Document:

Exhibit 4.7

 

EXECUTION COPY

 

 

 

 

CREDIT
AGREEMENT

 

dated as of June 28, 2005

 

among

 

AMRAM’S
DISTRIBUTING LTD.

as the
Borrower,

 

RUSS BERRIE
AND COMPANY, INC.

as Guarantor,

 

THOSE
FINANCIAL INSTITUTIONS PARTY HERETO,

as Lenders,

 

LASALLE
BUSINESS CREDIT, a division of

ABN AMRO
BANK, N.V., CANADA BRANCH,

as
Administrative Agent and Arranger

 

and

LASALLE
BUSINESS CREDIT, a division of

ABN AMRO
BANK, N.V., CANADA, as Issuing Bank

 

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE 1

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
  DEFINITIONS

  	
   

  
	
  1.2

  	
  OTHER INTERPRETIVE PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  
	
  COMMITMENTS
  OF THE LENDERS; BORROWING, CONVERSION AND LETTER OF CREDIT PROCEDURES

  
	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
  COMMITMENTS

  	
   

  
	
   

  	
  2.1.1

  	
  REVOLVING LOAN COMMITMENT

  	
   

  
	
   

  	
  2.1.2

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
   

  	
  2.1.3

  	
  L/C COMMITMENT

  	
   

  
	
   

  	
  2.1.4

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  2.2

  	
  LOAN PROCEDURES

  	
   

  
	
   

  	
  2.2.1

  	
  VARIOUS TYPES OF LOANS

  	
   

  
	
   

  	
  2.2.2

  	
  BORROWING PROCEDURES

  	
   

  
	
   

  	
  2.2.3

  	
  CONVERSION AND CONTINUATION PROCEDURES

  	
   

  
	
   

  	
  2.2.4

  	
  BORROWING REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  2.3

  	
  LETTER OF CREDIT PROCEDURES

  	
   

  
	
   

  	
  2.3.1

  	
  L/C APPLICATIONS

  	
   

  
	
   

  	
  2.3.2

  	
  PARTICIPATIONS IN LETTERS OF CREDIT

  	
   

  
	
   

  	
  2.3.3

  	
  REIMBURSEMENT AND OTHER OBLIGATIONS

  	
   

  
	
   

  	
  2.3.4

  	
  FUNDING BY LENDERS TO ISSUING BANK

  	
   

  
	
  2.4

  	
  COMMITMENTS SEVERAL

  	
   

  
	
  2.5

  	
  CERTAIN CONDITIONS

  	
   

  
	
  2.6

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  
	
  EVIDENCING
  OF LOANS

  
	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
  NOTES

  	
   

  
	
  3.2

  	
  RECORDKEEPING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  
	
  INTEREST

  
	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
  INTEREST RATES

  	
   

  
	
  4.2

  	
  INTEREST PAYMENT DATES

  	
   

  
	
  4.3

  	
  SETTING AND NOTICE OF LIBOR RATES

  	
   

  
	
  4.4

  	
  COMPUTATION OF INTEREST

  	
   

  
	
  4.5

  	
  MAXIMUM INTEREST

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  
	
  FEES

  
	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
  NON-USE FEE

  	
   

  
	
  5.2

  	
  LETTER OF CREDIT FEES

  	
   

  
	
  5.3

  	
  ADMINISTRATIVE AGENT’S FEES

  	
   

  
	
  5.4

  	
  TERMINATION FEE

  	
   

  

 

 

	
  ARTICLE 6

  
	
  REDUCTION,
  TERMINATION AND INCREASES OF THE REVOLVING COMMITMENT LIMIT AND THE REVOLVING
  COMMITMENT; PREPAYMENTS

  
	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
  REDUCTION, TERMINATION AND INCREASES OF THE
  REVOLVING COMMITMENT

  	
   

  
	
   

  	
  6.1.1

  	
  VOLUNTARY REDUCTION OR TERMINATION OF THE
  REVOLVING COMMITMENT

  	
   

  
	
   

  	
  6.1.2

  	
  INCREASES IN REVOLVING COMMITMENT LIMIT

  	
   

  
	
   

  	
  6.1.3

  	
  ALL REDUCTIONS OF THE REVOLVING COMMITMENT

  	
   

  
	
  6.2

  	
  PREPAYMENTS

  	
   

  
	
   

  	
  6.2.1

  	
  VOLUNTARY PREPAYMENTS. REVOLVING LOANS

  	
   

  
	
   

  	
  6.2.2

  	
  MANDATORY PREPAYMENTS

  	
   

  
	
  6.3

  	
  MANNER OF PREPAYMENTS

  	
   

  
	
  6.4

  	
  REPAYMENTS

  	
   

  
	
   

  	
  6.4.1

  	
  ALL OBLIGATIONS

  	
   

  
	
   

  	
  6.4.2

  	
  REVOLVING LOANS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7

  
	
  MAKING
  AND PRORATION OF PAYMENTS; SETOFF; TAXES

  
	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
  MAKING OF PAYMENTS

  	
   

  
	
   

  	
  7.1.1

  	
  MANNER OF PAYMENT; APPLICATION OF PAYMENT

  	
   

  
	
   

  	
  7.1.2

  	
  PAYMENT AUTHORIZATION

  	
   

  
	
   

  	
  7.1.3

  	
  SETTLEMENT

  	
   

  
	
  7.2

  	
  APPLICATION OF CERTAIN PAYMENTS

  	
   

  
	
  7.3

  	
  DUE DATE EXTENSION

  	
   

  
	
  7.4

  	
  SETOFF

  	
   

  
	
  7.5

  	
  PRORATION OF PAYMENTS

  	
   

  
	
  7.6

  	
  TAXES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8

  
	
  INCREASED
  COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS

  
	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
  INCREASED COSTS

  	
   

  
	
  8.2

  	
  BASIS FOR DETERMINING INTEREST RATE
  INADEQUATE OR UNFAIR

  	
   

  
	
  8.3

  	
  CHANGES IN LAW RENDERING LIBOR LOANS
  UNLAWFUL

  	
   

  
	
  8.4

  	
  FUNDING LOSSES

  	
   

  
	
  8.5

  	
  RIGHT OF LENDERS TO FUND THROUGH OTHER
  OFFICES

  	
   

  
	
  8.6

  	
  DISCRETION OF LENDERS AS TO MANNER OF
  FUNDING

  	
   

  
	
  8.7

  	
  MITIGATION OF CIRCUMSTANCES; REPLACEMENT OF
  LENDERS

  	
   

  
	
  8.8

  	
  CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  
	
  REPRESENTATIONS
  AND WARRANTIES

  
	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
  ORGANIZATION

  	
   

  
	
  9.2

  	
  AUTHORIZATION; NO CONFLICT

  	
   

  
	
  9.3

  	
  VALIDITY AND BINDING NATURE

  	
   

  
	
  9.4

  	
  FINANCIAL CONDITION

  	
   

  
	
  9.5

  	
  NO MATERIAL ADVERSE CHANGE

  	
   

  
	
  9.6

  	
  LITIGATION AND CONTINGENT LIABILITIES

  	
   

  
	
  9.7

  	
  OWNERSHIP OF PROPERTIES; LIENS

  	
   

  
	
  9.8

  	
  EQUITY OWNERSHIP; SUBSIDIARIES

  	
   

  
	
  9.9

  	
  PLANS

  	
   

  
	
  9.10

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  9.11

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  9.12

  	
  [INTENTIONALLY DELETED]

  	
   

  

 

ii

 

	
  9.13

  	
  TAXES

  	
   

  
	
  9.14

  	
  SOLVENCY, ETC.

  	
   

  
	
  9.15

  	
  ENVIRONMENTAL MATTERS

  	
   

  
	
  9.16

  	
  INSURANCE

  	
   

  
	
  9.17

  	
  REAL PROPERTY

  	
   

  
	
  9.18

  	
  INFORMATION

  	
   

  
	
  9.19

  	
  INTELLECTUAL PROPERTY

  	
   

  
	
  9.20

  	
  BURDENSOME OBLIGATIONS

  	
   

  
	
  9.21

  	
  LABOUR MATTERS

  	
   

  
	
  9.22

  	
  NO DEFAULT

  	
   

  
	
  9.23

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  9.24

  	
  SUBORDINATED DEBT

  	
   

  
	
  9.25

  	
  ELIGIBLE ACCOUNTS AND ELIGIBLE INVENTORY

  	
   

  
	
  9.26

  	
  OTHER DEBT

  	
   

  
	
  9.27

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  9.28

  	
  BANK ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10

  
	
  AFFIRMATIVE
  COVENANTS

  
	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
  REPORTS, CERTIFICATES AND OTHER INFORMATION

  	
   

  
	
   

  	
  10.1.1

  	
  ANNUAL REPORT

  	
   

  
	
   

  	
  10.1.2

  	
  INTERIM REPORTS

  	
   

  
	
   

  	
  10.1.3

  	
  COMPLIANCE CERTIFICATES

  	
   

  
	
   

  	
  10.1.4

  	
  REPORTS TO THE SEC AND TO SHAREHOLDERS

  	
   

  
	
   

  	
  10.1.5

  	
  NOTICE OF DEFAULT AND LITIGATION

  	
   

  
	
   

  	
  10.1.6

  	
  BORROWING BASE CERTIFICATES, SCHEDULES AND
  REPORTS

  	
   

  
	
   

  	
  10.1.7

  	
  MANAGEMENT REPORTS

  	
   

  
	
   

  	
  10.1.8

  	
  PROJECTIONS

  	
   

  
	
   

  	
  10.1.9

  	
  MATERIAL NOTICES

  	
   

  
	
   

  	
  10.1.10

  	
  ASSET DISPOSITIONS

  	
   

  
	
   

  	
  10.1.11

  	
  OTHER INFORMATION

  	
   

  
	
   

  	
  10.1.12

  	
  DELIVERIES UNDER US CREDIT AGREEMENT

  	
   

  
	
  10.2

  	
  BOOKS, RECORDS, INSPECTIONS AND APPRAISALS

  	
   

  
	
  10.3

  	
  MAINTENANCE OF PROPERTY; INSURANCE

  	
   

  
	
   

  	
  10.3.1

  	
  OBLIGATION TO MAINTAIN PROPERTIES

  	
   

  
	
   

  	
  10.3.2

  	
  PROPERTY INSURANCE

  	
   

  
	
   

  	
  10.3.3

  	
  LIABILITY INSURANCE

  	
   

  
	
   

  	
  10.3.4

  	
  FORCED PLACE COVERAGE

  	
   

  
	
  10.4

  	
  COMPLIANCE WITH LAWS; PAYMENT OF TAXES AND
  LIABILITIES

  	
   

  
	
  10.5

  	
  MAINTENANCE OF EXISTENCE, ETC.

  	
   

  
	
  10.6

  	
  RESERVED

  	
   

  
	
  10.7

  	
  USE OF PROCEEDS

  	
   

  
	
  10.8

  	
  EMPLOYEE BENEFIT PLANS

  	
   

  
	
  10.9

  	
  ENVIRONMENTAL MATTERS

  	
   

  
	
  10.10

  	
  NEW SUBSIDIARIES

  	
   

  
	
  10.11

  	
  DEPOSIT ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11

  
	
  NEGATIVE
  COVENANTS

  
	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
  DEBT

  	
   

  	
   

  
	
  11.2

  	
  LIENS

  	
   

  	
   

  
	
  11.3

  	
  RESTRICTED PAYMENTS

  	
   

  
	
  11.4

  	
  MERGERS, CONSOLIDATIONS, SALES AND OTHER TRANSACTIONS
  OUTSIDE THE ORDINARY COURSE OF BUSINESS

  	
   

  

 

iii

 

	
  11.5

  	
  MODIFICATION OF ORGANIZATIONAL DOCUMENTS

  	
   

  
	
  11.6

  	
  TRANSACTIONS WITH AFFILIATES

  	
   

  
	
  11.7

  	
  UNCONDITIONAL PURCHASE OBLIGATIONS

  	
   

  
	
  11.8

  	
  INCONSISTENT AGREEMENTS

  	
   

  
	
  11.9

  	
  BUSINESS ACTIVITIES; ISSUANCE OF EQUITY

  	
   

  
	
  11.10

  	
  INVESTMENTS

  	
   

  
	
  11.11

  	
  RESTRICTION OF AMENDMENTS TO CERTAIN
  DOCUMENTS

  	
   

  
	
  11.12

  	
  FISCAL YEAR

  	
   

  
	
  11.13

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  11.14

  	
  CANCELLATION OF DEBT

  	
   

  
	
  11.15

  	
  CREATION OF SUBSIDIARIES

  	
   

  
	
  11.16

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12

  
	
  EFFECTIVENESS;
  CONDITIONS OF LENDING, ETC.

  
	
   

  	
   

  	
   

  	
   

  
	
  12.1

  	
  INITIAL CREDIT EXTENSION

  	
   

  
	
   

  	
  12.1.1

  	
  LIST OF CLOSING DOCUMENTS

  	
   

  
	
   

  	
  12.1.2

  	
  CONSENTS, ETC.

  	
   

  
	
   

  	
  12.1.3

  	
  PAYMENT OF FEES

  	
   

  
	
   

  	
  12.1.4

  	
  [INTENTIONALLY
  DELETED]

  	
   

  
	
   

  	
  12.1.5

  	
  INDEPENDENT COLLATERAL FIELD AUDIT
  EXAMINATION DOCUMENTS

  	
   

  
	
   

  	
  12.1.6

  	
  MATERIAL ADVERSE EFFECT

  	
   

  
	
   

  	
  12.1.7

  	
  DUE DILIGENCE

  	
   

  
	
   

  	
  12.1.8

  	
  LITIGATION

  	
   

  
	
   

  	
  12.1.9

  	
  PROJECTIONS

  	
   

  
	
   

  	
  12.1.10

  	
  FINANCIAL STATEMENTS

  	
   

  
	
   

  	
  12.1.11

  	
  FILINGS, REGISTRATIONS AND RECORDINGS

  	
   

  
	
   

  	
  12.1.12

  	
  INSURANCE

  	
   

  
	
   

  	
  12.1.13

  	
  COLLATERAL DOCUMENTS

  	
   

  
	
   

  	
  12.1.14

  	
  U.S. CREDIT TRANSACTION

  	
   

  
	
   

  	
  12.1.15

  	
  OTHER

  	
   

  
	
   

  	
  12.1.16

  	
  MINISTER OF NATIONAL REVENUE

  	
   

  
	
  12.2

  	
  CONDITIONS

  	
   

  
	
   

  	
  12.2.1

  	
  COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC.

  	
   

  
	
   

  	
  12.2.2

  	
  CONFIRMATORY CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13

  
	
  EVENTS
  OF DEFAULT AND THEIR EFFECT

  
	
   

  	
   

  	
   

  	
   

  
	
  13.1

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
  13.1.1

  	
  NON-PAYMENT OF THE LOANS, ETC.

  	
   

  
	
   

  	
  13.1.2

  	
  NON-PAYMENT OF OTHER DEBT

  	
   

  
	
   

  	
  13.1.3

  	
  RESERVED

  	
   

  
	
   

  	
  13.1.4

  	
  BANKRUPTCY, INSOLVENCY, ETC.

  	
   

  
	
   

  	
  13.1.5

  	
  NON-COMPLIANCE WITH LOAN DOCUMENTS

  	
   

  
	
   

  	
  13.1.6

  	
  REPRESENTATIONS; WARRANTIES

  	
   

  
	
   

  	
  13.1.7

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
   

  	
  13.1.8

  	
  JUDGMENTS

  	
   

  
	
   

  	
  13.1.9

  	
  LOSS OF COLLATERAL

  	
   

  
	
   

  	
  13.1.10

  	
  LEVY, SEIZURE OR ATTACHMENT

  	
   

  
	
   

  	
  13.1.11

  	
  INVALIDITY OF COLLATERAL DOCUMENTS, ETC.

  	
   

  
	
   

  	
  13.1.12

  	
  INVALIDITY OF SUBORDINATION PROVISIONS, ETC.

  	
   

  
	
   

  	
  13.1.13

  	
  CHANGE OF CONTROL

  	
   

  
	
   

  	
  13.1.14

  	
  RESERVED

  	
   

  
	
   

  	
  13.1.15

  	
  [INTENTIONALLY
  DELETED]

  	
   

  

 

iv

 

	
   

  	
  13.1.16

  	
  U.S. CREDIT TRANSACTION

  	
   

  
	
  13.2

  	
  EFFECT OF EVENT OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14

  
	
  THE
  ADMINISTRATIVE AGENT

  
	
   

  	
   

  	
   

  	
   

  
	
  14.1

  	
  APPOINTMENT AND AUTHORIZATION

  	
   

  
	
  14.2

  	
  ISSUING BANK

  	
   

  
	
  14.3

  	
  DELEGATION OF DUTIES

  	
   

  
	
  14.4

  	
  EXCULPATION OF ADMINISTRATIVE AGENT

  	
   

  
	
  14.5

  	
  RELIANCE BY ADMINISTRATIVE AGENT

  	
   

  
	
  14.6

  	
  NOTICE OF DEFAULT

  	
   

  
	
  14.7

  	
  CREDIT DECISION

  	
   

  
	
  14.8

  	
  INDEMNIFICATION

  	
   

  
	
  14.9

  	
  ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY

  	
   

  
	
  14.10

  	
  SUCCESSOR ADMINISTRATIVE AGENT

  	
   

  
	
  14.11

  	
  COLLATERAL MATTERS

  	
   

  
	
  14.12

  	
  ADMINISTRATIVE AGENT MAY FILE PROOFS
  OF CLAIM

  	
   

  
	
  14.13

  	
  OTHER AGENTS; ARRANGERS AND MANAGERS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15

  
	
  GENERAL

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  WAIVER; AMENDMENTS

  	
   

  
	
  15.2

  	
  CONFIRMATIONS

  	
   

  
	
  15.3

  	
  NOTICES

  	
   

  
	
  15.4

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  15.5

  	
  COSTS, EXPENSES AND TAXES

  	
   

  
	
  15.6

  	
  ASSIGNMENTS; PARTICIPATIONS

  	
   

  
	
   

  	
  15.6.1

  	
  ASSIGNMENTS

  	
   

  
	
   

  	
  15.6.2

  	
  PARTICIPATIONS

  	
   

  
	
  15.7

  	
  REGISTER

  	
   

  
	
  15.8

  	
  GOVERNING LAW

  	
   

  
	
  15.9

  	
  CONFIDENTIALITY

  	
   

  
	
  15.10

  	
  SEVERABILITY

  	
   

  
	
  15.11

  	
  NATURE OF REMEDIES

  	
   

  
	
  15.12

  	
  ENTIRE AGREEMENT

  	
   

  
	
  15.13

  	
  COUNTERPARTS

  	
   

  
	
  15.14

  	
  SUCCESSORS AND ASSIGNS

  	
   

  
	
  15.15

  	
  CAPTIONS

  	
   

  
	
  15.16

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  15.17

  	
  INDEMNIFICATION BY THE BORROWER

  	
   

  
	
  15.18

  	
  NON-LIABILITY OF LENDERS

  	
   

  
	
  15.19

  	
  FORUM SELECTION AND CONSENT TO JURISDICTION

  	
   

  
	
  15.20

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  15.21

  	
  OTHER WAIVERS

  	
   

  
	
  15.22

  	
  JOINT AND SEVERAL LIABILITY

  	
   

  
	
   

  	
  15.22.1

  	
  NATURE OF OBLIGATIONS

  	
   

  
	
   

  	
  15.22.2

  	
  NO FRAUDULENT CONVEYANCES

  	
   

  
	
  15.23

  	
  REVIVAL AND REINSTATEMENT OF OBLIGATIONS

  	
   

  
	
  15.24

  	
  [INTENTIONALLY DELETED]

  	
   

  
	
  15.25

  	
  JUDGMENT CURRENCY

  	
   

  
	
  15.26

  	
  SURVIVAL

  	
   

  
	
  15.27

  	
  INCONSISTENCY OF TERMS

  	
   

  

 

v

 

ANNEXES

 

	
  ANNEX A

  	
  Lenders
  and Pro Rata Shares

  
	
  ANNEX B

  	
  Addresses
  for Notices

  

 

SCHEDULES

 

	
  SCHEDULE 9.6

  	
  Litigation
  and Contingent Liabilities

  
	
  SCHEDULE 9.8

  	
  Equity Ownership

  
	
  SCHEDULE 9.9

  	
  Plans

  
	
  SCHEDULE 9.15

  	
  Environmental
  Matters

  
	
  SCHEDULE 9.16

  	
  Insurance

  
	
  SCHEDULE 9.17

  	
  Real
  Property

  
	
  SCHEDULE 9.19

  	
  Intellectual
  Property

  
	
  SCHEDULE 9.21

  	
  Labour
  Matters

  
	
  SCHEDULE 9.26

  	
  Other
  Debt

  
	
  SCHEDULE 9.28

  	
  Bank
  Accounts

  
	
  SCHEDULE 11.2

  	
  Existing
  Liens

  
	
  SCHEDULE 11.10

  	
  Investments

  
	
  SCHEDULE 12.1.1

  	
  List
  of Closing Documents

  

 

EXHIBITS

 

	
  EXHIBIT A

  	
  Form of
  Revolving Loan Note (Section 3.1)

  
	
  EXHIBIT B

  	
  Form of
  Compliance Certificate (Section 10.1.3)

  
	
  EXHIBIT C

  	
  Form of
  Borrowing Base Certificate (Section 1.1)

  
	
  EXHIBIT D

  	
  Form of
  Assignment Agreement (Section 15.6.1)

  
	
  EXHIBIT E

  	
  Form of
  Notice of Borrowing (Section 2.2.2)

  
	
  EXHIBIT F

  	
  Form of
  Notice of Conversion/Continuation (Section 2.2.3)

  
	
  EXHIBIT G

  	
  Form of
  Joinder Agreement (Section 10.10)

  
	
  EXHIBIT H

  	
  Form of
  Intercompany Note (Section 11.1)

  

 

vi

 

CREDIT
AGREEMENT

 

THIS CREDIT AGREEMENT dated as of June 28, 2005
(this “Agreement”) is entered into
among AMRAM’S DISTRIBUTING LTD. (the “Borrower”),
RUSS BERRIE AND COMPANY, INC. (the “Company”),
the financial institutions that are or may from time to time become parties
hereto as Lenders (together with their respective successors and assigns, each
being a “Lender” and collectively,
the “Lenders”), LASALLE BUSINESS
CREDIT, a division of ABN AMRO BANK N.V., CANADA BRANCH, in its capacity as “Issuing Bank” hereunder, and LASALLE
BUSINESS CREDIT, a division of ABN AMRO BANK N.V., CANADA BRANCH, (in its
individual capacity, “LaSalle”),
as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders and the Issuing Bank.

 

The Lenders have agreed to make available to the
Borrower a certain revolving credit facility (which includes letters of
credit), the Issuing Bank has agreed to issue letters of credit for the
Borrower in each case, upon the terms and conditions set forth herein.

 

In consideration of the mutual agreements herein
contained, the parties hereto agree as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1                                                                               Definitions

 

When used herein the following terms shall have the
following meanings:

 

“Account,”
“Chattel Paper,” “Documents of Title,” “Equipment,” “Goods,” “Intangibles,”
“Instruments,” “Inventory,” “Proceeds,” and “Securities”
shall have the respective meanings assigned to such terms without initial
capitals in the PPSA.

 

“Account Debtor”
means in respect of any Account, the debtor obligated to make payment thereof.

 

“Acquired Debt” means mortgage Debt or Debt with respect to Capital Leases of a
Person existing at the time such Person became a Subsidiary or assumed by the
Borrower or a Subsidiary of the Borrower pursuant to a Permitted Acquisition
(and not created or incurred in connection with or in anticipation of such
Permitted Acquisition) which would be permitted pursuant to Section 11.4(f).

 

“Acquisition” means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of all or substantially
all of any business or division of a Person, (b) the acquisition of all of
the outstanding Capital Securities (including the acquisition or termination of
any rights, warrants or options to acquire the Capital Securities) of any
Person, or otherwise causing any Person to become a Wholly-Owned Subsidiary, or
(c) a merger or consolidation or any other combination with another Person
(other than a Person that is already a Wholly-Owned Subsidiary)

 

“Administrative
Agent” means LaSalle in its capacity as administrative agent for the
Lenders and the Issuing Bank hereunder and any successor thereto in such
capacity.

 

“Affected Loan”
- see Section 8.3.

 

 

“Affiliate”
of any Person means (a) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person, (b) any
officer or director of such Person and (c) with respect to any Lender, any
entity administered or managed by such Lender or an Affiliate or investment
advisor thereof and which is engaged in making, purchasing, holding or
otherwise investing in commercial loans. A Person shall be deemed to be “controlled
by” any other Person if such Person possesses, directly or indirectly, power to
vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managers or power to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise. Unless expressly stated otherwise herein, neither the
Administrative Agent, the Issuing Bank nor any Lender shall be deemed an
Affiliate of any Loan Party or Subsidiary.

 

“Affiliated Account
Debtors” means, with respect to any Account Debtor, any other
Account Debtor who, to the best knowledge of the chief financial officer
(including after written notice thereof from the Administrative Agent),
controls, is controlled by, or is under common control with, such Account
Debtor. For purposes of this definition, the meaning of “control” (including,
with correlative meanings, “controlled by” and “under common control with”) is
limited to the direct or indirect legal or beneficial ownership of more than
fifty percent (50%) of the voting control or equity interests of an Account
Debtor or an Affiliated Account Debtor.

 

“Agent Account”
– see Section 7.1.1.

 

“Agent Fee Letter”
means that certain amended and restated letter agreement dated as of the
Closing Date (as affirmed herein) among the US Borrowers, the US Agent, the
Borrower [and the Administrative Agent]
regarding fees payable to the US Agent and the Administrative Agent pursuant to
the US Credit Agreement and hereto, respectively.

 

“Agreement”
- see the Preamble.

 

“Applicable Margin”
means, subject to the provisions of Section 10.1.3, for any day,
the rate per annum set forth below opposite the level (the “Level”) corresponding to the Total Debt to EBITDA Ratio then in effect,
it being understood that the “Applicable Margin” for (i) Revolving Loans
which are designated as LIBOR Loans (the “Revolving
Loan LIBOR Margin”) shall be the percentage set forth under the
column “Revolving Loan LIBOR Margin,” (ii) Revolving Loans which are
designated as Base Rate Loans (the “Revolving
Loan Base Rate Margin”) shall be the percentage set forth under the
column “Revolving Loan Base Rate Margin,” (iii) Revolving Loans which are
designated as Canadian Base Rate Loans (the “Revolving
Loan Canadian Base Rate Margin”) shall be the percentage set forth
under the column “Revolving Loan Canadian Base Rate Margin”, (iv) the
Non-Use Fee Rate shall be the percentage set forth under the column “Non-Use
Fee Rate”, and (v) the L/C Fee Rate shall be the percentage set forth
under the column “L/C Fee Rate”, provided  that, at all times the
Applicable Margin for that portion of Revolving Loans that on any day is equal
to the Notional Real Estate Sublimit shall be the rate per annum set forth
below under the columns “Revolving Loan LIBOR Margin”, “Revolving Loan Base
Rate Margin” and “Revolving Loan Canadian Base Rate Margin”, as applicable, plus
0.50%:

 

2

 

	
   

  	
   

  	
   

  	
   

  	
  Revolving Loan

  	
   

  
	
  Level

  	
   

  	
  Total Debt to

  EBITDA

  Ratio

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  Canadian

  Base Rate

  Margin

  	
   

  	
  Non-Use Fee

  Rate

  	
   

  	
  L/C Fee Rate

  	
   

  
	
  I

  	
   

  	
  Greater
  than or equal to 2.75:1

  	
   

  	
  2.25%

  	
   

  	
  0.75%

  	
   

  	
  0.75%

  	
   

  	
  0.50%

  	
   

  	
  2.25%

  	
   

  
	
  II

  	
   

  	
  Greater
  than or equal to 2.25:1 but less than 2.75:1

  	
   

  	
  2.00%

  	
   

  	
  0.50%

  	
   

  	
  0.50%

  	
   

  	
  0.50%

  	
   

  	
  2.00%

  	
   

  
	
  III

  	
   

  	
  Greater
  than or equal to 1.75:1 but less than 2.25:1

  	
   

  	
  1.75%

  	
   

  	
  0.25%

  	
   

  	
  0.25%

  	
   

  	
  0.375%

  	
   

  	
  1.75%

  	
   

  
	
  IV

  	
   

  	
  Less
  than 1.75:1

  	
   

  	
  1.50%

  	
   

  	
  0.00%

  	
   

  	
  0.00%

  	
   

  	
  0.375%

  	
   

  	
  1.50%

  	
   

  

 

The Revolving Loan LIBOR Margin, the Revolving Loan
Base Rate Margin, the Revolving Loan Canadian Base Rate Margin, the Non-Use Fee
Rate and the L/C Fee Rate shall be determined and adjusted, to the extent
applicable, on the first Business Day after the Borrower provides the
Administrative Agent the annual and quarterly financial statements and other
information pursuant to Section 10.1.1 or 10.1.2(a), as
applicable, and the related Compliance Certificate, pursuant to Section 10.1.3.
Notwithstanding anything contained in this paragraph to the contrary, (a) if
the Borrower fails to deliver such financial statements and Compliance
Certificate in accordance with the provisions of Section 10.1.1, 10.1.2(a) and
10.1.3, the Revolving Loan LIBOR Margin, the Revolving Loan Base Rate
Margin, the Revolving Loan Canadian Base Rate Margin, the Non-Use Fee Rate and
the L/C Fee Rate shall be based upon Level I above beginning on the date such
financial statements and Compliance Certificate were required to be delivered
until the first Business Day after such financial statements and Compliance
Certificate are actually delivered, whereupon the Applicable Margin shall be
determined by the then applicable Level; and (b) no reduction to any
Applicable Margin shall become effective at any time when an Event of Default
or Unmatured Event of Default has occurred and is continuing. Notwithstanding
the foregoing, the Applicable Margins to be in effect on the Closing Date and
thereafter, until delivery of the financial statements and compliance
certificate required to be delivered as aforesaid with respect to Fiscal Year
ending December 31, 2005, shall be based on Level III.

 

“Asset Disposition”
means the sale, lease, assignment or other transfer for value by any Loan Party
to any Person (other than a Loan Party) of any asset or right of such Loan
Party (including, the loss, destruction or damage of any thereof or any actual
condemnation, confiscation, requisition, seizure or taking thereof) (each, a “Disposition”),
other than (i) the sale, lease or other dispositions of Inventory in the
ordinary course of business or any Disposition of Equipment sold in the
ordinary course of the Borrower’s business and not having an aggregate book
value of more than Cdn$100,000 in any Fiscal Year, and (ii) the sale and
leaseback in one or more transactions in the ordinary course of business of
Equipment having an aggregate book value of less than Cdn$100,000.

 

“Assignment
Agreement” - see Section 15.6.1.

 

“Attorney Costs”
means, with respect to any Person, all reasonable fees and charges of any
counsel to such Person, the reasonable allocable cost of internal legal
services of such Person, all reasonable disbursements of such internal counsel
and all court costs and similar legal expenses, in each case, without
duplication.

 

3

 

“Bank Product Agreements”
means those certain cash management service agreements entered into from time
to time between any Loan Party and LaSalle, any Lender or any of their
respective Affiliates in connection with any of the Bank Products.

 

“Bank Product
Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by the Loan Parties to
LaSalle, any Lender or any of their respective Affiliates pursuant to or
evidenced by the Bank Product Agreements and irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including all such amounts
that a Loan Party is obligated to reimburse to the Administrative Agent or
LaSalle, any Lender or any of their respective Affiliates as a result of the
Administrative Agent or LaSalle, any Lender or any of their respective
Affiliates purchasing participations or executing indemnities or reimbursement
obligations with respect to the Bank Products provided to the Loan Parties
pursuant to the Bank Product Agreements.

 

“Bank Products”
means any service or facility extended to any Loan Party by LaSalle, any Lender
or any of their respective Affiliates including: (a) credit cards, (b) credit
card processing services, (c) debit cards, (d) purchase cards, (e) cash
management, including controlled disbursement, accounts or services.

 

“Bankruptcy Code”
means Section 548 of Chapter 11 of Title II of the United States Code (11
U.S.C. §101, et. seq.).

 

“Base Rate”
means at any time the greater of (a) the Federal Funds Rate plus 0.5% and (b) the
US Prime Rate.

 

“Base Rate Loan”
means any Loan denominated in US Dollars which bears interest at or by
reference to the Base Rate.

 

“Blocked Accounts”
– see Section 10.11(a) hereof.

 

“Blocked Account
Agreement” means a bank agency or similar agreement with the
Administrative Agent, the Borrower and/or any other applicable Loan Party and
any financial institution at which the Borrower and/or such other applicable Loan
Party maintains a depositary or other account, in form and substance reasonably
satisfactory to the Administrative Agent, in order to give the Administrative
Agent control of such account.

 

“Board of Directors”
means the board of directors of the Borrower or any committee thereof duly
authorized to act on behalf of the board of directors.

 

“Borrower”
- see Preamble.

 

“Borrowing Base”
means the amount equal to:

 

(a)                                  the total of

 

(i)                                     up to 85% of the unpaid amount of all Eligible Accounts, plus

 

(ii)                                  the lesser of (x) up to 65% of the value of all Eligible Inventory
valued at the lower of cost or market and (y) up to 85% of the value of
all Eligible Inventory Valued at the Net Orderly Liquidation Value thereof as
determined by the

 

4

 

Administrative Agent from time to time in its
commercially reasonable credit judgment after consultation with the Borrower, plus

 

(iii)                               the Notional Real Estate Sublimit; and minus

 

(b)                                 the Rent Reserve, if any, in effect at such time; and minus

 

(c)                                  the estimated aggregate amount of Specified Hedging Obligations as
determined in good faith as between the Administrative Agent, the Borrower and
the counterparty on such Specified Hedging Agreements; and minus

 

(d)                                 such other reserves as the Administrative Agent elects, in its
commercially reasonable credit judgment after consultation with the Borrower, to establish from time to
time,

 

all expressed as the Canadian Dollar
Equivalent Amount.

 

“Borrowing Base
Certificate” means a certificate substantially in the form of Exhibit C.

 

“Business Day”
means any day on which commercial banks are open for commercial banking
business Toronto, Ontario and New York City, New York in the case of a Business
Day which relates to a LIBOR Loan, on which dealings are carried on in the
London interbank eurodollar market.

 

“Canadian Base Rate”
means the floating annual rate of interest established from time to time by the
Administrative Agent as the reference rate for determining interest rates on
commercial loans made in Canada in the lawful currency of Canada and designated
as its prime rate plus 1.50% per annum. The Canadian Base Rate is not
intended to be the lowest or most favourable rate of the Administrative Agent
in effect at any time. It shall vary from time to time as determined by the
Administrative Agent.

 

“Canadian Base Rate
Loan” means any Loan denominated in Canadian Dollars which bears
interest at or by reference to the Canadian Base Rate.

 

“Canadian Dollar
Equivalent Amount” shall mean, on any given date, the amount of
Canadian Dollars which could be purchased with the relevant amount of a
currency at the then applicable Spot Rate at 11:00 a.m. Toronto time on
such date (and if such date is not a Business Day, on the preceding Business
Day) for the purchase of Canadian Dollars with such currency.

 

“Canadian Resident”
shall mean, at any time, a Person who at that time is (a) not a
non-resident of Canada within the meaning of the Income Tax Act (Canada), or (b) an authorized foreign
bank under the Bank Act (Canada)
deemed to be resident in Canada within the meaning of the Income Tax  Act (Canada) in respect of all amounts paid or credited to
such person pursuant to this Agreement.

 

“Canadian Dollars”
and the sign “Cdn$” means lawful
money of Canada.

 

“Capital Lease”
means, with respect to any Person, any lease of (or other agreement conveying
the right to use) any real, personal or mixed property by such Person that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of such Person.

 

“Capital Securities”
means, with respect to any Person, all shares, interests, participations or
other equivalents (however designated, whether voting or non-voting) of such
Person’s capital, whether now outstanding or issued or acquired after the
Closing Date, including common shares,

 

5

 

preferred shares, membership interests in a
limited liability company, limited or general partnership interests in a
partnership, interests in a trust, interests in other unincorporated
organizations or any other equivalent of such ownership interest.

 

“Cash Collateralize”
means to deliver cash collateral to the Administrative Agent in the amount
equal to 105% of the sum of (x) the Stated Amount plus (y) the amount of unpaid
letter of credit fees then accrued and thereafter scheduled to accrue for the
duration of the outstanding Letters of Credit pursuant to Section 5.2(a) and
(b), to be held as cash collateral for outstanding Letters of Credit
pursuant to documentation reasonably satisfactory to the Administrative Agent. Derivatives
of such term have corresponding meanings.

 

“Cash Equivalent
Investment” means, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
Canadian or United States Government or any agency thereof, (b) commercial
paper, maturing not more than one year from the date of issue, or corporate
demand notes, in each case (unless issued by a Lender, its Affiliate or its
holding company) rated at least A-2 by Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc., P-2 by Moody’s
Investors Service, Inc., or R-1 (low) by Dominion Bond Rating Services
Inc., (c) any certificate of deposit, time deposit or banker’s acceptance,
maturing not more than one year after such time that is sold by LaSalle (or by
any other Schedule I, II or III bank under the Bank Act (Canada)), (d) any
repurchase agreement entered into with any Lender (or commercial banking
institution of the nature referred to in clause (c)) which (i) is secured
by a fully perfected security interest in any obligation of the type described
in any of clauses (a) through (c) above and (ii) has a market
value at the time such repurchase agreement is entered into of not less than
100% of the repurchase obligation of such Lender (or other commercial banking
institution) thereunder and (e) money market accounts or mutual funds
which at least 90% of its assets satisfying the foregoing requirements, and (f) other
short term liquid investments approved in writing by the Administrative Agent.

 

“Change of Control”
means each occurrence of any of the following:

 

(a)                                  any Person or group of Persons acting jointly or in concert (within
the meaning of the Securities Act
(Ontario)), other than Permitted Holders, becomes the beneficial owner directly
or indirectly, of 50.1% or more of the Capital Securities of the Company having
the right to vote for the election of members of the board of directors of the
Company,

 

(b)                                 a majority of the members of the board of directors of the Company
do not constitute Continuing Directors,

 

(c)                                  the Company ceases to own and control, directly or indirectly, 100%
of the shares of the Capital Securities of each of the other Loan Parties, including, without limitation, the Borrower,
unless otherwise permitted hereunder, or

 

(d)                                 the Company or any other Loan
Party (i) consolidates with or merges with or into another entity
(other than another Loan Party) and is not the surviving entity; or (ii) conveys,
transfers or leases all or substantially all of its property and assets to any
Person (other than another Loan Party).

 

“Chief Financial
Officer” means the chief financial officer of the Company.

 

“Closing Date”
- see Section 12.1.

 

6

 

“Collateral”
means all of the property, assets and undertaking of the Borrower or any other
Loan Party described in the Collateral Documents together with all other real
or personal property of the Borrower or any other Loan Party now or hereafter
pledged to the Administrative Agent for the benefit of the Administrative
Agent, the Issuing Bank and the Lenders.

 

“Collateral Access
Agreement” means an agreement in form and substance reasonably
satisfactory to the Administrative Agent pursuant to which a mortgagee or
lessor of real property on which Collateral is stored or otherwise located, or
a warehouseman, processor or other bailee of Inventory or other property owned
by the Borrower, acknowledges the Liens of the Administrative Agent and waives
or, in the reasonable discretion of the Administrative Agent, subordinates on
terms reasonably acceptable to the Administrative Agent, any Liens held by such
Person on such property, and, in the case of any such agreement with a mortgagee
or lessor, permits the Administrative Agent reasonable access to and use of
such real property following the occurrence and during the continuance of an
Event of Default to assemble, complete and sell any Collateral stored or
otherwise located thereon.

 

“Collateral
Documents” means, collectively, the Guaranty Agreement, the
documents listed in Section 12.1.13 hereof and each other Mortgage,
Collateral Access Agreement, each Blocked Account Agreement and any agreement
or instrument pursuant to which any Loan Party, or any other Person grants or
purports to grant Collateral to the Administrative Agent for the benefit of the
Administrative Agent, the Issuing Bank and Lenders or otherwise relates to such
Collateral.

 

“Commitment”
means, as to any Lender, such Lender’s commitment to make Loans, and to issue
or participate in Letters of Credit, under this Agreement and “Commitments”
means the Revolving Commitment of all Lenders. The initial amount of each
Lender’s Commitment to make Loans is set forth on Annex A.

 

“Company”
– see Preamble.

 

“Compliance
Certificate” means a Compliance Certificate in substantially the
form of Exhibit B.

 

“Contingent
Liability” means, with respect to any Person, each obligation and
liability of such Person and all such obligations and liabilities of such
Person incurred pursuant to any agreement, undertaking or arrangement by which
such Person: (a) guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, dividend, obligation or other liability of any other Person in
any manner (other than by endorsement of instruments in the course of
collection), including any indebtedness, dividend or other obligation which may
be issued or incurred at some future time; (b) guarantees the payment of
dividends or other distributions upon the Capital Securities of any other Person;
(c) undertakes or agrees (whether contingently or otherwise): (i) to
purchase, repurchase, or otherwise acquire any indebtedness, obligation or
liability of any other Person or any property or assets constituting security
therefor, (ii) to advance or provide funds for the payment or discharge of
any indebtedness, obligation or liability of any other Person (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain solvency, assets, level of income, working capital or other
financial condition of any other Person, or (iii) to make payment to any
other Person other than for value received; (d) agrees to lease property
or to purchase securities, property or services from such other Person with the
purpose or intent of assuring the owner of such indebtedness or obligation of
the ability of such other Person to make payment of the indebtedness or
obligation; (e) to induce the issuance of, or in connection with the
issuance of, any letter of credit for the benefit of such other Person; or (f) undertakes
or agrees otherwise to assure a creditor against loss. The amount of any
Contingent Liability shall (subject to any limitation

 

7

 

set forth herein) be deemed to be the
outstanding principal amount (or maximum permitted principal amount, if larger)
of the indebtedness, obligation or other liability guaranteed or supported
thereby. The term “Contingent Liability” shall exclude endorsements of
instruments for deposit or collection in the ordinary course of business and
product warranties extended in the ordinary course of business.

 

“Continuing Director”
means (a) any member of the board of directors of the Company who was a
director (or comparable manager) of the Company on the Closing Date, and (b) any
individual who becomes a member of the board of directors of the Company after
the Closing Date if such individual was appointed or nominated for election to
the board of directors of the Company by a majority of the Continuing
Directors.

 

“Debt” -
of any Person means, without duplication, (a) all indebtedness of such
Person, (b) all borrowed money of such Person, whether or not evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of
such Person as lessee under Capital Leases which have been or should be
recorded as liabilities on a balance sheet of such Person in accordance with
GAAP, (d) all obligations of such Person to pay the deferred purchase
price of property or services (excluding trade accounts payable or other
accounts payable incurred in the ordinary course of such Person’s business), (e) all
indebtedness secured by a Lien on the property of such Person, whether or not
such indebtedness shall have been assumed by such Person; provided that if such
Person has not assumed or otherwise become liable for such indebtedness, such
indebtedness shall be measured at the fair market value of such property
securing such indebtedness at the time of determination, (f) all
obligations, contingent or otherwise, with respect to the face amount of all
letters of credit (whether or not drawn), bankers’ acceptances and similar
obligations issued for the account of such Person (including the Letters of
Credit), (g) all Hedging Obligations of such Person, (h) all
Contingent Liabilities of such Person, (i) all Debt of any partnership of
which such Person is a general partner, (j) all monetary obligations of such
Person under (i) so called synthetic, off-balance sheet or tax retention
leases, or (ii) an agreement for the use or possession of property
creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized
as the indebtedness of such Person (without regard to accounting treatment),
(k) any Capital Securities or other equity instrument, whether or not
mandatorily redeemable, that under GAAP is characterized as debt, and (e) the
Subordinated Debt.

 

“Defaulting Lender”
– see Section 2.1.1(c).

 

“Designated Proceeds”
- see Section 6.2.2.

 

“Disposition”
– see the definition of “Asset Disposition.”

 

“Disproportionate
Advance” – See Section 2.2.2.

 

“Eligible Account”
means an Account (other than any portion of which is owing in respect of sales,
excise or similar taxes) owing to the Borrower which is acceptable for lending
purposes to the Administrative Agent in its commercially reasonable credit
judgment. Without limiting the Administrative Agent’s aforementioned credit
judgment, the Administrative Agent shall, in general, consider an Account to be
an Eligible Account if it meets, and so long as if continues to meet, the
following requirements:

 

(a)                                  it arises from the final, bona
fide sale or lease of Goods or the rendering of services which have
been fully performed by such Borrower; and if it arises from the sale or lease
of Goods, (i) such Goods comply with the relevant Account Debtor’s
specifications (if

 

8

 

any) and have been delivered to such Account Debtor
and (ii) the Borrower has possession of delivery receipts evidencing such
delivery;

 

(b)                                 it (i) is owned by the Borrower, (ii) is subject to a
perfected, first priority Lien in favour of the Administrative Agent and (iii) is
not subject to any other assignment, claim or Lien; provided that such Account
shall be deemed ineligible pursuant to this clause (b) only to the extent
of the amount of such assignment, claim or Lien.

 

(c)                                  it (i) is a valid, legally and enforceable obligation of the
Account Debtor with respect thereto, (ii) is not subject to (x) the
fulfillment of any condition whatsoever or any counterclaim, offset, credit,
allowance, discount, rebate, adjustment or liability by the Account Debtor with
respect thereto, or (y) any claim by such Account Debtor denying liability
thereunder in whole or in part; provided that only such portion of such Account
subject to such counterclaim, offset, credit, allowance, discount, rebate,
adjustment or liability shall be deemed ineligible pursuant to this clause
(c)(ii), and (iii) the Account Debtor has not refused to accept and/or has
not returned or offered to return any of the goods or services which are the
subject of such Account;

 

(d)                                 there is no bankruptcy, insolvency or liquidation proceeding pending
by or against the Account Debtor or any Affiliated Account Debtor with respect
thereto;

 

(e)                                  the Account Debtor with respect thereto is a resident or citizen of,
and is located within, the United States (including Puerto Rico, the U.S.
Virgin Islands and Guam) or Canada and such Account is denominated in US
Dollars or Canadian Dollars, respectively;

 

(f)                                    it is not (i) an Account arising from a “sale on approval,” “sale
or return,” “consignment” or “bill and hold” or subject to any other repurchase
or return agreement, or (ii) subject to a reserve or contra-account
established by the Borrower for potential returns or refunds (without
duplication of any other reserve or deductions regarding such returns or
refunds); provided that only such portion of such Account in the amount of such
reserve or contra-account shall be deemed ineligible pursuant to this clause
(f)(ii);

 

(g)                                 it is not an Account with respect to which possession and/or control
of the goods sold giving rise thereto is held, maintained or retained by the
Borrower (or by any agent or custodian of the Borrower) for the account of or
subject to further and/or future direction from the Account Debtor with respect
thereto;

 

(h)                                 it arises in the ordinary course of business of such Borrower;

 

(i)                                     if the Account Debtor is (i) the United States or any state or
local government, or any department, agency or instrumentality thereof, the
Borrower has assigned its right to payment of such Account to the
Administrative Agent pursuant to the Assignment
of Claims Act of 1940 or any comparable state or local law, as
applicable, and evidence (reasonably satisfactory to the Administrative Agent)
of such assignment has been delivered to the Administrative Agent (ii) Her
Majesty the Queen in Right of Canada or any department, agency or
instrumentality thereof, unless the Borrower grants to the Administrative Agent
by way of absolute assignment and as security, its right to payment of such
Account pursuant to and in full compliance with, and all other steps deemed
necessary by the Administrative Agent have been taken under, the Financial Administration Act (R.S.C. 1985,
c. F-11), as amended, or (iii) a Crown corporation, any other government
or other governmental body if such Account cannot be the object of a

 

9

 

valid first ranking security interest in favour of the
Administrative Agent without special formalities or requirements, unless such
formalities or requirements have been performed to the full satisfaction of the
Administrative Agent;

 

(j)                                     if the Borrower maintains a credit limit for an Account Debtor, the
aggregate dollar amount of Accounts due from such Account Debtor and its
Affiliated Account Debtors, including such Account, does not exceed such credit
limit; provided that only such portion of such Account that exceeds such credit
limit shall be deemed ineligible pursuant to this clause (j);

 

(k)                                  it is not an Account evidenced by chattel paper or an instrument;

 

(l)                                     such Account is evidenced by an invoice delivered to the related Account
Debtor and is not more than (i) sixty (60) days past the due date thereof
or (ii) ninety (90) days past the original invoice date thereof, in each
case according to the original terms of sale; provided that up to Cdn$1,000,000
of Accounts evidenced by invoices not more than (x) sixty (60) days past the
due date thereof or (y) one hundred and eighty (180) days past the original
invoice date thereof but which otherwise meet all other eligibility criteria
hereunder shall not be deemed ineligible pursuant to this clause (l);

 

(m)                               it is owing by an Account Debtor in respect of which 35% or more of
the aggregate dollar amount of all Accounts owing by such Account Debtor and
its Affiliated Account Debtors are ineligible pursuant to clause (l)
immediately above;

 

(n)                                 it is not an Account with respect to an Account Debtor that is
located in any jurisdiction which has adopted a statute or other requirement
with respect to which any Person that obtains business from within such
jurisdiction must file a notice of business activities report or make any other
required filings in a timely manner in order to enforce its claims in such
jurisdiction’s courts unless (i) such notice of business activities report
has been duly and timely filed or the Borrower is exempt from filing such
report and has provided the Administrative Agent with reasonably satisfactory
evidence of such exemption or (ii) the failure to make such filings may be
cured retroactively by the Borrower for a nominal fee;

 

(o)                                 the Account Debtor or Affiliated Account Debtor with respect thereto
is not (i) a Loan Party or an Affiliate of a Loan Party or (ii) a
director, officer, employee or agent of a Loan Party or an Affiliate of a Loan
Party;

 

(p)                                 if the aggregate amount of all Accounts owed by the Account Debtor
and its Affiliated Account Debtors thereon exceeds 25% of the aggregate amount
of all Eligible Accounts at such time, then all Accounts owed by such Account
Debtor or Affiliated Account Debtors in excess of such amount shall be deemed
ineligible;

 

(q)                                 it is not an Account (i) with respect to which any
representation or warranty contained in this Agreement or any other Loan
Document is untrue in any material respect (or, if such representation or
warranty is qualified by materiality or Material Adverse Effect, in any
respect), (ii) which violates any of the covenants contained in this
Agreement, any other Loan Document or the agreement or contract under which it
arises in any material respect (or if such covenant is qualified by materiality
or Material Adverse effect, in any respect), or (iii) which arises out of
a contract or order which fails in any material respect to comply with the
requirements of applicable law;

 

10

 

(r)                                    it is not an Account for which the Borrower has received any
prepayment or a deposit in respect of such Account; provided, that the amount
of such Account in excess of the amount of any such prepayment and/or deposit
shall not be deemed ineligible pursuant to this clause (r); and

 

(s)                                  it does not arise from the sale of Goods covered under any license
agreement, distribution agreement or other similar agreement that prohibits the
granting of Liens in the proceeds of such Goods in favor of the Administrative
Agent to secure the Obligations (and such prohibition has not been waived).

 

An Account which is at any time an Eligible Account,
but which subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be an Eligible Account. Further, with respect to any Account,
if the Administrative Agent or the Required Lenders at any time hereafter
determine in its or their reasonable credit judgment that the prospect of
payment or performance by the Account Debtor with respect thereto is materially
impaired for any reason whatsoever, such Account shall cease to be an Eligible
Account after consultation with, and notice of such determination is given to,
the Borrower.

 

“Eligible Assignee”
means (i) banks listed on Schedule I, II or III of the Bank Act (Canada), (ii) finance companies,
insurance companies or other financial institutions or funds (whether
corporations, partnerships, trusts or other entities) that are regularly
engaged in the Canada in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business and (iii) any
other Person other than an Affiliate of a Loan Party approved by the
Administrative Agent and the Borrower, such
approval not to be unreasonably withheld or delayed.

 

“Eligible Inventory”
means Inventory of the Borrower which is acceptable for lending purposes to the
Administrative Agent in its commercially reasonable credit judgment. Without
limiting the Administrative Agent’s aforesaid credit judgment, the
Administrative Agent shall, in general, consider Inventory to be Eligible
Inventory if it meets, and for so long as it continues to meet, each of the
following requirements:

 

(a)                                  it (i) is owned by the Borrower, (ii) is subject to a
perfected, first priority Lien in favour of the Administrative Agent and (iii) is
not subject to any other assignment, claim or Lien; provided that such
Inventory shall be deemed ineligible pursuant to this clause (a) only to
the extent of the amount of such assignment, claim or Lien;

 

(b)                                 it is saleable and not slow-moving, obsolete or discontinued;

 

(c)                                  it is in the possession and control of the Borrower and it is stored
and held in facilities owned by the Borrower (and not subject to a mortgage
other than a mortgage in favour of the Administrative Agent) or, if such
facilities are not so owned, the Administrative Agent is in possession of a
Collateral Access Agreement from any lessor and mortgagee thereof with respect
thereto or a Rent Reserve is then in effect with respect to such location;

 

(d)                                 it is not subject to any agreement or license which would restrict
the Administrative Agent’s ability to sell or otherwise dispose of such
Inventory or which contains any prohibition on the Administrative Agent’s Lien
therein to secure the Obligations (unless such prohibition shall have been
waived);

 

11

 

(e)                                  it is located at the Property or at one of the owned or leased
locations of the Borrower identified on Schedule 9.17 hereto or
otherwise identified to the Administrative Agent but only to the extent such
locations are in the Province of Ontario;

 

(f)                                    it is not “in transit” to the Borrower or held by the Borrower on
consignment; provided that up to Cdn$750,000 or the Canadian Dollar
Equivalent Amount thereof of Inventory which is “in transit” (the “In-Transit Inventory”) shall be deemed
eligible hereunder so long as such In-Transit Inventory (i) otherwise
meets all other criteria for eligibility hereunder; (ii) In-Transit
Inventory is subject to bills of lading, air bills or other similar documentation
(collectively the “Shipping Documents”)
which are adequate as determined by the Administrative Agent in its
commercially reasonable credit judgment, (iii) the In-Transit Inventory is
fully insured under an insurance policy naming the Administrative Agent as loss
payee; (iv) the Borrower has title to such In-Transit Inventory; (v) such
In-Transit Inventory shall be listed as such on the report required pursuant to
Section 10.1.6 for the months in which In-Transit Inventory is in
transit; and (vi) the Borrower has, if and to the extent requested by the
Administrative Agent at any time during the continuation of an Unmatured Event
of Default or Event of Default, delivered such Shipping Documents to the
Administrative Agent, appropriately endorsed, together with a power of attorney
to allow the Administrative Agent to list itself as “consignee” thereunder;

 

(g)                                 it is finished goods and is not work-in-progress, display inventory,
supply items, packaging, tooling, samples or literature;

 

(h)                                 it is not identified to any purchase order or contract to the extent
progress or advance payments are received with respect to such Inventory; and

 

(i)                                     it does not breach any of the representations, warranties or
covenants pertaining to Inventory set forth in the Loan Documents in any
material respect (or, if such representation or warranty is qualified by
materiality or Material Adverse Effect, in any respect).

 

Inventory which is at any time Eligible Inventory but
which subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be Eligible Inventory.

 

“Environmental
Claims” means all claims, however asserted, by any governmental,
regulatory or judicial authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for release or
injury to the environment.

 

“Environmental Laws”
means all present or future federal, state, provincial or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative or judicial orders, consent agreements, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
governmental authority, in each case relating to any matter arising out of or
relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, emission, release, threatened release, control
or cleanup of any Hazardous Substance, including, without limitation, the Environmental Protection Act (Ontario),
the Canadian Environmental Protection Act,
the Canadian Transportation of Dangerous
Goods Act, the Ontario Water
Resources Act, the Dangerous
Goods Transportation Act (Ontario), the Occupational Health and Safety Act (Ontario), the Fisheries Act (Canada) and the Gasoline Handling Code and Gasoline Handling Act (Ontario)
and regulations thereunder, and laws and

 

12

 

regulations respecting pesticides,
fisheries regulation and water resource management, as all of the aforesaid
laws and regulations have been and hereafter may be amended or supplemented,
and any related or analogous present or future federal, state, provincial or
local, statutes, rules having the force of law, regulations, ordinances,
licenses, permits and interpretations having the force of law, orders of
regulatory and administrative bodies and guidelines.

 

“Event of Default”
means any of the events described in Section 13.1.

 

“Excess Revolving
Loan Availability” means at any time the difference between
Revolving Loan Availability and the Revolving Outstandings at such time.

 

“Excluded Taxes”
means taxes (i) based upon, or measured by, the Lender’s or the
Administrative Agent’s (or a branch of the Lender’s or the Administrative Agent’s)
overall net income, overall net receipts, or overall net profits (including
franchise taxes imposed in lieu of such taxes), but only to the extent such
taxes are imposed by a taxing authority (a) in the United States or in
Canada or a jurisdiction (or political subdivision thereof) under the laws of
which such Lender or the Administrative Agent is organized, (b) in a
jurisdiction which the Lender’s or the Administrative Agent’s principal office
is located, or (c) in a jurisdiction in which such Lender or the
Administrative Agent maintains a lending office (or branch), including the
lending office in respect of which payments under this Agreement are made is
located, or in which such Lender or the Administrative Agent is a resident for
income tax purposes and (ii) branch profits taxes.

 

“Federal Funds Rate”
means, for any day, a fluctuating interest rate equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent. The Administrative Agent’s determination
of such rate shall be binding and conclusive absent manifest error.

 

“Fiscal Quarter”
means a fiscal quarter of a Fiscal Year.

 

“Fiscal Year”
means the fiscal year of the Company and its consolidated Subsidiaries ending
on December 31st of each calendar year. References to a Fiscal Year with a
number corresponding to any calendar year (e.g., “Fiscal Year 2005”) refers to
the Fiscal Year ending on December 31st of such calendar year.

 

“Fraudulent
Conveyance” – see Section 15.22.2.

 

“GAAP”
means (a) generally accepted accounting principles set forth from time to
time in Canada as such term applies to the Borrower, and (b) as such term
applies to the Company and its other Subsidiaries, the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of determination.

 

“Group” -
see Section 2.2.1.

 

“Guarantor”
means the Company or any other
Person that is both, or may in the future become, a “Grantor” and a “Guarantor”
under and as defined in the Guaranty Agreement.

 

13

 

“Guaranty Agreement”
means that certain Guaranty Agreement dated as of June 28, 2005 (as the
same may be amended, restated, supplemented or otherwise modified from time to
time), executed by the Company in favour of the Administrative Agent and
guaranteeing the obligations owing by the Borrower under the Loan Documents.

 

“Hazardous
Substances” means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls, radon gas and mold; (b) any chemicals,
materials, pollutant or substances defined as or included in the definition of “hazardous
substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous
substances”, “restricted hazardous waste”, “toxic substances”, “toxic
pollutants”, “contaminants”, “pollutants” or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or
substance, the exposure to, or release of which is prohibited, limited or
regulated by any governmental authority or for which any duty or standard of
care is imposed pursuant to, any Environmental Law.

 

“Hedging Agreement”
means any interest rate, currency or commodity swap agreement, cap agreement or
collar agreement, and any other agreement or arrangement designed to protect a
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.

 

“Hedging Obligation”
means, with respect to any Person, a mark-to-market reserve percentage of the
notional amount of any Hedging Agreement.

 

“Indemnified
Liabilities” - see Section 15.17.

 

“Intercreditor
Agreement” means an intercreditor agreement between the Agent and
the US Agent in form and substance reasonably satisfactory to the US Agent and
the Administrative Agent, pursuant to which the Administrative Agent shall,
among other things, subordinate its rights to payments and to enforce its
remedies, in each case, under the Guaranty Agreement, to those of the US
Lenders under the US Credit Agreement and under the other US Loan Documents.

 

“Interest Period”
means, as to any LIBOR Loan, the period commencing on the date such Loan is
borrowed or continued as, or converted into, a LIBOR Loan and ending on the
date one, two, three or six months thereafter as selected by the Borrower pursuant to Section 2.2.2
or 2.2.3, as the case may be; provided that:

 

(a)                                  if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the following Business
Day unless the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the preceding Business Day;

 

(b)                                 any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period shall end on the last Business Day of the calendar month at the end of
such Interest Period;

 

(c)                                  the Borrower may not
select any Interest Period which would extend beyond the Scheduled Termination
Date; and

 

(d)                                 there may be no more than six (6) Interest Periods outstanding
at any time.

 

“Interim Advance”
- see Section 2.1.1(b).

 

14

 

“Investment”
means, with respect to any Person, any investment in another Person, whether by
acquisition of any debt or Capital Security, by making any loan or advance, by
assuming, becoming obligated with respect to a liability, Debt or Contingent
Liability in respect of obligations of such other Person (other than travel,
relocation and similar advances to employees in the ordinary course of
business).

 

“Issuing Bank”
means LaSalle, in its capacity as the issuer of Letters of Credit hereunder, or
any Affiliate of LaSalle that may from time to time issue Letters of Credit,
and in each case, any successor and assign thereof acting in such capacity.

 

“LaSalle”
- see the Preamble.

 

“L/C Application”
means, with respect to any request for the issuance of a Letter of Credit, a
letter of credit application in the form being used by the Issuing Bank at the
time of such request for the type of letter of credit requested.

 

“L/C Fee Rate”
- see the definition of Applicable Margin.

 

“Lender”
has the meaning ascribed thereto in the Preamble. In addition, (i) “Lender”
shall include the Administrative Agent to the extent it makes any loans or advances
any financial accommodations hereunder or under any other Loan Documents and (ii) for
the purpose of identifying the Persons entitled to share in the Collateral and
the proceeds thereof under, and in accordance with the provisions of, this
Agreement and the Collateral Documents and the Persons entitled to
indemnification and exculpation as a Lender or a Lender Party hereunder or
under any of the other Loan Documents, the term “Lender” and “Lender Party”
shall include the Issuing Bank.

 

“Lenders”
means, collectively, each and every Lender.

 

“Lender Party”
- see Section 15.17 and the definition of Lender above.

 

“Letter of Credit”
- see Section 2.1.3.

 

“LIBOR Loan”
means any Loan which bears interest at a rate determined by reference to the
LIBOR Rate.

 

“LIBOR Office”
means with respect to any Lender the office or offices of such Lender which
shall be making or maintaining the LIBOR Loans of such Lender hereunder. A
LIBOR Office of any Lender may be, at the option of such Lender, either a
domestic or foreign office.

 

“LIBOR Rate”
means a rate of interest equal to (a) the per annum rate of interest at
which United States dollar deposits in an amount comparable to the amount of
the relevant LIBOR Loan and for a period equal to the relevant Interest Period
are offered in the London Interbank Eurodollar market at 11:00 A.M.
(London time) two (2) Business Days prior to the commencement of such
Interest Period (or three (3) Business Days prior to the commencement of
such Interest Period if banks in London, England were not open and dealing in
offshore United States dollars on such second preceding Business Day), as
displayed in the Bloomberg Financial Markets system (or other authoritative
source selected by the Administrative Agent in its sole discretion) or, if the
Bloomberg Financial Markets system or another authoritative source is not
available, as the LIBOR Rate is otherwise determined by the Administrative
Agent in its sole and absolute discretion, divided by (b) a number
determined by subtracting from 1.00 the then stated maximum reserve percentage
for determining reserves to be maintained by member banks of the United States
Federal Reserve System for Eurocurrency funding or liabilities as defined in
Regulation D

 

15

 

(or any successor category of liabilities
under Regulation D), such rate to remain fixed for such Interest Period. The
Administrative Agent’s determination of the LIBOR Rate shall be conclusive,
absent manifest error.

 

“Lien”
means, with respect to any Person, any interest granted by such Person in any
real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease)
which secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, title retention lien, charge, hypothec, pledge,
claim or other security interest of any kind, whether arising by contract, as a
matter of law, by judicial process or otherwise.

 

“Loan Documents”
means this Agreement, the Notes, the Letters of Credit, the Master
Indemnity/Reimbursement Agreement, the L/C Applications, the Agent Fee Letter,
the Collateral Documents, the Intercreditor Agreement, the subordination
agreements, if any, relating to any Subordinated Debt and all other documents,
instruments and agreements delivered in connection with the foregoing, in each
case, as the same may be amended, restated, supplemented or otherwise modified
from time to time.

 

“Loan Party”
means, collectively, the Borrower and the Guarantor and any other Person who
shall become primarily or secondarily liable for any Obligations, and “Loan Parties” means all such Persons, collectively.

 

“Loans”
means, collectively, any loans or advances made hereunder to the Borrower
including, without limitation, the Revolving Loans and “Loan” means any of the foregoing.

 

“Lock Box”
- See Section 10.11(b).

 

“Mandatory
Prepayment Event” - see Section 6.2.2(a).

 

“Master
Indemnity/Reimbursement Agreement” means, at any time, with respect
to the issuance of Letters of Credit, a master letter of credit agreement and
reimbursement agreement in the form, if any, being used by the Issuing Bank at
such time, together with any amendments, restatements, supplements or
modifications thereto.

 

“Material Adverse
Effect” means (a) a material adverse change in, or a material
adverse effect upon, the condition (financial or otherwise), operations,
assets, liabilities, business, or properties of the Borrower and the Loan
Parties taken as a whole, (b) a material impairment of the ability of the
Borrower and the Loan Parties taken as a whole to perform their obligations
under the Loan Documents or (c) a material adverse effect upon any
material portion of the Collateral or the validity, perfection or priority of
any Lien in favour of the Administrative Agent for the benefit of the Lenders
under the Collateral Documents against any material portion of the Collateral
or upon the legality, validity, binding effect or enforceability against the
Borrower or any Loan Party of any Loan Document or the rights and remedies,
taken as a whole, of the Administrative Agent or the Lenders under any Loan
Document.

 

“Maximum Revolving
Commitment” means, the lesser of (x) US$10,000,000 or the Canadian
Dollar Equivalent Amount thereof, as such amount may be increased or decreased
from time to time in accordance with Section 6.1.2 (the “Revolving
Commitment Limit”) and (y) the sum of the Revolving Commitments of all Lenders
as in effect at such time.

 

16

 

“Mortgage”
means a mortgage, deed of trust, leasehold mortgage or similar instrument
granting the Administrative Agent a Lien on real property of any Loan Party, in
each case, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

 

“Net Cash Proceeds”
means:

 

(a)                                  with respect to any Asset Disposition relating to any property of
any Loan Party (other than the Company), the aggregate cash proceeds (including
cash proceeds received pursuant to policies of insurance or by way of deferred
payment of principal pursuant to a note, instalment receivable or otherwise,
but only as and when received) received by any Loan Party (other than the
Company) pursuant to such Asset
Disposition, net of (i) the direct reasonable costs, expenses and fees
relating to such Asset Disposition (including reasonable and customary sales
commissions and reasonable legal, accounting and investment banking and other
professional and transactional fees, fees), (ii) taxes paid or reasonably
estimated by such Loan Party to be
payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), (iii) amounts
required to be applied to the repayment of any Debt secured by a Permitted Lien
having priority over the Liens of the Administrative Agent under the Loan
Documents on the asset subject to such transaction (other than the Loans); and (iv) amounts
reserved in accordance with GAAP for any indemnification obligations associated
with such sale so long as such reserves are required to be maintained; it being
agreed that the amount of such reserves shall be deemed Net Cash Proceeds of
such transaction received by such Loan Party upon (and in the amount of) the
release or reduction of any such reserve.

 

(b)                                 with respect to any issuance of Capital Securities, the aggregate
cash proceeds received by any Loan Party (other than the Company) pursuant to such issuance, net of the
direct reasonable and customary costs, expenses and fees (including legal,
accounting and other professional fees, costs and expenses) relating to such
issuance (including reasonable and customary sales and underwriters’
commissions); and

 

(c)                                  with respect to any issuance of Debt, the aggregate cash proceeds received
by any Loan Party (other than the Company) pursuant to such issuance, net of
the direct reasonable and customary costs. expenses and fees (including legal,
accounting and other professional fees, costs and expenses) of such issuance
(including reasonable and customary up-front, underwriters’ and placement
fees).

 

“Net Orderly
Liquidation Value” means, (i) when used in respect of the
Borrowing Base as it relates to the Borrower’s Eligible Inventory (and without
limiting the Administrative Agent’s ability to assign any lower value thereto
or apply reserves in accordance with the definition of Borrowing Base), the
orderly liquidation value thereof, net of costs, fees and expenses arising in
connection with such orderly liquidation thereof, determined in accordance with
the methodologies and conclusions set forth in the appraisal of such Inventory
prepared for the Administrative Agent by Hilco Appraisal Services, LLC prior to
the Closing Date or, if elected by the Administrative Agent, any subsequent field
audit or appraisal of such assets conducted for the Administrative Agent after
the Closing Date.

 

“Non-Use Fee Rate”
- see the definition of Applicable Margin.

 

“Notes”
means the Revolving Loan Notes.

 

“Notice of Borrowing”
- see Section 2.2.2.

 

17

 

“Notice of Control”
– see Section 10.11(b).

 

“Notice of
Conversion/Continuation” - see Section 2.2.3.

 

“Notional
Amortization Amount” means the aggregate amount obtained by adding,
on a cumulative basis, on the last day of each calendar month after the Closing
Date commencing on July 31, 2005, the amount of US$83,333.33.

 

“Notional Real
Estate Sublimit” means (a) US$5,000,000 less (b) the
Notional Amortization Amount.

 

“Obligations”
means all obligations, liabilities and indebtedness (monetary or otherwise,
including post-petition and default interest, allowed or not) of any Loan Party
under this Agreement and any other Loan Document owing to any Lender, the
Administrative Agent, the Issuing Bank, any Lender Party (that is related to a
Lender, the Issuing Bank or the Administrative Agent) (and any permitted
successor or assign of any of the foregoing), including, without limitation,
for principal, interest (including post-petition interest, allowed or not),
fees, costs, expenses, indemnification, Attorney Costs, any reimbursement
obligations of each Loan Party in respect of Letters of Credit and surety
bonds, all Specified Hedging Obligations permitted hereunder which are owed to
the Administrative Agent, LaSalle, any Lender or any of their respective
Affiliates, and all Bank Products Obligations incurred or arising in connection
with the transactions contemplated hereby, in each case, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now
or hereafter existing, or due or to become due; provided, that (i) obligations
of the Borrower or any other Loan Party under any Specified Hedging Agreement
shall be secured and guaranteed pursuant to the provisions of this Agreement
and the Loan Documents only to the extent that, and for so long as, the other
Obligations are so secured and guaranteed and (ii) any release of
Collateral or guarantors effected in the manner permitted by this Agreement
shall not require the consent of any counterparty on any Specified Hedging
Agreement or the holder of any Specified Hedging Obligations.

 

“Operating Accounts”
- see Section 10.11(a).

 

“Participant”
- see Section 15.6.2.

 

“Permitted
Acquisition” – see Section 11.4.

 

“Permitted Holder”
means (i) Angelica Berrie, (ii) any lineal descendant of Russell
Berrie, (iii) the Estate of Russell Berrie, (iv) The Russell Berrie
2002A Trust, (v) The Russell Berrie Foundation, a New Jersey Nonprofit
Corporation, (vi) any trust created pursuant to the terms of the instruments
governing or creating any of the Persons referred to in clause (iii), (iv), or
(v), and (vii) any fiduciary of any of the Persons referred to in clause (iii) (iv),
(v) or (vi).

 

“Permitted Lien”
means a Lien expressly permitted hereunder pursuant to Section 11.2.

 

“Person”
means any natural person, corporation, partnership, trust, limited liability
company, association, governmental authority or unit, or any other entity,
whether acting in an individual, fiduciary or other capacity.

 

“Plan” means all pension, retirement or supplemental
retirement benefit plans, arrangements or agreements, including any defined
benefit or defined contribution pension plans and any group registered
retirement savings plans, and any other similar employee benefit plans,
arrangements or agreements, whether oral or written, formal or informal, funded
or unfunded, that are, in each case,

 

18

 

sponsored or
maintained or contributed to or required to be contributed to, by the Borrower
or any other Loan Party (other than the Company) providing for retirement
income for the benefit of the Borrower’s or any such other Loan Party’s
employees, former employees or beneficiaries of either of them, whether or not
insured.

 

“PPSA”
means the Personal Property Security Act
(Ontario), as the same may be in effect from time to time,

 

“Pre-Settlement
Determination Date” – see Section 7.1.3.

 

“Pro Rata Share”
means with respect all matters, including a Lender’s obligation to make
Revolving Loans, participate in Letters of Credit, reimburse the Issuing Bank,
and/or receive payments of principal, interest, fees, costs, and expenses with
respect thereto, (x) prior to the Revolving Commitment being terminated or
reduced to zero, the percentage obtained by dividing (i) such Lender’s
Revolving Commitment at such time, by (ii) the aggregate Revolving
Commitment of Lenders at such time and (y) from and after the time the
Revolving Commitment has been terminated or reduced to zero, the percentage
obtained by dividing (i) the aggregate unpaid principal amount of such
Lender’s Revolving Outstandings at such time by (ii) the aggregate unpaid
principal amount of all Revolving Outstandings at such time.

 

“Property” means the real property owned by the
Borrower municipally known as 18 Parkshore Drive, Brampton, Ontario, as more
particularly described in the Collateral Documents.

 

“Register”
– See Section 15.7.

 

“Rent Reserve”
means a dollar amount equal to three times the monthly lease or mortgage
payments of each leased or owned and mortgaged facility of the Borrower where
any Inventory intended to be classified as Eligible Inventory is maintained and
in respect of which the Administrative Agent has not received a Collateral
Access Agreement with respect to such facility.

 

“Replacement Lender”
- see Section 8.7(b).

 

“Required Lenders”
means, at any time, those Lenders whose Pro Rata Shares (as determined in
accordance with the definition thereof) exceed 66 2/3%.

 

“Revolving
Commitment” means with respect to each Lender, such Lender’s
Revolving Commitment set forth on Annex A hereto or in the most recent
Assignment Agreement relating hereto to which such Lender is a party, and
Revolving Commitments means the sum of all such Commitments of all such
Lenders, in each case, as the same may be reduced from time to time pursuant to
Sections 6.1.1 and 6.1.3.

 

“Revolving
Commitment Limit” - see the definition of Maximum Revolving
Commitment.

 

“Revolving Loan”
- see Section 2.1.1(a).

 

“Revolving Loan
Availability” means at any time (a) the lesser of (i) the
Maximum Revolving Commitment in effect as such time and (ii) the Borrowing
Base at such time.

 

“Revolving Loan
LIBOR Margin” -see the definition of “Applicable Margin.”

 

19

 

“Revolving Loan
Notes” – see Section 3.1.

 

“Revolving Loan
Canadian Base Rate Margin” - see the definition of “Applicable
Margin.”

 

“Revolving
Outstandings” means, at any time, the sum of (a) the aggregate
principal amount of all outstanding Revolving Loans, plus (b) the Stated
Amount of all Letters of Credit.

 

“Scheduled
Termination Date” means June 28, 2010.

 

“SEC”
means the Securities and Exchange Commission or any other governmental
authority succeeding to any of the principal functions thereof.

 

“Senior Officer”
means, with respect to the Borrower or any Loan Party, any of the chief
executive officer, the chief financial officer, the chief operating officer or
the treasurer or controller or vice president of finance, of such Loan Party.

 

“Settlement Date”
– see Section 7.1.3.

 

“Specified Hedging
Agreement” means any Hedging Agreement (a) entered into by (i) the
Borrower and (ii) any Lender (as determined as of the date such Hedging
Agreement is entered into) or any Affiliate thereof, as counterparty and (b)(i) the covered transactions thereunder are the
Loans or Obligations hereunder or (ii) that has otherwise been
designated by the Administrative Agent, such Lender or such Affiliate, as the
case may be, and the Borrower, by notice to the Administrative Agent, as a
Specified Hedging Agreement. The designation of any Hedging Agreement as a
Specified Hedging Agreement shall not create in favor of the Administrative
Agent, any Lender or Affiliate thereof that is a party thereto any rights in
connection with the management or release of any Collateral or of the
obligations of any guarantor under this Agreement or the Loan Documents.

 

“Specified Hedging
Obligation” means any Hedging Obligations of the Borrower or any
other Loan Party under any Specified Hedging Agreement and “Specified Hedging Obligations” means all
such obligations and liabilities collectively.

 

“Spot Rate”
means in respect of a currency, the rate determined by the Administrative Agent
by reference to applicable currency markets to be the spot rate for the
purchase by the Administrative Agent of such currency with another currency
through its main Toronto branch at approximately 11:00 a.m. (Toronto time)
on the date as of which the foreign exchange computation is made; provided that
if at the time of any such determination, no such spot rate can be reasonably
quoted, the Administrative Agent may use any method as it deems applicable
acting reasonably to determine such rate hereunder, and such determination
shall be conclusive absent manifest error.

 

“Stated Amount”
means, with respect to any Letter of Credit at any date of determination, (a) the
maximum aggregate amount available for drawing thereunder under any and all
circumstances plus (b) the aggregate amount of all unreimbursed payments
and disbursements under such Letter of Credit which have not been converted to
Revolving Loans pursuant to Section 2.3.3 all expressed as the
Canadian Dollar Equivalent Amount.

 

“Subordinated Debt” means any Debt of the Borrower that is unsecured and is expressly
subordinated to the prior payment in full, in cash, of the Obligations pursuant
to an agreement in form and substance reasonably satisfactory to the
Administrative Agent.

 

20

 

 

“Subsidiary”
means, with respect to any Person, a corporation, partnership, limited
liability company or other entity of which such Person owns, directly or
indirectly, such number of outstanding Capital Securities as have more than 50%
of the ordinary voting power for the election of directors or other managers of
such corporation, partnership, limited liability company or other entity. Unless
the context otherwise requires, each reference to Subsidiaries herein shall be
a reference to Subsidiaries of the Company or the Borrower as the context
requires.

 

“Taxes”
means any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings imposed by Canada, any
province or locality or any political subdivision thereof, and any and all
liabilities (including interest and penalties and other additions to taxes)
with respect to the foregoing, but excluding Excluded Taxes.

 

“Termination Date”
means the earliest to occur of (i) the Scheduled Termination Date, (ii) the
termination of the Revolving Commitment (either automatically or at the
Required Lenders’ election) pursuant to Section 13.2, and (iii) the
termination or reduction to zero of the Revolving Commitment by the Borrower
pursuant to Section 6.1.1.

 

“Termination Fee”
see Section 5.4.

 

“Total Debt to
EBITDA Ratio” has the meaning ascribed thereto in the US Credit
Agreement.

 

“type” -
see Section 2.2.1.

 

“Unmatured Event of
Default” means any event that, if it continues uncured, will, with
lapse of time, giving of notice or both, constitute an Event of Default.

 

“US Agent”
means LaSalle Business Credit, LLC.

 

“US Borrowers”
means the Company and certain of its Subsidiaries.

 

“US Dollars”
and the sign “US$” mean lawful money of the United States of America.

 

“US Issuing Bank”
means LaSalle Bank National Association.

 

“US Lender”
means the “Lender” as defined
under the US Loan Documents.

 

“US Credit Agreement”
means that certain Credit Agreement dated as of June 28, 2005 (as the same
may be amended, restated, supplemented or otherwise modified from time to
time), among the US Agent, the US Issuing Bank, the financial institutions
parties thereto as lenders and the US Borrowers.

 

“US Loan Documents”
means the “Loan Documents” as defined under the US Credit Agreement.

 

“US Prime Rate”
means, for any day, the rate of interest in effect for such day as publicly
announced from time to time by the Administrative Agent as its “US prime rate”
(whether or not such rate is actually charged by the Administrative Agent),
which is not intended to be the Administrative Agent’s lowest or most
favourable rate of interest at any one time. Any change in the US Prime Rate
announced by the Administrative Agent shall take effect at the opening of
business on the day specified in

 

21

 

the public announcement of such change;
provided that the Administrative Agent shall not be obligated to give notice of
any change in the US Prime Rate.

 

“Voidable Transfer”
– see Section 15.23.

 

“Wholly-Owned Subsidiary”
means, as to any Person, a Subsidiary all of the Capital Securities of which
(except directors’ qualifying Capital Securities) are at the time directly or
indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such
Person. Unless the context otherwise requires, each reference to a Wholly-Owned
Subsidiary herein shall be a reference to a Wholly-Owned Subsidiary of the
Company or the Borrower as the context requires.

 

1.2                                                                               Other Interpretive Provisions.

 

(a)                                  The meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.

 

(b)                                 Section, Annex, Schedule and Exhibit references are to
this Agreement unless otherwise specified.

 

(c)                                  The term “including” is not limiting and means “including without limitation.”

 

(d)                                 In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including”; the words “to”
and “until” each mean “to but excluding”, and the word “through” means “to and
including.”

 

(e)                                  Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement and the other Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, supplements and other modifications thereto, but only to the
extent such amendments, restatements, supplements and other modifications are
not prohibited by the terms of any Loan Documents, and (ii) references to
any statute or regulation shall be construed as including all statutory and
regulatory provisions amending, replacing, supplementing or interpreting such
statute or regulation and the regulations promulgated thereunder.

 

(f)                                    This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and each
shall be performed in accordance with its terms.

 

(g)                                 This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Loan Parties, the Lenders, the Issuing Bank and the other parties
hereto and thereto and are the products of all parties. Accordingly, they shall
not be construed against the Administrative Agent, the Lenders or the Issuing
Bank merely because of the Administrative Agent’s, Lenders’ or the Issuing Bank’s
involvement in their preparation.

 

(h)                                 All dollar references contained herein shall be deemed to be
references to Canadian Dollars unless otherwise indicated and calculations to
be made hereunder which may involve references to US Dollars shall always be
calculated based on such US Dollars being expressed as the Canadian Dollar
Equivalent Amount thereof.

 

22

 

ARTICLE 2

COMMITMENTS OF
THE LENDERS; BORROWING, CONVERSION AND LETTER OF CREDIT PROCEDURES

 

2.1                                                                               Commitments.

 

On and subject to the terms and conditions of this
Agreement, each of the Lenders, severally and for itself alone, agrees to make
loans to, and to issue or participate in letters of credit for the account of,
the Borrower as follows:

 

2.1.1                                                                        Revolving Loan Commitment.

 

(a)                                  Revolving Loans. Subject to the terms
and conditions of this Agreement, each Lender with a Revolving Commitment agrees
to make loans on a revolving basis (“Revolving
Loans”) by way of LIBOR Loans, Base Rate Loans and Canadian Base
Rate Loans from time to time until the Termination Date in such Lender’s Pro
Rata Share of such aggregate amounts as the Borrower may request from the Administrative Agent in accordance
with Section 2.2.2; provided that, except as and to the extent set
forth in clause (b) below, the Revolving Outstandings will not at any time
exceed Revolving Loan Availability.

 

(b)                                 Interim Advances. If at any time the
Revolving Outstandings exceeds the Borrowing Base, and without limiting the
other rights and remedies of the Administrative Agent and the Lenders hereunder
and under the other Loan Documents, the Borrower shall immediately, and without
the necessity of demand by the Administrative Agent, make the mandatory
prepayment required pursuant to Section 6.2.2(b) to the
Administrative Agent; provided, that the Administrative Agent
may, at its option and in its sole discretion, permit such excess (the “Interim Advance”) to remain outstanding and
continue to advance Revolving Loans to the Borrower on behalf of the Lenders
without the consent of any Lender for a period of up to thirty (30) calendar
days, so long as (i) the amount of the Interim Advance does not exceed at
any time US$500,000 or the Canadian Dollar Equivalent Amount thereof, (ii) the
Revolving Outstanding do not exceed the Revolving Commitment Limit, and (iii) in
the case of any subsequent Interim Advances, the Administrative Agent has not
been notified by the Required Lenders to cease making such Revolving Loans. If
the Interim Advance is not repaid (or otherwise eliminated) in full within
thirty (30) days of the initial occurrence of the Interim Advance, no future
advances may be made to the Borrower without the consent of all Lenders until
the Interim Advance is repaid in full.

 

(c)                                  Defaulting Lender. If and to the extent
that a Lender does not settle with the Administrative Agent as required under
this Agreement (a “Defaulting Lender”),
the Borrower and such Defaulting Lender severally agree to repay to the
Administrative Agent forthwith on demand such amount required to be paid by
such Defaulting Lender to the Administrative Agent, together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent (x)
in the case of a Defaulting Lender at the Federal Funds Rate or the Canadian
Base Rate for US Dollar Loans and Canadian Dollar Loans, respectively, and (y)
in the case of the Borrower, at the interest rate applicable at such time for
such Loans; provided, that the Borrower’ obligation to repay such advance to
the Administrative Agent shall not relieve such Defaulting Lender of its
liability to the Administrative Agent for failure to settle as provided in this
Agreement.

 

23

 

2.1.2                                                                        [INTENTIONALLY DELETED]

 

2.1.3                                                                        L/C Commitment.

 

Subject to Section 2.3.1 and the other
terms and conditions of this Agreement, the Issuing Bank agrees to issue
letters of credit, in each case containing such terms and conditions as are
permitted by this Agreement and are reasonably satisfactory to the Issuing Bank
(each, a “Letter of Credit”), at
the request of the Borrower and
for the account of the Borrower from time to time before the Termination Date
and, as more fully set forth in Section 2.3.2, each Lender (which
shall not include the Issuing Bank) agrees to purchase a participation in each
such Letter of Credit; provided that (a) the aggregate Stated Amount of
all Letters of Credit (after giving effect to the Stated Amount of any Letter
of Credit so requested) shall not at any time exceed US$2,000,000 or the
Canadian Dollar Equivalent Amount thereof, and (b) the Revolving
Outstandings (after giving effect to the Stated Amount of any Letter of Credit
so requested) shall not at any time exceed Revolving Loan Availability.

 

2.1.4                                                                        [INTENTIONALLY DELETED]

 

2.2                                                                               Loan Procedures.

 

2.2.1                                                                        Various Types of Loans.

 

Each Revolving Loan shall be divided into tranches
which are a Base Rate Loan, a LIBOR Loan or a Canadian Base Rate Loan (each a “type”
of Loan), as the Borrower shall
specify in the related notice of borrowing or conversion pursuant to Section 2.2.2
or 2.2.3. LIBOR Loans having the same Interest Period which expire on
the same day are sometimes called a “Group”
or collectively “Groups”. Base
Rate Loans, LIBOR Loans and Canadian Base Rate Loans may be outstanding at the
same time, provided that not more than six (6) different Groups of LIBOR
Loans, in aggregate, shall be outstanding at any one time. All borrowings,
conversions and repayments of Revolving Loans shall be effected so that each
Lender will have a ratable share (according to its Pro Rata Share) of all types
and Groups of Revolving Loans.

 

2.2.2                                                                        Borrowing Procedures.

 

The Borrower
shall give written notice (each such written notice, a “Notice of Borrowing”) substantially in the
form of Exhibit E or telephonic notice (followed immediately by a
Notice of Borrowing) to the Administrative Agent of each proposed borrowing not
later than (a) in the case of a Base Rate or Canadian Base Rate borrowing,
11:00 A.M., Toronto time, on the proposed date of such borrowing, and (b) in
the case of a LIBOR borrowing, 11:00 A.M., Toronto time, at least three (3) Business
Days prior to the proposed date of such borrowing. Each such notice shall be
effective upon receipt by the Administrative Agent, shall be irrevocable, and
shall specify the date, amount and type of borrowing and, in the case of a
LIBOR borrowing, the initial Interest Period therefor. Upon its receipt of any
such notice, the Administrative Agent shall do either of the following, the
selection of which option to be at the Administrative Agent’s sole discretion:

 

(a)                                  advance the amount of the proposed Revolving Loan to the Borrower disproportionately (a “Disproportionate Advance”) out of the
Administrative Agent’s own funds on behalf of Lenders, which advance shall be
made (x) in the case of a Base Rate Loan or Canadian Base Rate Loan, on the
same day as the Borrower’s request therefor if the Borrower notifies the Administrative Agent of such request by
11:00 A.M. (Toronto time) on such day or (y) in the case of a LIBOR Rate
Loan, on the third Business Day following such request therefor if the Borrower notifies the Administrative
Agent of such request by

 

24

 

11:00 A.M. (Toronto time) on such third Business
Day preceding such day, and, in either case, thereafter request settlement in
accordance with Section 7.1.3 such that upon such settlement each
Lender’s share of the outstanding Revolving Loans (including, without
limitation, the amount of any Disproportionate Advance) equals its Pro Rata
Share; or

 

(b)                                 Notify each Lender by telecopy, electronic mail or other similar
form of teletransmission of the proposed advance on the same day the
Administrative Agent is notified or deemed notified by the Borrower of the Borrower’s request for an advance
pursuant to this Section 2.2.2. Each Lender shall remit, to the
demand deposit account designated by the Borrower (x) with respect to Base Rate Loans and Canadian Base
Rate Loans, at or prior to 3:00 P.M., Toronto time, on the date of the
proposed borrowing, if such notification is made before 12:00 P.M.,
Toronto time, or (y) with respect to LIBOR Rate Loans, at or prior to 3:00 P.M.,
Toronto time, on the date such LIBOR Rate Loans are to be advanced, immediately
available funds in an amount equal to such Lender’s Pro Rata Share of such proposed
advance.

 

Each borrowing shall be on a Business Day. Each Base
Rate or Canadian Base Rate borrowing shall be in an aggregate amount of at
least US$50,000 or Cdn$50,000, respectively, and integral multiples of
US$50,000 or Cdn$50,000, respectively in excess thereof, and each LIBOR
borrowing shall be in an aggregate amount of at least US$500,000 and integral
multiples of at least US$100,000 in excess thereof. Delivery of any Notice of
Borrowing, any request for a Letter of Credit, and the acceptance of any Loan
or any Letter of Credit, shall be deemed a representation and warranty by the Borrower that all conditions precedent
to the making of any Loans or other financial accommodations set forth in Sections
12.1 (in the case of the initial Loans to be made or Letter of Credit to be
issued hereunder) and 12.2 have been satisfied as of the date of such
request, notice or borrowing hereunder.

 

2.2.3                                                                        Conversion and Continuation Procedures.

 

(a)                                  Subject to Section 2.2.1, the Borrower may, upon
irrevocable written notice to the Administrative Agent in accordance with
clause (b) below:

 

(i)                                     elect, as of any Business Day, to convert any Loans of one type or
any part thereof into Loans of the other type (provided, in the case of any
conversion to a LIBOR Loan, such part thereof is in an aggregate amount not
less than US$500,000 or a higher integral multiple of US$100,000); or

 

(ii)                                  elect, as of the last day of the applicable Interest Period thereof,
to continue any LIBOR Loans having Interest Periods expiring on such day (or
any part thereof in an aggregate amount not less than US$500,000 or a higher
integral multiple of US$100,000) for a new Interest Period or convert such
LIBOR Loans to Base Rate Loans or Canadian Base Rate Loans;

 

provided that after giving effect to any
conversion or continuation, the aggregate principal amount of each Group of
LIBOR Loans shall be at least US$500,000 and an integral multiple of US$100,000
in excess thereof.

 

(b)                                 The Borrower shall
give written notice (each such written notice, a “Notice of Conversion/Continuation”) substantially in the form
of Exhibit F or telephonic notice (followed immediately by a Notice
of Conversion/Continuation) to the Administrative Agent of each proposed
conversion or continuation not later than (i) in the case of conversion
into Base Rate Loans or Canadian Base Rate Loans, 11:00 A.M., Toronto

 

25

 

time, on the proposed date of such conversion and (ii) in
the case of conversion into or continuation of LIBOR Loans, 11:00 A.M.,
Toronto time, at least three (3) Business Days prior to the proposed date
of such conversion or continuation, specifying in each case:

 

(i)                                     the proposed date of conversion or continuation;

 

(ii)                                  the aggregate amount of Loans to be converted or continued;

 

(iii)                               the type of Loans resulting from the proposed conversion or
continuation; and

 

(iv)                              in the case of conversion into, or continuation of, LIBOR Loans, the
duration of the requested Interest Period therefor.

 

(c)                                  If upon the expiration of any Interest Period applicable to LIBOR
Loans, the Borrower has failed
to select a new Interest Period to be applicable to such LIBOR Loans, the Borrower shall be deemed to have
elected to convert such LIBOR Loans into Base Rate Loans effective on the last
day of such Interest Period.

 

(d)                                 The Administrative Agent will promptly notify each Lender of its
receipt of a notice of conversion or continuation pursuant to this Section 2.2.3
or, if no timely notice is provided by the Borrower, of the details of any automatic conversion.

 

(e)                                  Any conversion of a LIBOR Loan on a day other than the last day of
an Interest Period therefor shall be subject to Section 8.4.

 

2.2.4                                                                        Borrowing Representations and Warranties.

 

Each and every request (or deemed request) by the
Borrower for, and acceptance by the Borrower of, a Revolving Loan shall, in
each case, constitute the Borrower’s representation and warranty that (and the
Administrative Agent’s and the Lenders’ obligation to make any such Revolving
Loan shall be subject to the conditions precedent that), both on the date of
such request for such Revolving Loan and on the date any such Revolving Loan is
made, (i) no Unmatured Event of Default or Event of Default has occurred
and is continuing and (ii) the Borrower’s representations and warranties
set forth in this Agreement, as supplemented from time to time, are true and
correct in all material respects (or, if such representations and warranties
are qualified by materiality or Material Adverse Effect, in all respects) except
to the extent any such representation and warranty expressly speaks to an
earlier date.

 

2.3                                                                               Letter of Credit Procedures.

 

2.3.1                                                                        L/C Applications.

 

The Borrower shall execute and deliver to the Issuing
Bank a Master Indemnity/Reimbursement Agreement on the Closing Date. The Borrower shall give notice to the
Administrative Agent and the Issuing Bank of the requested issuance of each
Letter of Credit on a Business Day which is at least three (3) Business
Days (or such lesser number of days as the Administrative Agent and the Issuing
Bank shall agree in any particular instance in their sole discretion) prior to
the proposed date of issuance of such Letter of Credit. Each such notice shall
be accompanied by an L/C Application, duly executed by the Borrower and in all respects
satisfactory to the Administrative Agent and the Issuing Bank, together with
such other documentation as the Administrative Agent or the Issuing Bank may
reasonably request in support thereof, it being understood that each L/C
Application shall specify, among other things, the date on which the proposed
Letter of Credit is to be issued, the

 

26

 

expiration date of such Letter of Credit
(which shall not be later than thirty (30) days prior to the Scheduled
Termination Date (unless such Letter of Credit is Cash Collateralized) and
shall in no event exceed more than one year from the date of issuance, provided
such Letter of Credit may provide for annual renewals subject to Issuing Bank
consent thereto) and whether such Letter of Credit is to be transferable in
whole or in part. Any Letter of Credit outstanding after the Scheduled
Termination Date which is Cash Collateralized for the benefit of the Issuing
Bank shall be the sole responsibility of the Issuing Bank and the Issuing Bank
shall be solely entitled to the benefits of such Cash Collateral. The Issuing
Bank shall promptly advise the Administrative Agent of the issuance of each
Letter of Credit and of any amendment thereto, extension thereof or event or
circumstance changing the amount available for drawing thereunder. In the event
of any inconsistency between the terms of the Master Indemnity/Reimbursement
Agreement, any L/C Application and the terms of this Agreement, the terms of
this Agreement shall control.

 

2.3.2                                                                        Participations in Letters of Credit.

 

Concurrently with the issuance of each Letter of
Credit, the Issuing Bank shall be deemed to have sold and transferred to each
Lender with a Revolving Commitment, and each such Lender shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such Lender’s Pro Rata Share (aggregating to 100% as among all
such Lenders), in such Letter of Credit and the Borrower’s reimbursement
obligations with respect thereto. Upon the incurrence of any reimbursement
obligation under any Letter of Credit, the Borrower shall be deemed to have
immediately requested that the Lenders make (i) a Revolving Loan which is
a Base Rate Loan if such Letter of Credit was issued in US Dollars; or (ii) a
Revolving Loan which is a Canadian Base Rate Loan if such Letter of Credit was
issued in Canadian Dollars, each in a principal amount equal to such
reimbursement obligations. The Administrative Agent shall promptly notify such
Lenders of such deemed request and, without the necessity of compliance with
the requirements of Section 2.2.2, 12.2 or otherwise such
Lender shall make available to the Administrative Agent its Pro Rata Share of
such Loan. The proceeds of such Loan shall be paid over by the Administrative
Agent to the Issuing Bank for the account of the Borrower in satisfaction of
such reimbursement obligations. The Issuing Bank hereby agrees, upon request of
the Administrative Agent, to deliver to the Administrative Agent or Lenders a
list of all outstanding Letters of Credit issued by the Issuing Bank, together
with such information related thereto as the Administrative Agent or any Lender
may reasonably request.

 

2.3.3                                                                        Reimbursement and Other Obligations.

 

(a)                                  The Borrower hereby unconditionally and irrevocably agrees to
reimburse the Issuing Bank for each payment or disbursement made by the Issuing
Bank under any Letter of Credit honouring any demand for payment made by the
beneficiary thereunder, in each case on the date that such payment or
disbursement is made. If any such amounts can not be reimbursed by the making
of a Revolving Loan for any reason, any amount not reimbursed on the date of
such payment or disbursement shall bear interest from the date of such payment
or disbursement to the date that the Issuing Bank is reimbursed by any Borrower
therefor, payable on demand, at a rate per annum equal to (i) the Base
Rate from time to time in effect plus the Revolving Loan Base Rate
Margin from time to time in effect if such Letter of Credit was issued in US
Dollars; or (ii) the Canadian Base Rate from time to time plus the
Revolving Loan Canadian Base Rate Margin from time to time in effect if such
Letter of Credit was issued in Canadian Dollars, plus, beginning on the
third Business Day after receipt of notice from the Issuing Bank of such
payment or disbursement, 2%. The Issuing Bank shall notify the Borrower and the Administrative Agent
whenever any demand for payment is made under any Letter of Credit by the

 

27

 

beneficiary thereunder; provided  that
the failure of the Issuing Bank to so notify the Borrower or the Administrative Agent shall not affect the rights
of the Issuing Bank or the Lenders in any manner whatsoever.

 

(b)                                 The Borrower’s reimbursement obligations hereunder shall be
irrevocable and unconditional under all circumstances, including (i) any
lack of validity or enforceability of any Letter of Credit, this Agreement or
any other Loan Document, (ii) the existence of any claim, set-off, defense
or other right which any Loan Party may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Administrative Agent,
the Issuing Bank, any Lender or any other Person, whether in connection with
any Letter of Credit, this Agreement, any other Loan Document, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between any Loan Party and the beneficiary named in any Letter of
Credit), (iii) the validity, sufficiency or genuineness of any document
which the Issuing Bank has determined complies on its face with the terms of
the applicable Letter of Credit, even if such document should later prove to
have been forged, fraudulent, invalid or insufficient in any respect or any
statement therein shall have been untrue or inaccurate in any respect, or (iv) the
surrender or impairment of any security for the performance or observance of
any of the terms hereof. Without limiting the foregoing, no action or omission
whatsoever by the Administrative Agent or any Lender (excluding, for purposes
hereof, the Issuing Bank) under or in connection with any Letter of Credit or
any related matters, absent gross negligence or wilful misconduct, shall result
in any liability of the Administrative Agent or any Lender to any Loan Party,
or relieve any Loan Party of any of its obligations hereunder to any such
Person.

 

(c)                                  Without limiting anything contained in this Agreement or in any
other Loan Documents, and for greater certainty, the Borrower hereby agrees and
covenants that with respect to any Letter of Credit, (i) the
Administrative Agent is authorized to charge any accounts of the Borrower with
respect to any amounts owed to the Issuing Bank in connection with any Letter
of Credit including any amendment fees charged by the Issuing Bank, (ii) the
Administrative Agent, the Issuing Bank and the Lenders shall not be in any way
responsible for performance by any beneficiary under any Letter of Credit of
its obligations to the Borrower, nor for the form, sufficiency, correctness,
genuineness, authority of person signing, falsification or legal effect of any
documents called for under any Letter of Credit if such documents on their face
appear to be in order and the Issuing Bank is hereby authorized to pay or
accept drafts, certificates any other instruments and documents as the case may
be, signed by any representative of the beneficiary under any Letter of Credit
such as a receiver, receiver and manager, administrator, executor or trustee
and bankruptcy, (iii) all directions and correspondence relating to any
Letter of Credit are to be sent at the risk of the Borrower and the
Administrative Agent, the Issuing Bank and the Lenders do not assume any
responsibility for any loss, interruption, error or delay in transmission or
delivery by post, telegraph, cable or any other method of telecommunication, or
for any inaccuracy of translation, (iv) any required import or export
licences applicable to any Letter of Credit have been obtained by the Borrower
and the Borrower is in compliance with foreign and domestic governmental
regulations pertaining to the subject matter of any such Letter of Credit, (v) the
shipment and financing of the goods described in any such Letter of Credit and
any goods described in any Letter of Credit shall be adequately covered by
insurance and the Administrative Agent and the Issuing Bank are hereby
authorized to collect any amounts due and payable under any such insurance in
accordance with the provisions of this Agreement,

 

28

 

(vi) the Administrative Agent and the Issuing
Bank are hereby granted a security interest in all goods and documents in
respect of or described under any Letter of Credit and shall be entitled to
sell any such goods and documents in accordance with the provisions of this
Agreement and the other Loan Documents, (vii) the Administrative Agent and
the Issuing Bank shall not be responsible for any error, neglect or default of
any of their respective correspondent banks, (viii) the Administrative
Agent and the Issuing Bank are hereby authorized to act and rely upon any oral
or written (whether delivered by hand or by telecopy or by other electronic
means), request or notice believed in good faith to have been given by the
Borrower to the Administrative Agent or the Issuing Bank, (ix) subject to
law and customs and practice of the trade existing in the area where the
beneficiary under any Letter of Credit is located, any Letter of Credit shall
be subject to, and performance by the Issuing Bank, its respective
correspondents, and the beneficiary thereunder shall be governed by the Uniform
Customs and Practice for Documentary Credits, 1993 Revision, International
Chamber of Commerce Publications No. 500 or by subsequent Congresses for
the International Chamber of Commerce, (x) the Borrower shall pay the
Administrative Agent and the Issuing Bank’s out-of-pocket legal fees and other
out-of-pocket expenses incurred in any matter in connection with the
enforcement or other dealing with any Letter of Credit, (xi) the Borrower shall
advise the Issuing Bank at least five (5) days prior to the expiry date of
any Letter of Credit whether such Letter of Credit is to be renewed, and in the
absence of any instructions by the Borrower, such Letter of Credit will expire
in accordance with its terms, and (xii) no Letter of Credit shall contain any
automatic renewal provisions.

 

2.3.4                                                                        Funding by Lenders to Issuing Bank.

 

If the Issuing Bank makes any payment or disbursement
under any Letter of Credit and (a) (i) a Revolving Loan may not be
made in accordance with Section 2.3.2 and (ii) the Borrower has not reimbursed the
Issuing Bank in full for such payment or disbursement by 11:00 A.M.,
Toronto time on the date of such payment or disbursement or (b) any
reimbursement that was received by the Issuing Bank from the Borrower or any
other Person on behalf of the Borrower
is or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Borrower, such other Person or otherwise, each Lender
with a Revolving Commitment shall be obligated to pay to the Administrative
Agent for the account of the Issuing Bank, in full or partial payment of the
purchase price of its participation in such Letter of Credit, its Pro Rata
Share (aggregating to 100% as among all such Lenders of such payment or
disbursement (but no such payment shall diminish the obligations of the
Borrower under Section 2.3.3), and, upon notice from the Issuing
Bank, the Administrative Agent shall promptly notify each Lender thereof. Each
Lender irrevocably and unconditionally agrees to so pay to the Administrative
Agent in immediately available funds for the Issuing Bank’s account the amount
of such Lender’s Pro Rata Share of such payment or disbursement. If and to the
extent any Lender shall not have made such amount available to the
Administrative Agent by 2:00 P.M., Toronto time, on the Business Day on
which such Lender receives notice from the Administrative Agent of such payment
or disbursement (it being understood that any such notice received after noon,
Toronto time, on any Business Day shall be deemed to have been received on the
next following Business Day), such Lender agrees to pay interest on such amount
to the Administrative Agent for the Issuing Bank’s account forthwith on demand,
for each day from the date such amount was to have been delivered to the
Administrative Agent to the date such amount is paid, at a rate per annum equal
to (a)(i) for the first three days after demand, the Federal Funds Rate
from time to time in effect and (ii) thereafter, the Base Rate from time
to time in effect if such reimbursement obligation is to be made in US Dollars;
or (b) the Canadian Base Rate if such reimbursement obligation is to be
made in Canadian Dollars. Any Lender’s failure to make available to the
Administrative Agent its Pro Rata Share of any such payment or disbursement
shall not relieve the Borrower or any other Lender of its obligation hereunder
to make available to the Administrative Agent,

 

29

 

the Borrower’s or such other Lender’s Pro
Rata Share of such payment, but no Lender shall be responsible for the failure
of any other Lender to make available to the Administrative Agent such other
Lender’s Pro Rata Share of any such payment or disbursement.

 

2.4                                                                               Commitments Several.

 

The failure of any Lender to make a requested Loan on
any date shall not relieve any other Lender of its obligation (if any) to make
a Loan on such date, but no Lender shall be responsible for the failure of any
other Lender to make any Loan to be made by such other Lender.

 

2.5                                                                               Certain Conditions.

 

Except with respect to the making of Loans in Sections
2.3.2 and 2.3.4 of this Agreement, no Lender shall have an
obligation to make any Loan, or to permit the continuation of or any conversion
into any LIBOR Loan, and the Issuing Bank shall not have any obligation to
issue any Letter of Credit, if an Event of Default or Unmatured Event of
Default exists or would result therefrom.

 

2.6                                                                               [INTENTIONALLY DELETED]

 

ARTICLE 3

EVIDENCING OF
LOANS

 

3.1                                                                               Notes.

 

The Loans of each Lender shall be evidenced by a Note
in the form set forth as Exhibit A (the “Revolving Loan Notes”). Each such Note shall have appropriate
insertions and shall be payable to the order of such Lender in a face principal
amount equal to such Lender’s Revolving Commitment. However, if such Loans are
not so evidenced, such Loans may be evidenced solely by entries upon the books
and records maintained by the Administrative Agent, which books and records
shall be conclusively presumed correct absent manifest error.

 

3.2                                                                               Recordkeeping.

 

The Administrative Agent, on behalf of each Lender,
shall record in its records, the date and amount of each Loan made by each
Lender, each repayment or conversion thereof and, in the case of each LIBOR
Loan, the dates on which each Interest Period for such Loan shall begin and end.
The aggregate unpaid principal amount so recorded shall be rebuttably
presumptive evidence of the principal amount of the Loans owing and unpaid. The
failure to so record any such amount or any error in so recording any such
amount shall not, however, limit or otherwise affect the Obligations of the
Borrower hereunder or under any Note to repay the principal amount of the Loans
hereunder, together with all interest accruing thereon.

 

ARTICLE 4

INTEREST

 

4.1                                                                               Interest Rates.

 

The Borrower hereby promises to pay interest on the
unpaid principal amount of each Loan for the period commencing on the date of
such Loan until such Loan is paid in full as follows:

 

30

 

(a)                                  at all times while such Loan is a Base Rate Loan, at a rate per
annum equal to the sum of the Base Rate from time to time in effect plus the
applicable Revolving Loan Base Rate Margin from time to time in effect;

 

(b)                                 at all times while such Loan is a LIBOR Loan, at a rate per annum
equal to the sum of the LIBOR Rate applicable to each Interest Period for such
Loan plus the applicable Revolving Loan LIBOR Margin from time to time in
effect; and

 

(c)                                  at all times while such Loan is a Canadian Base Rate Loan, at a rate
per annum equal to the sum of the Canadian Base Rate from time to time in
effect plus the applicable Revolving Loan Canadian Base Rate Margin from time
to time in effect;

 

provided that any time an Event of Default exists, at the Required Lenders’
election, the interest rate applicable to each such Loan shall be increased by
2% and provided, further, that any such increase may thereafter be rescinded by
the Required Lenders, notwithstanding Section 15.1. Notwithstanding
the foregoing, upon the occurrence of an Event of Default under Section 13.1.1
or 13.1.4, such increase shall occur automatically.

 

4.2                                                                               Interest Payment Dates.

 

Accrued interest on each Base Rate Loan and Canadian
Base Rate Loan shall be payable in arrears on the last day of each calendar
month and at maturity. Accrued interest on each LIBOR Loan shall be payable on
the last day of each Interest Period relating to such Loan, upon a prepayment
of such Loan (and, in the case of a LIBOR Loan with an Interest Period in
excess of three (3) months, on the three-month anniversary of the first
day of such Interest Period), and at maturity. After maturity, and at any time
an Event of Default exists, accrued interest on all Loans shall be payable on
demand.

 

4.3                                                                               Setting and Notice of LIBOR Rates.

 

The applicable LIBOR Rate for each Interest Period
shall be determined by the Administrative Agent, and notice thereof shall be
given by the Administrative Agent promptly to the Borrower and each applicable Lender. Each determination of the
applicable LIBOR Rate by the Administrative Agent shall be conclusive and
binding upon the parties hereto, in the absence of demonstrable error. The
Administrative Agent shall, upon written request of the Borrower or any Lender, deliver to the Borrower or such Lender a statement showing the computations used
by the Administrative Agent in determining any applicable LIBOR Rate hereunder.

 

4.4                                                                               Computation of Interest.

 

Interest hereunder shall be determined daily, and
calculated monthly not in advance and (in the case of LIBOR Rate Loans) at the
end of any applicable Interest Period, both before and after default and
judgment. In the case of Base Rate Loans and LIBOR Rate Loans, interest shall
be computed on the actual number of days elapsed over a year consisting of
three hundred and sixty (360) days. In the case of Canadian Base Rate Loans,
interest shall be computed on the actual number of days elapsed over a year
consisting of three hundred and sixty-five (365) days. For the purpose of the Interest Act (Canada) only, the yearly
rate of interest to which any rate for a period less than a year is equivalent
is such rate, divided by the number of days in such period, and multiplied by
the actual number of days in the year. The applicable interest rate for each
Base Rate Loan or Canadian Base Rate Loan shall change simultaneously with each
change in the Base Rate or Canadian Base Rate, as the case may be.

 

31

 

4.5                                                                               Maximum Interest

 

It is the intent of the parties that the rate of
interest and other charges to the Borrower under this Agreement and the other
Loan Documents shall be lawful; therefore, if for any reason the interest or
other charges payable under this Agreement are found by a court of competent
jurisdiction, in a final non-appealable determination, to exceed the limit
which the Administrative Agent and the Lenders may lawfully charge the
Borrower, then the obligation to pay interest and other charges shall
automatically be reduced to such limit and, if any amount in excess of such
limit shall have been paid, then such amount shall be refunded to the Borrower.

 

ARTICLE 5

FEES

 

5.1                                                                               Non-Use Fee.

 

The Borrower hereby agrees to pay to the
Administrative Agent, for the account of each Lender, a non-use fee, for the
period from the Closing Date to the Termination Date, at the Non-Use Fee Rate
in effect from time to time of such Lender’s Pro Rata Share (as adjusted from
time to time) of the daily average of the unused amount of the Maximum
Revolving Commitment. For purposes of calculating usage under this Section 5.1,
the Maximum Revolving Commitment shall be deemed used to the extent of
Revolving Outstandings. Such non-use fee shall be payable in arrears on the
last day of each calendar month and on the Termination Date for any period then
ending for which such non-use fee shall not have previously been paid. The
non-use fee shall be computed for the actual number of days elapsed on the
basis of a year of three hundred and sixty (360) days.

 

5.2                                                                               Letter of Credit Fees.

 

(a)                                  The Borrower hereby agrees to pay to the Administrative Agent, for
the account of each Lender, a letter of credit fee for each Letter of Credit
equal to the L/C Fee Rate in effect from time to time of such Lender’s Pro Rata
Share (as adjusted from time to time) of the undrawn amount of such Letter of
Credit (computed for the actual number of days elapsed on the basis of a year
of three hundred and sixty (360) days); provided that, upon the election of
Required Lenders (or automatically upon the occurrence of an Event of Default
under Section 13.1.1 or 13.1.4), the rate applicable to each
Letter of Credit shall be increased by 2% at any time that an Event of Default
exists. Such letter of credit fee shall be payable in arrears on the last day
of each calendar month and on the Termination Date (or such later date on which
such Letter of Credit expires or is terminated) for the period from the date of
the issuance of each Letter of Credit (or the last day on which the letter of
credit fee was paid with respect thereto) to the date such payment is due or,
if earlier, the date on which such Letter of Credit expired or was terminated.

 

(b)                                 In addition, with respect to each Letter of Credit, the Borrower
hereby agrees to pay to the Issuing Bank, for its own account, (i) such
fees and expenses as the Issuing Bank customarily requires in connection with
the issuance, negotiation, processing and/or administration of letters of
credit in similar situations, and (ii) letter of credit fronting fee in
the amount and at the time agreed to by the Borrower and the Issuing Bank.

 

5.3                                                                               Administrative Agent’s Fees.

 

The Borrower hereby agrees to pay to the
Administrative Agent such agent’s fees as are set forth in the Agent Fee
Letter.

 

32

 

5.4                                                                               Termination Fee.

 

In the event that the
Termination Date shall occur at any time prior to the first year anniversary of
the Closing Date for any reason whatsoever, the Borrower hereby agrees to pay
to the Administrative Agent, for the ratable benefit of each of the Lenders, a
termination fee (the “Termination Fee”) equal to one percent (1.00%) of
the highest Maximum Revolving Commitment that had been in effect at any time
prior to such termination. For clarification purposes, it is herby acknowledged
that no Termination Fee shall be due as a result of Revolving Outstandings
being reduced to zero from time to time.

 

ARTICLE 6

REDUCTION,
TERMINATION AND INCREASES OF THE REVOLVING COMMITMENT LIMIT AND THE REVOLVING
COMMITMENT; PREPAYMENTS

 

6.1                                                                               Reduction, Termination and Increases of the Revolving Commitment.

 

6.1.1                                                                        Voluntary Reduction or Termination of the Revolving Commitment.

 

The Borrower
may from time to time on at least three Business Days’ prior written notice
received by the Administrative Agent (which shall promptly advise each Lender
thereof) permanently reduce the Revolving Commitment Limit to an amount not
less than the Revolving Outstandings. Any such reduction shall be in an amount
not less than US$500,000 or a
higher integral multiple of US$500,000 thereof
and such reduction shall be applied Pro Rata as a reduction to each Lender’s
Revolving Commitment such that the sum of such Revolving Commitments equal the
Revolving Commitment Limit. Concurrently with any reduction of the Revolving
Commitment Limit to zero, the Termination Date shall be deemed to have
occurred, and the Borrower shall be required to repay all Obligations and shall
terminate or Cash Collateralize all outstanding Letters of Credit. Any such
termination of the Revolving Commitment Limit occurring on or prior to the
first year anniversary of the Closing Date shall be accompanied by the
Termination Fee required pursuant to Section 5.4.

 

6.1.2                                                                        Increases in Revolving Commitment Limit.

 

Upon the Borrower’s
request made at any time (i) prior to the Scheduled Termination Date and (ii) that
any existing Lender has agreed to increase its Revolving Commitment or any
other financial institution meeting the requirements of an Eligible Assignee
and approved by the Borrower and
the Administrative Agent has become a party hereto as a Lender and has agreed
to accept an additional Revolving Commitment (in each case, pursuant to
documentation in form and substance reasonably satisfactory to the
Administrative Agent), then, provided that no Unmatured Event of Default or
Event of Default then exists and is continuing and without the consent of any
other Lender or the Issuing Bank, the Revolving Commitment Limit shall be
increased by the amount of the additional or supplemental Revolving Commitments
of such Lender(s); provided that the Revolving Commitment Limit may not be
increased to an amount in excess of US$15,000,000 or the Canadian Dollar
Equivalent Amount thereof without the prior written consent of all Lenders, the
Issuing Bank and the Administrative Agent. Upon the increase in the Revolving
Commitment Limit, the Pro Rata Shares of each Lender in respect of the
Revolving Commitment shall be adjusted automatically to reflect such new or
supplemental Revolving Commitment. Any such increase in the Revolving Credit
Limit shall be conditioned on the payment of the applicable fees set forth in
the Agent Fee Letter.

 

33

 

6.1.3                                                                        All Reductions of the Revolving Commitment.

 

All reductions of the Revolving Commitment shall
reduce the Revolving Commitment Limit and shall reduce the Revolving
Commitments ratably among the Lenders according to their respective Pro Rata
Shares (as defined under clause (a) thereof).

 

6.2                                                                               Prepayments.

 

6.2.1                                                                        Voluntary Prepayments. Revolving Loans.

 

Revolving Loans may be prepaid at any time and,
subject to the terms and conditions hereof, reborrowed. Any such prepayment
shall be applied first to accrued but unpaid interest owing on the Revolving
Loans.

 

(a)                                  [INTENTIONALLY DELETED]

 

(b)                                 [INTENTIONALLY DELETED]

 

6.2.2                                                                        Mandatory Prepayments.

 

(a)                                  The Borrower shall make a prepayment of the Obligations until paid
in full upon the occurrence of any of the following (each a “Mandatory Prepayment Event”) at the
following times and in the following amounts, which amounts shall be applied in
accordance with this Section 6.2.2 and Section 6.3 as
follows (such proceeds being the “Designated
Proceeds”):

 

(i)                                     Subject to Section 10.3.2, concurrently with the receipt
by the Borrower or any other Loan party (other than the Company) of any Net
Cash Proceeds from any Asset Disposition (or financing or refinancing of any
Obligations with Debt permitted under Section 11.1(b)), in an
amount equal to 100% of such Net Cash Proceeds therefrom, which amounts shall
be applied (1) first, to the Revolving Outstandings until paid in full
(including delivery to the Administrative Agent of Cash Collateral for all
outstanding Letters of Credit), (2) second, against all Bank Products
Obligations and Specified Hedging Obligations due and owing to any Lender or
its Affiliates, pro-rata, until
paid in full, (3) third, to all other Obligations owing to any Lender and
the Administrative Agent and payable pursuant to any Loan Documents, pro rata, until paid in full, and (4) fourth,
any amounts remaining thereafter, shall be delivered to the Borrower; and

 

(ii)                                  Within three (3) Business Days after its receipt by the
Borrower or any other Loan party (other than the Company) of any Net Cash
Proceeds from any issuance of Capital Securities of the Borrower (excluding (x)
any issuance of Capital Securities to employees or directors of the Borrower
with respect to their compensation or benefits, whether pursuant to a formal
stock and/or option plan, benefit program or otherwise and (y) any such
issuance by a Subsidiary to the Company) or the issuance of any Debt of the
Borrower (excluding Debt permitted by clauses (a) - (m) of Section 11.1),
in an amount equal to 100% of such Net Cash Proceeds therefrom, which amounts
shall be applied as set forth in clause (i) immediately above.

 

34

 

Nothing in this Section 6.2.2(a) shall
be deemed to authorize any Asset Disposition or the sale or issuance of any
Capital Securities or Debt not otherwise permitted hereunder.

 

(b)                                 In addition to the payments required pursuant to clause (a) immediately
above, from and after the giving of any Notice of Control directing collections
of Accounts to the Agent Account (unless and until such Notice of Control is
rescinded in accordance with the provisions of Section 10.11), the
outstanding principal balance of the Revolving Loans shall be repaid daily from
available funds in the Agent Account as determined in accordance with Section 7.1.1
and Section 10.11 hereof. In addition, subject to Section 2.1.1(b) and
without limiting any of the other rights and remedies of the Administrative
Agent and the Lenders in respect thereof, if on any day the Revolving
Outstandings exceeds the Revolving Loan Availability on such day (provided
that the Administrative Agent shall have provided written or electronic
notice to the Borrower of such excess), the Borrower shall immediately prepay
the Revolving Loans and/or Cash Collateralize the outstanding Letters of Credit,
or do a combination of the foregoing, in an amount sufficient to eliminate such
excess or violation.

 

(c)                                  Nothing in this Section 6.2.2 shall be deemed to
authorize the taking of any action by the Borrower which is not otherwise
permitted hereunder.

 

6.3                                                                               Manner of Prepayments.

 

Any partial prepayment of a Group of LIBOR Loans shall
be subject to the proviso to Section 2.2.3(a). Any prepayment of a
LIBOR Loan on a day other than the last day of an Interest Period therefor
shall include interest on the principal amount being repaid and shall be
subject to Section 8.4. Except as otherwise provided by this
Agreement, all principal payments in respect of the Loans shall be made in the
currency in which such Loans have been borrowed and shall be applied, (i) in
the event that such payments are denominated in US Dollars first, to repay
outstanding Base Rate Loans, if any, then to repay outstanding LIBOR Rate Loans
in direct order of Interest Period maturities; and (ii) in the event such
payments are denominated in Canadian Dollars, to repay outstanding Canadian
Base Rate Loans.

 

6.4                                                                               Repayments.

 

6.4.1                                                                        All Obligations.

 

NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE
CONTRARY, ALL OBLIGATIONS (OTHER THAN UNASSERTED CONTINGENT AND INDEMNIFICATION
OBLIGATIONS) SHALL BE AND BECOME IMMEDIATELY DUE AND PAYABLE AND ALL LETTERS OF
CREDIT SHALL IMMEDIATELY BE REQUIRED TO BE TERMINATED OR CASH COLLATERALIZED
UPON THE OCCURRENCE OF THE TERMINATION DATE FOR ANY REASON WHATSOEVER.

 

6.4.2                                                                        Revolving Loans.

 

The Revolving Loans of each Lender shall be paid in
full and the Revolving Commitment shall terminate on the Termination Date.

 

35

 

ARTICLE 7

MAKING AND
PRORATION OF PAYMENTS; SETOFF; TAXES

 

7.1                                                                               Making of Payments.

 

7.1.1                                                                        Manner of Payment; Application of Payment.

 

All payments of principal or interest on the Notes,
and of all fees, shall be made by the Borrower to the Administrative Agent in
immediately available funds into an account at the office specified by the
Administrative Agent (the “Agent Account”)
not later than 1:00 p.m., Toronto time, on the date due; and funds
received after that hour shall be deemed to have been received by the
Administrative Agent on the following Business Day. For purposes of determining
Revolving Loan Availability for borrowing purposes, the Administrative Agent
shall, immediately upon its receipt thereof in the Agent Account, credit any
items of payment or proceeds of any Collateral to be applied against the
Obligations in accordance with the terms hereof, in such order as is specified
in this Agreement, subject to actual collection. The Administrative Agent shall
remit to each Lender its share of all such payments received in collected funds
by the Administrative Agent for the account of such Lender entitled thereto in
the manner and at the times set forth in Section 7.1.3 below. All
payments shall be made by the Borrower directly to the Administrative Agent
without setoff, counterclaim, deduction, withholding or other defense and Loans
that are Canadian Base Rate Loans shall only be denominated in Canadian Dollars
and Loans that are US Base Rate Loans or LIBOR Loans shall only be denominated
in US Dollars and any such Loan denominated in any such currency shall be
repayable, and all interest and fees in respect thereof or in connection
therewith shall accrue and be payable, in the like currencies. Whenever it
shall become necessary to convert a similar payment hereunder from one currency
to another, unless otherwise specifically provided, the rate of exchange used
by the Administrative Agent shall be the Administrative Agent’s Spot Rate of
exchange in the interbank market where its foreign currency exchange operations
in respect of such currency to be converted are then being conducted.

 

7.1.2                                                                        Payment Authorization.

 

The Borrower hereby authorizes the Administrative
Agent, in its sole discretion, to charge any of the Borrower’s accounts or
advance Revolving Loans to make any payments of principal, interest, fees,
costs or expenses required to be made under this Agreement or the other Loan
Documents.

 

7.1.3                                                                        Settlement.

 

On a weekly basis (or more frequently if requested by
the Administrative Agent (a “Settlement Date”),
the Administrative Agent shall provide each Lender with a statement of the
outstanding balance of the Obligations as of the end of the Business Day
immediately preceding the Settlement Date (the “Pre-Settlement Determination Date”) and the current balance of
the Loans funded by such Lender (whether made directly by such Lender to any
Borrower or constituting a settlement by such Lender of a previous
Disproportionate Advance made by the Administrative Agent on behalf of such
Lender to the Borrower). If such statement discloses that such Lender’s current
balance of the Loans as of the Pre-Settlement Determination Date exceeds such
Lender’s Pro Rata Share of the applicable Obligations outstanding as of the
Pre-Settlement Determination Date, then the Administrative Agent shall, on the
Settlement Date, transfer, by wire transfer, the net amount due to such Lender
in accordance with such Lender’s instructions, and if such statement discloses
that such Lender’s current balance of the Loans as of the Pre-Settlement
Determination Date is less than such Lender’s Pro Rata Share of the applicable
Obligations outstanding as of the Pre-Settlement Determination Date, then such
Lender shall, on the Settlement Date, transfer, by wire transfer the net amount
due to the Administrative Agent in accordance with the Administrative Agent’s
instructions. In addition, payments actually

 

36

 

received by the Administrative Agent with
respect to the following items shall be distributed by the Administrative Agent
to the Lenders as follows:

 

(a)                                  Within one (1) Business Day of receipt thereof by the
Administrative Agent, payments to be applied to interest on the Loans shall be
paid to each Lender in proportion to its Pro Rata Share of the Loans in respect
of which such interest is being paid, subject to any adjustments for any Disproportionate
Advances as provided in Section 2.2.2, so that the Administrative
Agent shall receive interest on the Disproportion Advances and each Lender
shall only receive interest on the amount of funds actually advanced by such
Lender;

 

(b)                                 Within one (1) Business Day of receipt thereof by the
Administrative Agent, payments to be applied to the Non-Use Fee as provided in Section 5.1
shall be paid to each Lender in proportion to its Pro Rata Share of the daily
average of the unused amount of the Revolving Commitment; and

 

(c)                                  Within one (1) Business Day of receipt thereof by the
Administrative Agent, payments to be applied to the letter of credit fee for
each Letter of Credit as provided in Section 5.2 shall be paid to
each Lender in proportion to its Pro Rata Share of the undrawn amount of such
Letter of Credit.

 

Notwithstanding the foregoing, the Administrative
Agent shall not be obligated to transfer to any Defaulting Lender any payment
made by the Borrower to the Administrative Agent, nor shall such Defaulting
Lender be entitled to share any interest, fees or other payment hereunder,
until payment is made by such Defaulting Lender to the Administrative Agent as
required in this Agreement.

 

7.2                                                                               Application of Certain Payments.

 

So long as no Event of Default has occurred and is
continuing, (a) payments matching specific scheduled payments then due
shall be applied to those scheduled payments and (b) voluntary and
mandatory prepayments shall be applied as set forth in Sections 6.2 and 6.3.
After the occurrence and during the continuance of an Event of Default, all
amounts collected or received by the Administrative Agent or any Lender as
proceeds from the sale of, or other realization upon, all or any part of the
Collateral shall be applied as the Administrative Agent shall determine in its
reasonable discretion. Concurrently with each remittance to any Lender of its
share of any such payment, the Administrative Agent shall advise such Lender as
to the application of such payment.

 

7.3                                                                               Due Date Extension.

 

If any payment of principal or interest with respect
to any of the Loans, or of any fees, falls due on a day which is not a Business
Day, then such due date shall be extended to the immediately following Business
Day (unless, in the case of a LIBOR Loan, such immediately following Business
Day is the first Business Day of a calendar month, in which case such due date
shall be the immediately preceding Business Day) and, in the case of principal,
additional interest shall accrue and be payable for the period of any such
extension.

 

7.4                                                                               Setoff.

 

The Borrower agrees that the Administrative Agent and
each Lender have all rights of set-off and bankers’ lien provided by applicable
law, and in addition thereto, the Borrower agrees that at any time any Event of
Default exists and is continuing, the Administrative Agent and each Lender may

 

37

 

apply to the payment of any Obligations of
the Borrower hereunder, whether or not then due, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter with the
Administrative Agent or such Lender.

 

7.5                                                                               Proration of Payments.

 

If any Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise,
on account of (a) principal of or interest on any Loan (but excluding (i) any
payment pursuant to Section 8.7 or 15.6 and (ii) payments
of interest on any Affected Loan) or (b) its participation in any Letter
of Credit) in excess of its applicable Pro Rata Share of those payments and
other recoveries obtained by all other applicable Lenders on account of
principal of and interest on the respective Loans (or such participation) then
held by them, then such Lender shall purchase from the other applicable Lenders
such participations in the respective affected Loans (or sub-participations in
Letters of Credit) held by them as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery.

 

7.6                                                                               Taxes.

 

(a)                                  Except as expressly otherwise provided in this Section 7.6,
all payments made by each Loan Party hereunder or under any Loan Documents
(including any payment of principal, interest, or fees) to, or for the benefit,
of any person

 

(i)                                     shall be made without setoff, counterclaim, or other defense and

 

(ii)                                  shall be made by each Loan Party free and clear of and without
deduction or withholding for, or account of, any Taxes now or hereinafter
imposed by any taxing authority.

 

(b)                                 If any Loan Party makes any payment hereunder or under any Loan
Document in respect of which it is required by applicable law to deduct or
withhold any Taxes, such Loan Party shall increase the payment hereunder or
under any such Loan Document such that after the reduction for the amount of
Taxes withheld (and any taxes withheld or imposed with respect to the
additional payments required under this Section 7.6(b)), the amount
paid to the Lenders, the Issuing Bank or the Administrative Agent equals the
amount that was payable hereunder or under any such Loan Document without
regard to this Section 7.6(b). To the extent any Loan Party
withholds any Taxes on payments hereunder or under any Loan Document, such Loan
Party shall pay the full amount deducted to the relevant taxing authority
within the time allowed for payment under applicable law and shall deliver to
the Administrative Agent within thirty (30) days after it has made payment to
such authority a receipt issued by such authority (or other evidence
satisfactory to the Administrative Agent) evidencing the payment of all amounts
so required to be deducted or withheld from such payment.

 

(c)                                  If any Lender, the Issuing Bank or the Administrative Agent is
required by law to make any payments of any Taxes on or in relation to any
amounts received or receivable hereunder or under any other Loan Document, or
any Tax is assessed against a Lender, the Issuing Bank or the Administrative
Agent with respect to amounts received or receivable hereunder or under any
other Loan Document, the Borrower hereby agrees to indemnify such person
against (i) such Tax (and any reasonable counsel fees and

 

38

 

expenses associated with such Tax) and (ii) any
Taxes imposed as a result of the receipt of the payment under this Section 7.6(c).
A certificate prepared in good faith as to the amount of such payment by such
Lender, the Issuing Bank or the Administrative Agent shall, absent manifest
error, be final, conclusive, and binding on all parties.

 

(d)                                 Notwithstanding anything to the contrary in this Agreement, no Loan
Party shall be required to indemnify or pay any additional amounts in respect
of Canadian withholding tax imposed under Part XIII of the Income Tax Act (Canada) applicable to any
amount payable with respect to any of the Obligations to any recipient thereof
that is not a Canadian Resident, provided  however that the Loan
Parties shall be obligated to indemnify and pay any such additional amounts in
respect of Canadian withholding tax in the event that: (i) any such Loans
were assigned, participated or transferred to such recipient at the request or
upon the consent of the Borrower, or (ii) any such Loans were assigned,
participated or transferred upon the occurrence and during the continuance of
an Event of Default.

 

(e)                                  Each Lender agrees to indemnify the Administrative Agent and hold
the Administrative Agent harmless for the full amount of any and all present or
future Taxes and related liabilities (including penalties, interest, additions
to tax and expenses, and any Taxes imposed by any jurisdiction on amounts
payable to the Administrative Agent under this Section 7.6) which
are imposed on or with respect to principal, interest or fees payable to such
Lender hereunder and which are not paid by the Borrower pursuant to this Section 7.6,
whether or not such Taxes or related liabilities were correctly or legally
asserted. This indemnification shall be made within thirty (30) days from the
date the Administrative Agent makes written demand therefor.

 

ARTICLE 8

INCREASED
COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS

 

8.1                                                                               Increased Costs.

 

(a)                                  If, after the date hereof, the adoption of, or any change in, any
applicable law, rule or regulation, or any change in the interpretation or
administration of any applicable law, rule or regulation by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency: (i) shall impose, modify or
deem applicable any reserve (but excluding any reserve included in the
determination of the LIBOR Rate pursuant to the definition thereof or Article 4),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by any Lender; or (ii) shall impose on
any Lender any other condition affecting its LIBOR Loans, its Notes or its
obligation to make LIBOR Loans; and the result of anything described in clauses
(i) and (ii) above is to increase the cost to (or to impose a cost
on) such Lender (or any LIBOR Office of such Lender) of making or maintaining
any LIBOR Loan, or to reduce the amount of any sum received or receivable by
such Lender (or its LIBOR Office) under this Agreement or under its Notes with
respect thereto (other than any such increased cost or reduction on account of
taxes of any kind, including Excluded Taxes and Taxes, as to which Section 7.6
shall govern), then upon demand by such Lender (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall
be furnished to the Administrative Agent), the Borrower hereby agrees to pay

 

39

 

directly to such Lender such additional amount as will
compensate such Lender for such increased cost or such reduction, so long as
such amounts have accrued on or after the day which is one hundred and eighty (180)
days prior to the date on which such Lender first made demand therefor.

 

(b)                                 If any Lender or the Issuing Bank shall reasonably determine that
any change in, or the adoption or phase-in of, any applicable law, rule or
regulation regarding capital adequacy, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
the compliance by any Lender or the Issuing Bank, or any Person controlling
such Lender or the Issuing Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender’s, the Issuing Bank’s or such controlling Person’s
capital as a consequence of such Person’s obligations hereunder or under any
Letter of Credit to a level below that which such Lender, or the Issuing Bank
or such controlling Person could have achieved but for such change, adoption,
phase-in or compliance (taking into consideration such Lender’s, or the Issuing
Bank’s or such controlling Person’s policies with respect to capital adequacy)
by an amount deemed by such Lender, or the Issuing Bank or such controlling
Person to be material, then from time to time, upon demand by such Lender or
the Issuing Bank (which demand shall be accompanied by a statement setting
forth the basis for such demand and a calculation of the amount thereof in reasonable
detail, a copy of which shall be furnished to the Administrative Agent), the
Borrower hereby agrees to pay to such Lender or the Issuing Bank, as
applicable, such additional amount as will compensate such Lender, or the
Issuing Bank, or such controlling Person for such reduction so long as such
amounts have accrued on or after the day which is one hundred and eighty (180)
days prior to the date on which such Lender or the Issuing Bank, as applicable,
first made demand therefor.

 

8.2                                                                               Basis for Determining Interest Rate Inadequate or Unfair.

 

If:

 

(a)                                  the Administrative Agent reasonably determines (which determination
shall be binding and conclusive on each Borrower) absent manifest error that by
reason of circumstances affecting the interbank LIBOR market, adequate and
reasonable means do not exist for ascertaining the applicable LIBOR Rate; or

 

(b)                                 the Required Lenders advise the Administrative Agent that the LIBOR
Rate as determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Lenders of maintaining or funding LIBOR Loans for the
relevant Interest Period (taking into account any amount to which such Lenders
may be entitled under Section 8.1) or that the making or funding of
LIBOR Loans has become impracticable as a result of an event occurring after
the date of this Agreement which in the opinion of such Lenders materially
affects such Loans;

 

then the
Administrative Agent shall promptly notify the other parties thereof and, so
long as such circumstances shall continue, (i) in the case of the Lenders,
no such Lender shall be under any obligation to make or convert any Base Rate
Loans into LIBOR Loans and (ii) on the last day of the current Interest
Period for each LIBOR Loan, such Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan.

 

40

 

8.3                                                                               Changes in Law Rendering LIBOR Loans Unlawful.

 

If any change in, or the adoption of any new, law or
regulation, or any change in the interpretation of any applicable law or
regulation by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Lender cause a substantial question as to whether it is) unlawful for any Lender
to make, maintain or fund LIBOR Loans, then such Lender shall promptly notify
each of the other parties hereto and, so long as such circumstances shall
continue, (a) no Lender shall have any obligation to make or convert any
Base Rate Loan into a LIBOR Loan (but shall make Base Rate Loans concurrently
with the making of or conversion of Base Rate Loans into LIBOR Loans by such
Lenders which are not so affected, in each case in an amount equal to the
amount of LIBOR Loans which would be made or converted into by such Lender at
such time in the absence of such circumstances) and (b) on the last day of
the current Interest Period for each LIBOR Loan of such Lender (or, in any
event, on such earlier date as may be required by the relevant law, regulation
or interpretation), such LIBOR Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan. Each Base Rate Loan made by a Lender
which, but for the circumstances described in the foregoing sentence, would be
a LIBOR Loan (an “Affected Loan”)
shall remain outstanding for the period corresponding to the Group of LIBOR
Loans of which such Affected Loan would be a part absent such circumstances.

 

8.4                                                                               Funding Losses.

 

The Borrower hereby agrees that upon written demand by
any Lender (which demand shall be accompanied by a statement setting forth in
reasonable detail the basis for the amount being claimed, a copy of which shall
be furnished to the Administrative Agent), the Borrower will indemnify such
Lender against any net loss or expense which such Lender may sustain or incur
(including any net loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain any LIBOR Loan), as reasonably determined by such Lender, as a result
of (a) any payment, prepayment or conversion of any LIBOR Loan of such
Lender on a date other than the last day of an Interest Period for such Loan
(including any conversion pursuant to Section 8.3) or (b) any
failure of the Borrower to borrow, convert or continue any Loan on a date
specified therefor in a notice of borrowing, conversion or continuation
pursuant to this Agreement. For this purpose, all such notices to the
Administrative Agent pursuant to this Agreement shall be deemed irrevocable.

 

8.5                                                                               Right of Lenders to Fund through Other Offices.

 

Each Lender may, if it so elects, fulfill its
commitment as to any LIBOR Loan by causing a foreign branch or Affiliate of
such Lender to make such Loan; provided that in such event for the purposes of
this Agreement such Loan shall be deemed to have been made by such Lender and
the obligation of the Borrower to repay such Loan shall nevertheless be to such
Lender and shall be deemed held by it, to the extent of such Loan, for the
account of such branch or Affiliate.

 

8.6                                                                               Discretion of Lenders as to Manner of Funding.

 

Notwithstanding any provision of this Agreement to the
contrary, each Lender shall be entitled to fund and maintain its funding of all
or any part of its Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if such Lender had actually funded and maintained each LIBOR
Loan during each Interest Period for such Loan through the purchase of deposits
having a maturity corresponding to such Interest Period and bearing an interest
rate equal to the LIBOR Rate for such Interest Period.

 

41

 

8.7                                                                               Mitigation of Circumstances; Replacement of Lenders.

 

(a)                                  Each Lender or the Issuing Bank, as applicable, shall promptly
notify the Borrower and the Administrative Agent of any event of which it has
knowledge which will or is likely to result in, and will use reasonable
commercial efforts available to it (other than the taking of such action which,
in such Lender’s or the Issuing Bank’s sole judgment, imposes any expense upon
or is otherwise disadvantageous to such Lender or the Issuing Bank, as
applicable) to mitigate or avoid, (i) any obligation by the Borrower to
pay any amount pursuant to Section 7.6 or 8.1 or (ii) the
occurrence of any circumstances described in Section 8.2 or 8.3
(and, if any Lender or the Issuing Bank has given notice of any such event
described in clause (i) or (ii) above and thereafter such event ceases
to exist, such Lender or the Issuing Bank, as applicable, shall promptly so
notify the Borrower and the
Administrative Agent); provided  that, the failure by any Lender
to provide any prospective notice to any such possible event shall not reduce
or diminish such Lender’s remedies or the Borrower’s or any other Loan Parties’
Obligations hereunder. Without limiting the foregoing, each Lender or the
Issuing Bank, as applicable, will designate a different funding office if such
designation will avoid (or reduce the cost to the Borrower of) any event
described in clause (i) or (ii) above and such designation will not,
in such Lender’s sole judgment, impose aggregate expenses in excess of US$1,000
or the Canadian Dollar Equivalent Amount thereof on such Lender or be otherwise
disadvantageous to such Lender.

 

(b)                                 If the Borrower becomes obligated to pay additional amounts to any
Lender pursuant to Section 7.6 or 8.1, any Lender gives
notice of the occurrence of any circumstances described in Section 8.2
or 8.3, or any Defaulting Lender pursuant to Section 2.1.1(c) does
not make payment to the Administrative Agent of such amounts giving rise to its
becoming a Defaulting Lender within fifteen (15) days of the date such payment
is required under this Agreement, the Borrower
may designate another bank which is acceptable to the Administrative Agent and
the Issuing Bank in their reasonable discretion (such other bank being called a
“Replacement Lender”) to purchase
the Loans of such Lender and such Lender’s rights hereunder, without recourse
to or warranty by, or expense to, such Lender, for a purchase price equal to
the outstanding principal amount of the Loans payable to such Lender plus any
accrued but unpaid interest on such Loans and all accrued but unpaid fees owed
to such Lender and any other amounts payable to such Lender under this
Agreement, and to assume all the obligations of such Lender hereunder, and,
upon such purchase and assumption (pursuant to an Assignment Agreement), such
Lender shall no longer be a party hereto or have any rights hereunder (other
than rights with respect to indemnities and similar rights applicable to such
Lender prior to the date of such purchase and assumption) and shall be relieved
from all obligations to the Borrower hereunder, and the Replacement Lender
shall succeed to the rights and obligations of such Lender hereunder.

 

8.8                                                                               Conclusiveness of Statements; Survival of Provisions.

 

Determinations and statements of any Lender or the
Issuing Bank pursuant to Section 7.6, 8.1, 8.2, 8.3
or 8.4 shall be conclusive absent demonstrable error. Lenders and the
Issuing Bank may use reasonable averaging and attribution methods in
determining compensation under Sections 7.6, 8.1 and 8.4, and the
provisions of such Sections shall survive repayment of the Obligations (other
than unasserted contingent indemnification obligations), cancellation of any
Notes, expiration or termination of the Letters of Credit and termination of
this Agreement.

 

42

 

ARTICLE 9

REPRESENTATIONS
AND WARRANTIES

 

To induce the Administrative Agent, the Lenders and
the Issuing Bank to enter into this Agreement and to induce the Issuing Bank to
issue Letters of Credit and the Lenders to make Loans and to participate in
Letters of Credit hereunder, the Borrower and each other Loan Party hereby
jointly and severally represent and warrant to the Administrative Agent, the
Lenders and the Issuing Bank that:

 

9.1                                                                               Organization.

 

The Borrower and each other Loan Party is validly
existing and in good standing under the laws of its jurisdiction of
organization and each is duly qualified to do business in each jurisdiction
where, because of the nature of its activities or properties, such
qualification is required, except for such jurisdictions where the failure to
so qualify would not have or could not reasonably be expected to have a
Material Adverse Effect.

 

9.2                                                                               Authorization; No Conflict.

 

The Borrower and each other Loan Party is duly
authorized to execute and deliver each Loan Document to which it is a party and
is duly authorized to borrow monies hereunder is duly authorized to perform its
obligations under each Loan Document to which it is a party. The execution,
delivery and performance by the Borrower and each other Loan Party of each Loan
Document to which it is a party, and the borrowings by the Borrower hereunder,
do not and will not (a) require any consent or approval of any
governmental agency or authority (other than any consent or approval which has
been obtained and is in full force and effect, except such as would not have
and reasonably could not be expected to have a Material Adverse Effect), (b) conflict
with (i) any provision of law, (ii) the charter, by-laws or other
organizational documents of the Borrower and each other Loan Party or (iii) any
material agreement, indenture, instrument or other material document, or any
judgment, order or decree, which is binding upon the Borrower and each other
Loan Party or any of its respective properties or (c) require, or result
in, the creation or imposition of any Lien on any asset of the Borrower (other
than Permitted Liens and Liens in favour of the Administrative Agent created
pursuant to the Collateral Documents).

 

9.3                                                                               Validity and Binding Nature.

 

Each of this Agreement and each other Loan Document to
which the Borrower and each other Loan Party is a party is the legal, valid and
binding obligation of the Borrower and each other Loan Party, enforceable
against the Borrower and each other Loan Party in accordance with its terms, subject
to bankruptcy, insolvency and similar laws affecting the enforceability of
creditors’ rights generally and to general principles of equity regardless of
whether considered in a proceeding in equity or law.

 

9.4                                                                               Financial Condition.

 

The audited consolidated financial statements of the
Company and its Subsidiaries for Fiscal Years 2002, 2003 and 2004 and the
unaudited consolidated financial statements of the Company and its Subsidiaries
as at the fiscal months and Fiscal Quarters ended after Fiscal Year 2004,
copies of each of which have been delivered to the Administrative Agent, were
prepared in accordance with GAAP (subject, in the case of such unaudited
statements, to the absence of footnotes and to normal year-end adjustments) and
present fairly in all material respects the consolidated financial condition of
the Company and its Subsidiaries as at such dates and the results of their
operations for the periods then ended.

 

43

 

9.5                                                                               No Material Adverse Change.

 

Since December 31, 2004, no event or circumstance
exists and/or has occurred that has had or could reasonably be expected to
have, either alone or in conjunction with any other circumstances, events or
occurrences, a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole; it being agreed, however, that the results of operations of
the Company and its Subsidiaries for the quarter ended March 31, 2005, as
reported on its Form 10-Q filed with the SEC on or about May 10, 2005
shall not, in and of themselves, be deemed a Material Adverse Effect.

 

9.6                                                                               Litigation and Contingent Liabilities.

 

No litigation (including derivative actions),
arbitration proceeding or governmental investigation or proceeding is pending
or, to the Borrower’s knowledge, threatened against the Borrower or any other
Loan Party (other than the Company) which has had or could reasonably be
expected to have a Material Adverse Effect. Other than any liability incident
to such litigation or proceedings, or as otherwise listed on Schedule 9.6
or permitted by Section 11.1, the Borrower does not have any
material Contingent Liabilities.

 

9.7                                                                               Ownership of Properties; Liens.

 

The Borrower owns good and,
in the case of real property, marketable title to all of its properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and copyrights)
material to its business, free and clear of all Liens, charges and claims
(including infringement claims with respect to patents, trademarks, service
marks, copyrights and the like) other than Permitted Liens and other charges or
claims which would not have or could not reasonably be expected to have a
Material Adverse Effect.

 

9.8                                                                               Equity Ownership; Subsidiaries.

 

All issued and outstanding Capital Securities of the
Borrower are duly authorized and validly issued, fully paid, non-assessable,
and free and clear of all Liens other than those in favour of the US Agent, and such securities were issued in compliance
with all applicable provincial and federal laws concerning the issuance of
securities. Schedule 9.8 sets forth the authorized Capital
Securities of the Borrower as of the Closing Date. All of the issued and
outstanding Capital Securities of the Borrower are owned as set forth on Schedule 9.8
as of the Closing Date. As of the Closing Date, except as set forth on Schedule 9.8,
there are no pre-emptive or other outstanding rights, options, warrants,
conversion rights or other similar agreements or understandings for the
purchase or acquisition of any Capital Securities of the Borrower.

 

9.9                                                                               Plans.

 

To
the Borrower’s knowledge, all Plans of or under which the Borrower or any other
Loan Party (other than the Company) is a participating employer are registered
under, and in compliance in all material respects with, all requirements of
law, all payments, reports, returns and filings required to be made thereunder
have been made, and there is no obligation on the part of the Borrower or any
other Loan Party (other than the Company) under any such Plan that is in
arrears. All such Plans have been administered in accordance with their terms
and provisions of applicable law except where failure to do so would or could
reasonably not be expected to have a Material Adverse Effect. In respect of
Plans which are registered pension plans within the meaning of the Income Tax Act (Canada), there has been no
partial wind-ups of Plans, no unauthorized merger of such Plans, no
unauthorized withdrawal of funds from such Plans and no improper contribution
holidays taken in respect of such Plans which would or

 

44

 

could be reasonably expected to have a Material Adverse Effect. The most
recent actuarial evaluation report filed with the applicable governmental
authorities, if applicable, for each such Plan did not disclose any going
concern unfunded actuarial liability, past service unfunded actuarial liability
or solvency deficiency as at the date of such evaluation which, in each case,
would or could reasonably be expected to have a Material Adverse Effect. Where
applicable, all Plans are fully funded on both a going concern and solvency
basis as at the Closing Date. Except as set forth on Schedule 9.9,
the Borrower or any other Loan Party (other than the Company) does not sponsor,
administer, maintain or contribute to any other Plans.

 

9.10                                                                        [INTENTIONALLY DELETED]

 

9.11                                                                        [INTENTIONALLY DELETED]

 

9.12                                                                        [INTENTIONALLY DELETED]

 

9.13                                                                        Taxes.

 

The Borrower and each other Loan Party has timely
filed all federal, state and provincial income and all other material tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges due and payable with respect to such return,
except any such taxes or charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books and in respect of which no
Lien has been filed against the assets of the Borrower or any other Loan Party.
The Borrower and each other Loan Party have made adequate reserves on their
books and records in accordance with GAAP for all federal, state and provincial
income and all other material taxes that have accrued but which are not yet due
and payable.

 

9.14                                                                        Solvency, etc.

 

On the Closing Date, both immediately before and after
giving effect to the transactions contemplated hereby and by the other Loan
Documents, and thereafter immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder and the use of
the proceeds thereof, the fair value of the assets of the Borrower, at a fair
valuation, will exceed the debts and liabilities, as determined in accordance
with GAAP, of the Borrower; the present fair saleable value of the assets of
the Borrower will be greater than the amount that will be required to pay the
probable liability of the Borrower on its debts and other liabilities as
determined in accordance with GAAP, as such debts and other liabilities become
absolute and matured; the Borrower will be able to pay its debts and
liabilities, as determined in accordance with GAAP, as such debts and
liabilities become absolute and matured; and the Borrower will not have
unreasonably small capital with which to conduct the businesses in which it is
engaged as such businesses are now conducted and are proposed to be conducted
after the date thereof. The Borrower does not intend to, or to permit any of
its Subsidiaries to, and does not believe that it or any of its Subsidiaries
will, on a consolidated basis, incur debts beyond their ability to pay such
debts as they mature, taking into account the timing of and amounts of cash to
be received by them or any such Subsidiary and the timing of the amounts of
cash to be payable on or in respect of their Debt or the Debt of such
Subsidiaries.

 

9.15                                                                        Environmental Matters.

 

The on-going operations of the Borrower and each Loan
Party (other than the Company) comply in all respects with all Environmental
Laws, except such non-compliance which has not had and could not (if enforced
in accordance with applicable law) reasonably be expected to result in, either

 

45

 

individually or in the aggregate, a Material
Adverse Effect. The Borrower and each Loan Party (other than the Company) have
obtained, and maintained in good standing, all licenses, permits,
authorizations, registrations and other approvals required under any
Environmental Law for their respective ordinary course operations, and for
their reasonably anticipated future operations, and the Borrower and each Loan
Party (other than the Company) are in compliance with all terms and conditions
thereof, except where the failure to do so has not had and could not reasonably
be expected to result in material liability to the Borrower and each Loan Party
(other than the Company) and has not had and could not reasonably be expected
to result in, either individually or in the aggregate, a Material Adverse Effect.
Except as set forth on Schedule 9.15, neither the Borrower nor any
other Loan Parties (other than the Company) nor any of their properties or
operations is subject to, or reasonably anticipates the issuance of, any
written order from or agreement with any federal, provincial, state or local
governmental authority, nor subject to any judicial or docketed administrative
or other proceeding, respecting any Environmental Law, Environmental Claim or
Hazardous Substance any of which has had or could reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect. There
are no Hazardous Substances or other conditions or circumstances existing with
respect to any property, arising from operations prior to the Closing Date, or
relating to any waste disposal, of the Borrower or any other Loan Parties
(other than the Company) that has had or could reasonably be expected to result
in, either individually or in the aggregate, a Material Adverse Effect. Neither
the Borrower nor any other Loan Parties (other than the Company) has any
underground storage tanks that are not properly registered or permitted under
applicable Environmental Laws or that at any time have released, leaked,
disposed of or otherwise discharged Hazardous Substances any of which has had
or could reasonably be expected to result in, individually or in the aggregate,
a Material Adverse Effect.

 

9.16                                                                        Insurance.

 

Set forth on Schedule 9.16 is a complete
and accurate summary of the property and casualty insurance program of the
Borrower and of the Company (to the extent any such insurance program of the
Company extends to the Borrower) as of the Closing Date (including the names of
all insurers, policy numbers, expiration dates, amounts and types of coverage,
annual premiums, exclusions, deductibles, self-insured retention, and a
description in reasonable detail of any self-insurance program, retrospective
rating plan, fronting arrangement or other risk assumption arrangement
involving the Borrower). The Borrower and each other Loan Parties (other than
the Company) and their respective properties are insured with financially sound
and reputable insurance companies which are not Affiliates of such parties, in
such amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the Borrower and/or other Loan Parties (other
than the Company) operate.

 

9.17                                                                        Real Property.

 

Set forth on Schedule 9.17 is a complete
and accurate list, as of the Closing Date, of the address of all real property
owned or leased by the Borrower, together with, in the case of leased property,
the name and mailing address of the lessor of such property.

 

9.18                                                                        Information.

 

None of representations or warranties made by the
Borrower or any other Loan Party in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in each exhibit, report, statement or certificate
furnished by or on behalf of the Borrower or any other Loan Party in connection
with the Loan Documents (including the offering and disclosure materials, if
any, delivered by the Borrower or any other Loan Party to the Administrative
Agent prior to the Closing Date), contains any untrue statement of a material
fact or omits any material

 

46

 

fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
It being recognized by the Administrative Agent and the Lenders that any
projections and forecasts provided in respect of the Company, the Borrower or
any other Loan Party are subject to uncertainties and contingencies, are based
on good faith estimates and assumptions believed by the Company, the Borrower
or other Loan Parties to be reasonable as of the date of the applicable
projections or forecasts and upon the best information then reasonably
available to the Company, the Borrower and the Loan Parties and that actual
results during the period or periods covered by any such projections and
forecasts may differ materially from projected or forecasted results; provided
however that if, during the period or periods covered by any such
projections and forecasts, management of the Company, the Borrower or any other
Loan Party determines that the projections and forecasts no longer accurately
reflect in any material respect the projected financial results for such period
or periods, as the case may be a Senior Officer shall, as soon as is reasonably
practicable, provide to the Administrative Agent revised projections and
forecasts for such period or periods.

 

9.19                                                                        Intellectual Property.

 

The Borrower and each other Loan Parties own and
possess or have a license or other right to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights and copyrights as are necessary for the conduct of the
businesses of such parties as currently conducted except for the failure to so
own or license which would not have or could not reasonably be expected to have
a Material Adverse Effect, as applicable, without any infringement upon rights
of others which would have or could reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 9.19, or with
respect to any such licensing or distribution agreements entered into after the
date hereof, as otherwise disclosed to the Administrative Agent promptly after
its written request (including by way of updating and replacing such Schedule),
the Borrower or any other Loan Parties is not party to any licensing agreement
or distribution agreement relating to any Inventory which contains any
restrictions or prohibitions on the Administrative Agent (or its agents) from
selling or disposing such Inventory on substantially the same terms as the
Borrower or any other Loan Parties to such license agreement or distribution
agreement or which contains a right in favour of the licensor or distributor to
repurchase such Inventory (other than for non-payment of invoices related to
the purchase by the Borrower or any other Loan Parties thereof).

 

9.20                                                                        Burdensome Obligations.

 

The Borrower and any other Loan Parties are not a
party to any agreement or contract or subject to any restriction contained in
its organizational documents which could reasonably be expected to have a
Material Adverse Effect.

 

9.21                                                                        Labour Matters.

 

Except as set forth on Schedule 9.21, the
Borrower and any other Loan Parties (other than the Company) are not subject to
any labour or collective bargaining agreement. Except as set forth on Schedule 9.21,
there are no existing or, to the knowledge of the Borrower, threatened strikes,
lockouts or other labour disputes involving the Borrower or any other Loan
Parties (other than the Company). Hours worked by and payment made to employees
of the Borrower or any other Loan Parties (other than the Company) are not in
violation in any material respect of applicable law, rule or regulation
dealing with such matters.

 

47

 

9.22                                                                        No Default.

 

No Event of Default or Unmatured Event of Default
exists or would result from the execution, delivery or performance hereof or of
the other Loan Documents, including as a result of the incurrence by the
Borrower or any other Loan Parties of any Debt hereunder or under any other
Loan Document.

 

9.23                                                                        [INTENTIONALLY DELETED]

 

9.24                                                                        Subordinated Debt.

 

All Obligations constitute senior Debt entitled to the
priority and benefits of any subordination provisions contained in any
agreements relating to any other Debt of the Borrower. The Borrower
acknowledges that the Administrative Agent, each Lender and the Issuing Bank
are entering into this Agreement and are extending the Commitments and making
the Loans in reliance upon any such provisions and this Section 9.24.

 

9.25                                                                        Eligible Accounts and Eligible Inventory.

 

All Accounts and Inventory represented by the Borrower
at any time as being eligible for lending purposes hereunder including, upon
each borrowing hereunder, shall constitute Eligible Accounts and Eligible
Inventory, respectively.

 

9.26                                                                        Other Debt.

 

Except as otherwise set forth on Schedule 9.26
or permitted pursuant to Section 11.1, the Borrower or any other
Loan Party (other than the Company) is not now obligated for any Debt other
than the Obligations.

 

9.27                                                                        [INTENTIONALLY DELETED]

 

9.28                                                                        Bank Accounts

 

Except as otherwise disclosed on Schedule 9.28,
all deposit accounts and operating bank accounts of the Borrower are either
maintained with LaSalle or are the subject of a Blocked Account agreement, in
form and substance satisfactory to the Administrative Agent, among the
Borrower, the Administrative Agent and the bank at which account is maintained.

 

ARTICLE 10

AFFIRMATIVE
COVENANTS

 

Until the expiration or termination of the Commitments
and thereafter until all Obligations (other than unasserted contingent and
indemnification obligations) hereunder and under the other Loan Documents are
paid in full in cash and all Letters of Credit have been terminated (or Cash
Collateralized), the Borrower and each other Loan Party agrees that, unless at
any time the Required Lenders shall otherwise expressly consent in writing, it
will:

 

10.1                                                                        Reports, Certificates and Other Information.

 

Deliver to the Administrative Agent:

 

48

 

10.1.1                                                                  Annual Report.

 

Promptly when available and in any event within ninety
(90) days after the close of each Fiscal Year (or such earlier or later date as
Form 10-Ks are required to be filed with the SEC taking into account any
extension granted by the SEC, provided the Borrower gives the Administrative
Agent prompt written notice of such extension): (a) a copy of the annual
audit report of the Company and its Subsidiaries for such Fiscal Year,
including therein consolidated balance sheets and statements of earnings and
cash flows of the Company and its Subsidiaries as at the end of such Fiscal
Year, certified without adverse reference to going concern value and without
qualification by independent auditors of recognized standing selected by the
Company and reasonably acceptable to the Administrative Agent, together with (i) a
written statement from such accountants to the effect that in making the
examination necessary for the signing of such annual audit report by such
accountants, nothing came to their attention that caused them to believe that
the Borrower and any other Loan Parties were not in compliance with any
provision of Section 11.13 of the US Credit Agreement of this
Agreement insofar as such provision relates to accounting matters or, if
something has come to their attention that caused them to believe that the
Borrower and any other Loan Parties were not in compliance with any such
provision, describing such non-compliance in reasonable detail and (ii) a
comparison with the budget for such Fiscal Year and a comparison with the
previous Fiscal Year; and (b) a consolidating balance sheet of the Company
and its Subsidiaries as of the end of such Fiscal Year and consolidating
statement of earnings and cash flows for the Company and its Subsidiaries for
such Fiscal Year, in each case, prepared in accordance with GAAP (other than
with respect to the absence of footnotes) certified by the Chief Financial
Officer as fairly and accurately presenting in all material respects the
financial condition and results of such entities as at the date and for the
period covered; provided that to the extent the Company’s annual report on Form 10-K
shall satisfy the requirements of this Section 10.1.1, the
Administrative Agent will accept such Form 10-K in lieu of such item.

 

10.1.2                                                                  Interim Reports.

 

(a)                                  Promptly when available and in any event within forty-five (45) days
after the end of each of the first three Fiscal Quarters of each Fiscal Year
(or such earlier or later date as Form 10-Qs are required to be filed by
the SEC taking into account any extension granted by the SEC, provided the
Borrower gives the Administrative Agent prompt written notice of such
extension), unaudited consolidated financial statements of the Company and its
Subsidiaries for such Fiscal Quarter, including therein consolidated balance
sheets and statements of earnings and cash flows as of the end of such Fiscal
Quarter and for the period beginning with the first day of such Fiscal Year and
ending on the last day of such Fiscal Quarter, in each case, prepared in
accordance with GAAP, consistently applied and certified by the Chief Financial
Officer as fairly presenting in all material respects the financial condition
of the Company and its Subsidiaries as at the date thereof, together with (i) a
comparison with the corresponding period of the previous Fiscal Year and a
comparison with the budget for such period of the current Fiscal Year and (ii) a
consolidating balance sheet of the Company and its Subsidiaries as of the end
of such Fiscal Quarter and consolidating statement of earnings and cash flows
for the Company and its Subsidiaries for such Fiscal Quarter, in each case,
prepared in accordance with GAAP (other than with respect to the absence of
footnotes and normal year end audit adjustments) certified by the Chief
Financial Officer as fairly presenting in all material respects the financial
condition of such entities as at the date and for the period covered; and

 

(b)                                 Promptly when available and in any event within thirty (30) days
after the end of each fiscal month of the Company (other than the end of a
fiscal month which is also a Fiscal

 

49

 

Quarter or Fiscal Year end), unaudited consolidated
financial statements of the Company and its Subsidiaries for such fiscal month,
including therein consolidated balance sheets and statements of earnings and
cash flows as of the end of such fiscal month and for the period beginning with
the first day of such Fiscal Year and ending on the last day of such fiscal
month, in each case, prepared in accordance with GAAP, consistently applied and
certified by the Chief Financial Officer as fairly presenting in all material
respects the financial condition of the Company and its Subsidiaries as at the
date thereof, together with (i) a comparison with the corresponding period
of the previous Fiscal Year and a comparison with the budget for such period of
the current Fiscal Year and (ii) a consolidating balance sheet of the
Company and its Subsidiaries as of the end of such month and consolidating
statement of earnings and cash flows for the Company and its Subsidiaries for
such month, in each case, prepared in accordance with GAAP (other than with
respect to the absence of footnotes and normal year-end audit adjustments)
certified by the Chief Financial Officer as fairly presenting in all material
respects the financial condition of such entities as at the date and for the
period covered; provided that to the extent that the Company’s quarterly report
on Form 10-Q shall satisfy the requirement of this Section 10.1.2,
the Administrative Agent will accept such Form 10-Q in lieu of such item.

 

10.1.3                                                                  Compliance Certificates.

 

Contemporaneously with the furnishing of a copy of
each annual audit report pursuant to Section 10.1.1 and each set of
quarterly statements pursuant to Section 10.1.2(a), a duly
completed compliance certificate in the form of Exhibit B, with
appropriate insertions, dated the date of such annual report or such quarterly
statements and signed by the Chief Financial Officer containing (i) if
required pursuant to the terms hereof, a computation of each of the financial
ratios and restrictions set forth in Section 11.13 of the US Credit
Agreement and to the effect that
such officer has not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing or, if there is any such event,
describing it and the steps, if any, taken or being taken to cure it and (ii) a
written statement of the Company’s management setting forth a discussion of the
financial condition of the Company and its Subsidiaries and any material changes
in their financial condition and/or results of operations; provided  that,
with respect to this clause (ii), to the extent that the Company’s quarterly
report on Form 10-Q or annual report on Form 10-K shall satisfy the
requirements of this Section 10.1.3, the Administrative Agent will
accept such Form 10-Q or Form 10-K, as applicable, in lieu of such
item.

 

10.1.4                                                                  Reports to the SEC and to Shareholders.

 

Promptly upon the filing or sending thereof, without
duplication, copies of all regular, periodic or special reports, if any, of the
Borrower or any other Loan Party filed with the SEC; copies of all registration
statements of the Borrower or any other Loan Party or Subsidiary filed with the
SEC (other than on Form S-8), if any; and copies of all proxy statements
or other communications made to security holders generally.

 

10.1.5                                                                  Notice of Default and Litigation

 

Promptly upon becoming aware of any of the following,
written notice describing the same and the steps being taken by the Borrower or
any other Loan Party with respect thereto:

 

(a)                                  the occurrence of an Event of Default or an Unmatured Event of
Default hereunder or the occurrence of an Event of Default or an Unmatured
Event of Default (as each such term is defined in the US Credit Agreement)
under the US Credit Agreement;

 

50

 

(b)                                 any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Borrower or any other Loan Party to
the Administrative Agent which has been instituted or, to the knowledge of the
Borrower, is threatened against the Borrower or any other Loan Party or to
which any of the properties of any thereof is subject which would have or could
reasonably be expected to have a Material Adverse Effect;

 

(c)                                  the institution of any steps to terminate any Plan, or the failure
to make a required contribution to any Plan;

 

(d)                                 any other event (including (i) any violation of any
Environmental Law or the assertion of any Environmental Claim or (ii) the
enactment or effectiveness of any law, rule or regulation) which would
have or could reasonably be expected to have a Material Adverse Effect; or

 

(e)                                  any cancellation, material change or any increase in the deductible
in any insurance policy or coverage maintained by the Borrower or any other
Loan Party.

 

10.1.6                                                                  Borrowing Base Certificates, Schedules and Reports

 

By the thirteenth (13th) Business Day of
each fiscal month for the immediately preceding month, a Borrowing Base
Certificate executed by a Senior Officer of the Borrower (provided that (i) the
Borrower may deliver a Borrowing
Base Certificate more frequently if it chooses, (ii) after the occurrence
and during the continuance of an Event of Default, the Administrative Agent may
require the Borrower to deliver
Borrowing Base Certificates more frequently upon its request and (iii) notwithstanding
the foregoing, if Excess Revolving Loan Availability shall at any time be less
than US$2,000,000, the Borrower shall be required to deliver Borrowing Base
Certificates on a weekly basis (by no later than Wednesday of each week for the
immediately preceding week) but only during such time as Excess Revolving Loan
Availability is less than US$2,000,000. Upon the request by the Administrative
Agent, the Borrower (at is sole expense) shall provide the Administrative Agent
with full access to copies of the Borrower’s sales journals, cash receipts
journals and credit memo journals for the relevant period and shall provide the
Administrative Agent with such other additional information concerning Accounts
and Inventory as may be reasonably requested by the Administrative Agent from
time to time. Each Borrowing Base Certificate shall reflect the actual,
aggregate Account balance and book Inventory balance as of such date.

 

10.1.7                                                                  Management Reports.

 

Promptly upon receipt thereof, copies of all detailed
financial and management reports submitted to the Company, the Borrower or any other Loan Party
by its independent auditors in connection with each annual or interim audit
made by such auditors of the books of the Company and its Subsidiaries.

 

10.1.8                                                                  Projections.

 

As soon as practicable, and in any event not later
than forty five (45) days after the commencement of each Fiscal Year
(commencing with Fiscal Year 2006), financial projections for the Company and
its Subsidiaries for such Fiscal Year (including monthly operating and cash
flow budgets) prepared in a manner consistent with the projections delivered by
the Borrower to the Administrative Agent prior to the Closing Date or otherwise
in a manner reasonably satisfactory to the Administrative Agent, accompanied by
a certificate of the Chief Financial Officer to the effect that (a) such
projections were prepared by the Company and its Subsidiaries in good faith, (b) the
Company and its Subsidiaries

 

51

 

had a reasonable basis for the assumptions
contained in such projections and (c) such projections have been prepared
in accordance with such assumptions (it being recognized that any projections
provided hereunder by the Company, the Borrower or any other Loan Party are
subject to uncertainties and contingencies, are based on good faith estimates
and assumptions believed by the Company, the Borrower or any other Loan Party
to be reasonable as of the date of the applicable projections and upon the best
information then reasonably available to the Company, the Borrower and the Loan
Parties and that actual results during the period or periods covered by any
such projections may differ materially from projected results; provided  however,
that if, during the period or periods covered by any such projections,
management of the Company, the Borrower or any other Loan Party determines that
the projections no longer accurately reflect in any material respect the
projected financial results for such period or periods, as the case may be, the
Borrower shall, as soon as practicable, provide to the Administrative Agent
revised projections for such period or periods certified by the Chief Financial
Officer.

 

10.1.9                                                                  Material Notices.

 

Promptly following receipt, copies of any notices of
default, termination or acceleration or any other material notices received
from any holder or trustee of, under or with respect to any other material
agreement to which the Borrower or any other Loan Party is a party, including,
without limitation, all notices received in connection with the US Credit
Agreement.

 

10.1.10                                                            Asset Dispositions.

 

Promptly upon learning thereof, notice of any Asset
Disposition.

 

10.1.11                                                            Other Information.

 

Promptly from time to time, such other information
concerning the Borrower or any other Loan Parties (or any of them) as any
Lender or the Administrative Agent may reasonably request.

 

10.1.12                                                            Deliveries under US Credit Agreement

 

To the extent that any notice, report, information,
projection, certificate or other document or item required to be delivered to
the Administrative Agent hereunder is also required to be, or otherwise is,
delivered to the US Agent under the US Credit Agreement, the Borrower’s and
each other Loan Party’s obligations hereunder in respect thereof shall be
deemed to have been satisfied.

 

10.2                                                                        Books, Records, Inspections and Appraisals.

 

Keep its books and records in accordance with sound
business practices sufficient to allow the preparation of financial statements
in accordance with GAAP; permit the Administrative Agent, any Lender or any
representative thereof to inspect the properties and operations of the Borrower
and the other Loan Parties during regular business hours and with reasonable
prior notice (or any time without notice if an Event of Default exists); and
permit, during regular business hours and with reasonable prior notice (or at
any time without notice if an Event of Default exists), the Administrative Agent
or any representative thereof to visit any or all of its offices, to discuss
its financial matters with its officers and its independent auditors (and the
Borrower hereby authorizes such independent auditors to discuss such financial
matters with any Lender or the Administrative Agent or any representative
thereof), and to examine (and, at the expense of the Borrower) photocopy
extracts from any of its books or other records; and permit, during regular
business hours and with reasonable prior notice (or at any time without notice
if an Event of Default exists), the Administrative Agent and its
representatives to inspect the Collateral and other tangible assets of the
Borrower, to perform appraisals of the Collateral and real property of the

 

52

 

Borrower, and to inspect, audit, check and
make copies of and extracts from the books, records, computer data, computer
programs, journals, orders, receipts, correspondence and other data relating to
Inventory, Accounts and any other Collateral. The Borrower shall be liable for
all reasonable expenses of the Administrative Agent incurred in connection with
such inspections, audits and appraisals including the reasonable fees and
expenses of its representatives and/or agents (it being agreed that any Lender
may accompany the Administrative Agent at its own expense); provided, however,
that other than with respect, to audits, inspections and appraisals conducted
at any time that an Event of Default exists, the Borrower shall not be required
to reimburse the Administrative Agent for more than two (2) inspections
and/or audits and more than two (2) appraisals in any Fiscal Year; it
being acknowledged that a single inspection, audit and/or appraisal may entail
visits to the multiple locations of books, records and assets of the Borrower;
and it being further agreed that the costs for each inspection/audit shall not
exceed US$35,000, in aggregate, and the costs for each appraisal shall not
exceed US$20,000, in aggregate, in each case (and, in each case, inclusive of
any such amounts expended in connection with audits or appraisals of the US
Borrowers pursuant to the US Credit Agreement and the other US Loan Documents) plus
reasonable out-of-pocket expenses and disbursements in connection with any such
inspections, audits and appraisals.

 

10.3                                                                        Maintenance of Property; Insurance.

 

10.3.1                                                                  Obligation to Maintain Properties.

 

Keep all Collateral and all other property useful and
necessary in the business of the Borrower and the other Loan Parties in good
working order and condition, ordinary wear and tear excepted and shall make all
necessary replacements of, and repairs to, the equipment so that the operating
efficiency and the value thereof shall at all times be preserved and maintained.

 

10.3.2                                                                  Property Insurance.

 

Keep the Collateral and all other property insured for
the full insurable value thereof against loss or damage by fire, theft,
explosion, sprinklers, collision and such other risks as are customarily
insured against by Persons engaged in businesses similar to that of the
Borrower, with such companies, in such amounts, with such deductibles, and
under policies in such form, as shall be reasonably satisfactory to the
Administrative Agent. Copies of all such policies of insurance covering the
property and operations of the Borrower have been and shall promptly hereafter
be delivered to the Administrative Agent, together with evidence of payment of
all premiums therefor, and shall contain an endorsement, in form and substance reasonably
acceptable to the Administrative Agent, showing loss under such insurance
policies (other than losses with respect to properties subject to prior
Permitted Liens of the type described in Section 11.2(d) in
favour of Persons other than the Administrative Agent or the Lenders) payable
to the Administrative Agent, for the benefit of the Administrative Agent and
the Lenders. Such endorsement, or an independent instrument furnished to the
Administrative Agent, shall provide that the insurance company shall give the
Administrative Agent at least thirty (30) days’ prior written notice before any
such policy of insurance is altered or cancelled and that no act, whether
wilful or negligent, or default of the Borrower or any other Person shall
affect the right of the Administrative Agent to recover under such policy of
insurance in case of loss or damage. In addition, the Borrower shall cause to
be executed and delivered to the Administrative Agent an assignment of proceeds
of its business interruption insurance policies. The Borrower hereby directs
all insurers under all policies of property insurance to pay all proceeds
payable thereunder directly to the Administrative Agent; provided  that,
so long as no Event of Default then exists or thereafter occurs, if the Borrower notifies the Administrative
Agent within twenty (20) days after such casualty event that it intends to
repair, rebuild or replace any such damaged or destroyed equipment or real
property with other property of comparable quality, value and use within one
hundred and eighty (180) days after any such casualty event, then the

 

53

 

Administrative Agent shall hold such
proceeds received by it in a non-interest bearing account at LaSalle and,
subject to its receipt of plans, specifications and budgets reasonably
acceptable to it, will agree to disburse such proceeds as needed to effect such
repair, reconstruction or replacement; it being agreed that (i) funds paid
to and held by the Administrative Agent as aforesaid shall not be deemed to
reduce the outstanding Obligations; and (ii) if such repairs, replacement
or reconstruction have not been substantially completed with such one hundred
and eighty (180) day period (or such earlier time as the Administrative Agent
reasonably determines that such repair, replacement or reconstruction is no
longer being diligently pursued), then Administrative Agent shall have the
right to apply all such funds being held by it to the Obligations as provided
therein. The Borrower irrevocably makes, constitutes and appoints the
Administrative Agent (and all officers, employees or agents designated by the
Administrative Agent) as the Borrower’s true and lawful attorney (and
agent-in-fact) for the purpose of, following the occurrence and during the
continuance of an Event of Default, making, settling and adjusting claims under
such policies of property and/or business interruption insurance, endorsing the
name of the Borrower on any check, draft, instrument or other item of payment
for the proceeds of such policies of insurance and making all determinations
and decisions with respect to such policies of insurance.

 

10.3.3                                                                  Liability Insurance.

 

Maintain at its expense, such public liability and
third party property damage insurance as is customary for Persons engaged in
businesses similar to that of the Borrower and the other Loan Parties with such
companies and in such amounts, with such deductibles and under policies in such
form as shall be reasonably satisfactory to the Administrative Agent and copies
of all such policies have been and shall promptly hereafter be delivered to the
Administrative Agent, together with evidence of payment of all premiums
therefor; each such policy relating to the Borrower shall contain an endorsement
showing the Administrative Agent as an additional insured thereunder and
providing that the insurance company shall give the Administrative Agent at
least thirty (30) days’ prior written notice before any such policy shall be
altered or cancelled (or ten (10) days in the case of cancellation for
non-payment of premiums).

 

10.3.4                                                                  Forced Place Coverage.

 

UNLESS THE BORROWER PROVIDES THE ADMINISTRATIVE AGENT
WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, AND AFTER
THE ADMINISTRATIVE AGENT’S WRITTEN DEMAND THEREFOR, THE ADMINISTRATIVE AGENT MAY (BUT
SHALL HAVE NO OBLIGATION TO) PURCHASE INSURANCE AT THE BORROWER’S EXPENSE TO
PROTECT THE ADMINISTRATIVE AGENT’S AND THE LENDERS’ INTERESTS IN THE COLLATERAL.
THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE BORROWER’S OR ANY OTHER LOAN
PARTY’S INTERESTS. THE COVERAGE THAT THE ADMINISTRATIVE AGENT PURCHASES MAY NOT
PAY ANY CLAIM THAT IS MADE AGAINST THE BORROWER IN CONNECTION WITH THE
COLLATERAL. THE BORROWER MAY LATER CANCEL ANY INSURANCE PURCHASED BY THE
ADMINISTRATIVE AGENT, BUT ONLY AFTER PROVIDING THE ADMINISTRATIVE AGENT WITH
EVIDENCE THAT THE BORROWER HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT.
IF THE ADMINISTRATIVE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE
BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING
INTEREST AND ANY OTHER CHARGES THAT MAY BE IMPOSED WITH THE PLACEMENT OF
THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF
THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE PRINCIPAL
AMOUNT OF THE LOANS OWING HEREUNDER. THE COSTS OF THE INSURANCE MAY BE
MORE THAN THE COST OF THE INSURANCE THE BORROWER MAY BE ABLE TO OBTAIN ON
ITS OWN.

 

54

 

10.4                                                                        Compliance with Laws; Payment of Taxes and Liabilities.

 

(a)                                  Comply in all material respects with all applicable laws, rules,
regulations, decrees, orders, judgments, licenses and permits, except where
failure to comply would not have or could not reasonably be expected to have a
Material Adverse Effect;

 

(b)                                 Without limiting clause (a) above, comply in all material
respects, with all applicable privacy legislation and anti-money laundering
laws and regulations; and

 

(c)                                  Pay prior to delinquency, all federal, provincial and state income
taxes and all other material taxes and other governmental charges against it or
any Collateral, as well as claims of any kind which, if unpaid, could become a
Lien (other than a Permitted Lien) on any of its property; provided that this
clause (c) shall not require the Borrower to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP and, in the case of a claim which could become
a Lien on any Collateral, such contest proceedings shall stay the foreclosure
of such Lien or the sale of any portion of the Collateral to satisfy such
claim.

 

10.5                                                                        Maintenance of Existence, etc.

 

Maintain and preserve, (a) its existence and good
standing in the jurisdiction of its organization and (b) its qualification
to do business and good standing in each jurisdiction where the nature of its
business makes such qualification necessary (other than such jurisdictions in
which the failure to be qualified or in good standing would not have or could
not reasonably be expected to have a Material Adverse Effect).

 

10.6                                                                        Reserved.

 

10.7                                                                        Use of Proceeds.

 

The Borrower shall use the proceeds of the Loans, and
the Letters of Credit, solely for working capital purposes, and for other
general business purposes or as funds of the Borrower are otherwise permitted
to be used by this Agreement.

 

10.8                                                                        Employee Benefit Plans.

 

Maintain each Plan and any other benefit and employee
plans in substantial compliance with all applicable requirements of law and
regulations.

 

10.9                                                                        Environmental Matters.

 

(a)                                  If any release or threatened release or other disposal of Hazardous
Substances shall occur or shall have occurred on any real property or any other
assets of the Borrower or any other Loan Party (other than the Company), the
Borrower or such other Loan Party shall cause the prompt containment and
removal of such Hazardous Substances and the remediation of such real property
or other assets as necessary to comply with all Environmental Laws and to
preserve the material value of such real property or other assets. Without
limiting the generality of the foregoing, the Borrower and any other Loan Party
(other than the Company) shall comply with any federal, provincial or state
judicial or administrative order requiring the performance at any real property
of the Borrower or

 

55

 

of any other Loan Party (other than the Company) of
activities in response to the release or threatened release of a Hazardous
Substance. To the extent that the transportation of Hazardous Substances is
permitted by this Agreement, the Borrower and each other Loan Party (other than
the Company) shall, dispose of such Hazardous Substances, or of any other
wastes, only at licensed disposal facilities operating to its knowledge in
compliance with Environmental Laws.

 

(b)                                 The Borrower and the other Loan Parties (other than the Company)
shall promptly notify the Administrative Agent in writing upon learning there
is or are in each case, which are reasonably likely to result in material
liability to such party under applicable Environmental Law, (i) any
Hazardous Substances other than those used by such parties or tenants under
leases at any real property of the Borrower, its Subsidiaries or any other Loan
Party (other than the Company) in the ordinary course of their businesses and
in compliance with all Environmental Laws, present on such real property; (ii) any
release of Hazardous Substances in, on, under, from or migrating towards such
real property; (iii) any material non-compliance with Environmental Laws
related in any way to such real property; (iv) any actual or reasonably
likely liens and other encumbrances imposed pursuant to any Environmental Law; (v) any
investigation or action or claim, whether threatened or pending, by any
governmental agency or third party pertaining to the release of Hazardous
Substances in, on, under, from, or migrating towards such real property; and (vi) any
installation of wells, piping, or other equipment at such real property to
investigate, remediate or otherwise address any release of Hazardous Substances
at, on, in or in the vicinity of such real property.

 

10.10                                                                 New Subsidiaries.

 

If, after the Closing Date, the Borrower creates or
acquires, either directly or indirectly, any Subsidiary in accordance with Section 11.4
or 11.15, it will upon such creation or acquisition thereof:

 

(a)                                  (x) cause such Subsidiary to become a Guarantor or a joint borrower
hereunder; (y) cause such Subsidiary to execute and deliver to the
Administrative Agent (1) a Joinder Agreement in the form of Exhibit G
hereto, in its capacity as a Guarantor or joint borrower, as applicable and (2) any
further documents, instruments or agreements as the Administrative Agent may
reasonably require in order to grant the Administrative Agent a perfected first
priority security interest (subject only to Permitted Liens) in substantially
all of the assets of such Subsidiary; and

 

(b)                                 [INTENTIONALLY DELETED]

 

(c)                                  (i) deliver to the Administrative Agent (1) revised
schedules to the Loan Documents reflecting the Borrower’s ownership interest in
such Subsidiary and (2) the certificates, if any, representing the Capital
Securities of such Subsidiary required to be pledged hereunder, together with
undated stock powers and an irrevocable proxy (or equivalent instruments, as
applicable), or if such interest is uncertificated, evidence of the
registration of the Administrative Agent’s lien on and security interest in
such interest on the books and records of such entity and (ii) execute and
deliver all such other instruments, documents and agreements and take such
other actions, the Administrative Agent may reasonably request or require to
fully evidence and consummate the transactions contemplated in clause (a) above
and to ensure the enforceability, perfection and first-priority (subject only
to Permitted Liens) of the interests and undertakings thereunder, including,
without limitation, (i) the execution and delivery of guaranties,

 

56

 

security agreements, pledge agreements, mortgages,
deeds of trust, financing statements and other documents, and the filing or
recording of any of the foregoing, (ii) the delivery of certificated
securities and other Collateral with respect to which perfection is obtained by
possession and (iii) legal opinions in form and substance and from such
counsel reasonably satisfactory to the Administrative Agent to be addressed to
(or permit reliance upon by) the Administrative Agent, the Lenders and the
Issuing Bank.

 

10.11                                                                 Deposit Accounts

 

(a)                                  Unless the Administrative Agent otherwise consents in writing, in
order to facilitate the Administrative Agent’s and the Lenders’ maintenance and
monitoring of their security interests in the Collateral, continue to maintain
all of its deposit accounts, securities accounts, operating accounts, checking
accounts and disbursement accounts (collectively, the “Operating Accounts”) with HSBC Bank Canada
and shall close and transition all other accounts currently in place at other
financial institutions to either HSBC Bank Canada or another financial
institution acceptable to the Administrative Agent on or within ten (10) Business
Days after the Closing Date. In addition, the Borrower and each other Loan
Party (other than the Company) shall establish with HSBC Bank Canada, on or
within ten (10) Business Days after the Closing Date, collection or other
accounts to which collections and proceeds of Accounts and other customer
payments are remitted or deposited with (collectively, “Blocked Accounts”).

 

(b)                                 With respect to any Blocked Accounts, the Borrower and each other
Loan Party (other than the Company) agrees to notify all Account Debtors to
remit payments on Accounts to such Blocked Accounts and shall deliver, on or
within ten (10) Business Days after the Closing Date, Blocked Account
Agreements executed by the Borrower and each other applicable Loan Party (other
than the Company), the applicable financial institution and the Administrative
Agent relating to each such Blocked Account. Following the Closing Date, the
Borrower and any other Loan Party (other than the Company) may not open any new
Operating Account or new Blocked Account unless the Borrower shall have given
the Administrative Agent ten (10) days’ prior written notice of its
intention to open any such new account and shall have delivered a
fully-executed copy of a Blocked Account Agreement covering any new Blocked
Account in accordance with the last sentence of this Section. The Borrower and
every other Loan Party (other than the Company) shall deliver to the
Administrative Agent a revised schedule showing any changes to its
Operating Accounts or Blocked Accounts within five (5) Business Days of
any such change. The Borrower and every other Loan Party (other than the
Company) hereby authorizes the financial institutions at which the Borrower and
every other Loan Party (other than the Company) maintains an Operating Account
or a Blocked Account to provide the Administrative Agent with a copy of such
financial institution’s regular statements and such other more frequent
statements or advices as the Administrative Agent may reasonably request, in
each case, covering the remittances, deposits, and withdrawals from and
balances of such account, and the Borrower and every other Loan Party (other
than the Company) hereby consents to such information being provided to the
Administrative Agent. The Borrower and every other Loan Party (other than the
Company) shall cause each financial institution at which the Borrower and every
other Loan Party (other than the Company) maintains a Blocked Account to enter
into a Blocked Account Agreement in order to give the Administrative Agent “control”
of such account. Notwithstanding anything contained herein or in any other Loan
Document to the contrary, with respect to any Blocked Accounts, upon the
earlier of (i) the occurrence and continuance of an Event of Default and (ii) the
delivery by the US Agent of any

 

57

 

Notice of Control (as defined in the US Credit
Agreement) pursuant to the provisions of the US Credit Agreement, the
Administrative Agent may instruct any or all of the financial institutions at
which any such accounts are maintained (A) to cease honoring the Borrower’s
and any of the Loan Party’s directions as to the handling, disposition and
disbursement of funds or remittance to or any deposit in any such accounts covered
by a Blocked Account Agreement and (B) to remit all amounts on deposit in
or remittance to such accounts to accounts designated by the Administrative
Agent (in each case of clause (A) or (B) above, a “Notice of Control”). The Administrative
Agent agrees that it shall not give a Notice of Control to any financial
institution party to a Blocked Account Agreement unless an event described in
either clause (i) or (ii) above has occurred and is continuing. Upon
the written request of the Borrower delivered to the Administrative Agent at
any time (1) after the waiver, if any, of any existing Events of Default
or (2) upon a Notice of Control (as defined in the US Credit Agreement)
delivered by the US Agent pursuant to the provisions of the US Credit Agreement
being rescinded by the US Agent and provided  that no other Event
of Default has occurred and is then continuing, the Administrative Agent shall
promptly notify all financial institutions to which it had previously delivered
a Notice of Control that such notice is rescinded and that such financial
institution is again entitled to rely on the instruction and direction of the
Borrower or other applicable Loan Party with respect to such accounts. In
addition, upon the occurrence of an event described in either clause (i) or
(ii) above, the Administrative Agent may request the Borrower and every
other Loan Party (other than the Company) to direct all of their respective
Account Debtors to make all payments on the Accounts directly to a post office
box (each a “Lock Box”) with a
financial institution acceptable to, and in the name and under exclusive
control of, the Administrative Agent. All payments received in the Lock Box
shall be deposited in the applicable Blocked Account. The Administrative Agent
shall copy the Borrower on any Notice of Control and any notices of rescission
given to a financial institution but the failure to do so shall in no event
effect the validity of any such Notice of Control, nor subject the
Administrative Agent to any liability.

 

ARTICLE 11

NEGATIVE
COVENANTS

 

Until the expiration or termination of the Commitments
and thereafter until all Obligations (other than unasserted contingent and
indemnification obligations) hereunder and under the other Loan Documents are
paid in full in cash and all Letters of Credit have been terminated, the
Borrower agrees that, unless at any time the Required Lenders shall otherwise
expressly consent in writing, it will:

 

11.1                                                                        Debt.

 

Not create, incur, assume or suffer to exist any Debt,
except:

 

(a)                                  Obligations under this Agreement and the other Loan Documents;

 

(b)                                 Debt secured by Liens permitted by Section 11.2(d);
provided that the aggregate amount of all such Debt at any time outstanding
shall not exceed US$100,000 or the Canadian Dollar Equivalent Amount thereof;

 

(c)                                  unsecured Debt owing by the Borrower to any other Loan Party or
unsecured Debt owing by any other Loan Party to the Borrower; provided  that
no Event of Default has occurred

 

58

 

and is continuing and provided  further  that
any such unsecured Debt (other than unsecured Debt of the Borrower owing to the
Company) shall be evidenced by a demand promissory note in the form of Exhibit H
attached hereto and pledged and delivered to the Administrative Agent pursuant
to the Collateral Documents as additional collateral security for the
Obligations, and the obligations under such demand note shall be subordinated
to the Obligations hereunder in a manner reasonably satisfactory to the
Administrative Agent;

 

(d)                                 unsecured Subordinated Debt to Persons (other than Debt owing by a
Loan Party to any other Loan Party or any Affiliate thereof) in an amount at
any time outstanding not to exceed US$1,500,000 or the Canadian Dollar
Equivalent Amount thereof;

 

(e)                                  Hedging Obligations approved by the Administrative Agent and
incurred in favour of a Lender or an Affiliate thereof (other than any Hedging
Agreement existing as of the Closing Date, which can be with any Person) for bona fide hedging purposes and not for
speculation;

 

(f)                                    Debt existing on the date hereof described on Schedule 9.26
and any extension, renewal or refinancing thereof so long as neither the
principal amount thereof is increased, the weighted average life to maturity
decreased or, if secured, any additional collateral is granted as security
therefor;

 

(g)                                 [INTENTIONALLY DELETED];

 

(h)                                 unsecured Contingent Liabilities arising with respect to customary
indemnification obligations in favour of sellers in connection with Permitted
Acquisitions and purchasers in connection with dispositions permitted under Section 11.4;

 

(i)                                     up to US$500,000 or the Canadian Dollar Equivalent Amount thereof at
any time outstanding of Acquired Debt assumed in Permitted Acquisitions;

 

(j)                                     unsecured Debt in respect of bid, performance or surety, appeal or
similar bonds issued for the account of and completion guarantees provided by
the Borrower in the ordinary course of business;

 

(k)                                  Debt arising from the honouring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business; provided, however, that
such Debt is extinguished within five Business Day of incurrence; and

 

(l)                                     Debt arising in connection with endorsement of instruments for
deposit in the ordinary course of business;

 

(m)                               [INTENTIONALLY DELETED].

 

11.2                                                                        Liens.

 

Not create or permit to exist any Lien on any of its
real or personal properties, assets or rights of whatsoever nature (whether now
owned or hereafter acquired), except:

 

59

 

(a)                                  Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and, in each case, for which it maintains
adequate reserves;

 

(b)                                 Liens arising in the ordinary course of business (such as (i) Liens
of carriers, warehousemen, mechanics and materialmen and other similar Liens
imposed by law and (ii) Liens in the form of deposits or pledges incurred
in connection with worker’s compensation, unemployment compensation and other
types of social insurance (or in connection with surety bonds, bids,
performance bonds and similar obligations) for sums not overdue or being
contested in good faith by appropriate proceedings and not involving any
advances or borrowed money or the deferred purchase price of property or
services and, in each case, for which it maintains adequate reserves;

 

(c)                                  Liens described on Schedule 11.2 existing as of the
Closing Date;

 

(d)                                 subject to the dollar limitation set forth in Section 11.1(b),

 

(i)                                     Liens (including Liens having priority over the Liens pursuant to
the Loan Documents) arising in connection with Capital Leases (and attaching
only to the property being leased),

 

(ii)                                  Liens (including Liens having priority over the Liens pursuant to
the Loan Documents) of the type described in subclauses (i) and (iii) of
this clause (d) existing on property at the time of the acquisition
thereof by the Borrower or any other Loan Party (and not created in
contemplation of such acquisition) pursuant to any Permitted Acquisition and

 

(iii)                               Liens (including Liens having priority over the Liens pursuant to
the Loan Documents) that constitute purchase money security interests on any
capital asset securing debt incurred for the purpose of financing all or any
part of the cost of acquiring such capital asset, provided that any such Lien
attaches solely to the capital asset so acquired and secures no more than the
purchase price (or portion) thereof financed thereby;

 

(e)                                  easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary conduct of the business of the Borrower or any other
Loan Party;

 

(f)                                    Liens in favour of the Administrative Agent under the Loan
Documents;

 

(g)                                 [INTENTIONALLY DELETED];

 

(h)                                 [INTENTIONALLY DELETED];

 

(i)                                     Liens on deposit accounts granted or arising in the ordinary course
of business in favour of depositary banks maintaining such deposit accounts
solely to secure customary account fees and charges payable in respect of such
deposit accounts and overdrafts;

 

(j)                                     Liens in favour of custom brokers for taxes, assessments and
governmental charges the payment of which is not required under Section 10.5
payable in connection with the

 

60

 

importation of Inventory in the ordinary course of
business of the Borrower or any other Loan Party;

 

(k)                                  leases or subleases granted to other Persons (as lessee thereof) not
materially interfering with the conduct of the business of the Borrower or any
other Loan Party;

 

(l)                                     [INTENTIONALLY DELETED];

 

(m)                               Liens arising out of the existence of judgment or awards not giving
rise to an Event of Default; provided that the Borrower or any such other Loan
Party shall promptly seek the stay of, or otherwise satisfy any such Lien not
being contested in good faith;

 

(n)                                 inchoate statutory and common law landlords’ liens under leases to
which the Borrower or any other Loan Party is a party;

 

(o)                                 [INTENTIONALLY DELETED];

 

(p)                                 the replacement, extension or renewal of any Lien permitted by
clauses (c) or (d) above upon or in the same property subject thereto
arising out of the extension, renewal or replacement of the Debt secured
thereby (without increase in the amount thereof or decrease in the weighted
average life to maturity thereof); and

 

(q)                                 any other Liens securing indebtedness of the Borrower or its
Subsidiaries in an aggregate amount not exceeding US$100,000 or the Canadian
Dollar Equivalent Amount thereof at any time.

 

11.3                                                                        Restricted Payments.

 

Except as permitted pursuant to the following
sentence, not (a) make any distribution to any holders of its Capital
Securities, (b) purchase or redeem any of its Capital Securities, (c) pay
any management fees or similar fees to any of its direct or indirect
equityholders or any Affiliate thereof, (d) pay, redeem, prepay, defease,
purchase, prepurchase or make any other payment on or in respect of any
Subordinated Debt, or (e) set aside funds for any of the foregoing. Notwithstanding
the foregoing,

 

(a)                                  any Subsidiary may pay dividends or make other distributions in
respect of its Capital Securities to the Borrower (including, without
limitation, to enable the recipient to pay taxes);

 

(b)                                 (i) so long as no Event of Default has occurred and is
continuing and no Unmatured Event of Default exists or would result therefrom,
the Borrower may make regularly scheduled payments of interest in respect of
Subordinated Debt (other than Subordinated Debt owing to any Affiliate) to the
extent permitted under the subordination provisions thereof, and (ii) the
Borrower shall be permitted to accrue all non-cash interest on its Subordinated
Debt and non-cash dividends on its Capital Securities consisting of preferred
stock.

 

(c)                                  so long as no Event of Default has occurred and is continuing and no
Event of Default would result therefrom, the Borrower may (i) declare and
pay out of legally available funds, regular cash dividends payable on the
Borrower’s common stock, and (ii) make regularly scheduled payments of
principal and interest on Debt permitted pursuant to Section 11.1(c);
and

 

61

 

(d)                                 any Loan Party may declare and pay dividends or make other
distributions in respect of its common stock payable solely in its Common
Stock.

 

(e)                                  [INTENTIONALLY DELETED]

 

11.4                                                                        Mergers, Consolidations, Sales and Other Transactions Outside the
Ordinary Course of Business.

 

Not:

 

(a)                                  sell, transfer, convey or lease any of its assets or Capital
Securities except for (i) sales of Inventory in the ordinary course of
business, (ii) sales of obsolete and unusable Equipment in the ordinary
course of business, (iii) subject to Section 6.2.2(a), so long
as no Event of Default then exists, the disposition of other property having a
fair market value not to exceed US$100,000 or the Canadian Dollar Equivalent
Amount thereof in the aggregate in any fiscal year for a cash purchase price
payable at closing of not less than the fair market value thereof (unless the
Administrative Agent consents otherwise) and (iv) in the case of its
Capital Securities, as permitted pursuant Section 11.9 or clause (f) of
this Section;

 

(b)                                 sell or assign with or without recourse any receivables;

 

(c)                                  prepay any Debt (other than the Obligations);

 

(d)                                 enter into any transaction whereby the Borrower leases any property
previously owned and sold by the Borrower;

 

(e)                                  except as expressly otherwise permitted hereunder enter into any
other transaction outside the ordinary course of the Borrower’s business; or

 

(f)                                    be a party to any amalgamation or consolidation or, except as
otherwise permitted pursuant to this Section 11.4(f), Section 11.10(a),
or Section 11.10(f), purchase or otherwise acquire the assets or
the Capital Securities of any class of any other Person; except for (1) the
amalgamation or consolidation of any Loan Party (other than the Company) into
any other Loan Party (other than the Company) or the sale, assignment or
conveyances of any, all or substantially all of the assets of one Loan Party
(other than the Company) to another Loan Party (other than the Company), or (2) any
Acquisition by the Borrower entered into and consummated after September 30,
2005 in respect of which the requirements of Section 10.10 have
then been satisfied, where:

 

(i)                                     the business, divisions or operating units acquired are for use, or
the Person acquired is engaged or reasonably related or complementary thereto,
in the businesses engaged in by the Borrower on the Closing Date;

 

(ii)                                  immediately before and after giving effect to such Acquisition, no
Event of Default or Unmatured Event of Default on an actual or pro forma basis
shall exist or would result therefrom;

 

(iii)                               the aggregate consideration to be paid by the Borrower (including
any Debt assumed or issued in connection therewith, the amount thereof to be
calculated in accordance with GAAP and the fair market value of any non-cash
consideration)

 

62

 

in connection with (1) such Acquisition (or any
series of related Acquisitions) is less than US$1,000,000 or the Canadian
Dollar Equivalent Amount thereof in any given transaction (or series of related
transactions) and US$2,000,000 or the Canadian Dollar Equivalent Amount thereof
in any given Fiscal year and (2) all Acquisitions after the Closing Date
is less than US$3,000,000 or the Canadian Dollar Equivalent Amount thereof in
the aggregate;

 

(iv)                              [INTENTIONALLY DELETED]

 

(v)                                 in the case of the Acquisition of any Person, the governing body of
such Person has approved such Acquisition;

 

(vi)                              reasonably prior to such Acquisition, the Administrative Agent shall
have received complete executed or conformed copies of each material document,
instrument and agreement to be executed in connection with such Acquisition
together with all lien search reports and lien release letters and other
documents as the Administrative Agent may reasonably require to evidence the
termination of Liens (other than the Permitted Liens) on the assets or business
to be acquired;

 

(vii)                           reasonably prior to such Acquisition, the Administrative Agent shall
have received an acquisition summary with respect to the Person and/or business
or division to be acquired, such summary to include a reasonably detailed
description thereof (including financial information) and operating results
(including financial statements for the most recent 12 month period for which
they are available and as otherwise available), the terms and conditions,
including economic terms, of the proposed Acquisition, and the calculation of pro forma compliance with the financial
ratios and restrictions of the Company set forth in Sections 11.13.1 and
11.13.2 of the US Credit Agreement;

 

(viii)                        the Administrative Agent shall have approved the computation of pro forma compliance with the financial
ratios and restrictions referred to in clause (vii) above;

 

(ix)                                consents have been obtained in favour of the Administrative Agent
and the Lenders to the granting of a security interest and/or the collateral
assignment of rights and indemnities under the related acquisition documents
and opinions of counsel for the Borrower and/or relevant Subsidiaries and (if
delivered to the Borrower or any such Subsidiary) the selling party allowing
reliance thereon by the Administrative Agent and the Lenders have been
delivered and the Borrower or any applicable Subsidiary shall have executed an
agreement providing for the granting of a security interest in, and the
collateral assignment to the Administrative Agent of, the Borrower’s or such
applicable Subsidiary’s rights and indemnities under the related acquisition
documents;

 

(x)                                   if such Acquisition is of one hundred percent of the Capital
Securities of a Person (and in respect of which the provisions of Section 10.10
will be complied with), or is made through a Subsidiary formed in compliance
with Section 11.15, the provisions of Section 10.10
have been satisfied with respect to all such Persons and its Subsidiaries or
such newly-formed Subsidiaries concurrently with or prior to such Acquisition;

 

63

 

(xi)                                if the assets acquired in such Acquisition are intended to be
included in the Borrowing Base, the Administrative Agent must provide its prior
written approval, upon its review of such assets including, without limitation,
its review of such field examinations, audits, appraisals and other due
diligence as the Administrative Agent shall reasonably require; it being
acknowledged and agreed that (i) the Administrative Agent may require that
the acquired assets be held in a separate Subsidiary which shall be deemed a
Guarantor and (ii) such additional assets, if any, included in the
Borrowing Base may be subject to different advance rates or may require the
imposition of additional reserves with respect thereto;

 

(xii)                             no Interim Advance shall then be outstanding or would be required on
a pro forma basis after giving effect to such Acquisition; and

 

(xiii)                          if the Acquisition is structured as a merger, the Borrower is the
surviving entity.

 

(any such Acquisition described in this
clause (f), being a “Permitted Acquisition”).

 

11.5                                                                        Modification of Organizational Documents.

 

Not permit the charter, by-laws or other
organizational documents of the Borrower to be amended or modified in any way
which could reasonably be expected to materially adversely affect the interests
of the Lenders. Not change its state of formation or its organizational form
unless it gives the Administrative Agent at least thirty (30) Business Days
prior notice and takes actions reasonably requested by Agent to maintain the
perfection or priority of any Lien or security interest granted hereunder.

 

11.6                                                                        Transactions with Affiliates.

 

Not enter into, or cause, suffer or permit to exist
any transaction, arrangement or contract with any of its other Affiliates
(including any Subsidiary or joint venture) which is on terms, which are less
favourable than are obtainable from any Person which is not one of its
Affiliates, other than (i) customary and reasonable employment
arrangements with employees (including without limitation, incentive
compensation arrangements) and benefit programs and entered into in the
ordinary course of business and pursuant to the reasonable requirements of the
Borrower’s business and in the case of any senior officers or directors of the
Borrower, approved by the Board of Directors and permissible under law, (ii) customary
indemnification agreements and insurance arrangements entered into for the
benefit of the Borrower’s directors or officers entered into in the ordinary
course of business consistent with past practices and pursuant of the
reasonable requirements of the Borrower’s business, and (iii) as permitted
to clauses (a), (g) and (k) of Section 11.10, (iv) transactions
with officers or directors of the Borrower or its Subsidiaries providing for
the payment of customary and reasonable fees, and indemnification and
reimbursement of expenses, upon customary and reasonable terms.

 

11.7                                                                        Unconditional Purchase Obligations.

 

Not enter into, guarantee or be a party to any
material contract for the purchase of materials, supplies or other property or
services if such contract requires that payment be made by it regardless of
whether delivery is ever made of such materials, supplies or other property or
services.

 

64

 

11.8                                                                        Inconsistent Agreements.

 

Not enter into any agreement containing any provision
which would (a) be violated or breached by any borrowing by the Borrower
hereunder or by the performance by the Borrower or any other Loan Party of any
of their respective Obligations hereunder or under any other Loan Document, or (b) prohibit
the Borrower or any other Loan Party from granting to the Administrative Agent
and the Lenders, a Lien on any of its assets (other than distribution
agreements or licence agreements, provided  that with respect to
any such distribution agreements or license agreements that prohibit the
Borrower or any other Loan Party (other than the Company) from granting to the
Administrative Agent Liens on the right to receive payments and other proceeds
from the sale of products licensed or distributed under such agreements, the Borrower and each such other
applicable Loan Party (other than the Company) shall use their commercially
reasonable efforts (it being agreed that this shall not include the payment of
any monies) to obtain the consent of the counterparties thereto to permit the
Liens of the Administrative Agent under the Loan Documents and the Borrower further
agrees to, and to cause the other Loan Parties (other than the Company) to,
disclose and schedule such agreements in accordance with the terms
contained in the Security referenced in Section 12.1.13(a), or (c) create or permit
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary of the Borrower to (i) pay dividends or make other
distributions to the Borrower or any other Loan Party, or pay any Debt owed to
the Borrower or any other Loan Party, (ii) make loans or advances to the
Borrower or any other Loan Party or (iii) transfer any of its assets or
properties to the Borrower or any other Loan Party, other than (A) customary
restrictions and conditions contained in agreements relating to the sale of all
or a substantial part of the assets of any Subsidiary of the Borrower pending
such sale, provided  that such restrictions and conditions apply
only to the Subsidiary to be sold and such sale is permitted hereunder, (B) restrictions
or conditions imposed by any agreement relating to purchase money Debt, Capital
Leases and other secured Debt permitted by this Agreement if such restrictions
or conditions apply only to the property or assets securing such Debt, (C) customary
provisions in leases and other contracts restricting the assignment or other
transfer thereof, and (D) customary provisions in organizational documents
of any Subsidiary of the Borrower that restrict the transfer of Capital
Securities of such Subsidiaries, or (E) any applicable law, rule or
regulation (including, without limitation, applicable currency control laws and
applicable federal or provincial corporate statutes restricting the payment of
dividends in certain circumstances).

 

11.9                                                                        Business Activities; Issuance of Equity.

 

Not engage in any line of business other than the
business of the Borrower is engaged in on the date hereof and businesses
reasonably related, incidental or complementary thereto. Not issue any Capital
Securities other than, so long as no Unmatured Event of Default or Event of Default
would occur or result therefrom (x) in accordance with Section 11.10
and (y) the issuance by the Borrower of its common stock (or options to
purchase its common stock) to any employee or director of the Borrower with
respect to compensation or benefits, whether or not pursuant to a formal option
program, benefit plan or compensation plan or otherwise in accordance with past
practices.

 

11.10                                                                 Investments.

 

Not make or permit to exist any Investment in any
other Person, except the following; it being agreed that to be permitted
hereunder, any such Investment, if evidenced by Capital Securities of the
Person being invested in, the provisions of Section 10.10 must be
complied with and, where appropriate, subordination thereof to the Obligations
must be complied with:

 

(a)                                  contributions by the Borrower to the capital of any Subsidiary of the Borrower, so long as the
recipient of any such capital contribution has guaranteed the Obligations and
such

 

65

 

guaranty is secured by a pledge of all of its Capital
Securities and substantially all of its real and personal property, in each
case in accordance with Section 10.10;

 

(b)                                 Investments constituting Debt permitted by Section 11.1;

 

(c)                                  Contingent Liabilities constituting Debt permitted by Section 11.1
or Liens permitted by Section 11.2;

 

(d)                                 Cash Equivalent Investments;

 

(e)                                  bank deposits in the ordinary course of business into Blocked
Accounts provided  that such deposits are made in bank accounts
subject to a Blocked Account Agreement so that such bank deposits may be dealt
with in accordance with the provisions thereof;

 

(f)                                    Investments in securities of Account Debtors received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of such account debtors;

 

(g)                                 loans or advances to employees, officers or directors of the
Borrower incurred in the ordinary course of business (including for travel,
entertainment and relocation expenses), in an aggregate amount not to exceed US$75,000
or the Canadian Dollar Equivalent Amount thereof at any one time outstanding;

 

(h)                                 subject to the limitations in Section 11.4, Investments
constituting Permitted Acquisitions;

 

(i)                                     Investments listed on Schedule 11.10 existing as of the
Closing Date;

 

(j)                                     [INTENTIONALLY DELETED]

 

(k)                                  Investments in accordance with past business practices in life
insurance plans of certain employees, officers, and directors of the Borrower
relating to their deferred compensation which insurance plans name the Borrower
as the beneficiary thereunder (it being agreed that (i) the Borrower has
granted a Lien to the Administrative Agent in such Investments and the proceeds
of such policies, and (ii) absent an Event of Default under Section 13.1.4,
or the attempted enforcement of any claim by any other creditor of the Borrower
or any other Loan Party against such assets, the Administrative Agent shall not
assert its interest in any such proceeds of such policies);

 

(l)                                     subject to the limitations in Section 11.6, customary security
deposits paid to landlords of real property leased by the Borrower or any other
Loan Party in the ordinary course of business and in accordance with the lease
to which the Borrower or any such other Loan Party is a party; and

 

(m)                               other Investments in an aggregate amount not to exceed US$50,000 or
the Canadian Dollar Equivalent Amount thereof at any time,

 

provided that (x) any Investment which when made complies with the requirements
of the definition of the term “Cash
Equivalent Investment” may continue to be held notwithstanding that
such Investment if made thereafter would not comply with such requirements; (y)
no Investment otherwise permitted by

 

66

 

clause (b) or (c) shall be
permitted to be made if, immediately before or after giving effect thereto, any
Event of Default or Unmatured Event of Default exists or would result
therefrom.

 

11.11                                                                 Restriction of Amendments to Certain Documents.

 

Not amend or otherwise modify, or waive any rights
under any agreement, document or instrument evidencing Subordinated Debt, if,
in any case, such amendment, modification or waiver would or would reasonably
be likely to be adverse to the interests of the Administrative Agent and the
Lenders.

 

11.12                                                                 Fiscal Year.

 

Not change its current determination of its fiscal
year.

 

11.13                                                                 [INTENTIONALLY DELETED]

 

11.14                                                                 Cancellation of Debt.

 

Not cancel any claim or Debt owing to it, other than (i) in
connection with trade discounts or allowances granted in the ordinary course of
its business consistent with past practices and (ii) so long as no Event
of Default or Unmatured Event of Default is then outstanding, the cancellation
of Debts or claims not to exceed US$100,000 or the Canadian Dollar Equivalent
Amount thereof in any Fiscal Year in connection with the resolution of good
faith disputes relating thereto.

 

11.15                                                                 Creation of Subsidiaries.

 

Not create any Subsidiary or enter into any joint
venture, other than so long as no Event of Default or Unmatured Event of
Default then exist or would result therefrom, Subsidiaries in respect of which
the provisions of Section 10.10 shall have been satisfied.

 

11.16                                                                 [INTENTIONALLY DELETED]

 

ARTICLE 12

EFFECTIVENESS;
CONDITIONS OF LENDING, ETC.

 

The obligation of each Lender to make its Loans and of
the Issuing Bank to issue Letters of Credit is subject to the following
conditions precedent:

 

12.1                                                                        Initial Credit Extension.

 

The obligation of the Lenders to make the initial
Loans and the obligation of the Issuing Bank to issue its initial Letter of
Credit (whichever first occurs) is, in addition to the conditions precedent
specified in Section 12.2, subject to the conditions precedent that
the Administrative Agent shall have received all of the following, each duly
executed and dated the Closing Date (or such earlier date as shall be
satisfactory to the Administrative Agent), in form and substance reasonably
satisfactory to the Administrative Agent (and the date on which all such
conditions precedent have been satisfied or waived in writing by the
Administrative Agent and the Lenders is called the “Closing Date”):

 

12.1.1                                                                  List of Closing Documents.

 

All instruments, documents, certificates and
agreements, set forth on the List of Closing Documents attached hereto as Schedule 12.1.1.

 

67

 

12.1.2                                                                  Consents, etc.

 

Evidence, reasonably satisfactory to the
Administrative Agent, that the Borrower has received all governmental and third
party approvals necessary for the continuing operations of the Borrower and
such approvals shall be on terms reasonably satisfactory to the Administrative
Agent and shall be in full force and effect, except for such approvals the
failure to obtain which, individually or in the aggregate, would not have or
could not reasonably be expected to have a Material Adverse Effect.

 

12.1.3                                                                  Payment of Fees.

 

Receipt by the Administrative Agent of payment by the
Borrower of all accrued and unpaid fees and expenses to the extent then due and
payable to the Administrative Agent and/or the Lenders on the Closing Date
(including, without limitation, pursuant to the Agent Fee Letter), together
with all Attorney Costs of the Administrative Agent to the extent invoiced
prior to the Closing Date, plus such additional amounts of Attorney Costs as shall
constitute the Administrative Agent’s reasonable estimate of Attorney Costs
incurred or to be incurred by the Administrative Agent through the closing
proceedings (provided, that such estimate shall not thereafter preclude final
settling of accounts between the Borrower and the Administrative Agent).

 

12.1.4                                                                  [INTENTIONALLY DELETED]

 

12.1.5                                                                  Independent Collateral Field Audit Examination Documents.

 

A collateral field examination shall have been
conducted by an independent third party acceptable to the Administrative Agent,
and the written results of such examination shall be satisfactory to the
Administrative Agent, in its sole and absolute discretion. To the extent that
the Administrative Agent requested any appraisals of any of the assets of the
Borrower, such appraisals shall have been conducted by independent third party
appraisers acceptable to the Administrative Agent, provide that they may be
relied upon by the Administrative Agent and the Lenders (subject, if
applicable, to reasonable confidentiality restrictions) and the written results
of such appraisals shall be satisfactory to the Administrative Agent, in its
sole and absolute discretion.

 

12.1.6                                                                  Material Adverse Effect.

 

Since December 31, 2004, no event shall have
occurred which has had or could reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries including the Borrower,
taken as a whole; it being agreed, however, that the results of operations of
the Company and its Subsidiaries for the quarter ended March 31, 2005, as
reported on its Form 10-Q filed with the SEC on or about May 10, 2005
shall not, in and of themselves, be deemed a Material Adverse Effect.

 

12.1.7                                                                  Due Diligence.

 

The Administrative Agent shall have completed its
legal and business due diligence with respect to the Borrower and the other
Loan Parties and the results thereof shall be acceptable to the Administrative
Agent, in its reasonable discretion.

 

12.1.8                                                                  Litigation.

 

The Administrative Agent shall have received evidence,
satisfactory to the Administrative Agent, that no litigation (including
derivative actions), arbitration proceeding or governmental investigation or
proceeding is pending or, to the knowledge of the Borrower, threatened

 

68

 

challenging the validity, permissibility or
legality of the transactions contemplated by the Loan Documents.

 

12.1.9                                                                  Projections.

 

The Administrative Agent shall have received projected
income statements, balance sheets and statements of cash flow of the Company
and its Subsidiaries after giving effect to the making of the initial Loans and
the issuance of the initial Letters of Credit on a monthly basis for Fiscal
Year 2005 and on an annual basis for Fiscal Year 2006.

 

12.1.10                                                            Financial Statements.

 

(a)                                  Audited consolidated financial statements (including balance sheets,
statements of earnings and cash flows) of the Company and its Subsidiaries for
the 2002, 2003 and 2004 Fiscal Years; and

 

(b)                                 Unaudited interim consolidated financial statements (including
balance sheets, statements of earnings and cash flows) of the Company and its
Subsidiaries for each fiscal month and quarter ended after the latest period
for which financial statements have been delivered in accordance with the
immediately preceding clause (i).

 

12.1.11                                                            Filings, Registrations and Recordings.

 

The Administrative Agent shall have received each
document (including PPSA financing statements and Bank Act (Canada) notices of intention to take security
under Section 427 of the Bank Act
(Canada)) required by the Collateral Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in
order to create in favour of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the collateral described therein, prior to any
other Liens (other than prior Liens permitted pursuant to Section 11.2),
in proper form for filing, registration or recording, including without
limitation, PPSA financing statements, mortgages, deeds of trust, account
control agreements, title policies.

 

12.1.12                                                            Insurance.

 

The Administrative Agent shall be reasonably satisfied
with the insurance program to be maintained by the Borrower and shall have
received, if requested by the Administrative Agent, copies of Borrower’s
insurance policies.

 

12.1.13                                                            Collateral Documents.

 

The Borrower agrees to deliver or cause to be
delivered to the Administrative Agent (and each of the Lenders in the case of Bank Act (Canada) security) each of the
following:

 

(a)                                  a Debenture in the principal amount of US$20,000,000 charging all
present and future property, assets and undertaking of the Borrower;

 

(b)                                 a Charge/Mortgage of Land (Form 2) having attached thereto the
Debenture referred to above as a Schedule;

 

(c)                                  Security under Section 427 of the Bank Act (Canada) from the Borrower in favour of and in the
forms provided by each Lender including, without limitation, a notice of
intention,

 

69

 

an agreement to give security, an application for
credit and promise to give security, etc. and a grant of security under Section 427;

 

(d)                                 the Guarantee Agreement;

 

(e)                                  Assignments of insurance monies which may become payable in respect
of insurance policies of the Borrower (as acknowledged by the insurer) in
favour of the Administrative Agent; and

 

(f)                                    such other security, hypothecs, assignments, and supporting
documents, certificates or instruments and legal opinion letters in respect of
Borrower, the Guarantor or any other Loan Party (including third party
postponement and subordinations, landlord and mortgagee waivers) as may be
required by the Administrative Agent from time to time.

 

12.1.14                                                            U.S. Credit Transaction

 

The transactions contemplated pursuant to the US
Credit Agreement shall have simultaneously closed and been completed at the
same time as the transactions contemplated hereunder in accordance with the
provisions and terms thereof.

 

12.1.15                                                            Other.

 

Such other documents, instruments or agreements as the
Administrative Agent or any Lender may reasonably request.

 

12.1.16                                                            Minister of National Revenue

 

No request of the Minister of National Revenue for
payment pursuant to Section 224(1.1), or any successor section, of the Income Tax Act (Canada) shall have been
received by the Administrative Agent or any Lender in respect of the Borrower.

 

12.2                                                                        Conditions.

 

The obligation (a) of each Lender to make each
Loan and (b) of the Issuing Bank to issue each Letter of Credit is subject
to the following further conditions precedent that:

 

12.2.1                                                                  Compliance with Warranties, No Default, etc.

 

Both before and after giving effect to the making,
continuation or conversion any Loan or the issuance of any Letter of Credit,
the following statements shall be true and correct:

 

(a)                                  the representations and warranties of the Borrower and any other
Loan Party set forth in this Agreement and the other Loan Documents shall be
true and correct in all material respects with the same effect as if then made
(or, if such representations and warranties are qualified by materiality or
Material Adverse Effect, in all respects) except to the extent stated to relate
to a specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date (or,
if such representations and warranties are qualified by materiality or Material
Adverse Effect, in all respects); and

 

70

 

(b)                                 no Event of Default or Unmatured Event of Default shall have then
occurred and be continuing.

 

12.2.2                                                                  Confirmatory Certificate.

 

If requested by the Administrative Agent or any
Lender, the Administrative Agent shall have received (in sufficient
counterparts to provide one to each Lender) a certificate dated the date of
such requested Loan or Letter of Credit and signed by a duly authorized
representative of the Borrower as to the matters set out in Section 12.2.1
(it being understood that each request by the Borrower for the making of a Loan
or the issuance of a Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower that the conditions precedent set
forth in Section 12.2.1 will be satisfied at the time of the making
of such Loan or the issuance of such Letter of Credit),.

 

ARTICLE 13

EVENTS OF
DEFAULT AND THEIR EFFECT

 

13.1                                                                        Events of Default.

 

Each of the following shall constitute an Event of
Default under this Agreement:

 

13.1.1                                                                  Non-Payment of the Loans, etc.

 

Default in the payment when due of the principal of
any Loan; or default, and continuance thereof for five (5) days, in the
payment when due of any interest, fee, reimbursement obligation with respect to
any Letter of Credit or other amount payable by the Borrower hereunder or under
any other Loan Document.

 

13.1.2                                                                  Non-Payment of Other Debt.

 

Any default shall occur under the terms applicable to
any Debt of the Borrower or any other Loan Party (other than the Company)
(including Subordinated Debt) in an aggregate amount exceeding US$100,000 or
the Canadian Dollar Equivalent Amount thereof and such default shall (a) consist
of the failure to pay such Debt when due, whether by acceleration or otherwise,
and including any such failure as a result of any prohibition under Section 11.3
or (b) accelerate the maturity of such Debt or permit the holder or
holders thereof, or any trustee or agent for such holder or holders, to cause
such Debt to become due and payable (or require the Borrower or any other Loan
Party (other than the Company) to purchase or redeem such Debt or post cash
collateral in respect thereof) prior to its expressed maturity.

 

13.1.3                                                                  Reserved.

 

13.1.4                                                                  Bankruptcy, Insolvency, etc.

 

The Borrower or any other Loan Party becomes insolvent
or generally fails to pay, or admits in writing its inability or refusal to
pay, debts as they become due; or the Borrower or any other Loan Party applies
for, consents to, or acquiesces in the appointment of a trustee, receiver or
other custodian for such party or any property thereof, or makes a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is
appointed for the Borrower or any other Loan Party or for a substantial part of
the property of any thereof and is not discharged within thirty (30) days; or
any bankruptcy, reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is commenced in respect of the Borrower or any other Loan Party,
and if such

 

71

 

case or proceeding is not commenced by such
party, it is consented to or acquiesced in by such party, or remains for sixty
(60) days undismissed; or the Borrower or any other Loan Party makes an
assignment or proposal in bankruptcy or provides notice of its intention to
make a proposal in bankruptcy or the commencement of any proceedings in
bankruptcy by or against the Borrower or any other Loan Party for the
liquidation or reorganization of the Borrower or any other Loan Party or
alleging that such parties are insolvent or unable to pay their debts and
liabilities as they become due, whether under the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act
(Canada), the United States Bankruptcy Code or under any law existing for the
relief of debtors, or the commencement of any analogous proceedings; or the
Borrower or any other Loan Party takes any action to authorize, or in
furtherance of, any of the foregoing.

 

13.1.5                                                                  Non-Compliance with Loan Documents.

 

(a)                                  Failure by the Borrower or any other Loan Party to comply with or to
perform any covenant set forth in Sections 10.1.5(a), 10.1.5(d), 10.3.2,
10.3.3, 10.5,  10.11 or Article 11 of this Agreement;
provided that the mere failure to deliver insurance certificates or proof of
insurance (as distinguished from the failure to maintain any such insurance in
effect) as required pursuant to Section 10.3.2 or 10.3.3
will not cause an Event of Default to immediately occur pursuant to this clause
(a),

 

(b)                                 Failure by the Borrower or any other Loan Party to comply with or to
perform any covenant set forth in Sections 10.1.1, 10.1.2, 10.1.3,
10.1.5 (other than clauses (a) or (d) thereof), 10.1.6,
10.1.8,  10.1.9 or to deliver insurance certificates or proof of
insurance (as distinguished from the failure to maintain any such insurance in
effect) as required pursuant to Section 10.3.2 or 10.3.3,
and continuance of such failure described in this clause (b) for twenty
(20) days, or

 

(c)                                  Failure by the Borrower or any other Loan Party to comply with or to
perform any other provision of this Agreement or any other Loan Document (and
not constituting an Event of Default under any other provision of this Article 13)
and continuance of such failure described in this clause (c) for thirty
(30) days.

 

13.1.6                                                                  Representations; Warranties.

 

Any representation or warranty made by the Borrower
herein or any other Loan Document is breached or is false or misleading in any
material respect when made or deemed to have been made, or any schedule,
certificate, financial statement, report, notice or other writing furnished by
the Borrower to the Administrative Agent or any Lender in connection herewith
is false or misleading in any material respect on the date as of which the
facts therein set forth are stated or certified.

 

13.1.7                                                                  [INTENTIONALLY DELETED]

 

13.1.8                                                                  Judgments.

 

Final judgments which (i) in the case of monetary
judgments, exceed US$1,000,000 or the Canadian Dollar Equivalent Amount thereof
in aggregate for all such judgments, in each case, in excess of any applicable
insurance with respect to which the insurer has not denied liability or
coverage and (ii) in the case of non-monetary judgments, would have or
could reasonably be expected to have a Material Adverse Effect, shall be rendered
against the Borrower or any other Loan Party and, in each of the cases of
clause (i) and (ii) above, shall not have been paid, discharged or
vacated or had execution thereof stayed pending appeal within thirty (30) days
after entry or filing of such judgments.

 

72

 

13.1.9                                                                  Loss of Collateral.

 

Any loss, theft, damage or destruction of any material
portion of the Collateral to the extent not fully covered (subject to such
deductibles and self-insurance retentions as the Administrative Agent shall
have permitted) by insurance or if and to the extent the insurance company has
denied or asserted a denial of coverage therefor.

 

13.1.10                                                            Levy, Seizure or Attachment.

 

The making by any Person of a levy, seizure, sequestration,
execution or attachment upon any material portion of the Collateral, except to
the extent that such proceedings are being diligently contested in good faith
by appropriate proceedings and the enforcement thereof is stayed (and the terms
of such stay do not adversely affect in any material respect the Administrative
Agent’s Liens or other rights in respect of or to such Collateral or its
ability to accept and retain payment hereunder).

 

13.1.11                                                            Invalidity of Collateral Documents, etc.

 

Any Collateral Document shall cease to be in full
force and effect (other than in accordance with its terms) or the Borrower (or
any Person by, through or on behalf of the Borrower) shall contest in any
manner the validity, binding nature or enforceability of any Collateral
Document or the Liens purported to be granted therein or any court or any
governmental authority shall issue a judgment, order, decree or ruling to the
effect that any of the obligations of any party to any Collateral Document are
illegal or unenforceable.

 

13.1.12                                                            Invalidity of Subordination Provisions, etc.

 

Any provision of the Intercreditor Agreement or any
subordination provision in any document or instrument governing Subordinated
Debt, or any subordination provision in any guaranty by the Borrower of any
Subordinated Debt, shall, in any such case, cease to be in full force and
effect, or the Borrower or any other Person (including the holder of any
applicable Subordinated Debt or any governmental authority having jurisdiction
over any of them, the Administrative Agent and/or the Lenders) shall contest in
any judicial or administrative proceeding the validity, binding nature or
enforceability of any such provision or agreement.

 

13.1.13                                                            Change of Control.

 

A Change of Control shall occur.

 

13.1.14                                                            Reserved.

 

13.1.15                                                            [INTENTIONALLY DELETED]

 

13.1.16                                                            U.S. Credit Transaction.

 

If an Event of Default (as such term is defined in the
US Credit Agreement) occurs, pursuant to or in connection with the US Credit
Agreement or any other document entered into in connection therewith or if the
US Credit Agreement is terminated for any reason.

 

73

 

13.2                                                                        Effect of Event of Default.

 

If any Event of Default described in Section 13.1.4
shall occur, the Commitments shall immediately terminate and the Loans and all
other Obligations hereunder shall become immediately due and payable and the
Borrower shall become immediately obligated to Cash Collateralize all Letters
of Credit, all without presentment, demand, protest or notice of any kind; and,
if any other Event of Default shall occur and be continuing, the Administrative
Agent may (and, upon the written request of the Required Lenders, declare the
respective Commitments to be terminated in whole or in part and/or declare all
or any part of the Loans and all other Obligations hereunder to be due and
payable and/or demand that the Borrower immediately Cash Collateralize all or
any Letters of Credit, whereupon the Commitments shall immediately terminate
(or be reduced, as applicable) and/or the Loans and other Obligations hereunder
shall become immediately due and payable (in whole or in part, as applicable)
and/or the Borrower shall immediately become obligated to Cash Collateralize
the Letters of Credit (all or any, as applicable), all without presentment,
demand, protest or notice of any kind. The Administrative Agent shall promptly
advise the Borrower of any such declaration, but failure to do so shall not
impair the effect of such declaration. Any cash collateral delivered hereunder
shall be held by the Administrative Agent (without liability for interest
thereon) and applied to the Obligations arising in connection with any drawing
under a Letter of Credit. After the expiration or termination of all Letters of
Credit, such cash collateral shall be applied by the Administrative Agent to
any remaining Obligations hereunder and any excess shall be delivered to the
Borrower, or as a court of competent jurisdiction may elect.

 

ARTICLE 14

THE
ADMINISTRATIVE AGENT

 

14.1                                                                        Appointment and Authorization.

 

Each Lender hereby irrevocably (subject to Section 14.10)
appoints, designates and authorizes the Administrative Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Administrative Agent shall not have any duty or
responsibility except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Lender or participant, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing
sentence, the use of the term “agent” herein and in other Loan Documents with
reference to the Administrative Agent is not intended to connote any fiduciary
or other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship
between independent contracting parties.

 

14.2                                                                        Issuing Bank.

 

The Issuing Bank shall act on behalf of the Lenders
(according to their Pro Rata Shares relating to the Revolving Loans) with
respect to any Letters of Credit issued by it and the documents associated
therewith. The Issuing Bank shall have all of the benefits and immunities (a) provided
to the Administrative Agent in this Article 14 with respect to any acts
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit issued by it or proposed to be issued by it and the applications

 

74

 

and agreements for letters of credit
pertaining to such Letters of Credit as fully as if the term “Administrative
Agent”, as used in this Article 14, included the Issuing Bank with respect
to such acts or omissions and (b) as additionally provided in this
Agreement with respect to the Issuing Bank.

 

14.3                                                                        Delegation of Duties.

 

The Administrative Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys in fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney in fact that it selects.

 

14.4                                                                        Exculpation of Administrative Agent.

 

None of the Administrative Agent nor any of its
directors, officers, employees or agents shall (a) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Loan Document or the transactions contemplated
hereby (except to the extent resulting from its own gross negligence or wilful
misconduct in connection with its duties expressly set forth herein as
determined by a final, non-appealable judgment by a court of competent
jurisdiction), or (b) be responsible in any manner to any Lender or
participant for any recital, statement, representation or warranty made by the
Borrower or Affiliate of the Borrower or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document (or the creation,
perfection or priority of any Lien or security interest therein), or for any
failure of the Borrower or any other Loan Party to any Loan Document to perform
its Obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrower or its Affiliates.

 

14.5                                                                        Reliance by Administrative Agent.

 

The Administrative Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, communication,
signature, resolution, representation, notice, consent, certificate, electronic
mail message, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders, as it deems appropriate and, if it so requests, confirmation
from the Lenders (or any of them) of their obligation to indemnify the
Administrative Agent against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders, and such request and any action
taken or failure to act pursuant thereto shall be binding upon each Lender. For
purposes of determining compliance with the conditions specified in Article 12,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or

 

75

 

acceptable or satisfactory to a Lender
unless the Administrative Agent shall have received written notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.

 

14.6                                                                        Notice of Default.

 

The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default or Unmatured
Event of Default except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall have received
written notice from a Lender or the Borrower referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a “notice of default”. The Administrative Agent will notify the
Lenders of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Event of Default or Unmatured Event of Default
as may be requested by the Required Lenders in accordance with Section 13.2;
provided that unless and until the Administrative Agent has received any such request,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Event of Default or
Unmatured Event of Default as it shall deem advisable or in the best interest
of the Lenders.

 

14.7                                                                        Credit Decision.

 

Each Lender acknowledges that the Administrative Agent
has not made any representation or warranty to it, and that no act by the
Administrative Agent hereafter taken, including any consent and acceptance of
any assignment or review of the affairs of the Borrower or any Loan Party,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender as to any matter, including whether the
Administrative Agent has disclosed material information in its possession. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower or any Loan Party, and
made its own decision to enter into this Agreement and to extend credit to the
Borrower hereunder. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower or
any Loan Party. Except for notices, reports and other documents expressly
herein required to be furnished to the Lenders by the Administrative Agent, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial or other condition or creditworthiness of the
Borrower or any Loan Party which may come into the possession of the
Administrative Agent.

 

14.8                                                                        Indemnification.

 

Whether or not the transactions contemplated hereby
are consummated, each Lender shall indemnify upon demand the Administrative
Agent and its directors, officers, employees and agents (to the extent not
reimbursed by or on behalf of the Borrower and without limiting the obligation
of the Borrower to do so), according to its applicable Pro Rata Share, from and
against any and all Indemnified Liabilities (as hereinafter defined); provided
that no Lender shall be liable for any payment to any such Person of any
portion of the Indemnified Liabilities to the extent such Indemnified
Liabilities resulted from the applicable Person’s own gross negligence or
wilful misconduct. No action taken in accordance with the directions of the
Required Lenders shall be deemed to constitute gross negligence or wilful
misconduct

 

76

 

for purposes of this Section. Without
limitation of the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any costs or out of pocket expenses
(including Attorney Costs and Taxes) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive repayment of the
Loans, cancellation of the Notes, expiration or termination of the Letters of
Credit, any foreclosure under, or modification, release or discharge of, any or
all of the Collateral Documents, termination of this Agreement and the
resignation or replacement of the Administrative Agent.

 

14.9                                                                        Administrative Agent in Individual Capacity.

 

LaSalle and its Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Borrower and Affiliates as
though LaSalle were not the Administrative Agent hereunder and without notice
to or consent of any Lender. Each Lender acknowledges that, pursuant to such
activities, LaSalle or its Affiliates may receive information regarding the
Borrower or their Affiliates (including information that may be subject to
confidentiality obligations in favour of such Borrower or such Affiliate) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to their Loans (if any), LaSalle
and its Affiliates shall have the same rights and powers under this Agreement
as any other Lender and may exercise the same as though LaSalle were not the
Administrative Agent, and the terms “Lender” and “Lenders” include LaSalle and
its Affiliates, to the extent applicable, in their individual capacities.

 

14.10                                                                 Successor Administrative Agent.

 

The Administrative Agent may resign as Administrative
Agent upon thirty (30) days’ notice to the Lenders and the Borrower. If the
Administrative Agent resigns under this Agreement, the Required Lenders shall,
with (so long as no Event of Default exists) the consent of the Borrower (which
shall not be unreasonably withheld or delayed), appoint from among the Lenders
a successor agent for the Lenders. If no successor agent is appointed prior to
the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Borrower, a successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term “Administrative Agent” shall mean such successor agent, and the retiring
Administrative Agent’s appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent’s resignation
hereunder as Administrative Agent, the provisions of this Article 14 and Sections
15.5 and 15.17 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor agent has accepted appointment as Administrative
Agent by the date which is thirty (30) days following a retiring Administrative
Agent’s notice of resignation, the retiring Administrative Agent’s resignation
shall nevertheless thereupon become effective and the Lenders shall perform all
of the duties of the Administrative Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.

 

14.11                                                                 Collateral Matters.

 

The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion, (a) to release any Lien
granted to or held by the Administrative Agent under any Collateral

 

77

 

Document (i) upon termination of the
Commitments and payment in full of all Loans and all other obligations of the
Borrower hereunder and the expiration or termination of all Letters of Credit; (ii) constituting
property sold or to be sold or disposed of as part of or in connection with any
disposition permitted hereunder; or (iii) subject to Section 15.1,
if approved, authorized or ratified in writing by the Required Lenders; or (b) to
subordinate its interest in any Collateral to any holder of a Lien on such
Collateral which is permitted by Section 11.2(d)(i) or 11.2(d)(iii) (it
being understood that the Administrative Agent may conclusively rely on a
certificate from the Borrower in determining whether the Debt secured by any
such Lien is permitted by Section 11.1(b)). Upon request by the
Administrative Agent at any time, the Lenders will confirm in writing the
Administrative Agent’s authority to release, or subordinate its interest in,
particular types or items of Collateral pursuant to this Section 14.11.
Each Lender hereby authorizes the Administrative Agent to give blockage notices
in connection with any Subordinated Debt at the direction of the Required
Lenders, and agrees that it will not act unilaterally to deliver such notices.

 

14.12                                                                 Administrative Agent May File Proofs of Claim.

 

In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any the Borrower or any other Loan Party, the Administrative
Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Borrower)
shall be entitled and empowered, by intervention in such proceeding or
otherwise:

 

(a)                                  to file and prove one or more claims for the whole amount of the
principal and interest owing and unpaid in respect of the Loans, and all other
Obligations that are owing and unpaid and to file such other documents as may
be necessary or advisable in order to have the claims of the Lenders and the
Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders and the Administrative
Agent and their respective agents and counsel and all other amounts due the
Lenders and the Administrative Agent under Article 5, Sections 15.5
and 15.17) allowed in such judicial proceedings; and

 

(b)                                 to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Lender to make such payments
to the Administrative Agent and, in the event that the Administrative Agent
shall consent to the making of such payments directly to the Lenders, to pay to
the Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and its agents
and counsel, and any other amounts due the Administrative Agent under Article 5,
Sections 15.5 and 15.17.

 

Nothing contained herein shall be deemed to authorize
the Administrative Agent to authorize or consent to or accept or adopt on
behalf of any Lender any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lender or to
authorize the Administrative Agent to vote in respect of the claim of any
Lender in any such proceeding.

 

14.13                                                                 Other Agents; Arrangers and Managers.

 

None of the Lenders or other Persons identified on the
facing page or signature pages of this Agreement as a “syndication
agent,” “documentation agent,” “co-agent,” “book manager,” “lead

 

78

 

manager,” “arranger,” “lead arranger” or “co-arranger”,
if any, shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than, in the case of such Lenders, those
applicable to all Lenders as such. Without limiting the foregoing, none of the
Lenders or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has
not relied, and will not rely, on any of the Lenders or other Persons so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.

 

ARTICLE 15

GENERAL

 

15.1                                                                        Waiver; Amendments.

 

Except as set forth in clauses (a) through (g) below,
no amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the other Loan Documents shall in any event be
effective unless the same shall be in writing and acknowledged by the
Administrative Agent, the Required Lenders, the Issuing Bank and the Borrower,
and then any such amendment, modification, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

(a)                                  Without the consent of each Lender (including the Issuing Bank)
directly affected thereby, no amendment, modification, waiver or consent shall (i) extend
or increase the Commitment of any Lender, (ii) extend the date scheduled
for payment of any principal (excluding mandatory prepayments) of or interest
on the Loans or any fees payable hereunder or waive an Event of Default for
non-payment thereof, (iii) reduce the principal amount of any Loan, the
rate of interest thereon or any fees payable hereunder (except for periodic
changes in the Applicable Margins hereunder or resulting from the imposition of
the Default Rate), or (iv) reduce such Lender’s Pro Rata Share (other than
in connection with any permitted increase to the Revolving Commitment Limit
pursuant to Section 6.1.2).

 

(b)                                 Without the consent of all Lenders, no amendment, modification,
waiver or consent shall (i) release the Borrower or any Loan Party from its obligations
hereunder, under any other Loan Document or under any guaranty of the
Obligations or release all or any substantial portion of the Collateral, (ii) change
the definition of Required Lenders, or reduce the aggregate Pro Rata Share
required to effect an amendment, (iii) amend the provisions of this Section 15.1;
(iv) increase the advance rates used in calculating the Borrowing Base or (v) amend
the definition of Pro Rata Share.

 

(c)                                  Without the consent of the Required Lenders no amendment,
modification, waiver or consent shall (i) amend any provision of this
Agreement if the effect is to (i) extend by more than one (1) year
from the original Scheduled Termination Date, (ii) amend Sections
10.1.5 (other than Sections 10.1.5(a) or (d)), 10.2
(except with respect to fees and charges by the Administrative Agent), 11.1,
11.3 through 11.12, 11.14, 11.15, 13.1.1,  13.1.4
and 13.1.5(a) (other than Sections 10.1.5(a) or (d));
it being agreed and understood that this clause (ii) shall apply to
amendments only and not to any waivers or consents under such Sections, (iii) amend
or waive or consent to a departure from the terms of Sections 10.1.5(a),
10.1.5(d), 10.7, 13.1.2, 13.1.6, 13.1.9, 13.1.10,
and 13.1.13, or (iii) except in connection with the financing,
refinancing, sale or other disposition of any asset of the Borrower permitted
under this Agreement or any other Loan Documents, release or subordinate (or
amend the Collateral Documents where the effect of such amendment is to release
or subordinate) any liens in favour of the Administrative Agent on any of the

 

79

 

Collateral or waive or consent to a departure from the
provisions of Section 11.2 if (1) the liens and security
interests under the Collateral Documents securing the Obligations would be
subordinated to the lien that is the subject of such waiver or consent and (2) the
lien that is the subject of such waiver and consent is of a type not included
in the definition of Permitted Liens (as such definition exists on the Closing
Date).

 

(d)                                 Without the consent of all Lenders, no amendment, modification,
waiver or consent shall amend the definition of Required Lenders.

 

(e)                                  No amendment, modification or waiver of, or consent with respect to,
any provision of this Agreement or the other Loan Documents affecting either
the Administrative Agent (including each and every provision of Article 14
hereof) or the Issuing Bank, in each case, in such Person’s capacity as such,
shall be effective without the consent of the Administrative Agent and/or the
Issuing Bank, as applicable.

 

(f)                                    Notwithstanding any of the foregoing to the contrary, for purposes
of voting or consenting to matters with respect to this Agreement and the other
Loan Documents, a Defaulting Lender shall not be considered a Lender and such
Defaulting Lender’s Pro Rata Share of the Obligations shall each be deemed to
be $0 until such Defaulting Lender makes the payments required in this
Agreement.

 

15.2                                                                        Confirmations.

 

The Borrower and each holder of a Note agree from time
to time, upon written request received by it from the other, to confirm to the
other in writing (with a copy of each such confirmation to the Administrative
Agent) the aggregate unpaid principal amount of the Loans then outstanding
under such Note.

 

15.3                                                                        Notices.

 

Except as otherwise provided in Sections 2.2.2
and 2.2.3, all notices hereunder shall be in writing (including
facsimile transmission) and shall be sent to the applicable party at its
address shown on Annex B or at such other address as such party may, by written
notice received by the other parties, have designated as its address for such
purpose. Notices sent by facsimile transmission shall be deemed to have been
given when sent; notices sent by mail shall be deemed to have been given three (3) Business
Days after the date when sent by registered or certified mail, postage prepaid;
and notices sent by hand delivery or overnight courier service shall be deemed
to have been given when received. For purposes of Sections 2.2.2 and 2.2.3,
the Administrative Agent shall be entitled to rely on telephonic instructions
from any person that the Administrative Agent in good faith believes is an
authorized officer or employee of the Borrower, and the Borrower shall hold the
Administrative Agent and each other Lender harmless from any loss, cost or expense
resulting from any such reliance. The Administrative Agent agrees to use
commercially reasonable efforts to give the Borrower and every other Loan Party
prompt notice of any amendment or modification to the Intercreditor Agreement, provided
that any failure to do so will not result in any liability of the
Administrative Agent or any Lender to the Borrower or any Loan Party, or
relieve the Borrower or any other Loan Party of its obligations hereunder to
such Person.

 

80

 

15.4                                                                        [INTENTIONALLY DELETED]

 

15.5                                                                        Costs, Expenses and Taxes.

 

Without duplication of any other provision of this
Agreement, the Borrower hereby agrees to pay on demand all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including
Attorney Costs, all field examination and appraisal costs and any Taxes in
connection with the preparation, execution, syndication, delivery and
administration (including perfection and protection of any Collateral and the
costs of Intralinks (or other similar service), if applicable) of this
Agreement, the other Loan Documents (including any amendment, supplement or
waiver to any Loan Document), whether or not the transactions contemplated
hereby or thereby shall be consummated, and all reasonable out-of-pocket costs
and expenses (including Attorney Costs (including the fees and disbursements)
of not more than one counsel for the Administrative Agent together with any
local counsel reasonably required to realize or exercise its rights in and upon
the Collateral in various locations), all field examination and appraisal costs
and any Taxes incurred by the Administrative Agent and each Lender after an
Event of Default in connection with the collection of the Obligations or the
enforcement of this Agreement, the other Loan Documents or any such other
documents or during any workout, restructuring or negotiations in respect
thereof. In addition, the Borrower hereby agrees to pay, and to save the
Administrative Agent and the Lenders harmless from all liability for, any fees
of the Borrower’s or any Loan Parties’
auditors in connection with any reasonable exercise by the Administrative Agent
and the Lenders of their rights pursuant to Section 10.2. All
Obligations provided for in this Section 15.5 shall survive
repayment of the Loans, cancellation of the Notes, expiration or termination of
the Letters of Credit and termination of this Agreement.

 

15.6                                                                        Assignments; Participations.

 

15.6.1                                                                  Assignments.

 

(a)                                  Any Lender may at any time assign to one or more Eligible Assignees
all or any portion of such Lender’s Loans and Commitments, with the prior
written consent of the Administrative Agent, the Issuing Bank (for an
assignment of the Revolving Loans and the Revolving Commitment) and, so long as
no Event of Default exists, the Borrower (which consents shall not be
unreasonably withheld or delayed and shall not be required for an assignment by
a Lender to a Lender or an Affiliate of a Lender). Except as the Administrative
Agent may otherwise agree in connection with the completion of a successful
syndication, any such assignment shall be in a minimum aggregate amount equal
to US$2,000,000 or the Canadian Dollar Equivalent Amount thereof or, if less,
the remaining Commitment and Loans held by the assigning Lender. The Borrower
shall be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned to an Eligible Assignee until the
Administrative Agent shall have received and accepted an effective assignment
agreement in substantially the form of Exhibit D hereto (an “Assignment Agreement”) executed, delivered
and fully completed by the applicable parties thereto and a processing fee of
US$3,500. No assignment may be made to any Person if at the time of such assignment
the Borrower would be obligated to pay any greater amount under Section 7.6
or Article 8 to the Eligible Assignee than the Borrower is then obligated
to pay to the assigning Lender under such Sections (and if any assignment is
made in violation of the foregoing, the Borrower will not be required to pay
such greater amounts). In addition, no Eligible Assignee shall be entitled to
the benefits of Section 7.6 unless such Eligible Assignee has
complied and will comply with the requirements of Section 7.6 as
though it were a Lender. In connection with any such assignment, the assignee
shall acknowledge and agree to be bound by the terms of the

 

81

 

Intercreditor Agreement as if originally a party
thereto. Any attempted assignment not made in accordance with this Section 15.6.1
shall be treated as the sale of a participation under Section 15.6.2.
The Borrower shall be deemed to have granted its consent to any assignment
requiring its consent hereunder unless the Borrower has expressly objected to
such assignment within five (5) Business Days after notice thereof. Upon
becoming a party to this Agreement, each Lender shall be deemed to have become
a party to and bound by the Intercreditor Agreement to the same extent as if
such Person were an original signatory thereto (in such capacity as such Person
is becoming a party hereto). The Borrower and any other Loan Party (other than
the Company), as applicable, concurrently with the execution and delivery of an
Assignment Agreement shall deliver the security referred to in Section 12.1.13(c) to
and in the name of any Person who becomes a Lender hereunder.

 

(b)                                 From and after the date on which the conditions described above have
been met, (i) such Eligible Assignee shall be deemed automatically to have
become a party hereto and, to the extent that rights and obligations hereunder
have been assigned to such Eligible Assignee pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and (ii) the
assigning Lender, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment Agreement, shall be released from
its rights (other than its indemnification rights) and obligations hereunder. Upon
the request of the Eligible Assignee (and, as applicable, the assigning Lender)
pursuant to an effective Assignment Agreement, the Borrower shall execute and
deliver to the Administrative Agent for delivery to the Assignee (and, as
applicable, the assigning Lender) Note(s) in the applicable principal amounts
of the Assignee’s Pro Rata Share of the Revolving Commitment (and Notes in the
principal amount of the Pro Rata Share of the Revolving Commitment retained by
the assigning Lender). Each such Note shall be dated the effective date of such
assignment. Upon receipt by the assigning Lender of such Note(s), the assigning
Lender shall return to the Borrower, any prior Note(s) held by it.

 

(c)                                  Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

 

15.6.2                                                                  Participations.

 

Any Lender may at any time sell to one or more Persons
participating interests in its Loans, Commitments or other interests hereunder
(any such Person, a “Participant”).
In the event of a sale by a Lender of a participating interest to a
Participant, (a) such Lender’s obligations hereunder shall remain
unchanged for all purposes, (b) the Borrower and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations hereunder and (c) all amounts payable
by the Borrower shall be determined as if such Lender had not sold such
participation and shall be paid directly to such Lender. No Participant shall
have any direct or indirect voting rights hereunder except with respect to any
event described in Section 15.1 expressly requiring the unanimous
vote of all Lenders or, as applicable, all affected Lenders. Each Lender agrees
to incorporate the requirements of the preceding sentence into each
participation agreement which such Lender enters into with any Participant. The
Borrower hereby agrees that if amounts outstanding under this Agreement are due
and payable (as a result of acceleration or otherwise), each Participant, shall
be deemed to have

 

82

 

the right of set-off in respect of its
participating interest in amounts owing under this Agreement and with respect
to any Letter of Credit to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; provided that such right of set-off shall be further subject to the
obligation of each Participant to share with the Lenders, and the Lenders agree
to share with each Participant, as provided in Section 7.5. The
Borrower also each hereby agrees that each Participant shall be entitled to the
benefits (and subject to the requirements) of Section 7.6 or Article 8
as if it were a Lender (provided that on the date of the participation no
Participant shall be entitled to any greater compensation pursuant to Section 7.6
or Article 8 than would have been paid to the participating Lender on such
date if no participation had been sold.

 

15.7                                                                        Register.

 

The Administrative Agent shall maintain a copy of each
Assignment Agreement delivered and accepted by it and register (the “Register”) for the recordation of names and
addresses of the Lenders and the Commitment of each Lender from time to time
and whether such Lender is the original Lender or the Assignee. No assignment
shall be effective unless and until the Assignment Agreement is accepted and
registered in the Register. All records of transfer of a Lender’s interest in
the Register shall be conclusive, absent manifest error, as to the ownership of
the interests in the Loans. The Administrative Agent shall not incur any
liability of any kind with respect to any Lender with respect to the
maintenance of the Register.

 

15.8                                                                        Governing Law.

 

This agreement and each note shall be a contract made
under and governed by the laws of the province of Ontario and laws of Canada
applicable therein, without regard to conflict of laws principles.

 

15.9                                                                        Confidentiality.

 

As required by applicable law and the Administrative
Agent’s policies and practices, the Administrative Agent may need to obtain,
verify, and record certain customer identification information and
documentation in connection with opening or maintaining accounts, or
establishing or continuing to provide services. The Administrative Agent and
each Lender agree to use commercially reasonable efforts (equivalent to the
efforts the Administrative Agent or such Lender applies to maintain the
confidentiality of its own confidential information) to maintain as
confidential all non-public information provided to them by the Borrower or any
other Loan Party (and which at the time is not, and does not thereafter become,
publicly available), except that the Administrative Agent and each Lender may
disclose such information (a) to Persons employed or engaged by the
Administrative Agent or such Lender in evaluating, approving, structuring or
administering the Loans and the Commitments; (b) to any assignee or
participant or potential assignee or participant that has agreed in writing to
comply with the covenant contained in this Section 15.9 (and any
such assignee or participant or potential assignee or participant may disclose
such information to Persons employed or engaged by them as described in clause (a) above);
(c) as required or requested by any federal, provincial or state
regulatory authority or examiner, or any insurance industry association, or as
reasonably believed by the Administrative Agent or such Lender to be compelled
by any court decree, subpoena or legal or administrative order or process; (d) as,
on the advice of the Administrative Agent’s or such Lender’s counsel, is
required by law; (e) in connection with the exercise of any right or
remedy under the Loan Documents or in connection with any litigation to which
the Administrative Agent or such Lender is a party; (f) to any nationally
recognized rating agency that requires access to information about a Lender’s
investment portfolio in connection with ratings issued with respect to such
Lender; (g) to any Affiliate of the Administrative Agent, the Issuing Bank
or any other Lender who may provide Bank Products to the Borrower; or (h) that
ceases to be

 

83

 

confidential through no fault of the
Administrative Agent or any Lender. Notwithstanding the foregoing, the Borrower
and each other Loan Party consents to the publication by the Administrative
Agent or any Lender (including in its capacity as Arranger) of a tombstone or
similar advertising material relating to the financing transactions
contemplated by this Agreement; provided that such tombstone or announcement
has been approved by the Borrower, which approval shall not be unreasonably
withheld or delayed, and the Administrative Agent reserves the right to provide
to industry trade organizations information necessary and customary for
inclusion in league table measurements.

 

15.10                                                                 Severability.

 

Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement. All obligations
of the Borrower and rights of the Administrative Agent and the Lenders
expressed herein or in any other Loan Document shall be in addition to and not
in limitation of those provided by applicable law.

 

15.11                                                                 Nature of Remedies.

 

All Obligations of the Borrower and the other Loan
Parties and rights of the Administrative Agent and the Lenders expressed herein
or in any other Loan Document shall be in addition to and not in limitation of
those provided by applicable law. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

 

15.12                                                                 Entire Agreement.

 

This Agreement, together with the other Loan
Documents, the US Credit Agreement and the documents delivered in connection
therewith, embodies the entire agreement and understanding among the parties
hereto and supersedes all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof (except as relates to the fees described in Section 5.3)
and any prior arrangements made with respect to the payment by the Borrower of
(or any indemnification for) any fees, costs or expenses payable to or incurred
(or to be incurred) by or on behalf of the Administrative Agent, the Issuing
Bank or the Lenders.

 

15.13                                                                 Counterparts.

 

This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. Receipt
of an executed signature page to this Agreement by facsimile or other
electronic transmission shall constitute effective delivery thereof. Electronic
records of executed Loan Documents maintained by the Administrative Agent, the
Lenders and the Issuing Bank shall deemed to be originals.

 

15.14                                                                 Successors and Assigns.

 

This Agreement shall be binding upon the Borrower, the
other Loan Parties, the Lenders, the Issuing Bank and the Administrative Agent
and their respective successors and assigns, and shall

 

84

 

inure to the benefit of the Borrower, the
other Loan Parties, the Lenders, the Issuing Bank and the Administrative Agent
and the successors and assigns of the Lenders, the Issuing Bank and the
Administrative Agent. No other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents. The
Borrower or any other Loan Party may not assign or transfer any of its rights
or Obligations under this Agreement without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender.

 

15.15                                                                 Captions.

 

Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.

 

15.16                                                                 [INTENTIONALLY DELETED]

 

15.17                                                                 Indemnification by the Borrower.

 

In consideration of the execution and delivery of this
Agreement by the Administrative Agent, the Issuing Bank and the Lenders and the
agreement to extend the Commitments provided hereunder and other financial
accommodations, the Borrower and every other Loan Party hereby agrees to
indemnify and hold the Administrative Agent, each Lender, the Issuing Bank and
each of the officers, directors, employees, affiliates and agents of the
Administrative Agent, the Issuing Bank and each Lender (each a “Lender Party”) free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities,
damages and expenses, including Attorney Costs (collectively, the “Indemnified Liabilities”), incurred by the
Lender Parties or any of them as a result of, or arising out of, or relating to
(a) any tender offer, merger, purchase of capital securities, purchase of
assets or other similar transaction financed or proposed to be financed in
whole or in part, directly or indirectly, with the proceeds of any of the
Loans, (b) the past, present or future presence, use, handling, release,
or threat of release, emission, discharge, transportation, storage, treatment
or disposal of any Hazardous Substances at or affecting any property owned or
leased by the Borrower or any Loan Party, including the Property, (c) any
violation of any Environmental Laws with respect to conditions at any property
owned or leased by the Borrower or any Loan
Party or the operations conducted thereon, including the Property, (d) the
investigation, cleanup or remediation of offsite locations at which the
Borrower or any other Loan Party or its respective predecessors are alleged to
have directly or indirectly disposed of Hazardous Substances or (e) the
execution, delivery, performance or enforcement of this Agreement or any other
Loan Document by the Borrower or any other Loan Party, except for any such
Indemnified Liabilities arising on account of any of the Lender Parties’ gross
negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. All
obligations provided for in this Section 15.17 shall survive
repayment of the Loans, cancellation of the Notes, expiration or termination of
the Letters of Credit, any foreclosure under, or any modification, release or
discharge of, any or all of the Collateral Documents and termination of this
Agreement.

 

15.18                                                                 Non-liability of Lenders.

 

The relationship between the Borrower and the other
Loan Parties on the one hand and the Lenders, the Issuing Bank and the
Administrative Agent on the other hand shall be solely that of borrower and
lender, respectively. Neither the Administrative Agent, the Issuing Bank nor
any Lender has any fiduciary relationship with or duty to the Borrower or any
other Loan Party arising out of or in connection with this Agreement or any of
the other Loan Documents, and the relationship between the

 

85

 

Borrower or any other Loan Party, on the
one hand, and the Administrative Agent, the Issuing Bank and the Lenders, on
the other hand, in connection herewith or therewith is solely that of debtor
and creditor, respectively. Neither the Administrative Agent, the Issuing Bank
nor any Lender undertakes any responsibility to the Borrower or any other Loan
Party to review or inform the Borrower or any other Loan Party of any matter in
connection with any phase of the Borrower’s or any other Loan Party’s business
or operations. The Borrower agrees that neither the Administrative Agent, the
Issuing Bank nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to the transactions
contemplated and the relationship established by the Loan Documents, or any
act, omission or event occurring in connection therewith, unless resulting from
the gross negligence or wilful misconduct of the party from which recovery is
sought. NO LENDER SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY OTHERS
OF ANY INFORMATION OR OTHER MATERIALS OBTAINED THROUGH INTRALINKS OR OTHER
SIMILAR INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT, NOR
SHALL ANY LENDER HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER HEREBY
WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER
BEFORE OR AFTER THE CLOSING DATE). The Borrower acknowledges that it has been
advised by counsel in the negotiation, execution and delivery of this Agreement
and the other Loan Documents to which it is a party. No joint venture is
created hereby or by the other Loan Documents or otherwise exists by virtue of
the transactions contemplated hereby among the Lenders or among the Borrower
and the Lenders.

 

15.19                                                                 FORUM SELECTION AND CONSENT TO JURISDICTION.

 

ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE PROVINCE OF ONTARIO;
PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE PROVINCE OF ONTARIO FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR OUTSIDE THE PROVINCE OF ONTARIO. THE
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. With respect to any action by the Administrative Agent to
enforce the rights and remedies of the Lenders hereunder or under the other
Loan Documents, each Lender hereby consents to the jurisdiction of the court in
which such action is maintained.

 

15.20                                                                 WAIVER OF JURY TRIAL.

 

THE BORROWER, THE ADMINISTRATIVE AGENT, THE ISSUING BANK
AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY
OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED

 

86

 

IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A COURT AND NOT BEFORE A JURY.

 

15.21                                                                 Other Waivers.

 

The Administrative Agent’s, the Issuing Bank’s and/or
the Lenders’ failure, at any time or times hereafter, to require strict
performance by the Borrower of any provision of this Agreement or any of the
other Loan Documents shall not waive, affect or diminish any right of the
Administrative Agent, the Issuing Bank or any Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by the
Administrative Agent, the Issuing Bank or any Lender of an Event of Default
under this Agreement or any default under any of the other Loan Documents shall
not suspend, waive or affect any other Event of Default under this Agreement or
any other default under any of the other Loan Documents, whether the same is
prior or subsequent thereto and whether of the same or of a different kind or
character. No delay on the part of the Administrative Agent, the Issuing Bank
or any Lender in the exercise of any right or remedy under this Agreement or
any other Loan Documents shall preclude other or further exercise thereof or
the exercise of any right or remedy. None of the undertakings, agreements,
warranties, covenants and representations of any Loan Party contained in this
Agreement or any of the other Loan Documents and no Event of Default under this
Agreement or default under any of the other Loan Documents shall be deemed to
have been suspended or waived by the Administrative Agent, the Issuing Bank
and/or the Lenders unless such suspension or waiver is in writing, signed by a
duly authorized officer of the Administrative Agent, the Required Lenders or
all of the Lenders and/or the Issuing Bank, as required herein, and directed to
such Loan Party specifying such suspension or waiver.

 

15.22                                                                 Joint and Several Liability.

 

15.22.1                                                            Nature of Obligations.

 

Notwithstanding anything to the contrary contained
herein, all Obligations of the Borrower and each other Loan Party hereunder and under the other Loan Documents
shall be joint and several obligations of the Borrower and each other Loan
Party.

 

15.22.2                                                            No Fraudulent Conveyances.

 

Notwithstanding any provisions of this Agreement to
the contrary, it is intended that the joint and several nature of the
Obligations of the Borrower and each other Loan Party and the liens and
security interests granted by the Borrower and each other Loan Party to secure
the Obligations, not constitute a “Fraudulent Conveyance” (as defined below). Consequently,
the Administrative Agent, the Lenders and the Borrower agree that if the
Obligations of the Borrower and any other Loan Party, or any liens or security
interests granted by such party securing the Obligations would, but for the
application of this sentence, constitute a Fraudulent Conveyance, the Obligations
of such party and the liens and security interests securing such Obligations
shall be valid and enforceable only to the maximum extent that would not cause
such Obligations or such lien or security interest to constitute a Fraudulent
Conveyance, and the Obligations of such Party and this Agreement shall
automatically be deemed to have been amended accordingly. For purposes hereof, “Fraudulent
Conveyance” means a fraudulent conveyance under the Bankruptcy Code or a
fraudulent conveyance or fraudulent transfer under the applicable provisions of
any fraudulent conveyance or fraudulent transfer or preferences law or similar
law of any province, state, nation or other governmental unit, as in effect
from time to time, including, without limitation, the Bankruptcy and Insolvency Act (Canada),
the Assignment and Preferences Act
(Ontario) and the Fraudulent Conveyances Act
(Ontario).

 

87

 

15.23                                                                 Revival and Reinstatement of Obligations.

 

If the incurrence or payment of the Obligations by the
Borrower or the transfer to the Administrative Agent, the Issuing Bank or any
Lender of any property should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors’ rights,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”),
and if the Administrative Agent, the Issuing Bank or any Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Administrative Agent, the Issuing Bank
or any Lender is required or elects to repay or restore, and as to all
reasonable costs, expenses, and Attorneys Costs of the Administrative Agent,
the Issuing Bank and/or the Lenders, the Obligations shall automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made, and if the Termination Date had previously
occurred, it shall be rescinded and this Agreement, the other Loan Documents
and all Liens granted hereunder and thereunder shall be immediately reinstated
until full and final payment of the Obligations, in cash, shall have been
received by the Administrative Agent.

 

15.24                                                                 [INTENTIONALLY DELETED]

 

15.25                                                                 Judgment Currency

 

If in the recovery by the Administrative Agent or any
Lender of any amount owing hereunder or under any of the Loan Documents in any
currency, judgment can only be obtained in another currency and because of
changes in the exchange rate of such currencies between the date of judgment
and payment in full of the amount of such judgment, the amount of recovery
under the judgment differs from the full amount owing hereunder, the Borrower
or a Loan Party, as applicable, shall pay any such shortfall to the
Administrative Agent or such Lender; such shortfall can be claimed by the
Administrative Agent or such Lender against the Borrower or such Loan Party, as
applicable as an alternative or additional cause of action.

 

15.26                                                                 Survival

 

All agreements, representations, warranties and
covenants made herein or in any of the loan Documents shall be deemed to have
been relied on by the Administrative Agent and Lenders notwithstanding any
investigations heretofore or hereafter made and shall survive the execution of
this Agreement and the Loan Documents and the making of any Loans or the
issuance of any Letters of Credit to the Borrower hereunder.

 

15.27                                                                 Inconsistency of Terms

 

In the event there occurs any conflict or
inconsistency between the provisions of this Agreement and any provision of the
Loan Documents, the provision of this Agreement has govern to the extent of
such conflict or inconsistency.

 

[Signature Page Follows]

 

88

 

The parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the date
first set forth above.

 

	
   

  	
  AMRAM’S DISTRIBUTING LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elliott Rivkin

  	
   

  
	
   

  	
  Name:

  	
  Elliott Rivkin

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tony Rodricks

  
	
   

  	
  Name:

  	
  Tony Rodricks

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ABN AMRO BANK N.V., Canada Branch, as

  Administrative Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darcy Mack

  	
   

  
	
   

  	
  Name:

  	
  Darcy Mack

  
	
   

  	
  Title:

  	
  First Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Bruce

  	
   

  
	
   

  	
  Name:

  	
  James Bruce

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ABN AMRO BANK N.V., Canada Branch, as Issuing

  Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darcy Mack

  	
   

  
	
   

  	
  Name:

  	
  Darcy Mack

  
	
   

  	
  Title:

  	
  First Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Bruce

  	
   

  
	
   

  	
  Name:

  	
  James Bruce

  
	
   

  	
  Title:

  	
  Vice President

  
								

 

89

 

The undersigned hereby acknowledges and
consents to the provisions of the foregoing Credit Agreement, confirms any
covenant, representation or warranty in any way relating to it and confirms the
continuing nature thereof, and covenants and agrees to abide by all covenants
and agreements of the Borrower to cause any action or thing to be done by it
and all covenants and agreements otherwise relating to it.

 

	
   

  	
  RUSS BERRIE AND COMPANY, INC., a New

  Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D. Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  

 

90EXHIBIT NO. 4.8

 

EXECUTION
COPY

 

THIS GUARANTY IS SUBJECT TO THE TERMS AND
CONDITIONS OF THAT CERTAIN INTERCREDITOR AGREEMENT DATED AS OF JUNE 28,
2005 BY AND AMONG LASALLE BUSINESS CREDIT, LLC AND LASALLE BUSINESS CREDIT, A
DIVISION OF ABN AMRO BANK N.V., CANADA BRANCH (AS AMENDED, RESTATED,
SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE “INTERCREDITOR
AGREEMENT”)

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT (this “Agreement”), dated as of June 28,
2005, made by Russ Berrie and Company, Inc., a New Jersey corporation (“Guarantor”), in favor of LaSalle
Business Credit, a division of ABN AMRO Bank N.V., Canada Branch, as agent (in
such capacity, “Agent”), for
itself and the Lenders (as such term is defined in the Credit Agreement
referred to below).  Capitalized terms
used herein but not otherwise defined have the same meanings ascribed to such
terms in the Credit Agreement referred to below; provided that if such terms
are not defined in the Credit Agreement, then such terms have the meanings
ascribed to them in the US Credit Agreement.

 

W I T N E S S E T H:

 

WHEREAS, Guarantor is the indirect legal and
beneficial owner of all of the issued and outstanding capital stock of Amram’s
Distributing Ltd., a corporation incorporated under the laws of Canada (“Borrower”);

 

WHEREAS, Borrower has entered into that
certain Credit Agreement dated June 28, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”)
with Agent and Lenders and acknowledged by Guarantor, pursuant to which Agent
and Lenders have agreed to make certain loans, advances and other financial
accommodations to Borrower;

 

WHEREAS, as a condition to their agreeing to
enter into the Credit Agreement and to make certain loans, advances and other
financial accommodations to Borrower, Agent and Lenders require that Guarantor
enter into this Agreement; and

 

WHEREAS, Guarantor will derive substantial
benefit and advantage from the loans, advances and other financial
accommodations available to Borrower pursuant to the Credit Agreement, and it
will be to Guarantor’s direct interest and economic benefit to assist Borrower
in procuring said loans, advances and other financial accommodations from
Lenders and Agent.

 

NOW, THEREFORE, for value received and in consideration
of any loan, advance, or financial accommodation of any kind whatsoever
heretofore, now or hereafter made, given or granted to Borrower by Agent and
Lenders pursuant to the Credit Agreement, Guarantor agrees as follows:

 

 

A.                                   Guaranty

 

1.                                       Guarantor
hereby unconditionally and irrevocably guaranties (i) the full and prompt
payment when due, whether at maturity or earlier, by reason of acceleration or
otherwise, and at all times thereafter, of all Obligations of Borrower owing to
Agent and Lenders under the Credit Agreement and the other Loan Documents and
(ii) the prompt, full discharge by Borrower of each and every term, condition,
agreement, representation and warranty now or hereafter made by Borrower to
Agent and Lenders pursuant to the Credit Agreement and the other Loan Documents
to which Borrower is a party (all such Obligations being hereinafter referred
to as “Guaranteed Obligations”).  It is
expressly understood and agreed that, if, at any time, the outstanding
principal amount of Guaranteed Obligations is declared to be immediately due
and payable for any reason whatsoever, then Guarantor shall, without demand but
subject to the Intercreditor Agreement, pay to the holders of Guaranteed
Obligations the entire outstanding Guaranteed Obligations due and owing to such
holders.  This guaranty is a guaranty of
payment and performance and not a guaranty of collection.

 

2.                                       Notwithstanding
any provision of this Agreement to the contrary, it is intended that this
Agreement not constitute a “Fraudulent Conveyance” (as defined below).  Consequently, Guarantor, Agent and Lenders
each agrees that if this Agreement would, but for the application of this
sentence, constitute a Fraudulent Conveyance, this Agreement shall be valid and
enforceable only to the maximum extent that would not cause this Agreement to
constitute a Fraudulent Conveyance as to Guarantor, and this Agreement shall
automatically be deemed to have been amended accordingly at all relevant
times.  For purposes hereof, “Fraudulent Conveyance” means a
fraudulent conveyance under Section 548 of Chapter 11 of Title 11 of the
United States Code (11 U.S.C. §101, et seq.), as amended (the “Bankruptcy Code”)
or a fraudulent conveyance or fraudulent transfer under the applicable provisions
of any fraudulent conveyance or fraudulent transfer law or similar law of any
state, nation or other governmental unit, as in effect from time to time.

 

3.                                       Guarantor
hereby agrees that its obligations under this Agreement shall be unconditional,
irrespective of (a) the validity or enforceability of Guaranteed Obligations or
any part thereof, or of any promissory note or other document evidencing all or
any part of Guaranteed Obligations, (b) the absence of any attempt to collect
Guaranteed Obligations from Borrower or any other guarantor or other action to
enforce the same, (c) the waiver or consent by Agent and/or Lenders with
respect to any provision of any instrument evidencing Guaranteed Obligations,
or any part thereof, or any other agreement heretofore, now or hereafter
executed by Borrower and delivered to Agent and/or Lenders, (d) the institution
of any proceeding under the Bankruptcy Code, or any similar proceeding, by or
against Borrower, (e) any borrowing or grant of a security interest by Borrower
or any other obligor as debtor-in-possession, under Section 364 of the
Bankruptcy Code, (f) the disallowance, under Sections 502 or 506 of the
Bankruptcy Code, of all or any portion of Agent’s or any Lender’s claim(s) for
repayment of Guaranteed Obligations, or (g) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Loan Party.

 

4.                                       Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with
a court in the event of a receivership or bankruptcy of Borrower or any other
Loan Party, protest or notice with respect to Guaranteed Obligations and all
demands

 

2

 

whatsoever,
and covenants that this Agreement will not be discharged, except by complete
performance of the Guaranteed Obligations or upon Agent’s consent to discharge
in writing.  Upon the occurrence and during
the continuance of any Event of Default by Borrower as provided in any
instrument or document evidencing all or any part of Guaranteed Obligations,
including, without limitation, the Credit Agreement, Agent may, subject to the
Intercreditor Agreement, at its sole election, or shall, at the request of the Required
Lenders, proceed directly and at once, without notice, against Guarantor to
collect and recover the full amount or any portion of Guaranteed Obligations
due and payable, without first proceeding against Borrower any other Loan Party,
or any other person, firm, or corporation.

 

5.                                       Agent
and each Lender is hereby authorized, without notice or demand and without
affecting the liability of Guarantor hereunder, to at any time and from time to
time (a) renew, extend, accelerate or otherwise change the time for payment of,
or other terms relating to, Guaranteed Obligations or otherwise modify, amend
or change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by Borrower or any other Loan Party and
delivered to Agent and/or Lenders; (b) accept partial payments on Guaranteed
Obligations; (c) take and hold security or collateral (other than from
Guarantor) for the payment of Guaranteed Obligations guaranteed hereby or other
liabilities of Borrower or any other Loan Party, and exchange, enforce, waive
and release any such security or collateral; (d) apply such security or
collateral and direct the order or manner of sale thereof as in its reasonable
discretion it may determine; and (e) settle, release, compromise, collect or
otherwise liquidate Guaranteed Obligations and any security or collateral
therefor in any manner, without affecting or impairing the obligations of
Guarantor hereunder.

 

6.                                       Guarantor
hereby assumes responsibility for keeping itself informed of the financial
condition of Borrower, each other Loan Party, and any and all endorsers of any
instrument or document evidencing all or any part of Guaranteed Obligations and
of all other circumstances bearing upon the risk of nonpayment of Guaranteed
Obligations or any part thereof that diligent inquiry would reveal and Guarantor
hereby agrees that neither Agent nor any Lender shall have any duty to advise
Guarantor of information known to Agent or such Lender regarding such condition
or any such circumstances or to undertake any investigation not a part of its
regular business routine.  If Agent or
any Lender, in its sole discretion, undertakes at any time or from time to time
to provide any such information to Guarantor, neither Agent nor such Lender
shall be under any obligation to update any such information or to provide any
such information to Guarantor on any subsequent occasion.

 

7.                                       Guarantor
consents and agrees that neither Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Guarantor or against or in payment
of any or all of Guaranteed Obligations. Guarantor further agrees that, to the extent that Borrower makes a
payment or payments to Agent and/or any Lender, or Agent or any Lender receives
any proceeds of collateral, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to Borrower, its estate, trustee, receiver or any
other party, including, without limitation, Guarantor or any
debtor-in-possession, receiver or trustee of or for Guarantor, under any
bankruptcy law, state or federal law, common law or equitable theory, then to
the extent of such payment or repayment, Guaranteed Obligations or the part
thereof which has been paid, reduced or satisfied by such amount, and Guarantor’s
obligations hereunder with respect to such portion of

 

3

 

Guaranteed Obligations,
shall be reinstated and continued in full force and effect as of the date such
initial payment, reduction or satisfaction occurred.

 

8.                                       Guarantor
agrees that any and all claims of Guarantor against Borrower, any other Loan
Party or any endorser of all or any part of Guaranteed Obligations, or against
any of Borrower’s, any other Loan Party’s or any such other endorser’s
properties, whether arising by reason of any payment by Guarantor to Agent
pursuant to the provisions hereof, or otherwise, including any and all claims
for subrogation, contribution or indemnity, whether arising out of contract or
law shall be subordinate and subject in right of payment to the prior payment,
in full, in cash, of all of Guaranteed Obligations (including any required
payment or cash collateralization of outstanding Letters of Credit pursuant to
the Credit Agreement, but excluding, contingent indemnification obligations not
yet asserted to be due and payable) and the termination of the Credit Agreement,
and no such action or claim therefor shall be brought or asserted prior to such
time.  Guarantor acknowledges and agrees
that this subordination is intended to benefit Agent and Lenders and shall not
limit or otherwise affect Guarantor’s liability hereunder or the enforceability
of this Section 8, and that Agent and Lenders and their respective
successors and assigns are intended third party beneficiaries of the waivers
and agreements set forth in this Section 8.

 

9.                                       Subject
to the terms of the Credit Agreement, Agent and each Lender may, without notice
to anyone, sell or assign Guaranteed Obligations or any part thereof, or grant
participations therein, in connection with the assignment by Agent or Lender of
its respective rights under the Credit Agreement, and Agent shall have an
unimpaired right, prior and superior to that of any such assignee, holder or
participant, to enforce this Agreement for the benefit of Agent and Lenders as
to any part of Guaranteed Obligations retained by Agent or any Lender or held
by such assignee, holder or participant.

 

B.                                     Binding
Obligations

 

10.                                 This
Agreement shall be binding upon Guarantor and upon its successors (including
without limitation, any receiver, trustee or debtor in possession of or for
Guarantor) and assigns and shall inure to the benefit of Agent and Lenders and
their respective successors and assigns.

 

C.                                     Remedies

 

11.                                 Upon
the occurrence and during the continuance of an Event of Default, Agent,
subject to the Intercreditor Agreement, may, and upon the direction of the Required
Lenders shall, exercise from time to time any rights and remedies available to
it under the Uniform Commercial Code and any other applicable law in addition
to, and not in lieu of, any rights and remedies expressly granted in this
Agreement, the Credit Agreement or in any of the other Loan Documents and all
of Agent’s rights and remedies shall be cumulative and non-exclusive to the
extent permitted by law.  Guarantor
recognizes that if Guarantor fails to perform, observe or discharge any of its
Guaranteed Obligations under this Agreement or the other Loan Documents, no
remedy at law will provide adequate relief to Agent and Lenders, and agrees
that Agent and Lenders shall be entitled to temporary and permanent injunctive
relief in any such case.

 

4

 

F.                                      Miscellaneous

 

12.                                 Guarantor
agrees to pay reasonable costs and expenses, including, without limitation, all
legal expenses and reasonable attorneys’ fees (whether for internal or outside
counsel, without duplication), incurred by Agent in connection with the (i)
collection of any Guaranteed Obligations after an Event of Default has occurred
and is continuing and (ii) administration and enforcement of any of Agent’s
and/or any Lender’s rights under this Agreement.  In addition, following the occurrence of an
Event of Default, Guarantor shall reimburse each Lender for all costs and
expenses incurred by such Lender in connection with the (i) collection of any
Guaranteed Obligations after an Event of Default has occurred and is continuing
and (ii) administration and enforcement of such Lender’s rights under this
Agreement, including the reasonable fees and disbursements of one counsel for
all Lenders (unless there is an actual or perceived conflict of interest with
respect to any other Lender, asserted in good faith, in which case each Lender
affected thereby may retain its own counsel). 
Notwithstanding the foregoing, in no event shall Guarantor reimburse
Agent for (i) costs or expenses constituting overhead of Agent other than
allocated costs and expenses of internal legal counsel of Agent without
duplication of expenses incurred by third parties or (ii) inspections,
evaluations or audits performed by employees of Agent or its affiliates unless
the Borrower is responsible for same pursuant to the Credit Agreement.

 

All such fees, costs or expenses required to be paid hereunder shall be
payable by Guarantor (x) if no Event of Default shall then be existing, on no
less than five (5) Business Days’ prior written notice to Guarantor thereof
(such notice, a “Guarantor Fee Notice”) and (y) after the occurrence and during
the continuance of an Event of Default, at Agent’s discretion.  Guarantor shall have five (5) Business Days after
the date of any Guarantor Fee Notice to request from Agent an invoice setting
forth in reasonable detail such costs, fees and/or expenses requested to be
paid by Agent and such costs, fees and/or expenses shall be due and payable by
Guarantor to Agent no later than the fifth (5th) Business Day after delivery of
such invoice to Guarantor. 
Notwithstanding the foregoing, in the event that Guarantor, in good
faith and in its commercially reasonable judgment, provides written notice to
Agent of its determination to contest such fees, costs and/or expenses within
the later to occur of five (5) Business Days after:  (i) the date of the Guarantor Fee Notice or
(ii) delivery of the applicable invoice, Guarantor shall be permitted thirty
(30) days from the date of the Guarantor Fee Notice to resolve such dispute,
during which period, such costs, fees and expenses shall remain outstanding and
after which period such costs, fees and expenses shall be immediately due and
payable to Agent whether or not such dispute has been resolved.  Any costs, fees or expenses owing hereunder
which are not paid when due shall, to the extent permitted by applicable law,
bear interest at a rate equal to the Revolving Loan Base Rate Margin applicable
to Base Rate Loans plus two percent (2.0%) if such costs, fees and expenses are
denominated in U.S. Dollars or at a rate equal to the Revolving Loan Canadian
Base Rate Margin applicable to Canadian Base Rate Loans plus two percent (2.0%)
if such costs, fees and expenses are denominated in Canadian Dollars.

 

13.                                 If
the incurrence or payment of the Obligations by the Guarantor or the transfer
to Agent or any Lender of any property should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (collectively, a “Voidable

 

5

 

Transfer”),
and if Agent or any Lender is required to repay or restore, in whole or in
part, any such Voidable Transfer, or elects to do so upon the reasonable advice
of its counsel, then, as to any such Voidable Transfer, or the amount thereof
that Agent or any Lender is required or elects to repay or restore, and as to
all reasonable costs, expenses, and reasonable attorneys fees of Agent and
Lenders, the Obligations automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made,
and if the Terminating Event (as defined below) had previously occurred, it
shall be rescinded and this Agreement, the Credit Agreement, the other Loan
Documents and all Liens granted thereunder shall be immediately reinstated
until full and final payment of the Obligations, in cash, shall have been
received by Agent.

 

14.                                 This
Agreement shall continue in full force and effect, and Agent and Lenders shall
be entitled to make loans and advances and extend financial accommodations to
Borrower on the faith hereof until such time as Agent has, in writing, notified
Guarantor that all of Guaranteed Obligations have been paid in full in cash and
the Credit Agreement has been terminated (the “Terminating Event”), this Agreement and the obligations of
Guarantor and its successors or assigns, shall remain in full force and effect
with respect to all of Guaranteed Obligations incurred prior to the receipt by
Agent of written notice of the Terminating Event.  

 

15.                                 Wherever
possible each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

16.                                 THIS
AGREEMENT SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS (OTHER THAN
CONFLICTS OF LAWS RULES) OF THE STATE OF NEW YORK.

 

17.                                 GUARANTOR IRREVOCABLY AGREES THAT, SUBJECT TO
AGENT’S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF NEW YORK.  GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID
STATE.  GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.  GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST GUARANTOR BY
AGENT IN ACCORDANCE WITH THIS PARAGRAPH.

 

18.                                 GUARANTOR
HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH
PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT.

 

19.                                 Notwithstanding
anything to the contrary contained in this Agreement, no payment made by or for
the account of Guarantor including, without limitation, a payment made

 

6

 

by Guarantor in respect of
Guaranteed Obligations, shall entitle Guarantor by subrogation, or contribution
or otherwise, to demand or receive any payment from Borrower, any other Loan
Party or any other endorser of any instrument or document evidencing Guaranteed
Obligations or from or out of any property of Borrower, any other Loan Party or
any other such Person until the date following the Terminating Event and
Guarantor shall not exercise any right or remedy against Borrower or any
property of Borrower, any other Obligor or any other such Person by reason of
any performance by Guarantor under this Agreement until the date following the
Terminating Event.

 

20.                                 If
in the recovery by Agent or any Lender of any amount owing hereunder in any
currency, judgment can only be obtained in another currency and because of
changes in the exchange rate of such currencies between the date of judgment
and payment in full of the amount of such judgment, the amount of recovery
under the judgment differs from the full amount owing hereunder, Guarantor
shall pay any such shortfall to Agent or such Lender and such shortfall can be
claimed by Agent or such Lender against Guarantor as an alternative or
additional cause of action.

 

21.                                 Any
and all payments by or on account of any of the Guaranteed Obligations shall be
made free and clear of and without deduction for any taxes (including without
limitation withholding taxes).  If
Guarantor shall be required to deduct any taxes from payments to be made to
Agent or any Lender hereunder, then (i) the amount payable by Guarantor shall
be increased as necessary so that, after making all required deductions, Agent
or such Lender receives an amount equal to the sum it would have received had
not such deductions been made, and (ii) the Agent or the Lender, as the case
may be, shall use all commercially reasonable efforts (to the extent then
permitted by applicable law) to deliver to the Guarantor, prior to any such
payment, two accurate and complete original signed copies of an IRS Form
W-8BEN, W-8ECI, or W-8IMY (or any successor or other applicable forms
prescribed by the IRS) to confirm or establish the entitlement of such Lender
or the Administrative Agent to a complete exemption from, or a reduced rate of
withholding with respect to, United States withholding tax on payments to be
made hereunder by the Guarantor, and, if applicable, a certificate (in form and
substance reasonably acceptable to the Guarantor) demonstrating that the Lender
is entitled to a complete exemption from United States withholding tax on
interest pursuant to Section 871(h) or 881(c) of the United States
Internal Revenue Code of 1986, as amended. 
Guarantor shall make any and all required deductions and pay the full
amount deducted to the appropriate governmental authority in accordance with
applicable law.

 

[Signature Page Follows]

 

7

 

IN WITNESS WHEREOF, this Agreement has been
duly executed by the undersigned as of this 28th day of June, 2005.

 

	
   

  	
  RUSS BERRIE AND COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D. Wille

  	
   

  
	
   

  	
  Name: John D. Wille

  
	
   

  	
  Title: Vice President and

  
	
   

  	
   

  	
   Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged and agreed to by:

  	
   

  
	
   

  	
   

  
	
  LASALLE BUSINESS CREDIT,
  a

  	
   

  
	
  division of ABN AMRO N.V.

  	
   

  
	
  Canada Branch, as Agent and Lender

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
									

 

 

Signature page to Canadian Guaranty Agreement

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