed, accepts the
transfer of the Transferred Rights, Benefits and Obligations (the “Transfer”)
and accepts and assumes the Transferred Rights, Benefits and Obligations (the
"Assumption”).



4. Upon the effectiveness of such Transfer, the Assignor’s share of the total
Commitments shall be •% and the Assignee’s share of the total Commitments shall
be •%.



5. The Transfer and the Assumption are governed by and subject to Sections 13.2
of the Loan Agreement.



6. The Assignee acknowledges and confirms that it has not relied upon and that
the Assignor has not made any representation or warranty whatsoever as to the
due execution, legality, effectiveness, validity or enforceability of the Loan
Agreement or any other Loan Documents or other documentation or information
delivered by the Assignor to the Assignee in connection therewith or for the
performance thereof by any party thereto or for the financial condition of the
Obligors. All representations, warranties and conditions express or implied by
law or otherwise are hereby excluded.



7. The Assignee represents and warrants that it has itself been, and will
continue to be, solely responsible for making its own independent appraisal of
and investigation into the financial condition, creditworthiness, affairs,
status and nature of the Obligors and has not relied and will not hereafter
rely on the Assignor to appraise or keep under review on its behalf the
financial condition, creditworthiness, affairs, status or nature of the
Obligors.



8. Each of the Assignor and the Assignee represents and warrants to the other,
that it has the capacity and power to enter into the Transfer and the
Assumption in accordance with the terms hereof and to perform its obligations
arising therefrom, and all action required to authorize the execution and
delivery hereof and the performance of such obligations has been duly taken.



9. This Transfer Certificate may be executed in any number of counterparts and
all of such counterparts taken together shall be deemed to constitute one and
the same instrument.



-2-









 








10. This Transfer Certificate shall be governed by and construed in accordance
with the laws of the Province of Ontario, Canada.



     DATED this                                       day of                    , 200                   .



	 	 	 	 	 
	ASSIGNOR
	 	ASSIGNEE

	Per:
	 	 	Per:	
	 	
	 	 	

	Name:

	 	 	Name:	 
	Title:
	 	 	Title:	 







     The Borrower hereby acknowledges and confirms that (i) it consents to the
assignment by the Assignor to the Assignee in accordance with the applicable
provisions of the Loan Agreement and (ii) that the Borrower has received an
executed copy of this Transfer Certificate.



     DATED this                                       day of                    , 200                   .

	 	 	 	 	 
	 	AINSWORTH LUMBER CO. LTD.
	 	Per:	 	 	 
	 	 	 	
	 
	 	Name:	 	 	 
	 	Title: 	 	 	 






-3-










 




SENIOR SECURED CREDIT FACILITIES




AINSWORTH LUMBER CO. LTD.

as Borrower




- and -




GMAC COMMERCIAL FINANCE
CORPORATION - CANADA

as Agent and as a Lender




- and -




AINSWORTH ENGINEERED CORP.




as Corporation










FIRST AMENDING AGREEMENT TO LOAN AGREEMENT

AND ACCESSION AGREEMENT










Dated as of May 19, 2004




 









 








FIRST AMENDING AGREEMENT




     First Amending Agreement and Accession Agreement (the “Amending
Agreement”) dated as of May 19, 2004, among Ainsworth Lumber Co. Ltd., as
borrower (the “Borrower”), GMAC Commercial Finance Corporation — Canada, as
agent (the “Agent”), the financial institutions party to the Loan Agreement, as
lenders and AINSWORTH ENGINEERED CORP., a corporation amalgamated under the
laws of Nova Scotia (the “Corporation”).



     WHEREAS GMAC Commercial Finance Corporation — Canada, as Agent, and such
financial institutions as may from time to time be parties to the Loan
Agreement as lenders (collectively, together with GMAC Commercial Finance
Corporation — Canada, in its capacity as a lender, the “Lenders”) agreed to
make certain credit facilities available to the Borrower upon the terms and
conditions contained in that certain loan agreement among, inter alia, the
Borrower, the Agent and the Lenders dated as of March 15, 2004 (the “Loan
Agreement”);



     AND WHEREAS the Borrower has requested of the Agent and the Lenders that
the Loan Agreement be amended as hereinafter provided and the Agent and the
Lenders have agreed to such amendments to the Loan Agreement on the terms and
conditions set forth in this Amending Agreement;



     AND WHEREAS pursuant to Section 9.16 of the Loan Agreement, the
Corporation is to become a party to the Loan Agreement;



     NOW THEREFORE in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:



1. Defined Terms. Capitalized terms used in this Amending Agreement and not
otherwise defined shall have the respective meanings attributed to them in the
Loan Agreement.



2. Amendment to Definition section in Schedule 1 of Loan Agreement. The
definition section in Schedule 1 of the Loan Agreement is amended effective as
of this date by adding the following definition of “May 2004 Notes” immediately
after the definition of “Maximum Revolving Credit Line”:



“May 2004 Notes” means those notes, in a maximum
aggregate principal amount of U.S.$                                                         ,
issued by the Borrower pursuant to an indenture dated
May                    , 2004 among the Borrower and
                                                                                               , as trustee. “



3. Amendment to Definition of “Note Indentures” in Schedule 1 of the Loan
Agreement. The definition of “Note Indentures” in Schedule 1 of the Loan
Agreement is amended effective as of this date by adding the words “, the May
2004 Notes” immediately after the words “the 2004 Notes” therein.



4. Amendment to Definition of "Notes” in Schedule 1 of the Loan Agreement. The
definition of “Notes” in Schedule 1 of the Loan Agreement is amended effective
as of this date by adding the words “, the May 2004 Notes” immediately after
the words “Senior Secured Notes” therein.



 









 








-2-




5. Amendment to Section 8.9 of the Loan Agreement. Section 8.9 of the Loan
Agreement is amended effective as of this date by adding the words “and the May
2004 Notes” immediately after the words “(c) the 2004 Notes”.



6. Amendment to Exhibit D of the Loan Agreement. Exhibit D of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit D attached
hereto, effective as of the date hereof.



7. Amendment to Exhibit E of the Loan Agreement. Exhibit E of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit E attached
hereto, effective as of the date hereof.



8. Amendment to Exhibit F of the Loan Agreement. Exhibit F of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit F attached
hereto, effective as of the date hereof.



9. Amendment to Exhibit H of the Loan Agreement. Exhibit H of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit H attached
hereto, effective as of the date hereof.



10. Amendment to Exhibit I of the Loan Agreement. Exhibit I of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit I attached
hereto, effective as of the date hereof.



11. Amendment to Exhibit J of the Loan Agreement. Exhibit J of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit J attached
hereto, effective as of the date hereof.



12. Amendment to Exhibit K of the Loan Agreement. Exhibit K of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit K attached
hereto, effective as of the date hereof.



13. Amendment to Exhibit L of the Loan Agreement. Exhibit L of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit L attached
hereto, effective as of the date hereof.



14. Amendment to Exhibit N of the Loan Agreement. Exhibit N of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit N attached
hereto, effective as of the date hereof.



15. Amendment to Exhibit O of the Loan Agreement. Exhibit O of the Loan
Agreement shall be deleted in its entirety and replaced by Exhibit O attached
hereto, effective as of the date hereof.



16. Admission and Recognition of the Corporations as Guarantors. The parties
acknowledge and agree that the Corporation is, by virtue of execution of this
Amending Agreement, as and from this date a party to the Loan Agreement as a
Guarantor and bound by the terms, conditions and covenants and entitled to the
benefits thereof as if it were an original party thereto.



 









 








-3-




17. Conditions to Effectiveness. This Amending Agreement shall become
effective as of the first date written above (the “Amendment Effective Date”)
upon the condition precedent that the Agent shall have received the following,
in form, substance and dated as of a date satisfactory to the Agent and
Lenders:




	(i)	 	duly executed counterparts hereof which, when taken together,
bear the authorized signatures of the Borrower, the Corporation,
each Lender and the Agent;
	 
	(ii)	 	a duly executed guarantee executed by the Corporation;
	 
	(iii)	 	a duly executed security agreement executed by the
Corporation;
	 
	(iv)	 	a certified copy of (a) the constating documents of the
Borrower and the Corporation; (b) the resolutions of the board of
directors of the Borrower and the Corporation approving the entering
into and completion of all transactions contemplated by this
Amending Agreement and the Loan Documents to which it is a party;
and (c) incumbency certificate;
	 
	(v)	 	a certificate of status, compliance or like certificate with
respect to the Borrower and the Corporation issued by the
appropriate governmental agency;
	 
	(vi)	 	a certified copy of the Indenture dated_______,
2004 among the Borrower and_______, as trustee;
	 
	(vii)	 	certified copies of all insurance policies maintained by the
Corporation under terms and conditions satisfactory to Agent
together with certificates of insurance and appropriate endorsements
naming Agent as loss payee and/or first mortgage, as appropriate;
	 
	(viii)	 	satisfactory opinions of the respective counsel to the Borrower
and the Corporation, as to such matters as the Agent may request;
	 
	(ix)	 	evidence of Personal Property Security Act registrations in
such jurisdictions as the Agent may require;
	 
	(x)	 	such other certificates and documentation as the Agent may
reasonably request; and
	 
	(xi)	 	the payment by the Borrower, of all reasonable legal fees and
disbursements incurred by the Agent and the Lenders in connection
with this Amending Agreement.





18. Representations. The Borrower and the Corporation represent and warrant to
the Lenders and the Agent that, as of the Amendment Effective Date:




	(i)	 	This Amending Agreement has been duly authorized, executed
and delivered by the Borrower and the Corporation, and the Loan
Agreement, as amended hereby, constitutes a legal, valid and binding
obligation of the Borrower and the Corporation, enforceable in
accordance with its terms, subject to applicable




 









 











-4-





	 	 	bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditor’s rights generally and subject to general
principles of equity, regardless of whether considered in a
proceeding in equity or at law;
	 
	(ii)	 	The representations and warranties of the Borrower and the
Guarantors set forth in each Loan Document (including this Amending
Agreement) are true and correct on and as of the Amendment Effective
Date. Upon the effectiveness of this Amending Agreement, the
Borrower and the Guarantors will be in full compliance with the
covenants (as amended by this Amending Agreement) in each Loan
Document; and
	 
	(iii)	 	No Default or Event of Default has occurred.





19. Reference to and Effect on Loan Agreement. On and after this date, each
reference in the Loan Agreement to “this Agreement” and each reference to the
Loan Agreement in the Loan Documents and any and all other agreements,
documents and instruments delivered by any of the Lenders, the Agent, the
Borrower, any Obligor or any other Person shall mean and be a reference to the
Loan Agreement as amended by this Amending Agreement. Except as specifically
amended by this Amending Agreement, the Loan Agreement shall remain in full
force and effect and is hereby ratified and confirmed.



20. No Waiver, etc. The execution, delivery and effectiveness of this Amending
Agreement shall not, except as expressly provided, operate as a waiver of any
right, power or remedy of the Agent or any of the Lenders under any of the Loan
Documents nor constitute a waiver of any provision of any of the Loan
Documents.



21. Governing Law. This Amending Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein.



22. Counterparts. This Amending Agreement may be executed in any number of
counterparts (including by way of facsimile) and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.



23. Expenses. The Borrower agrees to reimburse the Agent for its out-of-pocket
expenses in connection with this Amending Agreement, including the reasonable
legal fees and disbursements of Ogilvy Renault, counsel for the Agent.



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-5-




     IN WITNESS WHEREOF, the parties have caused this Amending Agreement to be
executed by their respective authorized officers as of the date first above
written.



	 	 	 
	 

	 	AINSWORTH LUMBER CO. LTD., as
 Borrower
	 
	 	 
	

	 	By: /s/ Authorized Officer                                      
	 
	 	 
	

	 	AINSWORTH ENGINEERED CORP., 
as the Corporation
	 
	 	 
	

	 	By: /s/ Authorized Officer                                      
	 
	 	 
	

	 	GMAC COMMERCIAL FINANCE 
CORPORATION — CANADA, as Agent
	 
	 	 
	

	 	By: /s/ Authorized Officer                                      
	 
	 	 
	

	 	GMAC COMMERCIAL FINANCE 
CORPORATION — CANADA, as Lender
	 
	 	 
	

	 	By: /s/ Authorized Officer