Document:

EXHIBIT 10.25

 

DOMESTIC
PLEDGE AGREEMENT dated as of February 17, 2004, among PLIANT
CORPORATION, a Utah corporation (the “Parent Borrower”), each Subsidiary
of the Parent Borrower listed on Schedule I hereto (each such Subsidiary
individually a “Subsidiary Pledgor” and collectively, the “Subsidiary
Pledgors”; the Parent Borrower and the Subsidiary Pledgors are referred to
collectively herein as the “Pledgors”) and DEUTSCHE BANK TRUST COMPANY
AMERICAS, a New York banking corporation (“DBTCA”), as collateral
agent (in such capacity, the “Collateral Agent”) for the Secured Parties
(as defined in the Credit Agreement referred to below).

 

Reference is made to (a) the Credit Agreement dated as of
February 17, 2004, (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among the Parent Borrower, the
subsidiaries of the Parent Borrower party thereto as domestic subsidiary
borrowers (the “Domestic Subsidiary Borrowers”), Uniplast Industries
Co., a Nova Scotia company (the “Canadian Subsidiary Borrower” and,
together with the Parent Borrower and the Domestic Subsidiary Borrowers, the “Borrowers”),
the lenders from time to time party thereto (the “Lenders”), Credit
Suisse First Boston, acting through its Cayman Islands Branch, as administrative
agent (in such capacity, the “Administrative Agent”) for the Lenders,
the Collateral Agent, General Electric Capital Corporation as co-collateral
agent (the “Co-Collateral Agent”), and JPMorgan Chase Bank, as
syndication agent (together with the Administrative Agent, the Collateral Agent
and the Co-Collateral Agent, the “Agents”), and (b) the Guarantee
Agreement dated as of February 17, 2004 (as amended, supplemented or
otherwise modified from time to time, the “Guarantee Agreement”), among
the Parent Borrower, the Subsidiary Pledgors and the Administrative Agent.  Capitalized terms used herein and not
defined herein shall have meanings assigned to such terms in the Credit
Agreement.

 

The Collateral Agent and the trustees for the holders of the Senior
Secured Discount Notes and the Existing Senior Secured Notes have entered into
an Amended and Restated Intercreditor Agreement dated February 17, 2004
(the “Intercreditor Agreement”), which confirms the relative priority of
the security interests of the Secured Parties, the holders of the Senior
Secured Discount Notes and the holders of the Existing Senior Secured Notes in
the Collateral.

 

The Lenders have agreed to make Loans to the Borrowers and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Parent
Borrower, pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement.  The
Guarantors have agreed to guarantee, among other things, all the obligations of
the Borrowers under the Credit Agreement. 
The Parent Borrower has agreed to guarantee, among other things, all the
obligations of the Domestic Subsidiary Borrowers and the Canadian Subsidiary
Borrower under the Credit Agreement. 
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned upon, among other things, the execution
and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure
(a) the due and punctual

 

 

payment by the Borrowers of (i) the principal
of and premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by the Borrowers under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of each Loan Party to the Secured
Parties under the Credit Agreement and the other Loan Documents, (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of each Loan Party under or pursuant to the Credit Agreement and
the other Loan Documents, (c) the due and punctual payment and performance
of all obligations of the Borrowers, monetary or otherwise, under each Swap
Agreement that (i) is effective on the Effective Date with a counterparty that
is a Lender (or an affiliate of a Lender) as of the Effective Date or (ii) is
entered into after the Effective Date with any counterparty that is a Lender
(or an Affiliate thereof) at the time such Swap Agreement is entered into and
(d) the due and punctual payment and performance of all monetary
obligations of each Loan Party in respect of overdrafts and related liabilities
owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank N.A.
(or any Affiliates thereof) arising from treasury, depositary and cash
management services or in connection with any automated clearinghouse transfers
of funds (all the monetary and other obligations referred to in the preceding
clauses (a) through (d) being referred to collectively as the “Obligations”).

 

Accordingly, each of the Pledgors and the
Collateral Agent, on behalf of itself and each Secured Party (and each of their
respective successors or assigns), hereby agrees as follows:

 

SECTION 1.                    Pledge.  As security for the payment and performance,
as the case may be, in full of the Obligations, each Pledgor hereby transfers,
grants, bargains, sells, conveys, hypothecates, pledges, sets over and
delivers, unto the Collateral Agent, its successors and assigns, and hereby
grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in all of the Pledgor’s
right, title and interest in, to and under (a) the shares of capital stock
and other Equity Interests owned by it and listed on Schedule II hereto
and any Equity Interests obtained in the future by the Pledgor and the certificates
representing all such shares (the “Pledged Stock”); (b)(i) the debt
securities listed opposite the name of the Pledgor on Schedule II hereto,
(ii) any debt securities in the future issued to the Pledgor and (iii) the
promissory notes and any other instruments evidencing such debt securities (the
“Pledged Debt Securities”); (c) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred
to in clauses (a) and (b) above; (d) subject to Section 5,
all rights and privileges of the Pledgor with respect to the securities and
other property referred to in clauses (a), (b), (c) and (d) above,
including any interest of such Pledgor in the entries on the books of the
issuer of the Pledged Stock or any financial intermediary pertaining to the
Pledged Shares; and (e) all proceeds of any of the foregoing (the items
referred to in clauses (a) through

 

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(e) above
being collectively referred to as the “Collateral”).  Notwithstanding any of the foregoing, the
Pledged Stock shall not include (i) more than 65% of the issued and
outstanding shares of common stock of any Foreign Subsidiary that is not a
Subsidiary Loan Party or (ii) to the extent that applicable law requires that a
Subsidiary of the Pledgor issue directors’ qualifying shares, such qualifying
shares.

 

Upon delivery to the Collateral Agent, (a) any stock certificates,
notes or other securities now or hereafter included in the Collateral (the “Pledged
Securities”) shall be accompanied by stock powers duly executed in blank or
other instruments of transfer satisfactory to the Collateral Agent and by such
other instruments and documents as the Collateral Agent may reasonably request
and (b) all other property comprising part of the Collateral shall be
accompanied by proper instruments of assignment duly executed by the applicable
Pledgor and such other instruments or documents as the Collateral Agent may
reasonably request.  Each delivery of
Pledged Securities shall be accompanied by a schedule describing the
securities then being pledged hereunder, which schedule shall be attached hereto
as Schedule II and made a part hereof. Each schedule so delivered
shall supplement any prior schedules so delivered.

 

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

 

SECTION 2.                    Delivery of
the Collateral.  (a)  Each
Pledgor agrees promptly to deliver or cause to be delivered to the Collateral
Agent any and all Pledged Securities, and any and all certificates or other
instruments or documents representing the Collateral.

 

(b)                                 Each
Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by
the Borrower or any Subsidiary to be evidenced by a duly executed promissory
note that is pledged and delivered to the Collateral Agent pursuant to the
terms thereof.

 

SECTION 3.                    Representations,
Warranties and Covenants.  Each
Pledgor hereby represents, warrants and covenants, as to itself and the
Collateral pledged by it hereunder, to and with the Collateral Agent that:

 

(a)                                  the
Pledged Stock represents that percentage as set forth on Schedule II of
the issued and outstanding shares of each class of the capital stock of the
issuer with respect thereto;

 

(b)                                 except
for the security interest granted hereunder and except as permitted by the
Credit Agreement, the Pledgor (i) is and will at all times continue to be
the direct owner, beneficially and of record, of the Pledged Securities
indicated on Schedule II, (ii) holds the same free and clear of all
Liens, (iii) will make no assignment, pledge, hypothecation or transfer
of, or create or permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto and (iv) subject to Section 5,
will cause any and all Collateral, whether for value paid by the Pledgor or
otherwise, to be forthwith deposited with the Collateral Agent and pledged or
assigned hereunder;

 

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(c)                                  the
Pledgor (i) has the power and authority to pledge the Collateral in the
manner hereby done or contemplated and (ii) will defend its title or
interest thereto or therein against any and all Liens (other than the Lien
created by this Agreement), however arising, of all Persons whomsoever;

 

(d)                                 no
consent which has not been obtained of any other Person (including stockholders
or creditors of any Pledgor) and no consent or approval which has not been
obtained of any Governmental Authority or any securities exchange is necessary
to the validity of the pledge effected hereby;

 

(e)                                  by
virtue of the execution and delivery by the Pledgors of this Agreement and the
Intercreditor Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to the
Collateral Agent in accordance with this Agreement, the Collateral Agent will
obtain a valid and perfected first lien upon and security interest in such
Pledged Securities as security for the payment and performance of the
Obligations;

 

(f)                                    the
pledge effected hereby is effective to vest in the Collateral Agent, on behalf
of the Secured Parties, the rights of the Collateral Agent in the Collateral as
set forth herein;

 

(g)                                 all
of the Pledged Stock has been duly authorized and validly issued and is fully
paid and nonassessable;

 

(h)                                 all
information set forth herein relating to the Pledged Stock is accurate and
complete in all material respects as of the date hereof; and

 

(i)                                     the
pledge of the Pledged Stock pursuant to this Agreement does not violate
Regulation U or X of the Federal Reserve Board or any successor thereto as
of the date hereof.

 

SECTION 4.                    Registration
in Nominee Name; Denominations.  The
Collateral Agent, on behalf of the Secured Parties, shall have the right (in
its sole and absolute discretion) to hold the Pledged Securities in its own name
as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of
the Pledgors, endorsed or assigned in blank or in favor of the Collateral
Agent.  Each Pledgor will promptly give
to the Collateral Agent copies of any notices or other communications received
by it with respect to Pledged Securities registered in the name of such
Pledgor.  The Collateral Agent shall at
all times have the right to exchange the certificates representing Pledged
Securities for certificates of smaller or larger denominations for any purpose
consistent with this Agreement and the Intercreditor Agreement.

 

The applicable Pledgor shall, within 30 days after the Effective Date,
for each interest in any limited liability company or limited partnership
controlled by such Pledgor and pledged hereunder that is represented by a
certificate, in the organizational documents of such limited liability company
or limited partnership, cause the issuer of such interests to elect to treat
such interests as a “security” within the meaning of Article 8 of the
Uniform Commercial Code of its jurisdiction of organization or formation, as
applicable, by including in its organizational

 

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documents language substantially similar to
the following and, accordingly, such interests shall be governed by
Article 8 of the Uniform Commercial Code:

 

“The Partnership/Company hereby irrevocably elects that all membership
interests in the Partnership/Company shall be securities governed by
Article 8 of the Uniform Commercial Code of [jurisdiction of organization
or formation, as applicable].  Each
certificate evidencing partnership/membership interests in the
Partnership/Company shall bear the following legend:  “This certificate evidences an interest in [name of
Partnership/LLC] and shall be a security for purposes of Article 8 of the
Uniform Commercial Code.”  No change to
this provision shall be effective until all outstanding certificates have been
surrendered for cancelation and any new certificates thereafter issued shall
not bear the foregoing legend.

 

For each interest in any limited liability company or limited
partnership controlled by any Pledgor and pledged hereunder that is not
represented by a certificate, the applicable Pledgor agrees that it shall not,
(a) at any time, elect to treat any such interest as a “security” within
the meaning of Article 8 of the Uniform Commercial Code of its
jurisdiction of organization or formation, as applicable, or (b) issue any
certificate representing such interest, unless (i) in the case of clause
(a), such Pledgor provides prior written notification to the Collateral Agent
of such election and (ii) in the case of clause (b), such Pledgor
immediately complies with the requirements of the second paragraph of this
Section 4 with respect to such interest and immediately pledges any such
certificate to the Collateral Agent pursuant to the terms hereof.

 

If any securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by any Pledgor (other than
Securities or other investment property held in the Notes Collateral Account
(as defined in the Intercreditor Agreement)) are held by such Pledgor or its
nominee through a securities intermediary or commodity intermediary, such
Pledgor shall promptly notify the Collateral Agent thereof and, at the
Collateral Agent’s request and option, pursuant to an agreement in form and
substance reasonably satisfactory to the Collateral Agent, either (i) cause
such securities intermediary or (as the case may be) commodity intermediary to
agree to comply with entitlement orders or other instructions from the
Collateral Agent to such securities intermediary as to such security
entitlements, or (as the case may be) to apply any value distributed on account
of any commodity contract as directed by the Collateral Agent to such commodity
intermediary, in each case without further consent of any Pledgor or such
nominee, or (ii) in the case of Financial Assets or other Investment Property
(each as defined in the NY UCC) held through a securities intermediary, arrange
for the Collateral Agent to become the entitlement holder with respect to such
investment property, with the Pledgor being permitted, only with the consent of
the Collateral Agent, to exercise rights to withdraw or otherwise deal with
such investment property.  The
Collateral Agent agrees with each of the Pledgor that the Collateral Agent
shall not give any such entitlement orders or instructions or directions to any
such issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by any
Pledgor, unless an Event of Default has occurred and is continuing, or, after
giving effect to any such investment and withdrawal rights would occur.  The provisions of this paragraph shall not
apply to any financial assets credited to a securities account for which the
Collateral Agent is the securities intermediary.

 

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SECTION 5.                    Voting
Rights; Dividends and Interest, etc.  (a)  In accordance with, and to the extent
consistent with, the terms of the Intercreditor Agreement, unless and until an
Event of Default shall have occurred and be continuing:

 

(i)                                     Each
Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof for any purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided, however,
that such Pledgor will not be entitled to exercise any such right if the result
thereof could materially and adversely affect the rights inuring to a holder of
the Pledged Securities or the rights and remedies of any of the Secured Parties
under this Agreement or the Credit Agreement or any other Loan Document or the
ability of the Secured Parties to exercise the same.

 

(ii)                                  The
Collateral Agent shall execute and deliver to each Pledgor, or cause to be
executed and delivered to each Pledgor, all such proxies, powers of attorney
and other instruments as such Pledgor may reasonably request for the purpose of
enabling such Pledgor to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i) above and
to receive the cash dividends it is entitled to receive pursuant to
subparagraph (iii) below.

 

(iii)                               Each
Pledgor shall be entitled to receive and retain any and all cash dividends,
interest and principal paid on the Pledged Securities to the extent and only to
the extent that such cash dividends, interest and principal are permitted by,
and otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws.  All noncash dividends, interest and
principal, and all dividends, interest and principal paid or payable in cash or
otherwise in connection with a partial or total liquidation or dissolution,
return of capital, capital surplus or paid-in surplus, and all other
distributions (other than distributions referred to in the preceding sentence)
made on or in respect of the Pledged Securities, whether paid or payable in
cash or otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any Pledged
Securities or received in exchange for Pledged Securities or any part thereof,
or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Collateral, and, if received by any
Pledgor, shall not be commingled by such Pledgor with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement).

 

(b)                                 In
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, upon the occurrence and during the continuance of an
Event of Default, all rights of any Pledgor to dividends, interest or principal
that such Pledgor is authorized to receive pursuant to paragraph (a)(iii)
above shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority
to receive and retain such dividends, interest or principal.  All dividends, interest or principal
received by the  Pledgor contrary to the
provisions of this Section 5 shall be held in trust for the benefit of the
Collateral Agent, shall be segregated from other property or funds of

 

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such Pledgor
and shall be forthwith delivered to the Collateral Agent upon demand in the
same form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent pursuant to
the provisions of this paragraph (b) shall, subject to the provisions of the
Intercreditor Agreement, be retained by the Collateral Agent, in an account to
be established by the Collateral Agent upon receipt of such money or other
property and shall be applied in accordance with the provisions of
Section 7.  After all Events of
Default have been cured or waived, the Collateral Agent shall, within five
Business Days after all such Events of Default have been cured or waived, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) above and which remain in such account.

 

(c)                                  In
accordance with, and to the extent consistent with, the terms of, the
Intercreditor Agreement, upon the occurrence and during the continuance of an
Event of Default, all rights of any Pledgor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to exercise
such voting and consensual rights and powers, provided that, and to the
extent consistent with the Intercreditor Agreement, unless otherwise directed
by the Required Lenders, the Collateral Agent shall have the right from time to
time following and during the continuance of an Event of Default to permit the
Pledgors to exercise such rights.  After
all Events of Default have been cured or waived, such Pledgor will have the
right to exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) above.

 

SECTION 6.                    Remedies
upon Default.  In accordance with,
and to the extent consistent with, the terms of the Intercreditor Agreement,
upon the occurrence and during the continuance of an Event of Default, subject
to applicable regulatory and legal requirements, the Collateral Agent may sell
the Collateral, or any part thereof, at public or private sale or at any
broker’s board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate.  The Collateral Agent shall be authorized at
any such sale (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not with a
view to the distribution or sale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and deliver
to the purchaser or purchasers thereof the Collateral so sold.  Each such purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Pledgor, and, to the extent permitted by applicable law, the Pledgors
hereby waive all rights of redemption, stay, valuation and appraisal any
Pledgor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.

 

The Collateral Agent shall give a Pledgor 10 days’ prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions) of the Collateral Agent’s
intention to make any sale of such Pledgor’s Collateral.  Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at a
broker’s board or on a securities exchange, shall state the board or exchange
at which such sale is

 

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to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or
exchange.  Any such public sale shall be
held at such time or times within ordinary business hours and at such place or
places as the Collateral Agent may fix and state in the notice of such
sale.  At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine.  The Collateral
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid in full by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. 
At any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section 6, any Secured Party may bid for or
purchase, free from any right of redemption, stay or appraisal on the part of
any Pledgor (all said rights being also hereby waived and released), the
Collateral or any part thereof offered for sale and may make payment on account
thereof by using any claim then due and payable to it from such Pledgor as a
credit against the purchase price, and it may, upon compliance with the terms
of sale, hold, retain and dispose of such property without further
accountability to such Pledgor therefor. 
For purposes hereof, (a) a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof,
(b) the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and (c) such Pledgor shall not be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact
that after the Collateral Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in
full.  As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may, in
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, proceed by a suit or suits at law or in equity to
foreclose upon the Collateral and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.  Any sale pursuant to the provisions of this
Section 6 shall be deemed to conform to the commercially reasonable
standards as provided in Section 9-611 of the Uniform Commercial Code as
in effect in the State of New York or its equivalent in other jurisdictions.

 

SECTION 7.                    Application
of Proceeds of Sale.  In accordance
with, and to the extent consistent with, the terms of the Intercreditor
Agreement, the proceeds of any sale of Collateral pursuant to Section 6,
as well as any Collateral consisting of cash, shall be applied by the
Collateral Agent as follows:

 

FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent or the Administrative Agent in connection with such sale or
otherwise in connection with this Agreement, any other Loan Document or any of
the Obligations, including all court costs and the reasonable fees and expenses
of its agents and legal counsel, the repayment of all advances made by the
Collateral

 

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Agent hereunder or under any other Loan Document on behalf of any
Pledgor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;

 

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

 

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

 

In accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, the Collateral Agent shall have absolute discretion as
to the time of application of any such proceeds, moneys or balances in
accordance with this Agreement.  Upon
any sale of the Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt
of the purchase money by the Collateral Agent or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

 

SECTION 8.                    Reimbursement
of Collateral Agent.  (a)  In accordance with, and to
the extent consistent with, the terms of the Intercreditor Agreement, the
Pledgors agree to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges and
disbursements of its counsel and of any experts or agents, that the Collateral
Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise
or enforcement of any of the rights of the Collateral Agent hereunder or
(iv) the failure by such Pledgor to perform or observe any of the
provisions hereof.

 

(b)                                 Without
limitation of its indemnification obligations under the other Loan Documents,
each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as defined
in Section 10.03 of the Credit Agreement) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees, other charges and
disbursements, incurred by or asserted against any Indemnitee arising out of,
in any way connected with, or as a result of (i) the execution or delivery
of this Agreement or any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses resulted from the gross negligence or
wilful misconduct of such Indemnitee.

 

(c)                                  Any
amounts payable as provided hereunder shall be additional Obligations secured
hereby and by the other Security Documents. 
The provisions of this

 

9

 

Section 8
shall remain operative and in full force and effect regardless of the
termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document or any investigation made by or on behalf of the Collateral Agent or
any other Secured Party.  All amounts
due under this Section 8 shall be payable on written demand therefor and
shall bear interest at the rate specified in Section 2.12(c) of the Credit
Agreement.

 

SECTION 9.                    Collateral
Agent Appointed Attorney-in-Fact. 
Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact
of such Pledgor, upon the occurrence and during the continuance of a Default,
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. 
Without limiting the generality of the foregoing, the Collateral Agent
shall have the right, upon the occurrence and during the continuance of an
Event of Default, with full power of substitution either in the Collateral
Agent’s name or in the name of such Pledgor, to ask for, demand, sue for,
collect, receive and give acquittance for any and all moneys due or to become
due under and by virtue of any Collateral, to endorse checks, drafts, orders
and other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in respect
of the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and to make any agreement respecting, or otherwise deal with, the
same; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby.  The Collateral Agent
and the other Secured Parties shall be accountable only for amounts actually
received as a result of the exercise of the powers granted to them herein, and
neither they nor their officers, directors, employees or agents shall be
responsible to any Pledgor for any act or failure to act hereunder, except for
their own gross negligence or wilful misconduct.

 

Notwithstanding anything in this Section 9 to the contrary, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 9 unless it does so in accordance
with, and to the extent consistent with, the terms of the Intercreditor
Agreement.

 

SECTION 10.              Waivers;
Amendment.  (a)  No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies
of the Collateral Agent hereunder and of the other Secured Parties under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. 
No waiver of any provisions of this Agreement or consent to any
departure by any Pledgor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or

 

10

 

consent shall
be effective only in the specific instance and for the purpose for which
given.  No notice or demand on any
Pledgor in any case shall entitle such Pledgor to any other or further notice
or demand in similar or other circumstances.

 

(b)                                 Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to a written agreement entered into between the Collateral
Agent and the Pledgor or Pledgors with respect to which such waiver, amendment
or modification is to apply, subject to (i) any consent required in accordance
with Section 10.02 of the Credit Agreement and (ii) the limitations in the
Intercreditor Agreement.

 

SECTION 11.              Securities Act,
etc.  In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to
time in effect being called the “Federal Securities Laws”) with respect
to any disposition of the Pledged Securities permitted hereunder.  Each Pledgor understands that compliance
with the Federal Securities Laws might very strictly limit the course of
conduct of the Collateral Agent if the Collateral Agent were to attempt to
dispose of all or any part of the Pledged Securities, and might also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Securities could dispose of the same. 
Similarly, there may be other legal restrictions or limitations affecting
the Collateral Agent in any attempt to dispose of all or part of the Pledged
Securities under applicable Blue Sky or other state securities laws or similar
laws analogous in purpose or effect. 
Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things,
to acquire such Pledged Securities for their own account, for investment, and
not with a view to the distribution or resale thereof.  Each Pledgor acknowledges and agrees that in
light of such restrictions and limitations, the Collateral Agent, in its
discretion, (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Securities
or part thereof shall have been filed under the Federal Securities Laws and
(b) may approach and negotiate with a single potential purchaser to effect
such sale.  Each Pledgor acknowledges
and agrees that any such sale might result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions.  In the event of any such
sale, the Collateral Agent shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price that the
Collateral Agent, in its discretion, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a substantially higher
price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were
approached.  The provisions of this
Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.

 

SECTION 12.              Registration,
etc.  Each Pledgor agrees that, upon
the occurrence and during the continuance of an Event of Default, if, in
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, for any reason the Collateral Agent desires to sell
any of the Pledged Securities at a public sale, it will, at any time and from
time to time, upon the written request of the Collateral Agent, use its best
efforts to take or to cause the issuer of such Pledged Securities to take such
action and prepare, distribute and/or file such

 

11

 

documents, as
are required or advisable in the reasonable opinion of counsel for the
Collateral Agent to permit the public sale of such Pledged Securities.  Each Pledgor further agrees to indemnify,
defend and hold harmless the Collateral Agent, each other Secured Party, any
underwriter and their respective officers, directors, affiliates and
controlling persons from and against all loss, liability, expenses, costs of
counsel (including, without limitation, reasonable fees and expenses to the
Collateral Agent of legal counsel), and claims (including the costs of
investigation) that they may incur insofar as such loss, liability, expense or
claim arises out of or is based upon any untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or in any
notification or offering circular, or arises out of or is based upon any
omission to state a material fact required to be stated therein or necessary to
make the statements in any thereof not misleading, except insofar as the same
may have been caused by any untrue statement or omission based upon information
furnished to such Pledgor or the issuer of such Pledged Securities by the
Collateral Agent or any other Secured Party expressly for use therein.  Each Pledgor further agrees, upon such
written request referred to above, to use its best efforts to qualify, file or
register, or cause the issuer of such Pledged Securities to qualify, file or
register, any of the Pledged Securities under the Blue Sky or other securities
laws of such states as may be requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations.  The Pledgors will bear
all costs and expenses of carrying out their obligations under this
Section 12.  Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to
comply with the provisions of this Section 12 and that such failure would
not be adequately compensable in damages, and therefore agrees that its
agreements contained in this Section 12 may be specifically enforced.

 

SECTION 13.              Security Interest
Absolute.  All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Credit Agreement, any other
Loan Document or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guaranty, for all or any of the Obligations or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any Pledgor in respect of the Obligations or in respect of this
Agreement (other than the indefeasible payment in full of all the Obligations).

 

SECTION 14.              Termination or
Release.  (a)  This
Agreement and the security interests granted hereby shall terminate when all
the Obligations (except for contingent indemnity and expense reimbursement
obligations for which no claim has been made) have been indefeasibly paid in
full and the Lenders have no further commitment to lend under the Credit
Agreement, the LC Exposure has been reduced to zero and the Issuing Bank
has no further obligation to issue Letters of Credit under the Credit
Agreement.

 

(b)                                 Upon
any sale or other transfer by any Pledgor of any Collateral that is permitted
under the Credit Agreement to any Person that is not a Pledgor, provided
that the

 

12

 

Required
Lenders shall have consented to such transfer (to the extent required by the
Credit Agreement) and the terms of such consent did not provide otherwise, or,
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 10.02(b) of
the Credit Agreement, the security interest in such Collateral shall be
automatically released.

 

(c)                                  In
connection with any termination or release pursuant to paragraph (a) or
(b), the Collateral Agent shall execute and deliver to any Pledgor, at such
Pledgor’s expense, all documents that such Pledgor shall reasonably request to
evidence such termination or release. 
Any execution and delivery of documents pursuant to this Section 14
shall be without recourse to or warranty by the Collateral Agent.

 

SECTION 15.              Notices.  All communications and notices hereunder
shall be in writing and given as provided in Section 10.01 of the Credit Agreement.  All communications and notices hereunder to
any Subsidiary Pledgor shall be given to it at the address for notices set
forth on Schedule I.

 

SECTION 16.              Further
Assurances.  Each Pledgor agrees to
do such further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral Agent,
in accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, may at any time reasonably request in connection with
the administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm unto
the Collateral Agent its rights and remedies hereunder.

 

SECTION 17.              Binding Effect;
Several Agreement; Assignments. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Pledgor that are contained in this Agreement
shall bind and inure to the benefit of its successors and assigns.  This Agreement shall become effective as to
any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall
have been delivered to the Collateral Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall be
binding upon such Pledgor and the Collateral Agent and their respective
successors and assigns, and shall inure to the benefit of such Pledgor, the
Collateral Agent and the other Secured Parties, and their respective successors
and assigns, except that no Pledgor shall have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such attempted
assignment shall be void), except as expressly contemplated by this Agreement
or the other Loan Documents.  If all of
the capital stock of a Pledgor is sold, transferred or otherwise disposed of to
a Person that is not an Affiliate of the Borrower pursuant to a transaction
permitted by Section 6.06 of the Credit Agreement, such Pledgor shall be
released from its obligations under this Agreement without further action.  This Agreement shall be construed as a
separate agreement with respect to each Pledgor and may be amended, modified,
supplemented, waived or released with respect to any Pledgor without the
approval of any other Pledgor and without affecting the obligations of any
other Pledgor hereunder.

 

SECTION 18.              Survival of
Agreement; Severability.  (a)  All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or

 

13

 

other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Collateral Agent and the other Secured Parties and shall survive
the making by the Lenders of the Loans and the issuance of the Letters of
Credit by the Issuing Bank, regardless of any investigation made by the Secured
Parties or on their behalf, and shall continue in full force and effect as long
as the principal of or any accrued interest on any Loan or any other fee or
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or the LC Exposure does not equal zero and as long as the
Commitments have not been terminated.

 

(b)                                 In
the event any one or more of the provisions contained in this Agreement should
be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other
jurisdiction).  The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 19.         Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

 

SECTION 20.              Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute a single contract, and shall
become effective as provided in Section 17.  Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.

 

SECTION 21.              Rules of
Interpretation.  The rules of
interpretation specified in Section 1.03 of the Credit Agreement shall be
applicable to this Agreement. 
Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.

 

SECTION 22.              Jurisdiction;
Consent to Service of Process.  (a)  Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to
this Agreement or the other Loan Documents, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that, to the extent permitted by applicable law, all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement shall affect any right that the Collateral Agent or any other Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Pledgor or its properties in
the courts of any jurisdiction.

 

14

 

(b)                                 Each
Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or the other Loan Documents in any New York State or
Federal court.  Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

 

(c)                                  Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 15.  Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.

 

SECTION 23.              Waiver Of Jury Trial.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 24.              Additional
Pledgors.  Pursuant to
Section 5.12 of the Credit Agreement, each Subsidiary Loan Party (other
than a Foreign Subsidiary) that was not in existence or not a Subsidiary Loan
Party on the date of the Credit Agreement is required to enter in this
Agreement as a Subsidiary Pledgor upon becoming a Subsidiary Loan Party.  Upon execution and delivery by the
Collateral Agent and a Subsidiary of an instrument in the form of Annex 1,
such Subsidiary shall become a Subsidiary Pledgor hereunder with the same force
and effect as if originally named as a Subsidiary Pledgor herein.  The execution and delivery of such
instrument shall not require the consent of any Pledgor hereunder.

 

The rights and obligations of each Pledgor hereunder shall remain in
full force and effect notwithstanding the addition of any new Subsidiary
Pledgor as a party to this Agreement.

 

SECTION 25.             Subject to
Intercreditor Agreement. 
Notwithstanding anything herein to the contrary, the lien and security
interest granted to the Collateral Agent pursuant to this Agreement and the
exercise of any right or remedy by the Collateral Agent hereunder are subject
to the provisions of the Intercreditor Agreement.  In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern.

 

SECTION 26.             Nova Scotia
Unlimited Liability Companies. 
Notwithstanding anything else contained in this Agreement or any other
document or agreement among all or some of the parties hereto, Uniplast
Holdings Inc. is the sole registered and beneficial owner of all Collateral
which is comprised of shares of the Canadian Subsidiary Borrower or any other

 

15

 

Person whose
securities are the subject hereof and which is an unlimited liability company
(a “ULC”) and will remain so until such time as such shares are
effectively transferred into the name of the Collateral Agent, any other
Secured Party or any other Person on the books and records of such ULC.  Accordingly Uniplast Holdings Inc. shall be
entitled to receive and retain for its own account any dividend on or other
distribution, if any, in respect of such Collateral (except insofar as Uniplast
Holdings Inc. has granted a security interest therein) and shall have the right
to vote such Collateral and to control the direction, management and policies
of the Canadian Subsidiary Borrower to the same extent as Uniplast Holdings
Inc. would if such Collateral were not pledged to the Collateral Agent (for its
own benefit and for the benefit of the Secured Parties) pursuant hereto.  Nothing in this Agreement or any other
document or agreement among all or some of the parties hereto is intended to,
and nothing in this Agreement or any other document or agreement among all or
some of the parties hereto shall, constitute the Collateral Agent, any Secured
Party or any Person other than Uniplast Holdings Inc. a member of a ULC for the
purposes of the Companies Act (Nova Scotia) until such time as notice is
given to Uniplast Holdings Inc. and further steps are taken thereunder so as to
register the Collateral Agent, any Secured Party or any other Person as holder
of shares of the ULC.  To the extent any
provision hereof would have the effect of constituting the Collateral Agent or
any Secured Party as a member of any ULC prior to such time, such provision
shall be severed herefrom and ineffective with respect to Collateral which are
shares of a ULC without otherwise invalidating or rendering unenforceable this
Agreement or invalidating or rendering unenforceable such provision insofar as
it relates to Collateral which are not shares of a ULC.

 

16

 

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

 

	
   

  	
  PLIANT
  CORPORATION,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Brian E. Johnson

  
	
   

  	
   

  	
  Title: 
  Executive Vice-President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE
  SUBSIDIARY PLEDGORS LISTED ON

  SCHEDULE I HERETO

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 
  Brian E. Johnson

  
	
   

  	
   

  	
  Title:Executive Vice-President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY

  AMERICAS, as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

17

 

Schedule I to the

Domestic Pledge Agreement

 

 

SUBSIDIARY PLEDGORS

 

 

	
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  

 

 

Schedule II to the

Domestic Pledge Agreement

 

 

CAPITAL STOCK

 

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Shares

  	
   

  	
  Percentage

  of Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

DEBT SECURITIES

 

 

	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of
  Note

  	
   

  	
  Maturity
  Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Annex 1 to the

Pledge Agreement

 

 

SUPPLEMENT
NO.    dated as of     , to the DOMESTIC PLEDGE AGREEMENT dated
as of February 17, 2004, among PLIANT CORPORATION, a Utah corporation (the
“Parent Borrower”), and each subsidiary of the Borrower listed on
Schedule I hereto (each such subsidiary individually a “Subsidiary
Pledgor” and collectively, the “Subsidiary Pledgors”; the Borrower
and the Subsidiary Pledgors are referred to collectively herein as the “Pledgors”)
and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation
(“DBTCA”), as collateral agent (in such capacity, the “Collateral Agent”)
for the Secured Parties (as defined in the Credit Agreement referred to below)

 

A.           Reference
is made to (a) the Credit Agreement dated as of February 17, 2004 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Parent Borrower, the subsidiaries of the Parent
Borrower party thereto as domestic subsidiary borrowers, Uniplast Industries
Co., a Nova Scotia company, the lenders from time to time party thereto (the “Lenders”),
Credit Suisse First Boston, acting through its Cayman Islands Branch, as
administrative agent for the Lenders, the Collateral Agent, General Electric
Capital Corporation, as co-collateral agent, and JPMorgan Chase Bank, as
syndication agent, and (b) the Guarantee Agreement dated as of
February 17, 2004 (as amended, supplemented or otherwise modified from
time to time, the “Guarantee Agreement”), among the Borrower, the
Subsidiary Pledgors and the Collateral Agent.

 

B.             Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.

 

C.             The Pledgors have entered into the
Domestic Pledge Agreement in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit. 
Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary
Loan Party (other than a Foreign Subsidiary) that was not in existence or not a
Subsidiary Loan Party on the date of the Credit Agreement is required to enter
into the Domestic Pledge Agreement as a Subsidiary Pledgor upon becoming a
Subsidiary Loan Party.  Section 24
of the Domestic Pledge Agreement provides that such Subsidiaries may become
Subsidiary Pledgors under the Domestic Pledge Agreement by execution and
delivery of an instrument in the form of this Supplement.  The undersigned Subsidiary (the “New
Pledgor”) is executing this Supplement in accordance with the requirements
of the Credit Agreement to become a Subsidiary Pledgor under the Domestic
Pledge Agreement in order to induce the Lenders to make additional Loans and
the Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.

 

Accordingly, the Collateral Agent and the New Pledgor agree as follows:

 

 

SECTION 1.  In accordance
with Section 24 of the Domestic Pledge Agreement, the New Pledgor by its
signature below becomes a Pledgor under the Domestic Pledge Agreement with the
same force and effect as if originally named therein as a Pledgor and the New
Pledgor hereby agrees (a) to all the terms and provisions of the Domestic
Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents
and warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof.  In furtherance of the foregoing, the New
Pledgor, as security for the payment and performance in full of the Obligations
(as defined in the Domestic Pledge Agreement), does hereby create and grant to
the Collateral Agent, its successors and assigns, for the benefit of the
Secured Parties, their successors and assigns, a security interest in and lien
on all of the New Pledgor’s right, title and interest in and to the Collateral
(as defined in the Domestic Pledge Agreement) of the New Pledgor.  Each reference to a “Subsidiary Pledgor” or
a “Pledgor” in the Domestic Pledge Agreement shall be deemed to include the New
Pledgor.  The Domestic Pledge Agreement
is hereby incorporated herein by reference.

 

SECTION 2.  The New Pledgor
represents and warrants to the Collateral Agent and the other Secured Parties
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

 

SECTION 3.  This Supplement
may be executed in counterparts, each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.  This Supplement shall become effective when
the Collateral Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Pledgor and the Collateral
Agent.  Delivery of an executed
signature page to this Supplement by facsimile transmission shall be effective
as delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.  The New Pledgor
hereby represents and warrants that set forth on Schedule I attached
hereto is a true and correct schedule of all its Pledged Securities.

 

SECTION 5.  Except as
expressly supplemented hereby, the Domestic Pledge Agreement shall remain in
full force and effect.

 

SECTION 6.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.  In case any one
or more of the provisions contained in this Supplement should be held invalid,
illegal or unenforceable in any respect, neither party hereto shall be required
to comply with such provision for so long as such provision is held to be
invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein and in the Domestic
Pledge Agreement shall not in any way be affected or impaired.  The parties hereto shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

2

 

SECTION 8.  All
communications and notices hereunder shall be in writing and given as provided
in Section 15 of the Domestic Pledge Agreement.  All communications and notices hereunder to the New Pledgor shall
be given to it at the address set forth under its signature hereto.

 

SECTION 9.  The New Pledgor
agrees to reimburse the Collateral Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including the reasonable fees,
other charges and disbursements of counsel for the Collateral Agent.

 

IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Domestic Pledge Agreement as of the day and
year first above written.

 

 

	
   

  	
  [Name
  of New Pledgor],

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY

  AMERICAS, as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

3

 

Schedule I to

Supplement No.

to the Pledge Agreement 

 

Pledged Securities of the New Pledgor

 

CAPITAL STOCK

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Shares

  	
   

  	
  Percentage

  of Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

DEBT
SECURITIES

 

 

	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of

  Note

  	
   

  	
  Maturity

  DateEXHIBIT
10.26

 

CANADIAN
PLEDGE AGREEMENT dated as of February 17, 2004, among UNIPLAST
INDUSTRIES CO., a Nova Scotia company (the “Canadian Subsidiary Borrower”),
each other subsidiary of Pliant Corporation, a Utah corporation (the “Parent
Borrower”), organized under the laws of Canada or any province thereof
listed on Schedule I hereto (each such subsidiary and the Canadian
Subsidiary Borrower individually a “Pledgor” and collectively, the “Pledgors”)
and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, as
collateral agent (in such capacity, the “Collateral Agent”) for the
Secured Parties (as defined in the Credit Agreement referred to below).

 

Reference is made to (a) the Credit Agreement dated as of
February 17, 2004, (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among the Parent Borrower, the
subsidiaries of the Parent Borrower party thereto as domestic subsidiary
borrowers (the “Domestic Subsidiary Borrowers”), the Canadian Subsidiary
Borrower (together with the Parent Borrower and the Domestic Subsidiary
Borrowers, the “Borrowers”), the lenders from time to time party thereto
(the “Lenders”), the Collateral Agent, Credit Suisse First Boston,
acting through its Cayman Islands Branch, as administrative agent (the “Administrative
Agent”), General Electric Capital Corporation, as co-collateral agent (the
“Co-Collateral Agent”), and JPMorgan Chase Bank, as syndication agent
(together with the Administrative Agent, the Collateral Agent and the Co-Collateral
Agent, the “Agents”), and (b) the Guarantee Agreement dated as of
February 17, 2004 (as amended, supplemented or otherwise modified from
time to time, the “Guarantee Agreement”), among the Parent Borrower, the
Canadian Subsidiary Borrower, the other guarantors party thereto and the
Administrative Agent.  Capitalized terms
used herein and not defined herein shall have meanings assigned to such terms
in the Credit Agreement.

 

The Collateral Agent and the trustees for the holders of the Senior Secured
Discount Notes and the Existing Senior Secured Notes have entered into an
Intercreditor agreement dated February 17, 2004 (the “Intercreditor
Agreement”), which confirms the relative priority of the security interests
of the Secured Parties, the holders of the Senior Secured Discount Notes and
the holders of the Existing Senior Secured Notes in the Collateral.

 

The Lenders have agreed to make Loans to the Borrowers and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Parent
Borrower, pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement.  The
Pledgors (other than the Canadian Subsidiary Borrower) have agreed to
guarantee, among other things, all the obligations of the Borrowers under the
Credit Agreement.  The Canadian
Subsidiary Borrower has agreed to guarantee, among other things, all the
obligations of the Parent Borrower and the Domestic Subsidiary Borrowers under
the Credit Agreement.  The obligations
of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
are conditioned upon, among other things, the execution and delivery by the
Pledgors of a Canadian Pledge Agreement

 

 

in the form hereof to secure (a) the due and
punctual payment by the Borrowers of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrowers under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of each Loan Party to the Secured Parties under
the Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of each
Loan Party under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all
obligations of the Borrowers, monetary or otherwise, under each Swap Agreement
that (i) is effective on the Effective Date with a counterparty that is a
Lender (or an affiliate of a Lender) as of the Effective Date or (ii) is
entered into after the Effective Date with any counterparty that is a Lender
(or an Affiliate thereof) at the time such Swap Agreement is entered into and
(d) the due and punctual payment and performance of all monetary
obligations of each Loan Party in respect of overdrafts and related liabilities
owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank N.A.
(or any Affiliates thereof) arising from treasury, depositary and cash
management services or in connection with any automated clearinghouse transfers
of funds (all the monetary and other obligations referred to in the preceding
clauses (a) through (d) being referred to collectively as the “Obligations”).

 

Accordingly, each of the Pledgors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agrees as follows:

 

SECTION 1.                     Pledge.  As general and continuing collateral
security for the payment and performance, as the case may be, in full of the
Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys,
hypothecates, pledges, sets over and delivers unto the Collateral Agent, its
successors and assigns, and hereby grants to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
continuing security interest in all of the Pledgor’s right, title and interest
in, to and under (a) the shares of capital stock and other Equity
Interests owned by it and listed on Schedule II hereto and any Equity
Interests obtained in the future by the Pledgor and the certificates
representing all such shares (the “Pledged Stock”); (b)(i) the debt
securities listed opposite the name of the Pledgor on Schedule II hereto,
(ii) any debt securities in the future issued to the Pledgor and (iii) the
promissory notes and any other instruments evidencing such debt securities (the
“Pledged Debt Securities”); (c) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred
to in clauses (a) and (b) above; (d) subject to Section 5,
all rights and privileges of the Pledgor with respect to the securities and
other property referred to in clauses (a), (b), and (c) above, including
any interest of such Pledgor in the entries on the books of the issuer of the
Pledged Stock or any financial intermediary pertaining to the Pledged Stock;
and (e) all proceeds of any of the foregoing (the

 

2

 

items referred to in clauses (a) through (e) above being
collectively referred to as the “Collateral”).  Notwithstanding any of the foregoing, the Pledged Stock shall not
include (i) more than 65% of the issued and outstanding shares of common
stock of any Foreign Subsidiary that is not a Subsidiary Loan Party, (ii) to
the extent that applicable law requires that a Subsidiary of the Pledgor issue
directors’ qualifying shares, such qualifying shares, or (iii) any shares or
other Equity Interests or debt securities issued by any Excluded Subsidiary.

 

Any stock certificates, notes or other securities now or hereafter
included in the Collateral (the “Pledged Securities”) shall be
accompanied by (a) stock powers of attorney duly executed in blank or other
instruments of transfer satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request and
(b) all other property comprising part of the Collateral shall be accompanied
by proper instruments of assignment duly executed by the applicable Pledgor and
such other instruments or documents as the Collateral Agent may reasonably
request.  Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities then being
pledged hereunder, which schedule shall be attached hereto as
Schedule II and made a part hereof. Each schedule so delivered shall
supplement any prior schedules so delivered.  If the constating documents of any Person listed under the heading
“Issuer” in Schedule II hereto restrict the transfer of the securities of
such Issuer, then the Pledgor will also deliver to the Collateral Agent a
certified copy of a resolution of the directors or shareholders of such Issuer
consenting to the transfer(s) contemplated by this Agreement, including any
prospective transfer of the Collateral by the Collateral Agent upon a
realization on the security constituted hereby in accordance with this Agreement.

 

Each Pledgor confirms that value has been given by the Collateral Agent
and the Secured Parties to the Pledgor, that the Pledgor has rights in the
Collateral (other than after-acquired property) and that the Pledgor and the
Collateral Agent have not agreed to postpone the time for attachment of the
security interests created by this Agreement to any of the Collateral.  The security interests created by this
Agreement will have effect and be deemed to be effective whether or not the
Obligations or any part thereof are owing or in existence before or after or
upon the date of this Agreement.

 

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

 

SECTION 2.                     Delivery
of the Collateral. 
(a)  Each Pledgor agrees promptly to deliver or cause to be
delivered to the Collateral Agent any and all Pledged Securities, and any and
all certificates or other instruments or documents representing the Collateral.

 

(b)                                 Each
Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by
the Parent Borrower or any Subsidiary to be evidenced by a duly executed
promissory note that is pledged and delivered to the Collateral Agent pursuant
to the terms thereof.

 

3

 

SECTION 3.                     Representations,
Warranties and Covenants.  Each
Pledgor hereby represents, warrants and covenants, as to itself and the
Collateral pledged by it hereunder, to and with the Collateral Agent that:

 

(a)                                  the
Pledged Stock represents that percentage as set forth on Schedule II of
the issued and outstanding shares of each class of the capital stock of the
issuer with respect thereto;

 

(b)                                 except
for the security interest granted hereunder and except as permitted by the
Credit Agreement, the Pledgor (i) is and will at all times continue to be
the direct owner, beneficially and of record, of the Pledged Securities
indicated on Schedule II, (ii) holds the same free and clear of all
Liens, (iii) will make no assignment, pledge, hypothecation or transfer
of, or create or permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto and (iv) subject to Section 5,
will cause any and all Collateral, whether for value paid by the Pledgor or
otherwise, to be forthwith deposited with the Collateral Agent and pledged or
assigned hereunder;

 

(c)                                  the
Pledgor (i) has the power and authority to pledge the Collateral in the
manner hereby done or contemplated and to execute, deliver and perform its
obligations under this Agreement, and such execution, delivery and performance
does not contravene any of the Pledgor’s constating documents or any agreement,
instrument or restriction to which the Pledgor is a party or by which the
Pledgor or any of the Collateral is bound and (ii) will defend its title
or interest thereto or therein against any and all Liens (other than the Lien
created by this Agreement), however arising, of all Persons whomsoever;

 

(d)                                 no
consent which has not been obtained of any other Person (including stockholders
or creditors of any Pledgor) and no consent or approval which has not been
obtained of any Governmental Authority or any securities exchange is necessary
to the validity of the pledge effected hereby;

 

(e)                                  by
virtue of the execution and delivery by the Pledgors of this Agreement and the
Intercreditor Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to the Collateral
Agent in accordance with this Agreement, the Collateral Agent will obtain a
valid and perfected first lien upon and security interest in such Pledged
Securities as security for the payment and performance of the Obligations;

 

(f)                                    the
pledge effected hereby is effective to vest in the Collateral Agent, on behalf
of the Secured Parties, the rights of the Collateral Agent in the Collateral as
set forth herein;

 

(g)                                 all
of the Pledged Stock has been duly authorized and validly issued and is fully
paid and nonassessable;

 

(h)                                 all
information set forth herein relating to the Pledged Stock is accurate and
complete in all material respects as of the date hereof;

 

4

 

(i)                                     the
pledge of the Pledged Stock pursuant to this Agreement does not violate
Regulation U or X of the Federal Reserve Board or any successor thereto as
of the date hereof;

 

(j)                                     this
Agreement had been duly authorized, executed and delivered by the Pledgor and
is a valid and binding obligation of the Pledgor enforceable against the
Pledgor in accordance with its terms, subject only to bankruptcy, insolvency,
liquidation reorganization, moratorium and other similar laws generally
affecting the enforcement of creditor rights, and to the fact that equitable
remedies (such as specific performance and injunction) are discretionary
remedies; and

 

(k)                                  there
is no existing agreement, option, right or privilege capable of becoming an
agreement or option pursuant to which the Pledgor would be required to sell or
otherwise dispose of any of the Pledged Securities.

 

SECTION 4.                     Registration
in Nominee Name; Denominations.  The
Collateral Agent, on behalf of the Secured Parties, shall have the right (in
its sole and absolute discretion) to hold the Pledged Securities in its own
name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the
name of the Pledgors, endorsed or assigned in blank or in favor of the
Collateral Agent.  Each Pledgor will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Securities registered in
the name of such Pledgor.  The
Collateral Agent shall at all times have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Agreement and the
Intercreditor Agreement.

 

If any securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by any Pledgor (other than Securities
or other investment property held in the Notes Collateral Account (as defined
in the Intercreditor Agreement)) are held by such Pledgor or its nominee
through a securities intermediary or commodity intermediary, such Pledgor shall
promptly notify the Collateral Agent thereof and, at the Collateral Agent’s
request and option, pursuant to an agreement in form and substance reasonably
satisfactory to the Collateral Agent, either (i) cause such securities
intermediary or (as the case may be) commodity intermediary to agree to comply
with entitlement orders or other instructions from the Collateral Agent to such
securities intermediary as to such security entitlements, or (as the case may
be) to apply any value distributed on account of any commodity contract as
directed by the Collateral Agent to such commodity intermediary, in each case
without further consent of any Pledgor or such nominee, or (ii) in the case of
Financial Assets or other Investment Property (each as defined in the Canadian
Security Agreement dated as of the date hereof between the Pledgors and the
Collateral Agent) held through a securities intermediary, arrange for the
Collateral Agent to become the entitlement holder with respect to such
investment property, with the Pledgor being permitted, only with the consent of
the Collateral Agent, to exercise rights to withdraw or otherwise deal with
such investment property.  The
Collateral Agent agrees with each of the Pledgors that the Collateral Agent shall
not give any such entitlement orders or instructions or directions to any such
issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by any
Pledgor, unless an Event of Default has occurred and is continuing, or, after
giving effect to any such investment and withdrawal rights would occur.

 

5

 

The provisions of this paragraph shall not apply to any financial
assets credited to a securities account for which the Collateral Agent is the
securities intermediary.

 

SECTION 5.                     Voting
Rights; Dividends and Interest, etc.  (a)  In accordance with, and to the extent
consistent with, the terms of the Intercreditor Agreement, unless and until an
Event of Default shall have occurred and be continuing:

 

(i)                                     Each
Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof for any purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided, however,
that such Pledgor will not be entitled to exercise any such right if the result
thereof could materially and adversely affect the rights inuring to a holder of
the Pledged Securities or the rights and remedies of any of the Secured Parties
under this Agreement or the Credit Agreement or any other Loan Document or the
ability of the Secured Parties to exercise the same.

 

(ii)                                  The
Collateral Agent shall execute and deliver to each Pledgor, or cause to be
executed and delivered to each Pledgor, all such proxies, powers of attorney
and other instruments as such Pledgor may reasonably request for the purpose of
enabling such Pledgor to exercise the voting and/or consensual rights and powers
it is entitled to exercise pursuant to subparagraph (i) above and to
receive the cash dividends it is entitled to receive pursuant to subparagraph
(iii) below.

 

(iii)                               Each
Pledgor shall be entitled to receive and retain any and all cash dividends, interest
and principal paid on the Pledged Securities to the extent and only to the
extent that such cash dividends, interest and principal are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws.  All noncash dividends, interest and
principal, and all dividends, interest and principal paid or payable in cash or
otherwise in connection with a partial or total liquidation or dissolution,
return of capital, capital surplus or paid-in surplus, and all other
distributions (other than distributions referred to in the preceding sentence)
made on or in respect of the Pledged Securities, whether paid or payable in
cash or otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any Pledged
Securities or received in exchange for Pledged Securities or any part thereof,
or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Collateral, and, if received by any
Pledgor, shall not be commingled by such Pledgor with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement).

 

(b)                                 In
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, upon the occurrence and during the continuance of an
Event of Default, all rights of any Pledgor to dividends, interest or principal
that such Pledgor is authorized to receive pursuant to paragraph (a)(iii)
above shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and 

 

6

 

authority to
receive and retain such dividends, interest or principal.  All dividends, interest or principal
received by the  Pledgor contrary to the
provisions of this Section 5 shall be held in trust for the benefit of the
Collateral Agent, shall be segregated from other property or funds of such
Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in
the same form as so received (with any necessary endorsement). Any and all
money and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this paragraph (b) shall, subject to the
provisions of the Intercreditor Agreement, be retained by the Collateral Agent,
in an account to be established by the Collateral Agent upon receipt of such
money or other property and shall be applied in accordance with the provisions
of Section 7.  After all Events of
Default have been cured or waived, the Collateral Agent shall, within five
Business Days after all such Events of Default have been cured or waived, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) above and which remain in such account.

 

(c)                                  In
accordance with, and to the extent consistent with, the terms of, the Intercreditor
Agreement, upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting and consensual rights
and powers it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 5, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 5, shall cease, and all such rights
shall thereupon become vested in the Collateral Agent, which shall have the
sole and exclusive right and authority to exercise such voting and consensual
rights and powers, provided that, and to the extent consistent with the
Intercreditor Agreement, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and during
the continuance of an Event of Default to permit the Pledgors to exercise such
rights.  After all Events of Default
have been cured or waived, such Pledgor will have the right to exercise the
voting and consensual rights and powers that it would otherwise be entitled to
exercise pursuant to the terms of paragraph (a)(i) above.

 

SECTION 6.                     Remedies
upon Default.  In accordance with,
and to the extent consistent with, the terms of the Intercreditor Agreement,
upon the occurrence and during the continuance of an Event of Default, subject
to applicable regulatory and legal requirements, the Collateral Agent may
exercise all of the rights and remedies granted to secured parties under the Personal
Property Security Act (Ontario) (the “PPSA”) and any other
applicable statute, or otherwise available to the Collateral Agent at law or in
equity.  Without limiting the generality
of the forgoing, the Collateral Agent may sell the Collateral, or any part
thereof, at public or private sale or at any broker’s board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. 
The Collateral Agent shall be authorized at any such sale (if it deems
it advisable to do so) to restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold.  Each
such purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of any Pledgor, and, to the extent
permitted by applicable law, the Pledgors hereby waive all rights of
redemption, stay, valuation and appraisal any Pledgor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.

 

7

 

The Collateral Agent shall give a Pledgor such prior written notice of
the Collateral Agent’s intention to make any sale of such Pledgor’s Collateral
as may be required by the PPSA or other applicable law.  Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at a
broker’s board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale.  At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine.  The Collateral Agent shall
not be obligated to make any sale of any Collateral if it shall determine not
to do so, regardless of the fact that notice of sale of such Collateral shall
have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral is made
on credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid in full by the purchaser or
purchasers thereof, but the Collateral Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be
sold again upon like notice.  At any
public (or, to the extent permitted by applicable law, private) sale made
pursuant to this Section 6, any Secured Party may bid for or purchase,
free from any right of redemption, stay or appraisal on the part of any Pledgor
(all said rights being also hereby waived and released), the Collateral or any
part thereof offered for sale and may make payment on account thereof by using
any claim then due and payable to it from such Pledgor as a credit against the
purchase price, and it may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to such Pledgor
therefor.  For purposes hereof,
(a) a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof, (b) the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and (c) such Pledgor shall
not be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full.  As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may, in accordance with, and to the extent consistent with,
the terms of the Intercreditor Agreement, proceed by a suit or suits at law or
in equity to foreclose upon the Collateral and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.

 

SECTION 7.                     Application
of Proceeds of Sale.  In accordance
with, and to the extent consistent with, the terms of the Intercreditor
Agreement, the proceeds of any sale of Collateral pursuant to Section 6,
as well as any Collateral consisting of cash, shall be applied by the
Collateral Agent as follows:

 

FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent or the Administrative Agent in connection with such sale or
otherwise in connection with this Agreement, any other Loan Document or any of
the Obligations, including all court costs and the reasonable fees and expenses
of its

 

8

 

agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of any
Pledgor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;

 

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

 

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

 

In accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, the Collateral Agent shall have absolute discretion as
to the time of application of any such proceeds, moneys or balances in
accordance with this Agreement.  Upon
any sale of the Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt
of the purchase money by the Collateral Agent or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

 

SECTION 8.                     Reimbursement
of Collateral Agent.  (a)  In accordance with, and to
the extent consistent with, the terms of the Intercreditor Agreement, the
Pledgors agree to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges and
disbursements of its counsel and of any experts or agents, that the Collateral
Agent may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder or
(iv) the failure by such Pledgor to perform or observe any of the
provisions hereof.

 

(b)                                 Without
limitation of its indemnification obligations under the other Loan Documents,
each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as
defined in Section 10.03 of the Credit Agreement) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees, other charges and
disbursements, incurred by or asserted against any Indemnitee arising out of,
in any way connected with, or as a result of (i) the execution or delivery
of this Agreement or any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
any Indemnitee is a party thereto, provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses resulted from the gross negligence or
wilful misconduct of such Indemnitee.

 

9

 

(c)                                  Any
amounts payable as provided hereunder shall be additional Obligations secured
hereby and by the other Security Documents. 
The provisions of this Section 8 shall remain operative and in full
force and effect regardless of the termination of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document or any investigation made by or on
behalf of the Collateral Agent or any other Secured Party.  All amounts due under this Section 8
shall be payable on written demand therefor and shall bear interest at the rate
specified in Section 2.12(c) of the Credit Agreement.

 

SECTION 9.                     Collateral
Agent Appointed Attorney-in-Fact. 
Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact
of such Pledgor, upon the occurrence and during the continuance of a Default,
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. 
Without limiting the generality of the foregoing, the Collateral Agent
shall have the right, upon the occurrence and during the continuance of an
Event of Default, with full power of substitution either in the Collateral
Agent’s name or in the name of such Pledgor, to ask for, demand, sue for,
collect, receive and give acquittance for any and all moneys due or to become
due under and by virtue of any Collateral, to endorse checks, drafts, orders
and other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in respect
of the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and to make any agreement respecting, or otherwise deal with, the
same; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby.  The Collateral Agent
and the other Secured Parties shall be accountable only for amounts actually
received as a result of the exercise of the powers granted to them herein, and
neither they nor their officers, directors, employees or agents shall be
responsible to any Pledgor for any act or failure to act hereunder, except for
their own gross negligence or wilful misconduct.

 

Notwithstanding anything in this Section 9 to the contrary, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 9 unless it does so in accordance
with, and to the extent consistent with, the terms of the Intercreditor
Agreement.

 

SECTION 10.               Waivers;
Amendment.  (a)  No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies
of the Collateral Agent hereunder and of the other Secured Parties under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. 
No waiver of any provisions

 

10

 

of this Agreement or consent to any departure by any Pledgor therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.  No notice or demand on any Pledgor in any
case shall entitle such Pledgor to any other or further notice or demand in
similar or other circumstances.

 

(b)                                 Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to a written agreement entered into between the Collateral
Agent and the Pledgor or Pledgors with respect to which such waiver, amendment
or modification is to apply, subject to (i) any consent required in accordance
with Section 10.02 of the Credit Agreement and (ii) the limitations in the
Intercreditor Agreement.

 

SECTION 11.               Securities Act,
etc.  In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to
time in effect being called the “Federal Securities Laws”) with respect
to any disposition of the Pledged Securities permitted hereunder.  Each Pledgor understands that compliance
with the Federal Securities Laws might very strictly limit the course of
conduct of the Collateral Agent if the Collateral Agent were to attempt to
dispose of all or any part of the Pledged Securities, and might also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Securities could dispose of the same. 
Similarly, there may be other legal restrictions or limitations
affecting the Collateral Agent in any attempt to dispose of all or part of the
Pledged Securities under applicable Blue Sky or other state securities laws or
similar laws analogous in purpose or effect. 
Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things,
to acquire such Pledged Securities for their own account, for investment, and
not with a view to the distribution or resale thereof.  Each Pledgor acknowledges and agrees that in
light of such restrictions and limitations, the Collateral Agent, in its
discretion, (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Securities
or part thereof shall have been filed under the Federal Securities Laws and
(b) may approach and negotiate with a single potential purchaser to effect
such sale.  Each Pledgor acknowledges
and agrees that any such sale might result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions.  In the event of any such
sale, the Collateral Agent shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price that the
Collateral Agent, in its discretion, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a substantially higher
price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were
approached.  The provisions of this
Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.

 

SECTION 12.               Registration,
etc.  Each Pledgor agrees that, upon
the occurrence and during the continuance of an Event of Default hereunder, if,
in accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, for any reason the Collateral Agent desires to sell
any of the Pledged Securities at a public sale, it will, at any time and from

 

11

 

time to time, upon the written request of the Collateral Agent, use its
best efforts to take or to cause the issuer of such Pledged Securities to take
such action and prepare, distribute and/or file such documents, as are required
or advisable in the reasonable opinion of counsel for the Collateral Agent to
permit the public sale of such Pledged Securities.  Each Pledgor further agrees to indemnify, defend and hold
harmless the Collateral Agent, each other Secured Party, any underwriter and
their respective officers, directors, affiliates and controlling persons from
and against all loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of legal
counsel), and claims (including the costs of investigation) that they may incur
insofar as such loss, liability, expense or claim arises out of or is based
upon any untrue statement of a material fact contained in any prospectus (or
any amendment or supplement thereto) or in any notification or offering
circular, or arises out of or is based upon any omission to state a material
fact required to be stated therein or necessary to make the statements in any
thereof not misleading, except insofar as the same may have been caused by any
untrue statement or omission based upon information furnished to such Pledgor
or the issuer of such Pledged Securities by the Collateral Agent or any other
Secured Party expressly for use therein. Each Pledgor further agrees, upon such
written request referred to above, to use its best efforts to qualify, file or
register, or cause the issuer of such Pledged Securities to qualify, file or
register, any of the Pledged Securities under the Blue Sky or other securities
laws of such states as may be requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations.  The Pledgors will bear
all costs and expenses of carrying out their obligations under this
Section 12.  Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to
comply with the provisions of this Section 12 and that such failure would
not be adequately compensable in damages, and therefore agrees that its
agreements contained in this Section 12 may be specifically enforced.

 

SECTION 13.               Security
Interest Absolute.  All rights of
the Collateral Agent hereunder, the grant of a security interest in the
Collateral and all obligations of each Pledgor hereunder, shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability
of the Credit Agreement, any other Loan Document, any agreement with respect to
any of the Obligations or any other agreement or instrument relating to any of
the foregoing, (b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or any other amendment
or waiver of or any consent to any departure from the Credit Agreement, any
other Loan Document or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guaranty, for all or any of the Obligations or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any Pledgor in respect of the Obligations or in respect of this
Agreement (other than the indefeasible payment in full of all the Obligations).

 

SECTION 14.               Termination or
Release.  (a)  This
Agreement and the security interests granted hereby shall terminate when all
the Obligations (except for contingent indemnity and expense reimbursement
obligations for which no claim has been made) have been indefeasibly paid in
full and the Lenders have no further commitment to lend under the Credit
Agreement, the LC Exposure has been reduced to zero and the Issuing Bank
has no further obligation to issue Letters of Credit under the Credit
Agreement.

 

12

 

(b)                                 Upon
any sale or other transfer by any Pledgor of any Collateral that is permitted
under the Credit Agreement to any Person that is not a Pledgor, provided
that the Required Lenders shall have consented to such transfer (to the extent
required by the Credit Agreement) and the terms of such consent did not provide
otherwise, or, upon the effectiveness of any written consent to the release of
the security interest granted hereby in any Collateral pursuant to
Section 10.02(b) of the Credit Agreement, the security interest in such
Collateral shall be automatically released.

 

(c)                                  In
connection with any termination or release pursuant to paragraph (a) or
(b), the Collateral Agent shall execute and deliver to any Pledgor, at such
Pledgor’s expense, all documents that such Pledgor shall reasonably request to
evidence such termination or release. 
Any execution and delivery of documents pursuant to this Section 14
shall be without recourse to or warranty by the Collateral Agent.

 

SECTION 15.               Notices.  All communications and notices hereunder
shall be in writing and given as provided in Section 10.01 of the Credit
Agreement.  All communications and
notices hereunder to any Pledgor shall be given to it at the address for
notices set forth on Schedule I.

 

SECTION 16.               Further
Assurances.  Each Pledgor agrees to
do such further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral Agent,
in accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, may at any time reasonably request in connection with
the administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm unto
the Collateral Agent its rights and remedies hereunder.

 

SECTION 17.               Binding Effect;
Several Agreement; Assignments. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Pledgor that are contained in this Agreement
shall bind and inure to the benefit of its successors and assigns.  This Agreement shall become effective as to
any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall
have been delivered to the Collateral Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall be
binding upon such Pledgor and the Collateral Agent and their respective
successors and assigns, and shall inure to the benefit of such Pledgor, the
Collateral Agent and the other Secured Parties, and their respective successors
and assigns, except that no Pledgor shall have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such attempted
assignment shall be void), except as expressly contemplated by this Agreement
or the other Loan Documents.  If all of
the capital stock of a Pledgor is sold, transferred or otherwise disposed of to
a Person that is not an Affiliate of the Borrower pursuant to a transaction permitted
by Section 6.06 of the Credit Agreement, such Pledgor shall be released
from its obligations under this Agreement without further action.  This Agreement shall be construed as a
separate agreement with respect to each Pledgor and may be amended, modified,
supplemented, waived or released with respect to any Pledgor without the
approval of any other Pledgor and without affecting the obligations of any
other Pledgor hereunder.

 

13

 

SECTION 18.               Survival of
Agreement; Severability.  (a)  All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or the LC Exposure does not equal zero and as long
as the Commitments have not been terminated.

 

(b)                                 In
the event any one or more of the provisions contained in this Agreement should
be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other
jurisdiction).  The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 19.          Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE
FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

 

SECTION 20.               Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute a single contract, and shall
become effective as provided in Section 17.  Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.

 

SECTION 21.               Rules of
Interpretation.  The rules of
interpretation specified in Section 1.03 of the Credit Agreement shall be
applicable to this Agreement. 
Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.

 

SECTION 22.               Jurisdiction;
Consent to Service of Process.  (a)  Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any Ontario court or federal court of Canada
sitting in such jurisdiction, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in Ontario or, to the extent permitted by law, in such
federal court.  Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. 
Nothing in this Agreement shall affect any right that the Collateral
Agent or any other Secured Party may

 

14

 

otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Pledgor or its properties in
the courts of any jurisdiction.

 

(b)                                 Each
Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any Ontario or federal court.  Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(c)                                  Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 15.  Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.

 

SECTION 23.               Waiver Of Jury Trial.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 24.               Additional
Pledgors.  Pursuant to
Section 5.12 of the Credit Agreement, each Subsidiary Loan Party organized
under the laws of Canada or any province thereof (a “Canadian Subsidiary”)
that was not in existence or not a Subsidiary Loan Party on the date of the
Credit Agreement is required to enter in this Agreement as a Pledgor upon
becoming a Subsidiary Loan Party.  Upon
execution and delivery by the Collateral Agent and a Canadian Subsidiary of an
instrument in the form of Annex 1, such Canadian Subsidiary shall become a
Pledgor hereunder with the same force and effect as if originally named as a
Pledgor herein.  The execution and
delivery of such instrument shall not require the consent of any Pledgor
hereunder.  The rights and obligations
of each Pledgor hereunder shall remain in full force and effect notwithstanding
the addition of any new Pledgor as a party to this Agreement.

 

SECTION 25.               Subject to
Intercreditor Agreement. 
Notwithstanding anything herein to the contrary, the lien and security
interest granted to the Collateral Agent pursuant to this Agreement and the
exercise of any right or remedy by the Collateral Agent hereunder are subject
to the provisions of the Intercreditor Agreement.  In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern.

 

15

 

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

 

 

	
   

  	
  UNIPLAST INDUSTRIES CO.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY

  AMERICAS, as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

16

 

Schedule I to the

Canadian Pledge Agreement

 

 

PLEDGORS

 

 

	
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
  Nil

  	
   

  	
   

  

 

 

Schedule II to the

Canadian Pledge Agreement

 

CAPITAL STOCK

 

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Shares

  	
   

  	
  Percentage

  of Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

DEBT SECURITIES

 

 

	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Annex 1 to the

Canadian Pledge Agreement

 

 

SUPPLEMENT
NO.    dated as of     , to the CANADIAN PLEDGE AGREEMENT dated
as of February 17, 2004, among UNIPLAST INDUSTRIES CO., a Nova Scotia
company (the “Canadian Subsidiary Borrower”), each other Canadian
Subsidiary (as defined below) of PLIANT CORPORATION, a Utah corporation (the “Parent
Borrower”), listed on Schedule I hereto (each such subsidiary and the
Canadian Subsidiary Borrower individually a “Pledgor” and collectively,
the “Pledgors”) and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York
banking corporation, as collateral agent (in such capacity, the “Collateral
Agent”) for the Secured Parties (as defined in the Credit Agreement
referred to below)

 

A.           Reference is made to (a) the Credit
Agreement dated as of February 17, 2004 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the
Parent Borrower, the subsidiaries of the Parent Borrower party thereto as
domestic subsidiary borrowers, the Canadian Subsidiary Borrower, the lenders
from time to time party thereto (the “Lenders”), Credit Suisse First
Boston, acting through its Cayman Islands Branch, as administrative agent for
the Lenders, the Collateral Agent, General Electric Capital Corporation, as
co-collateral agent, and JPMorgan Chase Bank, as syndication agent and
(b) the Guarantee Agreement dated as of February 17, 2004 (as
amended, supplemented or otherwise modified from time to time, the “Guarantee
Agreement”), among  the Parent Borrower, the Canadian
Subsidiary Borrower, the other guarantors party thereto and the Administrative
Agent.

 

B.             Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.

 

C.             The Pledgors have entered into the
Canadian Pledge Agreement in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit. 
Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary
Loan Party organized under the laws of Canada or any province thereof (a “Canadian
Subsidiary”) that was not in existence or not a Subsidiary Loan Party on
the date of the Credit Agreement is required to enter into the Canadian Pledge
Agreement as a Pledgor upon becoming a Subsidiary Loan Party.  Section 24 of the Canadian Pledge Agreement
provides that such Canadian Subsidiaries may become Pledgors under the Canadian
Pledge Agreement by execution and delivery of an instrument in the form of this
Supplement.  The undersigned Canadian
Subsidiary (the “New Pledgor”) is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Pledgor
under the Canadian Pledge Agreement in order to induce the Lenders to make
additional Loans and the Issuing Bank to issue additional Letters of Credit and
as consideration for Loans previously made and Letters of Credit previously
issued.

 

Accordingly, the Collateral Agent and the New Pledgor agree as follows:

 

 

SECTION 1.  In accordance
with Section 24 of the Canadian Pledge Agreement, the New Pledgor by its
signature below becomes a Pledgor under the Canadian Pledge Agreement with the
same force and effect as if originally named therein as a Pledgor and the New
Pledgor hereby agrees (a) to all the terms and provisions of the Canadian
Pledge Agreement applicable to it as a Pledgor thereunder and
(b) represents and warrants that the representations and warranties made
by it as a Pledgor thereunder are true and correct on and as of the date
hereof.  In furtherance of the foregoing,
the New Pledgor, as security for the payment and performance in full of the
Obligations (as defined in the Canadian Pledge Agreement), does hereby create
and grant to the Collateral Agent, its successors and assigns, for the benefit
of the Secured Parties, their successors and assigns, a security interest in
and lien on all of the New Pledgor’s right, title and interest in and to the
Collateral (as defined in the Canadian Pledge Agreement) of the New
Pledgor.  Each reference to a “Pledgor”
in the Canadian Pledge Agreement shall be deemed to include the New
Pledgor.  The Canadian Pledge Agreement
is hereby incorporated herein by reference.

 

SECTION 2.  The New Pledgor
represents and warrants to the Collateral Agent and the other Secured Parties
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

 

SECTION 3.  This Supplement
may be executed in counterparts, each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.  This Supplement shall become effective when
the Collateral Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Pledgor and the Collateral
Agent.  Delivery of an executed
signature page to this Supplement by facsimile transmission shall be effective
as delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.  The New Pledgor
hereby represents and warrants that set forth on Schedule I attached
hereto is a true and correct schedule of all its Pledged Securities.

 

SECTION 5.  Except as
expressly supplemented hereby, the Canadian Pledge Agreement shall remain in
full force and effect.

 

SECTION 6.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA
APPLICABLE THEREIN.

 

SECTION 7.  In case any one
or more of the provisions contained in this Supplement should be held invalid,
illegal or unenforceable in any respect, neither party hereto shall be required
to comply with such provision for so long as such provision is held to be
invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein and in the Canadian
Pledge Agreement shall not in any way be affected or impaired.  The parties hereto shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

2

 

SECTION 8.  All
communications and notices hereunder shall be in writing and given as provided
in Section 15 of the Canadian Pledge Agreement.  All communications and notices hereunder to the New Pledgor shall
be given to it at the address set forth under its signature hereto.

 

SECTION 9.  The New Pledgor
agrees to reimburse the Collateral Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including the reasonable fees,
other charges and disbursements of counsel for the Collateral Agent.

 

IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Canadian Pledge Agreement as of the day and
year first above written.

 

 

	
   

  	
  [Name of New Pledgor],

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY

  AMERICAS, as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

3

 

Schedule I to

Supplement No.

to the Canadian Pledge Agreement

 

Pledged Securities of the New Pledgor

 

 

CAPITAL STOCK

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Shares

  	
   

  	
  Percentage

  of Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

DEBT
SECURITIES

 

	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of

  Note

  	
   

  	
  Maturity

  Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}]]