Exhibit 10.3


 


EXECUTION COPY


 




 





 


CANADIAN
SECURITY AGREEMENT


 


dated as of


 


February 2, 2006,


 


among


 


INDALEX HOLDING CORP.,


 


6461948 CANADA INC.,


 


THE SUBSIDIARY PARTIES IDENTIFIED HEREIN


 


and


 


JPMORGAN CHASE BANK, N.A.,

as Administrative Agent


 


 




 




















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
  SECTION 1.01

  	
  Credit
  Agreement

  	
  1

  
	
  SECTION 1.02.
  

  	
  Other
  Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  PLEDGE OF SECURITIES

  	
   

  
	
  SECTION 2.01.

  	
  Pledge

  	
  6

  
	
  SECTION 2.02. 

  	
  Delivery of the Pledged Collateral

  	
  7

  
	
  SECTION 2.03. 

  	
  Representations, Warranties and Covenants

  	
  7

  
	
  SECTION 2.04. 

  	
  Certification of Limited Liability Company and Limited
  Partnership Interests

  	
  9

  
	
  SECTION 2.05. 

  	
  Unlimited Liability Companies

  	
  9

  
	
  SECTION 2.06. 

  	
  Registration in Nominee Name; Denominations

  	
  9

  
	
  SECTION 2.07. 

  	
  Voting Rights; Dividends and Interests

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE III  

  	
  SECURITY INTERESTS IN PERSONAL
  PROPERTY

  	
   

  
	
  SECTION 3.01. 

  	
  Security
  Interest

  	
  12

  
	
  SECTION 3.02. 

  	
  Representations and Warranties

  	
  14

  
	
  SECTION 3.03.
  

  	
  Covenants

  	
  17

  
	
  SECTION 3.04.
  

  	
  Other Actions

  	
  20

  
	
  SECTION 3.05. 

  	
  Covenants Regarding Patent, Trade-mark, Copyright and Industrial
  Design

  	
  22

  
	
  SECTION 3.06. 

  	
  Deposit accounts

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REMEDIES

  	
   

  
	
  SECTION 4.01. 

  	
  Remedies Upon Default

  	
  26

  
	
  SECTION 4.02. 

  	
  Application of Proceeds

  	
  28

  
	
  SECTION 4.03. 

  	
  Grant of License to Use Intellectual
  Property

  	
  29

  
	
  SECTION 4.04.
  

  	
  Securities Act

  	
  29

  
	
  SECTION 4.05.
  

  	
  Registration

  	
  30

  
	
  SECTION 4.06. 

  	
  Other Actions

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE V 

  	
  INDEMNITY, SUBROGATION AND
  SUBORDINATION

  	
   

  
	
  SECTION 5.01. 

  	
  Indemnity and Subrogation

  	
  31

  
	
  SECTION 5.02.
  

  	
  Contribution and
  Subrogation

  	
  31

  
	
  SECTION 5.03. 

  	
  Subordination

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI 

  	
  MISCELLANEOUS

  	
   

  
	
  SECTION 6.01.
  

  	
  Notices

  	
  32

  
	
  SECTION 6.02. 

  	
  Waivers; Amendment

  	
  32

  
	
  SECTION 6.03. 

  	
  Administrative Agent’s Fees and Expenses; Indemnification

  	
  32

  
	
  SECTION 6.04. 

  	
  Successors and Assigns

  	
  33

  
	
  SECTION 6.05. 

  	
  Survival of Agreement

  	
  33

  
	
  SECTION 6.06. 

  	
  Counterparts; Effectiveness; Several Agreement; Maximum Liability

  	
  34

  
	
  SECTION 6.07.

  	
  Severability

  	
  34

  
	
  SECTION 6.08. 

  	
  Compromises and Collection of Collateral

  	
  35

  
	
  SECTION 6.09. 

  	
  Governing Law; Jurisdiction; Consent to Service of Process

  	
  35

  
				



 

















 


	
  SECTION 6.10. 

  	
  WAIVER OF JURY TRIAL

  	
  36

  
	
  SECTION 6.11.

  	
  Headings

  	
  36

  
	
  SECTION 6.12. 

  	
  Security Interest Absolute

  	
  36

  
	
  SECTION 6.13. 

  	
  Termination or Release

  	
  36

  
	
  SECTION 6.14. 

  	
  Additional Subsidiaries

  	
  37

  
	
  SECTION 6.15. 

  	
  Administrative Agent Appointed Attorney-in-Fact

  	
  37

  
	
  SECTION 6.16. 

  	
  Intercreditor Agreement

  	
  38

  
	
  SECTION 6.17 

  	
  Judgment Currency

  	
  38

  
	
  SECTION 6.18. 

  	
  Attachment of Security Interest

  	
  39

  
	
  SECTION 6.19. 

  	
  Copy of Agreement; Verification Statement

  	
  39

  
	
  SECTION 6.20 

  	
  Amalgamation

  	
  39

  



 


3

















 


	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule
  I

  	
  Subsidiary
  Parties

  	
   

  
	
  Schedule
  II

  	
  Pledged
  Stock; Debt Securities

  	
   

  
	
  Schedule
  III

  	
  Intellectual
  Property

  	
   

  
	
  Schedule
  IV

  	
  Receivables
  and Deposit Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Supplement (Canadian Subsidiary Loan Party)

  	
   

  
	
  Exhibit B

  	
  Form of
  Supplement (Domestic Subsidiary Loan Party)

  	
   

  



 

















 


EXECUTION
COPY


 


CANADIAN SECURITY AGREEMENT (this “Agreement”)
dated as of February 2,  2006,
among INDALEX HOLDING CORP., a Delaware corporation (the “Parent Borrower”), 6461948 CANADA INC.,
a Canadian corporation and a wholly-owned subsidiary of the Parent Borrower
(the “Canadian Subsidiary Borrower” and, together with the Parent
Borrower, the “Borrowers”), the Subsidiary Parties identified herein and
JPMORGAN CHASE BANK, N.A., a national banking association, as Administrative
Agent (the “Administrative Agent”).


 


Reference is made to the Credit Agreement
dated as of February 2, 2006 (as amended, supplemented or otherwise
modified from time to time, the “Credit
Agreement”), among Indalex Holdings Finance Inc. (“Holdings”),
the Parent Borrower, the Canadian Subsidiary Borrower, the Subsidiary Loan
Parties thereto the Lenders from time to time party thereto and the
Administrative Agent.  The Lenders have
agreed to extend credit to the Borrowers subject to the terms and conditions
set forth in the Credit Agreement.  The
obligations of the Lenders to extend such credit are conditioned upon, among
other things, the execution and delivery of this Agreement.  The Subsidiary Parties, who are affiliates of
the Canadian Borrower, and the Parent Borrower will derive substantial benefits
from the extension of credit to the Borrowers pursuant to the Credit Agreement
and are willing to execute and deliver this Agreement in order to induce the
Lenders to extend such credit. 
Accordingly, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:


 


ARTICLE I


 


Definitions


 


SECTION 1.01.  Credit Agreement.  (a)  Capitalized terms used in this
Agreement and not otherwise defined herein have the meanings specified in the
Credit Agreement.  All terms defined in
the PPSA and not defined in this Agreement have the meanings specified in the
PPSA, including without limitation, “Accessions”, “Accounts”, “Chattel Paper”, “Document
of Title”, “Goods”, “Intangibles”, “Instruments”, “Inventory”, “Securities”, “financing
statement”, “financing change statement” and “Proceeds”.


 


(b)  The rules of construction specified in Section 1.03
of the Credit Agreement also apply to this Agreement.


 


SECTION 1.02.  Other
Defined Terms.  As used in this Agreement, the following terms have the meanings
specified below:


 


“Account Debtor” means any Person who is or who may become obligated to any Grantor
under, with respect to or on account of an Account.


 


“Agreement” has the meaning assigned
to such term in the preamble to


 


CANADIAN
SECURITY AGREEMENT


 

















 


this
Agreement.


 


“Claiming
Party” shall have the meaning assigned to such term
in Section 5.02.


 


 “Collateral”
means Personal Property Collateral and Pledged Collateral.


 


“Collateral
Access Agreement” means any landlord waiver or other
agreement between the Administrative Agent and any third party (including any
bailee, consignee, customs broker, or other similar Person) in possession of
any Collateral or any landlord of any Grantor for any real property where any
Collateral is located, as such landlord waiver or other agreement may be
amended, restated or otherwise modified from time to time.


 


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


 


“Contributing
Party” shall have the meaning assigned to such term
in Section 5.02.


 


“Copyright
License” means any written agreement, now or
hereafter in effect, granting any right to any third party under any copyright
now or hereafter owned by any Grantor or that such Grantor otherwise has the
right to license, or granting any right to any Grantor under any copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.


 


“Copyrights” means all of the following now owned or hereafter acquired by any
Grantor:  (a) all copyright rights
in any work subject to the copyright laws of Canada or any other country,
whether as author, assignee, transferee or otherwise, and (b) all
registrations and applications for registration of any such copyright in Canada
or any other country, including registrations, recordings, supplemental
registrations and pending applications for registration in the Canadian
Intellectual Property Office, including those listed on Schedule III.


 


“Credit
Agreement” has the meaning assigned to such term in
the preliminary statement of this Agreement.


 


“Deposit
Account Control Agreement” means an agreement, in
form and substance satisfactory to the Administrative Agent, among any Grantor,
a banking institution holding such Grantor’s funds and the Administrative Agent
with respect to control of all deposits and balances held in a deposit account
maintained by such Grantor with such banking institution.


 


 “Domestic
Security Agreement” means the Domestic Security Agreement dated as of the
date hereof, among Holdings, the Parent Borrower, the subsidiary parties
identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent.


 


2

















 


“First Activation Period” shall have
the meaning assigned to such term in Section 3.06(c).


 


“First Activation Period Notice”
shall have the meaning assigned to such term in Section 3.06(c).


 


“Grantors” means (a) the Canadian Subsidiary Borrower, (b) the
Subsidiary Parties (other than any Subsidiary Party that is a Domestic
Subsidiary Loan Party) and (c) solely in respect of the pledge of Pledged
Stock contemplated by Section 2.01(a), the Parent Borrower and the
Domestic Subsidiary Loan Parties party hereto.


 


“Industrial Design License” means
any written agreement, now or hereafter in effect, granting to any third party
any right to make, use or sell any Industrial Design, now or hereafter owned by
any Grantor or that any Grantor otherwise has the right to license, is in
existence, or granting to any Grantor any right to make, use or sell any
Industrial Design, now or hereafter owned by any third party, is in existence,
and all rights of any Grantor under any such agreement.


 


“Industrial Designs” mean all of the
following now owned or hereafter acquired by any Grantor: (a) all
industrial designs, design patents and other designs that the Grantor now or
hereafter owns or uses, including but not limited to all industrial designs,
design patents and other designs listed on Schedule III hereto and all renewals
and extensions thereof, (b) all registrations and recordings thereof and
all applications that have been or shall be made or filed in the Canadian
Industrial Design Office or any similar office or agency in Canada or any other
country or political subdivision thereof and all records thereof and all
reissues, extensions or renewals thereof, and (c) all common law and other
rights in the above.


 


“Intangibles” means all choses in action and causes of action and all other
intangible personal property of every kind and nature (other than Accounts) now
owned or hereafter acquired by any Grantor and all other “intangibles”, as
defined in the PPSA, including corporate or other business records,
indemnification claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, Swap Agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises, tax refund claims
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to any Grantor to secure payment by an Account Debtor of any
of the Accounts.


 


“Intellectual
Property” means all intellectual and similar
property of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trade-marks, Industrial Designs, trade secrets, confidential or proprietary
technical and business information, know-how, show-how or other data or
information, software and databases and all embodiments or fixations thereof
and related documentation, registrations and franchises, and all additions,
improvements and accessions to, and books and records describing or used in
connection with, any of the foregoing.


 


3

















 


“Judgment Currency” has the meaning
assigned to such term in Section 6.16(a).


 


“Judgment Currency Conversion Date”
has the meaning assigned to such term in Section 6.16(a).


 


“License” means any Patent License, Trade-mark License, Copyright License or
other license or sublicense agreement to which any Grantor is a party,
including those listed on Schedule III.


 


“New York UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York.


 


“Obligation Currency” has the
meaning assigned to such term in Section 6.16(a).


 


“Patent
License” means any written agreement, now or
hereafter in effect, granting to any third party any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any Grantor or that
any Grantor otherwise has the right to license, is in existence, or granting to
any Grantor any right to make, use or sell any invention on which a Patent, now
or hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement.


 


“Patents” means all of the following now owned or hereafter acquired by any
Grantor:  (a) all letters patent of
Canada or the equivalent thereof in any other country, all registrations and
recordings thereof, and all applications for letters patent of Canada or the
equivalent thereof in any other country, including registrations, recordings
and pending applications in the Canadian Intellectual Property Office or any
similar offices in any other country, including those listed on
Schedule III, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.


 


“Personal
Property Collateral” has the meaning assigned to
such term in Section 3.01.


 


“Pledged
Collateral” has the meaning assigned to such term
in Section 2.01.


 


“Pledged Debt
Securities” has the meaning assigned to such term
in Section 2.01.


 


“Pledged
Securities” means any promissory notes, stock
certificates or other securities now or hereafter included in the Pledged
Collateral, including all certificates, instruments or other documents
representing or evidencing any Pledged Collateral.


 


“Pledged
Stock” has the meaning assigned to such term in Section 2.01.


 


4

















 


“PPSA” means the Personal Property Security Act (Ontario),
including the regulations thereto, provided that, if perfection or the effect
of perfection or non-perfection or the priority of any Lien created hereunder
on the Collateral is governed by the personal property security legislation or
other applicable legislation with respect to personal property security as in
effect in a jurisdiction other than Ontario, “PPSA” means the Personal Property Security Act or such
other applicable legislation as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.


 


“Receivables” means the Accounts,
Chattel Paper, Documents of Title, Securities, Instruments and any other rights
or claims to receive money that are Intangibles or otherwise Collateral.


 


“Receiver” has the meaning assigned
to such term in Section 4.01.


 


“Receivables Account” shall have the
meaning assigned to such term in Section 3.06(a)(i).


 


“Receivables Account Bank” shall
have the meaning assigned to such term in Section 3.06(c).


 


“Second Activation Period Notice”
shall have the meaning assigned to such term in Section 3.06(c).


 


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


 


“Securities
Laws” has the meaning assigned to such term in Section 4.04.


 


“Security
Interest” has the meaning assigned to such term in Section 3.01.


 


“Short Form Security
Agreement” has the meaning assigned to such term in
Section 3.02(b).


 


“Sub-Agent” means a financial institution that has delivered to the
Administrative Agent an executed Lock Box Agreement.


 


“Subsidiary
Parties” means (a) the Canadian Subsidiary
Loan Parties identified on Schedule I, (b) each other Canadian
Subsidiary Loan Party that becomes a party to this Agreement as a Subsidiary
Party after the Effective Date and (c) each Domestic Subsidiary Loan Party
that becomes a party to this Agreement as a Subsidiary Party after the
Effective Date.


 


5

















 


“Termination Period” shall have the
meaning assigned to such term in Section 3.06(c).


 


“Termination Period Notice” shall
have the meaning assigned to such term in Section 3.06(c).


 


“Trade-mark
License” means any written agreement, now or
hereafter in effect, granting to any third party any right to use any
Trade-mark now or hereafter owned by any Grantor or that any Grantor otherwise
has the right to license, or granting to any Grantor any right to use any
Trade-mark now or hereafter owned by any third party, and all rights of any
Grantor under any such agreement.


 


“Trade-marks” means all of the following now owned or hereafter acquired by any
Grantor:  (a) all Trade-marks,
service marks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all registration and recording applications filed in connection
therewith, including registrations and registration applications in the
Canadian Intellectual Property Office or any similar offices in any province or
territory of Canada or any other country or any political subdivision thereof,
and all extensions or renewals thereof, including those listed on
Schedule III, (b) all goodwill associated therewith or symbolized
thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.


 


“ULC” has the meaning assigned to
such term in Section 2.05.


 


“ULC Interest” has the meaning
assigned to such term in Section 2.05.


 


ARTICLE II


 


Pledge of Securities


 


SECTION 2.01.  Pledge.  As security for the payment or
performance, as the case may be, in full of the Canadian Secured Obligations,
each Grantor hereby assigns, pledges and hypothecates to the Administrative
Agent, its successors and permitted assigns, for the rateable benefit of the
Secured Parties, and hereby grants and hypothecates to the Administrative
Agent, its successors and permitted assigns, for the rateable benefit of the
Secured Parties, a security interest in all of such Grantor’s right, title and
interest in, to and under (a)(i) the Equity Interests owned by it as of
the Effective Date and listed opposite the name of such Grantor on
Schedule II, (ii) any Equity Interests of Foreign Subsidiaries
obtained in the future by such Grantor (to the extent that such Equity
Interests are not otherwise pledged pursuant to Section 2.01 of the
Domestic Security Agreement) and (iii) the certificates representing all
such Equity Interests (the “Pledged Stock”), (b)(i) the debt
securities owned by it as of the Effective Date and listed opposite the name of
such Grantor on Schedule II, (ii) any debt securities in the future
issued to such Grantor and (iii) the promissory notes and any other
instruments evidencing such debt securities (the “Pledged Debt Securities”),
(c) all other property that 


 


6

















 


may be
delivered to and held by the Administrative Agent pursuant to the terms of this
Section 2.01, (d) subject to Section 2.07, all payments of
principal or interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of, in
exchange for or upon the conversion of, and all other Proceeds received in respect
of, the securities referred to in clauses (a) and (b) above, (e) subject
to Section 2.07, all rights and privileges of such Grantor with respect to
the securities and other property referred to in clauses (a), (b), (c) and
(d) above, and (f) all Proceeds of any of the foregoing (the items
referred to in clauses (a) through (f) above being collectively
referred to as the “Pledged Collateral”).


 


TO HAVE AND TO HOLD the Pledged Collateral,
together with all right, title, interest, powers, privileges and preferences
pertaining or incidental thereto, unto the Administrative Agent, its successors
and assigns, for the rateable benefit of the Secured Parties, forever; subject, however,
to the terms, covenants and conditions hereinafter set forth.


 


SECTION 2.02.  Delivery
of the Pledged Collateral.  (a)  Each Grantor agrees promptly to deliver or cause to be
delivered to the Administrative Agent any and all Pledged Securities.


 


(b)  Each Grantor will cause any Indebtedness for
borrowed money (i) in the case of Indebtedness owed to such Grantor by any
Person other than a Loan Party in any principal amount in excess of $100,000,
and (ii) in the case of Indebtedness owed to such Grantor by any Loan
Party in any principal amount, to be evidenced by a duly executed promissory
note that is pledged and delivered to the Administrative Agent pursuant to the
terms hereof.


 


(c)  Upon the delivery thereof to the Administrative
Agent by any Loan Party, (i) any Pledged Securities shall be accompanied
by stock powers duly executed in blank or other instruments of transfer
satisfactory to the Administrative Agent and by such other instruments and
documents as the Administrative Agent may reasonably request and (ii) all
other property comprising part of the Pledged Collateral shall be accompanied
by proper instruments of assignment duly executed by the applicable Grantor and
such other instruments or documents as the Administrative Agent may reasonably
request.  Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities, which schedule
shall be attached hereto as Schedule II and made a part hereof, provided that failure to attach any such
schedule hereto shall not affect the validity of such pledge of such Pledged
Securities.  Each schedule so delivered
shall supplement any prior schedules so delivered.


 


SECTION 2.03.  Representations,
Warranties and Covenants.  The Grantors
jointly and severally represent, warrant and covenant to and with the
Administrative Agent, for the benefit of the Secured Parties, that:


 


7
















 


(a)           Schedule II
correctly sets forth the percentage of the issued and outstanding units of each
class of the Equity Interests of the issuer thereof represented by the Pledged
Stock issued by Holdings, the Parent Borrower or any Subsidiary and includes all
Equity Interests, debt securities and promissory notes required to be pledged
hereunder;


 


(b)           in
the case of Pledged Stock and Pledged Debt Securities issued by Holdings, the
Parent Borrower or any Subsidiary, such Pledged Stock and Pledged Debt
Securities have been duly and validly authorized and issued by the issuers
thereof and (i) in the case of Pledged Stock, are fully paid and
nonassessable and (ii) in the case of Pledged Debt Securities, are legal,
valid and binding obligations of the issuers thereof, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law;


 


(c)           except
for the security interests granted hereunder, each of the Grantors (i) is
and, subject to any transfers made in compliance with the Credit Agreement,
will continue to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds
the same free and clear of all Liens, other than Liens created by this
Agreement, Permitted Encumbrances, Liens permitted by Section 6.02(u) of
the Credit Agreement and transfers made in compliance with the Credit
Agreement, (iii) will make no assignment, pledge, hypothecation or
transfer of, or create or permit to exist any security interest in or other
Lien on, the Pledged Collateral, other than Liens created by this Agreement,
Permitted Encumbrances, Liens permitted by Section 6.02(u) of the
Credit Agreement and transfers made in compliance with the Credit Agreement,
and (iv) will defend its title or interest thereto or therein against any
and all Liens (other than the Lien created by this Agreement and Permitted
Encumbrances), however arising, of all Persons whomsoever;


 


(d)           in
the case of Pledged Collateral issued by Holdings, the Parent Borrower or any
Subsidiary, except for restrictions and limitations imposed by the Loan
Documents or Securities Laws generally, such Pledged Collateral is and will
continue to be freely transferable and assignable, and none of such Pledged
Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, charter or by-law provisions or contractual restriction
of any nature that might prohibit, impair, delay or otherwise affect the pledge
of such Pledged Collateral hereunder, the sale or disposition thereof pursuant
hereto or the exercise by the Administrative Agent of rights and remedies
hereunder;


 


(e)           each
of the Grantors has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;


 


(f)            no
consent or approval of any Governmental Authority, any securities exchange or
any other Person was or is necessary to ensure the validity of the pledge of
any Pledged Collateral issued by Holdings, the Parent Borrower or any
Subsidiary effected hereby (other than such as have been obtained and are in
full force and effect); and


 


8

















 


(g)           by
virtue of the execution and delivery by the Grantors of this Agreement, when
any Pledged Securities are delivered to the Administrative Agent in accordance
with this Agreement, the Administrative Agent will obtain a legal, valid and
perfected Lien upon and security interest in such Pledged Securities as
security for the payment and performance of the Canadian Secured Obligations,
prior to any other Lien on any Pledged Securities other than Permitted
Encumbrances that have priority as a matter of law.


 


SECTION 2.04. 
Certification of Limited Liability Company and
Limited Partnership Interests. 
Each interest in any limited liability company or limited partnership,
in each case controlled by any Grantor and pledged hereunder shall be
represented by a certificate, shall be a “security” within the meaning of Article 8
of the New York UCC and shall be governed by Article 8 of the New York
UCC.


 


SECTION 2.05.  Unlimited Liability Companies.  Notwithstanding the grant of security
interest made by the Grantors in favour of the Administrative Agent, its
successor and assigns, for the rateable benefit of the Secured Parties, of all
of its Pledged Stock, any Grantor that controls any interest (for the purposes
of this Section 2.05, “ULC Interests”) in any unlimited liability
company (for the purposes of this Section 2.05, a “ULC”) pledged
hereunder shall remain registered as the sole registered and beneficial owner
of such ULC Interests and will remain as registered and beneficial owner until
such time as such ULC Interests are effectively transferred into the name of
the Administrative Agent or any other person on the books and records of such
ULC.  Nothing in this Agreement is
intended to or shall constitute the Administrative Agent or any person as a
shareholder or member of any ULC until such time as notice is given to such ULC
and further steps are taken thereunder so as to register the Administrative
Agent or any other person as the holder of the ULC Interests of such ULC.  To the extent any provision hereof would have
the effect of constituting the Administrative Agent or any other person as a
shareholder or member of a ULC prior to such time, such provision shall be
severed therefrom and ineffective with respect to the ULC Interests of such ULC
without otherwise invalidating or rendering unenforceable this Agreement or
invalidating or rendering unenforceable such provision insofar as it relates to
Pledged Stock which are not ULC Interests. 
Except upon the exercise of rights to sell or otherwise dispose of ULC
Interests following the occurrence and during the continuance of an Event of
Default hereunder, no Grantor shall cause or permit, or enable any ULC in which
it holds ULC Interests to cause or permit, the Administrative Agent to: (a) be
registered as shareholders or members of such ULC; (b) have any notation
entered in its favour in the share register of such ULC; (c) be held out
as a shareholder or member of such ULC; (d) receive, directly or
indirectly, any dividends, property or other distributions from such ULC by
reason of the Administrative Agent holding a security interest in such ULC; or (e) act
as a shareholder or member of such ULC, or exercise any rights of a shareholder
or member of such ULC including the right to attend a meeting of, or to vote
the shares of, such ULC.


 


SECTION 2.06.  Registration in Nominee Name; Denominations.  The Administrative Agent, on behalf of the
Secured Parties, shall have the right (in its sole and absolute discretion) to
hold the Pledged Securities in its own name as pledgee, the 


 


9

















 


name of its
nominee (as pledgee or as sub-agent) or the name of the applicable Grantor,
endorsed or assigned in blank or in favour of the Administrative Agent.  Each Grantor will promptly give to the
Administrative Agent copies of any material notices or other material
communications received by it with respect to Pledged Securities registered in
the name of such Grantor.  Upon the
occurrence and during the continuation of an Event of Default, the
Administrative Agent shall at all times have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.


 


SECTION 2.07.  Voting Rights; Dividends and Interest.  (a)  Unless and until an Event of
Default shall have occurred and be continuing and the Administrative Agent
shall have notified the Grantors that their rights under this Section 2.07
are being suspended:


 


(i)  Each Grantor shall be entitled to exercise
any and all voting and/or other consensual rights and powers inuring to an
owner of Pledged Securities or any part thereof for any purpose not
inconsistent with the terms of this Agreement, the Credit Agreement and the
other Loan Documents, provided that
such rights and powers shall not be exercised in any manner that could
materially and adversely affect the rights enuring to a holder of any Pledged
Securities or the rights and remedies of any of the Administrative Agent or the
other Secured Parties under this Agreement or the Credit Agreement or any other
Loan Document or the ability of the Secured Parties to exercise the same.


 


(ii) 
The Administrative Agent shall execute and deliver to each Grantor, or cause to
be executed and delivered to such Grantor, all such proxies, powers of attorney
and other instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i) above
(including for the purpose of reinstating any such rights and powers after the
cure or waiver of any Event of Default).


 


(iii) 
Each Grantor shall be entitled to receive and retain any and all dividends,
interest, principal and other distributions paid on or distributed in respect
of the Pledged Securities to the extent and only to the extent that such
dividends, interest, principal and other distributions are permitted by, and
otherwise paid or distributed in accordance with, the terms and conditions of
the Credit Agreement, the other Loan Documents and applicable laws, provided that any noncash dividends,
interest, principal or other distributions that would constitute Pledged Stock
or Pledged Debt Securities, whether resulting from a subdivision, combination
or reclassification of the outstanding Equity Interests of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, or as a result of any merger, consolidation,
amalgamation, acquisition or other exchange of assets to which such issuer may
be a party or otherwise, shall be and become part of the Pledged Collateral,
and, if received by any Grantor, shall not be commingled by 


 


10

















 


such Grantor
with any of its other funds or property but shall be held separate and apart
therefrom, shall be held in trust for the benefit of the Administrative Agent
and shall be forthwith delivered to the Administrative Agent in the same form
as so received (with any necessary endorsement).


 


(b)           Upon
the occurrence and during the continuance of an Event of Default, after the
Administrative Agent shall have notified the Grantors of the suspension of
their rights under paragraph (a)(iii) of this Section 2.07, then all
rights of any Grantor to dividends, interest, principal or other distributions
that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of
this Section 2.07 shall cease, and all such rights shall thereupon become
vested in the Administrative Agent, which shall have the sole and exclusive
right and authority to receive and retain such dividends, interest, principal
or other distributions.  All dividends,
interest, principal or other distributions received by any Grantor contrary to
the provisions of this Section 2.07 shall be held in trust for the benefit
of the Administrative Agent, shall be segregated from other property or funds
of such Grantor and shall be forthwith delivered to the Administrative Agent
upon demand in the same form as so received (with any necessary
endorsement).  Any and all money and
other property paid over to or received by the Administrative Agent pursuant to
the provisions of this paragraph (b) shall be retained by the
Administrative Agent in an account to be established by the Administrative
Agent upon receipt of such money or other property and shall be applied in
accordance with the provisions of Section 4.02.  After all Events of Default have been cured
or waived and the Parent Borrower has delivered to the Administrative Agent a
certificate to that effect, the Administrative Agent shall promptly repay to
each Grantor (without interest) all dividends, interest, principal or other
distributions that such Grantor would otherwise be permitted to retain pursuant
to the terms of paragraph (a)(iii) of this Section 2.07 and that
remain in such account.


 


(c)           Upon
the occurrence and during the continuance of an Event of Default, but after the
Administrative Agent shall have notified the Grantors of the suspension of
their rights under paragraph (a)(i) of this Section 2.07, all rights
of any Grantor to exercise the voting and consensual rights and powers it is
entitled to exercise pursuant to paragraph (a)(i) of this Section 2.07
and the obligations of the Administrative Agent under paragraph (a)(ii) of
this Section 2.07 shall cease, and all such rights shall thereupon become
vested in the Administrative Agent, which shall have the sole and exclusive
right and authority to exercise such voting and consensual rights and powers, provided that, unless otherwise directed
by the Required Lenders, the Administrative Agent shall have the right from
time to time following and during the continuance of an Event of Default to
permit the Grantors to exercise such rights.


 


(d)           Any
notice given by the Administrative Agent to the Grantors suspending their
rights under paragraph (a) of this Section 2.07 (i) may be
given by telephone if promptly confirmed in writing, (ii) may be given to
one or more of the Grantors at the same or different times and (iii) may
suspend the rights of the Grantors 


 


11

















 


under paragraph (a)(i) or paragraph
(a)(iii) in part without suspending all such rights (as specified by the
Administrative Agent in its sole and absolute discretion) and without waiving
or otherwise affecting the Administrative Agent’s rights to give additional
notices from time to time suspending other rights so long as an Event of Default
has occurred and is continuing.


 


ARTICLE III


 


Security Interests in
Personal Property


 


SECTION 3.01.  Security
Interest.   (a)  As security for the payment or
performance, as the case may be, in full of its Canadian Secured Obligations,
each Grantor hereby assigns, pledges and hypothecates to the Administrative
Agent, its successors and permitted assigns, for the benefit of the Secured
Parties, and hereby grants and hypothecates to the Administrative Agent, its
successors and assigns, for the benefit of the Secured Parties, a security
interest (the “Security Interest”) in, all right, title or interest in
or to any and all of the following assets and properties now owned or at any
time hereafter acquired by such Grantor or in which such Grantor now has or at
any time in the future may acquire any right, title or interest (collectively,
the “Personal Property Collateral”):


 


i)                                         all Accounts;


 


ii)                                      all
Chattel Paper;


 


iii)                                   all
cash and Deposit Accounts;


 


iv)                                  all
Documents of Title;


 


v)                                     all
Equipment;


 


vi)                                  all
Intangibles;


 


vii)                               all
Instruments;


 


viii)                            all
Inventory;


 


ix)                                    all
Securities;


 


x)                                       all books and records pertaining to the Personal Property
Collateral; and


 


xi)                                    to
the extent not otherwise included, all Proceeds and products of any and all of
the foregoing and all collateral security and guarantees given by any Person
with respect to any of the foregoing.


 


(b)           Each
Grantor hereby irrevocably authorizes the Administrative Agent at 


 


12

















 


any time and from time
to time to file in any relevant jurisdiction any initial financing statements
(including fixture filings) or financing change statements with respect to the
Personal Property Collateral or any part thereof and amendments thereto that (i) indicate
the Collateral as all assets of such Grantor or words of similar effect as
being of an equal or lesser scope or with greater detail and (ii) contain
the information required by the PPSA for the filing of any financing statement,
financing change statement or amendment, including (A) whether such
Grantor is an organization, the type of organization and any organizational
identification number issued to such Grantor and (B) in the case of a
financing statement filed as a fixture filing or covering Personal Property Collateral
constituting minerals or the like to be extracted or timber to be cut, a
sufficient description of the real property to which such Personal Property
Collateral relates.  Each Grantor agrees
to provide such information to the Administrative Agent promptly upon request.


 


Each Grantor also ratifies its
authorization for the Administrative Agent to file in any relevant jurisdiction
any initial financing statements, financing change statements or amendments
thereto if filed prior to the date hereof.


 


The Administrative Agent is further
authorized to file with the Canadian Intellectual Property Office (or any
successor office or any similar office in any other country) such documents as
may be necessary or advisable for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest, including a notice
of grant of security interest, granted by each Grantor, without the signature
of any Grantor, and naming any Grantor or the Grantors as debtors and the
Administrative Agent as secured party.


 


(c)           The Security Interest is granted as
security only and shall not subject the Administrative Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Personal Property Collateral.


 


(d)           Notwithstanding anything herein to
the contrary, (i) in no event shall the Security Interest granted
hereunder attach to (x) any license, contract or agreement to which a
Grantor is a party or any of its rights or interests thereunder if and for so
long as the grant of such Security Interest shall constitute or result in (A) the
unenforceability of any right of the Grantor therein, (B) a breach or
termination pursuant to the terms of, or a default under, any such license,
contract or agreement (other than to the extent any such term would be rendered
ineffective pursuant to the PPSA or any other applicable law or principles of
equity) or (C) the violation of any law applicable to such Grantor or (y) any
property or asset of any Grantor securing Indebtedness that prohibits the
granting of any other Lien on such property or asset, in each case as permitted
under the Credit Agreement; provided, however, that, in the case of clauses (x) and (y), such
Security Interest shall attach immediately at such time as the condition
causing such unenforceability or prohibiting the granting of any other Lien, as
the case may be, shall be remedied and, in the case of clause (x), to the
extent severable, shall attach immediately to any portion of such license,
contract or agreement that does not result in any of the consequences specified
in clause (A), (B) or (C) above, including, without 


 


13

















 


limitation,
any proceeds of such contract or agreement, and (ii) the term “Personal
Property Collateral” shall not include any asset of any Grantor to which the
Security Interest has not attached pursuant to this clause (d).


 


(e)           The Personal Property Collateral
shall not include the last day of the term of any lease or agreement therefor
but upon the enforcement of the Security Interest granted hereby in the
Personal Property Collateral, the Grantors or any of them shall stand possessed
of such last day in trust to assign the same to any person acquiring such term.


 


(f)            The term “Goods”
when used in this Agreement shall not include “consumer goods” of any Grantor
as that term is defined in the PPSA.


 


(g)           Notwithstanding Section 3.01(a),
any Grantor’s grant of security in Trade-marks (as defined in the Trade-marks Act (Canada)) under this
Agreement shall be limited to a grant by such Grantor of a security interest in
all of such Grantor’s right, title and interest in such Trade-marks.


 


(h)           Each Grantor and the
Administrative Agent hereby acknowledge that (a) value has been given in
respect of the security interests granted herein; (b) such Grantor has
rights in the Collateral in which it has granted a security interest; and (c) this
Agreement constitutes a security agreement as that term is defined in the PPSA.


 


(i)            If the Collateral
is realized upon and the security interest in the Collateral is not sufficient
to satisfy all of the Canadian Secured Obligations, each Grantor acknowledges
and agrees that, subject to the provisions of the PPSA, such Grantor shall
continue to be liable for any Canadian Secured Obligations remaining
outstanding and the Administrative Agent shall be entitled to pursue full
payment thereof.


 


SECTION 3.02. Representations
and Warranties.  The Grantors jointly and severally represent and warrant to the
Administrative Agent and the Secured Parties that:


 


(a)           Each
Grantor has good and valid rights in or title to the Personal Property
Collateral with respect to which it has purported to grant a Security Interest
hereunder and has full power and authority to grant to the Administrative
Agent, for the benefit of the Secured Parties, the Security Interest in such
Personal Property Collateral pursuant hereto and to execute, deliver and
perform its obligations in accordance with the terms of this Agreement, without
the consent or approval of any other Person other than any consent or approval
that has been obtained.


 


(b)           The
Canadian Perfection Certificate has been duly prepared, completed and executed
and the information set forth therein, including the exact legal name of each
Grantor, is correct and complete as of the Effective Date.  The financing statements (including fixture
filings, as applicable), financing change statements or other appropriate
filings, recordings or registrations prepared by the Administrative Agent based
upon the 


 


14

















 


information provided to
the Administrative Agent in the Canadian Perfection Certificate for filing in
each governmental office, federal, provincial or municipal, or other office
specified in Schedule 2 to the Canadian Perfection Certificate (or
specified by notice from the Parent Borrower to the Administrative Agent after
the Effective Date in the case of filings, recordings or registrations required
by Section 5.12 of the Credit Agreement or Section 3.03 hereof), are
all the filings, recordings and registrations (other than filings required to
be made in the Canadian Intellectual Property Office in order to perfect the
Security Interest in Personal Property Collateral consisting of Patents,
Trade-marks, Copyrights and Industrial Designs) that are necessary to publish
notice of and protect the validity of and to establish a legal, valid and
perfected security interest in favour of the Administrative Agent (for the
benefit of the Secured Parties) in respect of all Personal Property Collateral
in which the Security Interest may be perfected by filing, recording or
registration in Canada (or any political subdivision thereof) and its provinces
and territories and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the
filing of continuation statements or financing change statements for
renewals.  Each Grantor shall ensure that
a fully executed agreement in a form reasonably satisfactory to the
Administrative Agent (a “Short Form Security Agreement”) that
contains a description of all Personal Property Collateral consisting of the
applicable type of Intellectual Property shall have been received by the
Administrative Agent (i) within three months after the execution of this
Agreement with respect to Patents, Trade-marks, Copyrights and Industrial
Designs for recording by the Canadian Intellectual Property Office to protect
the validity of and to establish a legal, valid and perfected security interest
in favour of the Administrative Agent (for the benefit of the Secured Parties)
in respect of all Personal Property Collateral consisting of Patents,
Trade-marks, Copyrights and Industrial Designs in which a security interest may
be perfected by filing, recording or registration in Canada (or any political
subdivision thereof) and its provinces or territories and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary (other than such actions as are necessary to perfect the Security
Interest with respect to any Personal Property Collateral consisting of
Patents, Trade-marks, Copyrights and Industrial Designs (or registration or
application for registration thereof) acquired or developed after the date
hereof).


 


(c)           The
Security Interest constitutes (i) a legal and valid security interest in
all the Personal Property Collateral securing the payment and performance of
the Canadian Secured Obligations, (ii) subject to the filings described in
Section 3.02(b), a perfected security interest in all Personal Property
Collateral in which a security interest may be perfected by filing, recording
or registering a financing statement, financing change statement or analogous
document in Canada (or any political subdivision thereof) and its provinces or
territories pursuant to the PPSA and (iii) a security interest that shall
be perfected in all Personal Property Collateral in which a security interest
may be perfected upon the receipt of an executed Short Form Security
Agreement from the applicable Grantor and the recording of such Short Form Security
Agreement by the Administrative Agent with the Canadian Intellectual Property
Office within the applicable three month period (commencing as of the date
hereof).  The Security Interest is and
shall be prior to any other Lien on any of the Personal Property Collateral,
other than Permitted 


 


15

















 


Encumbrances that have
priority as a matter of law and Liens expressly permitted to be prior to the
Security Interest pursuant to Section 6.02 of the Credit Agreement.


 


(d)           The
Personal Property Collateral is owned by the Grantors free and clear of any
Lien, except for Liens expressly permitted pursuant to Section 6.02 of the
Credit Agreement.  None of the Grantors
has filed or consented to the filing of (i) any financing statement,
financing change statement or analogous document under the PPSA or any other
applicable laws covering any Personal Property Collateral, (ii) any
assignment in which any Grantor assigns any Collateral or any security
agreement or similar instrument covering any Personal Property Collateral with
the Canadian Intellectual Property Office or (iii) any assignment in which
any Grantor assigns any Personal Property Collateral or any security agreement
or similar instrument covering any Personal Property Collateral with any
foreign governmental, federal, provincial or municipal, or other office, which
financing statement, financing change statement or analogous document,
assignment, security agreement or similar instrument is still in effect,
except, in each case, for Liens expressly permitted pursuant to Section 6.02
of the Credit Agreement.


 


(e)           As of the
date of any such delivery, the names of the obligors, amounts owing, due dates
and other information with respect to the Accounts and Chattel Paper are and
will be correctly stated in all material respects in all invoices and the
Collateral Reports most recently delivered to the Administrative Agent with
respect thereto furnished to the Administrative Agent by such Grantor from time
to time.  As of the time when each
Account or each item of Chattel Paper arises, the Grantor shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case
may be, are genuine.


 


(f)            With
respect to any Inventory of any Grantor scheduled or listed on the most recent
Collateral Report, (i) such Inventory (other than Inventory in transit,
Inventory that is being processed or used as a sample offsite and Inventory
that is the subject of consignment) is located at one of the Grantors’
locations set forth in Section 2 of the Canadian Perfection Certificate, (ii) no
material amount of Inventory (other than Inventory in transit, Inventory that
is being processed or used as a sample offsite and Inventory that is the
subject of consignment) is now, or shall at any time or times hereafter be, stored
at any other location except as permitted by Section 3.04(g), (iii) each
Grantor has good, indefeasible and merchantable title to its Inventory and such
Inventory is not subject to any Lien or security interest or document
whatsoever except for the Lien granted to the Administrative Agent, for the
benefit of the Administrative Agent and Lenders, and except for Liens permitted
under Section 6.02 of the Credit Agreement, (iv) no material portion
of  such Inventory is subject to
any licensing, patent, royalty, Trade-mark, trade name or copyright agreements
with any third parties which would require any consent of any third party upon
sale or disposition of that Inventory or the payment of any monies to any third
party upon such sale or other disposition, and (v) the completion of
manufacture, sale or other disposition of such Inventory by the Administrative
Agent following an Event of Default shall not require the consent of any Person
and shall not constitute a breach or default under any contract or agreement to
which the applicable Grantor is a party or to which such Inventory is subject.


 


16
















 


SECTION 3.03.  Covenants.  (a) Each Grantor agrees
promptly to notify the Administrative Agent in writing of any change in (i) within
30 days, its legal name, (ii) within 30 days, the location or address of
its chief executive office, its principal place of business, any office in
which it maintains books or records relating to Personal Property Collateral
owned by it or any office or facility at which Personal Property Collateral
owned by it is located (including the establishment of any such new office or
facility), (iii) its identity or type of organization or corporate
structure, (iv) its Federal Taxpayer Identification Number or
organizational identification number or (v) its jurisdiction of
organization, incorporation or amalgamation. 
Each Grantor agrees to promptly provide the Administrative Agent with
certified organizational documents reflecting any of the changes described in
the first sentence of this paragraph. 
Each Grantor agrees not to effect or permit any change referred to in
the preceding sentence unless all filings have been made under the PPSA or
otherwise that are required in order for the Administrative Agent to continue
at all times following such change to have a valid, legal and perfected first
priority security interest in all the Personal Property Collateral.


 


(b)           Each
Grantor agrees to maintain, at its own cost and expense, such complete and
accurate records with respect to the Personal Property Collateral owned by it
in accordance with such prudent and standard practices used in industries that
are the same as or similar to those in which such Grantor is engaged, but in
any event to include accounting records that are complete in all material
respects and indicate all payments and proceeds received with respect to any
part of the Personal Property Collateral, and, at such time or times as the
Administrative Agent may reasonably request, promptly to prepare and deliver to
the Administrative Agent a duly certified schedule or schedules in form and
detail satisfactory to the Administrative Agent showing the identity, amount
and location of any and all Personal Property Collateral.


 


(c)           At the
time of delivery of financial statements pursuant to Section 5.01(a) of
the Credit Agreement, the Canadian Subsidiary Borrower shall deliver to the
Administrative Agent a certificate executed by a Financial Officer (i) setting
forth the information required by the Canadian Perfection Certificate or
confirming that there has been no change in such information since the date of
the Canadian Perfection Certificate delivered on the Effective Date or the date
of the certificate most recently delivered pursuant to this Section 3.03(c),
as applicable, and (ii) certifying that all PPSA financing statements and
financing change statements (including fixture filings), or other appropriate
filings, recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental office, federal, provincial or municipal, or other
appropriate office in each jurisdiction identified pursuant to clause (a) of
this Section 3.03 to the extent necessary to protect or perfect the
Security Interest for a period of not less than 18 months after the date
of such certificate (except as noted therein with respect to any continuation
statements to be filed within such period). 
Each certificate delivered pursuant to this Section 3.03(c) shall
identify in the format of Schedule III all Intellectual Property of any
Grantor in existence on the date thereof and not then listed on such Schedules
or previously so identified to the Administrative Agent.


 


17

















 


(d)           Each
Grantor shall, at its own expense, take any and all commercially reasonable
actions necessary to defend title to the Personal Property Collateral against
all Persons and to defend the Security Interest of the Administrative Agent in
the Personal Property Collateral and the priority thereof, in each case,
against any Lien not expressly permitted pursuant to Section 6.02 of the
Credit Agreement.


 


(e)           Subject
to any specific limitation contained herein, each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the
Administrative Agent may from time to time reasonably request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements or financing
change statements (including fixture filings) or other documents in connection herewith
or therewith.  If any amount payable
under or in connection with any of the Personal Property Collateral shall be or
become evidenced by any promissory note or other instrument, subject to Section 3.04
such note or instrument shall be immediately pledged and delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent.


 


Without limiting the generality of the
foregoing, each Grantor hereby authorizes the Administrative Agent, with prompt
notice thereof to the Grantors, to supplement this Agreement by supplementing
Schedule III or adding additional schedules hereto to specifically
identify any asset or item that may constitute Copyrights, Licenses, Patents,
Trade-marks or Industrial Designs, provided
that any Grantor shall have the right, exercisable within 10 days after it
has been notified by the Administrative Agent of the specific identification of
such Collateral, to advise the Administrative Agent in writing of any
inaccuracy of the representations and warranties made by such Grantor hereunder
with respect to such Collateral.  Each
Grantor agrees that it will use its best efforts to take such action as shall
be necessary in order that all representations and warranties hereunder shall
be true and correct with respect to such Collateral within 30 days after
the date it has been notified by the Administrative Agent of the specific
identification of such Collateral.


 


(f)            At its option, the Administrative
Agent may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Personal
Property Collateral and not permitted pursuant to Section 6.02 of the
Credit Agreement, and may pay for the maintenance and preservation of the
Personal Property Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly
and severally agrees to reimburse the Administrative Agent on demand for any
payment made or any expense incurred by the Administrative Agent pursuant to
the foregoing authorization, provided
that nothing in this paragraph shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Administrative Agent
or any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, Liens, security
interests or other encumbrances and 


 


18

















 


maintenance as
set forth herein or in the other Loan Documents.


 


(g)           If at any time any Grantor shall take
a security interest in any property of an Account Debtor or any other Person
with a fair market value in excess of $100,000 to secure payment and
performance of an Account, such Grantor shall promptly assign such security
interest to the Administrative Agent. 
Such assignment need not be filed of public record unless necessary to
continue the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other Person granting the security
interest.


 


(h)           Each Grantor shall remain liable to
observe and perform all the conditions and obligations to be observed and
performed by it under each contract, agreement or instrument relating to the
Personal Property Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Administrative Agent and the Secured Parties from and against any
and all liability for such performance.


 


(i)            None of the Grantors shall make or
permit to be made an assignment, pledge or hypothecation of the Personal
Property Collateral or shall grant any other Lien in respect of the Personal
Property Collateral, except as permitted by the Credit Agreement.  None of the Grantors shall make or permit to
be made any transfer of the Personal Property Collateral and each Grantor shall
remain at all times in possession of the Personal Property Collateral owned by
it, except that unless and until the Administrative Agent shall notify the
Grantors that an Event of Default shall have occurred and be continuing and
that during the continuance thereof the Grantors shall not sell, convey, lease,
assign, transfer or otherwise dispose of any Personal Property Collateral, the
Grantors may use, transfer and dispose of the Personal Property Collateral in
any lawful manner not inconsistent with the provisions of this Agreement, the
Credit Agreement or any other Loan Document.


 


(j)            Each Grantor irrevocably makes, constitutes
and appoints the Administrative Agent (and all officers, employees or agents
designated by the Administrative Agent) as such Grantor’s true and lawful agent
(and attorney-in-fact) for the purpose, upon the occurrence and during the
continuance of an Event of Default, of making, settling and adjusting claims in
respect of Personal Property Collateral under policies of insurance, endorsing
the name of such Grantor on any cheque, money order, note, order, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect
thereto.  In the event that any Grantor
at any time or times shall fail to obtain or maintain any of the policies of
insurance required under the Credit Agreement or to pay any premium in whole or
part relating thereto, the Administrative Agent may, without waiving or
releasing any obligation or liability of the Grantors hereunder or any Event of
Default, in its sole discretion, obtain and maintain such policies of insurance
and pay such premium and take any other actions with respect thereto as the
Administrative Agent deems advisable. 
All sums disbursed by the Administrative Agent in connection with this
paragraph, including reasonable legal fees, court costs, expenses and other
charges relating thereto, shall be payable, upon demand, by the Grantors to the
Administrative 


 


19

















 


Agent and
shall be additional Canadian Secured Obligations secured hereby.


 


(k)           No
Grantor will make or agree to make any discount, credit, rebate or other
reduction in the original amount owing on a Receivable or accept in
satisfaction of a Receivable less than the original amount thereof, except
that, prior to the occurrence of an Event of Default, any Grantor may reduce
the amount of Accounts arising from the sale of Inventory in the ordinary
course of business.  Except as otherwise
provided in this Agreement, each Grantor will collect and enforce, at such
Grantor’s sole expense, all amounts due or hereafter due to such Grantor under
the Receivables to the extent such collection or enforcement is commercially
warranted.  Each Grantor will deliver to
the Administrative Agent immediately upon its request after the occurrence and
during the continuation of an Event of Default duplicate invoices with respect
to each of its Account bearing such language of assignment as the
Administrative Agent shall specify.  Each
Grantor shall send the Administrative Agent a copy of any credit memorandum in
excess of $100,000 as soon as issued, and the Parent Borrower shall promptly
report each credit memorandum and each of the facts required to be disclosed to
the Administrative Agent in accordance with this clause (k) on the
Borrowing Base Certificates submitted by it.


 


(l)            In the
event any Account Debtor returns Inventory to any Grantor when an Event of
Default has occurred and is continuing, such Grantor, upon the request of the
Administrative Agent, shall (i) hold the returned Inventory in trust for the
Administrative Agent, (ii) segregate all returned Inventory from all its
other property, (iii) dispose of the returned Inventory solely according
to the Administrative Agent’s written instructions and (iv) not issue any
credits or allowances with respect thereto without the Administrative Agent’s
prior written consent.


 


SECTION 3.04.  Other
Actions.  In order to
further ensure the attachment, perfection and priority of, and the ability of
the Administrative Agent to enforce, the Security Interest, each Grantor
agrees, in each case at such Grantor’s own expense, to take the following
actions with respect to the following Personal Property Collateral:


 


(a)           Instruments.  If any Grantor shall at any time hold or
acquire any Instrument (other than items deposited for collection) evidencing
an amount in excess of $100,000, such Grantor shall forthwith endorse, assign
and deliver the same to the Administrative Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as the Administrative
Agent may from time to time reasonably request.


 


(b)           Deposit Accounts.  Schedule IV
identifies each deposit account of each Grantor as of the Effective Date.  For each deposit account that any Grantor at
any time opens or maintains, the applicable Grantor shall provide to the
Administrative Agent a Deposit Account Control Agreement duly executed on
behalf of each financial institution holding a deposit account of such Grantor
as set forth in Section 3.06, (x) in the case of each deposit account
set forth on Schedule IV, on or prior to the date that is 30 days after the
Effective Date (or such later date as is acceptable to the Administrative Agent
in its sole discretion), and (y) in the case of each deposit account
opened after the Effective 


 


20

















 


Date, on the date such deposit account is opened, provided
that the Administrative Agent may, in its sole discretion, defer delivery of
any such Deposit Account Control Agreement required to be delivered hereunder,
establish a  Reserve with respect to any
deposit account for which the Administrative Agent has not received such
Deposit Account Control Agreement or require any Grantor to open and maintain a
new deposit account with a financial institution subject to a Deposit Account
Control Agreement.  The provisions of
this clause (b) will not apply to (i) any deposit account for which
any Grantor, the depositary bank and the Administrative Agent have entered into
a cash collateral agreement specially negotiated among such Grantor, the
depositary bank and the Administrative Agent for the specific purpose set forth
therein, (ii) any deposit account for which the Administrative Agent is
the depositary and (iii) any deposit account specifically and exclusively
used for payroll, payroll taxes or other employee wage or benefit payments to
or for the benefit of the applicable Grantor’s employees.


 


(c)           Securities.  Except to the
extent otherwise provided in Article II, if any Grantor shall at any time
hold or acquire any certificated securities with a value in excess of $100,000,
such Grantor shall forthwith endorse, assign and deliver the same to the
Administrative Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as the Administrative Agent may from time to time
specify.  If any securities now or
hereafter acquired by any Grantor are uncertificated and are issued to such
Grantor or its nominee directly by the issuer thereof, such Grantor shall immediately
notify the Administrative Agent thereof and, at the Administrative Agent’s
reasonable request and option, pursuant to an agreement in form and substance
reasonably satisfactory to the Administrative Agent, either (i) cause the
issuer to agree to comply with instructions from the Administrative Agent as to
such securities, without further consent of any Grantor or such nominee, or (ii) arrange
for the Administrative Agent to become the registered owner of the securities
or (iii) take appropriate steps under applicable foreign law to effectuate
perfection.  Other than securities or
investment property held by any Grantor or its nominee through a securities
intermediary or commodities intermediary as described in clause (d) of the
definition of “Permitted Encumbrances” in the Credit Agreement or in connection
with any hedging agreement permitted under the Credit Agreement, if any
securities with a value in excess of $100,000, whether certificated or
uncertificated, or other investment property now or hereafter acquired by any
Grantor are held by such Grantor or its nominee through a securities
intermediary or commodity intermediary, such Grantor shall immediately notify
the Administrative Agent thereof and, at the Administrative Agent’s request and
option, pursuant to an agreement in form and substance reasonably satisfactory
to the Administrative Agent, either (i) cause such securities intermediary
or (as the case may be) commodity intermediary to agree to comply with
entitlement orders or other instructions from the Administrative Agent to such
securities intermediary as to such security entitlements, or (as the case may
be) to apply any value distributed on account of any commodity contract as
directed by the Administrative Agent to such commodity intermediary, in each
case without further consent of any Grantor or such nominee, or (ii) in
the case of financial assets or other Securities held through a securities
intermediary, arrange for the Administrative Agent to become the entitlement
holder with respect to such investment property, with the Grantor being
permitted, only with the 


 


21

















 


consent of the Administrative Agent, to exercise rights to withdraw or
otherwise deal with such investment property. 
The Administrative Agent agrees with each of the Grantors that the
Administrative Agent shall not give any such entitlement orders or instructions
or directions to any such issuer, securities intermediary or commodity
intermediary, and shall not withhold its consent to the exercise of any withdrawal
or dealing rights by any Grantor, unless an Event of Default has occurred and
is continuing, or, after giving effect to any such investment and withdrawal
rights would occur.  The provisions of
this paragraph shall not apply to any financial assets credited to a securities
account for which the Administrative Agent is the securities intermediary.


 


(d)           Letter-of-Credit Rights. 
If any Grantor is at any time a beneficiary under a letter of credit
with a face amount in excess of $100,000 now or hereafter issued in favour of
such Grantor, such Grantor shall promptly notify the Administrative Agent
thereof and, at the request and option of the Administrative Agent, such
Grantor shall, pursuant to an agreement in form and substance reasonably
satisfactory to the Administrative Agent, either (i) arrange for the
issuer and any confirmer of such letter of credit to consent to an assignment
to the Administrative Agent of the proceeds of any drawing under the letter of
credit or (ii) arrange for the Administrative Agent to become the
transferee beneficiary of the letter of credit, with the Administrative Agent
agreeing, in each case, that the proceeds of any drawing under the letter of
credit are to be paid to the applicable Grantor unless an Event of Default has
occurred or is continuing.


 


(e)           Collateral Access Agreements.  Each Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement from the lessor of
each leased property, mortgagee of each owned property or bailee or consignee
with respect to each warehouse, processor and converter facility and any other
location where Collateral is stored or located, which agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent.


 


(f)            Government Claims.  Each Grantor shall promptly notify the
Administrative Agent of any Collateral which constitutes a claim in excess of
$100,000  against the Canadian
federal government or any provincial, territorial, municipal or local
government or any instrumentality or agency thereof, the assignment of which
claim is restricted by any federal, provincial, territorial or municipal law of
Canada or any part thereof.


 


SECTION 3.05.  Covenants
Regarding Patent, Trade-mark, Copyright and Industrial Design Collateral.  (a)  Each Grantor agrees that it (i) will
not do any act or omit to do any act (and will exercise commercially reasonable
efforts to prevent its licensees from doing any act or omitting to do any act),
whereby any Patent that is material to the conduct of such Grantor’s business
may become invalidated or dedicated to the public, and (ii) shall continue
to mark any products covered by a Patent with the relevant patent number as
necessary and sufficient to establish and preserve its maximum rights under
applicable patent laws.


 


22

















 


(b)           Each
Grantor (either itself or through its licensees or its sublicensees) will, for
each Trade-mark material to the conduct of such Grantor’s business, (i) maintain
such Trade-mark in full force free from any claim of abandonment or invalidity
for non-use, (ii) maintain the quality of products and services offered
under such Trade-mark, (iii) display such Trade-mark with notice of
Canadian federal or foreign registration to the extent necessary and sufficient
to establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trade-mark in violation of
any third party rights.


 


(c)           Each
Grantor (either itself or through its licensees or sublicensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary
and sufficient to establish and preserve its maximum rights under applicable
copyright laws.


 


(d)           Each
Grantor (either itself or through its licensees or its sublicensees) will, for
each Industrial Design material to the conduct of such Grantor’s business, (i) maintain
such Industrial Design in full force free from any claim of abandonment or
invalidity for non use, (ii) maintain the quality of products and services
offered under such Industrial Design, (iii) not do any act or omit to do
any act (and will exercise commercially reasonable efforts to prevent its
licensees from doing any act or omitting to do any act), whereby any Industrial
Design may become invalidated or dedicated to the public, and (iv) continue
to mark any products covered by a Industrial Design with the relevant number as
necessary and sufficient to establish and preserve its maximum rights under
applicable laws.


 


(e)           Each
Grantor shall notify the Administrative Agent promptly if it knows or has
reason to know that any Patent, Trade-mark, Copyright or Industrial Design
material to the conduct of its business may become abandoned, lost or dedicated
to the public, or of any materially adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the Canadian Intellectual Property Office or any court or similar
office of any country) regarding such Grantor’s ownership of any such Patent,
Trade-mark, Copyright or Industrial Design, its right to register the same, or
its right to keep and maintain the same.


 


(f)            In no
event shall any Grantor, either itself or through any agent, employee, licensee
or designee, file an application for any Patent, Trade-mark, Copyright or
Industrial Design (or for the registration of any Trade-mark, Copyright or
Industrial Design) with the Canadian Intellectual Property Office or any office
or agency in any political subdivision of the United States, Canada or in any
other country or any political subdivision thereof, unless it promptly informs
the Administrative Agent, provides to the Administrative Agent a revised Schedule
III to supplement this Agreement and, upon request of the Administrative Agent,
executes and delivers any and all agreements, instruments, documents and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s security interest in such Patent, Trade-mark, Copyright
or Industrial Design, and each Grantor hereby appoints the Administrative Agent
as its attorney-in-fact to execute and file such writings for the foregoing
purposes, 


 


23

















 


all acts of such
attorney being hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.


 


(g)           Each
Grantor will take all necessary steps that are consistent with the practice in
any proceeding before the Canadian Intellectual Property Office or any office
or agency in any political subdivision of the United States or Canada or in any
other country or any political subdivision thereof, to maintain and pursue each
material application relating to the Patents, Trade-marks, Copyrights and/or
Industrial Designs (and to obtain the relevant grant or registration) and to
maintain each issued Patent and each registration of the Trade-marks,
Copyrights and Industrial Designs that is material to the conduct of any Grantor’s
business, including timely filings of applications for renewal, affidavits of
use, affidavits of incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition, interference
and cancellation proceedings against third parties.


 


(h)           In the
event that any Grantor becomes aware that any Personal Property Collateral
consisting of a Patent, Trade-mark, Copyright or Industrial Design material to
the conduct of any Grantor’s business has been or is about to be infringed,
misappropriated or diluted by a third party in any material respect, such
Grantor promptly shall notify the Administrative Agent and shall, if consistent
with good business judgment, promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as are appropriate
under the circumstances to protect such Personal Property Collateral.


 


(i)            Upon the
occurrence and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License, Trade-mark License or
Industrial Design License to effect the assignment of all such Grantor’s right,
title and interest thereunder to the Administrative Agent or its designee.


 


SECTION 3.06.  Deposit accounts.


 


(a)           Collection of Receivables.  (i) On or before the Effective Date,
each Grantor shall execute and deliver to the Administrative Agent a Deposit
Account Control Agreement for each deposit account it maintains into which all
cash, cheques, orders, notes, drafts or other similar payments relating to or
constituting payments made in respect of Receivables and Inventory will be deposited
(each, a “Receivables Account”), which Receivables Accounts are
identified as such on Schedule IV.  After
the Effective Date, each Grantor will comply with the terms of clause (b) of
this Section.


 


(ii)           Each Grantor shall
direct all of its Account Debtors to forward payments directly to Receivables
Accounts subject to the Deposit Account Control Agreements.  If any Grantor should refuse or neglect to
notify any Account Debtor to forward payments directly to a Receivables Account
subject to a Deposit Account Control Agreement after notice from the
Administrative Agent, the Administrative Agent shall be entitled to make 


 


24

















 


such
notification directly to Account Debtor. 
If notwithstanding the foregoing instructions, any Grantor receives any
proceeds of any Receivables or Inventory, such Grantor shall receive such
payments as the Administrative Agent’s trustee, and shall immediately deposit
all cash, cheques, orders, notes, drafts or other similar payments related to
or constituting payments made in respect of Receivables received by it to a
Receivables Account.


 


(b)          New Deposit Accounts.  Before any Grantor opens or replaces any
Receivables Account or any other deposit account, such Grantor shall (i) obtain
the Administrative Agent’s consent in writing to the opening of such deposit
account or Receivables Account and (ii) cause each bank or financial
institution in which it seeks to open (A) a deposit account to enter into
a Deposit Account Control Agreement with the Administrative Agent in order to
give the Administrative Agent control of such deposit account or (B) a
Receivables Account to enter into a Deposit Account Control Agreement with the
Administrative Agent in order to give the Administrative Agent control of the
Receivables Account.  In the case of
deposit accounts or Receivables Account maintained with Lenders, the terms of
such letter shall be subject to the provisions of the Credit Agreement
regarding set-offs.


 


(c)           Activation Periods.  Pursuant to each Deposit Account Control
Agreement, all amounts deposited in each Receivables Account shall be in the
control of the Administrative Agent.  The
applicable Grantor may operate and transact business through its Receivables
Account in its normal fashion, including making withdrawals, provided that (i) if, at any time, Availability falls
below $20,000,000, the Administrative Agent shall (A) send a notice (the “First
Activation Period Notice”) to each bank where any Grantor maintains a
Receivables Account (each, a “Receivables Account Bank”) that commences
a period (the “First Activation Period”) during which the applicable
Receivables Account Bank shall cease complying with any instructions originated
by the applicable Grantor and shall comply with instructions originated by the
Administrative Agent directing disposition of funds, without further consent of
the applicable Grantor and (B) apply (and allocate) the funds in each
Receivables Account pursuant to Section 2.10(b) of the Credit
Agreement, (ii) if, during the First Activation Period, Availability
exceeds $35,000,000 for a period of 60 consecutive days, the Administrative
Agent shall send a notice to each Receivables Account Bank (the “Termination
Notice”) that terminates the First Activation Period and commences a period
(the “Termination Period”) in which the applicable Grantor may transact
business through each Receivables Account in its normal fashion, including
making withdrawals from each Receivables Account, (iii) if, at any point
during the Termination Period, Availability falls below $20,000,000, the
Administrative Agent shall send a notice to each Receivables Account Bank (the “Second
Activation Period Notice”) that the applicable Receivables Account Bank
shall cease complying with any instructions originated by the applicable
Grantor and shall comply with instructions originated by the Administrative
Agent directing disposition of funds, without further consent of the applicable
Borrower.  Administrative Agent has sole
control over each Receivables Account and the Grantors cannot make any
withdrawals from any Receivables Account.


 


25
















 


ARTICLE
IV


 


Remedies


 


SECTION 4.01.  Remedies
Upon Default.  Upon the
occurrence and during the continuance of an Event of Default, each Grantor
agrees to deliver each item of Collateral to the Administrative Agent on
demand, and it is agreed that the Administrative Agent shall have the right to
take any of or all the following actions at the same or different times:  (a) with respect to any Personal
Property Collateral consisting of Intellectual Property, on demand, to cause
the Security Interest to become an assignment, transfer and conveyance of any
of or all such Personal Property Collateral by the applicable Grantors to the
Administrative Agent, or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or nonexclusive basis, any such Personal
Property Collateral throughout the world on such terms and conditions and in
such manner as the Administrative Agent shall determine (other than in
violation of any applicable laws or regulations or then-existing licensing arrangements
to the extent that waivers cannot be obtained), and (b) with or without
legal process and with or without prior notice or demand for performance, to
take possession of the Personal Property Collateral and without liability for
trespass to enter any premises where the Personal Property Collateral may be
located for the purpose of taking possession of or removing the Personal
Property Collateral and, generally, to exercise any and all rights afforded to
a secured party under the PPSA or other applicable law (including, without
limitation, giving notice of sole control or any other instruction under any
Deposit Account Control Agreement or any other control agreement with any
securities intermediary and take any action therein with respect to such Collateral).  Without limiting the generality of the
foregoing, each Grantor agrees that the Administrative Agent shall have the
right, subject to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral at a public or private
sale or at any broker’s board or on any securities exchange, for cash, upon
credit or for future delivery as the Administrative Agent shall deem
appropriate.  The Administrative Agent
shall be authorized at any such sale of securities (if it deems it advisable to
do so) to restrict the prospective bidders or purchasers to Persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon consummation of any such sale the Administrative Agent shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold.  Each such
purchaser at any such sale of Collateral shall hold the property sold
absolutely, free from any claim or right on the part of any Grantor, and each
Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which such Grantor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.


 


The Administrative Agent shall give the
applicable Grantors 10 days’ written notice (which each Grantor agrees is
reasonable notice within the meaning of the PPSA) of the Administrative Agent’s
intention to make any sale of Collateral. 
Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or 


 


26

















 


exchange at
which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Administrative Agent may fix and state in the notice (if any) of such
sale.  At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Administrative Agent may (in its sole and absolute
discretion) determine.  The
Administrative Agent shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. 
The Administrative Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.  In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Administrative Agent until the sale
price is paid by the purchaser or purchasers thereof, but the Administrative
Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice.  At any public (or, to the extent permitted by
law, private) sale made pursuant to this Agreement, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
the Collateral or any part thereof offered for sale and may make payment on
account thereof by using any claim then due and payable to such Secured Party
from any Grantor as a credit against the purchase price, and such Secured Party
may, upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to any Grantor therefor.  For purposes hereof, a written agreement to
purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Administrative Agent shall be free to carry out such sale pursuant
to such agreement and no Grantor shall be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact
that after the Administrative Agent shall have entered into such an agreement
all Events of Default shall have been remedied and the Canadian Secured
Obligations paid in full.  As an
alternative to exercising the power of sale herein conferred upon it, the
Administrative Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.  Any sale pursuant to the provisions of this Section 4.01
shall be deemed to conform to the commercially reasonable standards as provided
in the PPSA.


 


The Administrative Agent may appoint, remove or reappoint by instrument
in writing, any Person or Persons, whether an officer or officers or an
employee or employees of any Grantor or not, to be an interim receiver,
receiver or receivers (hereinafter called a “Receiver”, which term when
used herein shall include a receiver and manager) of such Collateral (including
any interest, income or profits therefrom). 
Any such Receiver shall, to the extent permitted by applicable law, be
deemed the agent of such Grantor and not of the Administrative Agent, and the
Administrative Agent shall not be in any way responsible for any misconduct,
negligence or non-feasance on the part 


 


27

















 


of any
such Receiver or its servants, agents or employees.  Subject to the provisions of the instrument
appointing it, any such Receiver shall (i) have such powers as have been
granted to the Administrative Agent under this Article IV and (ii) shall
be entitled to exercise such powers at any time that such powers would
otherwise be exercisable by the Administrative Agent under this Article IV,
which powers shall include, but are not limited to, the power to take
possession of the Collateral, to preserve the Collateral or its value, to carry
on or concur in carrying on all or any part of the business of such Grantor and
to sell, lease, licence or otherwise dispose of or concur in selling, leasing,
licensing or otherwise disposing of the Collateral.  To facilitate the foregoing powers, any such
Receiver may, to the exclusion of all others, including any Grantor, enter
upon, use and occupy all premises owned or occupied by such Grantor wherein the
Collateral may be situate, maintain the Collateral upon such premises, borrow
money on a secured or unsecured basis and use the Collateral directly in
carrying on such Grantor’s business or as security for loans or advances to
enable the Receiver to carry on such Grantor’s business or otherwise, as such
Receiver shall, in its reasonable discretion, determine.  Except as may be otherwise directed by the
Administrative Agent, all money received from time to time by such Receiver in
carrying out his/her/its appointment shall be received in trust for and be paid
over to the Administrative Agent and any surplus shall be applied in accordance
with applicable law.  Every such Receiver
may, in the discretion of the Administrative Agent, be vested with, in addition
to the rights set out herein, all or any of the rights and powers of the
Administrative Agent described in the Credit Agreement, the PPSA or the Bankruptcy and Insolvency Act (Canada).


 


SECTION 4.02.  Application
of Proceeds.  The
Administrative Agent shall apply the proceeds of any collection or sale of Collateral,
including any Collateral consisting of cash, as follows:


 


FIRST, to the payment of all costs and expenses incurred by
the Administrative Agent in connection with such collection or sale or
otherwise in connection with this Agreement, any other Loan Document or any of
the Canadian Secured Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all advances made by
the Administrative Agent hereunder or under any other Loan Document on behalf of
any Grantor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;


 


SECOND, to the payment in full of any other Canadian Secured
Obligations (the amounts so applied to be distributed among the Secured Parties
pro  rata in accordance with the amounts of such other Canadian
Secured Obligations owed to them on the date of any such distribution); and


 


THIRD, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.


 


The
Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement.  Upon any 


 


28

















 


sale of
Collateral by the Administrative Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Administrative Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Administrative Agent or such
officer or be answerable in any way for the misapplication thereof.


 


SECTION 4.03.  Grant
of License to Use Intellectual Property.  For the purpose of enabling the
Administrative Agent to exercise rights and remedies under this Agreement at
such time as the Administrative Agent shall be lawfully entitled to exercise
such rights and remedies, each Grantor hereby grants to the Administrative
Agent an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sublicense
any of the Personal Property Collateral consisting of Intellectual Property now
owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.  The use of such license by the Administrative
Agent may be exercised, at the option of the Administrative Agent, upon the
occurrence and during the continuation of an Event of Default, provided that
any license, sublicense or other transaction entered into by the Administrative
Agent in accordance herewith shall be binding upon the Grantors notwithstanding
any subsequent cure of an Event of Default.


 


SECTION 4.04.  Securities
Act.  In view of the
position of the Grantors in relation to the Pledged Collateral, or because of
other current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect in the United States or Canada
or any province or territory thereof (such Act and any such similar statute as
from time to time in effect being called the “Securities Laws”) with
respect to any disposition of the Pledged Collateral permitted hereunder.  Each Grantor understands that compliance with
the Securities Laws might very strictly limit the course of conduct of the
Administrative Agent if the Administrative Agent were to attempt to dispose of
all or any part of the Pledged Collateral, and might also limit the extent to
which or the manner in which any subsequent transferee of any Pledged
Collateral could dispose of the same. 
Similarly, there may be other legal restrictions or limitations
affecting the Administrative Agent in any attempt to dispose of all or part of
the Pledged Collateral under applicable “blue sky” or other state securities
laws or similar laws analogous in purpose or effect in the United States or
Canada or any province or territory thereof. 
Each Grantor recognizes that in light of such restrictions and
limitations the Administrative Agent may, with respect to any sale of the
Pledged Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Collateral for their own account, for
investment, and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that in
light of such restrictions and limitations, the Administrative Agent, in its
sole and absolute discretion (a) may proceed to make such a sale whether
or not a registration statement for the purpose of registering such Pledged
Collateral or part 


 


29

















 


thereof
shall have been filed under the Securities Laws and (b) may approach and
negotiate with a single potential purchaser to effect such sale.  Each Grantor acknowledges and agrees that any
such sale might result in prices and other terms less favourable to the seller
than if such sale were a public sale without such restrictions.  In the event of any such sale, the
Administrative Agent shall incur no responsibility or liability for selling all
or any part of the Pledged Collateral at a price that the Administrative Agent,
in its sole and absolute discretion, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a substantially higher
price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were
approached.  The provisions of this Section 4.04
will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at
which the Administrative Agent sells.


 


SECTION 4.05.  Registration.  Each Grantor agrees that, upon the occurrence
and during the continuance of an Event of Default, if for any reason the
Administrative Agent desires to sell any of the Pledged Collateral at a public
sale, it will, at any time and from time to time, upon the written request of
the Administrative Agent, use its best efforts to take or to cause the issuer
of such Pledged Collateral to take such action and prepare, distribute and/or
file such documents, as are required or advisable in the reasonable opinion of
counsel for the Administrative Agent to permit the public sale of such Pledged
Collateral.  Each Grantor further agrees
to indemnify, defend and hold harmless (in the manner and to the extent
provided by Section 9.03 of the Credit Agreement) the Administrative
Agent, each other Secured Party, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all loss,
liability, expenses, costs of counsel (including, without limitation,
reasonable fees and expenses of legal counsel to the Administrative Agent), and
claims (including the costs of investigation) that they may incur insofar as
such loss, liability, expense or claim directly or indirectly arises out of or
is based upon any alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto) or in any notification or
offering circular, or directly or indirectly arises out of or is based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements in any thereof not misleading, except insofar
as the same may have been caused by any untrue statement or omission based upon
information furnished in writing to such Grantor or the issuer of such Pledged
Collateral by the Administrative Agent or any other Secured Party expressly for
use therein.  Each Grantor further
agrees, upon such written request referred to above, to use its best efforts to
qualify, file or register, or cause the issuer of such Pledged Collateral to
qualify, file or register, any of the Pledged Collateral under the “blue sky”
or other analogous securities laws of such states or any of the provinces or
territories of Canada as may be requested by the Administrative Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations.  Each Grantor will bear
all costs and expenses of carrying out its obligations under this Section 4.05.  Each Grantor acknowledges that there is no adequate
remedy at law for failure by it to comply with the provisions of this Section 4.05
and that such failure would not be adequately compensable in damages, and
therefore agrees that its agreements contained in this Section 4.05 may be
specifically enforced.


 


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SECTION 4.06.  Other
Actions.  After the
occurrence of an Event of Default, each Grantor will, at its own expense, cause
the independent certified public or chartered accountants then engaged by such
Grantor to prepare and deliver to the Administrative Agent and each Lender, at
any time and from time to time, promptly upon the request of the Administrative
Agent, the following reports with respect to such Grantor:  (a) a reconciliation of all Accounts; (b) an
aging of such Accounts; (c) trial balances in respect of such Accounts;
and (d) a test verification of such Accounts.


 


ARTICLE V


 


Indemnity, Subrogation and
Subordination


 


SECTION 5.01.  Indemnity
and Subrogation.  The Borrowers
agree that in the event any assets of any Grantor shall be sold pursuant to
this Agreement or any other Collateral Document to satisfy in whole or in part
an obligation owed to any Secured Party, the Borrowers shall indemnify such
Grantor in an amount equal to the greater of the book value or the fair market
value of the assets so sold.


 


SECTION 5.02.  Contribution
and Subrogation.  Each Grantor
(a “Contributing Party”) agrees (subject to Section 5.03) that, in
the event a payment shall be made by any other Grantor hereunder in respect of
any Canadian Secured Obligation or assets of any other Grantor shall be sold
pursuant to any Collateral Document to satisfy any Canadian Secured Obligation
owed to any Secured Party and such other Grantor (the “Claiming Party”)
shall not have been fully indemnified by the Borrowers as provided in Section 5.01,
the Contributing Party shall indemnify the Claiming Party in an amount equal to
such Contributing Party’s Foreign Applicable Percentage (as such term is
defined in Section 10.10 of the Credit Agreement) of such payment or the
greater of the book value or the fair market value of such assets, as the case
may be.  Any Contributing Party making
any payment to a Claiming Party pursuant to this Section 5.02 shall be
subrogated to the rights of such Claiming Party under Section 5.01 to the
extent of such payment.  Nothing in this
provision shall affect any Grantor’s several liability for the entire amount of
the Canadian Secured Obligations (up to such Grantor’s Maximum Liability).


 


SECTION 5.03.  Subordination.  (a)  Notwithstanding any provision of
this Agreement to the contrary, all rights of the Grantors under
Sections 5.01 and 5.02 and all other rights of indemnity, contribution or
subrogation under applicable law or otherwise shall be fully subordinated to
the indefeasible payment in full in cash of the Canadian Secured
Obligations.  No failure on the part of
any Grantor to make the payments required by Sections 5.01 and 5.02 (or
any other payments required under applicable law or otherwise) shall in any
respect limit the obligations and liabilities of any Grantor with respect to
its obligations hereunder, and each Grantor shall remain liable for the full
amount of the obligations of such Grantor hereunder.


 


(b)           Each Grantor hereby agrees that all Indebtedness and other
monetary obligations owed by it to any other Grantor or any other Subsidiary
shall be fully 


 


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subordinated to the indefeasible payment in full in cash of the Canadian
Secured Obligations.


 


ARTICLE VI


 


Miscellaneous


 


SECTION 6.01.  Notices.  All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.01 of the Credit Agreement.  All communications and notices hereunder to
any Subsidiary Party shall be given to it in care of the Parent Borrower as
provided in Section 9.01 of the Credit Agreement.


 


SECTION 6.02.  Waivers;
Amendment.  (a)  No
failure or delay by the Administrative Agent, the Issuing Bank or any Lender in
exercising any right or power hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. 
The rights and remedies of the Administrative Agent, the Issuing Bank
and the Lenders hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise
have.  No waiver of any provision of this
Agreement or consent to any departure by any Grantor herefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of
this Section 6.02, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan, the acceptance and purchase of a B/A or the
issuance, amendment, renewal or extension of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.  No notice or demand
on any Grantor in any case shall entitle any Grantor to any other or further
notice or demand in similar or other circumstances.


 


(b)           Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Administrative Agent and the Grantor or Grantors
with respect to which such waiver, amendment or modification is to apply,
subject to any consent required in accordance with Section 9.02 of the
Credit Agreement.


 


SECTION 6.03.  Administrative
Agent’s Fees and Expenses; Indemnification.  (a)  The parties hereto agree that the
Administrative Agent shall be entitled to reimbursement of its expenses
incurred hereunder as provided in Section 9.03 of the Credit Agreement.


 


(b)           Without
limitation of its indemnification obligations under the other Loan Documents,
each Grantor jointly and severally agrees to indemnify the Administrative Agent
and the other Indemnitees against, and hold each Indemnitee harmless from, any 


 


32

















 


and all losses, claims,
damages, penalties, liabilities and related expenses, including the reasonable
fees, charges and disbursements of one counsel for the Indemnitees (in addition
to one local counsel in each relevant jurisdiction, including Canadian local
counsel) except in the case where there is a divergent or conflicting interest
between the Administrative Agent and the Lenders, in which case there shall be
one separate counsel for the Administrative Agent, on the one hand, and the
Lenders as a group, on the other hand, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of, the
execution, delivery or performance of this Agreement or any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing agreements or instruments contemplated hereby, or to the
Collateral (including any such claim, litigation, investigation or proceeding
brought by or on behalf of any Grantor or any Related Party of a Grantor),
whether based on contract, tort or any theory, regardless of whether or not any
Indemnitee is a party thereto, provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, penalties, liabilities or related expenses
are determined by a court of competent jurisdiction by final judgment to have
resulted from the gross negligence, bad faith or wilful misconduct of such
Indemnitee or any of its Related Parties.


 


(c)           Any such
amounts payable as provided hereunder shall be additional Canadian Secured
Obligations secured hereby and by the other Security Documents.  The provisions of this Section 6.03
shall remain operative and in full force and effect regardless of the
termination of this Agreement or any other Loan Document, the consummation of
the transactions contemplated hereby, the repayment of any of the Canadian
Secured Obligations, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent or any other Secured
Party.  All amounts due under this Section 6.03
shall be payable on written demand therefor.


 


SECTION 6.04.  Successors
and Assigns.  Whenever in
this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the permitted successors and assigns of such party; and
all covenants, promises and agreements by or on behalf of any Grantor or the
Administrative Agent that are contained in this Agreement shall bind and inure
to the benefit of their respective successors and assigns.


 


SECTION 6.05.  Survival
of Agreement.  All covenants, agreements, representations
and warranties made by the Grantors in the Loan Documents and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the execution and
delivery of the Loan Documents and the making of any Loans, the acceptance and
purchase of any B/As and issuance, amendment, renewal or extension of any
Letters of Credit, regardless of any investigation made by any Lender or on its
behalf and notwithstanding that the Administrative Agent, the Issuing Bank or
any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended under the Credit
Agreement, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan, the face amount of any B/A or any fee
or any other amount 


 


33

















 


payable
under any Loan Document is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not expired or terminated.


 


SECTION 6.06.  Counterparts;
Effectiveness; Several Agreement; Maximum Liability.  This Agreement may be executed
in counterparts, each of which shall constitute an original but all of which
when taken together shall constitute a single contract.  Delivery of an executed signature page to
this Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement. 
This Agreement shall become effective as to any Grantor when a
counterpart hereof executed on behalf of such Grantor shall have been delivered
to the Administrative Agent and a counterpart hereof shall have been executed
on behalf of the Administrative Agent, and thereafter shall be binding upon
such Grantor and the Administrative Agent and their respective permitted
successors and assigns, and shall inure to the benefit of such Grantor, the
Administrative Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign
or transfer its rights or obligations hereunder or any interest herein or in
the Collateral (and any such assignment or transfer shall be void) except as expressly
contemplated by this Agreement or the Credit Agreement.  This Agreement shall be construed as a
separate agreement with respect to each Grantor and may be amended, modified,
supplemented, waived or released with respect to any Grantor without the approval
of any other Grantor and without affecting the obligations of any other Grantor
hereunder.  In any action or proceeding
involving any United States or Canadian federal, state, provincial, territorial
or foreign corporate law, or any United States or Canadian federal, state,
provincial, territorial or foreign bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of
any Grantor under this Agreement would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such Grantor’s
liability under this Agreement, then, notwithstanding any other provision of
this Agreement to the contrary, the amount of such liability shall, without any
further action by the Grantors or the Administrative Agent, be automatically
limited and reduced to such Grantor’s Maximum Liability.  This Section 6.06 with respect to the
Maximum Liability of each Grantor is intended solely to preserve the rights of
the Administrative Agent and the Lenders to the maximum extent not subject to
avoidance under applicable law, and no Grantor nor any other person or entity
shall have any right or claim under this Section 6.06 with respect to such
Maximum Liability, except to the extent necessary so that the obligations of
any Grantor hereunder shall not be rendered voidable under applicable law.  Each Grantor agrees that the Canadian Secured
Obligations may at any time and from time to time exceed the Maximum Liability
of each Grantor without impairing this Agreement or affecting the rights and
remedies of the Administrative Agent and the Lenders hereunder, provided that
nothing in this sentence shall be construed to increase any Grantor’s
obligations hereunder beyond its Maximum Liability.


 


SECTION 6.07.  Severability.  Any provision of this
Agreement held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the 


 


34

















 


invalidity
of a particular provision in a particular jurisdiction shall not invalidate
such provision in any other jurisdiction. 
The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.


 


SECTION 6.08.  Compromises
and Collection of Collateral.  The Grantors and the Administrative Agent
recognize that set-offs, counterclaims, defenses and other claims may be
asserted by obligors with respect to certain of the Receivables, that certain
of the Receivables may be or become uncollectible in whole or in part and that
the expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect
to a Receivable.  In view of the
foregoing, each Grantor agrees that the Administrative Agent may, at any time
and from time to time, if an Event of Default has occurred and is continuing,
compromise with the obligor on any Receivable, accept in full payment of any
Receivable such amount as the Administrative Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Administrative
Agent shall be commercially reasonable so long as the Administrative Agent acts
in good faith based on information known to it at the time it takes any such
action.


 


SECTION 6.09.  Governing
Law; Jurisdiction; Consent to Service of Process.  (a)  This Agreement shall be
governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein.


 


(b)           Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the courts of the Province of
Ontario in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Province of Ontario.  Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. 
Nothing in this Agreement or any other Loan Document shall affect any
right that the Administrative Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
any other Loan Document against any Grantor or its properties in the courts of
any jurisdiction.


 


(c)           Each
Grantor hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court referred to
in paragraph (b) of this Section 6.09.  Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.


 


(d)           Each
party to this Agreement irrevocably consents to service of process in 


 


35

















 


the manner provided for
notices in Section 6.01.  Nothing in
this Agreement or any other Loan Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.


 


SECTION 6.10. 
WAIVER OF JURY TRIAL.  EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.


 


SECTION 6.11.  Headings.  Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.


 


SECTION 6.12.  Security
Interest Absolute.  All rights of the Administrative Agent
hereunder, the Security Interest, the grant of a security interest in the
Pledged Collateral and all obligations of each Grantor hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any agreement
with respect to any of the Canadian Secured Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Canadian Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan Document or
any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Canadian Secured Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Canadian Secured Obligations or
this Agreement.


 


SECTION 6.13.  Termination
or Release.  (a)  This Agreement, the Security
Interest and all other security interests granted hereby shall terminate when
all the Canadian Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend under the Credit Agreement, the
Total L/C Exposure has been reduced to zero and the Issuing Bank has no further
obligations to issue Letters of Credit under the Credit Agreement.


 


36
















 


(b)           A
Subsidiary Party shall automatically be released from its obligations hereunder
and the Security Interest in the Collateral of such Subsidiary Party shall be
automatically released upon the consummation of any transaction permitted by
the Credit Agreement as a result of which such Subsidiary Party ceases to be a
Subsidiary Loan Party, provided
that the Lenders shall have consented to such transaction (to the extent
required by the Credit Agreement) and the terms of such consent did not provide
otherwise.


 


(c)           Upon any
sale or other transfer by any Grantor of any Collateral that is permitted under
the Credit Agreement, or upon the effectiveness of any written consent to the
release of the security interest granted hereby in any Collateral pursuant to Section 9.02
of the Credit Agreement, the security interest in such Collateral shall be
automatically released.


 


(d)           In
connection with any termination or release pursuant to paragraph (a), (b) or
(c) above, the Administrative Agent shall execute and deliver to any
Grantor, at such Grantor’s expense, all documents that such Grantor shall
reasonably request to evidence such termination or release.  Any execution and delivery of documents
pursuant to this Section 6.13 shall be without recourse to or warranty by
the Administrative Agent.


 


SECTION 6.14.  Additional
Subsidiaries.  (a)  Pursuant to Section 5.12 of the Credit Agreement, each
Canadian Subsidiary Loan Party that was not in existence or not a Canadian
Subsidiary Loan Party on the Effective Date is required to enter into this
Agreement as a Subsidiary Party upon becoming such a Canadian Subsidiary Loan
Party.  Upon execution and delivery by
the Administrative Agent and a Canadian Subsidiary Loan Party of an instrument
in the form of Exhibit A hereto, such Canadian Subsidiary Loan Party shall
become a Subsidiary Party hereunder with the same force and effect as if
originally named as a Subsidiary Party herein. 
The execution and delivery of any such instrument shall not require the
consent of any other Grantor hereunder. 
The rights and obligations of each Grantor hereunder shall remain in
full force and effect notwithstanding the addition of any Canadian Subsidiary
Loan Party as a party to this Agreement.


 


(b)           Pursuant
to Section 5.12 of the Credit Agreement, each Domestic Subsidiary Loan
Party that at any time acquires any Equity Interests in a Foreign Subsidiary
that is organized under the laws of Canada of any territory or province thereof
is required to enter into this Agreement as a Subsidiary Party.  Upon execution and delivery by the
Administrative Agent and a Domestic Subsidiary Loan party of an instrument in
the form of Exhibit B hereto, such Domestic Subsidiary Loan Party shall
become a Subsidiary Party hereunder with the same force and effect as if
originally named as a Subsidiary Party herein. 
The execution and delivery of any such instrument shall not require the
consent of any other Grantor hereunder. 
The rights and obligations of each Grantor hereunder shall remain in
full force and effect notwithstanding the addition of any Domestic Subsidiary
Loan Party as a party to this Agreement.


 


SECTION 6.15.  Administrative
Agent Appointed Attorney-in-Fact.  Each Grantor 


 


37

















 


hereby
appoints the Administrative Agent the attorney-in-fact of such Grantor for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Administrative Agent may deem necessary
or advisable to accomplish the purposes hereof, which appointment is
irrevocable until the payment in full of the Canadian Secured Obligations and
coupled with an interest.  Without
limiting the generality of the foregoing, the Administrative Agent shall have
the right, upon the occurrence and during the continuance of an Event of
Default, with full power of substitution either in the Administrative Agent’s
name or in the name of such Grantor (a) to receive, endorse, assign and/or
deliver any and all notes, acceptances, cheques, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof, (b) to
demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral, (c) to sign the name of any
Grantor on any invoice or bill of lading relating to any of the Collateral, (d) to
send verifications of Receivables to any Account Debtor, (e) to commence
and prosecute any and all suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect or otherwise realize on all or
any of the Collateral or to enforce any rights in respect of any Collateral, (f) to
settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral, (g) to notify, or to
require any Grantor to notify, Account Debtors to make payment directly to the
Administrative Agent, and (h) to use, sell, assign, transfer, pledge, make
any agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the
Administrative Agent were the absolute owner of the Collateral for all
purposes, provided that nothing herein contained shall be construed as
requiring or obligating the Administrative Agent to make any commitment or to
make any inquiry as to the nature or sufficiency of any payment received by the
Administrative Agent, or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby.  The Administrative Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.


 


SECTION 6.16.  Intercreditor Agreement.  Notwithstanding anything herein to
the contrary, the Lien and Security Interest granted to the Administrative
Agent pursuant to this Agreement and the exercise of any right of remedy by the
Administrative Agent hereunder are subject to the provisions of the
Intercreditor Agreement.  In the event of
any conflict between the terms of the Intercreditor Agreement and this
Agreement, the terms of the Intercreditor Agreement shall govern.


 


SECTION 6.17.  Judgment Currency.  (a)  The obligations of any Grantor
hereunder and under the other Loan Documents to make payments in U.S. Dollars
or in Canadian Dollars, as the case may be (for the purposes of this Section 6.16,
the “Obligation Currency”), shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any
currency other than the


 


38

















 


Obligation
Currency, except to the extent that such tender or recovery results in the
effective receipt by the Administrative Agent or a Lender of the full amount of
the Obligation Currency expressed to be payable to the Administrative Agent or
a Lender under this Agreement or the other Loan Documents.  If, for the purpose of obtaining or enforcing
judgment against any Grantor or any other Loan Party in any court or in any
jurisdiction, it becomes necessary to convert into or from any currency other
than the Obligation Currency (for the purposes of this Section 6.16, such
other currency being hereinafter referred to as the “Judgment Currency”)
an amount due in the Obligation Currency, the conversion shall be made, at the
rate of exchange prevailing, in each case, as of the date immediately preceding
the day on which the judgment is given (for the purposes of this Section 6.16,
such Business Day being hereinafter referred to as the “Judgment Currency
Conversion Date”).


 


(b)           If there is a change
in the rate of exchange prevailing between the Judgment Currency Conversion
Date and the date of actual payment of the amount due, each Grantor covenants
and agrees to pay, or cause to be paid, such additional amounts, if any (but in
any event not a lesser amount), as may be necessary to ensure that the amount
paid in the Judgment Currency, when converted at the rate of exchange
prevailing on the date of payment, will produce the amount of the Obligation
Currency which could have been purchased with the amount of Judgment Currency
stipulated in the judgment or judicial award at the rate of exchange prevailing
on the Judgment Currency Conversion Date.


 


(c)           For purposes of
determining the prevailing rate of exchange, such amounts shall include any
premium and costs payable in connection with the purchase of the Obligation
Currency.


 


SECTION 6.18.  Attachment of Security Interest.  The security interest created hereby is
intended to attach, in respect of Collateral in which any Grantor has rights at
the time this Agreement is signed by such Grantor and delivered to the
Administrative Agent, at the time this Agreement is signed by such Grantor and
delivered to the Administrative Agent and, in respect of Collateral in which
any Grantor subsequently acquires rights, at the time such Grantor subsequently
acquires such rights.  The Grantors
acknowledge and confirm that value has been given by the Administrative Agent
and the Lenders to the Grantors.


 


SECTION 6.19.  Copy of Agreement; Verification Statement.  The Grantors hereby acknowledge receipt of a
signed copy of this Agreement and hereby waive the requirement to be provided
with a copy of any verification statement issued in respect of a financing
statement or financing change statement filed under the PPSA in connection with
this Agreement to perfect the security interest created herein.


 


SECTION 6.20  Amalgamation.  The Canadian Subsidiary Borrower acknowledges
and agrees that upon its amalgamation with Indalex Limited, it is the intention
of the parties hereto that the term the “Canadian Subsidiary Borrower” shall
apply to each of the amalgamating corporations and to the amalgamated
corporation, such that the Security Interest and Lien granted hereby:


 


39

















 


(a)           shall extend to all
of the Collateral owned by each of the amalgamating corporations and the amalgamated
corporation at the time of amalgamation and to any Collateral thereafter owned
or acquired by the amalgamated corporation; and


 


(b)           shall secure the
Secured Obligations of each of the amalgamating corporations and the
amalgamated corporation to any Secured Party at the time of amalgamation and
any Secured Obligation of the amalgamated corporation to any Secured Party
thereafter arising.  The Security
Interest shall attach to Collateral owned by the corporation amalgamating with
the Canadian Subsidiary Borrower, and by the amalgamated corporation, at the
time of the amalgamation, and shall attach to any Collateral thereafter owned
or acquired by the amalgamated corporation when such becomes owned or is
acquired.


 


[SIGNATURE
PAGES TO FOLLOW]


 


40

















 


IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.


 


	
   

  	
  INDALEX
  HOLDING CORP.

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ Michael Alger

  
	
   

  	
   

  	
  Name: Michael Alger

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  INDALEX
  LIMITED

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ Michael Alger

  
	
   

  	
   

  	
  Name: Michael Alger 

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  6461948
  CANADA INC.

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ Michael Alger

  
	
   

  	
   

  	
  Name: Michael Alger 

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  INDALEX
  HOLDINGS (B.C.) LTD.

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ Michael Alger

  
	
   

  	
   

  	
  Name: Michael Alger

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  NOVAR
  INC.

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ Michael Alger

  
	
   

  	
   

  	
  Name: Michael Alger 

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  6326765
  CANADA INC.

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ Michael Alger

  
	
   

  	
   

  	
  Name: Michael Alger 

  
	
   

  	
   

  	
  Title: CFO

  



 

















 


	
   

  	
  JPMORGAN
  CHASE BANK, N.A., 

  AS ADMINISTRATIVE AGENT

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  /s/ John C. Riordan

  
	
   

  	
   

  	
  Name: John C. Riordan 

  
	
   

  	
   

  	
  Title: Vice President