Document:

Exhibit 4.10

 

GENERAL
SECURITY AGREEMENT

 

THIS AGREEMENT is made between:

 

	
   

  	
   

  
	
   

  	
  WATER PIK TECHNOLOGIES CANADA, INC.

  
	
   

  	
  35 Grand Marshall Drive

  
	
   

  	
  Scarborough, Ontario

  
	
   

  	
  M1B 5W9

  
	
   

  	
   

  
	
   

  	
  (the “Debtor”)

  
	
   

  	
   

  
	
   

  	
  OF THE FIRST PART

  
	
   

  	
  - and -

  
	
   

  	
   

  
	
   

  	
  JP MORGAN CHASE BANK, TORONTO BRANCH, 

  (as Canadian Agent under the Credit Agreement)

  
	
   

  	
   

  
	
   

  	
  - and -

  
	
   

  	
   

  
	
   

  	
  JP MORGAN CHASE BANK, as Administrative
  Agent 

  and Collateral Agent (the “U.S. Agent”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (collectively,
  the “Agents”)

  
	
   

  	
   

  
	
   

  	
  OF THE SECOND PART

  
	
   

  	
   

  

 

The
Debtor, together with Water Pik, Inc. and Laars, Inc. is a party, as borrower
under an Amended and Restated Revolving Credit Agreement dated as of
August 27, 2003 to which each of the Agents is also a party (as amended,
modified, restated or supplemented from time to time, the “Credit Agreement”), providing for the
availability of certain credit facilities to, inter
alia, the Debtor upon the terms and subject to the conditions set
forth therein.  Capitalized terms used
herein without definition shall have the meanings given to them in the Credit
Agreement.

 

For
valuable consideration, the receipt and sufficiency of which are acknowledged
by each party, the parties hereto agree as follows:

 

1.                                                                                      Secured Obligations

 

The
Security Interest (as hereinafter defined) is hereby granted by the Debtor, as
more particularly set out in Section 2 below, to the Canadian Agent for the
rateable benefit of the 

 

 

Canadian Lenders and the
Canadian Participating Lenders and to the U.S. Agent for the rateable benefit
of the Lenders (including, without limitation, each Agent and any Lender as
Issuer of Letters of Credit, any counter party to any Derivative Obligation
with the Debtor which is required or permitted under the Credit Agreement that
is or was at the time such Derivative Obligation was entered into, a Lender or
an affiliate of a Lender) (collectively, the “Secured
Parties”) as continuing security
for the payment and performance of all present and future: Canadian Obligations
of the Debtor to each of the Secured Parties; and the U.S. Obligations to the
extent of the Canadian Support Collateral, to each of the Secured Parties; in
each case, whether direct or indirect, contingent or absolute (including
obligations under this agreement); and without limiting the generality of the
foregoing, specifically including the obligations of the Debtor under any
guarantee given by the Debtor to either Agent or any of the other Secured
Parties in respect of the obligations of any other party, and any bill of
exchange issued, accepted or endorsed by the Debtor of which either Agent is
the holder (collectively, the “Secured
Obligations”).

 

2.                                                                                      Creation of Security Interest

 

(a)                                  The Debtor hereby grants, mortgages, charges, transfers, assigns and
creates to and in favour of the Canadian Agent, for the rateable benefit of the
Secured Parties, a security interest in the following:

 

Inventory

 

(i)                                     all present and future inventory of the Debtor, including all raw
materials, materials used or consumed in the business of the Debtor,
work-in-progress, finished goods, goods used for packing, materials used in the
business of the Debtor not intended for sale, and goods acquired or held for
sale or furnished or to be furnished under contracts of rental or service (“Inventory”);

 

Accounts

 

(ii)                                  all present and future debts, demands and amounts due or accruing
due to the Debtor whether or not earned by performance, including without
limitation its book debts, accounts receivable, and claims under policies of
insurance; and all contracts, security interests and other rights and benefits
in respect thereof (“Accounts”);

 

Intangibles

 

(iii)                               all present and future intangible personal property of the Debtor,
including all contract rights, goodwill, and Intellectual Property (as
hereinafter defined), and all other choses in action of the Debtor of every
kind, whether due at the present time or hereafter to become due or owing (“Intangibles”); as used herein,
“Intellectual Property” means all of the Debtor’s present and future
intellectual property including without limitation, (i) copyrights, (ii)
patents, (iii) trade-marks, trade names, business names, trade styles, logos
and all other forms of business 

 

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identifiers,
and (iv) trade secrets and other confidential information and data in any form
or format, including without limitation, all know-how obtained, developed or
used in or contemplated at any time for use in the business, affairs,
undertaking and operations of the Debtor now or hereafter owned generated or
acquired, including in each instance all related additions, improvements and
accessories thereto and replacements thereof (whether registered or
unregistered) including without limitation the intellectual property described
in any Schedule B attached hereto;

 

Documents
of Title 

 

(iv)                              all present and future documents of title of the Debtor, whether
negotiable or otherwise including all warehouse receipts and bills of lading (“Documents of Title”);

 

Chattel
Paper

 

(v)                                 all present and future agreements made between the Debtor as secured
party and others which evidence both a monetary obligation and a security
interest in or a lease of specific goods (“Chattel
Paper”);

 

Instruments

 

(vi)                              all present and future bills, notes and cheques (as such are defined
pursuant to the Bills of Exchange Act
(Canada)), and all other writings that evidence a right to the payment of money
and are of a type that in the ordinary course of business are transferred by
delivery without any necessary endorsement or assignment (“Instruments”);

 

Money

 

(vii)                           all present and future money of the Debtor, whether authorized or
adopted by the Parliament of Canada as part of its currency or any foreign
government as part of its currency (“Money”);

 

Securities

 

(viii)                        all present and future securities held by the Debtor, including
shares, options, rights, warrants, joint venture interests, interests in
limited partnerships, bonds, debentures and all other documents which
constitute evidence of a share, participation or other interest of the Debtor
in property or in an enterprise or which constitute evidence of an obligation
of the issuer; and including an uncertificated security within the meaning of
Part VI (Investment Securities) of the Business
Corporations Act (Ontario) and all substitutions therefor and dividends
and income derived therefrom (“Securities”);

 

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Documents

 

(ix)                                all books, accounts, invoices, letters, papers, documents and other
records in any form evidencing or relating to collateral subject to the
Security Interest (“Documents”);

 

Undertaking

 

(x)                                   all present and future personal property, business, and undertaking
of the Debtor not being Inventory, Accounts, Intangibles, Documents of Title,
Chattel Paper, Instruments, Money, Securities or Documents (“Undertaking”); and

 

Proceeds

 

(xi)                                all personal property in any form derived directly or indirectly
from any dealing with collateral subject to the Security Interest or the
proceeds therefrom, including insurance proceeds and any other payment representing
indemnity or compensation for loss of or damage thereto or the proceeds
therefrom (“Proceeds”).

 

The
Inventory, Accounts, Intangibles, Documents of Title, Chattel Paper,
Instruments, Money, Securities, Documents, Undertaking and Proceeds are collectively
called the “Collateral”.  Any reference in this agreement to
Collateral shall mean Collateral or any part thereof, unless the context
otherwise requires.

 

(b)                                 The Debtor hereby grants, mortgages, charges, transfers, assigns,
and creates to and in favour of the U.S. Agent, for the rateable benefit of the
Secured Parties, a security interest in the Collateral to the extent that it
now or hereafter constitutes Canadian Support Collateral, such Security
Interest to attach and become effective immediately upon the Debtor delivering
to the Agents a Cross-Border Security Notice, without any further action by or
notice to the Debtor, either of the Agents or any of the other Secured Parties.

 

(c)                                  The grants, mortgages, charges, transfers, assignments and security
interests herein created are collectively called the “Security Interest”.

 

(d)                                 Notwithstanding anything to the contrary contained in this Section
2, the Security Interest does not: (i) extend to the Debtor’s Equipment (as
that term is defined in the Personal
Property Security Act (Ontario)) or fixtures (the “Excluded Interests”); (ii) extend or apply,
in favour of the U.S. Agent for the rateable benefit of the Lenders to the
Canadian Support Collateral until the Debtor delivers to the Agents a Cross-Border
Security Notice.

 

3.                                                                                      Further Description of Collateral

 

Without
limiting the generality of the description of Collateral as set out in
paragraph 3, for greater certainty the Collateral shall include all present and
future personal 

 

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property of the Debtor (other
than the Excluded Interests) located on or about or in transit to or from the
address of the Debtor set out on the first page of this agreement and the
location(s) set out in any Schedule “A” attached hereto.  The Debtor agrees to promptly inform each of
the Agents in writing of the acquisition by the Debtor of any personal property
of a material nature, and the Debtor agrees to execute and deliver at its own
expense from time to time amendments to this agreement or additional security
agreements as may be reasonably required by either of the Agents in order that
the Security Interest shall attach to such personal property.

 

4.                                                                                      Attachment

 

The
parties acknowledge that value has been given; the Debtor has rights in the
Collateral; and the parties have not agreed to postpone the time for attachment
of the Security Interest hereby created in favour of the Canadian Agent for the
Canadian Obligations but have agreed to postpone the time for attachment of the
Security Interest hereby created in the Canadian Support Collateral in favour
of the U.S. Agent for the U.S. obligations until such time, if ever, that the
Debtor delivers to the Agents a Cross-Border Security Notice as provided for in
the Credit Agreement.  In respect of
Collateral in which the Debtor obtains an interest after the execution and
delivery of this agreement, the Security Interest shall attach thereto
immediately upon the Debtor obtaining such rights, subject to the foregoing
qualification with respect to attachment of the Security Interest on the
Canadian Support Collateral.

 

5.                                                                                      Exception re Leasehold Interests and Contractual Rights

 

The
last day of the term of any lease, sublease or agreement therefor is
specifically excepted from the Security Interest, but the Debtor agrees to
stand possessed of such last day in trust for any person acquiring such
interest of the Debtor.  To the extent
that the creation of the Security Interest would constitute a breach or cause
the acceleration of any agreement, right, licence or permit to which the Debtor
is a party, the Security Interest shall not attach thereto but the Debtor shall
hold its interest therein in trust for each of the Agents, and shall assign
such agreement, right, license or permit to the Agents forthwith upon obtaining
the consent of the other party thereto. 
Each of the Agents confirms that the Security Interest herein in the
Intellectual Property is granted only as security as aforesaid.  Before the Security Interest shall have become
enforceable hereunder, the Agents shall not be or be deemed to be the owner of
any of the Intellectual Property. 
Further, notwithstanding any provision of this Agreement, the Agents
shall not be deemed to have assumed, or be or be deemed to be liable for, any
covenant, agreement or other obligation of the Debtor pursuant to any
agreement, right, license or permit to which the Debtor is a party.

 

6.                                                                                      Special Provisions re Securities

 

Until
further notice by either of the Agents, the certificates representing the
Securities may remain registered in the name of the Debtor, and the Debtor
shall at the option of either of the Agents either duly endorse such
certificates in blank for transfer or execute stock powers of attorney in
respect thereof; in either case with signatures guaranteed and with all
documentation being in form and substance satisfactory to the Agents and the
transfer agents appointed from time to time in respect of the Securities.  At any time and from time to time upon
request by either of the Agents, the Debtor shall cause any or all of the
Securities to be registered 

 

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in the name of either Agent or
its nominee, and each of the Agents are hereby appointed the irrevocable
attorney of the Debtor with full power of substitution to cause any or all of
the Securities to be registered in the name of either Agent or its
nominee.  Until either of the Agents
demands payment of the Secured Obligations:

 

(a)                                  the Debtor shall be entitled to exercise all voting rights attached
to the Securities and give consents, waivers and ratifications in respect
thereof; provided, however, that no vote shall be cast or consent, waiver or
ratification given or action taken or failed to be taken which could reasonably
be expected to be prejudicial to the interests of either of the Agents or which
would have the effect of reducing the value of the Securities as security for
the Secured Obligations or imposing any restriction on the transferability of
any of the Securities; and

 

(b)                                 the Debtor shall not exercise its voting rights attached to the
Securities in connection with the following matters relating to the issuer of
the Securities, without the prior written consent of the Agents:

 

(i)                                     the issuance of shares of any class in the capital stock of the
issuer, or any subdivision or consolidation of any such shares;

 

(ii)                                  any borrowing or guarantee of debt to be undertaken by the issuer;

 

(iii)                               any investment to be made by the issuer outside the existing scope
of its business;

 

(iv)                              any disposition by the issuer of assets outside of the existing
scope of its business;

 

(v)                                 any disposition by the issuer of any securities of its affiliates or
subsidiaries;

 

(vi)                              any plan of reorganization, merger, dissolution, liquidation, winding-up
or other similar plan affecting the corporate structure or existence of the
issuer; or

 

(vii)                           any amendment or other change to the constating documents of the
issuer.

 

All
such rights of the Debtor to vote and give consents, waivers and ratifications
shall cease immediately upon the occurrence and during the continuance of any
default by the Debtor in the performance of any of the Secured Obligations or
upon the Security Interest otherwise becoming enforceable.

 

The
responsibility of the Agents in respect of the Securities shall be limited to
exercising the same degree of care which each gives valuable property of such
Agents at such Agents’ office where any of the Securities are held.  None of the Agents or the Lenders shall be
bound under any circumstances to realize upon any of the Securities or allow
any of the Securities to be sold, or exercise any option or right attaching
thereto, or be responsible for any loss occasioned by any sale of the
Securities or by the retention or other refusal to sell the same; 

 

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nor shall any of the Lenders or
the Agents be obliged to collect or see to the payment of interest or dividends
thereon, but all such interest and dividends, if and when received by the Debtor,
shall be held in trust for the Agents and the Lenders and shall be forthwith
paid to the Agents.

 

7.                                                                                      Representations and Warranties

 

The
Debtor hereby represents and warrants as follows to the Agents and acknowledges
that the Agents is relying thereon:

 

(a)                                    Defaults.  The Debtor acknowledges that any default in
the due observance or performance by it of any covenant, condition or agreement
contained herein shall constitute an Event of Default to the extent provided in
Article VII of the Credit Agreement.

 

(b)                                   Ownership
of Collateral.  The Debtor owns, or
has valid rights as a lessee or licensee, or the power to transfer or pledge
with respect to, all Collateral purported to be pledged by it hereunder, free
and clear of any Liens, except for the Liens granted to the Agents for the
benefit of the Secured Parties pursuant to this Agreement and except for other
Liens permitted pursuant to Section 6.02
of the Credit Agreement (“Permitted Liens”).  No security agreement, financing statement
or other public notice with respect to all or any part of the Collateral is on
file or of record in any government or public office, and the Debtor has not
filed or consented to the filing of any such statement or notice, except (i)
statements or notices in favour of the Agents or, in the case of the notice of
intention to give security under the Bank
Act (Canada) in favour of the Canadian Lenders, (ii) as may be
otherwise permitted by the Credit Agreement.

 

(c)                                    Authorization;
Consent.  No authorization, consent
or approval of, or declaration or filing with, any Governmental Authority
(including, without limitation, any notice filing with provincial tax or
revenue authorities required to be made by account creditors in order to
enforce any Accounts in such state) is required for the valid execution,
delivery and performance by the Debtor of this Agreement, the grant by it of
the Lien and security interest in favor of the Agents provided for herein, or
the exercise by the Agents of its rights and remedies hereunder, except for (i)
the filings and actions described in Section 7(b), (ii) in the case of Accounts
owing from any federal governmental agency or authority, the compliance by the
Debtor with the Financial Administration Act
(Canada), as amended, and (iii) in the case of Securities, such filings and
approvals as may be required in connection with a disposition of any such
Collateral by laws affecting the offering and sale of securities generally.

 

(d)                                   No
Restrictions.  There are no
statutory or regulatory restrictions, prohibitions or limitations on the
Debtor’s ability to grant to the Agents a Lien upon and security interest in
the Collateral pursuant to this Agreement or (except for the provisions of the Financial Administration Act (Canada), as
amended) or on the exercise by the Agents of its rights and remedies hereunder
(including any foreclosure upon 

 

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or collection
of the Collateral), and there are no contractual restrictions on the Debtor’s
ability so to grant such Lien and security interest.

 

(e)                                    Accounts.  (i) 
All Accounts owned by the Debtor on the Effective Date constitute bona
fide Receivables arising in the ordinary course of business, the amount of
which is actually owing and payable to the Debtor in the ordinary course of
business.  All such Accounts, net of a
bad debt reserve determined in accordance with generally accepted accounting
principles, are collectible in accordance with their terms.

 

(ii)                                  Each
Account constituting an Eligible Receivable arising after the Effective Date
shall be on the date of its creation a good and valid account representing an
undisputed bona fide indebtedness incurred or an amount indisputably owed by
the Customer therein named, for a fixed sum, to the extent, set forth in the invoice
relating thereto, with respect to an absolute sale and delivery upon the
specified terms of goods sold by the Debtor, or work, labor and/or services
theretofore rendered by the Debtor; no such Account is or shall at any time be
subject to any defense, offset, counterclaim, discount or allowance except  as may be stated in the invoice relating
thereto or discounts and allowances as may be customary in Debtor’s business,
and Debtor has no  reason to believe
such Account will not be paid when due; none of the transactions underlying or
giving rise to any such Account shall violate any applicable provincial or
federal laws or regulations, and all documents relating to any such Account
shall be legally sufficient under such laws or regulations and are legally
enforceable in accordance with their terms; to the best knowledge of Debtor,
each customer, guarantor or endorser is solvent and will continue to be fully
able to pay such Account on which it is obligated in full when due; no
agreement under which any deduction or offset of any kind, other than normal
trade discounts and discounts granted by a Debtor in the ordinary course of its
business in accordance with its historical practices, have been granted by such
Debtor, at or before the time such Account was created; all documents and
agreements relating to such Account shall be true and correct and in all
respects what they purport to be; to the best of such Debtor’s knowledge, all
signatures and endorsements that appear on all documents and agreements relating
to such Account are genuine and all signatories and endorsers shall have full
capacity to contract; and such Account is not evidenced by Chattel Paper or an
Instrument, or if so, such Chattel Paper or Instrument shall be duly endorsed
to the order of the Agents and delivered to the Agents to be held as Collateral
hereunder.

 

(f)                                    Securities.  As of the date hereof, the Securities required to be pledged
hereunder by the Debtor consist of the number and type of shares of capital
stock (in the case of issuers that are corporations) or the percentage and type
of other Securities (in the case of issuers other than corporation) as
described in Schedule C.  All of
the Securities have been duly and validly issued and are fully paid and
non-assessable (or, in the case of partnership, limited liability company or
similar Securities, not subject to any capital call or other additional capital
requirement) and not subject to any pre-emptive rights, warrants, options or
similar rights or 

 

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restrictions
in favor of third parties or any contractual or other restrictions upon
transfer other than as may be permitted under the Credit Agreement.

 

(g)                                 Documents of Title.  No material bill of lading, warehouse
receipt or other document or instrument of title is outstanding with respect to
any Collateral other than Inventory in transit in the ordinary course of
business to a location set forth on Schedule A or to a Customer of
the Debtor.

 

(h)                                 Deposit Accounts.  Schedule D correctly sets forth each
deposit account of the Debtor maintained with each of the Agents or any other
bank or depository institution and including, without limitation, each
concentration account and each collateral account as of the date hereof
(together with all funds held from time to time therein and all certificates
and instruments from time to time representing, evidencing or deposited into
such account each such account existing as of the date hereof together with any
such account hereafter acquired or arising, “Deposit
Account”).

 

(i)                                     Capacity and Authority.  The Debtor has the capacity and authority to
incur the Secured Obligations, create the Security Interest and generally
perform its obligations under this agreement.

 

(j)                                     Authorization and Execution.  The execution and delivery of this agreement
and the performance by the Debtor of its obligations hereunder has been duly
authorized by all necessary proceedings, and this agreement has been duly
executed and delivered by the Debtor to the Agents.

 

(k)                                  No Agreements Breached.  None of the Secured Obligations nor the
granting of the Security Interest by the Debtor in favour of the Agents
constitutes a breach under any third party agreement.

 

(l)                                     Chief Executive Office.  The chief executive office of the Debtor is
located in the Province of Ontario at the address of the Debtor set out on the
first page of this agreement.

 

(m)                               Location of Collateral.  The Collateral is located only at the places
set out in Schedule A hereto and at no other place except as may be otherwise
noted therein, all locations identified in herein are leased by the Debtor. The
Debtor does not presently conduct business under any prior or other corporate
or company name or under any trade or fictitious names, except as indicated on Schedule
A, and the Debtor has not entered into any contract or granted any Lien
within the past five years under any name other than its legal name or a trade
or fictitious name indicated on Schedule B.  Each trade or fictitious name is a trade name and style (and not
the name of an independent corporation or other legal entity) by which the
Debtor may identify and sell certain of its goods or services and conduct a
portion of its business; all related Accounts are owned solely by the Debtor
and are subject to the Liens and other terms of this Agreement; and any dispute
which may arise with Customers with respect to the products invoiced under the
name of 

 

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any trade or
fictitious name are subject to the terms of this Agreement as though such trade
or fictitious name did not exist.

 

(n)                                 No Consumer Goods.  The Collateral does not include any goods
which are used or acquired by the Debtor primarily for personal, family or
household purposes.

 

(o)                                 Registration of Intellectual Property.  The Debtor has made all necessary filings,
registrations and recordations to protect all of its right, title and interest
in the Intellectual Property including all relevant renewals; and all such
filings, registrations and recordations have been duly and properly made and
are in full force and effect and are not subject to dispute by any governmental
authority or agency.

 

(p)                                 Third Party Agreements.  All leases, licenses, and other agreements
affecting any of the right, title or interest of the Debtor in any of the
Intellectual Property (collectively “Third
Party Agreements”) are in good standing.

 

(q)                                 Entitlement to use Intellectual Property.  The Debtor owns directly or is entitled to
use by license or otherwise all patents, trade-marks, trade secrets,
copyrights, licenses, technology, know-how, processes and other information and
rights with respect to the Intellectual Property.

 

(r)                                    No Litigation re Intellectual Property.  No litigation is pending or threatened which
contains allegations respecting the validity, enforceability, infringement or
ownership of any of the Intellectual Property, including without limitation,
any of right, title or interest of the Debtor in the Intellectual Property and
to the knowledge of the Debtor, no other person is presently infringing upon
the rights of the Debtor with regards to any Intellectual Property; and

 

(s)                                  List of Intellectual Property.  Schedule “B” contains a complete and
accurate list of all of the presently registered Intellectual Property of the
Debtor, including without limitation, all registered patents, trademarks and
copyrights of the Debtor.

 

8.                                                                                      Covenants of Debtor

 

Subject
to the terms of the Credit Agreement the Debtor covenants and agrees as
follows:

 

(a)                                  Payment of Secured Obligations.  To pay or satisfy the Secured Obligations
when due;

 

(b)                                 Encumbrances. To keep the Collateral
free and clear of all taxes, assessments, liens, mortgages, charges, claims,
encumbrances and security interests whatsoever, except for the Security Interest;
and for greater certainty, to ensure that all Collateral acquired by the Debtor
in the future shall be at the time of its acquisition free of all such claims,
encumbrances and security interests;

 

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(c)                                  Disposition of Collateral.  Not to sell, exchange, transfer, assign,
lease or otherwise dispose of or deal in any way with the Collateral or any
interest therein, or enter into any agreement or undertaking to do so; except
as may be permitted in this agreement or the Credit Agreement;

 

(d)                                 Inventory.  To maintain, in accordance with sound business practices, all
Inventory held by it or on its behalf in good saleable or useable
condition.  Unless notified otherwise by
the Agents in accordance with the terms hereof, the Debtor may, in any lawful
manner not inconsistent with the provisions of this Agreement and the other
Financing Documents, process, use and, in the ordinary course of business and
as permitted under the Credit Agreement, but not otherwise, sell its
Inventory.  Without limiting the
generality of the foregoing, the Debtor agrees that it shall not permit any
Inventory to be in the possession of any bailee, warehouseman, agents or
processor at any time unless such bailee, warehouseman, agents or processor
shall have been notified of the security interest created by this Agreement and
the Debtor shall have obtained, at the Debtor’s sole cost and expense, a
written agreement by such person to hold such Inventory subject to the security
interest created by this Agreement and the instructions of the Agents and to
waive and release any Lien (whether arising by operation of law or otherwise)
such person may have with respect to such Inventory, such agreement to be in
form and substance satisfactory to the Agents.

 

(e)                                  Insurance.  To obtain from financially responsible insurance companies and
maintain:

 

(i)                                     public liability insurance,

 

(ii)                                  all risks property insurance in respect of the Collateral on a
replacement cost basis,

 

(iii)                               business interruption insurance, and

 

(iv)                              insurance in respect of such other risks as the Agents may
reasonably require from time to time,

 

all of
which policies of insurance shall be in such amounts as may be reasonably
required by the Agents and shall include a standard mortgage clause approved by
the Insurance Bureau of Canada, and the Debtor agrees to cause the interest of
the Agents to be noted as first mortgagee on such policies of insurance (except
public liability insurance), and to furnish the Agents with certificates of
insurance and certified copies of such policies;

 

(f)                                    Contracts. To, at its expense, at all
times perform and comply with, in all material respects, all terms and
provisions of each material contract to which it is or hereafter becomes a
party required to be performed or complied with by it (including, without
limitation, the payment of all rent due and payable under each lease) and
enforce the terms and provisions thereof in accordance with its terms, and will
not waive, amend or modify any provision thereof in any manner other 

 

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than in the
ordinary course of business of the Debtor in accordance with past practices and
for a valid economic reason benefiting the Debtor (provided that in no
event may any waiver, amendment or modification be made that could reasonably
be expected to have a Material Adverse Effect).  The Debtor will deliver copies of each material contract to which
it is a party and each material amendment or modification thereof to the Agents
promptly upon the execution and delivery thereof.  The Debtor will not enter into any material contract (including
leases and licenses) that by its terms prohibits the assignment of the Debtor’s
rights and interest thereunder in the manner contemplated by this Agreement,
other than as may be entered into in the ordinary course of business of the
Debtor in accordance with past practices and for a valid economic reason
benefiting the Debtor.  The Debtor
further covenants and agrees to use its commercially reasonable efforts to
obtain any required consent to the collateral assignment and grant of security
interest in any material Contract (including personal property leases and
licenses), in form and substance satisfactory to the Agents, upon the request of
the Agents, and will deliver copies thereof to the Agents promptly upon
execution and delivery thereof.  The
Debtor will notify the Agents promptly in writing upon any termination of any
material contract, in whole or in part, or any material breach, default or
event of default by any party thereunder.

 

(g)                                 Notice to Agents.  To promptly notify the Agents of any loss or
damage to the Collateral, any change in any information provided in this
agreement or any actual or potential claim affecting the Debtor, the Collateral
or the Security Interest;

 

(h)                                 Landlords’ Acknowledgements.  To obtain a written agreement from each
landlord of the Debtor in favour of the Agents and in form and substance
satisfactory to the Agents, whereby such landlord:

 

(i)                                     agrees to give notice to the Agents of any default by the Debtor
under the lease and a reasonable opportunity to cure such default prior to the
exercise of any remedies by the landlord; and

 

(ii)                                  acknowledges the Security Interest and the right of the Agents to
enforce the Security Interest in priority to any claim of such landlord;

 

(i)                                     Business Activities.  To preserve its rights, powers, licences,
privileges, franchises and goodwill, comply with all applicable laws, rules,
and regulations, and generally conduct its business in a proper and efficient
manner so as to protect the Collateral, the Security Interest and the business
and undertaking of the Debtor;

 

(j)                                     Corporate Changes.  To maintain its existence and to refrain
from changing its name or amalgamating with any other corporation and not to
(i) change its name, (ii) change its chief executive office from the
location thereof listed on the first page hereof, (iii) remove any
Collateral (other than goods in transit), or any 

 

12

 

books, records
or other information relating to Collateral, from the applicable location
thereof listed on Schedule A, or keep or maintain any Collateral at
a location not listed on Schedule A, unless in each case the Debtor
has (A) given fifteen (15) days’ prior written notice to the Agents of its
intention to do so, together with information regarding any such new location
and such other information in connection with such proposed action as the
Agents may reasonably request, and (B) delivered to the Agents fifteen (15)
days prior to any such change or removal of such documents, instruments and
financing statements as may be required by the Agents, all in form and
substance satisfactory to the Agents, paid all necessary filing and recording
fees and taxes, and taken all other actions reasonably requested by the Agents
(including, at the request of the Agents, delivery of opinions of counsel
reasonably satisfactory to the Agents to the effect that all such actions have
been taken), in order to perfect and maintain the Lien upon and security
interest in the Collateral provided for herein.

 

(k)                                  Taxes and Charges.  To promptly pay all taxes, assessments,
rates, levies, payroll deductions, vacation pay, workers’ compensation
assessments, and any other charges which could result in the creation of a
statutory lien or deemed trust in respect of the Collateral;

 

(l)                                     Accessions and Fixtures.  To prevent the Collateral from becoming an
accession to any personal property not subject to this agreement, or becoming
affixed to any real property;

 

(m)                               Information.  To deliver to the Agents such information concerning the
Collateral or the Debtor as the Agents may reasonably request from time to time
including aged lists of Inventory and Accounts and annual and monthly financial
statements of the Debtor;

 

(n)                                 Maintain Records.  To (a) keep and maintain at its own cost and
expense satisfactory and complete records of the Accounts and all other
Collateral, including, without limitation, records of all payments received,
all credits granted thereon, all merchandise returned and all other
documentation relating thereto, and furnish to the Agents from time to time
such statements, schedules and reports (including, without limitation, accounts
receivable aging schedules) with regard (b) to the Collateral as the Agents may
reasonably request.

 

(o)                                 Inspection.  To make available to the Agents for inspection and review at the
Debtor’s offices copies of all invoices and other documents and information
relating to the Collateral (including, without limitation, itemized schedules
of all collections of Accounts, showing the name of each account debtor, the
amount of each payment and such other information as the Agents shall
reasonably request).  At the request of
the Agents, the Debtor will legend, in form and manner satisfactory to the
Agents, the books, records and materials evidencing or relating to the
Collateral with an appropriate reference to the fact that the Collateral has
been assigned to the Agents and that the Agents has a security interest
therein.  The Agents shall have the
right to make test verifications of Accounts in any 

 

13

 

reasonable
manner and through any reasonable medium, and the Debtor agrees to furnish all
such reasonable, assistance and information as the Agents may require in
connection therewith, provided, that, so long as no Event of Default
shall have occurred and be continuing, any such verification shall be conducted
in the name of the Debtor or in such other manner so as not to disclose the
Agents’ identity or interest in the Collateral.

 

(p)                                 Accounts.  Unless notified otherwise by the Agents in accordance with the
terms hereof, to endeavor to collect its Accounts and all amounts owing to it
thereunder in the ordinary course of its business consistent with past
practices and to apply forthwith upon receipt thereof all such amounts as are
so collected to the outstanding balances thereof, and in connection therewith,
upon the occurrence and continuance of an Event of Default, to, at the request
of the Agents, take such action as the Agents may deem necessary or advisable
(within applicable laws) to enforce such collection.  The Debtor shall not, except to the extent done in the ordinary
course of its business consistent with past practices and in accordance with
sound business judgment and provided that no Event of Default shall have
occurred and be continuing, (i) grant any extension of the time for
payment of any Account, (ii) compromise or settle any Account for less
than the full amount thereof, (iii) release, in whole or in part, any
person or property liable for the payment of any Account, or (iv) allow
any credit or discount on any Account. 
The Debtor shall promptly inform the Agents of any material disputes
with any account debtor or obligor and of any claimed offset and counterclaim
that may be asserted with respect thereto, where the Debtor reasonably believes
that the likelihood of payment by such account debtor is materially impaired, indicating
in detail the reason for the dispute, all claims relating thereto and the
amount in controversy.

 

(q)                                 Lockboxes, etc.  At its own cost and expense to, (i) arrange
for remittances on Accounts to be made directly to lockboxes designated by the
Agents and which may be at other financial institutions acceptable to the
Agents subject to an acceptable tri-party agreement, and (ii) promptly deposit,
or cause to be deposited, all payments received by the Debtor on account of
Accounts and the Proceeds of other Collateral or from the sale or other
disposition of assets permitted pursuant to the Credit Agreement, whether in
the form of cash, checks, notes, drafts, bills of exchange, money orders or
otherwise, in the cash collateral account established in connection therewith
in precisely the form received (but with any endorsements of the Debtor
necessary for deposit or collection), and until such payments are deposited,
such payments shall be deemed to be held in trust by the Debtor for and as the
Agents’ property and shall not be commingled with the Debtor’s other
funds.  Upon the occurrence and
continuance of an Event of Default, the Agents may send a notice of assignment
and/or notice of the Agents’ security interest to any and all customers or any
third party holding or otherwise concerned with any of the Collateral, and
thereafter the Agents shall have the sole right to collect Accounts and/or take
possession of the Collateral and the books and records relating thereto and to
establish Collateral Accounts.

 

14

 

(r)                                    Filings.  To make all necessary filings, registrations and other
recordations to protect the interest of the Debtor in the Collateral, including
without limitation all recordations in respect of patents, trade-marks, and
copyrights comprised in the Intellectual Property; and maintain all such
filings, registrations and other recordations, including without limitation,
timely payment of any renewal and/or maintenance fees and to notify the Agents
immediately if it knows or has reason to know that any material Intellectual
Property used in the conduct of its business may become abandoned or dedicated
to the public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding)
regarding, the Debtor’s ownership of any material Intellectual Property, its
right to register the same, or to keep and maintain the same.

 

(s)                                  Maintenance of Intellectual Property.  To perform all covenants required under any
third party agreement, including, inter alia,
promptly paying all required fees, royalties and taxes, to maintain each and
every item of Intellectual Property in full force and effect throughout as
applicable; and vigorously protect, preserve and maintain all of the value of,
and all of the right, title and interest of the Debtor, in the Intellectual
Property, including without limitation, the prosecution and/or defence against
any and all suits concerning validity, infringement, enforceability, ownership
or other aspects affecting any of the Intellectual Property;

 

(t)                                    Transfer of Intellectual Property.  Upon the occurrence and during the
continuance of any Event of Default, to use its commercially reasonable efforts
to obtain all requisite consents or approvals from the licensor of all licensed
Intellectual Property to effect the assignment of all of the Debtor’s right,
title and interest thereunder to the Agents or its designee.

 

(u)                                 Delivery of Certain Collateral.  (i) To deliver to the Agents from time to
time all items of Collateral comprising Chattel Paper, Instruments, Securities
and those Documents of Title which are negotiable and which shall be in form
suitable for transfer by delivery and shall be delivered together with undated
stock powers duly executed in blank, appropriate endorsements or other
necessary instruments of registration, transfer or assignment, duly executed
and in form and substance satisfactory to the Agents, and in each case such
other instruments or documents as the Agents may reasonably request.

 

(ii) To, at
Agents’ option, or  to permit the Agents
to at any time on behalf of the Debtor, cause the original of any such
Instrument, Chattel Paper, Securities or Document of Title to be conspicuously
marked in a form and manner acceptable to the Agents with the following legend
referring to Chattel Paper, Instruments, Securities/Document of Title, as
applicable:  “This [Chattel Paper,
Instrument, Securities/Document of Title] is subject to the security interest
of JPMorgan Chase Bank, as Agents, and any sale, transfer, assignment or
encumbrance of this [Chattel Paper, Instrument, Securities/Document of Title]
violates the rights of such secured party”.

 

15

 

(v)                                 Deposit and Collection Procedures.  (i) To, upon the creation of a new Deposit
Account immediately, enter into an account agreement for such Deposit Account
in form and substance satisfactory to the Agents.  Subject to the foregoing exceptions, no Proceeds of Accounts will
be deposited in or at any time transferred to a Deposit Account other than a
Deposit Account covered by an account agreement in form and substance
satisfactory to the Agents.

 

(ii) To
promptly notify the Agents in writing that it shall be entitled to or shall
receive any right to payment under any letter of credit, banker’s acceptance or
any similar instrument, whether as beneficiary thereof or otherwise after the
date hereof.  The Debtor shall
immediately, as Agents may specify, either (i) deliver, or cause to be
delivered to Agents, with respect to any such letter of credit, banker’s
acceptance or similar instrument, the written agreement of the issuer and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Agents, consenting to the assignment of the proceeds of the
letter of credit to Agents by the Debtor and agreeing to make all payments
thereon directly to Agents or as Agents may otherwise direct or (ii) cause
Agents to become, at the Debtor’s expense, the transferee beneficiary of the
letter of credit, banker’s acceptance or similar instrument (as the case may
be).

 

(w)                               Further Assurances.  To do, make, execute and deliver such
further and other assignments, transfers, deeds, security agreements and other
documents as may be required by the Agents to establish in favour of the Agents
the Security Interest intended to be created hereby and to accomplish the
intention of this agreement including all actions necessary to warrant and
defend the right, title and interest of the Agents and the Secured Parties in
and to the Collateral against the claims of all other persons; and

 

(x)                                   Payment of Expenses.  To pay all expenses, including solicitors’
and receivers’ fees and disbursements, incurred by the Agents or its Agents
(including any Receiver, as hereinafter defined) in connection with the
preparation, perfection, preservation, and enforcement of this agreement;
including all expenses incurred by the Agents or such Agents in dealing with
other creditors of the Debtor in connection with the establishment and
confirmation of the priority of the Security Interest; all of which expenses
shall be payable forthwith upon demand and shall form part of the Secured
Obligations.

 

9.                                                                                      Enforcement Upon Demand

 

The
Secured Obligations shall be due and payable and the Security Interest shall
become enforceable immediately upon the occurrence of an Event of Default.

 

10.                                                                               Remedies

 

Upon
the Security Interest becoming enforceable, in addition to exercising any other
remedies available at law or equity or contained in any other agreement between
the 

 

16

 

Debtor and the Agents, all of
which remedies shall be independent and cumulative, either of the Agents may:

 

(a)                                  enter any premises where Collateral may be located;

 

(b)                                 take possession of Collateral by any method permitted by law;

 

(c)                                  occupy and use any premises occupied by the Debtor and use all or
any of such premises and the Collateral located thereon;

 

(d)                                 take such actions as may be required in its sole discretion to
maintain, preserve and protect the Collateral, including payments on account of
other security interests affecting the Collateral; provided that such Agent
shall have no obligation to take any such actions or make any such
expenditures; but any such amounts paid by the Agents shall be added to the
Secured Obligations and shall be secured hereby;

 

(e)                                  sell, lease or otherwise dispose of Collateral;

 

(f)                                    collect, sell or otherwise deal with Accounts, including notifying
any person obligated to the Debtor in respect of an Account, Chattel Paper or
an Instrument to make payment to such Agent of all such present and future
amounts due thereon;

 

(g)                                 collect any rents, income, and profits received in connection with
the business of the Debtor or the Collateral, without carrying on such
business;

 

(h)                                 exercise all voting rights attached to the Securities (whether or
not registered in the name of such Agent or its nominee) and give or withhold
all consents, waivers and ratifications in respect thereof and otherwise act
with respect thereto as though it were the absolute owner thereof;

 

(i)                                     exercise any and all rights of conversion, exchange, subscription or
any other rights, privileges or options pertaining to any of the Securities as
if it were the absolute owner thereof including, without limitation, the right
to exchange at its discretion any and all of the Securities upon the merger,
consolidation, reorganization, recapitalization or other readjustment of any
issuer thereof, or upon the exercise by any issuer of any right, privilege or
option pertaining to any of the Securities, and in connection therewith, to
deposit and deliver any of the Securities with any committee, depositary,
transfer agents, registrar or other designated agency upon such terms and
conditions as it may determine, all without liability except to account for
property actually received by it;

 

(j)                                     comply with any limitation or restriction in connection with any
proposed sale or other disposition of the Securities as may be necessary in
order to comply with applicable law or regulation or any policy imposed by any
stock exchange, securities commission or other governmental or regulatory authority
or official, and the Debtor further agrees that such compliance shall not
result in such sale 

 

17

 

being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Agents be liable or accountable to the Debtor for any discount in
the sale price of the Securities which may be given by reason of the fact that
such Securities are sold in compliance with any such limitation or restriction;

 

(k)                                  carry on the business of the Debtor or any portion thereof;

 

(l)                                     demand, commence, continue or defend any judicial or administrative
proceedings for the purpose of protecting, seizing, collecting, realizing or
obtaining possession or payment of the Collateral, and give valid and effectual
receipts and discharges therefor and to compromise or give time for the payment
or performance of all or any part of the Accounts or any other obligation of
any third party to the Debtor;

 

(m)                               borrow money for the maintenance, preservation or protection of the
Collateral or for the carrying on of the business of the Debtor, and charge and
grant further security interests in the Collateral in priority to the Security
Interest, as security for the money so borrowed;

 

(n)                                 appoint by instrument in writing a receiver, or a receiver and
manager (each of which is herein called a “Receiver”)
in respect of the Debtor and/or the Collateral or any portion thereof;

 

(o)                                 apply to any court of competent jurisdiction for the appointment of
a receiver or a receiver and manager in respect of the Debtor and/or the
Collateral or any portion thereof;

 

(p)                                 accept the Collateral in satisfaction of the Secured Obligations;
and

 

(q)                                 file proofs of claim and other documents in order to have the claims
of the Agents lodged in any bankruptcy, winding-up, or other judicial
proceeding relating to the Debtor or the Collateral.

 

11.                                                                               Receiver

 

Any
Receiver appointed by either of the Agents may be any person or persons, and
such Agents may remove any Receiver so appointed and appoint another or others
instead.  The Receiver may exercise all
powers of such Agent as provided in this agreement.  The Receiver shall act as agent for such Agent for the purposes
of taking possession of the Collateral, and (except as provided below) as agent
for the Debtor for all other purposes, including without limitation the
occupation of any premises of the Debtor and in carrying on the Debtor’s
business.  For the purposes of realizing
upon the Security Interest, the Receiver may sell, lease, or otherwise dispose
of Collateral as agent for the Debtor or as agent for such Agent as it may
determine in its discretion.  The Debtor
agrees to ratify and confirm all actions of the Receiver acting as agent for
the Debtor, and to release and indemnify the Receiver in respect of all such
actions.

 

18

 

12.                                                                               Standards of Sale

 

The
Debtor agrees that it shall be commercially reasonable for either Agent to
dispose of Collateral by private sale or public sale, in such Agents’ discretion.  If Collateral is disposed of by public sale,
the sale may be held following one advertisement in a newspaper having general
circulation in the location of the Collateral to be sold at least seven days prior
to such sale, and the Agents may establish a reserve bid in respect of all or
any portion of the Collateral. 
Collateral may be disposed of in whole or in part, for cash or credit,
or part cash and part credit.  The
purchaser or lessee of such Collateral may be a customer of the Agents.

 

13.                                                                               Failure of Agents to Exercise Remedies

 

The
Agents shall not be liable for any delay or failure to enforce any remedies
available to it or to institute any proceedings for such purposes.

 

14.                                                                               Application of Payments

 

All
payments made in respect of the Secured Obligations and all monies received by
either of the Agents or any Receiver appointed by either of the Agents in
respect of the enforcement of the Security Interest (including the receipt of
any Money) may be held as security for the Secured Obligations or applied in
such manner as may be determined in the discretion of such Agent or the
Receiver, as the case may be, and the Agents may at any time apply or change
any such appropriation of such payments or monies to such part or parts of the
Secured Obligations as the Agents may determine in its discretion.  The Debtor shall remain liable to the Agents
for any deficiency; and any surplus funds realized after the satisfaction of
all Secured Obligations shall be paid in accordance with applicable law.

 

15.                                                                               Dealings by Agents

 

The
Agents may grant extensions of time and other indulgences, take and give up
securities, accept compositions, grant releases and discharges, and otherwise
deal with the Collateral, the Debtor, debtors of the Debtor, sureties of the
Debtor, and others as the Agents may see fit, without prejudice to the Secured
Obligations and the rights of the Agents to hold and realize upon the Security
Interest.  The Agents have no obligation
to keep Collateral identifiable, or to preserve rights against prior secured
creditors in respect of any Collateral which includes Chattel Paper or
Instruments.

 

16.                                                                               Notice

 

Without
prejudice to any other method of giving notice, any notice required or
permitted to be given hereunder to any party shall be conclusively deemed to
have been received by such party on the date following the sending thereof by
prepaid private courier to such party at its address noted on the first page of
this agreement.  Any party may change its
address for service by giving notice in such manner.

 

19

 

17.                                                                               Separate Security

 

This
agreement and the Security Interest are in addition to and not in substitution
for any other security now or hereafter held by either or both of the Agents in
respect of the Debtor, the Secured Obligations or the Collateral.

 

18.                                                                               Agents Not Obliged to Advance

 

Nothing
in this agreement shall obligate either or both of the Agents to make any loan
or accommodation to the Debtor, or extend the time for payment or satisfaction
of any Secured Obligations.

 

19.                                                                               Severability

 

If any
provision of this agreement shall be deemed by any court of competent
jurisdiction to be invalid or void, the remaining provisions shall remain in
full force and effect.

 

20.                                                                               Time of Essence

 

Time
shall be of the essence of this agreement.

 

21.                                                                               Grammatical Changes

 

This
agreement is to be read as if all changes in grammar, number and gender
rendered necessary by the context had been made, specifically including a
reference to a person as a corporation and vice-versa.

 

22.                                                                               Entire Agreement and Paramountcy

 

This
agreement, including any schedules attached hereto, constitutes the entire
agreement between the Debtor and the Agents relating to the subject-matter
hereof, and no amendment shall be effective unless made in writing.  There are no representations, warranties or
collateral agreements in effect between the Debtor and the Agents relating to
the subject-matter hereof; and possession of an executed copy of this agreement
by the Agents constitutes conclusive evidence that it was executed and
delivered by the Debtor free of all conditions.  In the event of any contradiction or conflict between any of the
provisions in this agreement, or in any of the other Security Agreements, on
the one hand, and any provision of the Credit Agreement, on the other hand, the
relevant provision in the Credit Agreement shall prevail.

 

23.                                                                               Governing Law; Attornment

 

This
agreement shall be interpreted in accordance with the laws of the Province of
Ontario, and without prejudice to the ability of the Agents to enforce this
agreement in any other proper jurisdiction, the Debtor hereby irrevocably
submits and attorns to the jurisdiction of the courts of the Province of
Ontario.

 

20

 

24.                                                                               Power of Attorney

 

The
Debtor hereby irrevocably constitutes and appoints each of the Agents and each
of its directors, officers, employees, agents and representatives as the true
and lawful attorney of the Debtor, with power of substitution, to do any and
all such acts and things or execute and deliver all such agreements, documents
and instruments in the name of the Debtor as such Agent in its sole discretion
considers necessary or desirable in connection with the performance of the Debtor’s
obligations hereunder or the exercise of any of the Agents’ rights and remedies
hereunder, and the Debtor hereby ratifies and agrees to ratify all actions of
any such attorney taken or done in accordance with this section; provided that
prior to the issuance of a demand for payment of the Secured Obligations either
Agent shall provide seven (7) days’ written notice to the Debtor before taking
any such action pursuant to this power of attorney unless such Agent in its
discretion considers that the giving of such notice could materially adversely
affect such Agents’ position or the value or enforceability of its security.
Without limiting the generality of the foregoing, the Agents may, pursuant to
this power of attorney, execute and file or register with the Canadian
Intellectual Property Office any and all documents required to transfer title
in and to any of the Intellectual Property using the name of the Debtor or take
any steps appropriate for the preservation or protection of any or all of the
Intellectual Property for the benefit of the Agents.

 

25.                                                                               Successors and Assigns

 

This
agreement and the Secured Obligations may be assigned in whole or in part by
either of the Agents to any person, firm or corporation without notice to or
the consent of the Debtor.  This
agreement may not be assigned by the Debtor without the prior written consent
of the Agents.  This agreement is
binding upon and enures to the benefit of, the parties hereto, and their
respective heirs, executors, administrators, legal personal representatives,
successors and permitted assigns.

 

26.                                                                               Amalgamation of Debtor

 

If the
Debtor amalgamates with any other corporation or corporations, this agreement
shall continue in full force and effect and shall be binding upon the
amalgamated corporation, and for greater certainty:

 

(a)                                  the Security Interest shall: (i) continue to secure all obligations
of the Debtor to each of the Agents and the other Secured Parties; (ii) secure
all obligations of each other amalgamating corporation to each of the Agents
and the other Secured Parties; and (iii) secure all obligations of the
amalgamated corporation to each of the Agents and the other Secured Parties
arising after the amalgamation; and the term “Secured
Obligations” shall include all such obligations of the Debtor, the
other amalgamating corporations and the amalgamated corporation;

 

(b)                                 the Security Interest shall: (i) continue to attach to all property
and assets of the Debtor; (ii) attach to all property and assets of each other
amalgamating corporation; and (iii) attach to all property and assets of the
amalgamated corporation acquired after the amalgamation; and the term
“Collateral” shall 

 

21

 

include all
such property and assets of the Debtor, the other amalgamating corporations and
the amalgamated corporation;

 

(c)                                  all defined terms and other provisions of this agreement shall be
deemed to have been amended to reflect such amalgamation, to the extent
required by the context; and

 

(d)                                 the parties agree to execute and deliver all such further documents
and assurances as may be necessary or desirable in connection with the
foregoing.

 

27.                                                                               Release and Reconveyance

 

Upon
final payment and satisfaction of the Secured Obligations in full, the Agents
shall within a reasonable time after receipt of a written request from the
Debtor, release the Security Interest and execute and deliver such releases and
discharges as the Debtor may reasonably require in this regard; provided that
all expenses incurred by both of the Agents in connection with the foregoing
shall be for the account of the Debtor.

 

[INTENTIONALLY LEFT BLANK]

 

22

 

28.                                                                               Copy of Agreement

 

The
Debtor acknowledges receipt of an executed copy of this agreement.

 

IN WITNESS WHEREOF, this agreement has been executed, sealed and delivered by the
Debtor under the hands of its proper officers duly authorized in that behalf,
this 27th day of August, 2003.

 

 

	
   

  	
  WATER PIK TECHNOLOGIES CANADA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ VICTOR
  C. STREUFERT

  	
  c/s

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Victor C.
  Streufert

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President - Finance

  
						

 

23

List of Schedules

 

 

A.                                   Additional Places where Collateral may be located

 

B.                                     List of Intellectual Property

 

C.                                     List of Securities

 

D.                                    List of Deposit Accounts

 

24Exhibit 4.11

 

 

 

HYPOTHEC ON MOVABLES

 

dated as of August 27, 2003

 

by

 

WATER PIK TECHNOLOGIES CANADA, INC.

 

as Grantor

 

in favour of

 

JPMORGAN CHASE BANK, TORONTO BRANCH

and

BANK ONE, NA, CANADA BRANCH

 

as Canadian Lenders

 

JPMORGAN CHASE BANK

BANK ONE, NA

PNC BANK, NATIONAL ASSOCIATION

and

UNION BANK OF CALIFORNIA, N.A.

 

as Lenders

 

and

 

JPMORGAN CHASE BANK, TORONTO BRANCH

 

as Canadian Agent

 

and

 

JPMORGAN CHASE BANK

 

as Administrative Agent

 

 

* * *

US Obligations

* * *

 

 

 

HYPOTHEC ON MOVABLES

 

THIS HYPOTHEC ON MOVABLES dated as
of August 27, 2003 is made by WATER PIK TECHNOLOGIES CANADA, INC. (the
“Grantor”), a corporation incorporated under the laws of Canada, in favour of
JPMORGAN CHASE BANK, TORONTO BRANCH, and BANK ONE, NA, CANADA BRANCH
(individually, a “Canadian Lender” and collectively, the “Canadian Lenders”),
JPMORGAN CHASE BANK, BANK ONE, NA, PNC BANK, NATIONAL ASSOCIATION, and UNION
BANK OF CALIFORNIA, N.A., (individually, a “Lender” and collectively, the
“Lenders”), and JPMORGAN CHASE BANK, TORONTO BRANCH (the “Canadian Agent”), as
agent for the Canadian Lenders, and JPMORGAN CHASE BANK (the “Administrative
Agent”), as agent for the Lenders.

 

RECITALS

 

A.  Pursuant to an Amended and
Restated Revolving Credit Agreement (as amended, supplemented or restated from
time to time, the “Credit Agreement”) dated as of August 27, 2003 among the
Borrowers, the Canadian Lenders, the Lenders, the Canadian Agent, the
Syndication Agent and the Administrative Agent, the Canadian Lenders and the
Lenders agreed to make certain credit facilities available to the Borrowers
upon the terms and subject to the conditions set forth therein.

 

B.  The Grantor is one of the
Borrowers.

 

C.   Pursuant to the Credit Agreement the Grantor
has agreed to grant security to the Secured Parties on certain of its assets.

 

NOW, THEREFORE, the parties hereby
agree as follows:

 

ARTICLE 1 

 

INTERPRETATION

 

Section 1.1                                      Definitions

 

In this Hypothec, unless the context shall indicate otherwise, the
following terms shall have the following meanings:

 

“Accounts” means all accounts maintained from time to time by
the Grantor with any depositary, including any Secured Party, and all cheques,
wire transfers, deposits and other items deposited into the Accounts.

 

“Administrative Agent” has the meaning ascribed thereto in the
introductory paragraph to this Hypothec.

 

 

“Agents” means the Canadian Agent and the Administrative Agent.

 

“Canadian Agent” has the meaning ascribed thereto in the
introductory paragraph to this Hypothec.

 

“Canadian Lenders” has the meaning ascribed thereto in the
introductory paragraph to this Hypothec.

 

“Claims” means (i) any and all claims, advances, book debts,
accounts receivable and any other amounts or Property now or hereafter owing to
the Grantor by any person, either absolutely or conditionally, including all
claims and indemnities payable under insurance policies covering the same, (ii)
any and all Liens in support thereof, and (iii) any and all books, papers,
invoices, notes and data files evidencing, recording or supporting the same.

 

“Credit Agreement” has the meaning ascribed thereto in Recital A
to this Hypothec.

 

“Enterprise” has the meaning ascribed thereto in Article 1525 of
the Civil Code of Québec.

 

“Excluded Interests” means any machinery, equipment, rolling
stock, furniture or fixtures of the Grantor.

 

“Grantor” has the meaning ascribed thereto in the introductory
paragraph to this Hypothec.

 

“Hypothecated Property” means any and all property, rights and
interest, present and future, intended to be charged by the hypothecs created
under Article 2 hereof, all substitutions and replacements thereof, all
increases, additions and accessions thereto, all rights attaching thereto and
all proceeds in any form derived directly or indirectly from any dealing with any
of the foregoing or the proceeds therefrom.

 

“Intellectual Property” means the Enterprise of the Grantor and
all of its trade names, trade marks, copyrights, designs, processes, know how,
goodwill,
licences, franchises, permits, quotas, patents and other rights of
intellectual and industrial property of any nature and description, and all
pending applications pertaining thereto.

 

“Inventory” means, regardless of the situs thereof at any
particular time (i) all inventory of raw materials, goods in process, finished
products and stock in trade of any nature and description, whether or not the
same is held for let or hire, leasing, resale or otherwise, (ii) all goods and
materials used in or procured for the packaging thereof, (iii) any such
property held by third parties under let or hire, leasing, conditional sale,
franchise, licence, consignment or other like contractual arrangements with its
lawful owner, (iv) any such property sold by the Grantor and later taken back
for any reason, and (v) all amounts and proceeds paid or payable to or for the
account of the Grantor as a result of the sale, lease or other dealings with
any of the foregoing.

 

2

 

“Lenders” has the meaning ascribed thereto in the introductory
paragraph to this Hypothec.

 

“Secured Parties” means each Canadian Lender, the Canadian
Agent, each Lender, and the Administrative Agent.

 

“Specifically Hypothecated Property” means any Hypothecated
Property which, at any particular time and from time to time, is actually in
existence.

 

“Tangible Property” means any of the Specifically Hypothecated
Property which is corporeal.

 

Section 1.2                                      Credit Agreement Definitions

 

Subject to Section 1.1, capitalized terms used in this Hypothec,
including the recitals hereto, shall have the meanings ascribed thereto in the
Credit Agreement.

 

ARTICLE 2

 

HYPOTHECS

 

Section 2.1                                      Conventional Hypothec

 

As security for the full and final payment of the US Obligations, the
Grantor hereby hypothecates to and in favour of the Secured Parties to the
extent of the sum of CDN$150,000,000, with interest thereon at the rate of 25%
per annum, all of its movable property of every nature and description,
corporeal and incorporeal, present and future, and wherever situate, including:

 

(i)                                     all of its Accounts;

 

(ii)                                  all of its Claims;

 

(iii)                               all of its Intellectual Property; and

 

(iv)                              all of its Inventory,

 

but
only to the extent that such property now or hereafter constitutes Canadian
Support Collateral, and excluding, in any event, any Excluded Interests.

 

Section 2.2                                      Additional Hypothec

 

To guarantee the payment of all sums not secured by the principal
hypothec created hereinabove, and in particular, interest due for the current
and three preceding years, interest on the interest, and all other amounts
expended by the Secured Parties to protect their hypothecary claim,

 

3

 

including, but not limited to, insurance premiums, taxes, costs, and
other accessories, an additional hypothec is created by the Grantor against the
Hypothecated Property. Consequently, the Grantor hypothecates the Hypothecated
Property in favour of the Secured Parties for an additional amount equal to
CDN$15,000,000, together with interest thereon at a rate of 25% per annum
calculated semi-annually and not in advance.

 

Section 2.3                                      Effectiveness

 

The hypothecary rights hereby constituted shall become effective
immediately upon the Grantor delivering to the Agents a Cross-Border Security
Notice, without further action or notice to the Grantor, either of the Agents
or any of the other Secured Parties. 
This Hypothec may not be registered at the Register of personal and
movable real rights or anywhere else until it has become effective in
accordance with this Section 2.3.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES

 

Section 3.1                                      Representations and Warranties

 

The Grantor hereby represents and warrants that it carries on an
Enterprise.

 

ARTICLE 4

 

COVENANTS

 

Section 4.1                                      Covenant

 

The Grantor covenants as follows:

 

(a)                                  The Grantor shall notify the Agents forthwith
of the existence of any Claims which are subject to the Financial Administration Act (Canada).

 

(b)                                 The Grantor shall notify the Agents in writing
not later than ten days after any of the Tangible Property is moved outside of
the Province of Québec on a permanent basis.

 

(c)                                  The Grantor shall refrain from mixing or
combining Tangible Property with other movable property belonging to third
parties, or from transforming the same, except in the normal course of the
Grantor’s Enterprise or unless consented to in writing by the Agents.

 

4

 

ARTICLE 5

 

SPECIAL PROVISIONS RELATIVE TO CLAIMS

 

Section 5.1                                      Authorization to Collect

 

The Secured Parties hereby authorize the Grantor to manage and collect
the Claims in the ordinary course of its business. Such authorization may
nevertheless be withdrawn by the Agents upon the occurrence of an Event of
Default, whereupon the Agents shall be free to do in the name of the Secured
Parties or in the name of the Grantor any of the following, without any
interference or consent on the part of the Grantor and without being bound (to
the fullest extent permitted by law) by the rules respecting the administration
of the property of others:

 

(i)                                     collect the Claims and apply such proceeds (net
of all collection costs and the reasonable remuneration of the Agents at the
customary rates) against the US Obligations in such manner as it shall deem
appropriate;

 

(ii)                                  give valid acquittances for any sums paid by
third party debtors at any time after as well as before the creation of this
security, and unilaterally cause, with or without consideration, the
cancellation or reduction of any lien securing the Claims or any part thereof;
and

 

(iii)                               re-negotiate, terminate or novate the Claims in
whole or in part upon such terms and conditions as it shall deem reasonable,
take and give up security and generally exercise, but without any obligation to
do so and at their entire discretion, all rights of the Grantor with respect to
the Claims, it being understood that the Secured Parties are relieved of any
obligation to inform the Grantor of any irregularity in the payment of any
Claim and they shall incur no liability for any loss or damage which may result
from the exercise of their rights except in the case of their own intentional
or gross fault.

 

Section 5.2                                      Money Receive

 

Any amount received by the Grantor with respect to the Claims after a
withdrawal of authorization as aforesaid shall be deemed so received as mandatory
or depository of the Secured Parties and shall forthwith be remitted to the
Agents without demand or notice, the whole without prejudice to the recourses
of the Secured Parties against the third party debtors.

 

Section 5.3                                      Perfection of Hypothecary Rights

 

If any of the Claims are themselves secured by a lien or any other
right susceptible of publication under the law, the Secured Parties shall have
the right to accomplish, at the expense of the 

 

5

 

Grantor, all the formalities required to perfect against the third
party debtors the hypothecary rights of the Secured Parties upon such Claims
and accessories thereof.

 

ARTICLE 6

 

EVENTS OF DEFAULT

 

Section 6.1                                      Event of Default

 

The hypothecary rights hereby constituted shall become enforceable upon
the occurrence of an Event of Default.

 

ARTICLE 7 

 

EXERCISE OF HYPOTHECARY RIGHTS

 

Section 7.1                                      Event of Default

 

Upon the occurrence of an Event of Default, the Grantor shall
immediately lose the benefit of the term inasmuch as it could claim any such
benefit, and the Secured Parties shall be entitled to terminate the Commitment
and demand from the Grantor the immediate payment of the US Obligations or any
part thereof and, failing receipt of such payment within the specified period,
the Secured Parties shall have the right to request from the Grantor the
voluntary surrender of the Specifically Hypothecated Property and the Grantor
hereby undertakes to do so. The Grantor shall also execute any deed or document
which may be necessary or useful to evidence such surrender or to give it full
effect.

 

Section 7.2                                      Exercise of Hypothecary Rights

 

(a)                                  The Secured Parties shall not be
bound to exercise the same hypothecary rights against all of the Hypothecated
Property. Whatever hypothecary rights the Secured Parties elect to exercise,
the provisions of this Section 7.2 shall apply:

 

(b)                                 The Secured Parties shall have the
right, at the expense of the Grantor and in order to conserve or realize upon
the Hypothecated Property:

 

(i)                                     to continue or terminate the use and operation
of the Specifically Hypothecated Property including the processing and sale of
the Inventory;

 

(ii)                                  to dispose of the Specifically Hypothecated
Property which may perish or deteriorate rapidly;

 

(iii)                               to use any information obtained by reason of
the exercise of their rights;

 

6

 

(iv)                              to perform any obligation or covenant of the
Grantor; and

 

(v)                                 to exercise any right with respect to the
Hypothecated Property.

 

(c)                                  The Secured Parties shall not be
bound to make an inventory, to take out insurance or to furnish any security.

 

(d)                                 The Secured Parties may acquire directly or
indirectly any of the Hypothecated Property.

 

(e)                                  The Secured Parties may from time to time in
the course of the exercise of their rights, renounce, with or without
consideration, any right of the Grantor.

 

(f)                                    The Secured Parties shall not be bound to make
the Hypothecated Property productive or to conserve the same.

 

(g)                                 Should the Secured Parties at any time abandon
the exercise of their rights, hypothecary or otherwise, against the
Hypothecated Property, the Secured Parties may elect, at their option, to
return to the Grantor without any representation or warranty, the Specifically
Hypothecated Property which the Grantor had surrendered to the Secured Parties,
or the remainder thereof if any, the whole without prejudice to their other
rights and recourses.

 

(h)                                 The Secured Parties shall be deemed to have
acted in the best interest of the Grantor and its successors if the Secured
Parties have acted in accordance with their standard methods of assessing and
managing financial risks in the ordinary course of their business.

 

Section 7.3                                      Taking in Payment

 

(a)                                  Where the Secured Parties exercise a right of
taking in payment and the Grantor, inasmuch as it has the right to do so,
requires that the Secured Parties sell the Hypothecated Property upon which
such recourse was exercised, the Grantor acknowledges that the Secured Parties
shall not be bound to abandon the right of taking in payment unless the Secured
Parties have obtained, before the end of the period allowed for surrender (i) a
satisfactory security guaranteeing that the sale will be made at a sufficiently
high price to enable the Secured Parties’ claim to be paid in full, (ii) the
full reimbursement of all costs thus incurred by them, and (iii) an advance of
the funds needed for the sale of the said properties.

 

(b)                                 If the Secured Parties themselves sell the
Specifically Hypothecated Property, they shall not be required to obtain any
prior appraisal thereof.

 

(c)                                  The sale by the Secured Parties of the
Specifically Hypothecated Property may be concluded by the Secured Parties
without legal warranty or, at their option, without any warranty whatsoever.

 

7

 

ARTICLE 8

 

REDUCTION AND CANCELLATION

 

Section 8.1                                      Reduction and Cancellation

 

The Agents may, on behalf of the Secured Parties, consent to the
reduction or cancellation of the security hereby constituted. However, the
Agents shall not be bound to consent to any such reduction or cancellation
unless and until the Secured Parties have received the full and final payment
of all amounts hereby secured and there is no outstanding Commitment. Any such
reduction or cancellation shall be at the expense of the Grantor.

 

ARTICLE 9

 

MISCELANEOUS

 

Section 9.1                                      Conflict

 

In the event that any provisions of this Hypothec contradict or are
otherwise incapable of being construed in conjunction with the provisions of
the Credit Agreement, the provisions of the Credit Agreement shall prevail over
those contained in this Hypothec and, in particular, if any act of the Grantor
is expressly permitted under the Credit Agreement but is prohibited under this
Hypothec, any such act shall be permitted under the Credit Agreement and shall
be deemed to be permitted under this Hypothec.

 

Section 9.2                                      No Novation

 

This Hypothec does not operate novation and the security hereby
constituted shall be in addition to any other guarantee or security which the
Secured Parties may have from time to time.

 

Section 9.3                                      No Waiver

 

The Secured Parties may grant extensions, take and give up security,
accept arrangements and otherwise deal with the Grantor or with any other party
as the Secured Parties may see fit, the whole without prejudice to the US
Obligations or to any other right of the Secured Parties hereunder or
otherwise. No failure or delay on the part of the Secured Parties in exercising
any right hereunder shall operate as a waiver thereof nor shall any waiver be
effective unless the same be in writing.

 

8

 

Section 9.4                                      Continuing Security

 

(a)                                  This Hypothec is a continuing security which
will subsist notwithstanding any fluctuation of the amounts hereby secured. The
Grantor shall be deemed to obligate itself again as provided in Article 2797 of
the Civil
Code of Québec with respect to any future obligation hereby secured.

 

(b)                                 The Agents and the other Secured Parties shall
have the right, at the expense of the Grantor, to perform all acts and things
and to execute all documents as may be necessary to ensure that this security
remains effective and opposable to third parties, including the execution and
filing of any forms required for the renewal hereof from time to time.

 

(c)                                  Any amount received by the Secured Parties in
the exercise of their rights hereunder or under any law may, at their option,
be retained by them as part of the Hypothecated Property, or may be applied by
them towards the partial payment of the US Obligations, even if not yet
exigible, as the Secured Parties shall alone determine notwithstanding the
rules governing the application of payments.

 

Section 9.5                                      Exercise of Rights by Secured Parties

 

(a)                                  The Secured Parties are not bound by any degree
of care beyond a reasonable diligence in the exercise of their rights or in the
performance of their duties, and they shall not be liable for any loss or
damage resulting therefrom except as a result of their own intentional or gross
fault.

 

(b)                                 The Secured Parties may delegate to any other
Person the exercise of their rights or the performance of their duties
hereunder and may provide such mandataries or agents with any information that
the Secured Parties may possess with respect to the Grantor or the Hypothecated
Property.

 

(c)                                  The property or sums of money received or held
by the Secured Parties by reason of these presents may be invested by the
Secured Parties in such manner as they shall deem appropriate without regard to
rules governing the administration of the property of others.

 

(d)                                 Should the Secured Parties at any time consider
that the location or the use of the Hypothecated Property requires the
registration of this security, or the creation of similar security, under the
laws of another jurisdiction, the Grantor shall forthwith at the request of the
Agents execute the documents and accomplish the formalities necessary for such
purpose.

 

(e)                                  The exercise by the Secured Parties of any of
their rights shall not preclude them from exercising any other right under this
Hypothec or the law; the rights and remedies of the Secured Parties shall be
cumulative and are in addition to and not in substitution for any other rights
or remedies. The non-exercise by the Secured Parties of any of their rights
shall not constitute a waiver of any subsequent exercise of such right.

 

9

 

Section 9.6                                      Notices

 

Notices or other communications under or in connection with this
Hypothec shall be given in accordance with Section 9.01 of the Credit
Agreement, the provisions of which shall apply mutatis mutandis to this
Hypothec as if set out in full herein.

 

Section 9.7                                      Interpretation

 

(a)                                  Any provision in this Hypothec held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Hypothec and the affect thereof shall be
confined to the provision held to be invalid or illegal.

 

(b)                                 The headings, captions and arrangements used in
this Hypothec are for convenience only and shall not affect the interpretation
of this Hypothec.

 

(c)                                  Unless there is something in the context
inconsistent therewith, words importing the singular shall include the plural
and vice versa, and words importing the neuter gender shall include the
masculine and feminine genders and viceversa.

 

Section 9.8                                      Acceptance by Canadian Lenders and Lenders 

 

This Hypothec need not be signed for acceptance by the Canadian Lenders
or the Lenders in order to be binding on the Grantor. Such acceptance by the
Canadian Agent on behalf of the Canadian Lenders and by the Administrative
Agent on behalf of the Lenders shall be sufficient and shall not be disputed by
the Grantor.

 

Section 9.9                                      Language

 

The parties confirm their express wish that this Hypothec and all
documents related thereto be drawn up in English. Les parties confirment leur volonté
expresse de voir la présente hypothèque et tous les documents s’y rattachant
être rédigés en anglais.

 

Section 9.10                                Governing law

 

This Hypothec shall be governed and construed in accordance with the
laws of the Province of Québec and the federal laws of Canada applicable
therein.  The Grantor irrevocably
submits to the jurisdiction of the courts of the Province of Québec.  This submission to jurisdiction is for the
benefit of the Secured Parties only.  As
a result, the Secured Parties shall not be prevented from taking proceedings in
any other courts with jurisdiction.

 

10

 

IN WITNESS WHEREOF the undersigned has caused this Hypothec to be executed by its duly
authorized representatives as of the date first above mentioned.

 

	
   

  	
  WATER PIK TECHNOLOGIES CANADA, INC.

  
	
   

  	
  as
  Grantor

  
	
   

  	
   

  
	
   

  	
  by:

  	
   /s/
  VICTOR C. STREUFERT

  
	
   

  	
  Name:

  	
   Victor
  C. Streufert

  
	
   

  	
  Title:

  	
   Vice
  President - Finance

  

 

11

 

IN WITNESS WHEREOF the undersigned has caused this Hypothec to be executed by its duly
authorized representatives as of the date first above mentioned.

 

	
   

  	
  JPMORGAN CHASE BANK, TORONTO BRANCH

  
	
   

  	
  as
  Canadian Agent

  
	
   

  	
   

  
	
   

  	
  by:

  	
   /s/
  CHRISTINE CHAN

  
	
   

  	
  Name:

  	
   Christine
  Chan

  
	
   

  	
  Title:

  	
   Vice
  President

  

 

12

 

IN WITNESS WHEREOF the undersigned has caused this Hypothec to be executed by its duly authorized
representatives as of the date first above mentioned.

 

	
   

  	
  JPMORGAN CHASE BANK

  
	
   

  	
  as
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
  by:

  	
   /s/ DONNA DIFORIO

  
	
   

  	
  Name:

  	
   Donna Diforio

  
	
   

  	
  Title:

  	
   Vice
  President

  

 

13

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