Document:

Exhibit 10.2

 

EXECUTION COPY

 

 

THIRD
AMENDED AND RESTATED

LOAN
AND SECURITY AGREEMENT

 

DATED
AS OF October 14, 2005

 

among

 

BEACON
ROOFING SUPPLY CANADA COMPANY

 

as
Borrower,

 

GE CANADA
FINANCE HOLDING COMPANY

 

as Agent
and as Lender, and

 

THE
FINANCIAL INSTITUTION(S) LISTED

ON THE
SIGNATURE PAGES HEREOF,

 

as Lenders

 

 

TABLE
OF CONTENTS

 

	
  SECTION 1. DEFINITIONS
  AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  
	
  1.1

  	
  CERTAIN DEFINED TERMS

  	
   

  
	
  1.2

  	
  ACKNOWLEDGEMENT OF EXISTING
  OBLIGATIONS AND RESTATEMENT THEREOF

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2. LOANS AND
  COLLATERAL

  	
   

  
	
   

  	
   

  
	
  2.1

  	
  LOANS

  	
   

  
	
  2.2

  	
  INTEREST

  	
   

  
	
  2.3

  	
  FEES

  	
   

  
	
  2.4

  	
  PAYMENTS AND PREPAYMENTS

  	
   

  
	
  2.5

  	
  APPLICATION OF PREPAYMENT
  PROCEEDS

  	
   

  
	
  2.6

  	
  TERM OF THIS AGREEMENT

  	
   

  
	
  2.7

  	
  STATEMENTS

  	
   

  
	
  2.8

  	
  GRANT OF SECURITY INTEREST

  	
   

  
	
  2.9

  	
  YIELD PROTECTION

  	
   

  
	
  2.10

  	
  TAXES

  	
   

  
	
  2.11

  	
  REQUIRED
  TERMINATION AND PREPAYMENT

  	
   

  
	
  2.12

  	
  OPTIONAL
  PREPAYMENT/REPLACEMENT OF LENDERS

  	
   

  
	
  2.13

  	
  COMPENSATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.
  CONDITIONS TO LOANS

  	
   

  
	
   

  	
   

  
	
  SECTION 4.
  REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  ORGANIZATION,
  POWERS, CAPITALIZATION

  	
   

  
	
  4.2

  	
  AUTHORIZATION
  OF BORROWING, NO CONFLICT

  	
   

  
	
  4.3

  	
  FINANCIAL CONDITION

  	
   

  
	
  4.4

  	
  INDEBTEDNESS
  AND LIABILITIES

  	
   

  
	
  4.5

  	
  ACCOUNT
  WARRANTIES AND COVENANTS

  	
   

  
	
  4.6

  	
  NAMES AND
  LOCATIONS

  	
   

  
	
  4.7

  	
  TITLE TO
  PROPERTIES; LIENS

  	
   

  
	
  4.8

  	
  LITIGATION;
  ADVERSE FACTS

  	
   

  
	
  4.9

  	
  PAYMENT OF
  TAXES

  	
   

  
	
  4.10

  	
  PERFORMANCE OF
  AGREEMENTS

  	
   

  
	
  4.11

  	
  EMPLOYEE
  PENSION AND BENEFIT PLANS

  	
   

  
	
  4.12

  	
  INTELLECTUAL
  PROPERTY

  	
   

  
	
  4.13

  	
  BROKER’S
  FEES

  	
   

  
	
  4.14

  	
  ENVIRONMENTAL
  MATTERS

  	
   

  
	
  4.15

  	
  SOLVENCY

  	
   

  
	
  4.16

  	
  DISCLOSURE

  	
   

  
	
  4.17

  	
  INSURANCE

  	
   

  
	
  4.18

  	
  COMPLIANCE
  WITH LAWS

  	
   

  
	
  4.19

  	
  BANK
  ACCOUNTS

  	
   

  
	
  4.20

  	
  EMPLOYEE
  MATTERS

  	
   

  
	
  4.21

  	
  GOVERNMENTAL
  REGULATION

  	
   

  
	
  4.22

  	
  ACCESS TO
  ACCOUNTANTS AND MANAGEMENT

  	
   

  
	
  4.23

  	
  INSPECTION;
  FIELD EXAMS

  	
   

  
	
  4.24

  	
  COLLATERAL
  RECORDS

  	
   

  
	
  4.25

  	
  COLLECTION
  OF ACCOUNTS AND PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.
  REPORTING AND OTHER AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  5.1

  	
  FINANCIAL
  STATEMENTS AND OTHER REPORTS

  	
   

  
	
  5.2

  	
  ENDORSEMENT

  	
   

  

 

i

 

	
  5.3

  	
  MAINTENANCE
  OF PROPERTIES

  	
   

  
	
  5.4

  	
  COMPLIANCE
  WITH LAWS

  	
   

  
	
  5.5

  	
  FURTHER
  ASSURANCES

  	
   

  
	
  5.6

  	
  MORTGAGES;
  CONSENTS AND WAIVERS, TITLE INSURANCE; SURVEYS AND CERTIFICATES OF LOCATION

  	
   

  
	
  5.7

  	
  USE OF
  PROCEEDS

  	
   

  
	
  5.8

  	
  BAILEES

  	
   

  
	
  5.9

  	
  THIRD PARTY
  INVENTORY

  	
   

  
	
  5.10

  	
  ENVIRONMENTAL
  MATTERS

  	
   

  
	
  5.11

  	
  CURRENCY
  RATE AGREEMENT

  	
   

  
	
   

  	
   

  
	
  SECTION 6.
  FINANCIAL COVENANTS

  	
   

  
	
   

  	
   

  
	
  SECTION 7.
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  INDEBTEDNESS
  AND LIABILITIES

  	
   

  
	
  7.2

  	
  CONTINGENT
  OBLIGATIONS

  	
   

  
	
  7.3

  	
  TRANSFERS,
  LIENS AND RELATED MATTERS

  	
   

  
	
  7.4

  	
  INVESTMENTS
  AND LOANS

  	
   

  
	
  7.5

  	
  RESTRICTED
  JUNIOR PAYMENTS

  	
   

  
	
  7.6

  	
  RESTRICTION
  ON FUNDAMENTAL CHANGES

  	
   

  
	
  7.7

  	
  CHANGES
  RELATING TO INDEBTEDNESS

  	
   

  
	
  7.8

  	
  TRANSACTIONS
  WITH AFFILIATES

  	
   

  
	
  7.9

  	
  CONDUCT OF
  BUSINESS

  	
   

  
	
  7.10

  	
  TAX
  CONSOLIDATIONS

  	
   

  
	
  7.11

  	
  SUBSIDIARIES

  	
   

  
	
  7.12

  	
  FISCAL
  YEAR; TAX DESIGNATION

  	
   

  
	
  7.13

  	
  PRESS
  RELEASE; PUBLIC OFFERING MATERIALS

  	
   

  
	
  7.14

  	
  BANK
  ACCOUNTS

  	
   

  
	
  7.15

  	
  HAZARDOUS MATERIALS

  	
   

  
	
  7.16

  	
  CIGNA IMPRESS
  ACCOUNT

  	
   

  
	
   

  	
   

  
	
  SECTION 8.
  DEFAULT, RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  
	
  8.1

  	
  EVENT OF
  DEFAULT

  	
   

  
	
  8.2

  	
  SUSPENSION
  OF COMMITMENTS

  	
   

  
	
  8.3

  	
  ACCELERATION

  	
   

  
	
  8.4

  	
  REMEDIES

  	
   

  
	
  8.5

  	
  APPOINTMENT
  OF RECEIVER

  	
   

  
	
  8.6

  	
  COSTS OF
  ENFORCEMENT

  	
   

  
	
  8.7

  	
  APPOINTMENT
  OF ATTORNEY-IN-FACT

  	
   

  
	
  8.8

  	
  LIMITATION
  ON DUTY OF AGENT WITH RESPECT TO COLLATERAL

  	
   

  
	
  8.9

  	
  APPLICATION
  OF PROCEEDS

  	
   

  
	
  8.10

  	
  LICENSE OF
  INTELLECTUAL PROPERTY

  	
   

  
	
  8.11

  	
  WAIVERS;
  NON-EXCLUSIVE REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9. AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  AGENT

  	
   

  
	
  9.2

  	
  NOTICE OF
  DEFAULT

  	
   

  
	
  9.3

  	
  ACTION BY
  AGENT

  	
   

  
	
  9.4

  	
  AMENDMENTS,
  WAIVERS AND CONSENTS

  	
   

  
	
  9.5

  	
  ASSIGNMENTS
  AND PARTICIPATIONS IN LOANS

  	
   

  
	
  9.6

  	
  SET OFF AND
  SHARING OF PAYMENTS

  	
   

  
	
  9.7

  	
  DISBURSEMENT
  OF FUNDS

  	
   

  
	
  9.8

  	
  SETTLEMENTS,
  PAYMENTS AND INFORMATION

  	
   

  
	
  9.9

  	
  DISCRETIONARY
  ADVANCES

  	
   

  
	
  9.10

  	
  BANKING
  SERVICES, INTEREST RATE AGREEMENTS; CURRENCY RATE AGREEMENTS

  	
   

  

 

ii

 

	
  SECTION 10.
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  10.1

  	
  EXPENSES
  AND LEGAL FEES

  	
   

  
	
  10.2

  	
  INDEMNITY

  	
   

  
	
  10.3

  	
  NOTICES

  	
   

  
	
  10.4

  	
  SURVIVAL OF
  REPRESENTATIONS AND WARRANTIES AND CERTAIN AGREEMENTS

  	
   

  
	
  10.5

  	
  INDULGENCE
  NOT WAIVER

  	
   

  
	
  10.6

  	
  MARSHALING;
  PAYMENTS SET ASIDE

  	
   

  
	
  10.7

  	
  ENTIRE
  AGREEMENT

  	
   

  
	
  10.8

  	
  SEVERABILITY

  	
   

  
	
  10.9

  	
  LENDERS’
  OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS’ RIGHTS

  	
   

  
	
  10.10

  	
  HEADINGS

  	
   

  
	
  10.11

  	
  APPLICABLE
  LAW

  	
   

  
	
  10.12

  	
  SUCCESSORS
  AND ASSIGNS

  	
   

  
	
  10.13

  	
  NO
  FIDUCIARY RELATIONSHIP; NO DUTY; LIMITATION OF LIABILITIES

  	
   

  
	
  10.14

  	
  CONSENT TO
  JURISDICTION

  	
   

  
	
  10.15

  	
  WAIVER OF
  JURY TRIAL

  	
   

  
	
  10.16

  	
  WAIVER OF
  NOTICES

  	
   

  
	
  10.17

  	
  JUDGMENT
  CURRENCY

  	
   

  
	
  10.18

  	
  CONSTRUCTION

  	
   

  
	
  10.19

  	
  COUNTERPARTS;
  EFFECTIVENESS

  	
   

  
	
  10.20

  	
  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  
	
  SECTION 11.
  DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  
	
  11.1

  	
  CERTAIN
  DEFINED TERMS

  	
   

  
	
  11.2

  	
  ACCOUNTING
  TERMS

  	
   

  
	
  11.3

  	
  OTHER
  DEFINITIONAL PROVISIONS

  	
   

  
	
   

  	
   

  
	
  SECTION 12.
  RESTATEMENT OF EXISTING LOAN AGREEMENT

  	
   

  

 

iii

 

INDEX OF DEFINED TERMS

 

	
  Defined Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  Accounting
  Changes

  	
   

  	
  §11.2

  
	
  Accounts

  	
   

  	
  §11.1

  
	
  Activation Notice

  	
   

  	
  §11.1

  
	
  Activation Period

  	
   

  	
  §11.1

  
	
  Additional Mortgaged Property

  	
   

  	
  §11.1

  
	
  Affected Lender

  	
   

  	
  §2.12

  
	
  Affiliate

  	
   

  	
  §11.1

  
	
  Agent

  	
   

  	
  §11.1

  
	
  Agent’s Account

  	
   

  	
  §11.1

  
	
  Agreed Currency

  	
   

  	
  §10.17

  
	
  Agreement

  	
   

  	
  §11.1

  
	
  Applicable Margins

  	
   

  	
  §11.1

  
	
  Applicable Revolver BA Rate Margin

  	
   

  	
  §11.1

  
	
  Applicable Revolver Index Margin

  	
   

  	
  §11.1

  
	
  Asset Disposition

  	
   

  	
  §11.1

  
	
  Assignment and Acceptance Agreement

  	
   

  	
  §11.1

  
	
  BA Loans

  	
   

  	
  §11.1

  
	
  BA Period

  	
   

  	
  §11.1

  
	
  BA Rate

  	
   

  	
  §11.1

  
	
  Bank Rate

  	
   

  	
  §11.1

  
	
  Banking Services

  	
   

  	
  §11.1

  
	
  Beacon Canada Holdings

  	
   

  	
  §11.1

  
	
  Best Distributing

  	
   

  	
  §11.1

  
	
  Blocked Accounts

  	
   

  	
  §4.25

  
	
  Borrower

  	
   

  	
  Recitals

  
	
  Borrower Collateral

  	
   

  	
  §2.8

  
	
  Borrowing Base Certificates

  	
   

  	
  §11.1

  
	
  Business Day

  	
   

  	
  §11.1

  
	
  Canadian Benefit Plans

  	
   

  	
  §11.1

  
	
  Canadian Borrowing Base

  	
   

  	
  §2.1(A)

  
	
  Canadian Borrowing Base Certificate

  	
   

  	
  §11.1

  
	
  Canadian Dollars and C$

  	
   

  	
  §11.1

  
	
  Canadian GAAP

  	
   

  	
  §11.1

  
	
  Canadian Pension Plans

  	
   

  	
  §11.1

  
	
  Capital Expenditures

  	
   

  	
  §11.1

  
	
  Capital Lease

  	
   

  	
  §11.1

  
	
  Capitalization/Acquisition Documents

  	
   

  	
  §11.1

  
	
  Cash Equivalents

  	
   

  	
  §11.1

  
	
  CHS

  	
   

  	
  §11.1

  
	
  CHS Indemnity Agreement

  	
   

  	
  §11.1

  
	
  CIGNA Impress Account

  	
   

  	
  §11.1

  

 

i

 

	
  Defined Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  Closing Date

  	
   

  	
  §11.1

  
	
  Collateral

  	
   

  	
  §11.1

  
	
  Collecting Banks

  	
   

  	
  §4.25

  
	
  Commitment(s)

  	
   

  	
  §11.1

  
	
  Compliance Certificate

  	
   

  	
  §11.1

  
	
  Consolidated Borrowing Base

  	
   

  	
  §2.1(A)

  
	
  Consolidated Borrowing Base Certificate

  	
   

  	
  §11.1

  
	
  Contingent Obligation

  	
   

  	
  §11.1

  
	
  Credit Memoranda Reserve

  	
   

  	
  §2.1(A)

  
	
  Currency Rate Agreement

  	
   

  	
  §5.11

  
	
  Daily Interest Amount

  	
   

  	
  §9.8(A)(3)(c)

  
	
  Daily Interest Rate

  	
   

  	
  §9.8(A)(3)(b)

  
	
  Daily Loan Balance

  	
   

  	
  §9.8(A)(3)(a)

  
	
  Default

  	
   

  	
  §11.1

  
	
  Default Rate

  	
   

  	
  §2.2(A)

  
	
  Defaulted Amount

  	
   

  	
  §11.1

  
	
  Defaulting Lender

  	
   

  	
  §11.1

  
	
  Dilution Reserve

  	
   

  	
  §2.1(A)

  
	
  Discretionary Advances

  	
   

  	
  §9.9

  
	
  Domestic Subsidiary

  	
   

  	
  §11.1

  
	
  EBITDA

  	
   

  	
  §11.1

  
	
  Eligible Accounts

  	
   

  	
  §2.1(B)

  
	
  Eligible Assignee

  	
   

  	
  §11.1

  
	
  Eligible Inventory

  	
   

  	
  §2.1(B)

  
	
  Employee Benefit Plan

  	
   

  	
  §11.1

  
	
  Environmental Claims

  	
   

  	
  §11.1

  
	
  Environmental Laws

  	
   

  	
  §11.1

  
	
  Environmental Liabilities

  	
   

  	
  §11.1

  
	
  Environmental Permits

  	
   

  	
  §11.1

  
	
  Equipment

  	
   

  	
  §11.1

  
	
  Equity Documents

  	
   

  	
  §11.1

  
	
  Equivalent Amount

  	
   

  	
  §11.1

  
	
  ERISA

  	
   

  	
  §11.1

  
	
  ERISA Affiliate

  	
   

  	
  §11.1

  
	
  Event of Default

  	
   

  	
  §8.1

  
	
  Excess Availability

  	
   

  	
  §11.1

  
	
  Existing Agent

  	
   

  	
  Recitals

  
	
  Existing Lenders

  	
   

  	
  Recitals

  
	
  Existing Loan Agreement

  	
   

  	
  Recitals

  
	
  Existing Obligations

  	
   

  	
  §11.1

  
	
  Existing Revolver Balance

  	
   

  	
  §1.2

  
	
  Fiscal Year

  	
   

  	
  §11.1

  
	
  Fixed Charge Coverage

  	
   

  	
  §11.1

  

 

ii

 

	
  Defined Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  Fixed Charges

  	
   

  	
  §11.1

  
	
  Free Cash Flow

  	
   

  	
  §11.1

  
	
  Funding Date

  	
   

  	
  §11.1

  
	
  GE Capital

  	
   

  	
  §11.1

  
	
  GE Canada Finance

  	
   

  	
  Recitals

  
	
  Hazardous Material

  	
   

  	
  §11.1

  
	
  Holdings

  	
   

  	
  §11.1

  
	
  Holdings’ Accountants

  	
   

  	
  §11.1

  
	
  Indebtedness

  	
   

  	
  §11.1

  
	
  Indemnified Liabilities

  	
   

  	
  §10.2

  
	
  Indemnitees

  	
   

  	
  §10.2

  
	
  Index Rate

  	
   

  	
  §11.1

  
	
  Index Rate Loans

  	
   

  	
  §11.1

  
	
  Insolvency Law

  	
   

  	
  §11.1

  
	
  Intellectual Property

  	
   

  	
  §11.1

  
	
  Intercreditor Agreement

  	
   

  	
  §11.1

  
	
  Interest Expense

  	
   

  	
  §11.1

  
	
  Interest Rate

  	
   

  	
  §2.2(A)

  
	
  Interest Rate Agreement

  	
   

  	
  §11.1

  
	
  Interest Rate Excess Availability

  	
   

  	
  §11.1

  
	
  Interest Ratio

  	
   

  	
  §9.8(A)(3)(d)

  
	
  Interest Settlement Date

  	
   

  	
  §9.8(A)(4)

  
	
  Inventory

  	
   

  	
  §11.1

  
	
  Inventory Advance Rate Percentage

  	
   

  	
  §2.1(A)

  
	
  Inventory Appraisal

  	
   

  	
  §2.1(A)

  
	
  IRC

  	
   

  	
  §11.1

  
	
  ITA

  	
   

  	
  §11.1

  
	
  Lender(s)

  	
   

  	
  Recitals

  
	
  Liabilities

  	
   

  	
  §11.1

  
	
  Lien

  	
   

  	
  §11.1

  
	
  Loan or Loans

  	
   

  	
  §11.1

  
	
  Loan Documents

  	
   

  	
  §11.1

  
	
  Loan Party

  	
   

  	
  §11.1

  
	
  Loan Year

  	
   

  	
  §11.1

  
	
  Material Adverse Effect

  	
   

  	
  §11.1

  
	
  Maximum Revolving Loan Amount

  	
   

  	
  §2.1(A)

  
	
  Moody’s

  	
   

  	
  §11.1

  
	
  Mortgage

  	
   

  	
  §11.1

  
	
  Mortgage Policies

  	
   

  	
  §5.6(A)

  
	
  Mortgaged Property

  	
   

  	
  §11.1

  
	
  Net Proceeds

  	
   

  	
  §11.1

  
	
  Notes

  	
   

  	
  §11.1

  
	
  Notice of Borrowing

  	
   

  	
  §11.1

  

 

iii

 

	
  Defined Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  Notice of Conversion/Continuation

  	
   

  	
  §11.1

  
	
  Obligations

  	
   

  	
  §11.1

  
	
  Orderly Liquidation Value

  	
   

  	
  §2.1(A)

  
	
  Other Currency

  	
   

  	
  §10.17

  
	
  Other Loan Party Collateral

  	
   

  	
  §11.1

  
	
  Permitted Acquisition

  	
   

  	
  §11.1

  
	
  Permitted Encumbrances

  	
   

  	
  §11.1

  
	
  Person

  	
   

  	
  §11.1

  
	
  Personal Property Security Legislation

  	
   

  	
  §11.1

  
	
  PPSA

  	
   

  	
  §11.1

  
	
  Prior Claims

  	
   

  	
  §2.1(A)

  
	
  Pro Forma

  	
   

  	
  §11.1

  
	
  Pro Forma EBITDA

  	
   

  	
  §11.1

  
	
  Pro Rata Share

  	
   

  	
  §11.1

  
	
  Projections

  	
   

  	
  §11.1

  
	
  Quality

  	
   

  	
  §11.1

  
	
  Real Estate

  	
   

  	
  §11.1

  
	
  Receiver

  	
   

  	
  §8.5

  
	
  Register

  	
   

  	
  §9.5(E)

  
	
  Related Fund

  	
   

  	
  §9.5(D)

  
	
  Related Transactions

  	
   

  	
  §11.1

  
	
  Related Transactions Documents

  	
   

  	
  §11.1

  
	
  Release

  	
   

  	
  §11.1

  
	
  Replacement Lender

  	
   

  	
  §2.12(A)

  
	
  Requisite Lenders

  	
   

  	
  §11.1

  
	
  Reserves

  	
   

  	
  §11.1

  
	
  Restricted Junior Payment

  	
   

  	
  §11.1

  
	
  Revolving Advance

  	
   

  	
  §11.1

  
	
  Revolving Credit Exposure

  	
   

  	
  §11.1

  
	
  Revolving Loan

  	
   

  	
  §11.1

  
	
  Revolving Loan Commitment

  	
   

  	
  §11.1

  
	
  Revolving Note

  	
   

  	
  §11.1

  
	
  RFC

  	
   

  	
  §11.1

  
	
  Seasonal Inventory Advance Rate Percentage

  	
   

  	
  §2.1(A)

  
	
  Security Documents

  	
   

  	
  §11.1

  
	
  Senior Indebtedness

  	
   

  	
  §11.1

  
	
  Settlement Date

  	
   

  	
  §9.8(A)(2)

  
	
  Stated Rate

  	
   

  	
  §2.2(B)

  
	
  Shelter

  	
   

  	
  §11.1

  
	
  Shelter Acquisition

  	
   

  	
  §11.1

  
	
  Shelter Acquisition Agreement

  	
   

  	
  §11.1

  
	
  Shelter Acquisition Documents

  	
   

  	
  §11.1

  
	
  Subsidiary

  	
   

  	
  §11.1

  

 

iv

 

	
  Defined Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  Target

  	
   

  	
  §11.1

  
	
  Tax Liabilities

  	
   

  	
  §2.10(A)

  
	
  Termination Date

  	
   

  	
  §2.6

  
	
  Unused Line Fee Margin

  	
   

  	
  §11.1

  
	
  US Borrower

  	
   

  	
  §11.1

  
	
  US Dollars or US$

  	
   

  	
  §11.1

  
	
  US Facility Agent

  	
   

  	
  §11.1

  
	
  US Facility Lenders

  	
   

  	
  §11.1

  
	
  US Facility Letter of Credit Obligations

  	
   

  	
  §11.1

  
	
  US Facility Loan Agreement

  	
   

  	
  §11.1

  
	
  US Facility Loan Documents

  	
   

  	
  §11.1

  
	
  US Facility Revolving Loan Commitment

  	
   

  	
  §11.1

  
	
  US Facility Revolving Loans

  	
   

  	
  §11.1

  
	
  US Facility Term Loans

  	
   

  	
  §11.1

  
	
  US GAAP

  	
   

  	
  §11.1

  
	
  US Obligors

  	
   

  	
  §11.1

  
	
  US Obligors Consolidating Borrowing Base

  	
   

  	
  §2.1(A)

  
	
  US Obligors Consolidating Borrowing Base
  Certificate

  	
   

  	
  §11.1

  
	
  West End

  	
   

  	
  §11.1

  

 

v

 

THIRD
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This THIRD AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT is dated as of October 14, 2005 and
entered into among BEACON ROOFING SUPPLY CANADA COMPANY, a Nova Scotia
unlimited liability company (“Borrower”), the financial institution(s) listed
on the signature pages hereof, and their respective successors and
Eligible Assignees (each, individually, a “Lender”, and, collectively, “Lenders”),
and GE CANADA FINANCE HOLDING COMPANY (in its individual capacity, “GE Canada
Finance”), for itself as a Lender and as Agent.

 

WHEREAS, Borrower, Heller
Financial Canada Holding Company (“Existing Agent”) as agent and lender, and
the other financial institutions party thereto as lenders (together with
Existing Agent, the “Existing Lenders”) are parties to that certain Second
Amended and Restated Loan and Security Agreement dated as of March 12,
2004 (as in effect on the date hereof, the “Existing Loan Agreement”) pursuant
to which the Existing Lenders agreed to extend credit to the Borrower pursuant
to the terms and conditions thereof; and

 

WHEREAS, the parties
hereto desire to restate and to further amend the provisions of the Existing
Loan Agreement for the purposes of (i) restating the terms of the Existing
Obligations and the security interests granted under the Existing Loan
Agreement, (ii) providing for the additional Obligations and the
additional grants of security interests set forth herein, and (iii) providing
funding for the repayment of certain indebtedness of Borrower and for working
capital and other general corporate purposes.

 

NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, Borrower, Agent and Lenders agree as follows:

 

SECTION 1.

DEFINITIONS AND ACCOUNTING TERMS

 

1.1           Certain Defined Terms. 

 

The capitalized terms not
otherwise defined in this Agreement and the accounting terms used in this
Agreement shall have the meanings set forth in Section 11 of this
Agreement.

 

1.2           Acknowledgement
of Existing Obligations and Restatement Thereof.

 

The Loan Parties, the
Agent and the Lenders acknowledge and agree that under the Existing Loan
Agreement, the aggregate principal balance of all Obligations owing by Loan
Parties on October 14, 2005 totaled CDN$9,569,827.36 (exclusive of interest, fees and expenses) which
constituted the aggregate principal balance of the Revolving Loan (the “Existing Revolver Balance”).  The Loan Parties acknowledge and agree that
all Obligations outstanding as of the Closing Date under the Existing Loan
Agreement constitute valid and binding obligations of the Loan Parties without
offset, counterclaim, defense or recoupment of any kind.  The Loan Parties, Agent and Lenders
acknowledge and agree that effective as of the Closing Date pursuant to the
terms of this Agreement, the Existing Revolver Balance outstanding under the
Existing Loan Agreement shall be allocated to and constitute the initial
principal balance of the Revolving Loans under this Agreement and shall be
deemed fully funded as of the Closing Date. 
The Loan

 

 

Parties, Agent and Lenders acknowledge and agree that
all interest, fees and expenses together with all other Obligations outstanding
under the Existing Loan Agreement which remain unpaid and outstanding as of the
Closing Date shall be and remain outstanding and payable under this Agreement
and the other Loan Documents.

 

SECTION 2.

LOANS AND COLLATERAL

 

2.1           Loans.

 

(A)          Revolving Loan. Each Lender,
severally, agrees to lend to Borrower from time to time its Pro Rata Share of
each Revolving Advance under the Revolving Loan Commitment.  The aggregate amount of the Revolving Loan
Commitment shall not exceed at any time C$15,000,000.  Amounts borrowed under this subsection 2.1(A) may
be repaid and reborrowed at any time prior to the earlier of (i) the
termination of the Revolving Loan Commitment pursuant to subsection 8.3
or (ii) the Termination Date. 
Except as otherwise provided herein, no Lender shall have any obligation
to make a Revolving Advance to the extent such Revolving Advance would cause
the Revolving Loan (after giving effect to any immediate application of the
proceeds thereof) to exceed the Maximum Revolving Loan Amount.  For the purpose of determining borrowing
availability hereunder on any date, the outstanding balance of the US Facility
Revolving Loans, the US Facility Letter of Credit Reserve and the US Obligors
Consolidating Borrowing Base shall be converted into the Equivalent Amount
thereof in Canadian Dollars (1) as of the date of the Canadian Borrowing
Base Certificate most recently required to be delivered to Agent hereunder or (2) in
light of currency exchange rate fluctuations, as of such date if Agent
exercises its discretion to make the determination as of such date.

 

“Canadian Borrowing Base”
means, for Borrower, as of any date of determination, an amount equal to the
sum of (a) up to 85% of Borrower’s Eligible Accounts less Borrower’s
Dilution Reserve and less Borrower’s Credit Memoranda Reserve, plus (b) up
to the Inventory Advance Rate Percentage (the Seasonal Inventory Advance Rate
Percentage during the period from January 1 through March 31 of each
year) of Borrower’s Eligible Inventory, and, less, in each case, without
duplication, Prior Claims and such other Reserves (excluding Credit Memoranda
Reserves and Dilution Reserves included in the definition thereof) as Agent in
its reasonable credit judgment may elect to establish with prior or
contemporaneous written notice to Borrower.

 

“Consolidated Borrowing
Base” means, as of any date of determination, an amount equal to the sum of the
aggregate US Obligors Consolidating Borrowing Base plus the Canadian Borrowing
Base.

 

“Credit Memoranda Reserve”
means, for Borrower as of any date of determination, a reserve equal to the
aggregate credits to account debtors provided under credit memoranda issued by
Borrower more than thirty (30) days after the creation of the Accounts giving
rise to such credits.  The Credit
Memoranda Reserve for Borrower as of the Closing Date is reflected in the
Borrowing Base Certificate delivered as of such date and shall thereafter be
adjusted after each field examination audit of the Borrower Collateral
conducted by Agent or any duly authorized representative of Agent.

 

2

 

“Dilution Reserve” means,
for Borrower as of any date of determination, a reserve for the amount by which
the total dilution of Borrower’s Accounts exceeds five percent (5%); with
dilution referring to all actual and potential offsets to an Account of
Borrower, including, without limitation, customer payment and/or volume
discounts, write-offs, credit memoranda, returns and allowances, and billing
errors.  The Dilution Reserve for
Borrower shall be adjusted after each field examination audit of the Borrower
Collateral conducted by Agent or any authorized representative designated by
Agent.

 

“Inventory Advance Rate
Percentage” means, initially, 64.5%, as such percentage may hereafter be
adjusted in the manner set forth below; provided, that the Inventory
Advance Rate Percentage shall never exceed 64.5%.

 

“Maximum Revolving Loan
Amount” means, as of any date of determination, the lesser of (a) the
Revolving Loan Commitments of all Lenders and (b) the Consolidated
Borrowing Base less the sum of (i) the outstanding balance of the
US Facility Revolving Loans and (ii) the US Facility Letter of Credit
Obligations.

 

“Prior Claims” means the
aggregate of all amounts that are secured by Liens created by applicable law
(in contrast with Liens voluntarily granted) which rank or are capable of
ranking prior or pari passu with Agent’s Liens
against all or part of the Borrower Collateral; including for amounts owing for
employee source deductions and contributions, vacation pay, goods and services
taxes, sales taxes, realty taxes, business taxes, workers’ compensation, pension
fund or plan obligations, overdue rents and Quebec corporate taxes.

 

“Seasonal Inventory
Advance Rate Percentage” means, initially, 69.5%, as such percentage may
hereafter be adjusted in the manner set forth below; provided, that the
Seasonal Inventory Advance Rate Percentage shall never exceed 69.5%.

 

With reasonable
promptness following Agent’s receipt of each Inventory appraisal obtained
pursuant to paragraph (H) of the Reporting Rider (each such
appraisal, an “Inventory Appraisal”), Agent shall determine the aggregate net
orderly liquidation value of all Inventory of Borrower as of the date of such
Inventory Appraisal, such determination to be made by Agent in good faith based
upon the net orderly liquidation values set forth in such Inventory Appraisal
(such aggregate net orderly liquidation value, the “Orderly Liquidation Value”).  Effective five (5) Business Days
following delivery by Agent to Borrower of written notice of such determination
(and any resulting adjustments to the Inventory Advance Rate Percentage and the
Seasonal Inventory Advance Rate Percentage):

 

(i)                                     the
Inventory Advance Rate Percentage shall be adjusted (if necessary) by Agent to
a percentage equal to the lower of (x) 64.5% and (y) that percentage which,
when multiplied by the aggregate Eligible Inventory of Borrower as of the date
of such Inventory Appraisal (determined at the lower of cost, excluding
intercompany charges or profits included in cost, on a weighted average basis,
or market), results in an amount not exceeding 85% of the Orderly Liquidation
Value of all Eligible Inventory of Borrower as of such date;

 

3

 

(ii)                                  the
Seasonal Inventory Advance Rate Percentage shall be adjusted (if necessary) by
Agent to a percentage equal to the lower of (x) 69.5% and (y) that percentage
which, when multiplied by the aggregate Eligible Inventory of Borrower as of
the date of such Inventory Appraisal (determined at the lower of cost,
excluding intercompany charges or profits included in cost, on a weighted
average basis, or market), results in an amount not exceeding 95% of the
Orderly Liquidation Value of all 
Inventory of Borrower as of such date.

 

All such adjustments to
the Inventory Advance Rate Percentage and the Seasonal Inventory Advance Rate
Percentage made by Agent hereunder shall be final and binding upon the Loan
Parties and Lenders absent demonstrable error by Agent.

 

“US Obligors
Consolidating Borrowing Base” has the meaning assigned to the term “Consolidating
Borrowing Base” in the US Facility Loan Agreement.

 

(B)           Eligible Collateral.

 

“Eligible Accounts”
means, for Borrower as at any date of determination, the aggregate of all
Accounts of Borrower that Agent, in its reasonable credit judgment, deems to be
eligible for borrowing purposes.  Without
limiting the generality of the foregoing, the Agent may determine that the
following Accounts are not Eligible Accounts:

 

(1)           Accounts which, at the date of
issuance of the respective invoice therefor, were payable more than ninety (90)
days after the date of issuance;

 

(2)           Accounts which remain unpaid for more
than the earlier of sixty (60) days after the due date specified in the
original invoice or one hundred twenty (120) days after invoice date;

 

(3)           Accounts which are otherwise eligible
with respect to which the account debtor is owed a credit by Borrower, but only
to the extent of such credit;

 

(4)           Accounts due from an account debtor
whose principal place of business is located outside the United States of
America or Canada (excluding the Northwest Territories and the Territory of
Nunavut) unless such Account is backed by a letter of credit, in form and
substance acceptable to Agent and issued or confirmed by a bank that is
organized under the laws of Canada or the United States of America or a state
thereof, that is acceptable to Agent; provided that such letter of
credit has been delivered to Agent as additional Borrower Collateral;

 

(5)           Accounts due from an account debtor
which Agent, in the exercise of its reasonable credit judgment, has notified
Borrower does not have a satisfactory credit standing;

 

(6)           Accounts which, together with all
Accounts of the US Obligors, exceed US$20,000 or the Equivalent Amount thereof
in Canadian Dollars in the aggregate and, with respect to which, the account
debtor is the federal government of Canada (Her Majesty in

 

4

 

Right of Canada), the United States of America, any province,
state or municipality, or any department, agency or instrumentality thereof,
unless Borrower has, with respect to such Accounts, complied with the Financial Administration Act (Canada), the Federal Assignment of Claims Act of 1940, as amended (31
U.S.C. Section 3727 et. seq.) or any applicable statute or municipal
ordinance of similar purpose and effect;

 

(7)           Accounts with respect to which the
account debtor is an Affiliate of Borrower or a director, officer, agent,
shareholder or employee of Borrower or any of its Affiliates;

 

(8)           Accounts due from an account debtor
if more than fifty percent (50%) of the aggregate amount of Accounts of such
account debtor owing to one or more of Borrower and the US Obligors have at the
time remained unpaid for more than the earlier of sixty (60) days after due
date or one hundred twenty (120) days after the invoice date;

 

(9)           Accounts with respect to which there
is any unresolved dispute with the respective account debtor (but only to the
extent of such dispute);

 

(10)         Accounts evidenced by an “instrument”
or “chattel paper” (as defined in the PPSA) not in the possession of Agent, on
behalf of itself and Lenders;

 

(11)         Accounts with respect to which Agent,
on behalf of itself and Lenders, does not have a valid and fully perfected
security interest (or the applicable equivalent thereof), subject only to, with
respect to priority, Prior Claims;

 

(12)         Accounts subject to any Lien except
those in favour of Agent, on behalf of itself and Lenders, those in favour of
US Facility Agent, on behalf of itself and US Facility Lenders, and Prior
Claims;

 

(13)         Accounts with respect to which the
account debtor is the subject of any bankruptcy, reorganization or other
insolvency proceeding;

 

(14)         Accounts due from an account debtor to
the extent that such Accounts exceed in the aggregate an amount equal to ten percent
(10%) of the aggregate of all Accounts of Borrower and the US Obligors at said
date;

 

(15)         Accounts with respect to which the
account debtor’s obligation to pay is conditional or subject to a repurchase
obligation or right to return or with respect to which the goods or services
giving rise to such Account have not been delivered (or performed, as
applicable) and accepted by such account debtor, including progress billings,
bill and hold sales, guarantied sales, sale or return transactions, sales on approval
or consignment sales;

 

(16)         Accounts with respect to which the
account debtor is located in any province or state denying creditors access to
its courts in the absence of a return and applicable notices of change or
Notice of Business Activities Report or other similar filing(s), unless
Borrower is qualified to transact business in such province or state;

 

5

 

(17)         Accounts with respect to which the
account debtor is a creditor of Borrower; provided, however, that
any such Account shall only be ineligible as to that portion of such Account
which is less than or equal to the amount owed by Borrower to such Person; and

 

(18)         that portion of Accounts which
represents taxes, service charges, late fees or similar charges.

 

“Eligible Inventory”
means, for Borrower as at any date of determination, the value (determined at
the lower of cost, excluding intercompany charges or profits included in cost,
on a weighted average cost basis, or market) of all Inventory owned by Borrower
and located in Canada or the United States of America that Agent, in its
reasonable credit judgment, deems to be eligible for borrowing purposes.  Without limiting the generality of the
foregoing, Agent may determine that the following is not Eligible Inventory:

 

(1)           work-in-process that is not readily
marketable in its current form;

 

(2)           finished goods which do not meet the
specifications of the purchase order for such goods and which are not readily
saleable in their current form by Borrower in the ordinary course of business;

 

(3)           Inventory which Agent determines, in
the exercise of its reasonable credit judgment, is unacceptable for borrowing
purposes due to age, quality, type, category and/or quantity, including,
without limitation, (a) Inventory on hand for more than twelve (12) months
and (b) Inventory purchased or otherwise acquired more than three (3) months
prior to any date of determination which is in excess of a twelve (12) month
supply;

 

(4)           packaging, shipping materials or supplies
consumed in the applicable Borrower’s business;

 

(5)           Inventory with respect to which
Agent, on behalf of itself and Lenders, does not have a valid and fully
perfected security interest (or the applicable equivalent thereof) subject only
to, with respect to priority, Prior Claims;

 

(6)           Inventory with respect to which there
exists any Lien in favour of any Person other than Agent, on behalf of itself
and Lenders, and US Facility Agent, on behalf of itself and US Facility
Lenders, and excluding Prior Claims;

 

(7)           Inventory produced in violation of
the United States Fair Labor Standards Act and
subject to the so-called “hot goods” provisions contained in Title 29 U.S.C.
215 (a)(i) or any replacement statute;

 

(8)           Inventory located at any location
other than those identified pursuant to subsection 4.6;

 

(9)           Inventory located at a vendor’s
location or with a consignee;

 

6

 

(10)         Inventory located with a warehouseman,
bailee, processor or similar third party, unless such Person has executed a
waiver of interest satisfactory to Agent; and

 

(11)         unless otherwise agreed by Agent,
Inventory in any location for which Agent has not received an agreement, in
form and substance acceptable to Agent, acknowledging Agent’s rights and
waiving its own interest in such Inventory from each lessor and sublessor and
each mortgagee of such location.

 

(C)           Borrowing Mechanics.  (1) BA Rate Loans made on any Funding
Date shall be in an aggregate minimum amount of C$2,500,000 and integral
multiples of C$500,000 in excess of such amount.  (2)  On any day when Borrower desires a
Revolving Advance under this subsection 2.1, Borrower shall give
Agent written or telephonic notice of the proposed borrowing by 1:00 p.m.
Toronto time on the Funding Date of an Index Rate Loan less than C$5,000,000
and written or telephonic notice by 1:00 p.m. Toronto time one (1) Business
Day prior to the Funding Date of an Index Rate Loan equal to or greater than
C$5,000,000, and three (3) Business Days in advance of the funding date of
a BA Rate Loan, which notice shall specify the proposed Funding Date (which
shall be a Business Day), whether such Loans shall consist of Index Rate Loans
or BA Rate Loans, and, for BA Rate Loans, the BA Period applicable thereto.  Any such telephonic notice shall be confirmed
with a Notice of Borrowing on the same day as such request.  Neither Agent nor any Lender shall incur any
liability to Borrower for acting upon any telephonic notice or a Notice of
Borrowing Agent believes in good faith to have been given by a duly authorized
officer or other person authorized to borrow on behalf of Borrower or for
otherwise acting in good faith under this subsection 2.1(C).  Neither Agent nor any Lender will be required
to make any Revolving Advance pursuant to any telephonic or written notice or a
Notice of Borrowing, unless all of the terms and conditions set forth in Section 3
and the Conditions Rider have been satisfied and Agent has also received the
most recent Canadian Borrowing Base Certificate and Consolidated Borrowing Base
Certificate and all other documents required under Section 5 and
the Reporting Rider by 1:00 p.m. Toronto time on the date of such funding
request.  Each Revolving Advance shall be
deposited by wire transfer in immediately available funds in such account as
Borrower may from time to time designate to Agent in writing.  The becoming due of any amount required to be
paid under this Agreement or any of the other Loan Documents as principal,
accrued interest, fees, compensation or any other amounts shall be deemed
irrevocably to be an automatic request by Borrower for a Revolving Advance,
which shall be an Index Rate Loan on the due date of, and in the amount
required to pay (as set forth on Agent’s books and records), such principal,
accrued interest, fees, compensation or any other amounts.

 

(D)          Notes.  Borrower shall execute and deliver to each
Lender, with appropriate insertions, a Note to evidence the Revolving Advances
made by such Lender.  Such Note shall be
in the principal amount of such Lenders Pro Rata Share of the aggregate
Revolving Loan Commitment.  In the event
of an assignment under subsection 9.5, Borrower shall, upon
surrender of the assigning Lender’s Note, issue new Notes to reflect the
interest held by the assigning Lender and its Eligible Assignee.

 

7

 

(E)           Availability of a Lender’s Pro
Rata Share.

 

(1)           Lender’s Amounts Available on a
Funding Date.  Unless Agent receives
written notice from a Lender on or prior to any Funding Date that such Lender
will not make available to Agent as and when required such Lender’s Pro Rata
Share of any requested Revolving Advance, 
Agent may assume that each Lender will make such amount available to
Agent in immediately available funds on the Funding Date and Agent may (but
shall not be so required), in reliance upon such assumption, make available to
Borrower on such date a corresponding amount.

 

(2)           Lender’s Failure to Fund.  A Defaulting Lender shall pay interest to
Agent at the Bank Rate on the Defaulted Amount from the Business Day following
the applicable Funding Date of such Defaulted Amount until the date such
Defaulted Amount is paid to Agent.  A
notice of Agent submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error.  If such amount is not paid when due to Agent,
Agent, at its option, may notify Borrower of such failure to fund and, upon
demand by Agent, Borrower shall pay the unpaid amount to Agent for Agent’s
account, together with interest thereon for each day elapsed since the date of
such borrowing, at a rate per annum equal to the interest rate applicable at
the time to the Revolving Advance made by the other Lenders on such Funding
Date.  The failure of any Lender to make
available any portion of its Revolving Loan Commitment on any Funding Date
shall not relieve any other Lender of any obligation hereunder to fund such
Lender’s Revolving Loan Commitment on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to honour its Revolving Loan
Commitment on any Funding Date.

 

(3)           Payments to a Defaulting Lender.  Agent shall not be obligated to transfer to a
Defaulting Lender any payment made by Borrower to Agent or any amount otherwise
received by Agent for application to the Obligations nor shall a Defaulting
Lender be entitled to the sharing of any interest, fees or payments hereunder.

 

(4)           Defaulting Lender’s Right to Vote.  For purposes of voting or consenting to matters
with respect to (i) the Loan Documents or (ii) any other matter
concerning the Revolving Loan, a Defaulting Lender shall be deemed not to be a “Lender”
and such Lender’s Revolving Loan Commitment and outstanding Revolving Advances
shall be deemed to be zero.

 

2.2           Interest.

 

(A)          Rate of Interest.  From the date the Revolving Advances are made
and the date the other Obligations become due, the Revolving Loan and the other
Obligations shall bear interest (the “Interest Rate”) at the applicable rates
set forth below:

 

(1)           If an Index Rate Loan, then at the
sum of the Index Rate plus the Applicable Revolver Index Margin per
annum.

 

(2)           If a BA Rate Loan, then at the sum of
the BA Rate plus the Applicable Revolver BA Rate Margin per annum.

 

8

 

As of the Closing Date,
the Applicable Revolver Index Margin shall be 0.50% and the Applicable Revolver
BA Rate Margin shall be 1.75%. 
Adjustments in Applicable Margins will be determined by reference to the
following grids: 

 

	
  If Interest Rate Excess
  Availability is:

  	
   

  	
  Level of Applicable Margin:

  
	
  <
  $20,000,000

  	
   

  	
  Level I

  
	
  > $20,000,000, but <
  $50,000,000

  	
   

  	
  Level II

  
	
  > $50,000,000

  	
   

  	
  Level III

  

 

	
   

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  
	
  Applicable
  Revolver Index Margin

  	
   

  	
  0.50

  	
  %

  	
  0.375

  	
  %

  	
  0.25

  	
  %

  
	
  Applicable
  Revolver BA Rate Margin

  	
   

  	
  1.75

  	
  %

  	
  1.625

  	
  %

  	
  1.50

  	
  %

  

 

The Applicable Margins
shall be adjusted (up or down) prospectively on April 30, 2006 and,
thereafter, on the first day of each fiscal quarter (commencing July 1,
2006), based upon Interest Rate Excess Availability.  If an Event of Default has occurred and is
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day of the first
calendar month following the date on which such Event of Default is waived or
cured.

 

Subject to the provisions
of subsection 2.1(C), Borrower shall designate to Agent whether a
Loan shall be an Index Rate Loan or a BA Rate Loan at the time a Notice of
Borrowing is given pursuant to subsection 2.1(C).  Such designation may be changed from time to
time pursuant to subsection 2.2(D). 
If on any day a Loan or portion of any Loan is outstanding with respect
to which notice has not been delivered to Agent in accordance with the terms of
this Agreement specifying the basis for determining the rate of interest or if
the BA Rate has been specified and no BA Rate quote is available, then for that
day that Loan or portion thereof shall bear interest determined by reference to
the Index Rate.

 

After the occurrence and
during the continuance of an Event of Default, subject to applicable law (i) the
Revolving Loan and all other Obligations shall, at the election of Requisite
Lenders, bear interest at a rate per annum equal to (1) two percent (2%)
plus (2) the applicable Interest Rate (collectively, the “Default Rate”), (ii) each
BA Rate Loan shall automatically convert to an Index Rate Loan at the end of
any applicable BA Period and (iii) no Loans may be made or continued as,
or converted to, BA Rate Loans.

 

(B)           Computation and Payment of
Interest.  Interest on the Revolving
Loan and all other Obligations shall be computed on the daily principal balance
on the basis of a three hundred and sixty-five (365) day year for the actual
number of days elapsed in the period during which it accrues.  In computing interest on any Loan, the date
of funding of the Loan or the first day of the BA Period applicable to such
Loan or, with respect to an Index Rate Loan being converted from a BA Rate
Loan, the date of conversion of such BA Rate Loan to such Index Rate Loan,
shall be included; and the date of payment of such Loan or the expiration date
of the BA Period applicable to such Loan, or with respect to an Index Rate Loan
being converted to a BA Rate Loan, the date of conversion of such Index Rate
Loan to such BA Rate Loan, shall be excluded; provided that if a Revolving
Advance is repaid on the same day on which it is made,

 

9

 

one (1) day’s interest shall be charged on that
Revolving Advance.  Interest on Index
Rate Loans and all other Obligations other than BA Rate Loans shall be payable
to Agent for the benefit of Lenders monthly in arrears on the first day of each
month, on the date of any prepayment of Loans, and at maturity, whether by
acceleration or otherwise.  Interest on
BA Rate Loans shall be payable to Agent for the benefit of Lenders in arrears
on the last day of the applicable BA Period for such BA Rate Loan, on the date
of any prepayment of the Loans, and at maturity, whether by acceleration or
otherwise.  For purposes of disclosure
under the Interest Act (Canada), where interest or
fees are calculated pursuant hereto at a rate based upon a 365 day year (the “Stated
Rate”), it is hereby agreed that the rate or percentage of interest on a yearly
basis is equivalent to such Stated Rate multiplied by the actual number of days
in the year divided by 365.  The parties
agree that (i) the principle of deemed reinvestment of interest shall not
apply to any interest calculation under this Agreement or any of the other Loan
Documents and (ii) the rates of interest stipulated in this Agreement are
intended to be nominal rates and not effective rates or yields.

 

(C)           Limitations on Interest.  If any provision of this Agreement or any of
the other Loan Documents would obligate any Loan Party to make any payment of
interest or other amount payable to any Lender in an amount or calculated at a
rate which would be prohibited by applicable law or would result in a receipt
by that Lender of interest at a criminal rate (as such terms are construed
under the Criminal Code (Canada)) then,
notwithstanding such provision, such amount or rate shall be deemed to have
been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by applicable law
or so result in a receipt by that Lender of interest at a criminal rate, such
adjustment to be effected, to the extent necessary, as follows:  (a) firstly, by reducing the amount or
rate of interest required to be paid to that Lender under subsection 2.2(A);
and (b) thereafter, by reducing any fees, commissions, premiums and other
amounts required to be paid to the affected Lender which would constitute
interest for purposes of Section 347 of the Criminal
Code (Canada). 
Notwithstanding the foregoing, and after giving effect to all
adjustments contemplated thereby, if any Lender shall have received an amount
in excess of the maximum permitted by that section of the Criminal Code (Canada), then the applicable Loan Party shall
be entitled, by notice in writing to the affected Lender, to obtain
reimbursement from that Lender in an amount equal to such excess, and pending
such reimbursement, such amount shall be deemed to be an amount payable by that
Lender to such Loan Party.  Any amount or
rate of interest referred to in this subsection 2.2(C) shall
be determined in accordance with generally accepted actuarial practices and
principles as an effective annual rate of interest over the term that the
Revolving Loan remains outstanding on the assumption that any charges, fees or
expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific
period of time, be pro-rated over that period of time and otherwise be
pro-rated over the period from the Closing Date to the Termination Date or, if
all the Obligations are not irrevocably repaid on such date, such later date on
which all of the Obligations of Borrower are irrevocably paid and, in the event
of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries
appointed by Agent shall be conclusive for the purposes of such determination.

 

(D)          Conversion or Continuation.  Subject to the other provisions of this
Agreement, Borrower shall have the option to (1) convert at any time all
or any part of outstanding Loans equal to C$2,500,000 and integral multiples of
C$250,000 in excess of that

 

10

 

amount from Index Rate Loans to BA Rate Loans or (2) upon
the expiration of any BA Period applicable to a BA Rate Loan, to (a) continue
all or any portion of such BA Rate Loan equal to C$2,500,000 and integral
multiples of C$250,000 in excess of that amount as a BA Rate Loan or (b) convert
all or any portion of such BA Rate Loan to an Index Rate Loan.  The succeeding BA Period(s) of such continued
or converted Loan commence on the last day of the BA Period of the Loan to be
continued or converted; provided that no outstanding Loan may be continued as,
or be converted into, a BA Rate Loan having a BA Period of more than 30 days,
when any Default has occurred and is continuing; provided  further,
that no outstanding Loan may be continued as, or be converted into, a BA Rate
Loan, when any Event of Default has occurred and is continuing.

 

Borrower shall deliver a
Notice of Conversion/Continuation with respect to any such
conversion/continuation to Agent no later than 12:00 noon (Toronto time) at
least three (3) Business Days in advance of the proposed
conversion/continuation date.  The Notice
of Conversion/Continuation with respect to such conversion/continuation shall
certify:  (1) the proposed
conversion/continuation date (which shall be a Business Day); (2) the
amount of the Loan to be converted/continued; (3) the nature of the
proposed conversion/continuation; (4) in the case of conversion to, or a
continuation of, a BA Rate Loan, the requested BA Period; and (5) that no
Default or Event of Default has occurred and is continuing or would result from
the proposed conversion/continuation.

 

In lieu of delivering a
Notice of Conversion/Continuation with respect to any such
conversion/continuation, Borrower may give Agent telephonic notice by the
required time of any proposed conversion/continuation under this subsection 2.2(D);
provided that such notice shall be promptly confirmed in writing by delivery of
a Notice of Conversion/Continuation (in form and substance described herein)
with respect to such conversion/continuation to Agent on or before the proposed
conversion/continuation date.

 

Neither Agent nor any
Lender shall incur any liability to Borrower in acting upon any telephonic
notice or a Notice of Conversion/Continuation referred to above that Agent
believes in good faith to have been given by an officer or other person
authorized to act on behalf of Borrower or for otherwise acting in good faith
under this subsection 2.2(D).

 

2.3           Fees.

 

(A)          Unused Line Fee.  Borrower shall pay to Agent, for the benefit
of Lenders, a fee in an amount equal to the Revolving Loan Commitment less the
average daily balance of the Revolving Loan during the preceding month,
multiplied by the Unused Line Fee Margin per annum.  Such fee to be calculated on the basis of a
three hundred sixty-five (365) day year for the actual number of days elapsed
and to be payable monthly in arrears on the first day of each month following
the Closing Date.

 

(B)           Audit Fees.  Borrower agrees to pay all fees and expenses
of the firm or individual(s) engaged by Agent to perform audits of Borrower’s
operations.  Notwithstanding the
foregoing, if Agent uses its internal auditors to perform any such audit,
Borrower agrees to pay to Agent, for its own account, an audit fee with respect
to each such audit equal to US$800 per internal auditor per day or any portion
thereof, together with all out of pocket expenses.

 

11

 

(C)           Other Fees and Expenses.  Borrower shall pay to Agent, for its own
account, all charges for returned items and all other bank charges incurred by
Agent, as well as Agent’s standard wire transfer charges for each wire transfer
made under this Agreement.

 

(D)          Fee Letter.  Borrower shall pay to GE Canada Finance,
individually, the fees specified in that certain letter agreement dated as of August 9,
2005 among Borrower, US Borrower, GE Capital and GE Canada Finance, in the
amounts and at the times specified therein.

 

2.4           Payments and
Prepayments.

 

(A)          Manner and Time of Payment.  In its sole discretion, Agent may elect to
honour the automatic requests by Borrower for Revolving Advances for all
principal, interest, fees, compensation and any other amounts due hereunder or
under any of the other Loan Documents on their applicable due dates pursuant to
subsection 2.1(C), up to the
Revolving Loan Commitment of all Lenders, and the proceeds of each such
Revolving Advance, if made, shall be applied as a direct payment of the
relevant Obligation.  To the extent such
amounts exceed the Revolving Loan Commitment of all Lenders, or if Agent elects
to bill Borrower for any amount due hereunder or under any of the other Loan
Documents, such amount shall be immediately due and payable with interest
thereon as provided herein.  All payments
made by Borrower with respect to the Obligations shall be made in the currency
in which such Obligations are denominated and without deduction, defense,
setoff or counterclaim.  All payments to
Agent hereunder shall, unless otherwise directed by Agent, be made to Agent’s
Account or in accordance with subsection 4.25, in each case in
immediately available funds.  All
payments remitted to Agent’s Account in immediately available funds shall be
credited to the Obligations on the Business Day received; provided,
that, solely for the purpose of computing interest, payments received in
accordance with this sentence for application to the Revolving Loan shall be
applied to the Revolving Loan one (1) Business Day following Agent’s
receipt thereof in immediately available funds.  If Agent receives a payment or
proceeds of realization in a currency other than the currency in which the
Obligations are denominated, Agent may in its discretion convert the amount
received into the currency of the applicable Obligations and such Obligations
shall be reduced solely to the extent of the amount received upon such
conversion and applied to such Obligations.

 

(B)           Mandatory Prepayments.

 

(1)           Overadvance.  Subject to subsection 9.9, at any
time that the Revolving Loan exceeds the Maximum Revolving Loan Amount, Borrower
shall, immediately repay the Revolving Loan to the extent necessary to reduce
the aggregate principal balance to an amount equal to or less than the Maximum
Revolving Loan Amount.

 

(2)           Prepayments from Proceeds of Asset
Dispositions.  Immediately upon receipt
by Borrower or any of its Subsidiaries of any Net Proceeds in excess of
US$100,000 or the Equivalent Amount thereof in the aggregate during any Fiscal
Year, Borrower shall prepay the Obligations in an amount equal to such
proceeds.  All such prepayments shall be
applied to the Loans in accordance with subsection 2.5; provided,
however, that if Borrower reasonably expects the Net Proceeds of any
Asset Disposition to be reinvested within one hundred eighty (180) days to
repair or replace such assets with like assets, Borrower shall deliver the
proceeds to

 

12

 

Agent to be applied to the Revolving Loan and Agent shall
establish a reserve against available funds for borrowing purposes under the
Revolving Loan for such amount, until such time as such proceeds have been
re-borrowed or applied to other Obligations as set forth herein.  If as contemplated by the immediately
preceding sentence, Borrower elects to deliver such proceeds to Agent, Borrower
may, so long as no Default or Event of Default shall have occurred and be
continuing, reborrow such proceeds only for such repair or replacement.

 

(3)           Prepayments from Issuance of
Securities.  Immediately upon the
receipt by Borrower or any of its Subsidiaries of the proceeds of the issuance
of equity securities (other than (i) proceeds of the issuance of equity
securities to Borrower or any Subsidiary of Borrower and (ii) fifty
percent (50%) of the proceeds of the issuance of equity securities to US
Borrower or any Subsidiary of US Borrower in a primary public offering,
Borrower shall prepay the Revolving Loan in an amount equal to such proceeds,
net of underwriting discounts and commissions and other reasonable costs
associated therewith; provided that, such prepayment shall not permanently
reduce the aggregate Revolving Loan Commitment. 
All such prepayments shall be applied to the Loans in accordance with subsection 2.5.

 

(C)           Voluntary Prepayments and
Repayments.  Borrower may, at any
time upon not less than three (3) Business Days prior notice to Agent,
terminate the Revolving Loan Commitment; provided, however, the
Revolving Loan Commitment may not be terminated by Borrower until all
Obligations are paid in full and unless the US Facility Revolving Loan
Commitment is contemporaneously terminated in accordance with the US Facility
Loan Agreement.  Any prepayment of the
Obligations permitted in this subsection 2.4(C) shall be
subject to the payment of all fees set forth in subsection 2.3, and
the payment of any amounts owing pursuant to subsection 2.13 resulting from such prepayment.  All such prepayments shall be applied to the
Loans in accordance with subsection 2.5.

 

(D)          Payments on Business Days.  Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest or fees due hereunder.

 

2.5           Application of
Prepayment Proceeds.  With respect to
the prepayments described in subsections 2.4(B) and 2.4(C), any such
prepayment shall be applied first to Index Rate Loans before application to BA
Rate Loans, in each case in any manner which minimizes any resulting BA Rate
breakage fees.

 

2.6           Term of this Agreement.  This Agreement shall be effective until the
earliest of (a) October 14, 2010, (b) the acceleration of all
Obligations pursuant to subsection 8.3 and (c) the date of
termination of US Facility Lenders’ obligations to make the US Facility
Revolving Loans or permit existing US Facility Revolving Loans to remain
outstanding (the “Termination Date”). 
The Commitments shall terminate (unless earlier terminated pursuant to
the terms hereunder) upon the Termination Date and all Obligations shall become
immediately due and payable without notice or demand.  Notwithstanding any termination, until all
Obligations (other than contingent indemnity obligations to the extent no
unsatisfied claim has been asserted) have been fully paid and satisfied, Agent,
on behalf of itself and Lenders, shall be entitled to retain Liens

 

13

 

upon all Collateral, and even after payment of all
Obligations hereunder, Borrower’s obligation to indemnify Agent and each Lender
in accordance with the terms hereof shall continue.

 

2.7           Statements.  Agent shall render a monthly statement of
account to Borrower within twenty (20) days after the end of each month.  Such statement of account shall constitute an
account stated unless Borrower makes written objection thereto within thirty
(30) days from the date such statement is mailed to Borrower. Agent shall
record in its books and records, including computer records, (a) all Revolving
Advances, interest charges and payments thereof, (b) the charging and payment
of all fees, costs and expenses and (c) all other debits and credits pursuant
to this Agreement.  The balance in the
loan accounts shall constitute presumptive evidence, absent demonstrable error,
of the accuracy of the information contained therein; provided, however,
that any failure by Agent to so record shall not limit or affect the Borrower’s
obligation to pay.

 

2.8           Grant of Security
Interest.  To secure the payment and
performance of the Borrower’s Obligations, including all renewals, extensions,
restructurings and refinancings of any or all of Borrower’s Obligations,
Borrower hereby grants to Agent, on behalf of Agent and Lenders, (and any
Affiliates of Lenders to the extent such Affiliates are parties to Loan
Documents), a continuing security interest, lien, hypothec and mortgage in and
to all right, title and interest of Borrower in all of Borrower’s personal and real property,
whether now owned or existing or hereafter acquired or arising and regardless
of where located (all being collectively referred to as the “Borrower
Collateral”) including, without limitation, (A) Accounts, and all
guarantees and security therefor, and all goods and rights represented thereby
or arising therefrom, including the rights of stoppage in transit,
replevin and reclamation; (B) Inventory and other goods; (C) intangibles
(as defined in the PPSA) including, without limitation, all Intellectual
Property; (D) documents of title (as defined in the PPSA) or other
receipts covering, evidencing or representing goods; (E) instruments (as
defined in the PPSA); (F) chattel paper (as defined in the PPSA); (G) Equipment;
(H) Mortgaged Property; (I) securities (as defined in the PPSA) including,
without limitation, certificated and uncertificated securities, security
accounts, security entitlements, commodity contracts and commodity accounts;
(J) all deposit accounts of Borrower maintained with any bank or financial
institution; (K) all cash and other money and property of Borrower in the
possession or under the control of Agent, any Lender or any participant; (L)
all books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at any time evidence or
contain information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization
thereon; and (M) proceeds and products of all or any of the property described
above, including, without limitation, the proceeds of any insurance policies
covering any of the above described property. 
Notwithstanding the foregoing, Borrower Collateral shall not include (a) the
last day of the term of any lease (but upon the enforcement of Agent’s rights
hereunder, Agent shall stand possessed of such last day in trust to assign the
same to any person acquiring such term) or (b) any consumer goods (as
defined in the PPSA).

 

2.9           Yield Protection.

 

(A)          Capital Adequacy and Other
Adjustments.  In the event Agent or
any Lender shall have determined that the adoption after the date hereof of any
law, treaty, governmental (or quasi-governmental) rule, regulation, guideline
or order regarding capital

 

14

 

adequacy, reserve requirements or similar requirements or
compliance by Agent or such Lender or any corporation controlling Agent or such
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) from any
central bank or governmental agency or body having jurisdiction does or shall
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by Agent or such Lender or any corporation
controlling Agent or such Lender and thereby reducing the rate of return on
Agent’s or such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder, then Borrower shall within fifteen (15) days after
notice and demand from such Lender (with a copy to Agent) or Agent (together
with the certificate referred to in the next sentence and with a copy to Agent)
pay to Agent, for the account of Agent or such Lender, as applicable,
additional amounts sufficient to compensate Agent or such Lender, as
applicable, for such reduction.  A
certificate as to the amount of such cost and showing the basis of the
computation of such cost submitted by Agent or such Lender to Borrower shall, absent
demonstrable error, be final, conclusive and binding for all purposes.

 

(B)           Increased BA Funding Costs.  If, after the date hereof, the introduction
of, change in or interpretation of any law, rule, regulation, treaty or
directive would impose or increase reserve requirements (other than as taken
into account in the definition of BA Rate) or otherwise increase the cost to
any Lender of making or maintaining a BA Rate Loan, then Borrower shall from
time to time within fifteen (15) days after notice and demand from such
affected Lenders (together with the certificate referred to in the next
sentence and with a copy to Agent) pay to Agent, for the account of such
affected Lenders, additional amounts sufficient to compensate such Lenders for
such increased cost.  A certificate as to
the amount of such cost and showing the basis of the computation of such cost
submitted by such affected Lenders to Borrower and Agent shall, absent
demonstrable error, be final, conclusive and binding for all purposes.

 

2.10         Taxes.

 

(A)          No Deductions.  Any and all payments or reimbursements made
hereunder shall be made free and clear of and without deduction for any and all
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto (all such taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto referred to
herein as “Tax Liabilities”; excluding, however, net income taxes, or franchise
taxes imposed in lieu of net income taxes, to the extent imposed on the net
income of any Lender or Agent by the jurisdiction under the laws of which Agent
or such Lender is organized or is resident or carrying on business).  If Borrower shall be required by law to
deduct any such Tax Liabilities from or in respect of any sum payable hereunder
or any other Loan Document to Agent or any Lender, then (i) the sum
payable hereunder shall be increased as may be necessary so that after making
all required withholdings and deductions (including withholdings and deductions
applicable to additional sums payable under this subsection 2.10),
Agent or such Lender receives an amount equal to the sum it would have received
had no such withholdings or deductions been made, (ii) Borrower shall make
such deductions and (iii) Borrower shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law.

 

15

 

(B)           Changes in Tax Laws. 
In the event that, subsequent to the Closing Date, (i) any changes
in any existing law, regulation, treaty or directive or in the interpretation
or application thereof, (ii) any new law, regulation, treaty or directive
enacted or any interpretation or application thereof, or (iii) compliance
by Agent or Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality:

 

(1)           does or shall subject Agent or any Lender to any tax
of any kind whatsoever or causes the withdrawal or termination of a previously
granted tax exemption with respect to this Agreement, the other Loan Documents
or any Revolving Advances made hereunder, or change the basis of taxation of
payments to Agent or such Lender of principal, fees, interest or any other
amount payable hereunder (except for net income taxes or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, provincial
or local taxing authorities with respect to interest or commitment or other
fees payable hereunder or changes in the rate of tax on the overall net income
of Agent or such Lender); or

 

(2)           does or shall impose on Agent or any Lender any other
condition or increased cost in connection with the transactions contemplated
hereby or participations herein;

 

and the result of any of
the foregoing is to increase the cost to Agent or such Lender of making or
continuing any Revolving Advance hereunder or to reduce any amount receivable
hereunder, then, in any such case, Borrower shall promptly pay to Agent or such
Lender, upon its notice and demand, any additional amounts necessary to
compensate Agent or such Lender, on an after-tax basis, for such additional
cost or reduced amount receivable, as determined by Agent or such Lender with
respect to this Agreement or the other Loan Documents.  If Agent or any Lender becomes entitled to
claim any additional amounts pursuant to this subsection, it shall promptly
notify Borrower of the event by reason of which Agent or such Lender has become
so entitled (with any such Lender concurrently notifying Agent).  A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrower shall, absent demonstrable error, be final, conclusive and binding for
all purposes.

 

(C)           Without prejudice to the survival of any agreement of
Borrower under this Agreement, the agreement and obligations of Borrower
contained in this subsection 2.10 shall survive the Termination Date.

 

(D)          Foreign Lenders.  Each Lender, and the successors and assignees of such
Lender, organized under the laws of a jurisdiction outside of Canada (each, a “Foreign
Lender”), to whom payments to be made under this Agreement or under the Notes
may be exempt from Canadian withholding tax under the law of the jurisdiction
in which the relevant Lender is located or under any tax treaty to which such
jurisdiction is a party shall, at the time or times prescribed by applicable
law, provide to Borrower (with a copy to Agent) any applicable form,
certificate or document, in each case certifying as to such Foreign Lender’s
entitlement to such exemption (a “Certificate of Exemption”).  Prior to becoming a Lender under this
Agreement and within fifteen (15) days after a reasonable written request of
Borrower or Agent from time to time thereafter, each Foreign Lender that
becomes a Lender under this Agreement shall provide a

 

16

 

Certificate of Exemption to Borrower and Agent; provided
that no Person who would otherwise be a Foreign Lender shall become a Lender
hereunder unless such Person is able to deliver a Certificate of Exception at
the time it becomes a Lender.

 

If a Foreign Lender is
entitled to an exemption with respect to payments to be made to such Foreign
Lender under this Agreement and does not provide a Certificate of Exemption to
Borrower and Agent within the time periods set forth in the preceding
paragraph, Borrower shall withhold taxes from payments to such Foreign Lender
at the applicable statutory rates and Borrower shall not be required to pay any
additional amounts as a result of such withholding; provided, however,
that all such withholding shall cease upon delivery by such Foreign Lender of a
Certificate of Exemption to Borrower and Agent.

 

2.11         Required Termination
and Prepayment.

 

Notwithstanding anything
to the contrary contained herein, if the introduction of or any change in any
law, rule, regulation, treaty or directive (or any change in the interpretation
thereof) shall make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for any Lender to agree to make or
to make or to continue to fund or maintain any Loan, then, unless that Lender
is able to make or to continue to fund or to maintain such Loan at another
branch or office of that Lender without, in that Lender’s opinion, adversely
affecting it or its Loans or the income obtained therefrom, on notice thereof
and demand therefor by such Lender to Borrower through Agent, (i) the
obligation of such Lender to agree to make or to make or to continue to fund or
maintain Loans shall terminate and (ii) Borrower shall forthwith prepay in
full all outstanding Loans owing to such Lender, together with interest accrued
thereon.

 

2.12         Optional
Prepayment/Replacement of Lenders. 
Within fifteen (15) days after receipt by Borrower of (i) written
notice and demand from any Lender for payment of additional costs as provided
in subsection 2.9 or subsection 2.10 or (ii) written
notice of any Lender’s inability to make Loans as provided in subsection 2.11
(any such Lender demanding such payment or having such inability being referred
to herein as an “Affected Lender”), Borrower may, at its option notify Agent
and such Affected Lender of its intention to take one of the actions set forth
herein in subparagraph (A) or (B) below, provided that,
in the case of an Affected Lender’s inability to make Loans as provided in subsection 2.11,
Borrower’s option is conditional upon the Affected Lender not being required by
law to terminate its Revolving Commitment hereunder prior to the expiry of the
ninety (90) day period contemplated in subparagraphs (A) and (B) below:

 

(A)          Replacement of an Affected Lender. 
Borrower may obtain, at Borrower’s expense, a replacement Lender (“Replacement
Lender”) for an Affected Lender, which Replacement Lender shall be reasonably
satisfactory to Agent.  In the event that
Borrower obtains a Replacement Lender that will purchase all outstanding Obligations
owed to such Affected Lender and assume its Revolving Loan Commitment hereunder
within ninety (90) days following notice of Borrower’s intention to do so, the
Affected Lender shall sell and assign its Revolving Advances and Revolving Loan
Commitment to such Replacement Lender in accordance with the provisions of subsection 9.5;
provided, however, Borrower has (i) reimbursed such Affected
Lender for any administrative fee payable by such Affected Lender to

 

17

 

Agent pursuant to subsection 9.5 and, (ii) in
any case where such replacement occurs as the result of a demand for payment of
certain costs pursuant to subsection 2.9 or subsection 2.10,
paid all increased costs for which such Affected Lender is entitled to under subsection 2.9
or subsection 2.10 through the date of such sale and assignment; or

 

(B)           Prepayment of an Affected Lender. 
Borrower may prepay in full all outstanding Obligations owed to an
Affected Lender and terminate such Affected Lender’s Revolving Loan
Commitment.  Borrower shall, within
ninety (90) days following notice of its intention to do so, prepay in full all
outstanding Obligations owed to such Affected Lender, including such Affected
Lender’s increased costs for which it is entitled to reimbursement under this
Agreement through the date of such prepayment, and terminate such Affected
Lender’s Revolving Loan Commitment.

 

2.13         Compensation.

 

Borrower shall promptly
compensate Agent for the benefit of Lenders (Agent’s calculation of such
amounts shall, absent manifest error, be conclusive and binding upon all
parties hereto), for any losses, expenses and liabilities including, without
limitation, any loss (including interest paid) sustained by such Lender in
connection with the re-employment of such funds: (i) if for any reason
(other than a default by any Lender) a borrowing of any BA Rate Loan does not
occur on a date specified therefor in a Notice of Borrowing or a telephonic
request of borrowing by Borrower; (ii) if any prepayment of any of its BA
Rate Loans occurs on a date that is not the last day of an Interest Period
applicable to that Loan (regardless of the source of such prepayment and
whether voluntary, by acceleration or otherwise); (iii) if any prepayment
of any of its BA Rate Loans is not made on any date specified in a notice of
prepayment given by Borrower; or (iv) as a consequence of any other
default by Borrower to repay its BA Rate Loans when required by the terms of
this Agreement; provided that during the period while any such amounts have not
been paid, Agent may, in its sole discretion, (a) in accordance with subsection 2.4(A) and
upon contemporaneous notice to Borrower, elect to honor the automatic request
by Borrower for a Revolving Advance for such amount pursuant to subsection 2.1(C) or
(b) reserve an equal amount from amounts otherwise available to be
borrowed under the Revolving Loan.

 

SECTION 3.

CONDITIONS TO LOANS

 

The obligations of Agent
and each Lender to make Revolving Advances on each Funding Date are subject to
satisfaction of all of the terms and conditions set forth in this Agreement and
in the Conditions Rider attached hereto, and the accuracy of all the
representations and warranties of Borrower and the other Loan Parties (as
applicable) set forth herein and in the other Loan Documents.

 

SECTION 4.

REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS

 

To induce Agent and each
Lender to enter into the Loan Documents and to make and to continue to make
Revolving Advances, Borrower represents, warrants and covenants to Agent and
each Lender that the following statements are and (when deemed remade
hereunder)

 

18

 

will be true, correct and complete and, unless
specifically limited, shall remain so for so long as the Revolving Loan
Commitment shall be in effect and until payment in full of all Obligations:

 

4.1           Organization,
Powers, Capitalization.

 

(A)          Organization and Powers. 
Each of the Loan Parties is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and qualified to
do business in all jurisdictions where such qualification is required except
where failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect.  Each of the
Loan Parties has all requisite organizational power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted and to enter into each Loan Document.

 

(B)           Capitalization.  As of the
Closing Date, the authorized share capital or capital stock of each of the Loan
Parties and its respective Subsidiaries is as set forth on Schedule 4.1(B),
including all preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from any Loan Party of any shares of capital or other securities of
any such entity.  All issued and
outstanding shares of capital of each of US Borrower and its Subsidiaries are
duly authorized and validly issued, fully paid, nonassessable, free and clear
of all Liens other than those in favour of Agent for the benefit of Agent and
Lenders, and those in favour of US Facility Agent, for the benefit of US
Facility Agent and US Facility Lenders, and such shares were issued in
compliance with all applicable state, provincial, Canadian and US federal laws
concerning the issuance of securities. 
Borrower will promptly notify Lender of any change in the ownership or
corporate structure of any Loan Party that would result in the occurrence of an
Event of Default pursuant to subsection 8.1.

 

4.2           Authorization of
Borrowing, No Conflict.  Each of the
Loan Parties has the organizational power and authority to incur the
Obligations and to grant security interests (or applicable equivalents) in the
Collateral (in which it has any right, title or interest).  On the Closing Date, the execution, delivery
and performance of the Loan Documents by each Loan Party signatory thereto will
have been duly authorized by all necessary corporate and shareholder
action.  The execution, delivery and
performance by each Loan Party of each Loan Document to which it is a party and
the consummation of the transactions contemplated by the Loan Documents by each
Loan Party do not contravene any applicable law, the constating documents,
corporate charter or bylaws or other organizational documents of any Loan Party
or any agreement or order by which any Loan Party or any Loan Party’s property
is bound. The Loan Documents are the legally valid and binding obligations of
the applicable Loan Parties respectively, each enforceable against the Loan
Parties, as applicable, in accordance with their respective terms.

 

4.3           Financial
Condition.  All financial statements
concerning the Loan Parties (except for the financial statements concerning SDI
Holding and its Subsidiaries for periods ending on or prior to June 30,
2005, which are addressed in the following paragraph) which have been or will
hereafter be furnished to Agent or any Lender pursuant to this Agreement have
been or will be prepared in accordance with US GAAP consistently applied
throughout the periods involved (except as disclosed therein and, in the case
of interim financial statements, except for the

 

19

 

absence of footnotes and
non-material year-end adjustments) and do or will present fairly in all
material respects the financial condition of the entities covered thereby as at
the dates thereof and the results of their operations for the periods then
ended.

 

The audited consolidated
financial statements of SDI Holding (consisting of the audited consolidated
balance sheets of SDI Holding and the related audited consolidated statements
of operations, changes in stockholders’ equity and cash flow of SDI Holding) as
of and for the five month period ending December 31, 2002 and as of and
for the fiscal years ended December 31, 2003 and 2004, and the unaudited
consolidated financial statements of SDI Holding (consisting of the unaudited
consolidated balance sheet of SDI Holding and the related unaudited
consolidated statements of operations, changes in stockholders’ equity and cash
flow of SDI Holding) as of and for the six (6) month period ended June 30,
2005 (true, complete and correct copies of which have been furnished to Agent
and Lenders), have been prepared in accordance with US GAAP, consistently
applied, and present fairly, in all material respects, the consolidated
financial position of SDI and its Subsidiaries as of the dates indicated and
the results of operations for the periods then ended, subject, in the case of
interim financial statements, to (a) normal year end adjustments, and (b) the
absence of disclosures normally made in footnotes.

 

The Pro Forma was
prepared by US Borrower based on the unaudited consolidated balance sheet of
Holdings and its Subsidiaries dated June 30, 2005 and the audited
consolidated balance sheet of SDI Holding and its Subsidiaries dated June 30,
2005.

 

The Projections delivered
by Borrower will be prepared in light of the past operations of the business of
Holdings and its Subsidiaries, and such Projections will represent the good
faith estimate of Borrower and its senior management concerning the reasonably
expected course of the Loan Parties’ business as of the date such Projections
are delivered; it being recognized that the Projections (as they relate to
future events) are not to be viewed as fact and that actual results during the
period or periods covered by the Projections may differ by a material amount
from the Projections.

 

Since September 30,
2004 (June 30, 2004, in the case of SDI Holding, SDI Guarantor and
Shelter), there have been no events or changes in facts or circumstances
affecting any Loan Party which, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect and that have
not been disclosed herein or in the attached Schedules.

 

4.4           Indebtedness and
Liabilities.  As of the Closing Date,
neither Holdings nor any of its Subsidiaries has (a) any Indebtedness
except as reflected on the Pro Forma; or (b) any Liabilities other than as
reflected on the Pro Forma or as incurred in the ordinary course of business
following the date of the Pro Forma. 
Borrower shall promptly deliver copies of all notices given or received
by Holdings and any of its Subsidiaries with respect to noncompliance with any
term or condition related to any Indebtedness in an amount exceeding US$200,000
or the Equivalent Amount thereof, and shall promptly notify Agent of any potential
or actual Event of Default with respect to any such Indebtedness.

 

4.5           Account Warranties
and Covenants.  Except as otherwise
disclosed to Agent in writing, as to each Account of Borrower (excluding
Accounts of Borrower and US Obligors in

 

20

 

an aggregate amount not
exceeding US$200,000 or the Equivalent Amount thereof at any time) that, at the
time of its creation, the Account is a valid, bona fide account, representing
an undisputed indebtedness incurred by the named account debtor for goods
actually sold and delivered or for services completely rendered; there are no
setoffs, offsets or counterclaims, genuine or otherwise, against the Account;
the Account does not represent a sale to an Affiliate or a consignment, sale or
return or a bill and hold transaction; no agreement exists permitting any
deduction or discount (other than the discount stated on the invoice); Borrower
is the lawful owner of the Account and has the right to assign the same to Agent,
for the benefit of Agent and Lenders; the Account is free of all Liens other
than those in favour of Agent, on behalf of itself and Lenders, and US Facility
Agent, on behalf of itself and the US Facility Lenders, and Prior Claims and
the Account is due and payable in accordance with its terms.  Borrower shall, at its own expense: (a) cause
all invoices evidencing Accounts and all copies thereof to bear a notice that
such invoices are payable to the lockboxes established in accordance with subsection 4.25
and (b) use its diligent efforts to assure prompt payment of all amounts
due or to become due under the Accounts. 
No discounts, credits or allowances will be issued, granted or allowed
by Borrower to customers and no returns will be accepted without Agent’s prior
written consent; provided, however, until Agent notifies Borrower
to the contrary, Borrower may presume consent. 
Borrower will immediately notify Agent in the event that a customer
alleges any dispute or claim with respect to an Account or of any other
circumstances known to Borrower that may impair the validity or collectibility
of an Account.  Agent shall have the
right, at any time or times hereafter, to verify the validity, amount or any
other matter relating to an Account, by mail, telephone or in person.  After the occurrence of an Event of Default
and upon notice from Agent to Borrower, Borrower shall not, without the prior
consent of Agent, adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereof, or allow
any credit or discount thereon.

 

4.6           Names and Locations. Schedule 4.6 sets forth, as
of the Closing Date, all names, trade names, fictitious names and business
names under which each Loan Party currently conducts business or has at any
time during the past five years conducted business and the name of any entity
which any Loan Party has acquired in whole or in part or from whom any Loan
Party has acquired a significant amount of assets within the past five years
and sets forth the location of each Loan Party’s chief executive office,
principal place of business, domicile (within the meaning of the Quebec Civil Code), the location of each Loan Party’s books
and records, the location of all other offices of each Loan Party and all
locations of Collateral and any of the real or personal property of any of the
other Loan Parties, and such locations are the applicable Loan Party’s sole
locations for its business and its real or personal property.  Borrower will give Agent at least thirty (30)
days advance written notice of: (a) any change of name or of any new trade
name or fictitious business name of any Loan Party, (b) change of chief
executive office, principal place of business, domicile (within the meaning of
the Quebec Civil Code) or jurisdiction of
incorporation or organization, (c) any change in the location of such
Person’s books and records or personal or real property, or (d) any new
location for such Person’s books and records or other personal or real
property.

 

4.7           Title to Properties;
Liens.  Borrower and each of its
Subsidiaries has good, sufficient and legal title to all of its respective
material properties and assets, in each case, free and clear of all Liens
except Permitted Encumbrances.

 

21

 

4.8           Litigation; Adverse
Facts.  There are no judgments
outstanding against any Loan Party or affecting any property of any Loan Party
nor is there any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration now pending or, to the best knowledge
of Borrower after due inquiry, threatened against or affecting any Loan Party
or any property of any Loan Party (including without limitation any tort claim
in respect of asbestos products sold or distributed by any Loan Party) which
could reasonably be expected to result in any Material Adverse Effect.  Promptly upon any officer of any Loan Party
obtaining knowledge of (a) the institution of any material action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Agent or (b) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which
could reasonably be expected to have a Material Adverse Effect, Borrower will
promptly give notice thereof to Agent and provide such other information as may
be reasonably available to enable Agent and its counsel to evaluate such
matter.

 

4.9           Payment of Taxes. All material tax returns and reports of
each Loan Party required to be filed by any of them have been timely filed and
are complete and accurate in all material respects.  All taxes, assessments, fees and other
governmental charges which are due and payable by each Loan Party have been
paid when due; provided that no such tax need be paid if the applicable
Loan Party is contesting same in good faith by appropriate proceedings promptly
instituted and diligently conducted, such Loan Party has established
appropriate reserves as shall be required in conformity with US GAAP and, if
such taxes are Prior Claims, the amount thereof has been reserved by Borrower
in its calculation of the Canadian Borrowing Base.  As of the Closing Date, none of the income
tax returns of any Loan Party are under audit and Borrower shall promptly
notify Agent in the event that any Loan Party’s tax returns become the subject
of an audit .  No tax liens have been
filed against any Loan Party.  The
charges, accruals and reserves on the books of each Loan Party in respect of
any taxes or other governmental charges are in accordance with US GAAP.  The federal tax identification number of each
Loan Party is set forth on Schedule 4.9 hereto.

 

4.10         Performance of
Agreements.  None of the Loan Parties
and none of their respective Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any material contractual obligation of any such Person, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default, in any case which could reasonably be expected
to have a Material Adverse Effect. 
Borrower shall promptly notify Agent of (a) the occurrence of any
material default or breach under any material contractual obligation of any
Loan Party, (b) the termination of any material contractual obligation of
any Loan Party in a manner adverse in any material respect to any Loan Party,
or (c) the material amendment or modification of any material contractual
obligation of any Loan Party, in a manner adverse in any material respect to
any Loan Party.

 

4.11         Employee Pension and
Benefit Plans.

 

(A)          Except as specifically disclosed in Schedule 4.11,
each Canadian Pension Plan is duly registered under the ITA and all other
applicable laws which require registration and

 

22

 

no event has occurred which is reasonably likely to cause the
loss of such registered status; all material obligations of each Loan Party
(including fiduciary, funding, investment and administration obligations)
required to be performed in connection with the Canadian Pension Plans and the
funding agreements therefor have been performed in a timely fashion; there have
been no improper withdrawals or applications of the assets of the Canadian
Pension Plans or the Canadian Benefit Plans; there are no outstanding disputes
concerning the assets of the Canadian Pension Plans or the Canadian Benefit
Plans; and each of the Canadian Pension Plans is fully funded on a solvency
basis (using actuarial methods and assumptions which are consistent with the
valuations last filed with the applicable governmental authorities, agency or
instrumentality and which are consistent with generally accepted actuarial
principles).  Each Loan Party, after
diligent inquiry, has neither any knowledge, nor any grounds for believing,
that any of the Canadian Pension Plans or Canadian Benefit Plans are the
subject of an investigation, any other proceeding, an action or a claim.  There exists no state of facts which after
notice or lapse of time or both could reasonably be expected to give rise to
any such proceeding, action or claim.

 

(B)           Each Loan Party and each ERISA Affiliate, as the case
may be, is in compliance, and will continue to remain in compliance, in all
material respects with all applicable provisions of ERISA, the IRC and all
other applicable laws and the regulations and interpretations thereof with
respect to all Employee Benefit Plans. 
No material liability has been incurred by any Loan Party or any ERISA
Affiliate, as the case may be, which remains unsatisfied for any funding
obligation, taxes or penalties with respect to any Employee Benefit Plan.

 

4.12         Intellectual Property. Each Loan Party owns, is licensed to use
or otherwise has the right to use, all Intellectual Property used in or
necessary for the conduct of its business as currently conducted, and, as of
the Closing Date, all patents, trademarks, industrial designs and registered
copyrights owned by any Loan Party and all licenses in respect of Intellectual
Property to which any Loan Party is a party, are identified on Schedule 4.12.  All US or Canadian federally registered
Intellectual Property owned by any Loan Party is valid, subsisting and
enforceable and all filings necessary to maintain the effectiveness of such
registrations have been made, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

4.13         Broker’s Fees.  No broker’s or finder’s fee or commission will
be payable with respect to any of the transactions contemplated hereby.

 

4.14         Environmental Matters. Except as set forth in Schedule 4.14,
as of the Closing Date:

 

(i)            the Real Estate is free of contamination from any
Hazardous Material except for such contamination that could not reasonably be
expected to adversely impact the value or marketability of such Real Estate and
that could not reasonably be expected to result in Environmental Liabilities of
the Loan Parties or their Subsidiaries in excess of US$500,000 in the
aggregate;

 

(ii)           no Loan Party and no Subsidiary of a Loan Party has
caused or suffered to occur any Release of Hazardous Materials on, at, in,
under, above, to,

 

23

 

from or
about any of their Real Estate that could reasonably be expected to result in
Environmental Liabilities of the Loan Parties or their Subsidiaries in excess
of [US$500,000] in the aggregate;

 

(iii)          the Loan Parties and their Subsidiaries are and have
been in compliance with all Environmental Laws, except for such noncompliance
that could not reasonably be expected to result in Environmental Liabilities of
the Loan Parties or their Subsidiaries in excess of US$500,000 in the aggregate;

 

(iv)          the Loan Parties and their Subsidiaries have obtained,
and are in compliance with, all Environmental Permits required by Environmental
Laws for the operations of their respective businesses as presently conducted
or as proposed to be conducted, except where the failure to so obtain or comply
with such Environmental Permits could not reasonably be expected to result in
Environmental Liabilities of the Loan Parties or their Subsidiaries in excess
of US$500,000  in the aggregate, and all such Environmental
Permits are valid, uncontested and in good standing;

 

(v)           no Loan Party and no Subsidiary of a Loan Party is
involved in operations or knows of any facts, circumstances or conditions,
including any Releases of Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Loan Party or Subsidiary which could
reasonably be expected to be in excess of US$500,000  in the aggregate, and no Loan Party or
Subsidiary of a Loan Party has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations;

 

(vi)          there is no Litigation arising under or related to any
Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses in excess of US$500,000  in the aggregate or
injunctive relief against, or that alleges criminal misconduct by any Loan
Party or any Subsidiary of a Loan Party;

 

(vii)         no notice has been received by any Loan Party or any
Subsidiary of a Loan Party identifying any of them as a “potentially
responsible party” or requesting information under CERCLA or analogous state or
provincial statutes, and to the knowledge of the Loan Parties, there are no
facts, circumstances or conditions that may result in any of the Loan Parties
or their Subsidiaries being identified as a “potentially responsible party”
under CERCLA or analogous state or provincial statutes except for matters that
could not reasonably be expected to result in Environmental Liabilities of the
Loan Parties or their Subsidiaries in excess of US$250,000 in the aggregate;
and

 

(viii)        the Loan Parties have provided to Agent copies of all
existing environmental reports, reviews and audits known to the Loan Parties
and all written information known to the Loan Parties pertaining to actual or
potential Environmental Liabilities, in each case relating to any of the Loan
Parties or their Subsidiaries.

 

(B)           Borrower hereby acknowledges and agrees that (i) to
its knowledge, Agent is not now, and has not ever been, in control of any of
the Real Estate or affairs of any Loan Party or its Subsidiaries, and (ii) Agent
does not have the capacity through the provisions of the

 

24

 

Loan Documents or otherwise to influence any Loan Party’s or
its Subsidiaries’ conduct with respect to the ownership, operation or
management of any of their Real Estate or compliance with Environmental Laws or
Environmental Permits.

 

4.15         Solvency.  Borrower and each of its Subsidiaries:  (a) owns and will own assets, the
aggregate of which is, at a fair valuation, sufficient, or, if disposed of at a
fairly conducted sale under legal process, would be sufficient to enable
payment of all of their respective obligations, due and arising due; (b) are
paying their current obligations in the ordinary course of business as they
generally become due; and (c) are able to meet their respective
obligations as they generally become due. 
US Borrower and each of its Domestic Subsidiaries:  (a) owns and will own assets the fair
saleable value of which on a going concern basis are (i) greater than the
total amount of its liabilities (including contingent liabilities) and (ii) greater
than the amount that will be required to pay the probable liabilities of its
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it; (b) has
capital that is not unreasonably small in relation to its business as presently
conducted or after giving effect to any contemplated or undertaken transaction;
and (c) does not intend to incur and does not believe that it will incur
debts beyond its ability to pay such debts as they become due.

 

4.16         Disclosure.  No representation or warranty of any Loan
Party contained in this Agreement, the financial statements, the other Loan
Documents, or any other document, certificate or written statement furnished to
Agent or any Lender by or on behalf of any such Person for use in connection
with the Loan Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. 
There is no material fact known to any Loan Party that has had or could
have a Material Adverse Effect and that has not been disclosed herein or in
such other documents, certificates and statements furnished to Agent or any
Lender for use in connection with the transactions contemplated hereby.

 

4.17         Insurance.  Each Loan Party maintains adequate insurance
policies for public liability, property damage, product liability, and business
interruption with respect to its business and properties and the business and
properties of its Subsidiaries against loss or damage of the kinds customarily
carried or maintained by corporations of established reputation engaged in
similar businesses and in amounts acceptable to Agent. Borrower shall cause
Agent to be named as loss payee on all insurance policies relating to any
Collateral and shall cause Agent to be named as additional insured under all
liability policies of each Loan Party, in each case pursuant to appropriate
endorsements in form and substance satisfactory to Agent and shall, and shall
cause each other Loan Party to, collaterally assign to Agent, for itself and on
behalf of Lenders, as security for the payment of Obligations of the applicable
Loan Party all business interruption insurance of each Loan Party.  No notice of cancellation has been received
with respect to such policies and each Loan Party is in compliance with all
conditions contained in such policies. 
Borrower shall apply any proceeds received from any policies of
insurance relating to any Collateral to the Obligations as set forth in subsection 2.4.  In the event Borrower fails to provide Agent
with evidence of the insurance coverage required by this Agreement, Agent may,
but is not required to, purchase insurance at Borrower’s expense to protect
Agent’s and the Lenders’ interests in the Collateral.  This insurance may, but need not, protect
each Loan Party’s interests.

 

25

 

The coverage purchased by Agent
may not pay any claim made by any Loan Party or any claim that is made against
any Loan Party in connection with the Collateral.  Borrower may later cancel any insurance
purchased by Agent, but only after providing Agent with evidence that the
applicable Loan Party has obtained insurance as required by this
Agreement.  If Agent purchases insurance
for the Collateral, Borrower will be responsible for the costs of that
insurance, including interest thereon and other charges imposed on Agent in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance, and such costs may be added to the
Obligations of Borrower.  The costs of
the insurance may be more than the cost of insurance any Loan Party is able to
obtain on its own.

 

4.18         Compliance with Laws. No Loan Party is in violation of any
law, ordinance, rule, regulation, order, policy, guideline or other requirement
of any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of its business or the ownership of its
properties, including, without limitation, any Environmental Law, which
violation would subject any Loan Party or any of its Subsidiaries, or any of
their respective officers to criminal liability or have a Material Adverse
Effect and no such violation which could reasonably be expected to have a
Material Adverse Effect has been alleged.

 

4.19         Bank Accounts.  Schedule 4.19 sets forth the
account numbers and locations of all bank accounts of each Loan Party.  Neither Borrower nor its Subsidiaries shall
establish any new bank accounts, or amend or terminate any Blocked Account or
lockbox agreement without Agent’s prior written consent.  Neither Borrower nor any of its Subsidiaries
will deposit or maintain in any disbursement account or operating account
amounts in excess of outstanding cheques written on such account, payroll
amounts and bank administration fees coming due.

 

4.20         Employee Matters.  Except as set forth on Schedule 4.20,
(a) as of the Closing Date, no Loan Party or Subsidiary of a Loan Party
nor any of their respective employees is subject to any collective bargaining
agreement, (b) as of the Closing Date, no petition for certification or
union election is pending with respect to the employees of any Loan Party or
any of their Subsidiaries and no union or collective bargaining unit has sought
such certification or recognition with respect to the employees of any Loan
Party or any of their Subsidiaries, (c) as of the Closing Date, there are
no strikes, slowdowns, work stoppages or controversies pending or, to the
best knowledge of any Loan Party after due inquiry, threatened between any Loan
Party or any of their Subsidiaries and its respective employees, other than
employee grievances arising in the ordinary course of business which would not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect; (d) hours worked by and payment made to employees
of each Loan Party and each of their Subsidiaries comply in all material
respects with the Fair Labor Standards Act and each other federal, state,
provincial, local or foreign law applicable to such matters, and (e) each
Loan Party has withheld all employee withholdings and has made all employer
contributions to be withheld and made by it pursuant to applicable law on
account of the Canada and Quebec Pension plans, employment insurance and
employee income taxes; all payments due from any Loan Party for U.S. employee
health and welfare insurance have been paid or accrued as a liability on the
books of such Loan Party.  Except as set
forth on Schedule 4.20, as of the Closing Date, neither Borrower
nor any other Loan Party is party to an employment contract.

 

26

 

4.21         Governmental
Regulation.  None of the Loan Parties
is subject to regulation under the United States Public
Utility Holding Company Act  of 1935, Federal Power Act or Investment Company Act
of 1940 or to any US or Canadian
federal, state or provincial statute or regulation limiting its ability to
incur indebtedness for borrowed money.

 

4.22         Access to Accountants
and Management.  Borrower authorizes
Agent and Lenders to discuss the financial condition and financial statements
of the Loan Parties with Holdings’ Accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes Holdings’ Accountants to
respond to all of Agent’s inquiries. Agent and each Lender may, with the
consent of Agent, which will not be unreasonably denied, and upon prior notice
(in the absence of an Event of Default), confer with Loan Parties’ management
directly regarding Loan Parties’ business, operations and financial condition.

 

4.23         Inspection; Field
Exams.  Borrower shall permit Agent
and any authorized representatives designated by Agent and shall cause each
other Loan Party to permit such representatives to visit and inspect any of the
properties of Borrower or any other Loan Party, including their financial and
accounting records, and, in conjunction with such inspection, to make copies
and take extracts therefrom, and to discuss their affairs, finances and
business with their officers and Holdings’ Accountants, upon prior notice (in
the absence of an Event of Default) and at such reasonable times during normal
business hours and as often as may be reasonably requested.  Each Lender may, with the consent of Agent,
which will not be unreasonably denied, accompany Agent on any such visit or
inspection (at such Lender’s expense in the absence of a continuing Event of
Default described in either of subsection 8.1(A) or 8.1(C) (as
a result of any breach of the Financial Covenants Rider)).  Obligors shall permit Agent and any
authorized representatives designated by Agent to conduct field examinations
with respect to any of the properties of Borrower or any of its Subsidiaries,
from time to time, upon prior notice (in the absence of an Event of Default)
and at such reasonable times during normal business hours and as often as may
be reasonably requested; provided, however, so long as no Default
or Event of Default is continuing, (1) Agent shall not conduct field
audits during the first Loan Year other than during the period from January 1,
2006 through March 31, 2006 and (2) following the first Loan Year,
Agent shall not conduct field examinations with respect to any division of the
US Obligors more than once every Loan Year.

 

4.24         Collateral Records. Borrower shall keep, and cause each Loan
Party to keep, full and accurate books and records relating to the Collateral
and shall mark such books and records to indicate Agent’s security interests
and other Liens thereon, for the benefit of Agent and Lenders.

 

4.25         Collection of Accounts
and Payments.  On or prior to the
Closing Date, Borrower shall have established lockboxes and blocked accounts
(collectively, “Blocked Accounts”) in its name with such banks (“Collecting
Banks”) as are acceptable to Agent (subject to irrevocable instructions
acceptable to Agent as hereinafter set forth) to which all account debtors of
Borrower shall directly remit all payments on Accounts of Borrower and in which
Borrower will immediately deposit all payments made for Inventory or other
payments constituting proceeds of Borrower Collateral in the identical form in
which such payment was made, whether by cash or cheque.  The Collecting Banks shall acknowledge and
agree, in a manner satisfactory to Agent, that the Collecting Banks have no
right to setoff against the Blocked Accounts at any time.  The

 

27

 

Collecting Banks shall further
acknowledge and agree, in a manner satisfactory to Agent, that during the
Activation Period:  (i) all payments
made to the Blocked Accounts are the sole and exclusive property of Agent and
US Facility Agent for their benefit and for the benefit of Lenders and US
Facility Lenders and (ii) all such payments received will be promptly
transferred to Agent’s Account.  Borrower
hereby agrees that (i) Agent and US Facility Agent, for their benefit and
for the benefit of Lenders and US Facility Lenders, have been granted a Lien on
such Blocked Accounts and all funds on deposit therein as additional collateral
security for the Obligations and the indebtedness and obligations under the US
Facility Loan Agreement and (ii) during the Activation Period, all
payments made to such Blocked Accounts or otherwise received by Agent and
whether on the Accounts or as proceeds of other Borrower Collateral or
otherwise will be the sole and exclusive property of Agent and US Facility
Agent, for their benefit and for the benefit of Lenders and US Facility
Lenders.  Borrower shall irrevocably
instruct each Collecting Bank to promptly transfer, during the Activation
Period, all payments or deposits to the Blocked Accounts into Agent’s
Account.  If Borrower, or any if its
Affiliates, employees, agents or other Person acting for or in concert with
Borrower, shall during the Activation Period receive any monies, cheques,
notes, drafts or any other payments relating to and/or proceeds of Accounts of
Borrower or other Borrower Collateral, Borrower shall cause such Person to hold
such instrument or funds in trust for Agent, and, immediately upon receipt
thereof, shall remit the same or cause the same to be remitted, in kind, to the
Blocked Accounts or to Agent at its address set forth in subsection 10.3
below.  Notwithstanding any provision to
the contrary herein or in any other Loan Document, prior to the Activation
Period: (i) Borrower shall have sole dominion and control over the funds
in the Blocked Accounts and the Collecting Banks shall transfer or apply funds
on deposit therein in accordance with the instructions of Borrower, (ii) Borrower
shall have no obligation to apply the funds in the Blocked Accounts to reduce
any Obligations, and the Lenders and US Facility Lenders shall not have any
right to cause such funds to be so applied, and (iii) neither the Agent
nor the US Facility Agent shall have any right to endorse or collect any
payments made to the Blocked Accounts, or to withdraw any funds from the
Blocked Accounts, or to direct how the funds in the Blocked Accounts are
applied.  An Activation Notice shall not
be given unless and until either (i) an Event of Default occurs or (ii) Excess
Availability is less than US$10,000,000 and, in the case of this clause (ii),
Requisite Lenders have directed that such Activation Notice be given or have
consented thereto.

 

Borrower may amend any
one or more of the Schedules referred in this Section 4 (subject to
prior notice to Agent, as applicable) and any representation, warranty, or
covenant contained herein which refers to any such Schedule shall from and
after the date of any such amendment refer to such Schedule as so amended;
provided  however, that in no event shall the amendment of any
such Schedule constitute a waiver by Agent and Lenders of any Default or
Event of Default that exists notwithstanding the amendment of such Schedule.

 

SECTION 5.

REPORTING AND OTHER AFFIRMATIVE COVENANTS

 

Borrower covenants and
agrees that, so long as the Revolving Loan Commitment shall be in effect and
until payment in full of all Obligations, Borrower shall perform, and shall cause the other Loan Parties to perform, all
covenants in this Section 5 applicable to such Person.

 

28

 

5.1           Financial Statements
and Other Reports.  Borrower will
deliver to Agent and each Lender (unless specified to be delivered solely to
Agent) the financial statements and other reports contained in the Reporting
Rider attached hereto.

 

5.2           Endorsement.  Borrower hereby constitutes and appoints Agent
and all Persons designated by Agent for that purpose as Borrower’s true and
lawful attorney-in-fact, with power to endorse Borrower’s name to any of the
items of payment or proceeds described in subsection 4.25 above and
all proceeds of Collateral that come into Agent’s possession or under Agent’s
control.  Both the appointment of Agent
as Borrower’s attorney and Agent’s rights and powers are coupled with an
interest and are irrevocable until payment in full and complete performance of
all of the Obligations (other than contingent indemnity obligations to the
extent no unsatisfied claim has been asserted).

 

5.3           Maintenance of
Properties.  Each Loan Party will
maintain or cause to be maintained in good repair, working order and condition
all material properties used in the businesses of Loan Parties and their
Subsidiaries and will make or cause to be made all appropriate repairs,
renewals and replacements thereof.

 

5.4           Compliance with
Laws.  Each Loan Party will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority as now in effect and which may be imposed in the future
in all jurisdictions in which the Loan Parties or any of their Subsidiaries is
now doing business or may hereafter be doing business, other than those laws
the noncompliance with which would not have a Material Adverse Effect.

 

5.5           Further Assurances. Each Loan Party shall, and shall cause
its Subsidiaries to, from time to time, execute such guaranties, financing,
financing change or continuation statements, documents, security agreements,
reports and other documents or deliver to Agent such instruments, certificates
of title, mortgages, deeds of trust, deeds of hypothecs, or other documents as
Agent at any time may reasonably request to evidence, perfect, publish or
otherwise implement the guaranties and security for repayment of the
Obligations provided for in the Loan Documents. Without limiting the foregoing,
(a) Borrower shall, and shall cause the other Loan Parties to, execute and
file such financing, financing change and continuation statements, or
amendments thereto, and such other instruments, documents or notices, as may be
necessary or desirable, or as Agent may request, in order to create, preserve
and protect the security interests, hypothecs or liens granted or purported to
be granted hereby or pursuant to any other Loan Document and (b) Borrower
shall cause each Person, upon its becoming a Subsidiary of Borrower (provided
that this shall not be construed to constitute consent by any of the Lenders to
any transaction referred to above which is not expressly permitted by the terms
of this Agreement), promptly to guarantee the Obligations and to grant to
Agent, for the benefit of Agent and Lenders, security interests in the property
of such Person to secure the Obligations and shall pledge, or cause to be
pledged, to Agent, for the benefit of Agent and Lenders, all of the equity
interests of such Subsidiary to secure the Obligations.

 

29

 

5.6           Mortgages; Consents
and Waivers, Title Insurance; Surveys and Certificates of Location.

 

(A)          Title Insurance.  On or before the
Closing Date in respect of the Mortgaged Property located in the United States
(or within thirty (30) days following delivery of any Mortgage with respect to
any Additional Mortgaged Property, regardless of where located), Borrower
shall, except as otherwise agreed by Agent, deliver or cause to be delivered to
Agent ALTA lender’s title insurance policies or date down endorsement to any
existing title insurance policies issued by title insurers reasonably
satisfactory to Agent (the “Mortgage Policies”) in form and substance and in
amounts reasonably satisfactory to Agent assuring Agent that the Mortgages are
valid and enforceable first priority mortgage liens (or the equivalent thereof
under applicable law) on the respective Mortgaged Property or Additional
Mortgaged Property, free and clear of all defects and encumbrances except
Permitted Encumbrances.  The Mortgage
Policies shall be in form and substance reasonably satisfactory to Agent and
shall include an endorsement insuring against the effect of future advances
under this Agreement, for mechanics’ liens and for any other matter that Agent
may reasonably request; .

 

(B)           Additional Mortgaged Property. 
Borrower shall as promptly as possible (and in any event within sixty
(60) days after such designation) deliver to Agent a fully executed Mortgage,
in form and substance satisfactory to Agent, together with title insurance
policies and surveys or, in case of real property in the Province of Quebec,
certificates of location, on any Additional Mortgaged Property designated by
Agent.

 

(C)           Leaseholds.  In the case
of each leasehold constituting Mortgaged Property or Additional Mortgaged
Property, Agent shall have received such estoppel letters, consents and waivers
from the landlords and non-disturbance agreements from any holders of
mortgages, deeds of trust or deeds of hypothec on such real property as may
have been requested by Agent, which letters shall be in form and substance
satisfactory to Agent.

 

(D)          Surveys and Certificates of Location. 
On or before the Closing Date (or within thirty (30) days following
delivery of any Mortgage with respect to Additional Mortgaged Property),
Borrower shall, to the extent necessary to obtain the Mortgage Policies,
deliver or cause to be delivered to Agent current surveys or certificates of
location, as applicable, certified or executed by a licensed surveyor, for all
real property that is the subject of the Mortgage Policies including Additional
Mortgaged Property for which a Mortgage Policy is issued.  All such surveys and certificates of location
or equivalents thereof shall be sufficient to allow the issuer of the Mortgage
Policy to remove the general survey exception (or the applicable equivalent
thereof).

 

5.7           Use of Proceeds. Borrower shall use the proceeds of all Revolving
Advances for proper business purposes (as described in the recitals to this
Agreement) consistent with all applicable laws, statutes, rules and
regulations.

 

5.8           Bailees.  If any Collateral is at any time in the
possession or control of any warehouseman, bailee or US Obligor’s agents or
processors, upon the request of Agent, Borrower shall notify, or arrange the
notification of, such warehouseman, bailee, agent or processor of the security
interests (or applicable equivalents thereof) in favour of Agent, for the
benefit of Agent and Lenders, created hereby or the other Loan Documents, and
shall instruct such Person to hold all such Collateral for Agent’s Account
subject to Agent’s instructions.

 

30

 

5.9           Third Party
Inventory.  All inventory and
products owned by Persons other than a Loan Party and located on any premises
owned, leased or controlled by any Loan Party, shall be separately and
conspicuously identified as such and shall be segregated from such Loan Party’s
own Inventory located at such premises.

 

5.10         Environmental
Matters.

 

Each Loan Party shall and
shall cause each Person within its control to: (a) conduct its operations
and keep and maintain its Real Estate in compliance with all Environmental Laws
and Environmental Permits other than noncompliance that would not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining
to the presence, generation, treatment, storage, use, disposal, transportation
or Release of any Hazardous Material on, at, in, under, above, to, from or
about any of its Real Estate, except, in each case, where the failure to do so
could not reasonably be expected to have a Material Adverse Effect; (c) notify
Agent promptly after such Loan Party or any Person within its control becomes
aware of any violation of Environmental Laws or Environmental Permits or any
Release on, at, in, under, above, to, from or about any Real Estate that is
reasonably likely to result in a Material Adverse Effect; and (d) promptly
forward to Agent a copy of any order, notice, request for information or any
communication or report received by such Loan Party or any Person within its
control in connection with any such violation, Release or order or any other
matter relating to any Environmental Laws or Environmental Permits that would
reasonably be expected to result in a Material Adverse Effect.  If Agent at any time has a reasonable basis
to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Loan Party or any Person under its control, or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about, any of its Real Estate that, in
each case, would reasonably be expected to have a Material Adverse Effect, then
each Loan Party and its Subsidiaries shall, upon Agent’s written request (i) cause
the performance of such environmental audits including subsurface sampling of
soil and groundwater, and preparation of such environmental reports, at
Borrower’s expense, as Agent may from time to time reasonably request, which
shall be conducted by reputable environmental consulting firms reasonably
acceptable to Agent and shall be in form and substance reasonably acceptable to
Agent, and (ii) permit Agent or its representatives to have access to all
Real Estate for the purpose of conducting such environmental audits and testing
as Agent reasonably deems appropriate, including subsurface sampling of soil
and groundwater.  Borrower shall
reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.

 

5.11         Currency Rate
Agreement.  If Agent shall determine
in its reasonable credit judgment that Borrower and its Subsidiaries at any
time hereafter have a material currency exchange risk exposure relative to
Borrower’s Obligations hereunder, then, within sixty (60) days after a request
by Agent to do so, Borrower shall enter into (and thereafter maintain) Currency
Rate Agreements to hedge such currency exchange exposure in a manner, and upon
terms and conditions, reasonably satisfactory to Agent.

 

31

 

“Currency Rate Agreement”
means any currency rate swap agreement, currency forward purchase contract or
similar agreement or arrangement entered into between Borrower and any Lender
(or Affiliate of any Lender), designed to protect Borrower against fluctuations
in currency exchange rates entered into in accordance with this subsection 5.10.

 

SECTION 6.

FINANCIAL COVENANTS

 

Borrower covenants and
agrees that so long as the Revolving Loan Commitment remains in effect and
until indefeasible payment in full of all Obligations, Borrower and each other
Loan Party shall comply with all covenants contained in the Financial Covenants
Rider.

 

SECTION 7.

NEGATIVE COVENANTS

 

Borrower covenants and
agrees that so long as the Revolving Loan Commitment remains in effect and
until indefeasible payment in full of all Obligations, Borrower shall not and
will not permit any other Loan Party (except where indicated) to:

 

7.1           Indebtedness and
Liabilities.  Directly or indirectly
create, incur, assume, guarantee, or otherwise become or remain directly or
indirectly liable, on a fixed or contingent basis, with respect to any Indebtedness
except:

 

(a)           the Obligations;

 

(b)           intercompany Indebtedness (i) outstanding on the
Closing Date, and (ii) arising from loans made by US Borrower to its
Subsidiaries following the Closing Date to fund working capital requirements of
such Subsidiaries in the ordinary course of business and to fund Permitted
Acquisitions; provided, however, that the aggregate outstanding
principal amount of intercompany loans from US Borrower to Beacon Canada
Holdings and Borrower shall not exceed an amount equal to the outstanding
balance of such intercompany loan as of the Closing Date (after giving effect
to the Related Transactions on the Closing Date) plus US$3,000,000 or the
Equivalent Amount thereof in Canadian Dollars at any time; provided, further,
that upon the request of Agent at any time, such Indebtedness shall be
evidenced by promissory notes having terms reasonably satisfactory to Agent,
the sole originally executed counterparts of which shall be delivered to US
Facility Agent and shall be pledged to (i) US Facility Agent, for the
benefit of US Facility Agent and US Facility Lenders, as security for the
obligations under the US Facility Loan Documents and (ii) Agent, for the
benefit of Agent and Lenders, as security for the payee Loan Party’s Obligations;

 

(c)           Indebtedness of US Borrower pursuant to the US
Facility Loan Documents;

 

(d)           in the case of the Loan Parties, other than Borrower
and its Subsidiaries, Indebtedness permitted under the US Facility Loan
Agreement;

 

32

 

(e)           Indebtedness not to exceed US$12,000,000, or the
Equivalent Amount thereof in Canadian Dollars, in the aggregate for all Loan
Parties at any time outstanding secured by purchase money Liens or incurred
with respect to Capital Leases;

 

(f)            unsecured Indebtedness not to exceed US$15,000,000, or
the Equivalent Amount thereof in Canadian Dollars, in the aggregate for all
Loan Parties at any time outstanding which is subordinated to the Obligations
in a manner satisfactory to Agent and Requisite Lenders;

 

(g)           Indebtedness existing on the Closing Date and
identified on Schedule 7.1;

 

(h)           unsecured Indebtedness of Holdings incurred in
connection with any Permitted Acquisition; provided, however, that any such
Indebtedness shall (i) have a maturity date no earlier than ninety (90)
days after the date set forth in clause (a) of the definition of “Termination
Date”, (ii) shall be fully subordinated to the Obligations in a manner
satisfactory to Agent and (iii) be otherwise issued pursuant to terms and
conditions reasonably satisfactory to Agent; and

 

(i)            “earn-out” payment obligations of US Borrower under
the Shelter Acquisition Documents.

 

Loan Parties will not,
and will not permit the other Loan Parties to, incur any Liabilities except for
Indebtedness permitted herein and trade payables and normal accruals in the
ordinary course of business not yet due and payable or with respect to which
any Loan Party is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that such Loan Party has
established adequate reserves therefor under US GAAP.

 

7.2           Contingent
Obligations.  Directly or indirectly
create or become or be liable with respect to any Contingent Obligation (other
than in respect of the Obligations) except:

 

(a)           those resulting from Currency Rate Agreements and
Interest Rate Agreements entered into by Borrower with any Lender (or Affiliate
of a Lender) or otherwise with Agent’s prior written approval;

 

(b)           those resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;

 

(c)           those existing on the Closing Date and described in Schedule 7.2
annexed hereto;

 

(d)           those arising under indemnity agreements to title
insurers to cause such title insurers to issue to Agent mortgagee title
insurance policies;

 

(e)           those arising with respect to customary
indemnification obligations incurred in connection with Asset Dispositions or
Permitted Acquisitions;

 

33

 

(f)            those incurred in the ordinary course of business with
respect to surety and appeal bonds, performance and return-of-money bonds and
other similar obligations not exceeding at any time outstanding US$200,000, or
the Equivalent Amount thereof, in aggregate liability for all Loan Parties;

 

(g)           those incurred with respect to Indebtedness permitted
by clauses (a), (c), (e), and (f) of subsection 7.1
provided that any guaranty of Indebtedness that is subordinated to the
Obligations shall be subordinated to the same extent that such Indebtedness is
subordinated to the Obligations;

 

(h)           in the cases of the Loan Parties, other than Borrower
and its Subsidiaries, those that are permitted under the US Facility Loan
Agreement; and

 

(i)            any other Contingent Obligation not expressly
permitted by clauses (a) through (h) above, so long as
any such other Contingent Obligations, in the aggregate at any time outstanding
for all Loan Parties, do not exceed US$500,000, or the Equivalent Amount
thereof.

 

7.3           Transfers, Liens and
Related Matters.

 

(a)           Transfers.  Sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to any of the Collateral or the assets or property of any other
Loan Party, except that Borrower, US Borrower and its other Subsidiaries may (i) sell
Inventory to customers in the ordinary course of business and dispose of
obsolete equipment not used or useful in the business for fair value; and (ii) make
Asset Dispositions if all of the following conditions are met: (1) the
aggregate market value of assets sold or otherwise disposed of in any Fiscal
Year does not exceed US$500,000 or the
Equivalent Amount thereof (for all such Loan Parties); (2) the
consideration received is at least equal to the fair market value of such
assets; (3) at least 75% of the consideration received is cash;  (4) the net proceeds of such Asset
Disposition are applied as required by subsection 2.4 or the US
Facility Loan Agreement, as applicable; (5) after giving effect to the
sale or other disposition of the assets included within the Asset Disposition
and the repayment of the Obligations or the obligations under the US Facility
Loan Documents, as applicable, with the proceeds thereof, each Loan Party is in
compliance on a pro forma basis with the covenants set forth in the
Financial Covenants Rider recomputed for the most recently ended fiscal quarter
or fiscal month (as applicable) for which information is available and is in
compliance with all other terms and conditions contained in this Agreement; and
(6) no Default or Event of Default shall then exist or result from such
sale or other disposition.

 

(b)           Liens.  Except for
Permitted Encumbrances, directly or indirectly create, incur, assume or permit
to exist any Lien on or with respect to any of the Collateral or the assets of
any other Loan Party or any proceeds, income or profits therefrom.

 

(c)           No Negative Pledges. 
Enter into or assume any agreement (other than the Loan Documents and
the US Facility Loan Documents) prohibiting the creation or assumption of any
Lien upon the properties or assets of any Loan Party, whether now owned or
hereafter acquired.

 

34

 

(d)           No Restrictions on Subsidiary Distributions. 
Except as provided herein and in the US Facility Loan Documents,
directly or indirectly create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Subsidiary of Borrower to: (1) pay dividends or make any other
distribution on any of such Subsidiary’s shares or capital stock owned by
Borrower or any Subsidiary of Borrower; (2) pay any indebtedness owed to
Borrower or any Subsidiary of Borrower; (3) make loans or advances to
Borrower or any Subsidiary of Borrower; or (4) transfer any of its
property or assets to Borrower or any Subsidiary of Borrower.

 

7.4           Investments and
Loans.  Make or permit to exist
investments in or loans to any other Person, except:  (a) Cash Equivalents; (b) intercompany
loans by US Borrower to its Subsidiaries to the extent permitted under subsection 7.1;
(c) loans and advances to employees for moving, entertainment, travel and
other similar expenses in the ordinary course of business in an aggregate
outstanding amount not in excess of US$300,000, or the Equivalent Amount
thereof, for all employees of all Loan Parties, at any time; (d) promissory
notes of employees issued to Holdings in consideration for shares of capital
stock of Holdings issued by Holdings to such employees in an aggregate
outstanding amount not exceeding US$750,000, or the Equivalent Amount thereof,
at any time; and (e) Permitted Acquisitions consummated by US Obligors.

 

7.5           Restricted Junior
Payments.  Directly or indirectly
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, except that:

 

(a)           Borrower may make payments and distributions to Beacon
Canada Holdings that are used by Beacon Canada Holdings to make payments and
distributions to US Borrower, the proceeds of which payments and distributions
US Borrower uses to make payments and distributions to Holdings in order that
Holdings may pay US federal and state income taxes then due and owing,
franchise taxes and other similar licensing expenses incurred in the ordinary
course of business; provided that Borrower’s aggregate contribution to taxes as
a result of the filing of a consolidated or combined return by Holdings shall
not be greater, nor the aggregate receipt of tax benefits less, than they would
have been had Borrower and its Subsidiaries not filed a consolidated or
combined return with Holdings;

 

(b)           Subsidiaries of Borrower may make Restricted Junior
Payments to Borrower;

 

(c)           US Borrower may make distributions to Holdings to
permit Holdings to redeem (and Holdings may redeem) shares of its capital stock
(or warrants or options to acquire any such shares) from employees of US
Borrower and its Subsidiaries upon the death or other termination of employment
of such employees, provided all of the following conditions are satisfied:

 

(i)            no Default or Event of Default shall have occurred and
be continuing or would arise as a result of such distribution or redemption;

 

(ii)           after giving effect to such distribution and
redemption, the Loan Parties shall be in compliance on a pro forma basis with
all covenants and

 

35

 

agreements
set forth in the Financial Covenants Rider (excluding paragraph A
thereof) recomputed for the twelve-month period ending on the last day of the
most recent fiscal quarter for which Agent has received the monthly financial
statements required to be delivered pursuant to paragraph (A) of the
Reporting Rider;

 

(iii)          the aggregate amount of such distributions permitted
in any fiscal year of US Borrower shall not exceed US$500,000; and

 

(iv)          after giving effect to such distribution and payment
and the making of any US Facility Revolving Loan to fund such distribution,
Excess Availability is at least US$10,000,000; and

 

(d)           in the cases of the Loan Parties, other than Borrower
and its Subsidiaries, may make Restricted Junior Payments permitted under the
US Facility Loan Agreement.

 

7.6           Restriction on
Fundamental Changes.

 

(a)           Enter into any transaction of amalgamation, merger or
consolidation; (b) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution); (c) convey, sell, lease, sublease, transfer
or otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its business or assets, or the capital stock or shares
of any of its Subsidiaries, whether now owned or hereafter acquired; or (d) acquire
by purchase or otherwise all or any substantial part of the business or assets
of, or stock, shares or other beneficial ownership of, any Person, except
pursuant to a Permitted Acquisition.

 

7.7           Changes Relating to
Indebtedness.  Change or amend the
terms of any of its Indebtedness permitted by clauses (b) through (h) of
subsection 7.1 if the effect of such amendment is an attempt to: (a) increase
the interest rate on such Indebtedness; (b) change the dates upon which
payments of principal of or interest on such Indebtedness are due; (c) change
any event of default or add any covenant with respect to such Indebtedness; (d) change
the payment provisions of such Indebtedness; (e) change the subordination
provisions thereof; or (f) change or amend any other term if such change
or amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner adverse
to any Loan Party, Agent or any Lender.

 

7.8           Transactions with
Affiliates.  Directly or indirectly,
enter into or permit to exist any transaction (including the purchase, sale or
exchange of property or the rendering of any service) with any Affiliate or
with any officer, director or employee of any Loan Party, except (a) for
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of any Loan Party and upon fair and reasonable
terms which are fully disclosed to Agent and are no less favourable to such
Loan Party than would be obtained in a comparable arm’s length transaction with
a Person that is not an Affiliate, (b) for payment of reasonable
compensation to officers and employees for services actually rendered to such
Loan Party, and (c) for payment of reasonable fees to independent
directors.

 

7.9           Conduct of Business. From and after the Closing Date, engage
in any business other than businesses of the type engaged in by such Loan Party
on the Closing Date.

 

36

 

7.10         Tax Consolidations. File or consent to the filing of any
consolidated income tax return with any Person other than the Loan Parties; provided
that the contribution of Borrower and its Subsidiaries with respect to taxes as
a result of the filing of a consolidated return with Holdings shall not be
greater, nor the receipt of tax benefits less, than they would have been had
Borrower and its Subsidiaries not filed a consolidated return with Holdings.

 

7.11         Subsidiaries.  Other than the Subsidiaries set forth on Schedule 7.11,
establish, create or acquire any new Subsidiaries other than in connection with
a Permitted Acquisition..

 

7.12         Fiscal Year; Tax
Designation.  Change its Fiscal Year;
or, in the case of the Loan Parties other than Borrower, elect to be designated
as an entity other than a C corporation or, in the case of Borrower, elect to
be designated as an entity other than an unlimited liability company.

 

7.13         Press Release; Public
Offering Materials.  Borrower agrees
that none of it, the other Loan Parties or any of their respective Affiliates
will in the future issue any press releases or other public disclosure,
including any prospectus, proxy statement or other materials filed with any
Governmental Authority relating to a public offering of the Stock of any Loan
Party or any of its Subsidiaries, using the name of GE Canada Finance or GE
Capital or any of their respective Affiliates or specifically referring to this
Agreement, the other Loan Documents or the Related Transactions Documents
without at least two (2) Business Days’ prior notice to GE Canada Finance
and GE Capital and without the prior written consent of GE Canada Finance and
GE Capital except that, to the extent (and only to the extent) such disclosure
is required under applicable law or under the applicable rules of any
national securities exchange, national securities association, national market
system or similar provincial self-regulatory organization or any other
self-regulatory organization, the Loan Parties may make such disclosure without
the consent of GE Capital and GE Canada Finance, and except in the case of any
material disclosure, without giving prior notice to GE Capital and GE Canada
Finance, provided that the Loan Parties must in all events use reasonable
efforts to consult with GE Capital and GE Canada Finance before making such
disclosure.  Borrower consents to the
publication by Agent or any Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this
Agreement.  Agent or such Lender shall
provide a draft of any such tombstone or similar advertising material to each
Loan Party for review and comment prior to the publication thereof.  Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.

 

7.14         Bank Accounts.  In the case of Borrower and its Subsidiaries,
establish any new bank accounts, or attempt to amend or terminate any Blocked
Account or lockbox agreement without Agent’s prior written consent.

 

7.15         Hazardous
Materials.

 

Borrower shall
not and shall not cause or permit any Loan Party or any of their respective
Subsidiaries to cause or permit a Release of any Hazardous Material on, at, in,
under, above, to, from or about any of the Real Estate where such Release would
(a) violate in any respect, or form the basis for any Environmental
Liabilities by the Loan Parties or any of their Subsidiaries under, any
Environmental Laws or Environmental Permits or (b) otherwise

 

37

 

adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations, Environmental Liabilities or adverse impact on value or
marketability that could not reasonably be expected, in either case, to have a
Material Adverse Effect.

 

7.16         CIGNA
Impress Account.

 

Maintain more than
US$125,000 on deposit in the CIGNA Impress Account.

 

SECTION 8.

DEFAULT, RIGHTS AND REMEDIES

 

8.1           Event of Default. “Event of Default” shall mean the
occurrence or existence of any one or more of the following (for each subsection a
different grace or cure period may be specified, if no grace or cure period is
specified, such occurrence or existence constitutes an immediate Event of
Default):

 

(A)          Payment.  (1) Failure
to pay any payments of principal of the Revolving Loan when due, or to repay
the Revolving Loan to reduce its balance to the Maximum Revolving Loan Amount
or (2) failure to pay, within (5) days after the due date, any
interest on the Revolving Loan or any other amount due (other than principal of
the Revolving Loan) under this Agreement or any of the other Loan Documents; or

 

(B)           Default in Other Agreements. 
(1) Failure of any Loan Party to pay when due any principal or
interest on any Indebtedness (other than the Obligations) or (2) breach or
default of any Loan Party with respect to any Indebtedness (other than the
Obligations); if such failure to pay, breach or default entitles the holder to
cause such Indebtedness having an individual principal amount in excess of
US$200,000, or the Equivalent Amount thereof or having an aggregate principal
amount in excess of US$300,000, or the Equivalent Amount thereof, to become or
be declared due prior to its stated maturity; or

 

(C)           Breach of Certain Provisions. 
(1) Failure of any Loan Party to perform or comply with any term or
condition contained in paragraph (A) or (B) of the
Reporting Rider, that portion of subsection 4.17 relating to Loan
Parties’ obligations to maintain insurance or subsection 5.1, or
contained in Section 7 or the Financial Covenants Rider; or (2) failure
of any Loan Party to perform or comply with any term or condition contained in paragraph
(D), (E) or (J) of the Reporting Rider and such failure is not
remedied or waived within five (5) Business Days (two (2) Business
Days in the case of any term or condition contained in paragraph (E) of
the Reporting Rider to be performed on a weekly basis) after the date such failure
first occurs; or

 

(D)          Breach of Warranty.  Any
representation, warranty, certification or other statement made by any Loan
Party in any Loan Document or in any statement or certificate at any time given
by such Person in writing pursuant to or in connection with any Loan Document
is false in any material respect on the date made; or

 

(E)           Other Defaults Under Loan Documents. 
Borrower or any other Loan Party defaults in the performance of or
compliance with any term contained in this Agreement,

 

38

 

other than those otherwise set forth in this subsection 8.1,
or defaults in the performance of or compliance with any term contained in any
other Loan Document and such default is not remedied or waived within fifteen
(15) days after notice from Agent, as required, or Requisite Lenders, to
Borrower of such default; or

 

(F)           Change in Control. (1) Any person or group of persons (within the
meaning of the Securities Exchange Act of 1934) other than the underwriters in
a public offering or CHS shall acquire beneficial ownership (within the meaning
of Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934) of 25% or more of the issued and
outstanding shares of capital stock of Holdings having the right to vote for
the election of directors of Holdings under ordinary circumstances; or (2) Holdings ceases to beneficially and of record
own and control all of the issued and outstanding capital stock or other equity
securities of US Borrower free and clear of all Liens other than Liens in
favour of Agent and US Facility Agent; or (3) US Borrower ceases to
beneficially own and control, directly or indirectly, free and clear of all
Liens other than Liens in favour of Agent and US Facility Agent, 100% of the
issued and outstanding shares of each class of capital stock or other equity
securities entitled (without regard to the occurrence of any contingency) to
vote for the election of a majority of the members of the boards of directors
of any Loan Party other than US Borrower and Holdings; or

 

(G)           Involuntary Bankruptcy; Appointment of Receiver, etc. 
(1) A court enters a decree or order for relief with respect to any
Loan Party in an involuntary case under any applicable Insolvency Law now or
hereafter in effect, which decree or order is not stayed or other similar
relief is not granted under any applicable law; or (2) the continuance of
any of the following events for forty-five (45) days unless dismissed, bonded
or discharged: (a) an involuntary case is commenced against any Loan
Party, under any applicable Insolvency Law now or hereafter in effect; or (b) a
receiver, interim receiver, receiver and manager, liquidator, sequestrator,
trustee, monitor, custodian or other Person having similar powers over any Loan
Party, or over all or a substantial part of their respective property, is
appointed; or

 

(H)          Voluntary Bankruptcy; Appointment of Receiver, etc. 
(1) Any Loan Party commences a voluntary case or proceeding under
any applicable Insolvency Law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case or proceeding or to the
conversion of an involuntary case or proceeding to a voluntary case or
proceeding under any such law or consents to the appointment of or taking
possession by a receiver, interim receiver, receiver and manager, trustee,
monitor, custodian or other similar Person for all or a substantial part of its
property; or (2) any Loan Party makes any assignment for the benefit of
creditors; or (3) the board of directors of any Loan Party adopts any
resolution or otherwise authorizes action to approve any of the actions
referred to in this subsection 8.1(H); or

 

(I)            Liens.  Any lien,
levy or assessment is filed or recorded with respect to or otherwise imposed
upon all or any part of the Collateral or the assets of US Borrower or any of
its Subsidiaries by Canada (Her Majesty in Right of Canada) or the United
States or any department, agency or instrumentality thereof or by any province,
state, county, municipality or other governmental agency (other than Permitted
Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or
discharged within ten (10) days; or

 

39

 

(J)            Judgment and Attachments. 
Any money judgment, writ or warrant of execution or attachment, or
similar process involving (1) an amount in any individual case in excess
of US$300,000, or the Equivalent Amount thereof, or (2) an amount in the
aggregate at any time in excess of US$500,000, or the Equivalent Amount thereof
(in either case not adequately covered by insurance as to which the insurance
company has acknowledged coverage) is entered or filed against any Loan Party
or any of their respective assets and remains undischarged, unvacated, unbonded
or unstayed for a period of thirty (30) days, but in any event not later than
five (5) days prior to the date of any proposed sale thereunder; or

 

(K)          Dissolution.  Any order,
judgment or decree is entered against any Loan Party decreeing the dissolution,
winding-up or split up of such Loan Party and such order remains undischarged
or unstayed for a period in excess of fifteen (15) days, but in any event not
later than five (5) days prior to the date of any proposed dissolution,
winding-up or split up; or

 

(L)           Solvency. Any Loan Party ceases to be solvent (as represented
by the Loan Parties in subsection 4.15) or admits in writing its
present or prospective inability to pay its debts as they become due; or

 

(M)         Injunction. Any Loan Party is enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business and such order
continues for fifteen (15) days or more; or

 

(N)          Invalidity of Loan Documents. 
Any of the Loan Documents for any reason, other than a partial or full
release in accordance with the terms thereof, ceases to be in full force and
effect or is declared to be null and void, or any Loan Party denies that it has
any further liability under any Loan Document to which it is party, or gives
notice to such effect; or

 

(O)          Failure of Security. 
Agent, on behalf of itself and Lenders, does not have or ceases to have
a valid and perfected first priority security interest (or the applicable
equivalent thereof) in the Collateral (subject to Permitted Encumbrances), in
each case, for any reason other than the failure of Agent or any Lender to take
any action within its control; or

 

(P)           Income Tax Act. 
A requirement from the Minister of National Revenue for payment pursuant
to Section 224 or any successor section of the Income Tax
Act (Canada) or Section 317, or any successor section of
the Excise Tax Act (Canada) or any
comparable provision of similar legislation shall have been received by Lender
or any other Person in respect of Borrower or any of its Subsidiaries or
otherwise issued in respect of Borrower or any of its Subsidiaries; or

 

(Q)          Damage, Strike, Casualty. 
Any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labour dispute,
embargo, condemnation, act of God or public enemy, or other casualty which
causes, for more than fifteen (15) consecutive days, the cessation or
substantial curtailment of revenue producing activities at any facility of US
Borrower or any of its Subsidiaries if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect; or

 

(R)           Licenses and Permits. 
The loss, suspension or revocation of, or failure to renew, any license
or permit now held or hereafter acquired by US Borrower or any of its

 

40

 

Subsidiaries, if such loss, suspension, revocation or failure
to renew could reasonably be expected to have a Material Adverse Effect; or

 

(S)           Forfeiture.  There is
filed against any Loan Party of any civil or criminal action, suit or
proceeding, which action, suit or proceeding (1) is not dismissed within
one hundred twenty (120) days; and (2) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral; or

 

(T)           Default under US Facility Loan Agreement. 
Any Event of Default (as defined under the US Facility Loan Agreement)
shall occur under the US Facility Loan Agreement.

 

8.2           Suspension of
Commitments.  Upon the occurrence of
any Default or Event of Default, notwithstanding any grace period or right to
cure, Agent may, or upon demand by Requisite Lenders shall, without notice or
demand, immediately cease making additional Revolving Advances and the
Revolving Loan Commitment shall be suspended; provided, that in the case
of a Default, if the subject condition or event is waived or cured within any
applicable grace or cure period, the Revolving Loan Commitment shall be
reinstated.

 

8.3           Acceleration.
Upon the occurrence of any Event of Default described in the foregoing subsections
8.1(G) or 8.1(H), all Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Borrower,
and the Revolving Loan Commitment shall thereupon terminate.  Upon the occurrence and during the
continuance of any other Event of Default, Agent may and, upon demand by
Requisite Lenders, shall, by written notice to Borrower, declare all or any
portion of the Obligations to be, and the same shall forthwith become,
immediately due and payable and the Revolving Loan Commitment shall thereupon
terminate.

 

8.4           Remedies.  If any Event of Default shall have occurred
and be continuing, in addition to and not in limitation of any other rights or
remedies available to Agent and Lenders at law or in equity, Agent may, and
shall upon the request of Requisite Lenders, exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
in the other Loan Documents or otherwise available to it, all the rights and
remedies of a secured party on default under the Personal Property Security
Legislation (whether or not such Personal Property Security Legislation applies
to the affected Borrower Collateral) and may also (a) require Borrower to,
and Borrower hereby agrees that it will, at its expense and upon request of
Agent forthwith, assemble all or part of the Collateral as directed by Agent
and make it available to Agent at a place to be designated by Agent which is
reasonably convenient to both parties; (b) withdraw all cash in the
Blocked Accounts and apply such monies in payment of the Obligations in the
manner provided in subsection 8.7; and (c) without notice or
demand or legal process, enter upon any premises of Borrower and take
possession of Collateral. All rights and remedies may be exercised without
notice to or consent by Borrower, except as such notice or consent is expressly
provided for hereunder or required by applicable law.  Borrower agrees that, to the extent notice of
sale of the Borrower Collateral or any part thereof shall be required by law,
at least fifteen (15) days notice to Borrower of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  At
any sale of

 

41

 

the Borrower Collateral (whether
public or private), if permitted by law, Agent or any Lender may bid (which bid
may be, in whole or in part, in the form of cancellation of indebtedness) for
the purchase of the Borrower Collateral or any portion thereof for the account
of Agent or such Lender.  Agent shall not
be obligated to make any sale of Borrower Collateral regardless of notice of
sale having been given.  Borrower shall
remain liable for any deficiency.  Agent
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.  To the extent permitted by law, Borrower
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter enacted.  Agent shall not be required to proceed
against any Collateral but may proceed against any Loan Party directly.

 

8.5           Appointment of
Receiver.  Agent and Lenders may
appoint, remove and reappoint any person or persons, including any employee or
agent of Agent and Lenders to be an interim receiver or receiver (the “Receiver”)
which terms shall include a receiver and manager of, or agent for, all or any
part of the Borrower Collateral.  Any
such Receiver shall, as far as concerns responsibility for his acts, be deemed
to be the agent of Borrower and not of Agent or any Lender, and Agent and
Lenders shall not in any way by responsible for any misconduct, negligence or
non-feasance of such Receiver, its employees or agents.  Except as otherwise directed by Agent and
Lenders, all money received by such Receiver shall be received in trust for and
paid to Agent for the benefit of Lenders. 
Such Receiver shall have all of the powers and rights of Agent and
Lenders described in subsection 8.4.  Agent may, either directly or through its
agents or nominees, exercise any or all powers and right of a Receiver.

 

8.6           Costs of
Enforcement.  Borrower shall pay all
costs, charges and expenses incurred by Agent, any Lender or any Receiver or
any nominee or agent of Agent or any Lender, whether directly or for services
rendered (including, without limitation, solicitor’s costs on a solicitor and
his own client basis, auditor’s costs, other legal expenses and Receiver
remuneration) in enforcing this Agreement or any other Loan Document and in
enforcing or collecting Obligations and all such expenses together with any
money owing as a result of any borrowing permitted hereby shall be a charge on
the proceeds of realization and shall be secured hereby.

 

8.7           Appointment of
Attorney-in-Fact.  Borrower hereby
constitutes and appoints Agent as Borrower’s attorney-in-fact with full
authority in the place and stead of Borrower and in the name of Borrower, Agent
or otherwise, from time to time in Agent’s discretion while an Event of Default
is continuing to take any action and to execute any instrument that Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including: (a) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; (b) to adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly
any customer or Borrower thereunder or allow any credit or discount thereon; (c) to
receive, endorse, and collect any drafts or other instruments, documents and
chattel paper, in connection with clause (a) above; (d) to file any
claims or take any action or institute any proceedings that Agent may deem
necessary or desirable for the collection of or to preserve the value of any of
the Collateral or otherwise to enforce the rights of Agent and Lenders with
respect to any of the Collateral; and (e) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse

 

42

 

receipts, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral.  The
appointment of Agent as Borrower’s attorney and Agent’s rights and powers are
coupled with an interest and are irrevocable until indefeasible payment in full
and complete performance of all of the Obligations and termination of the Revolving
Loan Commitment.

 

8.8           Limitation on Duty
of Agent with Respect to Collateral.  Beyond the safe custody thereof, Agent and
each Lender shall have no duty with respect to any Collateral in its possession
or control (or in the possession or control of any agent or bailee) or with
respect to any income thereon or the preservation of rights against prior
parties or any other rights pertaining thereto. 
Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which Agent accords its own
property.  Neither Agent nor any Lender
shall be liable or responsible for any loss or damage to any of the Collateral,
or for any diminution in the value thereof, by reason of the act or omission of
any warehouseman, carrier, forwarding agency, consignee, broker or other agent
or bailee selected by Borrower or selected by Agent in good faith.

 

8.9           Application of
Proceeds.  Notwithstanding anything
to the contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the
right to direct the application of any and all payments at any time or times
thereafter received by Agent from or on behalf of Borrower, and Agent shall
have the continuing and exclusive right to apply and to reapply any and all
payments received at any time or times after the occurrence and during the
continuance of an Event of Default against the Obligations in such manner as
Agent may deem advisable notwithstanding any previous application by Agent and (b) subject
to the Intercreditor Agreement, in the absence of a specific determination by
Agent with respect thereto, the proceeds of any sale of, or other realization
upon, all or any part of the Collateral shall be applied: first, to all
fees, costs and expenses incurred by or owing to Agent and then any Lender with
respect to this Agreement, the other Loan Documents or the Borrower Collateral;
second, to accrued and unpaid interest on the Obligations (including any
interest which but for the provisions of any Insolvency Law would have accrued
on such amounts); third, to the principal amounts of the Obligations
outstanding; and fourth, to any other Obligations or other obligations
or indebtedness of Borrower owing to Agent or any Lender under the Loan
Documents or any Interest Rate Agreement or Currency Rate Agreement or in
respect of any Banking Services.  Any balance
remaining shall be delivered to the Borrower or to whomever may be lawfully
entitled to receive such balance or as a court of competent jurisdiction may
direct.

 

8.10         License of
Intellectual Property.  Borrower
hereby assigns, transfers and conveys to Agent, for the benefit of Agent and Lenders,
effective upon the occurrence of any Event of Default hereunder, the
non-exclusive right and license to use all Intellectual Property owned or used
by Borrower, together with any goodwill associated therewith, all to the extent
necessary to enable Agent to realize on the Collateral and any successor or
assign to enjoy the benefits of the Collateral (subject, in the case of
trade-marks, to sufficient rights of quality control and inspection in favour
of the owner of such trade-marks as is reasonably necessary to avoid the risk
of invalidation of such trade-marks). 
This right and license shall inure to the benefit of all successors,
assigns and transferees of Agent and its successors, assigns and transferees,
whether

 

43

 

by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise.  Such right and
license is granted free of charge. 
Insofar as the terms of any agreement prohibit the assignment or sublicense
of Borrower’s rights under such contract, Borrower shall use its best efforts
to obtain a consent to such assignment, conveyance or sublicense to Agent from
the other parties to such contract.

 

8.11         Waivers; Non-Exclusive
Remedies.  No failure on the part of
Agent or any Lender to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement or the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise by Agent or any Lender of any right under this Agreement or any other
Loan Document preclude any other or further exercise thereof or the exercise of
any other right.  The rights in this
Agreement and the other Loan Documents are cumulative and shall in no way limit
any other remedies provided by law.

 

SECTION 9.

AGENT

 

9.1           Agent.

 

(A)          Appointment.  Each Lender
hereto and, upon obtaining an interest in any Loan, any participant, transferee
or other assignee of any Lender irrevocably appoints, designates and authorizes
GE Canada Finance as Agent to take such actions or refrain from taking such
action as its agent on its behalf and to exercise such powers hereunder and
under the other Loan Documents as are delegated by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto.  Neither the Agent nor any of its directors,
officers, employees or agents shall be liable for any action so taken.  The provisions of this subsection 9.1
are solely for the benefit of Agent and Lenders and no Loan Party shall have
any rights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties under
this Agreement and the other Loan Documents, Agent shall act solely as agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any Loan
Party.  Agent may perform any of its
duties hereunder, or under the Loan Documents, by or through its agents or
employees.  For the purposes of holding
any security granted by any Loan Party pursuant to the laws of the Province of
Quebec, Agent shall be the holder of an irrevocable power of attorney for all
present and future Lenders.  By executing
an Assignment and Acceptance Agreement, any future Lender shall be deemed to
ratify the power of attorney granted to Agent hereunder.  Lenders and each Loan Party agree that
notwithstanding Section 32 of “the Act respecting the Special Powers of
Legal Persons (Quebec)”, Agent may, as the person holding the power of attorney
of Lenders, acquire any debentures or other title of indebtedness secured by
any hypothec granted by any Loan Party to Agent pursuant to the laws of the
Province of Quebec.

 

(B)           Nature of Duties.  Agent shall
have no duties, obligations or responsibilities except those expressly set
forth in this Agreement or in the Loan Documents.  The duties of Agent shall be mechanical and
administrative in nature.  Agent shall
not have by reason of this Agreement a fiduciary, trust or agency relationship
with or in respect of any Lender or any Loan Party.  Nothing in this Agreement or any of the Loan
Documents, express or implied, is intended to or shall be construed to impose
upon Agent any obligations in respect of

 

44

 

this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. 
Each Lender shall make its own appraisal of the credit worthiness of the
Loan Parties, and shall have independently taken whatever steps it considers
necessary to evaluate the financial condition and affairs of the Loan Parties,
and Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto (other than as expressly required herein), whether coming
into its possession before the Closing Date or at any time or times
thereafter.  If Agent seeks the consent
or approval of any Lenders to the taking or refraining from taking any action
hereunder, then Agent shall send notice thereof to each Lender.  Agent shall promptly notify each Lender any
time that the Requisite Lenders have instructed Agent to act or refrain from
acting pursuant hereto.

 

(C)           Rights, Exculpation, Etc. 
Neither Agent nor any of its officers, directors, employees or agents
shall be liable to any Lender for any action taken or omitted by them hereunder
or under any of the Loan Documents, or in connection herewith or therewith,
except that Agent shall be liable to the extent of its own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.  Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith and if any
such apportionment or distribution is subsequently determined to have been made
in error, the sole recourse of any Lender to whom payment was due but not made,
shall be to recover from other Lenders any payment in excess of the amount to
which they are determined to be entitled (and such other Lenders hereby agree
to return to such Lender any such erroneous payments received by them).  In performing its functions and duties
hereunder, Agent shall exercise the same care which it would in dealing with
loans for its own account, but neither Agent nor any of its agents or
representatives shall be responsible to any Lender for any recitals,
statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement or any of the Loan Documents or the transactions
contemplated thereby, or for the financial condition of any Loan Party.  Agent shall not be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any of the Loan Documents or the
financial condition of any Loan Party, or the existence or possible existence
of any Default or Event of Default. 
Agent may at any time request instructions from Lenders with respect to
any actions or approvals which by the terms of this Agreement or of any of the
Loan Documents Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders or all or such other portion
of the Lenders as shall be prescribed by this Agreement.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders in the
absence of an express requirement for a greater percentage of Lender approval
hereunder for such action.

 

(D)          Reliance.  Agent shall
be under no duty to examine, inquire into, or pass upon the validity,
effectiveness or genuineness of this Agreement, any other Loan Document, or any
instrument, document or communication furnished pursuant hereto or in
connection herewith.  Agent shall be
entitled to rely, and shall be fully protected in relying, upon any written

 

45

 

or oral notices, statements, certificates, orders or other
documents or any telephone message or other communication (including any
writing, fax, telecopy or telegram) believed by it in good faith to be genuine,
valid, effective and correct and to have been signed, sent or made by the
proper Person, and with respect to all matters pertaining to this Agreement or
any of the Loan Documents and its duties hereunder or thereunder.  Agent shall be entitled to rely upon the
advice of legal counsel, independent accountants, and other experts selected by
Agent in its sole discretion.

 

(E)           Indemnification.  Each Lender,
in proportion to its Pro Rata Share, severally and not jointly, agrees to
reimburse and indemnify Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, legal fees and expenses), advances or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against Agent in any way relating to or arising out of
this Agreement or any of the Loan Documents or any action taken or omitted by
Agent under this Agreement or any of the Loan Documents, in proportion to each
Lender’s Pro Rata Share, but only to the extent that any of the foregoing is
not promptly reimbursed by Borrower; provided, however, no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements resulting from Agent’s gross negligence or willful misconduct as
determined by a final non-appealable judgment by a court of competent
jurisdiction.  If any indemnity furnished
to Agent for any purpose shall, in the opinion of Agent, be insufficient or
become impaired, Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against, even if so directed by Lenders or
Requisite Lenders, until such additional indemnity is furnished.  The obligations of Lenders under this subsection 9.1(E) shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

(F)           GE Canada Finance Individually. 
With respect to its Commitments and the Loans made by it, GE Canada
Finance shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender.  The terms “Lenders”
or “Requisite Lenders” or any similar terms shall, unless the context clearly
otherwise indicates, include GE Canada Finance in its individual capacity as a
Lender or one of the Requisite Lenders. 
GE Canada Finance, either directly or through strategic affiliations,
may lend money to, acquire equity or other ownership interests in, provide
advisory services to and generally engage in any kind of banking, trust or
other business with any Loan Party as if it were not acting as Agent pursuant
hereto and without any duty to account therefor to Lenders.  GE Canada Finance, either directly or through
strategic affiliations, may accept fees and other consideration from any Loan
Party for services in connection with this Agreement or otherwise without
having to account for the same to Lenders. 
Each Lender acknowledges that GE Capital, of which GE Canada Finance is
a Subsidiary, is the US Facility Agent and a US Facility Lender and has
purchased certain equity interests in Holdings and
the potential conflict of interest of GE Canada Finance as Agent and as a
Lender, and GE Capital, as the US Facility Agent, a US Facility Lender and a
holder of an equity interest in, and subordinated indebtedness of, Holdings and consents thereto.

 

46

 

(G)           Successor Agent.

 

(1)           Resignation.  Agent may
resign from the performance of all its agency functions and duties hereunder at
any time by giving at least thirty (30) Business Days’ prior written notice to
Borrower and the Lenders.  Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment as provided below.

 

(2)           Appointment of Successor. 
Upon any such notice of resignation pursuant to clause (G)(1) above,
Requisite Lenders shall appoint a successor Agent which, unless an Event of
Default has occurred and is continuing, shall be reasonably acceptable to
Borrower.  If a successor Agent shall not
have been so appointed within said thirty (30) Business Day period, the
retiring Agent, upon notice to Borrower, shall then appoint a successor Agent
who shall serve as Agent until such time, if any, as Requisite Lenders appoint
a successor Agent as provided above.

 

(3)           Successor Agent.  Upon the
acceptance of any appointment as Agent under the Loan Documents by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under the
Loan Documents.  After any retiring Agent’s
resignation as Agent, the provisions of this Section 9 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent.

 

(H)          Collateral Matters.

 

(1)           Release of Collateral. 
Lenders hereby irrevocably authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral
(i) upon termination of the Revolving Loan Commitment and upon payment and
satisfaction of all Obligations (other than contingent indemnification
obligations to the extent no claims giving rise thereto have been asserted); or
(ii) constituting property being sold or disposed of if Borrower certifies
to Agent that the sale or disposition is made in compliance with the provisions
of this Agreement (and Agent may rely in good faith conclusively on any such
certificate, without further inquiry). 
In addition, with the consent of Requisite Lenders, Agent may release
Liens granted to or held by Agent upon any Collateral having a book value of
not greater than five percent (5%) of the total book value of all Collateral,
as determined by Agent, either in a single transaction or in a series of
related transactions; provided, however, in no event will Agent,
acting under the authority granted to it pursuant to this sentence, release
during any calendar year Liens granted to or held by Agent upon any Collateral
having a total book value in excess of ten percent (10%) of the total book
value of all Collateral, as determined by Agent.

 

(2)           Confirmation of Authority; Execution of Releases. Without in any manner limiting
Agent’s authority to act without any specific or further authorization or
consent by Lenders (as set forth in subsection 9.1(H)(1) above),
each Lender agrees to confirm in writing, upon request by Agent or Borrower,
the authority to release any Collateral conferred upon Agent under clauses (i) and
(ii) of subsection 9.1(H)(1). 
Upon receipt by Agent of confirmation from the requisite percentage of
Lenders (as set forth in subsection 9.1(H)(1) above), if any,
of Agent’s authority to release any Liens upon any Collateral, and upon at
least ten (10) Business Days prior written request by Borrower, Agent
shall, and is hereby irrevocably

 

47

 

authorized by Lenders to, execute such documents as may be
necessary to evidence the release of the Liens granted to Agent, for the
benefit of Agent and Lenders, upon such Collateral; provided, however,
that (i) Agent shall not be required to execute any such document on terms
which, in Agent’s opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any
manner discharge, affect or impair the Obligations or any Liens granted to
Agent on behalf of Agent and Lenders upon (or obligations of any Loan Party, in
respect of) all interests retained by any Loan Party, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.

 

(3)           Absence of Duty.  Agent shall
have no obligation whatsoever to any Lender or any other Person to assure that
the property covered by this Agreement or the Loan Documents exists or is owned
by any Loan Party or is cared for, protected or insured or has been encumbered
or that the Liens granted to Agent on behalf of Agent and Lenders herein or
pursuant hereto have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in
any of the other Loan Documents, it being understood and agreed that in respect
of the property covered by this Agreement or the other Loan Documents or any
act, omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent’s own interest in property covered
by this Agreement or the other Loan Documents as one of the Lenders and that
Agent shall have no duty or liability whatsoever to any of the other Lenders; provided,
however, that Agent shall exercise the same care which it would in
dealing with loans for its own account.

 

(I)            Agency for Perfection. 
Agent and each Lender hereby appoint each other Lender as agent for the
purpose of perfecting Agent’s security interest in assets which, in accordance
with applicable law in any applicable jurisdiction, can be perfected only by
possession.  Should any Lender (other
than Agent) obtain possession of any such assets, such Lender shall notify
Agent thereof, and, promptly upon Agent’s request therefor, shall deliver such
assets to Agent or in accordance with Agent’s instructions.  Agent may file such proofs of claim or
documents as may be necessary or advisable in order to have the claims of Agent
and Lenders (including any claim for the reasonable compensation, expenses,
disbursements and advances of Agent and Lenders, their respective agents,
financial advisors and counsel), allowed in any judicial proceedings relative
to any of the Loan Parties, or any of their respective creditors or property,
and shall be entitled and empowered to collect, receive and distribute any
monies, securities or other property payable or deliverable on any such
claims.  Any custodian in any judicial proceedings
relative to any Loan Party is hereby authorized by each Lender to make payments
to Agent and, in the event that Agent shall consent to the making of such
payments directly to Lenders, to pay to Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Agent, its agents,
financial advisors and legal counsel, and any other amounts due Agent.  Nothing contained in this Agreement or the
other Loan Documents shall be deemed to authorize Agent to authorize or consent
to or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Loans, or the rights of
any holder thereof, or to authorize Agent to vote in respect of the claim of
any Lender in any such proceeding, except as specifically permitted herein.

 

48

 

(J)            Exercise of Remedies. 
Each Lender agrees that it will not have any right individually to
enforce or seek to enforce this Agreement or any Loan Document or to realize
upon any collateral security for the Loans, unless instructed to do so by
Agent, it being understood and agreed that such rights and remedies may be
exercised only by Agent.

 

9.2           Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default except
with respect to defaults in the payment of principal, interest and fees
required to be paid to Agent for the account of Lenders, unless Agent shall
have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a “notice of default”.  Agent
will notify each Lender of its receipt of any such notice.

 

9.3           Action by Agent. Agent shall take such action with
respect to any Default or Event of Default as may be requested by Requisite
Lenders in accordance with Section 8.  Unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to any Default or Event of Default as it
shall deem advisable or in the best interests of Lenders.

 

9.4           Amendments, Waivers
and Consents.

 

(A)          Percentage of Lenders Required. 
Except as otherwise provided herein or in any of the other Loan
Documents, no amendment, modification, termination or waiver of any provision
of this Agreement or any other Loan Document, or consent to any departure by
any Loan Party therefrom, shall in any event be effective unless the same shall
be in writing and signed by Requisite Lenders (or, Agent, if expressly set
forth herein or in any of the other Loan Documents) and the applicable Loan
Party; provided however, no amendment, modification, termination, waiver
or consent shall be effective, unless in writing and signed by all Lenders
(excluding Defaulting Lenders) and all US Facility Lenders (excluding “Defaulting
Lenders”, as such term is defined in the US Facility Loan Agreement):  (i) increase the Revolving Loan
Commitment or any Lender’s Pro Rata Share of the Revolving Loan Commitment; (ii) reduce
the principal of or the rate of interest on any Loan or reduce the fees payable
with respect to any Loan; (iii) extend the Termination Date or the
scheduled due date for all or any portion of principal of the Loans or any
interest or fees due hereunder; (iv) amend the definitions of the term “Requisite
Lenders” or the percentage of Lenders which shall be required for Lenders to
take any action hereunder; (v) amend or waive this subsection 9.4
or the definitions of the terms used in this subsection 9.4 insofar
as the definitions affect the substance of this subsection 9.4; (vi) increase
the percentages contained in the definition of Canadian Borrowing Base (or in
the definition of Consolidating Borrowing Base under the US Facility Loan
Agreement) or amend the definitions of the terms “Canadian Borrowing Base”, “Consolidated
Borrowing Base” or “Consolidating Borrowing Base” (as defined under the US
Facility Loan Agreement) or the definitions of the terms used therein insofar
as those terms affect the substance of such terms; (vii) amend paragraph
A of the Financial Covenants Rider or the definitions of the terms used
therein insofar as the definitions affect the substance of such paragraph
(A); (viii) release Collateral (except if the sale, disposition or
release of such Collateral is permitted under subsection 7.3 or subsection 9.1
or under any other Loan Document); or (ix) amend the terms “Obligations”
or the definitions of the terms used therein insofar as those definitions
affect the substance of such term; (x) consent to the assignment, delegation or
other transfer by any Loan

 

49

 

Party of any of its rights and obligations under any Loan
Document; (xi) amend or waive subsection 8.9; or (xii) increase the “Commitments”
under (and as defined in) the US Facility Loan Agreement; provided, further,
that no amendment, modification, termination, waiver or consent affecting the
rights or duties of Agent under this Section 9 or under any Loan
Document shall in any event be effective, unless in writing and signed by
Agent, in addition to Lenders and other Persons (if any) required to take such
action.  Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 9
shall be binding upon each Lender or future Lender and, if signed by a Loan
Party, on such Loan Party.

 

(B)           Specific Purpose or Intent. 
Each amendment, modification, termination, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.  No amendment,
modification, termination, waiver or consent shall be required for Agent to
take additional Collateral.

 

(C)           Failure to Give Consent; Replacement of Non-Consenting
Lender.  In the event Agent requests the consent of a
Lender and does not receive a written consent or denial thereof within ten (10) Business
Days after such Lender’s receipt of such request, then such Lender will be
deemed to have denied the giving of such consent.  If, in connection with any proposed
amendment, modification, termination or waiver of any of the provisions of this
Agreement requiring the consent or approval of all Lenders under this subsection 9.4,
the consent of Requisite Lenders is obtained but the consent of one or more
other Lenders whose consent is required is not obtained, then Borrower shall
have the right, so long as all such non-consenting Lenders are either replaced
or prepaid as described in clauses (A) or (B) below, to either (A) replace
the non-consenting Lenders with one or more Replacement Lenders pursuant to subsection 2.12(A),
as if such Lender were an Affected Lender thereunder, but only so long as each
such Replacement Lender consents to the proposed amendment, modification,
termination or waiver, or (B) prepay in full the Obligations of the
non-consenting Lenders and terminate the non-consenting Lenders’ Commitments
pursuant to subsection 2.12(B), as if such Lender were an Affected
Lender thereunder.

 

Notwithstanding anything
in this subsection 9.4, Agent and Borrower, without the consent of
either Requisite Lenders or all Lenders, may execute amendments to this
Agreement and the Loan Documents, which consist solely of the making of
typographical corrections.

 

9.5           Assignments and
Participations in Loans.

 

(A)          Assignments.  Each Lender
may assign its rights and delegate its obligations under this Agreement to an
Eligible Assignee; provided, however, (1) such Lender (other
than GE Canada Finance) shall first obtain the written consent of Agent and
Borrower (unless assigning to a Lender or an Affiliate of a Lender), which
consent, in either case, shall not be unreasonably withheld; provided, that
such consent of Borrower shall not be required at any time that an Event of
Default exists), (2) the Pro Rata Share of the Revolving Loan Commitment
being assigned shall in no event be less than the lesser of (a) C$7,500,000,
or (b) the entire amount of the Pro Rata Share of the Revolving Loan
Commitment of the assigning Lender, (3) (a) the parties to such
assignment shall execute and deliver to Agent for acceptance and recording a
Assignment and Acceptance Agreement together with (i) a processing and
recording fee of US$3,500 or the Equivalent Amount thereof payable by the
assigning Lender to Agent and

 

50

 

(ii) each of the Notes originally delivered to the
assigning Lender, and (4) if such assignee is a non-resident of Canada for
the purpose of the ITA (and, for greater certainty, a Person who is deemed to
be resident in Canada for the purpose of the ITA or is deemed by subsection 212
(13.3) of the ITA to be resident in Canada in respect of any amounts paid or
credited under this Agreement is not such a non-resident of Canada), then,
notwithstanding subsection 2.10, prior to the occurrence of an
Event of Default that is continuing, Borrower shall not be obligated to
gross-up payments of interest and fees payable hereunder to such assignee by
the amounts of Canadian withholding tax that may be exigible on such interest
or fees as a result of the assignee being a non-resident of Canada for the
purpose of the ITA.  The administrative
fee referred to in clause (3) of the preceding sentence shall not apply to
an assignment of a security interest in all or any portion of a Lender’s rights
under this Agreement or the other Loan Documents, as described in paragraph
(D)(1) below. Upon receipt of all of the foregoing, Agent shall notify
Borrower of such assignment and Borrower shall comply with its obligations
under the last sentence of subsection 2.1(D).  In the case of an assignment authorized under
this subsection 9.5, the assignee shall be considered to be a “Lender”
hereunder (and without limiting the generality of the foregoing, the assignee
shall be considered to be a Lender under, and bound by, the Intercreditor
Agreement) and Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of the Borrower to the assignee. The assigning
Lender shall be relieved of its obligations to make Loans hereunder with
respect to its Pro Rata Share of the Revolving Loan Commitment or assigned
portion thereof.

 

(B)           Participations.  Each Lender
may sell participations in all or any part of its Pro Rata Share of the Revolving
Loan Commitment made by it to another Person; provided, however,
such Lender shall first obtain the prior written consent of Agent, which
consent shall not be unreasonably withheld, and any such participation shall be
in a minimum amount of C$5,000,000.  All
amounts payable by Borrower hereunder shall be determined as if that Lender had
not sold such participation and the holder of any such participation shall not
be entitled to require such Lender to take or omit to take any action hereunder
except action directly effecting (1) any reduction in the principal amount
or an interest rate on any Loan in which such holder participates; (2) any
extension of the Termination Date or the date fixed for any payment of interest
or principal payable with respect to any Loan in which such holder
participates; and (3) any release of substantially all of the
Collateral.  Borrower hereby acknowledges
and agrees that the participant under each participation shall for purposes of subsections
2.9, 2.10, 9.6 and 10.2 be considered to be a “Lender”; provided,
that no such participant shall be entitled to receive any greater amount
pursuant to such subsections from the participating Lender would have been
entitled to receive in respect of the portion of such Revolving Loan or Revolving
Loan Commitment in which such participation was sold.

 

(C)           No Relief of Obligations; Cooperation; Ability to Make
BA Rate Loans.  Except as otherwise provided in subsection 9.5(A) no
Lender shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans
or other Obligations owed to such Lender. 
Each Lender may furnish any information concerning the Loan Parties in
the possession of that Lender from time to time to Eligible Assignees and
participants (including prospective assignees and participants), subject to the
provisions of subsection 10.20. 
Borrower agrees that it will use its diligent efforts to assist and
cooperate with Agent and any Lender in any manner reasonably requested by Agent
or such Lender to effect the

 

51

 

sale of a participation or an assignment described above,
including, without limitation, assistance in the preparation of appropriate
disclosure documents or placement memoranda. 
Notwithstanding anything contained in this Agreement to the contrary, so
long as the Requisite Lenders shall remain capable of making BA Rate Loans, no
Person shall become a Lender hereunder unless such Person shall also be capable
of making BA Rate Loans.

 

(D)          Security Interests; Assignment to Affiliates. 
Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time following written notice to Agent (1) pledge the
Obligations held by it or create a security interest in all or any portion of
its rights under this Agreement or the other Loan Documents in favour of any
Person; provided, however  (a) no
such pledge or grant of security interest to any Person shall release such
Lender from its obligations hereunder or under any other Loan Document and (b) the
acquisition of title to such Lender’s Obligations pursuant to any foreclosure
or other exercise of remedies by such Person shall be subject to the provisions
of this Agreement and the other Loan Documents in all respects including,
without limitation, any consent required by subsection 9.5; and (2) subject
to complying with the provisions of subsection 9.5(A), assign all
or any portion of its funded loans to an Eligible Assignee which is a
Subsidiary of such Lender or its parent company, to one or more other Lenders,
or to a Related Fund.  For purposes of
this paragraph, a “Related Fund” shall mean, with respect to any Lender, a fund
or other investment vehicle that invests in commercial loans and is managed by
such Lender or by the same investment advisor that manages such Lender or by an
Affiliate of such investment advisor.

 

(E)           Recording of Assignments. 
Agent shall maintain at its office in Toronto, Ontario a copy of each
Assignment and Acceptance Agreement delivered to it and a register for the
recordation of the names and addresses of Lenders, and the commitments of, and
principal amount of the Loans owing to each Lender pursuant to the terms hereof
from time to time (the “Register”).  The
entries in the Register shall be presumptive evidence of the amounts due and
owing to Lenders in the absence of manifest error.  Borrower, Agent and each Lender may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for
inspection by Borrower and any Lender, at any reasonable time upon reasonable
prior notice.

 

9.6           Set Off and Sharing
of Payments.  In addition to any
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized by Borrower at any
time or from time to time, with reasonably prompt subsequent notice to Borrower
(any prior or contemporaneous notice being hereby expressly waived) to set off
and to appropriate and to apply any and all (a) balances held by such Lender
at any of its offices for the account of Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to Borrower or its
Subsidiaries), and (b) other property at any time held or owing by such
Lender to or for the credit or for the account of Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of
Agent.  Any Lender exercising its right
to set off shall purchase for cash (and the other Lenders shall sell) interests
in each of such other Lender’s Pro Rata Share of the Obligations as would be
necessary to cause all Lenders to share the amount so set off with each other
Lender in accordance with their respective Pro Rata Shares.  Borrower agrees, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with
respect to

 

52

 

amounts in excess of its Pro
Rata Share of the Obligations and upon doing so shall deliver such amount so
set off to Agent for the benefit of Agent and all Lenders in accordance with
their Pro Rata Shares.

 

9.7           Disbursement of
Funds.  Agent may, on behalf of
Lenders, disburse funds to Borrower for Loans requested.  Each Lender shall reimburse Agent on demand
for all funds disbursed on its behalf by Agent, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Loan or Revolving Advance
before Agent disburses same to Borrower. 
If Agent elects to require that each Lender make funds available to
Agent prior to a disbursement by Agent to Borrower, Agent shall advise each
Lender by telephone, telex, fax or telecopy of the amount of such Lender’s Pro
Rata Share of the Loan requested by Borrower no later than 1:00 p.m.
Toronto time on the Funding Date applicable thereto, and each such Lender shall
pay Agent such Lender’s Pro Rata Share of such requested Loan, in same day
funds, by wire transfer to Agent’s Account on such Funding Date. If any Lender
fails to pay the amount of its Pro Rata Share within one (1) Business Day
after Agent’s demand, Agent shall promptly notify Borrower, and Borrower shall
immediately repay such amount to Agent. 
Any repayment required pursuant to this subsection 9.7 shall
be without premium or penalty.  Nothing
in this subsection 9.7 or elsewhere in this Agreement or the other
Loan Documents, including without limitation the provisions of subsection 9.8,
shall be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights that Agent or Borrower may have against any Lender as a
result of any default by such Lender hereunder.

 

9.8           Settlements,
Payments and Information.

 

(A)          Revolving Advances and Payments; Fee Payments.

 

(1)           Fluctuation of Revolving Loan Balance. 
The Revolving Loan balance may fluctuate from day to day through Agent’s
disbursement of funds to, and receipt of funds from, Borrower.  In order to minimize the frequency of
transfers of funds between Agent and each Lender notwithstanding terms to the
contrary set forth in Section 2 and subsection 9.7,
Revolving Advances and repayments will be settled according to the procedures
described in this subsection 9.8. Notwithstanding these procedures,
each Lender’s obligation to fund its portion of any advances made by Agent to
Borrower will commence on the date such advances are made by Agent.  Such payments will be made by such Lender
without set-off, counterclaim or reduction of any kind.

 

(2)           Settlement Dates.  Once each
week for the Revolving Loan or more frequently (including daily), if Agent so
elects (each such day being a “Settlement Date”), Agent will advise each Lender
by telephone, fax or telecopy of the amount of each such Lender’s Pro Rata
Share of the Revolving Loan.  In the
event payments are necessary to adjust the amount of such Lender’s required Pro
Rata Share of the Revolving Loan balance to such Lender’s actual Pro Rata Share
of the Revolving Loan balance as of any Settlement Date, the party from which
such payment is due will pay the other, in same day funds, by wire transfer to
the other’s account not later than 3:00 p.m. Toronto time on the Business
Day following the Settlement Date.

 

53

 

(3)           Settlement Definitions. 
For purposes of this subsection 9.8(A), the following terms
and conditions will have the meanings indicated:

 

(a)           “Daily Loan Balance” means an amount
calculated as of the end of each calendar day by subtracting (i) the
cumulative principal amount paid by Agent to a Lender on a Loan from the
Closing Date through and including such calendar day, from (ii) the
cumulative principal amount on a Loan advanced by such Lender to Agent on that Loan
from the Closing Date through and including such calendar day.

 

(b)           “Daily Interest Rate” means an
amount calculated by dividing the interest rate payable to a Lender on a Loan
(as set forth in subsection 2.2) as of each calendar day by three
hundred sixty (360).

 

(c)           “Daily Interest Amount” means an
amount calculated by multiplying the Daily Loan Balance of a Loan by the
associated Daily Interest Rate on that Loan.

 

(d)           “Interest Ratio” means a number
calculated by dividing the total amount of the interest on a Loan received by
Agent with respect to the immediately preceding month by the total amount of
interest on that Loan due from Borrower during the immediately preceding month.

 

(4)           Settlement Payments. 
On the first Business Day of each month (“Interest Settlement Date”),
Agent will advise each Lender by telephone, fax or telecopy of the amount of
such Lender’s share of interest and fees on each of the Loans as of the end of
the last day of the immediately preceding month.  Provided that such Lender has made all
payments required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender’s account (as specified by such Lender
on the signature page of this Agreement or the applicable Assignment and
Acceptance Agreement, as amended by such Lender from time to time after the
date hereof or in the applicable Assignment and Acceptance Agreement) not later
than 3:00 p.m. Toronto time on the next Business Day following the
Interest Settlement Date, such Lender’s share of interest and fees on each of
the Loans.  Such Lender’s share of
interest on each Loan will be calculated for that Loan by adding together the
Daily Interest Amounts for each calendar day of the prior month for that Loan
and multiplying the total thereof by the Interest Ratio for that Loan.  Such Lender’s share
of the Unused Line Fee described in subsection 2.3(A) shall be
an amount equal to (a)(i) such Lender’s average Revolving Loan Commitment
during such month, less such Lender’s average Daily Loan Balance of the
Revolving Loan for the preceding month, multiplied by (b) the
percentage required by subsection 2.3(A).  Such Lender’s share of all other fees paid to
Agent for the benefit of Lenders hereunder shall be paid and calculated based
on such Lender’s Commitment with respect to the Loans on which such fees are
associated.  To the extent Agent does not
receive the total amount of any fee owing by Borrower under this Agreement,
each amount payable by Agent to a Lender under this subsection 9.8(A)(4) with
respect to such fee shall be reduced on a pro rata basis.  Any funds disbursed or received by Agent
pursuant to this Agreement, including, without limitation, under subsections
9.7, 9.8(A)(1), and 9.9, prior to the Settlement Date for such
disbursement or payment shall be deemed advances or remittances by GE Canada
Finance, in its capacity as a Lender, for purposes of calculating interest and
fees pursuant to this subsection 9.8(A)(4).

 

54

 

(B)           Return of Payments.

 

(1)           Recovery After Non-Receipt of Expected Payment. 
If Agent pays an amount to a Lender under this Agreement in the belief
or expectation that a related payment has been or will be received by Agent
from Borrower and such related payment is not received by Agent, then Agent
will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind together with interest thereon, for each
day from and including the date such amount is made available by Agent to such
Lender to but excluding the date of repayment to Agent, at the greater of the
Bank Rate and a rate determined by Agent in accordance with banking industry rules on
interbank compensation.

 

(2)           Recovery of Returned Payment. 
If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to Borrower or paid to any other Person
pursuant to any requirement of law, court order or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not
be required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to Agent
on demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without set-off, counterclaim or deduction of
any kind.

 

9.9           Discretionary
Advances.  Notwithstanding anything
contained herein to the contrary, Agent may, in its sole discretion, make
Revolving Advances on behalf of the Lenders in an aggregate amount of not more
than C$1,000,000 in excess of the limitations set forth in the Canadian
Borrowing Base for the purpose of preserving or protecting the Collateral or
the value thereof or for incurring any costs associated with collection or
enforcing rights or remedies against the Collateral, or incurred in any action
to enforce this Agreement or any other Loan Document (such Revolving Advances, “Discretionary
Advances”); provided, that Agent shall not make additional Discretionary
Advances at any time when the Revolving Loan has exceeded the limitations set
forth in the Consolidated Borrowing Base for more than sixty (60) consecutive
days (and, for the purposes of this Section 9.9, the US Dollar
amount of the Consolidated Borrowing Base shall be converted into the
Equivalent Amount in Canadian Dollars). 
Discretionary Advances shall be payable on demand by the Agent.

 

9.10         Banking Services,
Interest Rate Agreements; Currency Rate Agreements.  Each Lender shall, upon the request of the
Agent, provide the Agent with such information as the Agent may reasonably
request regarding any Banking Service in respect of such Lender (or Affiliate
of a Lender) or any Interest Rate Agreement or any Currency Rate Agreements
entered into by such Lender (or Affiliate of a Lender) with Borrower.

 

SECTION 10.

MISCELLANEOUS

 

10.1         Expenses and Legal
Fees.  Whether or not the
transactions contemplated hereby shall be consummated, Borrower agrees to
promptly pay all reasonable fees, costs and expenses incurred in connection
with any matters contemplated by or arising out of this Agreement or the other
Loan Documents including the following, and all such fees, costs and expenses
shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and

 

55

 

expenses incurred by Agent
(including legal fees and expenses, the allocated costs of Agent’s internal
legal staff and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
incurred by Agent (including legal fees and expenses, the allocated costs of
Agent’s internal legal staff and fees of environmental consultants, accountants
and other professionals retained by Agent) incurred in connection with the
review, negotiation, preparation, documentation, execution, syndication and
administration of the Loan Documents, the Loans, and any amendments, waivers,
consents, forbearances and other modifications relating thereto or any
subordination or intercreditor agreements, including reasonable documentation
charges assessed by Agent for amendments, waivers, consents and any other
documentation prepared by Agent’s internal legal staff; (c) fees, costs
and expenses (including legal fees and allocated costs of internal legal staff)
incurred by Agent or any Lender in creating, perfecting and maintaining
perfection of Liens in favour of Agent, on behalf of Agent and Lenders; (d) fees,
costs and expenses incurred by Agent in connection with forwarding to Borrower
the proceeds of Loans including Agent’s or any Lenders’ standard wire transfer
fee; (e) fees, costs, expenses and bank charges, including bank charges
for returned cheques, incurred by Agent or any Lender in establishing,
maintaining and handling lock box accounts, blocked accounts or other accounts for
collection of the Collateral; (f) fees, costs and expenses (including
legal fees and allocated costs of internal legal staff) of Agent or any Lender
and costs of settlement incurred in collecting upon or enforcing rights against
the Collateral or incurred in any action to enforce this Agreement or any of
the other Loan Documents or to collect any payments due from Borrower or any
other Loan Party under this Agreement or any other Loan Document or incurred in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement, whether in the nature of a “workout” or in
connection with any insolvency or bankruptcy proceedings or otherwise.

 

10.2         Indemnity.  In addition to the payment of expenses
pursuant to subsection 10.1, whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to indemnify, pay and
hold Agent and each Lender, and the officers, directors, employees, agents,
consultants, auditors, persons engaged by Agent or any Lender to evaluate or
monitor the Collateral, affiliates and legal counsel of Agent, Lender and such
holders (collectively called the “Indemnitees”) harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the fees and disbursements of legal counsel for
such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement or any of the other Loan Documents, the consummation of the
transactions contemplated by this Agreement, the statements contained in the
commitment letters, if any, delivered by Agent or any Lender, Agent’s and each
Lender’s agreement to make the Loans hereunder, the use or intended use of the
proceeds of any of the Loans or the exercise of any right or remedy hereunder
or under the other Loan Documents (the “Indemnified Liabilities”); provided,
that Borrower shall have no obligation to an Indemnitee hereunder with respect
to Indemnified Liabilities arising from the gross negligence or willful
misconduct of that Indemnitee as determined by a final non-appealable judgment
by a court of competent jurisdiction.

 

56

 

10.3         Notices.  Unless otherwise specifically provided herein,
all notices shall be in writing addressed to the respective party as set forth
below and may be personally served, faxed, telecopied or sent by overnight
courier service or United States mail (in the case where the sender’s notice
address is in the United States of America) or Canadian mail (in the case where
the sender’s notice address is in Canada) and shall be deemed to have been
given: (a) if delivered in person, when delivered; (b) if delivered
by fax or telecopy, on the date of transmission if transmitted on a Business
Day before 4:00 p.m. Toronto time or, if not, on the next succeeding
Business Day; (c) if delivered by overnight courier, two (2) days
after delivery to such courier properly addressed; or (d) if by mail, four
(4) Business Days after deposit, with postage prepaid and properly
addressed.

 

	
  If to Borrower:

  	
   

  	
  Beacon Roofing Supply Canada Company

  
	
   

  	
   

  	
  13145 Prince-Arthur

  
	
   

  	
   

  	
  Montreal, Quebec

  
	
   

  	
   

  	
  H1A 1A9

  
	
   

  	
   

  	
  Attn: Jean Guy Plante

  
	
   

  	
   

  	
  Fax/Telecopy No.: (514) 642-4331

  
	
   

  	
   

  	
   

  
	
  If to any Loan Party:

  	
   

  	
  Beacon Sales Acquisition, Inc.

  
	
   

  	
   

  	
  50 Webster Avenue

  
	
   

  	
   

  	
  Somerville, Massachusetts 02143

  
	
   

  	
   

  	
  Attn: Andrew Logie

  
	
   

  	
   

  	
  Fax/Telecopy No.: (617) 629-2939

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Code Hennessy & Simmons III, L.P.

  
	
   

  	
   

  	
  10 South Wacker Drive, Suite 3175

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
   

  	
  Attn: Peter M. Gotsch

  
	
   

  	
   

  	
  Fax/Telecopy No.: (312) 876-3854

  
	
   

  	
   

  	
   

  
	
  If to Agent or to GE:

  	
   

  	
  GE CANADA FINANCE HOLDING COMPANY

  
	
  Finance:

  	
   

  	
  11 King Street West, Suite 1500

  
	
   

  	
   

  	
  Toronto, Ontario

  
	
   

  	
   

  	
  M5H 4C7

  
	
   

  	
   

  	
  Attn: Account Manager - Corporate Finance-Beacon

  
	
   

  	
   

  	
  Fax/Telecopy No.: (416) 202-6216

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street, Suite 1700

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN: Salman Mukhtar

  
	
   

  	
   

  	
  Fax: (312) 441-7920

  

 

57

 

	
  With a copy to:

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  201 Merritt 7

  
	
   

  	
   

  	
  P.O. Box 5201

  
	
   

  	
   

  	
  Norwalk, Connecticut 06851

  
	
   

  	
   

  	
  ATTN: General Counsel –

  
	
   

  	
   

  	
  GE Global Sponsor Finance

  
	
   

  	
   

  	
  Fax: (203) 956-4216

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street, Suite 1700

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN: General Counsel - GE

  
	
   

  	
   

  	
  Fax: (312) 441-6876

  
	
   

  	
   

  	
   

  
	
  If to any
  Lender:

  	
   

  	
  Its address
  indicated on the signature page hereto, in an Assignment and Acceptance
  Agreement or in a notice to Agent and Borrower or to such other address as
  the party addressed shall have previously designated by written notice to the
  serving party, given in accordance with this subsection 10.3.

  

 

10.4         Survival of
Representations and Warranties and Certain Agreements.  All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement and the
making of the Loans hereunder. 
Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower, Agent and Lenders set forth in subsections
10.1, 10.2, 10.6, 10.11, 10.14 and 10.15 (Borrower’s agreement to
pay fees, costs and expenses, Borrower’s agreement to indemnify Indemnitees,
the reinstatement of Obligations, Liens, rights and remedies, the parties’
agreement as to choice of law and submission to jurisdiction, and Borrower’s
and Lenders’ waiver of a jury trial) shall survive the payment of the Loans and
the termination of this Agreement.

 

10.5         Indulgence Not Waiver. No failure or delay on the part of
Agent, any Lender or any holder of any Note in the
exercise of any power, right or privilege hereunder or under any Note shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof
or of any other right, power or privilege.

 

10.6         Marshaling; Payments
Set Aside.  Neither Agent nor any
Lender shall be under any obligation to marshal any assets in payment of any or
all of the Obligations.  To the extent
that any Loan Party makes a payment or payments to Agent and/or any Lender or
Agent and/or any Lender enforces its security interests or exercises its rights
of setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently

 

58

 

invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization law, state, provincial or federal law, common law or equitable
cause, then to the extent of such recovery, the Obligations or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 

10.7         Entire Agreement.  This Agreement and the other Loan Documents
embody the entire agreement among the parties hereto and supersede all prior
commitments, agreements, representations, and understandings, whether written
or oral, relating to the subject matter hereof, and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.

 

10.8         Severability.  The invalidity, illegality or unenforceability
in any jurisdiction of any provision in or obligation under this Agreement or
the other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement
or any of the other Loan Documents.

 

10.9         Lenders’ Obligations
Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several and not joint and neither Agent nor any Lender shall be responsible for
the obligation or Commitment of any other Lender hereunder.  In the event that any Lender at any time should
fail to make a Loan as herein provided, the Lenders, or any of them, at their
sole option, may make the Loan that was to have been made by the Lender so
failing to make such Loan.  Nothing
contained in any Loan Document and no action taken by Agent or any Lender
pursuant hereto or thereto shall be deemed to constitute Lenders to be a
partnership, an association, a joint venture or any other kind of entity.  The amounts payable at any time hereunder to
each Lender shall be a separate and independent debt, and, provided Agent fails
or refuses to exercise any remedies against Borrower after receiving the
direction of the Requisite Lenders, each Lender shall be entitled to protect
and enforce its rights arising out of this Agreement and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.

 

10.10       Headings.  Section and subsection headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose or be given any
substantive effect.

 

10.11       APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE PROVINCE
OF ONTARIO AND THE LAWS OF CANADA APPLICABLE THEREIN, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.

 

10.12       Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided, however, Borrower shall not assign its rights
or obligations hereunder without the written consent of Lenders.

 

59

 

10.13       No Fiduciary
Relationship; No Duty; Limitation of Liabilities. 

 

(A)          No Fiduciary Relationship. 
No provision in this Agreement or in any of the other Loan Documents and
no course of dealing between the parties shall be deemed to create any
fiduciary duty by Agent or any Lender to Borrower.

 

(B)           No Duty.  All legal
counsel, accountants, appraisers, and other professional Persons and
consultants retained by Agent or any Lender shall have the right to act
exclusively in the interest of Agent or such Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any type
or nature whatsoever to Borrower or any of Borrower’s shareholders or any other
Person.

 

(C)           Limitation of Liabilities. 
Neither Agent nor any Lender, nor any affiliate, officer, director,
shareholder, employee, legal counsel, or agent of Agent or any Lender shall
have any liability with respect to, and Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by Borrower in
connection with, arising out of, or in any way related to, this Agreement or
any of the other Loan Documents, or any of the transactions contemplated by
this Agreement or any of the other Loan Documents.  Borrower hereby waives, releases, and agrees
not to sue Agent or any Lender or any of Agent’s or any Lender’s affiliates,
officers, directors, employees, counsel, or agents for punitive damages in
respect of any claim in connection with, arising out of, or in any way related
to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.

 

10.14       CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION LOCATED
WITHIN THE PROVINCE OF ONTARIO AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND CONSENTS TO
THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS.  TO THE EXTENT PERMITTED BY
LAW, BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER, AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS
AFTER THE SAME HAS BEEN POSTED.  IN ANY
LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS OF BORROWER OR OF ITS AFFILIATES SHALL BE DEEMED TO BE
EMPLOYEES OR MANAGING AGENTS OF BORROWER FOR PURPOSES OF ALL APPLICABLE LAW OR
COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY
(WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE).  BORROWER AGREES THAT AGENT’S OR ANY LENDER’S
COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY

 

60

 

OF THESE INDIVIDUALS AS IF
UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE
USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION.  BORROWER IN ANY EVENT WILL USE ALL
COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE RESOLUTION
PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY AGENT OR ANY LENDER, ALL
PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER
THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE.

 

10.15       WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. 
BORROWER, AGENT AND EACH LENDER WARRANT AND REPRESENT THAT EACH HAS HAD
THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

10.16       Waiver of Notices.  Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonour with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein.  No notice to or demand on
Borrower or any Loan Party which Agent or any Lender may elect to give shall
entitle Borrower or any Loan Party to any other or further notice or demand in
the same, or other circumstances.

 

10.17       Judgment Currency.  To the extent permitted by applicable law, the
obligations of each Loan Party in respect of any amount due under this
Agreement or any other Loan Document shall, notwithstanding any payment in any
other currency (the “Other Currency”) (whether pursuant to a judgment or
otherwise), be discharged only to the extent of the amount in the currency in
which it is due (the “Agreed Currency”) that Agent or any Lender may, in
accordance with normal banking procedures, purchase with the sum paid in the
Other Currency (after any premium and costs of exchange) on the Business Day immediately
after the day on which Agent or such Lender receives the payment.  If the amount in the Agreed Currency that may
be so purchased for any reason falls short of the amount originally due, the
applicable Loan Party shall pay additional amounts, in the Agreed Currency, as
may be necessary to compensate for the shortfall.  Any obligation of the applicable Loan Party
not discharged by that payment shall, to the extent permitted by applicable
law, be due as a separate and independent obligation and, until discharged as
provided in this subsection 10.17, continue in full force and
effect.

 

10.18       Construction.  Borrower, Agent and each Lender each
acknowledge that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this

 

61

 

Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by Borrower, Agent and each
Lender.

 

10.19       Counterparts;
Effectiveness.  This Agreement and
any amendments, waivers, consents, or supplements may be executed via
telecopier or facsimile transmission in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.

 

10.20       Confidentiality.  Agent and each Lender agree to exercise their
best efforts to keep confidential any non-public information delivered pursuant
to the Loan Documents and identified as such by Borrower and not to disclose
such information to Persons other than to: its respective affiliates, officers,
directors and employees; or its potential assignees or participants; or Persons
employed by or engaged by Agent, a Lender or a Lender’s assignees or
participants including, without limitation, legal counsel, auditors,
professional consultants, rating agencies and portfolio management services; or
to US Facility Agent or any US Facility Lender. 
The confidentiality provisions contained in this subsection shall
not apply to disclosures (i) required to be made by Agent or any Lender to
any regulatory or governmental agency or pursuant to legal process or (ii) consisting
of general portfolio information that does not identify any Loan Party.  The obligations of Agent and Lenders under
this subsection 10.20 shall supersede and replace the obligations
of Agent and Lenders under any confidentiality agreement in respect of this
financing executed and delivered by Agent or any Lender prior to the date
hereof.  In no event shall Agent or any
Lender be obligated or required to return any materials furnished by any Loan
Party; provided, however, each potential assignee or participant shall
be required to agree that if it does not become an assignee (or participant) it
shall return all materials furnished to it by any Loan Party in connection
herewith.

 

SECTION 11.

DEFINITIONS AND ACCOUNTING TERMS

 

11.1         Certain Defined Terms. The following terms used in this
Agreement shall have the following meanings:

 

“Accounts” means all “accounts”
(as defined in the PPSA), accounts receivable, contract rights and general
intangibles relating thereto, notes, drafts and other forms of obligations owed
to or owned by any Loan Party, as applicable, arising or resulting from the
sale of goods or the rendering of services, whether or not earned by
performance.

 

“Activation Notice” means
written notice from Agent or US Facility Agent instructing the Collecting Bank
to transfer funds in such Blocked Account to Agent or US Facility Agent or as
otherwise instructed by Agent or US Facility Agent.

 

“Activation Period”
means, with respect to a Blocked Account at a Collecting Bank, the period which
commences as soon as possible but in any event within a reasonable

 

62

 

period of time (not to exceed two Business Days) after
such Collecting Bank’s receipt of an Activation Notice with respect to such
Blocked Account.

 

“Additional Mortgaged
Property” means all real property owned or leased by any Loan Party or any of
its Subsidiaries in which after the Closing Date Agent requires a mortgage (or
the equivalent thereof under applicable laws) to secure the Obligations.

 

“Affiliate” means, with
respect to any Person, any other Person (other than Agent or any Lender): (a) directly
or indirectly controlling, controlled by, or under common control with, any
such Person; (b) directly or indirectly owning or holding ten percent
(10%) or more of any equity interest in such Person; or (c) ten percent
(10%) or more of whose stock or other equity interest having ordinary voting
power for the election of directors or the power to direct or cause the
direction of management, is directly or indirectly owned or held by such
Person.  For purposes of this definition,
“control” (including with correlative meanings, the terms “controlling”, “controlled
by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities or
other equity interest, or by contract or otherwise.

 

“Agent” means GE Canada
Finance Holding Company in its capacity as agent for the Lenders under the Loan
Documents and any successor in such capacity appointed pursuant to subsection 9.1(G).

 

“Agent’s Account” means
Transit No. 00002, Account No. 1209329 at Royal Bank of Canada, Main
Branch, Toronto, Ontario, Reference: Canadian Dollar Receipt Account re Beacon
Roofing Supply Canada Company.

 

“Agreement” means this
Third Amended and Restated Loan and Security Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time.

 

“Applicable Margins”
means collectively the Applicable Revolver Index Margin and the Applicable
Revolver BA Rate Margin.

 

“Applicable Revolver BA Rate
Margin” means the per annum interest rate from time to time in effect and
payable in addition to the BA Rate applicable to the Revolving Loan, as
determined by reference to Section 2.2(A).

 

 “Applicable Revolver Index Margin” means the
per annum interest rate margin from time to time in effect and payable in
addition to the Index Rate applicable to the Revolving Loan, as determined by
reference to Section 2.2(A).

 

 “Asset Disposition” means the disposition,
whether by sale, lease, transfer, loss, damage, destruction, condemnation or
otherwise, of any or all of the assets of any Loan Party or any of its
Subsidiaries other than sales of Inventory in the ordinary course of business.

 

“Assignment and
Acceptance Agreement” shall mean an Assignment and Acceptance Agreement
substantially in the form of Exhibit A.

 

63

 

“BA Period” means with
respect to any BA Rate Loan bearing interest at a rate based on the BA Rate, a
period of thirty (30), sixty (60) or ninety (90) days commencing on a Business
Day selected by Borrower in the Notice of Borrowing or Notice of
Conversion/Continuation with respect to such BA Rate Loan delivered to Agent in
accordance with Paragraph 2.1(C) or Paragraph 2.2(D) (as applicable),
provided that the foregoing provision relating to BA Periods is subject to the
following:

 

(a)                                  any BA Period that would otherwise extend beyond the Commitment
Termination Date shall end on the Business Day immediately preceding such
Commitment Termination Date;

 

(b)                                 Borrower shall select BA Periods so as not to require a payment or
prepayment on any BA Rate Loan during a BA Period for such Revolving Loan; and

 

(c)                                  Borrower shall select BA Periods so there shall be no more than five
(5) separate BA Periods in effect at any one time.

 

“BA Rate” means, with respect to any BA Rate Loan and applicable BA
Period, the annual rate of interest which is the average of the “BA 1, 2 or 3 month or thirty (30), sixty (60) or
ninety (90) day” rates, as applicable, applicable to Canadian Dollar
bankers’ acceptances displayed and identified as such on the “Reuters Monitor
Screen Page CDOR” at approximately 11:00 a.m., Toronto time, on the
date which is two (2) Business Days prior to the first day of such BA
Period or, if such display or service ceases to exist, any other similar
display and service designated by Agent in existence at the relevant time (as
adjusted by Agent after such time to reflect any error in a posted rate or in
the posted average rate of interest); provided, however, if no such rates are
then provided by Reuters or a similar service designated by Agent, then the BA
Rate at the relevant time shall be GE Canada Finance’s cost of funds at such
time for loans of a similar amount and term, as certified by GE Canada Finance,
whose certification thereof shall be binding and conclusive for all purposes
hereof.

 

“BA Rate Loan” means a
Loan denominated in Canadian Dollars that bears interest at a rate based on the
BA Rate.

 

“Banking Services” means
treasury management services (including, without limitation, controlled
disbursement, automated clearinghouse transactions, returned items, overdrafts
and interstate depository network services) provided to any Loan Party by any
Lender (or Affiliate of a Lender).

 

“Bank Rate” means, as of
any date of determination, the Bank of Canada Rate quoted or published on such
date in the Report on Business section of The Globe
and Mail or such other daily Canadian nationally circulated
newspaper; provided, that if such rate is not so quoted or published on any
date of determination, then such rate most recently so quoted or published
prior to such date of determination shall constitute the “Bank Rate” on such
date.

 

“Beacon Canada Holdings”
means Beacon Canada, Inc., a Delaware Corporation.

 

“Best Distributing” means
Best Distributing Co., a North Carolina corporation.

 

64

 

“Borrowing Base
Certificates” means the US Obligors Consolidating Borrowing Base Certificates,
the Consolidated Borrowing Base Certificate and the Canadian Borrowing Base
Certificate.

 

“Business Day” means any
day, excluding Saturday, Sunday and any day which is a legal holiday under the
laws of the Province of Ontario or is a day on which banking institutions
located in the Province of Ontario are closed.

 

“Canadian Benefit Plans”
means all material employee benefit plans of any nature or kind whatsoever that
are not Canadian Pension Plans and are maintained or contributed to by any Loan
Party which has employees in Canada.

 

“Canadian Borrowing Base
Certificate” means a certificate and schedule duly executed by an officer
of Borrower appropriately completed and in substantially the form of Exhibit B.2.

 

“Canadian Dollars” and “C$”
each means the lawful money of Canada.

 

“Canadian GAAP” means
generally accepted accounting principles in Canada as set forth in the opinions
and pronouncements of the relevant Canadian public and private accountings
boards and institutions that are applicable to the circumstances as of the date
of determination.

 

“Canadian Pension Plans”
means each plan which is considered to be a pension plan for the purposes of
any applicable pension benefits standards statute and/or regulation in Canada
maintained or contributed to by a Loan Party for its employees or former
employees and does not include the Canada Pension Plan or the Quebec Pension
Plan which is maintained by the Government of Canada or the Province of Quebec,
respectively.

 

“Capital Expenditures”
means all expenditures (including deposits) for, or contracts for expenditures
(excluding contracts for expenditures under or with respect to Capital Leases,
but including cash down payments for assets acquired under Capital Leases) with
respect to any fixed assets or improvements, or for replacements, substitutions
or additions thereto, which have a useful life of more than one year, including
the direct or indirect acquisition of such assets by way of increased product
or service charges, offset items or otherwise.

 

“Capital Lease” means any
lease of any property (whether real, personal or mixed) that, in conformity
with US GAAP, should be accounted for as a capital lease.

 

“Capitalization/Acquisition
Documents” means, collectively: (a) any or all of the stock certificates,
notes, debentures or other instruments representing securities bought, sold or
issued, or loans made, to facilitate the consummation of the Related
Transactions; (b) the indentures or other documents pursuant to which such
stock, notes, debentures or other instruments are issued or to be issued; (c) each
document governing the issuance of, or setting forth the terms of, such stock,
notes, debentures or other instruments; (d) any stockholders, registration
or intercreditor agreement among or between the holders of such stock, notes,
debentures or other instruments; (e) the Shelter Acquisition Documents and
(f) the Equity Documents; but excluding all Loan Documents and all US
Facility Loan Documents.

 

65

 

“Cash Equivalents” means:
(a) marketable direct obligations issued or unconditionally guaranteed by
the United States or Canadian Government or issued by any agency thereof and
backed by the full faith and credit of the United States or Canada, in each case
maturing within six (6) months from the date of acquisition thereof; (b) commercial
paper maturing no more than six (6) months from the date issued and, at
the time of acquisition, having a rating of at least A-1 from Standard &
Poor’s Corporation or at least P-1 from Moody’s Investors Service, Inc.;
and (c) certificates of deposit or bankers’ acceptances maturing within
six (6) months from the date of issuance thereof issued by, or overnight
reverse repurchase agreements from, any commercial bank organized under the
laws of the United States of America, or any state thereof or the District of
Columbia, having combined capital and surplus of not less than US$250,000,000
or organized under the laws of Canada and referenced in Schedule I of the Bank Act (Canada) and not subject to setoff rights in favour
of such bank.

 

“CHS” means Code,
Hennessy & Simmons III, L.P., a Delaware limited partnership.

 

“CIGNA Impress Account”
means that certain Citibank Delaware depository account number 30548966, for
the account of Beacon Roofing Supply Company, Inc.

 

“Closing Date” means October 14,
2005.

 

“Collateral” means
Borrower Collateral and Other Loan Party Collateral.

 

“Commitment” or “Commitments”
means the commitment or commitments of Lenders to make Loans as set forth in subsection 2.1(A).

 

“Compliance Certificate”
means a certificate duly executed on behalf of Borrower by the chief executive
officer or chief financial officer of Borrower appropriately completed and in
substantially the form of Exhibit C.

 

“Consolidated Borrowing
Base Certificate” means a certificate and schedule duly executed by an
officer of Borrower appropriately completed and in substantially the form of Exhibit B.1.

 

“Contingent Obligation”,
as applied to any Person, means any direct or indirect liability of that
Person:  (i) with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
purpose or intent of the Person incurring such liability, or the effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (ii) with respect
to any letter of credit issued for the account of that Person or as to which
that Person is otherwise liable for reimbursement of drawings; (iii) under
any foreign exchange contract, currency swap agreement, interest rate swap
agreement or other similar agreement or arrangement designed to alter the risks
of that Person arising from fluctuations in currency values or interest rates; (iv) to
make take-or-pay or similar payments if required regardless of nonperformance
by any other party or parties to an agreement, or (v) pursuant to any
agreement to purchase, repurchase or otherwise acquire any obligation or any
property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to maintain the

 

66

 

solvency, financial condition or any balance sheet
item or level of income of another.  The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.

 

“Default” means a
condition, act or event that, after notice or lapse of time or both, would
constitute an Event of Default if that condition, act or event were not cured
or removed within any applicable grace or cure period.

 

“Defaulted Amount” means,
with respect to any Lender at any time, any amount required to be paid
hereunder or under any other Loan Document by such Lender to the Agent or any
other Lender which has not been so paid.

 

“Defaulting Lender”
means, at any time, any Lender that owes a Defaulted Amount.

 

“Domestic Subsidiary”
means any Subsidiary organized under the laws of a jurisdiction within the
United States and whose chief executive office and principal places of business
are located in the United States.

 

“EBITDA” means, for any
period, without duplication, the total of the following for Holdings and its
Subsidiaries on a consolidated basis, each calculated for such period:  (1) net income determined in accordance
with US GAAP; plus, to the extent included in the calculation of net
income, (2) the sum of (a) income, capital and franchise taxes paid
or accrued;  (b) interest expenses,
net of interest income, paid or accrued; (c) amortization and
depreciation, (d) other non-cash charges (excluding accruals for cash
expenses made in the ordinary course of business) and (e) out-of-pocket
expenses incurred in connection with the consummation of the IPO or any other
primary public offering of equity securities by Holdings; less, to the
extent included in the calculation of net income, (3) the sum of (a) the
income of any Person (other than US Borrower and wholly-owned Subsidiaries of
US Borrower) in which Holdings or a wholly-owned Subsidiary of Holdings has an
ownership interest except to the extent such income is received by US Borrower
or a wholly-owned Subsidiary of US Borrower in a cash distribution during such
period; (b) gains or losses from sales or other dispositions of assets
(other than Inventory in the normal course of business); and (c) extraordinary
or non-recurring gains, but not net of extraordinary or non-recurring “cash”
losses.

 

“Eligible Assignee” means
(a) any Lender, any Affiliate of any Lender and, with respect to any
Lender that is an investment fund that invests in commercial loans, any other
investment fund that invests in commercial loans and that is managed or advised
by the same investment advisor as such Lender or by an Affiliate of such
investment advisor, and (b) any “accredited investor” (as defined under Ontario
Securities Commission Rule 45-501 (as amended, supplemented, replaced or
otherwise modified from time to time)) which extends credit or buys loans as
one of its businesses, mutual fund, lease financing company and commercial
finance company which extends credit or buys loans as one of its businesses
and, in each case, which has a rating of BBB or higher from Standard &
Poor’s Ratings Group or Dominion Bond Rating Service Limited or a rating of
Baa2 or higher from Moody’s Investor Service, Inc. at the date that it
becomes a Lender and which, through its applicable lending

 

67

 

office, is capable of lending to Borrower without the
imposition of any withholding or similar taxes; provided, that no Person determined
by Agent to be acting in the capacity of a vulture fund or distressed debt
purchaser shall be an Eligible Assignee and no Person or Affiliate of such
Person (other than a Person that is already a Lender) holding Subordinated Debt
or shares issued by any Loan Party shall be an Eligible Assignee.

 

“Employee Benefit Plan”
means any employee benefit plan within the meaning of Section 3(3) of
ERISA which (a) is maintained for employees of any Loan Party or any ERISA
Affiliate or (b) has at any time within the preceding 6 years been
maintained for the employees of any Loan Party or any current or former ERISA
Affiliate.

 

“Environmental Claims”
means claims, liabilities, investigations, litigation, administrative
proceedings, judgments or orders relating to Hazardous Materials.

 

“Environmental Laws”
means all applicable federal, provincial, local and foreign laws, statutes,
ordinances, codes, rules, standards, orders-in-council, and regulations, now or
hereafter in effect and, in each case, as amended or supplemented from time to
time, and any applicable judicial or administrative interpretation thereof,
including any applicable judicial or administrative order, consent decree,
order or judgment, imposing liability or standards of conduct for or relating
to the regulation and protection of human health, safety, the environment and
natural resources (including ambient air, surface water, groundwater, wetlands,
land surface or subsurface strata, wildlife, aquatic species and vegetation).

 

“Environmental Liabilities”
means, with respect to any Person, all liabilities, obligations,
responsibilities, response, remedial and removal costs, investigation and
feasibility study costs, capital costs, operation and maintenance costs,
losses, damages, punitive damages, property damages, natural resource damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of legal counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, administrative order, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws, Environmental
Permits, or in connection with any Release or threatened Release or presence of
a Hazardous Material whether on, at, in, under, from or about or in the
vicinity of any real or personal property.

 

“Environmental Permits”
means all permits, licenses, authorizations, certificates, approvals or
registrations required by any Governmental Authority under any Environmental
Laws.

 

“Equipment” means all “equipment”
(as defined in the PPSA), all furniture, furnishings, fixtures, machinery,
motor vehicles, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof and all additions and accessions thereto and replacements
therefor.

 

“Equity Documents” means (i) the
Chief Executive Securities Agreement dated as of August 21, 1997 by and
among Holdings, CHS and Andrew Logie and (ii) the Executive Securities
Agreements among Holdings, CHS and certain managers of the Loan Parties.

 

68

 

“Equivalent Amount”
means, on any date of determination, with respect to obligations or valuations
denominated in one currency (the “first currency”), the amount of another
currency (the “second currency”) which would result from the conversion of the
relevant amount of the first currency into the second currency at the 12:00
noon (Toronto time) rate quoted on the Reuters’ Screen Page BOFC on such
date, or if such date is not a Business Day, on the Business Day immediately
preceding such date of determination (or, if such display or service ceases to
exist, any other similar display and service designated by Agent in existence
at the relevant time).

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any successor statute and all rules and regulations promulgated
thereunder.

 

“ERISA Affiliate”, as
applied to any Loan Party, means any Person who is a member of a group which is
under common control with any Loan Party, who together with any Loan Party is
treated as a single employer within the meaning of Section 414(b) and
(c) of the IRC.

 

“Excess Availability” has
the meaning assigned to it in the US Facility Loan Agreement as of the Closing
Date.

 

“Existing Obligations”
means the “Obligations” of the Borrower under the Existing Loan Agreement
outstanding on the Closing Date.

 

“Existing Revolver
Balance” has the meaning assigned to that term in Section 1.2.

 

“Fiscal Year” means each
twelve (12) month period ending on the last day of September in each year.

 

“Fixed Charge Coverage”
means, for any period, Free Cash Flow divided by Fixed Charges.

 

“Fixed Charges” means,
for any period, and each calculated for such period (without duplication), (a) Interest
Expense of Holdings and its Subsidiaries; plus (b) scheduled
payments of principal with respect to all Indebtedness of Holdings and its
Subsidiaries.

 

“Free Cash Flow” means,
for any period, (a) EBITDA; less (b) any provision for (to the
extent it is greater than zero) income, capital or franchise taxes included in
the determination of net income, excluding any provision for deferred taxes; less
(c) payment of deferred taxes accrued in any prior period; less (d) unfinanced
Capital Expenditures.

 

“Funding Date” means the
date of each funding of a Loan.

 

“Governmental Authority”
means any nation or government, any province, state or other political
subdivision thereof, and any agency, department or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

 

69

 

“Hazardous Material”
means any substance, material or waste that is regulated by, or forms the basis
of liability now or hereafter under, any Environmental Laws, including any
material or substance that is (a) defined as a “solid waste”, “hazardous
waste”, “hazardous material”, “hazardous substance”, “dangerous goods”, “extremely
hazardous waste”, “restricted hazardous waste, “pollutant”, “contaminant”, “hazardous
constituent”, “special waste”, “toxic substance” or other similar term or
phrase under any Environmental Laws, or (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any
radioactive substance.

 

“Holdings” means Beacon
Roofing Supply, Inc., a Delaware corporation.

 

“Holdings’ Accountants”
means the independent certified public accountants selected by Holdings and its
Subsidiaries and reasonably acceptable to Agent, which selection shall not be
modified during the term of this Agreement without Agent’s prior written
consent.

 

“Indebtedness” as applied
to any Person, means: (a) all indebtedness for borrowed money; (b) that
portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with US GAAP; (c) any
obligation under any lease (a “synthetic lease”) treated as an operating lease
under US GAAP and as a loan or financing for United States income tax purposes
or creditors rights purposes; (d) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money; (e) any obligation owed for all or any part of the
deferred purchase price of property or services if the purchase price is due
more than six (6) months from the date that the obligation is incurred or
is evidenced by a note or similar written instrument; (f) “earnouts” and
similar payment obligations (but excluding US Borrower’s “earn-out” payment
obligations under the Shelter Acquisition Documents), which obligations shall,
for purposes of determining outstanding Indebtedness in connection with
calculating Borrower’s and the other Loan Parties’ compliance with the
covenants contained in Section 7, be valued based upon the amount
thereof required to be recorded as a liability on a balance sheet prepared in
accordance with US GAAP; (g) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person and (h) obligations in respect of
letters of credit.

 

“Index Rate” means, on
any day, a floating rate per annum equal to the greater of (1) the annual
rate of interest most recently quoted in the “Report on Business” section of
The Globe and Mail as being the current “Canadian prime rate”, “chartered
bank prime rate” or words of similar description in effect and (2) the BA
Rate in respect of a BA Period of thirty (30) days commencing on the first
Business Day of the calendar month in which such date occurs plus 1.75% per
annum.  Each change in any interest rate
provided for in the Agreement based upon the Index Rate shall take effect at
the time of such change in the Index Rate. 
For greater certainty, no adjustment shall be made to account for the
difference between the number of days in a year on which the rates referred to
in this definition are based and the number of days in a year on the basis of
which interest is calculated in the Agreement.

 

“Index Rate Loan” means a
Loan denominated in Canadian Dollars bearing interest at a rate determined by
reference to the Index Rate.

 

70

 

“Insolvency Law” means
any of the Bankruptcy and Insolvency Act (Canada),
the Companies’ Creditors Arrangement Act
(Canada) and Title 11 of the United States
Code entitled “Bankruptcy”, each as amended from time to time, and any other
applicable bankruptcy, insolvency and other similar law now or hereafter in
effect and all rules and regulations promulgated thereunder.

 

“Intellectual Property”
means all present and future designs and registrations and applications
therefor, patents, patent rights and applications therefor, trademarks and
registrations or applications therefor, trade names, inventions, copyrights and
all applications and registrations therefor, software or computer programs,
license rights, trade secrets, methods, processes, know-how, drawings,
specifications, descriptions, and all memoranda, notes and records with respect
to any research and development, whether now owned or hereafter acquired, all
goodwill associated with any of the foregoing, and proceeds of all of the
foregoing, including, without limitation, proceeds of insurance policies
thereon.

 

“Intercreditor Agreement”
means the intercreditor agreement dated as of the Closing Date among Agent, US
Facility Agent, Lenders, US Facility Lenders and the Loan Parties party
thereto.

 

“Interest Expense” means,
without duplication, for any period, the following, for Holdings and its Subsidiaries
each calculated for such period: 
interest expenses deducted in the determination of net income (excluding
(i) the amortization of fees and costs with respect to the Related
Transactions which have been capitalized as transaction costs in accordance
with the provisions of subsection 11.2; and (ii) interest paid
in kind).

 

“Interest Rate Agreement”
means any interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement or similar agreement or arrangement designed to protect
Borrower against any fluctuations in interest rates entered into between
Borrower and any Lender (or an Affiliate of any Lender).

 

“Interest Rate Excess
Availability” means, as of any adjustment date with respect to the Applicable
Margins, the average daily Excess Availability for the three-month period
immediately preceding such date, as determined by the Agent.

 

“Inventory” means all “inventory”
(as defined in the PPSA), including, without limitation, finished goods, raw
materials, work in process and other materials and supplies used or consumed in
a Person’s business, and goods which are returned or repossessed.

 

“IPO” means the initial
public offering of Holdings’ common stock consummated on September 9,
2004.

 

“IRC” means the Internal
Revenue Code of 1986, as amended from time to time and any successor statute
and all rules and regulations promulgated thereunder.

 

“ITA” means the Income Tax Act (Canada) R.S.C., 1985, as amended form time
to time and any successor statute and all rules and regulations
promulgated thereunder.

 

“JGA” means J.G.A. Beacon, Inc.,
a Delaware corporation.

 

71

 

“Liabilities” shall have
the meaning given that term in accordance with US GAAP and shall include
Indebtedness.

 

“Lien” means any lien,
claim, hypothec, mortgage, pledge, security interest, charge or encumbrance of
any kind, whether voluntary or involuntary, (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).

 

“Loan” or “Loans” means
an advance or advances under the Revolving Loan Commitment.

 

“Loan Documents” means
this Agreement, the Notes, all security agreements, pledge agreements,
mortgages and similar agreements guaranteeing payment of or granting a Lien
upon property as security for payment of all or any portion of the Obligations,
the Intercreditor Agreement, each Interest Rate Agreement with a Lender (or
Affiliate of a Lender), each Currency Rate Agreement with a Lender (or
Affiliate of a Lender) pursuant to subsection 5.10, the letter
agreement referenced in subsection 2.3(D) and all other
documents, instruments and agreements executed by or on behalf of any Loan
Party and delivered previously or concurrently herewith or at any time
hereafter to or for Agent or any Lender in connection with the Loans and any
other transaction contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time but excluding all
Capitalization/Acquisition Documents.

 

“Loan Party” means each
of Holdings, US Borrower, Borrower and each other Subsidiary of US Borrower.

 

“Loan Year” means each
period of twelve (12) consecutive months commencing on the Closing Date and on
each anniversary thereof.

 

“Material Adverse Effect”
means a material adverse effect upon (a) the business, operations,
prospects, properties, assets or condition (financial or otherwise) of Holdings
and its Subsidiaries taken as a whole or (b) the ability of any Loan Party
to perform its obligations under any Loan Document to which it is a party or of
Agent or any Lender to enforce or collect any of the Obligations.  In determining whether any individual event
would result in a Material Adverse Effect, notwithstanding that such event does
not of itself have such effect, a Material Adverse Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then
existing events would result in a Material Adverse Effect.

 

“Moody’s” means Moody’s
Investor Services, Inc.

 

“Mortgage” means each of
the mortgages, deeds of hypothec, deeds of trust, leasehold mortgages,
leasehold deeds of trust, collateral assignments of leases or other real estate
security documents or equivalents delivered by any Loan Party to Agent, on
behalf of Agent and Lenders, with respect to Mortgaged Property or Additional
Mortgaged Property, all in form and substance satisfactory to Agent.

 

“Mortgaged Property”
means the real property owned or leased by Borrower, US Borrower or its
Subsidiaries as described on Schedule 11.1(A).

 

72

 

“Net Proceeds” means cash
proceeds received by Borrower or any of its Subsidiaries from any Asset
Disposition (including insurance proceeds, awards of condemnation, and payments
under notes or other debt securities received in connection with any Asset
Disposition), net of (a) the costs of such sale, lease, transfer or other
disposition (including taxes attributable to such sale, lease or transfer) and (b) amounts
applied to repayment of Indebtedness (other than the Obligations) secured by a
Lien on the asset or property disposed.

 

“Notes” means the
Revolving Notes.

 

“Notice of Borrowing”
means a notice duly executed by an authorized representative of Borrower
appropriately completed and in the form of Exhibit D.

 

“Notice of
Conversion/Continuation” means a notice duly executed by an authorized
representative of Borrower appropriately completed and in the form of Exhibit F.

 

“Obligations” means all
obligations, liabilities and indebtedness of every nature of each Loan Party
from time to time owed to Agent or to any Lender (or any Affiliate of any
Lender) under the Loan Documents (whether incurred before or after the
Termination Date), including the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest and all fees, costs and expenses,
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable including, without
limitation, all interest, fees, costs and expenses accrued or incurred after
the filing of any petition under any bankruptcy or insolvency law whether or
not allowed in such proceeding. 
Obligations shall also include all obligations of the Loan Parties to
any Lender (or any Affiliate of any Lender) in respect of Banking Services.

 

“Other Loan Party
Collateral” means all real and personal property of each Loan Party, other than
Borrower, and in which such Loan Party purports to grant security interests
and/or other Liens to Agent and/or Lenders under the Security Documents.

 

“Permitted Acquisition”
means an acquisition by any US Obligor of all or substantially all of the
assets or 100% of the equity securities of any Person that engaged in the same
(or substantially the same) line of business as the US Obligors which has been
approved in writing by the Requisite Lenders in their sole and absolute
discretion.

 

“Permitted Encumbrances”
means the following types of Liens: (a) Liens (other than Liens relating
to Environmental Claims or ERISA) for taxes, assessments or other governmental
charges not yet due and payable; (b) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other similar liens imposed
by law, which are incurred in the ordinary course of business for sums not more
than thirty (30) days delinquent; (c) Liens (other than any Lien imposed
by ERISA) incurred or deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money); (d) deposits, in an aggregate amount not to exceed
US$250,000 or the Equivalent Amount thereof made in the ordinary course of
business to secure liability to insurance carriers; (e) easements,
rights-of-way,

 

73

 

restrictions, and other similar charges or
encumbrances not interfering in any material respect with the ordinary conduct
of the business of any Loan Party or any of its Subsidiaries; (f) Liens on
fixed assets for purchase money obligations, provided that (i) the
purchase of the asset subject to any such Lien is permitted under paragraph (B) of
the Financial Covenants Rider, (ii) the Indebtedness secured by any such
Lien is permitted under subsection 7.1, (iii) such Lien
encumbers only the asset so purchased and (iv) the Indebtedness or other
obligation secured by such Liens is incurred within ninety (90) days after the
purchase or lease of such asset; (g) Liens in favour of Agent, on behalf
of itself and Lenders, (h) Liens under the US Facility Loan Documents in
favour of US Facility Agent, for the benefit of US Facility Agent and US
Facility Lenders, and (i) Liens set forth on Schedule 11.1(B).

 

“Person” means and
includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, limited liability partnerships,
joint stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.

 

“Personal Property
Security Legislation” means any applicable personal property security
legislation, as all such legislation now exists or may from time to time
hereafter be amended, modified, recodified, supplemented or replaced, together
with all rules, regulations and interpretations thereunder ore related thereto.

 

“PPSA” means the Personal Property Security Act (Ontario), as such
legislation now exists or may from time to time hereafter be amended, modified,
recodified, supplemented or replaced, together with all rules, regulations and
interpretations thereunder or related thereto. 
References to sections of the PPSA shall be construed to also refer to
any successor sections.

 

“Pro Forma” means the
unaudited consolidated and consolidating balance sheets of Holdings and its
Subsidiaries prepared in accordance with US GAAP as
of the Closing Date after giving effect to the transactions contemplated by
this Agreement.  The Pro Forma is
attached hereto as Schedule 11.1(C).

 

“Pro Forma EBITDA”
has the meaning assigned to it in the US Facility Loan Agreement.

 

“Pro Rata Share” means,
with respect to a Lender’s obligation to make Revolving Advances and such
Lender’s right to receive payments of interest and principal with respect
thereto and the related unused line fee described in subsection 2.3(A),
and for all other purposes, the percentage obtained by dividing (i) the
Revolving Credit Exposure of such Lender by (ii) the aggregate Revolving
Credit Exposure of all Lenders.

 

“Projections” means
Holdings’ forecasted consolidated and consolidating:  (a) balance sheets; (b) profit and
loss statements; (c) cash flow statements; and (d) capitalization
statements, all prepared on a division by division and Subsidiary by Subsidiary
basis consistent with Borrower’s historical financial statements and based upon
good faith estimates and assumptions by Borrower believed to be reasonable at
the time made, together with appropriate supporting details and a statement of
underlying assumptions.

 

74

 

“Quality” means Quality
Roofing Supply Company, Inc., a Delaware corporation.

 

“Real Estate” means all
real property owned, leased, subleased or used by Borrower or any other Loan
Party.

 

“Related Transactions”
means the Shelter Acquisition, the execution and delivery of the Related
Transactions Documents entered into in connection with those Related
Transactions consummated on the Closing Date, the funding of all Loans on the
Closing Date, and the payment of all fees, costs and expenses associated with
all of the foregoing.

 

“Related Transactions
Documents” means the Loan Documents, the Capitalization/Acquisition Documents
and all other agreements, instruments and documents executed or delivered in connection
with the Related Transactions.

 

“Release” means any
release, threatened release, spill, emission, leaking, pumping, pouring,
emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Material in the indoor or outdoor
environment, including the movement of Hazardous Material through or in the
air, soil, surface water, ground water or property.

 

“Requisite Lenders” means
Lenders (including, for purposes hereof, US Facility Lenders and excluding (i) Defaulting
Lenders hereunder and (ii) “Defaulting Lenders” as defined in the US
Facility Loan Agreement) having (together with their Affiliates) (a) more
than 50% of the sum of (i) the Equivalent Amount in US Dollars of the
Revolving Loan Commitment plus (ii) the US Facility Revolving Loan
Commitment and the aggregate outstanding principal balance of the US Facility
Term Loans of all US Facility Lenders (that are not “Defaulting Lenders”, as
defined in the US Facility Loan Agreement) or (b) if the Revolving Loan
Commitment has been terminated, more than 50% of the sum of (i) the
Equivalent Amount in US Dollars of the aggregate outstanding principal balance
of the Loans of all Lenders that are not Defaulting Lenders plus (ii) the
aggregate outstanding principal balance of the US Facility Revolving Loans and
the US Facility Term Loans of all US Facility Lenders (that are not “Defaulting
Lenders”, as defined in the US Facility Loan Agreement) plus (iii) the
aggregate Pro Rata Share of Letter of Credit Obligations (as defined in the US
Facility Loan Agreement) of all US Facility Lenders (that are not “Defaulting
Lenders”, as defined in the US Facility Loan Agreement); provided that, in each
case, Requisite Lenders shall at all times consist of at least three Lenders.

 

“Reserves” means, with
respect to the Canadian Borrowing Base (a) the Credit Memoranda Reserve
and the Dilution Reserve and (b)  reserves against Eligible Accounts,
Eligible Inventory or the Canadian Borrowing Base that Agent may, in its
reasonable credit judgment, establish from time to time, with prior or
contemporaneous notice to Borrower.

 

“Restricted Junior
Payment” means:  (a) any dividend or
other distribution, direct or indirect, on account of any shares of any class
of stock or other equity securities, or ownership interest in, any Loan Party
now or hereafter outstanding, except a dividend payable solely with shares of
the class of stock on which such dividend is declared; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock or other equity security of, or ownership

 

75

 

interest in, any Loan Party now or hereafter
outstanding, or the issuance of a notice of any intention to do any of the
foregoing (including without limitation, any payment of the “earn-out” amount
under the Shelter Acquisition Documents; (c) any payment or prepayment of
interest on, principal of, premium, if any, redemption, conversion, exchange,
purchase, retirement, defeasance, sinking fund or similar payment with respect
to, any Indebtedness subordinated to the Obligations, or the issuance of a
notice of any intention to do any of the foregoing; (d) any payment made
to retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock or other equity security
of, or ownership interest in, any Loan Party now or hereafter outstanding; and (e) any
payment by Borrower or any of its Subsidiaries of any management, consulting or
similar fees to any Affiliate, whether pursuant to a management agreement or
otherwise.

 

“Revolving Advance” means
each advance made by Lender(s) under the Revolving Loan Commitment pursuant to subsection 2.1(A).

 

“Revolving Credit
Exposure” means, with respect to any Lender as of any date of determination, (a) prior
to the termination of the Revolving Loan Commitment, such Lender’s Revolving
Loan Commitment and (b) after termination of the Revolving Loan
Commitment, the aggregate outstanding principal amount of the Revolving Loan
held by such Lender.

 

“Revolving Loan” means
the outstanding balance of all Revolving Advances and any amounts added to the
principal balance of the Revolving Loan pursuant to this Agreement.

 

“Revolving Loan
Commitment” means (a) as to any Lender, the commitment of such Lender to
make Revolving Advances pursuant to subsection 2.1(A) in the
aggregate amount set forth on the signature page of this Agreement below
such Lender’s signature or in the most recent Assignment and Acceptance
Agreement, if any, executed by such Lender and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Revolving Advances.

 

“Revolving Note” means
each promissory note of Borrower, in form and substance reasonably acceptable
to Agent, issued to evidence the Revolving Loan Commitments.

 

“RFC” means The Roof
Centre, Inc., a Delaware corporation.

 

“SDI Guarantor” means SDI
Acquisition Guarantor, Inc., a Delaware corporation.

 

“SDI Holding” means SDI
Holding, Inc., a Delaware corporation.

 

“Security Documents”
means all instruments, documents and agreements executed by or on behalf of any
Person to guaranty or provide collateral security with respect to the
Obligations, including, without limitation, each guaranty of the Obligations,
each security agreement, pledge agreement, mortgage, debenture, deed of trust
and deed of hypothec and all instruments, documents and agreements executed
pursuant to the terms of the foregoing.

 

“Senior Indebtedness”
means the aggregate outstanding principal balance of all Indebtedness of
Holdings and its Subsidiaries on a consolidated basis, but excluding any
Indebtedness which, by its express terms is subordinated to the Obligations on
a basis satisfactory to Agent.

 

76

 

“Shelter” means Shelter
Distribution, Inc., a Delaware corporation.

 

“Shelter Acquisition”
means the acquisition by the US Borrower of all of the issued and outstanding
shares of capital stock and outstanding warrants to purchase shares of capital
stock of SDI Holding, owner of all of the issued and outstanding shares of
capital stock of SDI Guarantor and of Shelter pursuant to the Shelter
Acquisition Agreement and the other Shelter Acquisition Documents.

 

“Shelter
Acquisition Agreement” means that certain Securities Purchase Agreement dated
as of August 9, 2005  among US
Borrower, SDI Holding, each of the Persons party thereto as Sellers (as defined
therein) and Brazos Private Equity Partners, LLC.

 

“Shelter Acquisition
Documents” means the Shelter Acquisition Agreement and all agreements,
instruments and documents executed or delivered in connection therewith, but
excluding all Loan Documents and all US Facility Loan Documents.

 

 “Subsidiary” means, with respect to any
Person, any corporation, association or other business entity of which more
than fifty percent (50%) of the total voting power of shares of stock (or
equivalent ownership or controlling interest) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other subsidiaries of that Person or a
combination thereof.

 

“Target” has the meaning
assigned to it in the US Facility Loan Agreement.

 

“Total Indebtedness”
means the aggregate outstanding principal balance of all Indebtedness of
Holdings and its Subsidiaries on a consolidated basis.

 

“Unused Line Fee Margin”
means with respect to any month (or portion thereof) for which the unused line
fee under Section 2.3 is being calculated, a per annum rate equal
to three-eighths of one percent (0.375%).

 

“US Borrower” means
Beacon Sales Acquisition, Inc., a Delaware corporation.

 

“US Dollars” and “US$”
each means the lawful money of the United States of America.

 

“US Facility Agent” means
General Electric Capital Corporation, as agent under the US Facility Loan
Documents.

 

“US Facility Lenders”
means the lenders party to the US Facility Loan Agreement.

 

“US Facility Letter of
Credit Obligations” has the meaning assigned to the term “Letter of Credit
Obligations” under the US Facility Loan Agreement.

 

“US Facility Loan
Agreement” means the Third Amended and Restated Loan and Security Agreement
dated as of the Closing Date among Beacon Canada Holdings, Best

 

77

 

Distributing, Quality, RFC, West End, US Borrower,
JGA, SDI Holding, SDI Guarantor, Shelter, US Facility Agent, US Facility
Lenders, GECC Capital Markets Group, Inc., as sole lead arranger and sole
bookrunner, JPMorgan Chase Bank, N.A., as syndication agent and Wachovia
Capital Finance Corp. (Central) and The CIT Group/Business Credit, Inc., as
co-documentation agents.

 

“US Facility Loan
Documents” means the US Facility Loan Agreement and the other “Loan Documents”
as defined therein.

 

“US Facility Revolving
Loan Commitment” means the “Revolving Loan Commitment” as defined under the US
Facility Loan Agreement.

 

“US Facility Revolving
Loans” means the “Loans” as defined under the US Facility Loan Agreement.

 

“US Facility Term Loans”
means the “Term Loans”, as defined in the US Facility Loan Agreement.

 

“US GAAP” means generally
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination.

 

“US Obligors” means US
Borrower and its Domestic Subsidiaries that are party to the US Facility Loan
Agreement.

 

“US Obligors
Consolidating Borrowing Base Certificate” has the meaning assigned to the term “Consolidating
Borrowing Base Certificate” in the US Facility Loan Agreement.

 

“West End” means West End
Lumber Company, Inc., a Delaware corporation.

 

11.2         Accounting Terms  For purposes of this Agreement, all accounting
terms not otherwise defined herein (for example by reference to Canadian GAAP)
shall have the meanings assigned to such terms in conformity with US GAAP.  Financial statements and other information
furnished to Agent or any Lender pursuant to subsection 5.1 shall
be prepared in accordance with US GAAP (as in effect at the time of such
preparation) on a consistent basis.  In
the event any “Accounting Changes” (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Borrower and Lenders agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial
condition of Borrower shall be the same after such Accounting Changes as if
such Accounting Changes had not been made, and until such time as such an
amendment shall have been executed and delivered by Borrower and Requisite
Lenders, (A) all financial covenants, standards and terms in this
Agreement shall be calculated and/or construed as if such Accounting Changes
had not been made, and (B) Borrower shall prepare footnotes to each
Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the certificate or financial statements delivered (which reflect such

 

78

 

Accounting Changes) and the
basis for calculating financial covenant compliance (without reflecting such
Accounting Changes). “Accounting Changes” means: (a) changes in accounting
principles required by US GAAP and implemented by Holdings; (b) changes in
accounting principles recommended by Holdings’ Accountants; and (c) changes
in carrying value of Holdings’ or any of its Subsidiaries’ assets, liabilities
or equity accounts resulting from (i) the application of purchase
accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to
the Related Transactions or (ii) any other adjustments that, in each case,
were applicable to, but not included in, the Pro Forma.  All such adjustments resulting from
expenditures made subsequent to the Closing Date (including, but not limited
to, capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period.

 

11.3         Other Definitional
Provisions.  References to “Sections”,
“subsections”, “Riders”, “Exhibits”, “Schedules” and “Addendums” shall be to Sections,
subsections, Riders, Exhibits,  Schedules
and Addendums, respectively, of this Agreement unless otherwise specifically
provided.  Any of the terms defined in subsection 11.1
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference.  In
this Agreement, words importing any gender include the other genders; the words
“including”, “includes” and “include” shall be deemed to be followed by the
words “without limitation”; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments,
assignments and other modifications are not prohibited by the terms of this
Agreement or any other Loan Document; references to Persons include their
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.

 

SECTION 12.

RESTATEMENT OF EXISTING LOAN AGREEMENT

 

The parties hereto agree
that on the Closing Date, the following transactions shall be deemed to occur
automatically, without further action by any party hereto:

 

(a)           The Existing Loan Agreement shall be
deemed to be amended and restated in its entirety in the form of this
Agreement;

 

(b)           All Existing Obligations shall, to
the extent not repaid on the Closing Date, be deemed to be Obligations
outstanding hereunder;

 

(c)           the guaranties and Liens in favour of the Agent for
the benefit of the Existing Lenders securing payment of the Existing
Obligations shall remain in full force and effect with respect to the
Obligations; and

 

(d)           all references in the other Loan Documents to the
Existing Loan Agreement shall be deemed to refer to this Agreement without
further amendment to such other Loan Documents.

 

79

 

The parties acknowledge
and agree that this Agreement and the other Loan Documents do not constitute a
novation, payment and reborrowing or termination of the Existing Obligations
and that all such Existing Obligations are in all respects continued and
outstanding as Obligations under this Agreement and the Notes with only the
terms being modified from and after the effective date of this Agreement as
provided in this Agreement, the Notes and the other Loan Documents.  After giving effect to this Agreement, the
aggregate outstanding principal balances of each Lender’s Loans on the Closing
Date is as set forth on Schedule 12 hereto.

 

[Signature Pages Follow]

 

80

 

Witness the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.

 

	
   

  	
  BEACON ROOFING SUPPLY CANADA

  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Name:

  	
  David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
							

 

81

 

	
   

  	
  GE CANADA FINANCE HOLDING

  COMPANY, as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Ellis Gaston

  	
   

  
	
   

  	
  Title:

  	
  Duly Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: C$15,000,000

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  11 King Street West, Suite 1500

  
	
   

  	
  Toronto, Ontario

  
	
   

  	
  M5H 4C7

  
	
   

  	
  Attn:   Account Manager -
  Corporate Finance Beacon

  
	
   

  	
  Fax/Telecopy No.: (416) 202-6226

  
					

 

82

 

EXHIBITS

 

A.            Assignment and
Acceptance Agreement

B-1          Consolidated Borrowing
Base Certificate

B-2          Canadian Borrowing Base
Certificate

C.            Compliance
Certificate

D.            Notice of Borrowing

E.             Inventory Report

F.             Notice of
Conversion/Continuation

 

83

 

SCHEDULES

 

	
  3

  	
   

  	
  List of Closing
  Documents

  
	
  4.1(B)

  	
   

  	
  Capitalization
  of Loan Parties

  
	
  4.6

  	
   

  	
  Business and
  Trade Names (Present and Past Five Years); Locations of Principal

  Places of Business, Chief Executive Offices, Domiciles, Books and Records and
  Collateral

  
	
  4.9

  	
   

  	
  Federal Tax
  Identification Number for each Loan Party

  
	
  4.11

  	
   

  	
  Employee Pension
  and Benefit Plans

  
	
  4.12

  	
   

  	
  Intellectual
  Property

  
	
  4.14

  	
   

  	
  Environmental
  Matters

  
	
  4.19

  	
   

  	
  Bank Accounts

  
	
  4.20

  	
   

  	
  Employee Matters

  
	
  7.1

  	
   

  	
  Indebtedness

  
	
  7.2

  	
   

  	
  Contingent
  Obligations

  
	
  7.11

  	
   

  	
  Subsidiaries

  
	
  11.1(A)

  	
   

  	
  Mortgaged
  Property

  
	
  11.1(B)

  	
   

  	
  Other Liens

  
	
  11.1(C)

  	
   

  	
  Pro Forma

  
	
  12

  	
   

  	
  Outstanding
  Obligations

  

 

 

RIDERS

 

A.            Conditions
Rider

B.            Reporting
Rider

C.            Financial
Covenants Rider

 

 

CONDITIONS
RIDER

 

This Conditions Rider is
attached to and made a part of that certain Third Amended and Restated Loan and
Security Agreement dated as of October 14, 2005 and entered into between
Beacon Roofing Supply Canada Company, Agent and Lenders.

 

(A)          Closing Deliveries.  Agent shall
have received, in form and substance satisfactory to Agent and Lenders, all
documents, instruments and information identified on Schedule 3 and
all other agreements, notes, certificates, orders, authorizations, financing
statements, mortgages and other documents which Agent may at any time
reasonably request, and all of the conditions to the effectiveness of the US
Facility Loan Agreement shall have been satisfied.

 

(B)           Security Interests.  Agent shall
have received satisfactory evidence that all security interests and liens granted
to Agent for the benefit of Agent and Lenders pursuant to this Agreement or the
other Loan Documents have been duly perfected and constitute first priority
liens on the Collateral, subject only to Permitted Encumbrances.

 

(C)           Closing Date Availability Under US Facility Loan
Agreement.  After giving effect to the consummation of
the transactions contemplated hereunder and the transactions contemplated under
the US Facility Loan Agreement on the Closing Date and the payment by Borrower
and US Borrower, as applicable, of all costs, fees and expenses relating
thereto, (i) the Maximum Revolving Loan Amount on the Closing Date shall
exceed the Revolving Loan by at least [C$3,000,000],
(ii) the outstanding balance of the US Facility Revolving Loan shall not exceed
[US$61,800,104.72] (including US
Facility Letter of Credit Obligations), and (iii) the ratio of Total
Indebtedness of Holdings and its Subsidiaries on a consolidated basis to EBITDA
shall not exceed 3.6.

 

(D)          Representations and Warranties. 
The representations and warranties contained herein and in the Loan
Documents shall be true, correct and complete in all material respects on and
as of that Funding Date to the same extent as though made on and as of that
date, except for any representation or warranty limited by its terms to a
specific date and taking into account any amendments to the Schedules or
Exhibits as a result of any disclosures made by Borrower to Agent after the
Closing Date and approved by Agent.

 

(E)           Fees.  With respect
to the Revolving Advance to be made on the Closing Date, Borrower shall have
paid all fees due to Agent or any Lender and payable on the Closing Date.

 

(F)           No Default.  No event
shall have occurred and be continuing or would result from funding a Revolving
Advance requested by Borrower that would constitute an Event of Default or a
Default.

 

(G)           Performance of Agreements. 
Each Loan Party shall have performed in all material respects all
agreements and satisfied all conditions which any Loan Document provides shall
be performed by it on or before that Funding Date.

 

 

(H)          No Prohibition.  No order,
judgment or decree of any court, arbitrator or governmental authority shall
purport to enjoin or restrain Agent or any Lender from making any Loans.

 

(I)            No Litigation.  There shall
not be pending or, to the knowledge of Borrower, threatened, any material
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration by, against or affecting any Loan Party or any of
its Subsidiaries (including, without limitation, any tort claims in respect of
asbestos products sold or distributed by any Loan Party) or any property of any
Loan Party or any of its Subsidiaries that has not been disclosed to Agent by
Borrower in writing, and there shall have occurred no development in any such
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration that, in the opinion of Agent, would reasonably be
expected to have a Material Adverse Effect.

 

(J)            Appraisal.  Agent shall have received appraisals as to
all Equipment and all Inventory of the Loan Parties, which shall be in form and
substance reasonably satisfactory to Agent.

 

(K)          Field
Examination.  US Facility Agent shall
have completed its business and legal due diligence with respect to the Shelter
Acquisition, including, without limitation, a field examination of business,
environmental matters, operations, financial condition and assets, with results
reasonably satisfactory to US Facility Agent.

 

(L)           Consummation
of Related Transactions.  US Facility
Agent shall have received fully executed copies of the Shelter Acquisition
Agreement and final and complete copies of each of the other Related
Transactions Documents, each of which shall be in full force and effect in form
and substance reasonably satisfactory to US Facility Agent. The Shelter
Acquisition shall have been consummated in accordance with the terms of the
Shelter Acquisition Agreement.

 

 

REPORTING
RIDER

 

This Reporting Rider is
attached and made a part of that certain Third Amended and Restated Loan and
Security Agreement, dated as of October 14, 2005 and entered into between
Beacon Roofing Supply Canada Company, Agent and Lenders.

 

(A)          Monthly Financials.  As soon as
available and, in any event, within thirty (30) days after the end of each
month, Borrower will deliver to Agent and Lenders (1) the consolidated and
consolidating balance sheets of Holdings and its Subsidiaries as at the end of
such month and the related consolidated and consolidating statements of income,
stockholders’ equity and cash flow for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month, and (2) a
schedule of the outstanding Indebtedness for borrowed money of Holdings
and its Subsidiaries describing in reasonable detail each such debt issue or
loan outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt issue or loan.

 

(B)           Year-End Financials. 
As soon as available and, in any event, within ninety (90) days after
the end of each Fiscal Year, Borrower will deliver to Agent and Lenders: (1) the
consolidated and consolidating balance sheets of Holdings and its Subsidiaries
as at the end of such Fiscal Year and the related consolidated and
consolidating statements of income, stockholders’ equity and cash flow for such
Fiscal Year; (2) a schedule of the outstanding Indebtedness of
Holdings and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan; and (3) a
report with respect to the financial statements from Holdings’ Accountants,
which report shall be unqualified as to going concern and scope of audit of
Holdings and its Subsidiaries and shall state that (a) such consolidated
financial statements present fairly the consolidated financial position of
Holdings and its Subsidiaries as at the dates indicated and the results of
their operations and cash flow for the periods indicated in conformity with US
GAAP applied on a basis consistent with prior years and (b) that the
examination by Holdings’ Accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; and (4) copies of the consolidating financial
statements of Holdings and its Subsidiaries, including (a) consolidating
balance sheets of Holdings and its Subsidiaries as at the end of such Fiscal
Year showing intercompany eliminations and (b) related consolidating
statements of income of Holdings and its Subsidiaries showing intercompany
eliminations.

 

(C)           Accountants’ Certification and Reports. 
Together with each delivery of consolidated and consolidating financial statements
of Holdings and its Subsidiaries pursuant to paragraph (B) above,
Borrower will deliver to Agent and Lenders a written statement by Holdings’
Accountants (1) stating that their examination has included a review of
the terms of this Agreement as same relate to accounting matters and (2) stating
whether, in connection with their examination, any condition or event that
constitutes a Default or an Event of Default has come to their attention and,
if such a condition or event has come to their attention, specifying the nature
and period of existence thereof. 
Promptly upon receipt thereof, Borrower will deliver to Agent and
Lenders copies of all significant reports submitted to Holdings by Holdings’
Accountants in connection with each annual, interim or special audit of the
financial statements

 

 

of Holdings made by Holdings’ Accountants, including the
comment letter submitted by Holdings’ Accountants to management in connection
with their annual audit.

 

(D)          Compliance Certificate. 
(i) Together with the delivery of each set of financial statements
referenced in paragraphs (A) and (B) above, Borrower
will deliver to Agent and Lenders a Compliance Certificate, together with (in
the case of financial statements delivered for any period ending on the last
day of a fiscal quarter) copies of the calculations and work-up employed to
determine the applicable Loan Parties’ compliance or noncompliance with those
financial covenants set forth in the Financial Covenants Rider.

 

(E)           Canadian and Consolidated Borrowing Base Certificates,
Registers and Journals.  On the
Closing Date and thereafter, within five (5) Business Days after the last
day of each month (provided that (a) at any time during the months of
January, February and March when the sum of the outstanding Revolving
Loan, plus the outstanding US Facility Revolving Loan, plus the outstanding US
Facility Letter of Credit Obligations, exceeds the Consolidated Borrowing Base
(calculated without giving effect to the Seasonal Inventory Advance Rate
Percentage) and (b) at all times when Excess Availability is less
than US$15,000,000, such delivery shall also be made on each Monday following
the end of the prior week), Borrower shall deliver to Agent for the last
Business Day of such period:  (1) a
Canadian Borrowing Base Certificate updated to reflect the most recent sales
and collections of Borrower, together with a Consolidated Borrowing Base
Certificate setting forth the Consolidated Borrowing Base; (2) an invoice
register or sales journal (or a similar summary report satisfactory to Agent)
describing all sales of the Borrower, in form and substance satisfactory to
Agent, and, if Agent so requests, copies of invoices evidencing such sales and
proofs of delivery relating thereto; (3) a cash receipts journal (or a
similar summary report satisfactory to Agent); (4) a credit memo journal
(or a similar summary report satisfactory to Agent); and (5) an adjustment
journal (or a similar summary report satisfactory to Agent), setting forth all
adjustments to Borrower’s accounts receivable. 
Borrower shall cause US Borrower to deliver to Agent copies of all
deliveries required under paragraph (F) of the Reporting Rider to
the US Facility Loan Agreement, contemporaneously with providing such
deliveries to US Facility Agent (including, without limitation, a copy of the
US Obligors Consolidating Borrowing Base Certificate).

 

(F)           Inventory Reports and Listings and Agings. 
On the Closing Date and within five (5) Business Days after the
last day of each month and from time to time upon the request of Agent,
Borrower will deliver to Agent: (1) an aged trial balance of all then
existing Accounts; and (2) an Inventory Report duly executed by an officer
of Borrower and substantially in the form of Exhibit E as of the
last day of such period.  As soon as
available and in any event within five (5) Business Days after the last
day of each month, and from time to time upon the request of Agent, Borrower
will deliver to Agent: (1) an aged trial balance of all then existing
accounts payable; and (2) a detailed inventory listing and cover summary
report.  All such reports shall be in
form and substance satisfactory to Agent and, unless otherwise directed by
Agent, may be transmitted to Agent pursuant to an electronic transmitting
reporting system.  Borrower shall cause
US Borrower to deliver to Agent copies of all deliveries required under paragraph
(F) of the Reporting Rider to the US Facility Loan Agreement,
contemporaneously with providing such deliveries to US Facility Agent.

 

 

(G)           Management Report.  Together with
each delivery of financial statements of Holdings and its Subsidiaries pursuant
to paragraphs (A) and (C) above, Borrower will deliver
to Agent and Lenders a management report: 
(1) describing the operations and financial condition of Holdings
and its Subsidiaries for the month then ended and the portion of the current
Fiscal Year then elapsed; (2) setting forth in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal Year
and the corresponding figures from the most recent Projections for the current
Fiscal Year delivered to Lenders pursuant to paragraph (K) below; and (3) discussing the reasons for any
significant variations.  The information
above shall be presented in reasonable detail and shall be certified on behalf
of Borrower by the chief financial officer of Borrower to the effect that such
information fairly presents in all material respects the results of operations
and financial condition of Holdings and its Subsidiaries as at the dates and
for the periods indicated.

 

(H)          Appraisals.  From time to
time, upon the request of Agent, Borrower will obtain and deliver to Agent, at
Borrower’s expense, appraisal reports in form and substance and from appraisers
satisfactory to Agent, stating the then current fair market and orderly
liquidation values of all or any portion of the Collateral; provided, however,
so long as no Default or Event of Default is continuing, Agent shall not
request an appraisal as to any particular category of Collateral to be
performed more than once every Loan Year at Borrower’s expense.  Without limiting the generality of the
foregoing, Agent shall request and Borrower will obtain and deliver to Agent,
at least once every Loan Year, an appraisal report stating the then current
orderly liquidation value of US Obligors’ and Borrower’s Inventory.

 

(I)            Government Notices.  Borrower will
deliver to Agent and Lenders promptly after receipt copies of all notices,
requests, subpoenas, inquiries or other writings received from any governmental
agency concerning any Canadian Pension Plan, Canadian Benefit Plan or Employee
Benefit Plan, the violation or alleged violation of any Environmental Laws, the
storage, use or disposal of any Hazardous Material, the violation or alleged
violation of the United States Fair Labor Standards Act
or any Loan Party’s payment or non-payment of any taxes including any tax
audit.

 

(J)            Events of Default, etc. 
Promptly upon any officer of Borrower obtaining knowledge of any of the
following events or conditions, Borrower shall deliver to Agent copies of all
notices given or received by any Loan Party with respect to any such event or
condition and a certificate on behalf of Borrower, signed on behalf of Borrower
by Borrower’s chief executive officer, specifying the nature and period of
existence of such condition or event and what action such Loan Party has taken,
is taking and proposes to take with respect thereto: (1) any condition or
event that constitutes an Event of Default or Default; (2) any notice of
default that any Person has given to any Loan Party or any other action taken
with respect to a claimed default; or (3) any Material Adverse Effect or (4) any
default or event of default with respect to any Indebtedness of Holdings or any
of its Subsidiaries.

 

(K)          Projections.  As soon as
available and in any event no later than forty-five (45) days after the end of
Holdings’ Fiscal Year, Borrower will deliver to Agent and Lenders consolidated
and consolidating Projections of Holdings and its Subsidiaries for the
forthcoming Fiscal Year, month by month.

 

 

(L)           Other Information.  With
reasonable promptness, Borrower will deliver such other information and data as
Agent or Lenders may reasonably request from time to time.

 

(M)         SEC
Filings and Press Releases.  Promptly
upon their becoming available, Borrower will deliver to Agent copies of (1) all
financial statements, reports, notices and proxy statements sent or made
available by Holdings to its stockholders, (2) all
regular and periodic reports and all registration statements and prospectuses,
if any, filed by Holdings with
any securities exchange or with the Securities and Exchange Commission or any
private regulatory authority, and (3) all press releases and other
statements made available by Holdings
to the public concerning developments in the business of any Loan Party.

 

 

FINANCIAL
COVENANTS RIDER

 

This Financial Covenants
Rider is attached and made a part of that certain Third Amended and Restated
Loan and Security Agreement, dated as of October 14, 2005 and entered into
among Beacon Roofing Supply Canada Company, Agent and Lenders.

 

A.            Excess
Availability. Excess Availability shall be maintained at all times in an
amount of at least US$5,000,000.

 

B.            Capital
Expenditure Limits.  The aggregate
amount of all Capital Expenditures of US Borrower and its Subsidiaries, Capital
Leases with respect to fixed assets of US Borrower and its Subsidiaries (which
shall be considered to be expended in full on the date such Capital Lease is
entered into) and other contracts with respect to fixed assets initially
capitalized on US Borrower’s or any Subsidiary’s balance sheet prepared in
accordance with US GAAP (which shall be considered to be expended in full on
the date such contract is entered into) (excluding, in each case, expenditures
for trade-ins and replacement of assets to the extent funded with casualty
insurance proceeds and excluding the purchase price allocated to fixed assets
acquired in connection with the Shelter Acquisition or a Permitted Acquisition)
will not in any Fiscal Year exceed one and one-half percent (1.50%) of gross
revenues of Holdings and its Subsidiaries on a consolidated basis (determined
in accordance with GAAP) for such Fiscal Year.

 

C.            Fixed
Charge Coverage.  Fixed Charge Coverage
for each twelve (12) month period ending as of any date set forth below shall
not be less than the ratio set forth below for such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005 and the last day of each fiscal quarter thereafter

  	
   

  	
  1.20

  	
   

  

 

D.            Senior
Indebtedness to EBITDA.  The ratio of
Senior Indebtedness calculated as of any date set forth below to EBITDA for the
twelve (12) month period ending on such date shall not be greater than the
ratio set forth below for such date:

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005 and the last day of each fiscal quarter thereafter through
  December 31, 2007

  	
   

  	
  3.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008 and the last day of each fiscal quarter thereafter

  	
   

  	
  3.25

  	
   

  

 

The aggregate
balances of the Revolving Loan and the US Facility Revolving Loans included in
Senior Indebtedness as of any date of determination shall be equal to the
average balance of the Revolving Loan and the US Facility Revolving Loans,
respectively, for such date and the last day of the two immediately preceding
months.

 

 

With respect to
each Target acquired by US Borrower during any such twelve month period, EBITDA
shall be adjusted by an amount equal to the Pro Forma EBITDA of such Target for
the portion of such twelve (12) month period which precedes the acquisition of
such Target by US Borrower.

 

E.             Total
Indebtedness to EBITDA.  The ratio of
Total Indebtedness calculated as of any date set forth below to EBITDA for the
twelve (12) month period ending on such date shall not be greater than the
ratio set forth below for such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005 and the last day of each fiscal quarter thereafter through
  December 31, 2007

  	
   

  	
  4.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008 and the last day of each fiscal quarter thereafter

  	
   

  	
  4.50

  	
   

  

 

The aggregate
balance of the Revolving Loan and the US Facility Revolving Loans included in
Total Indebtedness as of any date of determination shall be equal to the
average balance of the Revolving Loan and the US Facility Revolving Loans,
respectively, for such date and the last day of the two immediately preceding
months.

 

With respect to
each Target acquired by US Borrower during any such twelve month period, EBITDA
shall be adjusted by an amount equal to the Pro Forma EBITDA of such Target for
the portion of such twelve (12) month period which precedes the acquisition of
such Target by US Borrower.

 

F.             Lease
Limits.  No Loan Party or any of its
Subsidiaries will, directly or indirectly, become or remain liable in any way,
whether directly or by assignment or as a guarantor or other surety, for the
obligations of the lessee under any operating lease, synthetic lease or similar
off-balance sheet financing, if the aggregate amount of all rents (or
substantially equivalent payments) paid by the Loan Parties and their
Subsidiaries under all such leases (excluding any lease providing for aggregate
annual rental payments of less than $100,000) would exceed US$22,000,000, or
the Equivalent Amount thereof, in any fiscal year of Borrower.Exhibit  10(ii)(A)
                           POMEROY IT SOLUTIONS, INC.

                    SECOND AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This  Second Amendment To Amended And Restated Employment Agreement is made
this  13th  day of October, 2005, effective as of the 13th day of October, 2005,
by  and  between  Pomeroy IT Solutions, Inc., a Delaware corporation ("Company")
and  Stephen  E.  Pomeroy  ("Executive").

     WHEREAS,  on  the  3rd day of November, 2003, Company and Executive entered
into  an  Amended  and  Restated  Employment  Agreement;

     WHEREAS,  on  the  6th  day of January, 2004, Company and Executive entered
into a First Amendment to Amended and Restated Employment Agreement; and

     WHEREAS,  Company  and  Executive desire to amend the agreement, to reflect
certain  changes  agreed  upon  by  Company and Executive regarding compensation
payable to Executive for the 2005 fiscal year of Company.

     NOW  THEREFORE,  in consideration of the foregoing premises, and the mutual
covenants hereinafter set forth, the parties hereby agree as follows:

     1.     Sections  5(b)  and  5(c)  are  amended  to  set forth the following
criteria, for the 2005 fiscal year bonus plan for Executive as follows:

          (b)     Annual  Bonus.  Executive  shall  be  entitled  to a bonus and
                  -------------
     restricted  stock  grant  for  the  2005 fiscal year in the event Executive
     satisfies  the  applicable  criteria  set  forth below of the Company's Net
     Sales  and  Revenues  and  the  Company's  Earnings  Per  Share ("EPS") (as
     hereinafter  defined)  of  the  Company  for  2005,  as  follows:

               (i)  Net  Sales  and  Revenues  of  Company  greater  than
                    $860,000,000.00  with  an  EPS  of  $1.25  or greater equals
                    $400,000.00  cash  bonus and a 20,000 share restricted stock
                    grant.

          (c)     Annual  Bonus  Determination.  Within  thirty (30) days of the
                  ----------------------------
     conclusion  of  the  2005  fiscal  year of the Company and each fiscal year
     thereafter,  Executive  and  Company  shall agree upon the threshold of Net
     Sales  and Revenues and EPS or any other performance-related criteria to be
     utilized for determining any bonus and restricted stock grant to be awarded
     to  Executive for such year. Such bonus and restricted stock grant for each
     subsequent  year  of  this  Employment  Agreement  shall be consistent with
     Executive's  prior  plan.

                                Page 1 of 3 Pages
<PAGE>
          Any  restricted  stock grant of Company's no-par common stock shall be
     made pursuant to the terms of the Company's 2002 Amended and Restated Stock
     Incentive  Plan  that  pertains  to  performance  restricted  share awards.

          For  purposes of this section, the term "Net Sales and Revenues" shall
     mean  the net sales and revenues of Company during the applicable period on
     a  consolidated  basis as reflected on the Company's 2005 audited financial
     statements.  In making such Net Sales and Revenues determination, all gains
     and  losses realized on the sale or other disposition of Company assets not
     in  the  ordinary  course  of  business  shall  be  excluded.

          For  purposes  of  this Agreement, the "EPS" shall be the Earnings Per
     Share  of  Company  as  reflected  on  its  consolidated  audited financial
     statements for the year 2005. For purposes of this Agreement, the EPS shall
     be  computed  without  regard  to  the bonus payable to Executive under the
     terms  of  his  Employment  Agreement,  shall  exclude  any gains or losses
     realized  by  Company  on the sale or other disposition of its assets other
     than  in  the  ordinary  course  of  business  (and  shall  exclude  any
     extraordinary  one-time  charges  made by Company during such fiscal year).
     Such  Net  Sales and Revenues and EPS shall be determined on a consolidated
     basis  by  the  independent  accountant  regularly retained by the Company,
     subject  to the foregoing provisions of this subparagraph and in accordance
     with  generally  accepted  accounting  principles.  Said  determination and
     payment of such bonus shall be made within seventy-five (75) days following
     the  end  of  the  fiscal  year of the Company and the determination by the
     accountant shall be final, binding and conclusive on all parties hereto. In
     the  event  the  audited  financial  statements  are not issued within such
     seventy-five (75) day period, Company shall make the payment due hereunder,
     if  any,  based on its best reasonable estimate of any liability hereunder,
     which amount shall be recorded and shall be reconciled by both parties once
     the audited financial statements are issued. Company shall have the ability
     to  advance  amounts  to  Executive  based upon the projected amount of the
     bonus  compensation  to  be  paid hereunder. In the event that such advance
     payments  are  in excess of the amount due hereunder, any such excess shall
     be  reimbursed  to  Company  by  Executive  within  seventy-five  (75) days
     following  the  end  of the fiscal year. In the event such advance payments
     are  less  than  the  amount  of  said  bonus  as determined hereunder, any
     additional amount due Executive shall be paid within seventy-five (75) days
     following the end of the fiscal year of the Company.

          In  the event that Company would acquire during its 2005 fiscal year a
     company  that  had gross revenues in excess of $100,000,000.00 for its most
     recently  concluded  fiscal  year,  Company  and  Executive  shall  in good

                                Page 2 of 3 Pages
<PAGE>
     faith  determine  whether any adjustments to the Net Sales and Revenues and
     EPS  criteria set forth above, whether upward or downward, shall be made in
     order  to  reflect  the effect of such acquisition on the operations of the
     Company.

     2.     Section  5(f) is amended for the years November 3, 2005, November 3,
2006  and  November  3, 2007 by inserting in line 7 of said paragraph the words,
"fifty thousand shares," in lieu of "one hundred thousand shares."

     3.     Section  5  is  amended  by  adding  at the end of Section 5(f), the
following  Section  5(g):

          (g)     Restricted  Stock  Award.  Upon  the  implementation  of  the
                  ------------------------
Company's  Long  Term  Incentive  Program  for  Management  under Company's 2002
Amended  and  Restated Stock Incentive Plan ("Plan"), Executive shall be granted
for  the  year  2005,  48,000  retention  restricted  shares  upon the terms and
conditions  of  the  Plan  applicable to retention restricted stock awards.  Any
future  grant  of  restricted  shares under the Plan to Executive for subsequent
years  shall  be  subject  to the determination of the Board of Directors of the
Company.

     Except  as modified above, the terms of the Amended and Restated Employment
Agreement,  as amended by the First Amendment to Amended and Restated Employment
Agreement  dated  January  6, 2004 and as amended hereby are hereby affirmed and
ratified  by  the  parties.

     IN  WITNESS  WHEREOF,  this  Second  Amendment  To  Amended  And  Restated
Employment  Agreement  has  been  executed  as  of  the day and year first above
written.

WITNESSES:                                            POMEROY IT SOLUTIONS, INC.

Kristi Nelson

---------------------------
Samantha Shirely                                      Michael E. Rohrkemper
                                                 By:
---------------------------                         ----------------------------
                                                      Michael E. Rohrkemper, CFO

Kristi Nelson                                         Stephen E. Pomeroy

---------------------------                         ----------------------------
Samantha Shirley                                      Stephen E. Pomeroy

---------------------------

                                Page 3 of 3 Pages

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