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Exhibit 10.24  

        THIS SUPPLEMENTAL INDENTURE made as of the Effective Date 

	BETWEEN:	 
	
 	
SR TELECOM INC. a company incorporated under the laws of Canada and having an office in the City of Montreal in the province of Quebec,
	
 	

(the "Corporation")
	
 	

OF THE FIRST PART
	
 	
and
	
 	
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under the laws of Canada, having an office in the City of Montreal in the province of Quebec,
	
 	

(the "Trustee" or "Montreal Trust")
	
 	

OF THE SECOND PART
	
 	
and
	
 	
COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company organized under the laws of Canada, having an office in the City of Montreal in the province of Quebec,
	
 	

("Computershare")
	
 	

OF THE THIRD PART

WITNESSETH THAT:  

        WHEREAS the Corporation and the Trustee entered into an Indenture dated as of April 22, 1998 providing for the issuance of a maximum aggregate principal
amount of $75,000,000 of 8.15% Debentures due 2005 of the Corporation (the "Principal Indenture"); 

        WHEREAS
the Corporation has issued on April 22, 1998, pursuant to the Principal Indenture, $75,000,000 principal amount 8.15% Debentures due 2005 of the Corporation
(the "Debentures"); 

        WHEREAS
the Corporation proposes to amend the terms of the Principal Indenture and the Debentures to reflect the amended terms and conditions stipulated in this Supplemental Indenture as
stipulated in this Supplemental Indenture; 

        WHEREAS
the amendments to the Principal Indenture and the Debentures have been approved by an instrument in writing that is an Extraordinary Resolution of the Debentureholders, the whole
in accordance with Sections 8.11, 8.12 and 8.15 of the Principal Indenture; 

        WHEREAS
Computershare acquired the corporate trust business of Montreal Trust pursuant to an Asset Purchase Agreement dated as of June 30, 2000; 

 

        WHEREAS
the Corporation and Montreal Trust are desirous of confirming the transfer and assignment of the rights, powers, duties and obligations of Montreal Trust under the Principal
Indenture to, and assumed by, Computershare, and Computershare is desirous of confirming same, all with effect from the close of business on June 30, 2000 (the "Transfer Date"); 

NOW THEREFORE, IN CONSIDERATION of the premises and mutual covenants herein contained and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties hereby agree as follows: 

1.             INTERPRETATION

                1.1           This
Supplemental Indenture is declared to be supplemental to the Principal Indenture and to form part thereof and shall modify the Principal Indenture in accordance
herewith as though such amendments were incorporated in the Principal Indenture, and the Debentureholders shall be bound by such amendments. 

                1.2           Unless
otherwise defined or unless there is something in the subject matter or the context inconsistent therewith, all capitalized words and expressions used herein or
in any deed, document or agreement supplemental or ancillary hereto shall have the meanings ascribed to them in the Principal Indenture. 

                1.3           All
provisions of the Principal Indenture, except only insofar as may be inconsistent with the express provisions of these present, shall apply to and have effect in
connection with this Supplemental Indenture. 

2.             ASSIGNMENT OF THE PRINCIPAL INDENTURE

                2.1           Montreal
Trust hereby confirms that it has transferred and assigned to Computershare all of its rights, powers, duties and obligations under the Principal Indenture,
and confirms its resignation as trustee thereunder, all with effect upon the Transfer Date. 

                2.2           The
Corporation hereby confirms that it consented to such transfers and assignments from Montreal Trust to Computershare, accepted such resignation, waived any periods
of notice that may be set forth in the Principal Indenture, and appointed Computershare as trustee, all with effect upon the Transfer Date. The Corporation further releases Montreal Trust from any
duties and liabilities that may arise pursuant to Computershare's administration of the Principal Indenture from and after the Transfer Date. 

                2.3           Computershare
hereby confirms its acceptance of such appointments, transfers and assignments, effective upon the Transfer Date and upon such terms as are set forth in
the Principal Indenture, and agrees to perform all of the obligations of Montreal Trust under the Principal Indenture which are required to be performed from and after the Transfer Date. 

                2.4           Montreal
Trust confirms that it has transferred and delivered to Computershare, and Computershare has accepted, any and all records, documents, property, monies and
other holdings held by Montreal Trust in connection with the Principal Indenture. 

                2.5           Each
party hereto agrees to execute and deliver all such documents and instruments and to do such other acts as may be necessary or advisable to give effect to the
foregoing assignments, transfers, and deliveries. 

3.             AMENDMENT OF THE PRINCIPAL INDENTURE

                The Principal Indenture is hereby amended as follows: 

                3.1           The
definition of "Consolidated Capitalization" in Section 1.1 is hereby deleted. 

                3.2           The
definition of "Consolidated EBITDA" in Section 1.1 is hereby deleted. 

                3.3           The
definition of "Consolidated Indebtedness" in Section 1.1 is hereby deleted. 

2

 

                3.4           The
definition of "Debentures" in Section 1.1 is deleted and replaced by the following definition: 

"Debentures" means the 8.15% Debentures (senior unsecured) due October 15, 2011 of the Corporation issued hereunder and for the time being
outstanding, as may be amended from time to time;" 

                3.5           The
definition of "Liens" in Section 1.1 is hereby deleted. 

                3.6           The
definition of "Life to Maturity" in Section 1.1 is deleted and replaced by the following definition: 

"Life to Maturity" of the principal amount of any Debentures being redeemed or accelerated means, as of the time of any determination thereof, the
number of years (rounded to the nearest one-twelfth) which will elapse between the date of determination and October 15, 2011;" 

                3.7           The
definition of "Net Earnings" in Section 1.1 is hereby deleted. 

                3.8           The
definition of "Permitted Investments" in Section 1.1 is hereby deleted. 

                3.9           The
definition of "Restricted Payments" in Section 1.1 is hereby deleted. 

                3.10         The
definition of "Shareholders' Equity" in Section 1.1 is hereby deleted. 

                3.11         The
definition of "Trustee" in Section 1.1 is deleted and replaced by the following definition: 

"Trustee" means Computershare Trust Company of Canada and its successors hereunder;" 

                3.12         Section 4.2
is deleted in its entirety. 

                3.13         Section 9.3
is deleted and replaced by the following: 

"Notice to the Trustee

Any
notice to the Trustee under the provisions of this Indenture shall be valid and affective if delivered personally to, or subject to Section 9.4, if given by registered mail, postage
prepaid, or fax (514-982-7677) addressed to the Trustee at Computershare Trust Company of Canada, Corporate Trust Services, 1500 University Street, Suite 700,
Montreal, Quebec, H3A 3S8, and shall be deemed to have been given on the date of delivery or on the third Business Day after such letter has been mailed, as the case may be. The Trustee may
from time to time notify the Corporation of a change of address which thereafter, until changed by further notice, shall be the address of the Trustee for all purposes of this Indenture." 

                3.14         Schedule "A"
is hereby amended and restated as set forth in Schedule "A" hereto. 

4.             CONFIRMATION OF INDENTURE

                All other terms and conditions of the Principal Indenture shall remain in full force and effect unamended. Nothing in this Supplemental
Indenture shall
constitute or be deemed to constitute a novation of any Indebtedness of the Corporation to the Debentureholders. 

5.             EXCHANGE OF CERTIFICATES

                5.1           The
Debentureholders shall exchange the Debenture certificates outstanding on and after the Effective Date of the Amendment for amended Debenture certificates
determined appropriate by the Trustee and the Corporation acting reasonably, reflecting the amended terms and conditions of the Principal Indenture as stipulated in Schedule A; provided
however, the amendment of the Debentures and any such exchange of the Debenture certificates shall not effect novation of any Indebtedness of the Corporation to the Debentureholders. 

                5.2           Notice
to the Debentureholders of the amendments to the Debentures and of the exchange of existing Debenture certificates shall be given in accordance with the
provisions of Article 9 of the Principal Indenture. 

3

 

                5.3           The
Corporation shall execute and the Trustee shall certify amended Debenture certificates necessary to carry out the exchange of existing Debenture certificates
contemplated in Section 5.1 of this Supplemental Indenture pursuant to the exchange procedure set forth in Section 2.10 which shall apply mutatis
mutandis, provided however that no charge shall be made to Debentureholders for the exchange of Debenture certificates under this Section 5. All Debenture certificates
surrendered for exchange shall be cancelled by the Trustee. 

                5.4           To
the extent that any Debentureholder does not surrender the Debenture(s) then held by it in order to receive Debentures that reflect the amendments
contemplated herein, such Debentures shall be deemed amended and certificates representing such Debentures shall be deemed from and after the Effective Date of
the Amendment to represent the amended terms and conditions of the Debentures, as stipulated in Schedule A hereto. 

6.             ENTIRE AGREEMENT

                This Supplemental Indenture constitutes the entire understanding of the parties hereto with respect to the subject matter contained
herein. In the event of any
direct conflict between the provisions of this Supplemental Indenture and the provisions of the Principal Indenture, the provisions of this Supplemental Indenture shall prevail. 

7.             ENUREMENT

                This Supplemental Indenture shall enure to the benefit of and be binding upon the parties, their successors and permitted assigns.

8.             GOVERNING LAW

                This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the province of Quebec and the laws of
Canada applicable therein
and shall be treated in all respects as a Quebec contract. 

9.             COUNTERPARTS

                This Supplemental Indenture may be executed in any number of counterparts, including by facsimile and all or such counterparts taken
together shall be deemed to
constitute one and the same instrument. 

10.           LANGUAGE

                This Supplemental Indenture has been drawn up and executed in the English language at the request of the parties. La
présente convention de fiducie complémentaire a été rédigée et exécutée dans la
langue anglaise à la demande des parties. 

11.           EFFECTIVE DATE

                This Supplemental Indenture shall be effective on the date on which the Corporation paid for Debentures tendered and consents deposited
pursuant to an offer and
solicitation launched by the Corporation on August 22, 2005 (the "Effective Date"). 

4

 

        IN WITNESS WHEREOF, the parties have duly executed this Supplemental Indenture as of the date first set forth above. 

	SR TELECOM INC.	 	MONTREAL TRUST COMPANY OF CANADA, as Trustee
	
 	

 	
 	

 	

 
	Per:	/s/  WILLIAM E. AZIZ      
 Authorized Signing Officer	 	Per:	/s/  CHARLES ERIC GAUTHIER      
 Authorized Signing Officer
	
 	

 	
 	

 	

 
	Per:	/s/  DAVID L. ADAMS      
 Authorized Signing Officer	 	Per:	/s/  RANNY SAUND      
 Authorized Signing Officer
	
COMPUTERSHARE TRUST

COMPANY OF CANADA, as

replacement Trustee	
 	

 	

 
	
 	

 	
 	

 	

 
	Per:	/s/  CHARLES ERIC GAUTHIER      
 Authorized Signing Officer	 	 	 
	
 	

 	
 	

 	

 
	Per:	/s/  RANNY SAUND      
 Authorized Signing Officer

	 	 	 

5

 
 

SCHEDULE A
  
    FORM OF DEBENTURE    
    

[English Language Version]

	Certificate No. •	 	SR TELECOM INC.

(incorporated under the laws of Canada)	 	Principal amount/Currency
 CUSIP No. 78464PAA7
	
 	
 	

 	
 	

 
	Date of issue: April 22, 1998	 	 	 	Maturity Date: October 15, 2011

8.15% DEBENTURE DUE
OCTOBER 15, 2011

        SR TELECOM INC., (hereinafter called the "Corporation ") for value
received hereby acknowledges itself indebted and promises to pay to
                                         
                                        or registered
assigns
(the "Holder") on October 15, 2011, or on such earlier date as the principal hereof may become due in accordance with the provisions of
the Indenture hereinafter mentioned, the principal sum of
                                        
DOLLARS in lawful money of Canada on presentation and surrender of this Debenture at the
principal office of the Trustee in Montreal, Québec and to pay interest on the said principal sum at the rate of 8.15% per annum in like money; half-yearly on
April 22 and October 22 in each year, commencing October 22, 1998 until payment of the said principal sum, from the date hereof or from the last Interest Date (as defined
in the Indenture) to which interest shall have been paid or
made available for payment whichever shall be the later, such interest to be payable at the principal office of the Trustee in Montreal, Québec and should the Corporation at any time
make default in the payment of the principal or interest, to pay interest on the amount in default at the same rate in like money at the same place and half-yearly on the same dates.
Interest hereon shall be payable (except at maturity when interest may at the option of the Corporation be paid on surrender hereof) by cheque mailed to the registered holder hereof as provided in the
Indenture and, subject to the provisions of the Indenture, the mailing of such cheque shall satisfy and discharge the liability for interest on this Debenture to the extent of the sum represented
thereby plus the amount of any tax which the Corporation is required to and does withhold therefrom. 

        This
Debenture is one of the Debentures of the Corporation issued or issuable under the provisions of an indenture (which indenture together with all instruments supplemental or
ancillary thereto is herein referred to as the "Indenture") made as of April 22, 1998 between the Corporation and Montreal Trust Company as
Trustee (hereinafter called the "Trustee"). The 8.15% Debentures, due 2011 (herein sometimes referred to as the
"Debentures") of which this is one, are limited to an aggregate principal amount of $75,000,000 in lawful money of Canada and mature on
October 15, 2011. 

        This
Debenture and all other Debentures certified and delivered under the Indenture rank equally and ratably without discrimination, preference or priority. This Debenture is an
unsecured direct obligation of the Corporation. Reference is made to the Indenture for particulars of the rights of the holders of Debentures and of the Corporation and of the Trustee and the terms
and conditions upon which the Debentures are issued and held, to all of which the holder of this Debenture, by acceptance hereof, assents. The Holder of this Debenture also accepts and confirms the
appointment of the Trustee as fondé de pouvoir (holder of the power of attorney) of the Holder of this Debenture to the extent necessary for the purposes hereof and of the Indenture in
accordance with and subject to the provisions thereof. 

        The
Corporation shall have the right at its option and upon prior notice of not less than 30 days nor more than 60 days to redeem prior to October 15, 2011 at any
time the whole or from time to time any part of the Debentures for the time being outstanding at a price equal to the greater of 100% of the principal amount thereof and the Canada Yield Price
(as defined in the Indenture), together in each case with accrued interest, if any, to the date fixed for redemption. 

        The
right is reserved to the Corporation to purchase Debentures in the market, by tender or by private contract at any price. 

        In
case an event of default, as defined in the Indenture, shall have occurred, the principal of and interest on all Debentures outstanding under the Indenture may be declared, and shall
thereupon become, immediately due 

 

and
payable, with the effects and subject to the conditions set forth in the Indenture. The Indenture contains provisions for the waiver of defaults and cancellation of declarations and provides the
terms and conditions under which such waivers and cancellations may be made. 

        The
Indenture contains provisions making binding upon all holders of Debentures outstanding thereunder resolutions passed at meetings of such holders held in accordance with such
provisions and instruments in writing signed by the holders of a specified majority of Debentures outstanding. 

        Upon
presentation at the principal office of the Trustee in Montreal or at such other facilities as the Corporation may provide from time to time, subject to the provisions of the
Indenture and upon compliance with the reasonable requirements of the Trustee: (1) Debentures of any denomination may be exchanged for Debentures of any other authorized denomination, in each
case of the same series and of the same aggregate principal amount; and (2) a Debenture may be transferred by the registered holder thereof or his executors, administrators or other legal
representatives or his or their attorney duly appointee in writing. 

        This
Debenture shall not become obligatory for any purpose until it shall have been authenticated by or on behalf of the Trustee for the time being under the Indenture. 

IN WITNESS WHEREOF SR Telecom Inc. has caused this Debenture to be signed by its duly authorized officers and date August 22, 2005. 

SR TELECOM INC.

	
 President	 	
 Secretary

2

 
 

REGISTRAR'S AUTHENTICATION    
    

Authenticated for and on behalf of SR Telecom Inc.  

Date of authentication:  

Computershare Trust Company of Canada  

REGISTRAR

By
                                         
                               

Authorized Officer 

 
 

FORM OF TRANSFER    
    

FOR
VALUE RECEIVED,
                                         
                                          
                                      hereby assign(s)
 and transfer(s) unto
                                         
                               , the within Debenture, together with
the principal thereof and all accrued interest thereon, if any, by irrevocably constituting and appointing
                                         
                                to transfer such Debenture on the securities
register of SR Telecom Inc., with full power of substitution in the premises. 

Dated
                                         
                               

 

In
the presence of
                                         
                               

Signature:
                                         
                                          
             
 

Transferee's
social insurance number (if applicable):
                                         
                               

[French Language Version]

	Certificat no. •	 	SR TELECOM INC.

(constituée en vertu des lois du Canada)	 	Capital/Monnaie:
 CUSIP no. 78464PAA7
	
 	
 	

 	
 	

 
	Date d'émission: 22 avril 1998	 	 	 	Date d'échéance: 15 octobre 2011

DÉBENTURES À 8,15%, ÉCHÉANT
LE 15 OCTOBRE 2011

        SR TELECOM INC. (ci-après appelée la
«société»), pour valeur reçue, reconnaît par les
présentes devoir et promet de payer à
                                         
                                       ou à
ses ayants droit inscrits
(le «porteur»), le 15 octobre 2011 ou à toute date antérieure à
laquelle le principal des présentes peut devenir exigible en vertu des dispositions de la convention mentionnée ci-dessous, le montant en principal de
                                        
DOLLARS en monnaie légale du Canada sur présentation et remise de cette débenture au bureau principal du
fiduciaire à Montréal (Québec) et de payer l'intérêt sur ledit montant en principal au taux de 8,15% l'an, en la
même monnaie, semi-annuellement le 22 avril et le 22 octobre de chaque année, à compter du 22 octobre 1998, jusqu'au
paiement dudit montant en principal, à compter de la date des présentes ou de la date de paiement d'intérêt (selon la
définition donnée dans la convention) à laquelle les intérêts auront été payés
ou réservés pour paiement sur les débentures, selon la dernière de ces deux dates, cet intérêt
étant payable au bureau principal du fiduciaire à Montréal (Québec). Au cas où la société
ferait défaut, à tout moment, de payer le principal ou tout intérêt sur cette débenture, elle promet de payer
l'intérêt sur le montant en défaut en la même monnaie et au même taux, aux mêmes endroits et
semi-annuellement, aux mêmes dates. L'intérêt sur cette débenture sera payable (sauf à
l'échéance alors que l'intérêt pourra, au choix de la société, être payé sur
remise de cette débenture) par chèque posté au porteur inscrit de cette débenture, tel que le prévoit la convention et, sous
réserve des dispositions de la convention, l'envoi par la poste d'un tel chèque satisfera et acquittera l'obligation de payer l'intérêt sur
cette débenture jusqu'à concurrence du montant représenté par ce chèque plus le montant de toute taxe ou impôt
que la société est tenue de retenir et qu'elle retient. 

        Cette
débenture est l'une des débentures de la société émises ou pouvant être
émises en vertu des dispositions d'une convention (cette convention, ainsi que tous les actes supplémentaires ou se rattachant à celle-ci, sont
ci-après appelés la «convention») intervenue en date du 22 avril 1998 entre la
société et la Compagnie Montréal Trust (ci-après appelée le
«fiduciaire») à titre de fiduciaire. Les débentures à 8,15%,
échéant en 2011 (ci-après quelquefois appelées les
«débentures»), dont cette débenture fait partie, sont limitées au montant en
principal global de 75 000 000 $ en monnaie légale du Canada et viennent à échéance le 15 octobre 2011. 

        Cette
débenture prend rang égal et proportionnel avec toutes les autres débentures attestées et livrées en
vertu de la convention, sans distinction, préférence ou priorité. Cette débenture constitue une obligation directe non garantie de la
société. Il y a lieu de se reporter à la convention pour le détail des droits des porteurs de débentures, ceux de la
société et du fiduciaire et pour le détail des modalités et conditions en vertu desquelles les débentures sont
émises et détenues, à l'ensemble desquels le porteur de cette débenture consent par son acceptation des présentes. Le porteur
accepte et confirme la nomination du fiduciaire à titre de fondé de pouvoir du porteur de cette débenture dans la mesure nécessaire pour les
fins de cette débenture et de la convention, conformément à leurs dispositions respectives et sous réserves de celles-ci. 

        La
société aura le droit, à son gré, sur préavis d'au moins de 30 jours et d'au plus 60 jours, de
racheter avant le 15 octobre 2011 en totalité ou de temps à autre en partie les débentures alors en circulation à un prix
égal au plus élevé de 100% de leur montant en principal et du prix basé sur le rendement des obligations du gouvernement du Canada
(tel que ce terme est défini à la convention), majoré dans chaque cas de l'intérêt couru jusqu'à la
date fixée pour le rachat, s'il en est. 

        La
société se réserve le droit d'acheter, à quelque prix que ce soit, des débentures sur le
marché, par appel d'offres ou par convention privée. 

        Dans
le cas d'un défaut, tel que le définit la convention, le principal et l'intérêt de toutes les débentures
en cours en vertu de la convention peuvent être déclarés immédiatement dus et exigibles et le devenir dès lors, avec les
conséquences et sous réserve des conditions contenues dans la convention. La convention contient des 

 

dispositions
concernant la renonciation aux défauts et l'annulation de telles déclarations et précise les modalités et conditions auxquelles
sont soumises ces renonciations et annulations. 

        La
convention contient des dispositions qui prévoient que tous les porteurs de débentures en cours seront liés par des
résolutions adoptées aux assemblées de tels porteurs, tenues conformément à de telles dispositions, ainsi que par des
écrits signés par les porteurs d'une majorité spécifiée de débentures en cours. 

        Sur
présentation au bureau principal du fiduciaire à Montréal, ou à tout autre endroit que peut choisir la
société de temps à autre, mais sous réserve des dispositions de la convention et une fois satisfaites les exigences raisonnables du
fiduciaire: 1) les débentures de toute coupure peuvent être échangées pour des débentures de toute autre coupure
autorisée, dans chaque cas de la même série et pour un même montant en principal global; et 2) une débenture peut
être transférée par son porteur inscrit ou ses exécuteurs, administrateurs ou autres représentants légaux, ou
par son ou leur fondé de pouvoir dûment mandaté par écrit. 

        Cette
débenture ne liera la société que lorsqu'elle aura été attestée par le fiduciaire alors en
fonction en vertu de la convention ou au nom de celui-ci. 

        EN FOI DE QUOI SR Telecom Inc. a fait signer la présente débenture par ses dirigeants
dûment autorisés et daté celle-ci du 22 août 2005. 

SR TELECOM INC.

	
 Le Président	 	
 Le Secrétaire

2

 
 

AUTHENTIFICATION DE L'AGENT CHARGÉ
  DE LA TENUE DES REGISTRES    
    

Authentifié pour le compte de SR Telecom Inc.  

Date d'authentification:  

Société de fiducie Computershare du Canada  

AGENT CHARGÉ
DE LA TENUE DES REGISTRES

Par
                                         
                               

Dirigeant autorisé 

 
 

FORMULAIRE DE TRANSFERT    
    

CONTRE
VALEUR REÇUE,
                                         
                                          
                                      vend(ent),
cède(nt) et transfère(nt) par les présentes
à
                                         
                               , la présente débenture, de même que le
capital de celle-ci et tous les
intérêts courus sur celle-ci, s'il en est, et constitue(nt) et nomme(nt) irrévocablement
                                         
                                aux fins du transfert de cette débenture dans le
registre des valeurs mobilières de SR Telecom Inc., avec pleins
pouvoirs de substitution à cet égard. 

Date
                                         
                               

En
présence de
                                         
                               

 

Signature
                                         
                                          
              

Numéro
d'assurance sociale de cessionnaire (s'il en est):
                                         
                               

 

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REGISTRAR'S AUTHENTICATION

FORM OF TRANSFER

AUTHENTIFICATION DE L 'AGENT CHARGÉ DE LA TENUE DES REGISTRES

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Exhibit 10.25  

CREDIT AGREEMENT  

Dated as of May 19, 2005 

Between 

SR TELECOM INC.  

as Borrower 

and

BNY TRUST COMPANY OF CANADA  

as Administrative Agent and Collateral Agent 

and 

THE LENDERS NAMED HEREIN  

as Lenders 

 
 

TABLE OF CONTENTS    
    

	SECTION 1 AMOUNT AND TERMS OF CREDIT FACILITIES	 	2
	 	
 1.1	
 	

Credit Facilities	
 	

2
	 	     (1)	 	Revolving Loans	 	3
	 	     (2)	 	Reliance on Notices of Revolving Credit Advances	 	3
	 	     (3)	 	Term Loan	 	3
	 	1.2	 	Voluntary Prepayments	 	3
	 	1.3	 	Use of Proceeds	 	3
	 	1.4	 	Interest	 	3
	 	     (1)	 	Cash Pay Interest	 	3
	 	     (2)	 	PIK Interest	 	4
	 	     (3)	 	PIK Notes	 	4
	 	     (4)	 	Extension to Next Business Day	 	4
	 	     (5)	 	Calculations on 360 Day Year	 	4
	 	     (6)	 	Interest Upon Payment Default	 	4
	 	     (7)	 	Criminal Rates of Interest	 	4
	 	     (8)	 	Interest Act	 	5
	 	1.5	 	Intentionally Deleted	 	5
	 	1.6	 	Intentionally Deleted	 	5
	 	1.7	 	Cash Management Systems	 	5
	 	1.8	 	Fees	 	5
	 	1.9	 	Receipt of Payments	 	6
	 	1.10	 	Application and Allocation of Payments and Proceeds	 	6
	 	1.11	 	Loan Accounts and Accounting	 	6
	 	1.12	 	Indemnity	 	7
	 	1.13	 	Taxes	 	7
	 	1.14	 	Capital Adequacy; Increased Costs	 	8
	 	1.15	 	Secured Loans	 	9
	 	1.16	 	Change of Control	 	9
	
SECTION 2 CONDITIONS PRECEDENT	
 	

9
	 	
 2.1	
 	

Conditions to First Revolving Credit Advance	
 	

9
	 	     (1)	 	Credit Agreement; Loan Documents	 	9
	 	     (2)	 	Original Budget	 	9
	 	     (3)	 	Restructuring Term Sheet	 	9
	 	     (4)	 	Repayment of Prior Lender Obligations	 	9
	 	     (5)	 	Approvals	 	9
	 	     (6)	 	Payment of Fees	 	10
	 	     (7)	 	Restructuring Intercreditor Agreement and CTR Facility	 	10
	 	2.2	 	Further Conditions to subsequent Revolving Credit Advances	 	10
	 	2.3	 	Conditions to Availability of additional Revolving Loan Commitments	 	11
	 	 	 	 	 

 

	 	
SECTION 3 REPRESENTATIONS AND WARRANTIES	
 	

11
	 	
 3.1	
 	

Corporate Existence; Compliance with Law	
 	

11
	 	3.2	 	Executive Offices; Locations of Collateral	 	11
	 	3.3	 	Corporate Power, Authorization, Enforceable Obligations	 	11
	 	3.4	 	Financial Statements and Original Budget	 	12
	 	3.5	 	Material Adverse Effect	 	12
	 	3.6	 	Ownership of Property; Liens	 	12
	 	3.7	 	Labour Matters	 	13
	 	3.8	 	Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness; Corporate Structure	 	13
	 	3.9	 	Government Regulation	 	13
	 	3.10	 	Taxes	 	13
	 	3.11	 	Canadian Pension and Benefit Plans; Subsidiary Pension Plans	 	14
	 	3.12	 	Litigation	 	14
	 	3.13	 	Brokers	 	14
	 	3.14	 	Intellectual Property	 	15
	 	3.15	 	Full Disclosure	 	15
	 	3.16	 	Environmental Matters	 	15
	 	3.17	 	Insurance	 	16
	 	3.18	 	Deposit and Disbursement Accounts	 	16
	 	3.19	 	Intentionally Deleted	 	16
	 	3.20	 	Customer and Trade Relations	 	16
	 	3.21	 	Agreements and Other Documents	 	16
	 	3.22	 	Intentionally Deleted	 	17
	 	3.23	 	Subordinated Debt	 	17
	
SECTION 4 FINANCIAL STATEMENTS AND INFORMATION	
 	

17
	 	
 4.1	
 	

Reports and Notices	
 	

17
	 	4.2	 	Intentionally Deleted	 	17
	
SECTION 5 AFFIRMATIVE COVENANTS	
 	

17
	 	
 5.1	
 	

Maintenance of Existence and Conduct of Business	
 	

17
	 	5.2	 	Payment of Obligations	 	17
	 	5.3	 	Books and Records	 	18
	 	5.4	 	Insurance; Damage to or Destruction of Collateral	 	18
	 	5.5	 	Compliance with Laws	 	19
	 	5.6	 	Supplemental Disclosure	 	19
	 	5.7	 	Intellectual Property	 	20
	 	5.8	 	Environmental Matters	 	20
	 	5.9	 	Landlords' Agreements, Mortgagee Agreements and Bailee Letters	 	20
	 	5.10	 	Purpose; Budget	 	21
	 	5.11	 	Visits and Inspections; Lender Meetings	 	21
	 	5.12	 	Further Assurances	 	21
	 	5.13	 	Intentionally Deleted	 	21
	 	5.14	 	Operating Plan and Financial Covenants	 	21
	 	 	 	 	 

ii

 

	
SECTION 6 NEGATIVE COVENANTS	
 	

22
	 	
 6.1	
 	

Amalgamations, Subsidiaries, Etc.	
 	

22
	 	6.2	 	Investments; Loans and Advances	 	22
	 	6.3	 	Indebtedness; Unfunded Pension and Benefit Plan Obligations	 	22
	 	6.4	 	Affiliate Transactions and Employee Loans	 	23
	 	6.5	 	Capital Structure and Business	 	23
	 	6.6	 	Guaranteed Indebtedness	 	23
	 	6.7	 	Liens	 	23
	 	6.8	 	Sale of Stock and Assets	 	24
	 	6.9	 	Financial Covenants	 	24
	 	6.10	 	Hazardous Materials	 	24
	 	6.11	 	Sale-Leasebacks	 	24
	 	6.12	 	Cancellation of Indebtedness	 	25
	 	6.13	 	Restricted Payments	 	25
	 	6.14	 	Change of Corporate Name or Location; Change of Fiscal Year	 	25
	 	6.15	 	No Speculative Transactions	 	25
	 	6.16	 	Intentionally Deleted	 	25
	 	6.17	 	Changes Related to Subordinated Debt	 	25
	 	6.18	 	Intentionally Deleted	 	25
	
SECTION 7 TERM	
 	

25
	 	
 7.1	
 	

Termination	
 	

25
	 	7.2	 	Survival of Obligations Upon Termination of Financing Arrangements	 	25
	
SECTION 8 EVENTS OF DEFAULT: RIGHTS AND REMEDIES	
 	

26
	 	
 8.1	
 	

Events of Default	
 	

26
	 	8.2	 	Remedies	 	27
	 	8.3	 	Waivers by Borrower	 	28
	
SECTION 9 ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS	
 	

28
	 	
 9.1	
 	

Assignment and Participations	
 	

28
	 	9.2	 	Appointment of Agent	 	29
	 	9.3	 	Agent's Reliance, Etc.	 	30
	 	9.4	 	Agents Engaging in Business	 	30
	 	9.5	 	Lender Credit Decision	 	31
	 	9.6	 	Indemnification	 	31
	 	9.7	 	Successor Agent	 	31
	 	9.8	 	Setoff and Sharing of Payments	 	32
	 	9.9	 	Advances; Payments; Non-Funding Lenders; Information; Actions in Concert	 	32
	
SECTION 10 SUCCESSORS AND ASSIGNS	
 	

35
	 	
 10.1	
 	

Successors and Assigns	
 	

35
	 	 	 	 	 

iii

 

	
SECTION 11 MISCELLANEOUS	
 	

35
	 	
 11.1	
 	

Complete Agreement; Modification of Agreement	
 	

35
	 	11.2	 	Amendments and Waivers	 	35
	 	11.3	 	Fees and Expenses	 	37
	 	11.4	 	No Waiver	 	37
	 	11.5	 	Remedies	 	38
	 	11.6	 	Severability	 	38
	 	11.7	 	Conflict of Terms	 	38
	 	11.8	 	Confidentiality	 	38
	 	11.9	 	GOVERNING LAW	 	38
	 	11.10	 	Notices	 	39
	 	11.11	 	Section Titles	 	39
	 	11.12	 	Counterparts	 	39
	 	11.13	 	Press Releases	 	40
	 	11.14	 	Reinstatement	 	40
	 	11.15	 	Advice of Counsel	 	40
	 	11.16	 	No Strict Construction	 	40
	 	11.17	 	Dollar References	 	40
	 	11.18	 	Judgment Currency	 	40
	 	11.19	 	Time of Day	 	41
	 	11.20	 	Formal Date	 	41

iv

  

 
 

ANNEXES    
    

	Annex A	 	Definitions
	Annex B	 	Cash Management Systems
	Annex C	 	Closing Checklist
	Annex D	 	Reporting — Financial Statements, Budget, Operating Plan And Other
	Annex E	 	Financial Covenants
	Annex F	 	Notice Addresses

 
 

SCHEDULES    
    

	Schedule 1.3	 	Use of Proceeds
	Schedule 3.2	 	Chief Executive Office and Principal Place of Business and Locations of Collateral
	Schedule 3.4(1)	 	Financial Statements
	Schedule 3.4(2)	 	Original Budget
	Schedule 3.6	 	Ownership of Property; Liens
	Schedule 3.7	 	Labour Matters
	Schedule 3.8	 	Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness; Corporate Structure
	Schedule 3.10	 	Taxes
	Schedule 3.11	 	Canadian Pension and Benefit Plans; Subsidiary Pension Plans
	Schedule 3.12	 	Litigation
	Schedule 3.14	 	Intellectual Property
	Schedule 3.16	 	Environmental Matters
	Schedule 3.17	 	Insurance
	Schedule 3.18	 	Deposit and Disbursement Accounts
	Schedule 3.19	 	Intentionally Deleted
	Schedule 3.21	 	Agreements and Other Documents
	Schedule 3.23	 	Subordinated Debt
	Schedule 5.1	 	Maintenance of Existence and Conduct of Business
	Schedule 5.2(1)	 	Contested Charges
	Schedule 6.3	 	Indebtedness and Guaranteed Indebtedness
	Schedule 6.4(1)	 	Employee Loans and Affiliate Transactions
	Schedule 6.7	 	Liens

 
 

EXHIBITS    
    

	Exhibit 1.1(1)(a)	 	Form of Notice of Revolving Credit Advance
	Exhibit 1.1(1)(b)	 	Form of Revolving Note
	Exhibit 1.4(2)	 	Form of PIK Note
	Exhibit 9.1(a)	 	Assignment Agreement

1

 
 
 

CREDIT AGREEMENT    
    

This
CREDIT AGREEMENT dated as of May 19, 2005 is entered into by and between SR TELECOM INC., a Canadian corporation ("Borrower"), BNY
TRUST COMPANY OF CANADA, as Administrative Agent and Collateral Agent, and Lenders party hereto from time to time. 

RECITALS

A.            Borrower
desires that Lenders extend revolving and term credit facilities to Borrower of up to Thirty-Nine Million Six Hundred Twenty-Five Thousand US Dollars
(US$39,625,000) in the aggregate for the purpose (collectively, the "Purpose") of providing Borrower with (1) short-term liquidity
and operational stability (including to bring payables current over time
and to provide liquidity to fulfill production and delivery obligations) while the remaining aspects of the Restructuring are implemented, (2) longer-term borrowing capacity
including for general corporate purposes and (3) the ability to restructure its balance sheet; and for these purposes, Lenders are willing to make certain loans to Borrower of up to such amount
upon the terms and conditions set forth herein. 

B.            Borrower
desires to secure all of its indebtedness, liabilities and obligations under the Loan Documents by granting to Collateral Agent, on behalf of Agents and Lenders, a first
priority Lien upon all of its existing and after-acquired property, assets and undertaking. 

C.            Capitalized
terms used in this Agreement shall have the meanings ascribed to them in Annex A. All Annexes, Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified in or referred to in this Agreement, are incorporated herein by reference, and taken
together, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement. 

FOR
VALUE RECEIVED, the parties agree as follows: 

 
 

SECTION 1
  AMOUNT AND TERMS OF CREDIT FACILITIES    
    

1.1           Credit Facilities  

(1)           Revolving Loans.  

                (a)           Subject
to the terms and conditions hereof, each Lender agrees to make available to Borrower from time to time until the Commitment Termination Date its
Pro Rata Share of advances (each, a "Revolving Credit Advance") on account of Revolving Loan Commitment No. 1, Revolving Loan Commitment
No. 2, Revolving Loan Commitment No. 3 and Revolving Loan Commitment No. 4, as the case may be. The Pro Rata Share of the Total Revolving Loan Commitment of any
Lender shall not at any time exceed its Commitment. The aggregate amount of outstanding Revolving Credit Advances shall at no time exceed the Maximum Amount.
The obligations of each Lender hereunder shall be several and not joint. Until the Term-Out Date, Borrower may from time to time borrow, repay and reborrow under this
Section 1.1(1)(a) in a minimum amount of US$1,000,000 and integral multiples of US$1,000,000 in excess of such amount. Each Revolving Credit Advance shall be made
on notice (a "Notice of Revolving Credit Advance") by Borrower to Administrative Agent at the address specified on Annex F. Each Notice of
Revolving Credit Advance must be given no later than 11:00 a.m. (Toronto time) two (2) Business Days prior to the proposed Revolving Credit Advance; provided
that the Notice of Revolving Credit Advance in respect of the first Revolving Credit Advance must be given no later than 11:00 a.m. (Toronto time) one (1) Business Day
prior to such Revolving Credit Advance. Each Notice of Revolving Credit Advance must be given in writing (by telecopy or overnight courier) substantially in the form of
Exhibit 1.1(1)(a) and shall include the information required in such Exhibit and such other information as may be required by Requisite Lenders. 

                (b)           Borrower
shall execute and deliver to each Lender a promissory note (each, a "Revolving Note"; collectively, the
"Revolving Notes") to evidence such Lender's Commitment. Such Revolving Note shall be in the principal amount of such Lender's Commitment, dated as of
the Closing Date and substantially in the form of Exhibit 1.1(1)(b). Such Revolving Note shall represent the obligation of Borrower to pay to such Lender the amount
of such Revolving Note or, if less, the aggregate unpaid amount of such Lender's Pro Rata Share of 

2

 

the
Revolving Loan made to Borrower, together with interest thereon as prescribed in Section 1.4. Borrower acknowledges and agrees that the aggregate principal
amount stated to be outstanding set forth on each Revolving Note or in the Loan Accounts shall, absent manifest error, be presumptive evidence of the amounts due and owing to each Lender by Borrower;
provided that any failure to so record or any error in so recording or to issue a Revolving Note shall not limit or otherwise affect Borrower's duty to pay the
Obligations. The entire unpaid balance of the Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the
Commitment Termination Date. 

                (c)           Each
payment of principal with respect to the Revolving Loan shall be paid to Administrative Agent for the ratable benefit of each Lender, ratably in proportion to
each such Lender's Pro Rata Share of the Revolving Loan. 

(2)           Reliance on Notices of Revolving Credit Advances.    Administrative Agent shall be entitled to rely upon, and shall be fully
protected in relying upon, any Notice of Revolving Advance or similar notice believed by Administrative Agent to be genuine. Administrative Agent may assume that each Person named in the most recent
Incumbency Certificate received by Administrative Agent from Borrower executing and delivering such a notice was duly authorized. Administrative Agent shall be entitled to refuse to act, and shall be
fully protected by not acting, upon any notice or instructions given by Borrower which is not signed by a Person named in the most recent Incumbency Certificate received by Administrative Agent from
Borrower. 

(3)           Term Loan.

                (a)           Following
October 1, 2006 (the "Term-Out Date"), the aggregate unpaid amount of the Revolving
Loan shall be referred to as the "Term Loan" which shall be subject to all the terms and conditions of this Agreement. For greater certainty, each
Lender's share of the Term Loan shall be equal to such Lender's Pro Rata Share of the Revolving Loan as at the close of business on October 1, 2006. The parties confirm that the Term
Loan is the same Obligation as the Revolving Loan as at such close of business and that the Term Loan does not involve a novation or a new advance of funds or any repayment by Borrower of the
Revolving Loan. 

                (b)           The
entire unpaid balance of the Term Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available
funds on the Commitment Termination Date. 

                (c)           Each
payment of principal with respect to the Term Loan shall be paid to Administrative Agent for the ratable benefit of each Lender, ratably in proportion to each
such Lender's Pro Rata Share of the Term Loan. 

1.2           Voluntary Prepayments.  

                Borrower may at any time after the Term-Out Date on at least ten (10) days' prior written notice to Administrative Agent voluntarily
prepay
(a) part (but not all) of the Loans (provided that any such prepayment must be in a minimum amount of at least US$1,000,000 and integral multiples of
US$100,000) or (b) all of the Loans. Any voluntary prepayment of the Loans shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid (as determined by
the Lenders in their sole discretion) and in respect of prepayment in full of the Loans, the Payout Fee 

1.3           Use of Proceeds.  

                Borrower shall utilize the proceeds of the Revolving Credit Advances and the Term Loan for the Purpose. Schedule 1.3 contains
a description of Borrower's sources and uses of funds on the Closing Date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses. 

1.4           Interest.  

(1)           Cash Pay Interest.    From the date of advance of each Revolving Credit Advance until the irrevocable payment in full of the
Loans, interest ("Cash Pay Interest") shall be payable monthly in arrears on each Interest Payment Date by Borrower on the aggregate outstanding
principal balance of the Loans from time to time at a rate per annum equal to the Fixed Cash Pay Interest Rate. Cash Pay Interest shall accrue daily and shall be paid in cash to Administrative Agent. 

3

 

(2)           PIK Interest.    In addition to Cash Pay Interest as described in Section 1.4(1), from
the date of advance of each Revolving Credit Advance until the irrevocable payment in full of the Loans, additional interest ("PIK Interest") shall be
payable monthly in arrears on each Interest Payment Date by Borrower on the aggregate outstanding principal balance of the Loans from time to time at a rate per annum equal to the PIK Interest Rate.
PIK Interest shall accrue daily and shall be paid and satisfied as follows: 

                (a)           by
Borrower requesting an additional advance (each, a "PIK Advance") from each Lender in a principal amount equal to
the amount of PIK Interest otherwise payable in cash on the applicable Interest Payment Date to such Lender and each such advance shall be evidenced by a PIK promissory note (each, a
"PIK Note"; collectively, the "PIK Notes"), substantially in the form of
Exhibit 1.4(2) and on terms set out in Section 1.4(3), and the proceeds of such advance shall be paid and applied
in satisfaction of PIK Interest payable at that time; or 

                (b)           by
Borrower in cash. 

(3)           PIK Notes.    Each PIK Advance is a separate debt obligation and Borrower shall execute and deliver to Administrative Agent
a PIK Note to evidence aggregate PIK Advances made by Lenders on the applicable Interest Payment Date. Each PIK Note shall be in the principal amount of the aggregate PIK Advances, dated as of the
date of advance. Each PIK Note shall represent the obligation of Borrower to pay the amount of such PIK Note or, if less, the aggregate unpaid amount of such PIK Advances made to Borrower and
evidenced thereby, together with interest thereon as prescribed in Section 1.4. Borrower acknowledges and agrees that the aggregate principal amount stated to be
outstanding set forth on the PIK Notes or in the Loan Accounts shall, absent manifest error, be presumptive evidence of the amounts due and owing to Lenders by Borrower in respect of the PIK Loan;
provided that any failure to so record or any error in so recording or to issue a PIK Note shall not limit or otherwise affect Borrower's duty to pay the Obligations. The
entire unpaid balance of the PIK Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination
Date. Each payment of principal with respect to the PIK Loan shall be paid to Administrative Agent for the ratable benefit of each Lender, ratably in proportion to each such Lender's Pro Rata
Share of the PIK Loan. 

(4)           Extension to Next Business Day.    If any payment on any Loan becomes due and payable on a day other than a Business Day,
the maturity thereof will be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such
extension. 

(5)           Calculations on 360 Day Year.    All computations of interest (calculated on a per annum basis) shall be made by
Administrative Agent on the basis of a three hundred and sixty (360) day year for the actual number of days occurring in the period for which such interest is payable. Each determination by
Administrative Agent of an interest rate hereunder shall be conclusive, absent manifest error. 

(6)           Interest Upon Payment Default.    Upon a default in the payment of interest or any other amount due under this Agreement or
any of the other Loan Documents to which Borrower is a party or satisfaction of such amounts by issuance of PIK Notes, Borrower shall pay interest on such overdue amount, both before and after
judgment, at a rate per annum equal to the applicable rate of interest payable under this Section 1.4 plus three percent (3%), calculated on a daily basis from the
date such amount becomes overdue for so long as such amount remains overdue and on the basis of the actual number of days elapsed in a 360 day year. Such interest shall be payable by Borrower
upon demand by Administrative Agent and shall compound monthly. From and after the occurrence of any Event of Default, all interest payable on the Loans shall be increased by three percent
(3%) per annum over the interest otherwise applicable hereunder. 

(7)           Criminal Rates of Interest.    If any provision of this Agreement or any of the other Loan Documents would obligate Borrower
to make any payment of interest or other amount payable to any Agent or Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by such Agent or
Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provision, such
amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a
receipt by such Agent or Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (1) firstly, by reducing the amount or rate of interest
required to be paid to such 

4

 

Agent
or Lender under this Section 1.4; and (2) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to such
Agent or Lender which would constitute interest for purposes of Section 347 of the Criminal Code (Canada). Any amount or rate of interest
referred to in this Section 1.4(7) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of
interest over the term that any Loan remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of "interest"
(as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time
and otherwise be pro-rated over the period from the Closing Date to the Termination Date and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries
appointed by such Agent or Lender shall be conclusive for the purposes of such determination. 

(8)           Interest Act.    For purposes of disclosure pursuant to the Interest Act
(Canada), the annual rates of interest or fees to which the rates of interest or fees provided in this Agreement and the other Loan Documents (and stated herein or therein, as applicable, to be
computed on the basis of a 365 day year or any other period of time less than a calendar year) are equivalent are the rates so determined multiplied by the actual number of days in the
applicable calendar year and divided by 365 or such other period of time, respectively. 

1.5           Intentionally Deleted.  

1.6           Intentionally Deleted.  

1.7           Cash Management Systems.  

                Within three (3) months from the Closing Date (or such later date as Requisite Lenders may consent to in writing), Borrower will
establish and will
maintain until the Term-Out Date, the cash management systems described in Annex B (the "Cash Management Systems"). 

1.8           Fees.  

(1)           Borrower
shall pay to Administrative Agent, for the ratable benefit of Lenders, the following fees: 

                (a)           an
up-front facility fee of two percent (2%) of: 

                (i)            the
maximum amount of Revolving Loan Commitment No. 1 payable on the Closing Date; 

                (ii)           the
maximum amount of Revolving Loan Commitment No. 2 payable on the first Business Day of the third (3rd) Fiscal Quarter of 2005; 

                (iii)          the
maximum amount of Revolving Loan Commitment No. 3 payable on the first Business Day of the fourth (4th) Fiscal Quarter of 2005; and 

                (iv)          the
maximum amount of Revolving Loan Commitment No. 4 payable on the first Business Day of the first (1st) Fiscal Quarter of 2006. 

                (b)           on
the Commitment Termination Date, a payout and completion fee (the "Payout Fee") in the amount of, at the
option of Requisite Lenders, (x) five percent (5%) of the Maximum Amount payable by Borrower in cash or (y) two percent (2%) of Distributable Value on such date payable by
Borrower in kind by the issuance by Borrower of Indebtedness or equity based on the composition of Distributable Value on such date; provided that the Payout Fee payable
in paragraph (y) immediately above shall first be promptly determined by Borrower and subject to the prior written approval of Requisite Lenders and then payment
thereof made to Administrative Agent for the ratable benefit of Lenders; provided further that, for greater certainty, only Persons that are Lenders on the Commitment
Termination Date shall be entitled to their Pro Rata Share of the Payout Fee; and 

                (c)           on
the first Business Day of each month until the Term-Out Date, a standby fee at a rate equal to one-half of one percent (0.50%) per annum
(calculated on the basis of a three hundred and sixty-five day year for the actual number of days occurring in the period for which such fee is payable) calculated upon the amount by which
the aggregate amount of Revolving Loan Commitment No. 1, Revolving Loan Commitment 

5

 

No. 2,
Revolving Loan Commitment No. 3 and Revolving Loan Commitment No. 4, as in effect at the applicable time, exceeds the average daily principal balance of the
Revolving Loans during the immediately preceding month (or part thereof). 

(2)           The
fees payable under Section 1.8(1) shall be fully earned on the date of required payment thereof and shall be non-refundable when
paid. 

1.9           Receipt of Payments.  

                Borrower shall make each payment under this Agreement for value not later than 2:00 p.m. (Toronto time) on the day when due to the
applicable Collection
Account in the currency in which the Obligation is denominated. For the purpose of computing interest as of any date, all payments shall be deemed received on the day following the day of receipt of
value for such payments in the applicable Collection Account. For the purpose of computing Fees, all payments shall be deemed received on the day of receipt of value for such payments in the
applicable Collection Account prior to 2:00 p.m. (Toronto time) and payments received after 2:00 p.m. (Toronto time) on any Business Day shall be deemed to have been received on the
following Business Day. 

1.10         Application and Allocation of Payments and Proceeds.  

(1)           Borrower
hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Borrower and any proceeds of realization, collection or
disposition of Collateral in the possession of, or payable to, any Agent or Lender or their respective Related Parties, and Borrower hereby irrevocably agrees that Administrative Agent, acting on
instructions of Requisite Lenders, shall have the continuing exclusive right to apply any and all such payments and proceeds against Obligations then due and payable as Administrative Agent, acting on
instructions of Requisite Lenders, may deem advisable notwithstanding any previous entry by Administrative Agent in the Loan Accounts or any other books and records. In the absence of a specific
determination by Administrative Agent, acting on instructions of Requisite Lenders, with respect thereto, such payments and proceeds shall be applied to amounts then due and payable in the following
order: (A) to Fees and each Agent's costs and expenses reimbursable hereunder; (B) to principal payments on the Loans, ratably to the aggregate, combined principal balance of the Loans;
(C) to interest on the Loans, ratably in proportion to the interest accrued as to each Loan and (D) to all other Obligations. Any excess proceeds of such payments after application in
accordance with the immediately preceding sentence shall be provided to Borrower or applied as Borrower may direct. 

(2)           Administrative
Agent is authorized to, and shall upon the instructions of Requisite Lenders, charge to the Loan balance on behalf of Borrower and cause to be paid all Fees, expenses,
Charges, costs (including insurance premiums in accordance with Section 5.4(1)) and interest and principal owing by Borrower under this Agreement or any of the
other Loan Documents if and to the extent Borrower fails to pay any such amounts promptly as and when due. To the extent permitted by law, any charges so made shall constitute separate debt
obligations of Borrower that constitute part of the Loans hereunder but shall be payable by Borrower in accordance with the written instructions of Requisite Lenders. Administrative Agent shall
provide to Borrower supporting documentation for such charges within thirty (30) days of Borrower's written request therefor. 

1.11         Loan Accounts and Accounting.  

                Administrative Agent shall maintain loan accounts (the "Loan Accounts") on its books
to record all Loans,
all payments made by Borrower and all other debits and credits processed by Administrative Agent or its Related Parties on its behalf as provided in this Agreement with respect to the Loans or any
other Obligations. All entries in the Loan Accounts shall be made in accordance with Administrative Agent's customary accounting practices as in effect from time to time. The balance in the Loan
Accounts, as recorded on Administrative Agent's most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agents and
Lenders by Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrower's duty to pay the Loans or any other
Obligations. Within a reasonable time following the end of each month, Administrative Agent shall render to Borrower an accounting of transactions for the previous month with respect to the Loans and
setting forth the 

6

 

balance
of the Loan Accounts. Unless Borrower notifies Administrative Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty
(30) days after the date thereof, each and every such accounting shall, absent manifest error, be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected
therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrower. Notwithstanding any provision herein contained to the contrary, except if instructed
otherwise by a Lender for its own account, Administrative Agent may elect (which election may be revoked) to dispense with the issuance of any Notes and may rely on the Loan Accounts as evidence of
the amount of Obligations from time to time owing by Borrower to Agents and Lenders. 

1.12         Indemnity.  

                Borrower shall indemnify and hold harmless each of Agents, Lenders and their respective Affiliates, and each such Person's respective
Related Parties (each, an
"Indemnified Person"), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable
legal fees, on a solicitor and client basis, and disbursements and other costs of investigation or defence, including those incurred upon any appeal) which may be instituted or asserted against or
incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit,
and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental
Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively,
"Indemnified Liabilities"); provided that Borrower shall not be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person's gross negligence or wilful misconduct. NO INDEMNIFIED PERSON SHALL
BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. 

1.13         Taxes.  

(1)           Except
as required by law, any and all payments by Borrower hereunder or under the other Loan Documents shall be made, in accordance with this
Section 1.13, free and clear of and without deduction for any and all present or future Taxes. If Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Loan Document, (i) the sum payable shall be increased as much as shall be necessary so that after making all required withholdings and
deductions (excluding Taxes imposed on or measured by the net income of a Lender by the jurisdictions under the laws of which it is organized or is resident or carries on
business through a permanent establishment located therein or any political subdivisions thereof but including withholdings and deductions applicable to additional sums payable under this
Section 1.13) each Agent or Lender, as applicable, shall receive an amount equal to the sum it would have received had no such withholdings or deductions been made,
(ii) Borrower shall make all required withholdings and deductions, and (iii) Borrower shall pay the full amount withheld or deducted to the relevant taxing or other authority in
accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower shall furnish to Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof. 

(2)           In
addition, Borrower agrees to pay any present or future Taxes that arise from any payment made under this Agreement or under any other Loan Document or from the execution, sale,
transfer, delivery or registration of, or otherwise with respect to, this Agreement, the other Loan Documents and any other agreements and instruments contemplated hereby or thereby
(except for Taxes imposed on or measured by the net income of a Lender by the jurisdictions under the laws of which it is organized or is resident or carries on business
through a permanent establishment located therein or any political subdivisions thereof). Each Lender agrees that, as promptly as reasonably practicable after it becomes aware of any circumstances
referred to above which would result in additional payments under this Section 1.13(2), it shall notify Borrower thereof. 

7

 

(3)           Borrower
shall indemnify each Agent and Lender for the full amount of the Taxes referred to in this Section 1.13
(except for Taxes imposed on or measured by the net income of a Lender by the jurisdictions under the laws of which it is organized or is resident or carries on business
through a permanent establishment located therein or any political subdivisions thereof, other than any such Taxes imposed by any jurisdiction on amounts payable by Borrower under this
Section 1.13) paid or payable or alleged to be paid or payable by such Agent or Lender and any liability (including for greater certainty all penalties, interest
and other amounts constituting Taxes and all legal, accounting or other costs and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.
This indemnification shall be made within ten (10) days after the date the party seeking indemnification makes written demand therefor. 

1.14         Capital Adequacy; Increased Costs.  

(1)           If
a Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force
of law), in each case, adopted after the Closing Date, from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other
funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder, then Borrower shall from time to time
upon demand by such Lender (with a copy of such demand to Administrative Agent) pay to such Lender additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower and Administrative Agent shall, absent manifest error, be final, conclusive and binding
on Borrower for all purposes. 

(2)           If,
due to either (a) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (b) the compliance with any
guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrower shall from time to time upon demand by such Lender (with a copy of such demand to Administrative Agent)
pay to such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost submitted by such Lender to Borrower and
Administrative Agent shall, absent manifest error, be final, conclusive and binding on Borrower for all purposes. 

(3)           Within
thirty (30) days after receipt by Borrower of written notice and demand from any Lender (an "Affected Lender")
for payment of additional amounts or increased costs as provided in Sections 1.13(1), 1.13(2), 1.14(1) or
1.14(2), Borrower may, at its option, notify Administrative Agent and such Affected Lender of its intention to replace such Affected Lender. So long as no Default or Event
of Default has occurred and is continuing, Borrower, with the consent of Requisite Lenders, may obtain, at Borrower's expense, a replacement Lender (a "Replacement
Lender") for such Affected Lender, which Replacement Lender must be satisfactory to Requisite Lenders. If Borrower obtains a Replacement Lender within ninety (90) days
following notice of its intention to do so, such Affected Lender must sell and assign its Loans and Commitment to such Replacement Lender for an amount equal to the principal balance of all Loans held
by such Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale and assignment, such sale and assignment to be consummated pursuant to an executed
Assignment Agreement without the payment of an assignment fee to Administrative Agent; provided that Borrower shall have reimbursed such Affected Lender for the additional
amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. Notwithstanding the foregoing, Borrower shall not have the right to obtain
a Replacement Lender if such Affected Lender rescinds its demand for increased costs or additional amounts within fifteen (15) days following its receipt of Borrower's notice of intention to
replace such Affected Lender. Furthermore, if Borrower gives a notice of intention to replace and does not so replace such Affected Lender within ninety (90) days thereafter, Borrower's rights
under this Section 1.14(3) shall terminate with respect to such Affected Lender and Borrower shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 1.13(1), 1.13(2), 1.14(1) and
1.14(2). 

8

  

1.15         Secured Loans.  

                All Loans to Borrower and all of the other Obligations shall be secured, until the Termination Date, by all of the Collateral. 

1.16         Change of Control.  

(1)           Other
than any change in Control contemplated pursuant to the Restructuring Term Sheet, Borrower shall promptly give notice of a change in Control to Administrative Agent and each
Lender. Such notice shall contain and constitute an offer to prepay the Loans as described in Section 1.16(2) and shall be accompanied by the certificate described in
Section 1.16(4). 

(2)           The
offer to prepay the Loans contemplated by Section 1.16(1) shall be an offer to prepay, in accordance with and subject to this
Section, all, but not less than all, the Loans on a date specified in such offer (the "Proposed Payment Date") that
is not less than thirty (30) days and not more than sixty (60) days after the date of such offer (and if the Proposed Payment Date shall not be specified in such offer, the
Proposed Payment Date shall be the day which is thirty (30) days after the date of such offer). 

(3)           Requisite
Lenders may accept the offer to prepay pursuant to Section 1.16(1) by causing a notice of such acceptance to be delivered by
Administrative Agent to Borrower at least fifteen (15) days prior to the Proposed Payment Date. A failure by Requisite Lenders to respond to an offer to prepay made pursuant to
Section 1.16(1) shall be deemed to constitute a rejection of such offer by Requisite Lenders. 

(4)           Each
offer to prepay the Loans pursuant to Section 1.16(1) shall be accompanied by a certificate, executed by a senior officer of Borrower
dated the date of such offer specifying (a) the Proposed Payment Date, (b) that such offer is made pursuant to Section 1.16(1), (c) the
principal amount of the Loans to be prepaid, (d) the accrued interest and Fees that would be due on the Loans (which shall include, for greater certainty,
the Payout Fee) to be prepaid on the Proposed Payment Date, (e) that the conditions of this Section have been fulfilled and (f) in reasonable detail the
nature and date of the change of Control. 

 
 

SECTION 2
  CONDITIONS PRECEDENT    
    

2.1           Conditions to First Revolving Credit Advance.  

                Lenders shall not be obligated to make the first Revolving Credit Advance or to take, fulfill, or perform any other action hereunder,
until the following
conditions have been satisfied or provided for in a manner satisfactory to Requisite Lenders in their sole discretion, or waived in writing by Requisite Lenders: 

(1)           Credit Agreement; Loan Documents.    This Agreement or counterparts hereof shall have been duly executed by, and delivered
to, Borrower, each Agent and Lender; and Administrative Agent shall have received such documents, certificates, instruments, agreements and legal opinions as Administrative Agent or Requisite Lenders
shall request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as
Annex C, each in form and substance satisfactory to Requisite Lenders, in their sole discretion. 

(2)           Original Budget.    Lenders shall have received the Original Budget for the period from May 13, 2005 and ending
August 5, 2005 in form and substance satisfactory to Requisite Lenders in their sole discretion. 

(3)           Restructuring Term Sheet.    The Restructuring Term Sheet shall have been duly executed by, and delivered to, the parties
thereto. 

(4)           Repayment of Prior Lender Obligations.    Lenders shall have received satisfactory written confirmation that all of the
Prior Lender Obligations have been satisfied in full or will be repaid in full prior to the advance, or from the proceeds, of the first Revolving Credit Advance. 

(5)           Approvals.    Lenders shall have received satisfactory evidence that Borrower has obtained all required consents, permits
and approvals of all Persons (including all requisite Governmental Authorities) to the execution, delivery and performance of this Agreement and the other Loan Documents. 

9

 

(6)           Payment of Fees.    Borrower shall have paid the Fees required to be paid on the Closing Date and shall have reimbursed
Agents, Lenders and any trustee with respect to the Debentures for all fees, costs and expenses of closing (including fees of legal counsel) presented as of the Closing Date. 

(7)           Restructuring Intercreditor Agreement and CTR Facility.    The Restructuring Intercreditor Agreement, in form and substance
satisfactory to Requisite Lenders in their sole discretion, shall have been executed by, and delivered to, the parties thereto and all waivers, amendments and consents required by Requisite Lenders to
be delivered in connection with the CTR Facility shall have been received by Lenders. 

2.2           Further Conditions to subsequent Revolving Credit Advances.  

                Except as otherwise expressly provided herein or waived in writing by Requisite Lenders, no Lender shall be obligated to fund any
Revolving Credit Advance
following the first Revolving Credit Advance if, as of the date thereof, Requisite Lenders have determined in their sole discretion that: 

(1)           Any
representation or warranty by Borrower or its Subsidiaries contained herein or in any of the other Loan Documents shall be untrue or incorrect as of such date, except to the
extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement; or 

(2)           Any
event or circumstance having a Material Adverse Effect shall have occurred since the date hereof; or 

(3)           Any
Event of Default shall have occurred and be continuing or would result after giving effect to any Advance or (b) a Default shall have occurred and be continuing or would
result after giving effect to any Advance, and Requisite Lenders shall have determined not to make any Advance so long as that Default is continuing; or 

(4)           During
the Private Period, such Revolving Credit Advance (a) is in excess of that required pursuant to the most recent Budget (including the Original Budget) approved in
writing by Requisite Lenders or (b) together with all other outstanding Revolving Credit Advances, would exceed the aggregate amount of Revolving Loan Commitment No. 1, Revolving Loan
Commitment No. 2, Revolving Loan Commitment No. 3
and Revolving Loan Commitment No. 4, as in effect at the applicable time; provided that, for greater certainty, PIK Advances are
not Revolving Credit Advances and shall not be used to determine availability under the immediately preceding paragraph (b) immediately above; or 

(5)           During
the Public Period, such Revolving Credit Advance would (a) result in a breach of the Financial Covenants set forth on Annex E or (b) together with all other
outstanding Revolving Credit Advances, exceed the aggregate amount of Revolving Loan Commitment No. 1, Revolving Loan Commitment No. 2, Revolving Loan Commitment No. 3
and Revolving Loan Commitment No. 4, as in effect at the applicable time; provided that, for greater certainty, PIK Advances are not Revolving Credit Advances and shall not be used to
determine availability under the immediately preceding paragraph (b) immediately above; or 

(6)           Requisite
Lenders shall not have received satisfactory evidence, in their sole discretion, that Borrower has obtained all required consents, permits and approvals of all Persons
(including all Governmental Authorities and the Toronto Stock Exchange and the NASDAQ Exchange) with respect to the Restructuring and all documentation relating thereto; or 

(7)           Any
default or breach of the terms of the Restructuring Term Sheet shall have occurred and be continuing; or 

(8)           Any
condition precedent to the first Revolving Credit Advance under Section 2.1 waived in writing by Requisite Lenders will not be satisfied or
provided for in a manner satisfactory to Requisite Lenders, in their sole discretion. 

        The
request or acceptance by Borrower of the proceeds of any Loan shall be deemed to constitute, as of the date of such request or acceptance, (a) a representation and warranty by
Borrower that the conditions in this Section 2.2 have been satisfied and (b) a reaffirmation by Borrower of the granting and continuance of Collateral
Agent's valid and perfected first priority Liens pursuant to the Collateral Documents. 

10

 

2.3           Conditions to Availability of additional Revolving Loan Commitments.  

                Each Lender shall make available its Pro Rata Share of Revolving Loan Commitment No. 2, Revolving Loan Commitment No. 3
and Revolving
Loan Commitment No. 4 available to Borrower in such Lender's sole and absolute discretion; provided that Non-Funding Lenders and Non-Committing Lenders shall be subject
to the terms and conditions of this Agreement including Section 9.9(4)(b). 

 
 

SECTION 3
  REPRESENTATIONS AND WARRANTIES    
    

        To induce Lenders to make each Advance and enter into the Loan Documents, Borrower makes the following representations and warranties to Agents and Lenders on its
own behalf and on behalf of each of its Material Subsidiaries, each and all of which shall survive the execution and delivery of this Agreement. 

3.1           Corporate Existence; Compliance with Law.  

                Borrower and each of its Material Subsidiaries (1) is a corporation duly incorporated, organized, validly existing and in good
standing under the laws of
its jurisdiction of incorporation; (2) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so qualified would not result in exposure to losses, damages or liabilities in excess of Cdn$50,000; (3) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage, hypothecate or otherwise encumber and operate its properties and assets, to lease the property and assets it operates under
lease and to conduct its business as now, heretofore and proposed to be conducted; (4) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given
all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct except where the failure to possess, have made or given individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (5) is in compliance with its constating documents and by-laws; and (6) is in
compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 

3.2           Executive Offices; Locations of Collateral  

                As of the Closing Date, the current location of Borrower's and each of its Material Subsidiaries' chief executive office and principal
place of business is set
forth in Schedule 3.2, and none of such locations has changed within the twelve (12) months preceding the Closing Date. As of the Closing Date,
Schedule 3.2 sets forth all locations where Collateral is held, stored or located and the locations of all of Borrower's books and records concerning the
Collateral. 

3.3           Corporate Power, Authorization, Enforceable Obligations.  

                The execution, delivery and performance by Borrower and each of its Material Subsidiaries of the Loan Documents (to which it is a
party) and the creation
of all Liens provided for therein: (1) are within its corporate power; (2) have been duly authorized by all necessary or proper corporate and shareholder action; (3) do not
contravene any provision of its constating documents or bylaws; (4) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (5) do not
conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which it is a party or by which it or any of its property or assets is bound; (6) do not result in the creation or imposition of any Lien upon any of its
property or assets other than those in favour of Collateral Agent, on behalf of Agents and Lenders, pursuant to the Loan Documents; and (7) do not require the consent or approval of, filing
with, or notice to, any Governmental Authority or any other Person, except those which will have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan Documents has
been duly executed and delivered by Borrower and each of its Material Subsidiaries, to the extent a party thereto, and each such Loan Document constitutes a legal, valid and binding obligation of
Borrower and each of its Material Subsidiaries, to the extent a party thereto, enforceable against it in accordance with its terms. 

11

 

3.4           Financial Statements and Original Budget.  

(1)           The
unaudited balance sheet at March 31, 2005 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal period then ended, which are
attached hereto as Schedule 3.4(1), have been prepared in accordance with GAAP consistently applied throughout the periods covered and present fairly in all
material respects the financial position of Borrower and its Subsidiaries covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. 

(2)           The
budget (the "Original Budget") delivered on the date hereof and attached hereto as
Schedule 3.4(2) has been prepared by Borrower in light of the past operations of the businesses of Borrower and its Subsidiaries, but including future
payments of known contingent liabilities (which have been disclosed therein), and reflect projections and budgeting to August 5, 2005. The Original Budget is based upon estimates and
assumptions stated therein, all of which Borrower believes to be reasonable and fair in light of current conditions and current facts known to Borrower and reflect Borrower's good faith and reasonable
estimates of the future financial performance of Borrower and its Subsidiaries and of the other information contained therein for the period set forth therein. 

3.5           Material Adverse Effect.  

                Between March 31, 2005 and the Closing Date, (1) Borrower and its Material Subsidiaries have not incurred any obligations,
contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments which have not been disclosed in writing to
Administrative Agent and which, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (2) no contract, lease or other agreement or instrument has been
entered into by Borrower or its Material Subsidiaries or has become binding upon Borrower's or its Material Subsidiaries' property, assets or undertaking and no law or regulation applicable to
Borrower or its Material Subsidiaries has been adopted which has had or could reasonably be expected to have a Material Adverse Effect, and (3) Borrower and its Material Subsidiaries are not in
default and to the best of Borrower's knowledge, no third party is in default under any material contract, lease or other agreement or instrument which alone or in the aggregate could reasonably be
expected to have a Material Adverse Effect. Between March 31, 2005 and the Closing Date, no event has occurred, which alone or together with other events, could reasonably be expected to have a
Material Adverse Effect. 

3.6           Ownership of Property; Liens.  

                As of the Closing Date, the real estate and/or immovable properties ("Real Estate") listed
on
Schedule 3.6 constitutes all of the real property owned, leased, subleased, or used by Borrower and its Material Subsidiaries. Borrower and each of its Material
Subsidiaries owns good and marketable fee simple title to all of its owned Real Estate, subject only to Permitted Encumbrances listed on Schedule 3.6,
and valid and marketable leasehold interests in all of its leased Real Estate, all as described on Schedule 3.6, and copies of all such leases or a
summary of terms thereof satisfactory to Requisite Lenders have been delivered to Administrative Agent. Schedule 3.6 further describes any Real Estate with respect
to which Borrower and its Material Subsidiaries are a lessor, sublessor or assignor as of the Closing Date. Borrower and its Material Subsidiaries also have good and marketable title to, or valid
leasehold interests in, all of its personal properties and assets. None of the properties and assets of Borrower and its Material Subsidiaries are subject to any Liens other than Permitted
Encumbrances or Liens summarized on Schedules 3.6 and 6.7, and there are no facts, circumstances or conditions known to Borrower
that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Borrower and each of its Material Subsidiaries have received all deeds, assignments,
waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to
establish, protect and perfect Borrower's and each of its Material Subsidiaries' right, title and interest in and to all such Real Estate and other properties and assets.
Schedule 3.6 also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. No portion of
Borrower's or its Material Subsidiaries' Real Estate has suffered any material damage by fire or other casualty loss which has not heretofore been repaired and restored in all material respects to its
original condition or otherwise remedied. All material permits required to have been issued or appropriate to enable the Real Estate to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full 

12

 

force
and effect. Borrower has not received notice of, nor is any work order or other notice pending, from any Governmental Authority advising or indicating that the Mortgaged Properties are not in
compliance with applicable law or regulations and, to Borrower's knowledge, there exists no proposed zoning changes or amendments or modifications to any zoning by-laws that may affect the
Mortgaged Properties and subject Borrower to a loss, penalty or fine in excess of Cdn$50,000. The Liens granted to Collateral Agent, on behalf of Agents and Lenders, pursuant to the Collateral
Documents are valid and perfected first priority Liens in and to the Collateral described therein, subject only to Permitted Encumbrances. 

3.7           Labour Matters.  

(1)           No
strikes or other material labour disputes against Borrower or its Material Subsidiaries is pending or, to Borrower's knowledge, threatened; (2) hours worked by and payment
made to employees of Borrower and its Material Subsidiaries comply in all material respects with each federal, provincial, local or foreign law applicable to such matters; (3) all payments due
from Borrower and its Material Subsidiaries for employee health and welfare insurance have been paid or accrued as a liability on the books of Borrower and its Material Subsidiaries; (4) except
as set forth in Schedule 3.7 as of the Closing Date, Borrower and its Material Subsidiaries are not a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement or any employment agreement (and true and complete copies of any agreements described on Schedule 3.7 have been
delivered to Administrative Agent); (5) there is no organizing activity involving Borrower and its Material Subsidiaries pending or, to Borrower's knowledge, threatened by any labour union or
group of employees; (6) there are no certification applications pending or, to Borrower's knowledge, threatened with any labour relations board, and no labour organization or group of employees
of Borrower and its Material Subsidiaries has made a pending demand for recognition; and (7) except as set forth in Schedule 3.7 as of the Closing Date,
there are no complaints or charges against Borrower and its Material Subsidiaries pending or, to the knowledge of Borrower, threatened to be filed with any Governmental Authority or arbitrator based
on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by Borrower or its Material Subsidiaries of any individual. 

3.8           Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness; Corporate Structure  

                Except as set forth in Schedule 3.8 as of the Closing Date, Borrower has no Subsidiaries and Borrower and its Subsidiaries are not
engaged in any joint
venture or partnership with any other Person. All of the issued and outstanding Stock (by class and number) of SR Group (other than Borrower) is owned by each of the Persons and in the amounts
or percentages set forth on Schedule 3.8 and on the corporate structure chart attached as part of Schedule 3.8 as of the
Closing Date and the corporate structure of SR Group is accurately set forth on Schedule 3.8 as of the Closing Date and all of such Stock is represented by the
certificates listed on Schedule 3.8. Except as set forth on Schedule 3.8 as of the Closing Date, there are no outstanding rights
to purchase, options, warrants or similar rights or agreements pursuant to which Borrower or any of its Material Subsidiaries may be required to issue, sell, repurchase or redeem any of its Stock or
other equity securities. All outstanding Indebtedness of Borrower and its Material Subsidiaries as of the Closing Date is described in Section 6.3. As of the
Closing Date, the Subsidiaries of Borrower that are Material Subsidiaries are set forth on Schedule 3.8. 

3.9           Government Regulation.  

                Borrower and its Material Subsidiaries are not subject to regulation under any Canadian federal law, or any provincial, local or foreign
law that restricts or
limits their ability to incur Indebtedness or to perform their respective obligations hereunder or under the other Loan Documents. The making of the Loans by Lenders
to Borrower, the application of the proceeds thereof and repayment thereof will not violate any provision of any statute or any rule, regulation or order issued by or policy of any securities
regulatory authority or stock exchange. 

3.10         Taxes.  

                All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by Borrower or
its Material
Subsidiaries has been filed with the appropriate Governmental 

13

 

Authority
and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest,
late charge or loss has been paid), excluding Charges or other amounts being contested in accordance with Section 5.2(2). Proper and accurate amounts have
been withheld by Borrower and its Material Subsidiaries from payments to its employees, customers and other applicable payees (including payees resident and not resident in Canada for the purposes of
the ITA) for all periods in full as required by all applicable Canadian federal law and all applicable provincial, local and foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. Schedule 3.10 sets forth as of the Closing Date in respect of Borrower and its Material Subsidiaries (i) those taxation years that
have not yet been assessed by any applicable federal, provincial, local or foreign Governmental Authority, (ii) the taxation years that are currently being audited by any federal, provincial,
local or foreign Governmental Authority, (iii) any assessments or, to Borrower's knowledge, threatened assessments in connection with such audit, or otherwise currently outstanding, and
(iv) the most recent taxation year that an audit by any applicable federal, provincial, local or foreign Governmental Authority has been completed. Except as described on
Schedule 3.10 as of the Closing Date, Borrower and its Material Subsidiaries have not executed or filed with any Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment or collection of any Charges. As of the Closing Date, except as set forth on
Schedule 3.10, Borrower and its Material Subsidiaries and their respective predecessors are not liable for any Charges (a) under any agreement (including any
tax sharing agreements) or (b) to Borrower's knowledge, as a transferee. 

3.11         Canadian Pension and Benefit Plans; Subsidiary Pension Plans.  

                Schedule 3.11 lists as of the Closing Date all Canadian Benefit Plans and Canadian Pension Plans adopted or maintained by
Borrower or any of its Material Subsidiaries and other similar benefit or pension plans adopted and maintained by SR Group (the "SR Group Pension
Plans"). The Canadian Pension Plans are duly registered under the ITA and all other applicable laws which require registration and no event has occurred which is reasonably
likely to cause the loss of such registered status. All material obligations of Borrower and its Material Subsidiaries (including fiduciary, funding, investment and administration obligations)
required to be performed in connection with the Canadian Pension Plans, Canadian Benefit Plans and the SR Group Pension Plans and the funding agreements therefor have been performed in a timely
fashion. There have been no improper withdrawals or applications of the assets of the Canadian Pension Plans, the Canadian Benefit Plans or the SR Group Pension Plans. There are no outstanding
disputes concerning the assets of the Canadian Pension Plans, the Canadian Benefit Plans or the SR Group
Pension Plans. Except as set forth on Schedule 3.11 as of the Closing Date, each of the Canadian Pension Plans, Canadian Benefit Plans and the SR Group Pension
Plans is fully funded on a solvency basis (using actuarial methods and assumptions which are consistent with the valuations last filed with the applicable Governmental Authorities and which are
consistent with generally accepted actuarial principles). 

3.12         Litigation.  

                Except as set forth on Schedule 3.12, no action, claim, lawsuit, demand, investigation or proceeding is now pending or, to
the knowledge of Borrower, threatened against Borrower or any of its Material Subsidiaries, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively,
"Litigation"), (1) which challenges Borrower's or any of its Material Subsidiaries' right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party or the validity or enforceability of any Loan Document or any action taken thereunder, (2) which has a reasonable risk of being
determined adversely to Borrower or its Material Subsidiaries and which, if so determined, could reasonably be expected to have a Material Adverse Effect or (3) seeks injunctive relief or
alleges criminal misconduct of Borrower or its Material Subsidiaries. 

3.13         Brokers.  

                Other than Genuity Capital Markets, no broker or finder acting on behalf of Borrower or any of its Material Subsidiaries brought about the
obtaining, making or
closing of the Loans, and Borrower and each of its 

14

 

Material
Subsidiaries does not have any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 

3.14         Intellectual Property.  

                As of the Closing Date, Borrower and each of its Material Subsidiaries owns or has rights to use all Intellectual Property necessary to
continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by it, and each Patent, Trademark, Copyright and License is listed, together with application or registration numbers, as
applicable, in Schedule 3.14 hereto; provided that the parties acknowledge and agree that, with respect to
Copyrights and Licenses, Schedule 3.14 hereto contains a list of only those Copyrights and Licenses which, if Borrower or its Material Subsidiaries were not
the owners thereof or had no rights to use same, could reasonably be expected to have a Material Adverse Effect. Borrower and each of its Material Subsidiaries conducts its business and affairs
without infringement of or interference with any Intellectual Property of any other Person. 

3.15         Full Disclosure.  

                No information contained in this Agreement, the Original Budget, any of the other Loan Documents, any Operating Plan, Financial Statements,
 Budget or other
reports from time to time delivered hereunder or any written statement furnished by or on behalf of Borrower or its Material Subsidiaries to any Agent or any Lender pursuant to the terms of this
Agreement or any other Loan Document contains any untrue statement or misrepresentation of a material fact or omits to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made; provided that the Operating Plans, Original Budget and each
Budget are based upon estimates and assumptions stated therein, all of which Borrower believes to be reasonable and fair in light of current conditions and current facts known to Borrower and reflect
Borrower's good faith and reasonable estimates of the future financial performance of Borrower and its Subsidiaries and of the other information contained therein for the period set forth therein; and
further provided that, without prejudice to any rights or remedies of Agents or Lenders under any Loan Document
or in any way affecting the determination or occurrence of a Default or Event of Default, with respect to Schedules 3.7, 3.8, 3.12, 3.18,
3.21 and 6.3 (collectively, the "Incomplete Schedules"), such Incomplete Schedules currently disclose
the information that was available to Borrower after due inquiry and after having used all commercially reasonable efforts to compile and complete such Incomplete Schedules and such Incomplete
Schedules shall not be read or considered as being comprehensive of the subject matter thereof as of the Closing Date and therefore any representation and warranty or covenant in this Agreement
relating to, or otherwise made with reference to, any such Incomplete Schedules shall be considered as being expressly subject to such caveat. 

3.16         Environmental Matters.  

(1)           Except
as set forth in Schedule 3.16, as of the Closing Date: (a) the Real Estate is free of contamination from any Hazardous Material
except for such contamination that would not adversely impact the value or marketability of such Real Estate and which would not result in Environmental Liabilities which could reasonably be expected
to exceed Cdn$250,000; (b) Borrower and its Material Subsidiaries have not caused or suffered to occur any Release of Hazardous Materials on, at, in, under, above, to, from or about any of its
Real Estate; (c) Borrower and each of its Material Subsidiaries is and has been in compliance with all Environmental Laws, except for such noncompliance which would not result in Environmental
Liabilities which could reasonably be expected to exceed Cdn$250,000; (d) Borrower and each of its Material Subsidiaries has obtained, and is in compliance with, all Environmental Permits
required by Environmental Laws for the operations of its business as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits
would not result in Environmental Liabilities which could reasonably be expected to exceed Cdn$250,000, and all such Environmental Permits are valid, uncontested and in good standing;
(e) Borrower and each of its Material Subsidiaries is not involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are
likely to result in any Environmental Liabilities of Borrower and each of its Material Subsidiaries which could reasonably be expected to exceed Cdn$250,000, and Borrower and each of its Material
Subsidiaries has not permitted any current or 

15

 

former
tenant or occupant of the Real Estate to engage in any such operations; (f) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous
Material which seeks damages, penalties, fines, costs or expenses in excess of Cdn$25,000 or injunctive relief, or which alleges criminal misconduct by Borrower or its Material Subsidiaries;
(g) no notice has been received by Borrower or its Material Subsidiaries identifying it as a "potentially responsible party" or requesting information under any Environmental Law, and to the
knowledge of Borrower, there are no facts, circumstances or conditions that may result in Borrower or its Material Subsidiaries being identified as a "potentially responsible party" under any
Environmental Law; and (h) Borrower has provided to Administrative Agent copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or
potential Environmental Liabilities, in each case relating to Borrower and its Material Subsidiaries. 

(2)           Borrower
hereby acknowledges and agrees that each Agent and Lender is not and has not ever been prior to the Closing Date, in control of any of the Real Estate or Borrower's or any
of its Material Subsidiaries' affairs. 

3.17         Insurance.  

                Schedule 3.17 lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by
Borrower and its Material Subsidiaries, as well as a summary of the terms of each such policy. 

3.18         Deposit and Disbursement Accounts.  

                Schedule 3.18 lists all banks and other financial institutions at which Borrower and each of its Material Subsidiaries
maintains deposits and/or other accounts as of the Closing Date, including any Disbursement Accounts and Borrower Accounts, and such Schedule correctly identifies the name, address and telephone
number of each such bank and financial institution, the name in which the account is held, a description of the purpose of the account, and the complete account number. 

3.19         Intentionally Deleted.  

3.20         Customer and Trade Relations.  

                As of the Closing Date, there exists no actual or, to Borrower's knowledge, threatened termination or cancellation of, or any material
adverse modification or
change in: (1) the business relationship of Borrower or its Material Subsidiaries with any customer or group of customers whose purchases during the preceding twelve (12) months caused
them to be ranked among the ten largest customers of Borrower or its Material Subsidiaries, or (2) the business relationship of Borrower or its Material Subsidiaries with any supplier material
to their respective operations. 

3.21         Agreements and Other Documents.  

                As of the Closing Date, Borrower has provided to Administrative Agent or its counsel accurate and complete copies (or detailed
summaries or other
particulars) of all of the following agreements or documents to which it or any of its Material Subsidiaries are subject and each of which are listed on
Schedule 3.21: (1) supply agreements and purchase agreements not terminable by Borrower or its Material Subsidiaries within sixty (60) days following
written notice issued by Borrower or its Material Subsidiaries and involving transactions in excess of Cdn$500,000 per annum; (2) any lease of Equipment having a remaining term of one year or
longer and requiring aggregate rental and other payments in excess of Cdn$100,000 per annum; (3) licenses and permits held by Borrower or its Material Subsidiaries, the absence of which could
reasonably be expected to have a Material Adverse Effect; (4) instruments or documents evidencing Indebtedness of Borrower or its Material Subsidiaries and any Lien granted by Borrower or its
Material Subsidiaries with respect thereto; and (5) instruments and agreements evidencing the issuance of any Stock (including Common Shares), warrants, rights or options to purchase Stock of
Borrower or its Material Subsidiaries. 

16

  

3.22         Intentionally Deleted.  

3.23         Subordinated Debt.  

                As of the Closing Date, the Indebtedness listed on Schedule 3.23 constitutes all of the Subordinated Debt. 

 
 

SECTION 4
  
    FINANCIAL STATEMENTS AND INFORMATION    
    

4.1           Reports and Notices.  

(1)           Borrower
hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Administrative Agent and Lenders the Financial Statements, notices,
Operating Plans, Budgets, reports and other information at the times, to the Persons and in the manner set forth in Annex D. 

(2)           Notwithstanding
any other term or condition of this Agreement and provided that no Event of Default has occurred or is continuing or would immediately occur as a direct result of the
operation of this Section 4.1(2), Requisite Lenders may, at any time and from time to time by written notice (each, a "Public Period
Notice") by Administrative Agent to Borrower, instruct Administrative Agent to waive the
requirement for the delivery by Borrower of Financial Statements, notices, Operating Plans, Budgets, and other information required to be delivered pursuant to the terms of this Agreement that are not
made publicly available by Borrower to its security holders and Borrower shall not deliver such Financial Statements, notices, Operating Plans, Budgets and other information;
provided that: 

                (a)           such
waiver shall be in effect from the effective date of the Public Period Notice until the earlier of the date of (i) the occurrence of an Event of Default or
(ii) written notice by Administrative Agent, acting on the instructions of Requisite Lenders, to Borrower canceling the effect of this Section 4.1(2)
(the "Public Period"); and 

                (b)           during
a Public Period, as soon as practicable, and in any event within one (1) Business Day after an executive officer of Borrower has actual knowledge of the
existence of any Default or Event of Default, Borrower shall provide notice of same simultaneously to all Agents, Lenders and Borrower's security holders. 

4.2           Intentionally Deleted.  

 
 

SECTION 5
  
    AFFIRMATIVE COVENANTS    
    

        Except with the prior written consent of Requisite Lenders, Borrower agrees that from and after the date hereof and until the Termination Date: 

5.1           Maintenance of Existence and Conduct of Business.  

                Borrower shall, and shall cause each of its Material Subsidiaries to, (1) do or cause to be done all things necessary to preserve and
keep in full force
and effect its corporate existence and its rights and franchises; (2) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; (3) at all
times maintain, preserve and protect all of its properties and assets used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with
industry practices; (4) and transact business only in such corporate and trade names as are set forth in Schedule 5.1. 

5.2           Payment of Obligations.  

(1)           Subject
to Section 5.2(2), Borrower shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it or its Material
Subsidiaries, including (a) Charges imposed upon it or its 

17

 

Material
Subsidiaries, its or its Material Subsidiaries' income and profits, or any of its or its Material Subsidiaries' property and assets and all Charges with respect to employee source deduction
obligations and (b) lawful claims for labour, materials, supplies and services or otherwise, before any thereof shall become past due. 

(2)           Borrower
may in good faith contest, by appropriate proceedings, the validity or amount of any Charges or claims described in Section 5.2(1);
provided that (a) adequate reserves with respect to such contest are maintained on the books of Borrower in accordance with GAAP, (b) no Lien shall be
imposed to secure payment of such Charges that is superior to any of the Liens securing payment of the Obligations, (c) such contest is maintained and prosecuted continuously and with diligence
and operates to suspend collection or enforcement of such Charges, (d) none of the Collateral becomes subject to forfeiture or loss as a result of such contest, (e) Borrower shall
promptly pay or discharge such contested Charges or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Administrative Agent evidence acceptable to
Requisite Lenders of such compliance, payment or discharge, on the earliest of the day any such amount is required by law to be paid, the day such contest is terminated or discontinued adversely to
Borrower or any of its Material Subsidiaries and the day the conditions set forth in this Section 5.2(2) are no longer met or (f) Administrative Agent,
acting on the instructions of Requisite Lenders, has not advised Borrower in writing that Requisite Lenders believe that nonpayment or nondischarge thereof could reasonably be expected to have or
result in a Material Adverse Effect. 

5.3           Books and Records.  

                Borrower shall keep adequate books and records with respect to its and its Material Subsidiaries' business activities in which proper
entries, reflecting all
financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as Schedule 3.4(1) and such books
and records shall be maintained at Borrower's chief executive office set forth on Schedule 3.2. 

5.4           Insurance; Damage to or Destruction of Collateral.  

(1)           Borrower
shall, at its sole cost and expense, maintain the policies of insurance described on Schedule 3.17 as in effect on the date hereof or
otherwise as is customary and prudent in the industry of Borrower. If Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay
all premiums relating thereto, Administrative Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect
thereto which Requisite Lenders deems advisable. Administrative Agent shall have no obligation to obtain insurance for Borrower or its Material Subsidiaries or pay any premiums therefor. By doing so,
Administrative Agent shall not be deemed to have waived any Default or Event of Default arising from Borrower's failure to maintain such insurance or pay any premiums therefor. All sums so disbursed,
including legal fees, court costs and other charges related thereto, shall be payable on demand by Borrower to Administrative Agent and shall be additional Obligations hereunder secured by the
Collateral. Borrower shall deliver to Administrative Agent, in form and substance satisfactory to Requisite Lenders, endorsements to (a) all "All Risk" and business interruption insurance of
Borrower and its Material Subsidiaries naming Collateral Agent as loss payee, and containing the standard mortgage clause approved by the Insurance Bureau of Canada and (b) all general
liability and other liability policies naming Collateral Agent as additional insured. 

(2)           Administrative
Agent, acting on the instructions of Requisite Lenders, reserves the right at any time upon any change in Borrower's or its Material Subsidiaries' risk profile
(including any change in the product mix maintained by Borrower or its Material Subsidiaries or any laws affecting the potential liability of Borrower or its Material Subsidiaries) to require
additional forms and limits of insurance to, in the reasonable opinion of Requisite Lenders, adequately protect Collateral Agent's interests, on behalf of Agents and Lenders, in all or any portion of
the Collateral and to ensure that Borrower and its Material Subsidiaries are protected by insurance in amounts and with coverage customary for their industry. If requested by Administrative Agent,
acting on the instructions of Requisite Lenders, Borrower shall deliver to Administrative Agent from time to time a report of a reputable insurance broker, satisfactory to Requisite Lenders, with
respect to its insurance policies. 

18

 

(3)           Borrower
irrevocably makes, constitutes and appoints Administrative Agent (and all Related Parties designated by Administrative Agent), so long as any Event of Default shall
have occurred and be continuing or the anticipated insurance proceeds exceed Cdn$500,000, as Borrower's and its Material Subsidiaries' true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under such "All Risk" policies of insurance, endorsing the name of Borrower or any Subsidiary on any
cheque or other item of payment for the proceeds of such "All Risk" policies of insurance and for making all determinations and decisions with respect to such "All Risk" policies of insurance.
Administrative Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower shall promptly notify
Administrative Agent of any loss, damage, or destruction to the Collateral in the amount of Cdn$100,000 or more, whether or not covered by insurance. After deducting from such proceeds the expenses,
if any, incurred by Administrative Agent in the collection or handling thereof, Administrative Agent shall remit the balance to Borrower which shall use such money, or any part thereof, firstly to
replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or
destruction and secondly for the Purpose. 

5.5           Compliance with Laws.  

(1)           Borrower
shall, and shall cause each of its Material Subsidiaries to, comply with all federal, provincial, local and foreign laws and regulations applicable to it, including those
relating to licensing and employment and labour matters and Environmental Laws and Environmental Permits, except to the extent that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. 

(2)           For
each existing Canadian Pension Plan and SR Group Pension Plan, Borrower shall ensure that such plan retains its registered status under and is administered in a timely manner in
all material respects in accordance with the applicable pension plan text, funding agreement, the ITA and all other applicable laws. 

(3)           For
each Canadian Pension Plan and SR Group Pension Plan hereafter adopted by Borrower or any of its Material Subsidiaries which is required to be registered under the ITA or any
other applicable laws, Borrower shall use its best efforts to seek and receive confirmation in writing from the applicable Governmental Authorities to the effect that such plan is unconditionally
registered under the ITA or such other applicable laws. 

(4)           For
each existing and hereafter adopted Canadian Pension Plan, Canadian Benefit Plan and SR Group Pension Plan, Borrower shall in a timely fashion perform in all material respects
all obligations (including fiduciary, funding, investment and administration obligations) required to be performed in connection with such plan and the funding media therefor. 

(5)           Borrower
shall deliver to Administrative Agent and Lenders, (a) promptly after the filing thereof with any applicable Governmental Authority, copies of each annual and other
return, report or valuation with respect to each Canadian Pension Plan and SR Group Pension Plan; (b) promptly after receipt thereof, a copy of any direction, order, notice, ruling or opinion
that Borrower or any of its Material Subsidiaries may receive from any applicable Governmental Authority with respect to any Canadian Pension Plan or SR Group Pension Plan; and (c) prompt
notification of any increases having a cost to Borrower or any of its Material Subsidiaries in excess of Cdn$150,000 per annum, in the benefits of any existing Canadian Pension Plan, Canadian Benefit
Plan or SR Group Pension Plan, or the establishment of any new Canadian Pension Plan, Canadian Benefit Plan or SR Group Pension Plan, or the commencement of contributions to any such plan to which
Borrower or its Material Subsidiaries were not previously contributing. 

5.6           Supplemental Disclosure.  

                From time to time as may be requested by Requisite Lenders, Borrower shall supplement each Schedule hereto, or any representation herein
or in any other Loan
Document, with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedule or as an
exception to such representation or which is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to
any Schedule, such Schedule shall be appropriately marked to show the changes made therein); provided that (1) no such supplement to any such Schedule or
representation shall be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as 

19

 

consented
to by Requisite Lenders in writing; (2) no supplement shall be required as to representations and warranties that relate solely to the Closing Date; and (3) all such requested
supplements shall be provided to Lenders within ten (10) days from such request. 

5.7           Intellectual Property.  

                Borrower shall, and shall cause each of its Material Subsidiaries to, conduct its business and affairs without infringement of or
interference with any
Intellectual Property of any other Person in any material respect. 

5.8           Environmental Matters.  

                Borrower shall, and shall cause each Person within its control to, (1) conduct its operations and keep and maintain its Real Estate
in compliance with all
Environmental Laws and Environmental Permits other than noncompliance which could not reasonably be expected to have a Material Adverse Effect; (2) implement any and all investigation,
remediation, removal and response actions which are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws and Environmental
Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of the Real
Estate; (3) notify Administrative Agent promptly after Borrower becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from
or about any Real Estate which could reasonably be expected to result in Environmental Liabilities in excess of Cdn$50,000; and (4) promptly forward to Administrative Agent a copy of any order,
notice, request for information or any communication or report received by Borrower or its Material Subsidiaries in connection with any such violation or Release or any other matter relating to any
Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of Cdn$50,000, in each case whether or not any Governmental Authority has
taken or threatened any action in connection with any such violation, Release or other matter. If Requisite Lenders at any time have a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by Borrower or any of its Material Subsidiaries or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under,
above, to, from or about any of the Real Estate, which, in each case, could reasonably be expected to have a Material Adverse Effect, then Borrower shall, upon Administrative Agent's written request
(a) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrower's expense, as
Administrative
Agent may from time to time request, which shall be conducted by reputable environmental consulting firms acceptable to Requisite Lenders and shall be in form and substance acceptable to Requisite
Lenders, and (b) permit any Agent or its Related Parties to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Requisite Lenders deem
appropriate, including subsurface sampling of soil and groundwater. Borrower shall reimburse Administrative Agent for the costs of such audits and tests and the same will constitute a part of the
Obligations secured hereunder. 

5.9           Landlords' Agreements, Mortgagee Agreements and Bailee Letters.  

(1)           If
requested by Requisite Lenders, Borrower shall obtain a landlord's agreement, mortgagee agreement or bailee letter, as applicable, from the lessor of each leased property or
mortgagee of owned property or with respect to any warehouse, processor or converter facility or other location where Collateral is located, which agreement or letter shall contain a waiver or
subordination of all Liens or claims (including any distraint rights) that the landlord, mortgagee or bailee may assert against the Collateral at that location, and shall otherwise be satisfactory in
form and substance to Requisite Lenders. After the Closing Date, no real property or warehouse space shall be leased or acquired by Borrower or its Material Subsidiaries and no Inventory shall be
shipped to a processor or converter under arrangements established after the Closing Date without the prior written consent of Requisite Lenders or, unless and until a satisfactory landlord or
mortgagee agreement or bailee letter, as appropriate, shall first have been obtained with respect to such location. Borrower shall, and shall cause each of its Material Subsidiaries to, timely and
fully pay and perform its obligations under 

20

 

all
leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. 

(2)           If
Borrower acquires any real property after the Closing Date, Borrower shall deliver to Collateral Agent concurrently with or immediately following such acquisition a first-ranking
Mortgage or Lien (subject to Permitted Encumbrances) covering such real property, title insurance policies, a legal opinion, current as-built surveys, zoning letters and certificates of
occupancy, in each case, in form and substance (a) substantially similar to those that Borrower delivered on or about the Closing Date in respect of certain of Borrower's Real Estate owned by
Borrower on such date and (b) reasonably satisfactory to Requisite Lenders. 

5.10         Purpose; Budget.  

(1)           Borrower
shall ensure that each Revolving Credit Advance and the proceeds of the Term Loan shall be applied exclusively for the Purpose. 

(2)           During
the Private Period, Borrower shall (a) ensure that each Revolving Credit Advance complies with the terms of the Original Budget and each subsequent Budget
(to the extent that the Original Budget or a Budget is not inconsistent with the most recent Budget approved in writing by Requisite Lenders) and (b) permit Requisite Lenders, from time
to time, at the option of Requisite Lenders, to participate with Borrower in approving each Budget and Borrower shall promptly provide a copy of such approved Budget to all Lenders. 

5.11         Visits and Inspections; Lender Meetings.  

                Borrower agrees that it shall, and shall cause its Material Subsidiaries to, permit (i) Agents, any Lender and their respective
Related Parties, from time
to time, as often as may be reasonably requested, but only during normal business, hours, to visit and inspect the properties of Borrower and each of its Material Subsidiaries, inspect, audit and make
extracts from their respective books and records, and discuss with their respective Related Parties, Borrower's and each of its Material Subsidiaries' business, assets, liabilities, financial
condition, business prospects and results of operations and (ii) appraisers engaged by Agents (whether or not personnel of Agents or any Lender), from time to time, as often as may be
reasonably requested, but only during normal business hours, to visit and inspect the properties of Borrower and each of its Material Subsidiaries, for the purpose of completing appraisals. Agents or
any Lender, if no Default or Event of Default then exists or is reasonably likely to occur, shall give Borrower or the applicable Subsidiary reasonable prior notice of any such inspection or audit.
Without limiting the foregoing, Borrower will participate and will cause their Related Parties and Material Subsidiaries to participate in meetings with Agents, Lenders and their respective Related
Parties periodically during each year, which meeting(s) shall be held at such times and such places as may be reasonably requested by Agents. 

5.12         Further Assurances.  

                Borrower agrees that it shall, at Borrower's expense and upon request of Administrative Agent, duly execute and deliver, or cause to be
duly executed and
delivered, to Administrative Agent such further instruments and do and cause to be done such further acts as may be necessary, proper or desirable in the opinion of Requisite Lenders to carry out more
effectively the provisions and purposes of this Agreement or any other Loan Document. 

5.13         Intentionally Deleted.  

5.14         Operating Plan and Financial Covenants.  

                Borrower agrees that: 

                (a)           it
shall deliver to Lenders an Operating Plan for Fiscal Year 2005 by no later than July 15, 2005 (or such later date as Requisite Lenders may consent to
in writing); 

                (b)           by
no later than August 15, 2005 (or such later date as Requisite Lenders may consent to in writing), Borrower and Requisite Lenders shall negotiate and
agree upon, each acting in good faith, revised Financial Covenants and related definitions based on the information set forth in such Operating Plan; and 

21

 

                (c)           this
Agreement shall be amended and revised (in form and substance satisfactory to Borrower and Requisite Lenders, each acting in good faith) to include such
negotiated and agreed upon revised Financial Covenants and related definitions, 

provided
that any failure by Borrower to deliver such Operating Plan by the date referred to in paragraph (a) immediately above or agree upon any revised Financial
Covenants and related definitions by the date referred to in paragraph (b) immediately above or negotiate in good faith as provided for in this
Section 5.14 shall constitute an "Event of Default" hereunder. 

 
 

SECTION 6
  
    NEGATIVE COVENANTS    
    

        Borrower agrees that, without the prior written consent of Requisite Lenders, from and after the date hereof until the Termination Date: 

6.1           Amalgamations, Subsidiaries, Etc.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, directly or indirectly, by operation of law or otherwise,
(1) form or
acquire any Subsidiary, or (2) amalgamate or merge with,
consolidate with, acquire all or substantially all of the property, assets or Stock of, or otherwise combine with or acquire, any Person; except that Borrower and its
Material Subsidiaries may form Subsidiaries in the ordinary course of their respective businesses consistent with past practice. 

6.2           Investments; Loans and Advances.  

                Except as otherwise expressly permitted by this Section 6 or in accordance with the Restructuring Term Sheet, Borrower
shall not, and shall cause each of its Material Subsidiaries not to, make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through
the direct or indirect lending of money, holding of securities or otherwise; except that Borrower may hold funds in the Borrower Accounts and Disbursement Accounts and
investments comprised of notes payable, or stock or other securities issued by Account Debtors to Borrower pursuant to negotiated agreements with respect to settlement of such Account Debtor's
Accounts in the ordinary course of business, so long as the aggregate amount of such Accounts so settled by Borrower does not exceed Cdn$1,000,000; provided further that
Borrower may hold the following investments in paragraphs (a) and (b) immediately below and the amount of such investments shall be
excluded from determining such Cdn$1,000,000 amount: 

                (a)           notes
payable or stock or other securities issued by Telmex Argentina to Borrower from time to time pursuant to negotiated agreements with respect to settlement of
Telmex Argentina's Accounts in the ordinary course of business; and 

                (b)           notes
payable or stock or other securities issued by any Account Debtor to Borrower pursuant to negotiated agreements with respect to settlement of Accounts and which
are insured by insurance or guaranteed by letters of credit or letters of guarantee (in each case in form and substance satisfactory to Requisite Lenders). 

6.3           Indebtedness; Unfunded Pension and Benefit Plan Obligations.  

(1)           Borrower
shall not, and shall cause each of its Material Subsidiaries not to, create, incur, assume or permit to exist any Indebtedness, except (without duplication)
(a) Indebtedness secured by Liens permitted in Section 6.7, (b) the Loans and the other Obligations and (c) existing Indebtedness described in
Schedule 6.3. 

(2)           Except
in accordance with the Restructuring Term Sheet, Borrower shall not, and shall cause each of its Material Subsidiaries not to, directly or indirectly, voluntarily purchase,
redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness, other than the Obligations. 

(3)           Borrower
shall not, and shall cause each of its Material Subsidiaries not to, permit its unfunded pension fund and other employee benefit plan obligations and liabilities to remain
unfunded other than in accordance with applicable law. 

22

 

6.4           Affiliate Transactions and Employee Loans.  

(1)           Except
as otherwise expressly permitted in this Section 6 or in accordance with the Restructuring Term Sheet, Borrower shall not, and shall
cause each of its Material Subsidiaries not to, enter into or be a party to any transaction with any of its Affiliates (other than direct or indirect wholly-owned Material Subsidiaries) except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or its Material Subsidiaries' business and upon fair and reasonable terms that are no less favourable to Borrower or its
Material Subsidiaries than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of Borrower. In addition, prior to entering into any transaction with any of its
Affiliates (other than for the purchase and sale of goods that are in compliance with the first sentence of this Section 6.4(1)), the terms of each such transaction
must be disclosed ten (10) days in advance to Administrative Agent. All such transactions existing as of the date hereof are described on Schedule 6.4(1). 

(2)           Borrower
shall not, and shall cause each of its Material Subsidiaries not to, enter into any lending or borrowing transaction with any of its employees, except on an arm's-length
basis in the ordinary course of business consistent with past practices for travel expenses, relocation costs and similar purposes. 

6.5           Capital Structure and Business.  

                Except in accordance with the Restructuring Term Sheet, Borrower shall not, and shall cause each of its Material Subsidiaries not to,
(1) make any changes
to its capital structure or in any of its business objectives, purposes or operations which could in any way adversely affect the repayment of the Loans or any of the other Obligations or could
reasonably be expected to have or result in a Material Adverse Effect; or (2) amend its constating documents or bylaws in a manner which would adversely affect Borrower's or any of its Material
Subsidiaries' duty or ability to repay the Obligations. Borrower shall not, and shall cause each of its Material Subsidiaries not to, engage in any business other than the businesses currently engaged
in by it or businesses reasonably related thereto. 

6.6           Guaranteed Indebtedness.  

                Except in accordance with the Restructuring Term Sheet, Borrower shall not, and shall cause each of its Material Subsidiaries not to,
create, incur, assume or
permit to exist any Guaranteed Indebtedness except for Guaranteed Indebtedness set forth on Schedule 6.3. 

6.7           Liens.  

(1)           Borrower
shall not, and shall cause each of its Material Subsidiaries not to, create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other
properties, assets or undertakings (whether now owned or hereafter acquired) except: 

                (a)           Permitted
Encumbrances; 

                (b)           Liens
in existence on the date hereof and summarized on Schedules 3.6 and 6.7; 

                (c)           Liens
created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures acquired by Borrower or its Material Subsidiaries in the ordinary course of business, involving the incurrence of an aggregate amount of purchase
money Indebtedness and Capital Lease Obligations of not more than Cdn$500,000 outstanding at any one time for all such Liens; provided that such Liens attach only to the assets subject to such
purchase money Indebtedness and such Indebtedness is incurred within twenty (20) days following such purchase and does not exceed one hundred percent (100%) of the purchase price of the subject
assets; 

                (d)           Liens
created after the date hereof in connection with purchase money Indebtedness with respect to Inventory acquired by Borrower or its Material Subsidiaries in the
ordinary course of business, involving the incurrence of an aggregate amount of purchase money Indebtedness of not more than Cdn$2,000,000 outstanding at any one time for all such Liens;
provided that such Liens attach only to the assets subject to such purchase money Indebtedness and such Indebtedness is incurred within twenty (20) days 

23

 

following
such purchase and does not exceed one hundred percent (100%) of the purchase price of the subject assets; 

                (e)           Liens
permitted in accordance with the Restructuring Term Sheet; 

                (f)            to
the extent set forth and described in the Original Budget or a Budget approved in writing by Requisite Lenders, Liens created after the date hereof in the form of
cash or cash equivalent collateral as security for any credit facility made or to be made available to Borrower or any Material Subsidiary with respect to the issuance of letters of credit or letters
of guarantee required in the ordinary course of business of Borrower or a Material Subsidiary; and 

                (g)           to
the extent set forth and described in the Original Budget or a Budget approved in writing by Requisite Lenders, Liens created after the date hereof and ranking  pari passu with Collateral Agent's
Liens under the Collateral Documents in favour of EDC as security for any indebtedness of Borrower or any of
its Material Subsidiaries to EDC pursuant to the performance security guarantee program of EDC. 

(2)           In
addition, Borrower shall not, and shall cause each of its Material Subsidiaries not to, become a party to any agreement, note, indenture or instrument, or take any other action,
which would prohibit the creation of a Lien on any of its properties, assets or undertaking in favour of Collateral Agent, on behalf of Agents and Lenders, as additional collateral for the
Obligations, except operating leases, Capital Leases or Licenses which prohibit Liens upon the assets that are subject thereto. 

6.8           Sale of Stock and Assets.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, sell, transfer, convey, assign or otherwise dispose of any
of its properties,
assets or undertaking including any of its Accounts or issue any Stock of Material Subsidiaries, other than (1) the sale of Inventory in the ordinary course of business and equipment to the CTR
Group (as defined in the Support Agreement) in accordance with Section 3(c) of the Support Agreement; (2) the sale, transfer, conveyance or other disposition by Borrower or
its Material Subsidiaries of Equipment or Fixtures that are obsolete or no longer used or useful in Borrower's or its Material Subsidiaries' business and having a value not exceeding Cdn$250,000 in
the aggregate per annum, (3) Stock contemplated to be issued pursuant to the Restructuring Term Sheet and (4) to the extent set forth and described in the Original Budget or a Budget
approved in writing by Requisite Lenders, the sale, assignment, securitization, discounting or similar disposition of letters of credit or Accounts to banks, EDC or other financial institutions;
provided that, notwithstanding any other term or condition of this Agreement, in accordance with Section 11.2(2)(e), the prior written
consent of all Lenders shall be required to permit Borrower or any of its Material Subsidiaries to sell, transfer, convey, assign or otherwise dispose of any of the Collateral except for transactions
permitted pursuant to paragraphs (1), (2), (3) and (4) immediately above. 

6.9           Financial Covenants.  

                During the Public Period, Borrower shall not breach or fail to comply with any of the Financial Covenants (the "Financial
Covenants") set forth in Annex E, as the same are negotiated and determined pursuant to Section 5.14. 

6.10         Hazardous Materials.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, cause or permit a Release of any Hazardous Material on, at,
in, under, above, to,
from or about any of the Real Estate where such Release would (1) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental
Permits or (2) otherwise adversely impact the value or marketability of any of the Real Estate or any of the Collateral, other than such violations or impacts which could not reasonably be
expected to have a Material Adverse Effect. 

6.11         Sale-Leasebacks.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, engage in any sale-leaseback, synthetic lease or similar
transaction
involving any of its property, assets or undertaking. 

24

  

6.12         Cancellation of Indebtedness.  

                Except in accordance with the Restructuring Term Sheet, Borrower shall not, and shall cause each of its Material Subsidiaries not to,
cancel any claim or debt
owing to it, except for reasonable consideration negotiated on an arm's-length basis and in the ordinary course of its business consistent with past practices. 

6.13         Restricted Payments.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, make any Restricted Payment, except (a) employee loans
permitted under
Section 6.4(2) above and (b) pursuant to the Restructuring Term Sheet to the extent that any such Restricted Payment thereunder would not result in a
breach of the Financial Covenants set forth on Annex E. 

6.14         Change of Corporate Name or Location; Change of Fiscal Year.  

(1)           Borrower
shall not, and shall cause each of its Material Subsidiaries not to, (1) change its corporate name, or (2) change its chief executive office, principal place
of business, corporate offices or warehouses or locations at which Collateral is held, located or stored, or the location of its records concerning the Collateral from that set forth on
Schedule 3.2, in any case without at least thirty (30) days prior written notice to Administrative Agent and after Administrative Agent's written
acknowledgment that any action requested by Requisite Lenders in connection therewith, including to continue the perfection of any Liens in favour of Collateral Agent, on behalf of Agents and Lenders,
in any Collateral, has been completed or taken, and provided that any such new location shall be in the Province of Quebec.

(2)           Borrower
shall not, and shall cause its Material Subsidiaries not to, change its accounting periods (including the Fiscal Quarter and the Fiscal Year). 

6.15         No Speculative Transactions.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, engage in any transaction involving commodity options,
futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of commodities owned or purchased by it and the values of foreign currencies receivable or payable by it and interest swaps,
caps or collars. 

6.16         Intentionally Deleted.  

6.17         Changes Related to Subordinated Debt.  

                Borrower shall not, and shall cause each of its Material Subsidiaries not to, change or amend the terms of any Subordinated Debt
(or any indenture or
agreement in connection therewith). 

6.18         Intentionally Deleted.  

 
 

SECTION 7
  TERM    
    

7.1           Termination.  

                The financing arrangements contemplated hereby shall be in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be
automatically due and payable in full on such date. 

7.2           Survival of Obligations Upon Termination of Financing Arrangements.  

                Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any
financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties and liabilities of Borrower or its Subsidiaries or the rights of Agents and Lenders relating to any unpaid portion of the
Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination or cancellation, or any transaction 

25

 

or
event, the performance of which is required after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon Borrower or its Subsidiaries, and all rights of Agents and Lenders, all as contained in the Loan Documents, shall not terminate or expire,
but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided however, that in all events
the provisions of Section 11, the payment obligations under Sections 1.13 and 1.14, and the indemnities contained in the
Loan Documents shall survive the Termination Date. 

 
 

SECTION 8
  EVENTS OF DEFAULT: RIGHTS AND REMEDIES    
    

8.1           Events of Default.  

                The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder: 

(1)           Borrower
or any of its Subsidiaries (a) fails to make any payment of principal of, or interest on, or Fees owing in respect of, the Loans or any of the other Obligations when
due and payable, or (b) fails to pay or reimburse any Agent or Lender for any expense reimbursable hereunder or under any other Loan Document within three (3) days following an Agent's
or a Lender's demand for such reimbursement or payment of expenses. 

(2)           Borrower
fails or neglects to perform, keep or observe any of the provisions of Sections 1.2, 1.3,
1.7, 1.12, 1.13, 1.14, 4,
5, 6, or any of the provisions set forth in Annexes B, D or
E respectively and the same shall remain unremedied for five (5) Business Days or more. 

(3)           Borrower
or any of its Material Subsidiaries fails or neglects to perform, keep or observe any other provision of this Agreement or of any of the other Loan Documents (other than any
provision embodied in or covered by any other paragraph of this Section 8.1) and the same shall remain unremedied for five (5) Business Days or more. 

(4)           A
default or breach shall occur under any other agreement, document or instrument to which Borrower or any of its Material Subsidiaries is a party (other than any default or breach
caused by any act or omission of any Agent or Lender) which is not cured within any applicable cure or grace period, and such default or breach: 

                (a)           involves
the failure to make any payment when due in respect of any Indebtedness (other than (i) the Obligations and (ii) any Ordinary Course
Indebtedness) of Borrower or any of its Material Subsidiaries in excess of Cdn$100,000 in the aggregate; or 

                (b)           causes,
or permits any holder of any Indebtedness (other than (i) the Obligations and (ii) and Ordinary Course Indebtedness), or a trustee to cause, such
Indebtedness or a portion thereof in excess of Cdn$100,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, regardless of whether such
default is waived, or such right is exercised, by such holder or trustee; or 

                (c)           is
a default or breach under the Restructuring Term Sheet; or 

                (d)           involves
the failure to make any payment when due in respect of Ordinary Course Indebtedness in excess of Cdn$1,000,000 in the aggregate. 

(5)           Any
representation or warranty herein or in any Loan Document or in any written statement, report, Financial Statement or certificate made or delivered to any Agent or Lender by
Borrower or any of its Subsidiaries is untrue or incorrect in any material respect as of the date when made or deemed made. 

(6)           Property
or assets of Borrower or any of its Material Subsidiaries with a fair market value in the aggregate of Cdn$100,000 or more shall be attached, seized, levied upon or
subjected to execution, garnishment, distress or any other similar process, or come within the possession of any trustee, interim receiver, receiver, receiver and manager, liquidator, administrator,
custodian, sequestrator, agent, examiner, monitor, sheriff, bailiff or other similar official or assignee for the benefit of creditors of Borrower or any of its Material Subsidiaries and such
condition continues for thirty (30) days or more. 

26

 

(7)           Any
involuntary case or proceeding (including the filing of any notice in respect thereof) is commenced against Borrower or any of its Material Subsidiaries under any Insolvency Law,
any incorporation law or other applicable law in any jurisdiction in respect of the: 

                (a)           bankruptcy,
liquidation, winding-up, cessation, dissolution or suspension of general operations, 

                (b)           composition,
compromise, rescheduling, reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of the
debts or obligations, 

                (c)           appointment
of a trustee, interim receiver, receiver, receiver and manager, liquidator, administrator, custodian, sequestrator, agent, examiner, monitor or other
similar official for, or for all or a substantial part of the property and assets, or 

                (d)           possession,
foreclosure, seizure or retention, sale or other disposition of, or other proceedings to enforce security over, all or a substantial part of the property
and assets, 

of
Borrower or any of its Material Subsidiaries and such case or proceeding shall remain undismissed or unstayed for thirty (30) days or more or such court shall enter a decree or order
granting the relief sought in such case or proceeding. 

(8)           Borrower
or any of its Material Subsidiaries (i) commences or fails to contest in a timely and appropriate manner or consents to the institution of cases or proceedings
referred to in Section 8.1(7) above or to the filing of any petition or application or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of Borrower or any of its Material Subsidiaries or of any part of Borrower's or any of its Material Subsidiaries' property
and assets or (ii) shall take any corporate action in furtherance of any of the foregoing or of any of the cases or proceedings referred to in
Section 8.1(7) above or (iii) admits in writing its inability to pay its debts as such debts become due or (iv) becomes insolvent. 

(9)           A
final judgment or judgments for the payment of money in excess of Cdn$250,000 in the aggregate at any time outstanding shall be rendered against Borrower or any of its Material
Subsidiaries and the same shall not, within thirty (30) days after the entry thereof, have been discharged or execution thereof stayed or bonded pending appeal, or shall not have been
discharged prior to the expiration of any such stay. 

(10)         Any
obligation of Borrower or any of its Subsidiaries under any provision of any Loan Document shall for any reason become unlawful and as a result cease to be valid, binding and
enforceable in accordance with its terms (or Borrower or any of its Subsidiaries shall on any basis challenge the enforceability of any Loan Document or shall on any basis assert in writing, or
engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid,
binding and enforceable in accordance with its terms), or any Lien created under any Loan Document shall cease to be a valid and perfected first priority Lien (except as otherwise permitted herein or
therein) in any of the Collateral purported to be covered thereby. 

(11)         Any
involuntary and unanticipated event shall occur, whether or not insured or insurable, as a result of which revenue-producing activities cease or are substantially curtailed at
any facility of Borrower or any of its Material Subsidiaries generating more than ten percent (10%) of Borrower's revenues (on a consolidated basis) for the Fiscal Year preceding such event and
such cessation or curtailment continues for more than thirty (30) days. 

(12)         Any
default or breach by Borrower or any of its Material Subsidiaries shall occur and be continuing under any agreement (including the CTR Guarantee) to which Borrower or any of its
Material Subsidiaries is a party or any of its property or assets is subject, and such breach or default (other than a breach or default under the CTR Guarantee) could reasonably be expected to have a
Material Adverse Effect. 

8.2           Remedies.  

(1)           If
any Default or Event of Default shall have occurred and be continuing, Administrative Agent may (and shall on the instructions of the Requisite Lenders), without notice,
suspend further Advances whereupon 

27

 

no
further Advance shall be made or extended in Requisite Lenders' sole discretion so long as such Default or Event of Default is continuing. 

(2)           If
any Event of Default shall have occurred and be continuing, Administrative Agent may (and shall on the instructions of Requisite Lenders), without notice,
(a) terminate further Advances; (b) declare all or any portion of the Obligations, including all or any portion of any Loan to be forthwith due and payable, all without presentment,
demand, protest or further notice of any kind, all of which are expressly waived by Borrower; and (c) exercise any rights and remedies provided to any Agent or Lender under the Loan Documents
and/or at law or equity, including all remedies provided under the PPSA, the Civil Code, the equivalents thereof, or other laws similar thereto in any
jurisdiction; provided however, that upon the earliest to occur of (i) the date an initial order is made under Section 11 of the CCAA with respect to
Borrower, (ii) the date on which Borrower becomes a bankrupt pursuant to the BIA and (iii) the date on which Borrower initiates proceedings under Part III of the BIA, further
Advances shall be immediately terminated and all of the Obligations, including the Loans, shall become immediately due and payable without declaration, notice or demand by any Person. 

8.3           Waivers by Borrower.  

                Except as otherwise provided for in this Agreement or by applicable law, Borrower waives: (a) presentment, demand and protest and
notice of presentment,
dishonour, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guarantees at any time held by any Agent or Lender on which Borrower or any of its Subsidiaries may in any way be liable, and
hereby ratifies and confirms whatever any Agent or Lender may do in this regard, (b) all rights to notice and a hearing prior to any Agent's taking possession or control of, or to any Agent's
replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing any Agent to exercise any of its remedies, and (c) the benefit of
all valuation, appraisal, marshalling and exemption laws. 

 
 

SECTION 9
  ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS    
    

9.1           Assignment and Participations.  

(1)           Subject
to the terms of this Section 9.1, any Lender may make an assignment to a Qualified Assignee of, or a sale of participations in, at any
time or times, the Loan Documents, its Loans or Commitment or any portion thereof or interest therein, including any Lender's rights, title, interests, remedies, powers or duties thereunder. Any
assignment by a Lender shall: (i) require the execution of an assignment agreement (an "Assignment Agreement" substantially in the form
attached hereto as Exhibit 9.1(a) and satisfactory to Requisite Lenders); (ii) be conditioned on such assignee Lender representing to the
assigning Lender and Administrative Agent that it is purchasing the applicable Obligations to be assigned to it for its own account, for investment purposes and not with a view to the distribution
thereof; (iii) after giving effect to any such partial assignment, the assignee Lender shall have Commitments in an amount at least equal to US$1,000,000 and the assigning Lender shall have
retained Commitments in an amount at least equal to US$1,000,000; (iv) include a payment to Administrative Agent of an assignment fee of Cdn$1,000 and (v) include reasonable prior notice
to Borrower of such assignment. In the case of an assignment by a Lender under this Section 9.1, the assignee Lender shall have, to the extent of such assignment,
the same rights, benefits and obligations as all other Lenders hereunder. The assigning Lender shall be relieved of its obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby acknowledges and agrees that any assignment shall give rise to a direct obligation of Borrower to the assignee Lender and that the
assignee Lender shall be considered to be a "Lender". In all instances, each Lender's liability to make Advances hereunder shall be several and not joint and, in the case of Revolving Credit Advances,
shall be limited to such Lender's Pro Rata Share of Revolving Loan Commitment No. 1, Revolving Loan Commitment No. 2, Revolving Loan Commitment No. 3 or Revolving
Loan Commitment No. 4, as the case may be. In the event any Lender assigns or otherwise transfers all or any part of the Obligations, in accordance with this
Section 9.1, such Lender shall so notify Borrower. 

28

 

(2)           Any
sale of a participation by a Lender of all or any part of its Loans or Commitment shall be made with the understanding that all amounts payable by Borrower hereunder shall be
determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such holder participates, (ii) any
extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially
all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). Neither Agents nor any Lender (other than Lender selling a
participation) shall have any duty to any participant and may continue to deal solely with Lender selling a participation as if no such sale had occurred. 

(3)           Except
as expressly provided in this Section 9.1, no Lender shall, as between Borrower and that Lender, or Agents and that Lender, be relieved of
any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loan Documents, Loans, Commitment, the Notes,
or other Obligations owed to such Lender. 

(4)           A
Lender may furnish any information concerning Borrower or its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective
assignees and participants); provided that such Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in
Section 11.8. 

9.2           Appointment of Agent.

(1)           BNY
Trust Company of Canada is hereby appointed to act on behalf of all Lenders as Administrative Agent and Collateral Agent under this Agreement and the other Loan Documents. BNY
Trust Company of Canada is also appointed to act as the power of attorney and the "Fondé de Pouvoir" of Lenders, Collateral Agent and the
"Bondholders" (as defined in the Security Agreement) for the purposes of holding hypothecs over and against all of Borrower's present and future property, in general, and the Collateral and the
Mortgaged Properties, in particular, securing payment of bonds and other titles of indebtedness as envisaged by article 2692 of the Civil Code.
To the extent permitted by applicable law and as required to give effect to this Section 9.2, each Loan Document shall be deemed to appoint BNY Trust Company of
Canada as Administrative Agent, Collateral Agent, the power of attorney and the "Fondé de Pouvoir" of Lenders, Collateral Agent and the
"Bondholders" (as defined in the Security Agreement) and, in such capacity, BNY Trust Company of Canada shall be entitled to all protections, rights, privileges and powers as are expressly
provided for the Administrative Agent, Collateral Agent, the power of attorney and the "Fondé de Pouvoir" therein. The provisions of this
Section 9.2 are solely for the benefit of each Agent and Lender and neither Borrower nor any other Person shall have any rights as a third party beneficiary of any
of the provisions hereof. In performing their functions and duties under this Agreement and the other Loan Documents, Agents shall act solely as agents of Lenders and do not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any other Person. Agents shall have no duties or responsibilities except for those expressly set
forth in this Agreement and the other Loan Documents. The duties of Agents shall be mechanical and administrative in nature and Agents shall not have, or be deemed to have, by reason of this
Agreement, any other Loan Document or otherwise a fiduciary relationship in respect of any Lender. In respect of notices, agreements or other written communication received by an Agent by or on behalf
of Borrower pursuant to the terms of this Agreement or the other Loan Documents, such Agent shall only be required to provide copies of such notice, agreements, documents or other written
communication to the Lenders (to the extent not provided to a Lender concurrently with delivery to such Agent) and such Agent shall, except as otherwise expressly provided herein or agreed to
between such Agent and Requisite Lenders, have no independent obligation to pursue such notices, agreements, documents or other written communication or review or confirm the sufficieny thereof.
Except as expressly set forth in this Agreement and the other Loan Documents, Agents shall not have any duty to disclose, and shall not be liable for failure to disclose, any information relating to
Borrower or its Subsidiaries or any Account Debtor that is communicated to or obtained by it or any of its Affiliates in any capacity. Agents shall have the right to delegate any of their respective
duties and obligations under the Loan Documents to any Person (each a "Sub-Agent") upon such terms and conditions as such Agent may think 

29

 

fit; provided
that (a) such Agent gives each Lender prior written notice and reasonable details thereof, (b) neither
Borrower nor any Lender shall have any duty to such Sub-Agent and may continue to deal solely with such delegating Agent and (c) such delegating Agent shall be directly responsible
for all such delegated duties and obligations. 

(2)           Except
in circumstances where an Agent reasonably believes that any Collateral is in material jeopardy or is about to be put in material jeopardy or the rights of Agents or Lenders
may be materially prejudiced or impaired and an act or action of such Agent is (in the good faith judgment of such Agent) required to
preserve or protect such Collateral or the rights of Agents and Lenders, such Agent shall request instructions from Requisite Lenders or all affected Lenders, as the case may be, with respect to any
act or action (including failure to act) in connection with this Agreement or any other Loan Document, and such Agent shall be entitled to refrain from such act or taking such action unless and until
such Agent shall have received instructions from Requisite Lenders or all affected Lenders, as the case may be, and such Agent shall not incur liability to any Person by reason of so refraining. An
Agent shall be fully justified in failing or refusing to take any action hereunder or under any other Loan Document (a) if such action would, in the opinion of such Agent, be contrary to law or
the terms of this Agreement or any other Loan Document, (b) if such action would, in the opinion of such Agent, expose such Agent to Environmental Liabilities or (c) if such Agent shall
not first be indemnified to its satisfaction against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against an Agent as a result of such Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with
the instructions of Requisite Lenders or all affected Lenders, as applicable. 

9.3           Agent's Reliance, Etc.  

                Neither an Agent nor any of its Affiliates nor any of their respective Related Parties shall be liable for any action taken or omitted to
be taken by it or them
under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or wilful misconduct. Without limiting the generality of the
foregoing, an Agent: (a) may treat the payee of any Note as the holder thereof until Administrative Agent receives written notice of the assignment or transfer thereof signed by such payee and
in form reasonably satisfactory to Administrative Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall
not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of Borrower or its Subsidiaries or to
inspect the Collateral (including the books and records) of Borrower or its Subsidiaries; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under
or in respect of this Agreement or the other Loan Documents by relying or acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or parties. 

9.4           Agents Engaging in Business  

                Agents and their respective Affiliates may lend money to, invest in, and generally engage in any kind of business with Borrower, any of
its Affiliates and any
Person who may do business with or own securities of Borrower or any of its Affiliates, all as if they were not Agents and without any duty to account therefor to Lenders. Agents and their respective
Affiliates may accept fees and other consideration from Borrower or its Subsidiaries for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 

30

 

9.5           Lender Credit Decision.  

                Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on the Financial
Statements referred to in
Section 3.4(1) and such other documents and information as it has deemed appropriate, made its own credit and financial analysis of Borrower and its
Subsidiaries and its own decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Each Lender acknowledges the
potential conflict of interest of each other Lender as a result of Lenders holding disproportionate interests in the Loans, and expressly consents to, and waives any claim based upon, such conflict of
interest. 

9.6           Indemnification.  

                Each Lender agrees to indemnify each Agent (to the extent not reimbursed by Borrower and without limiting the obligations of Borrower
hereunder), ratably
according to its Pro Rata Share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted
to be taken by such Agent in connection therewith (for greater certainty, the indemnity in this Section 9.6 in favour of each Agent includes an indemnity for
any acts, decisions or documents completed, made or executed, as the case may be, in its capacity as power of attorney and the "Fondé de
Pouvoir" as set out in Section 9.2(1)); provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from an Agent's gross negligence or wilful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse each Agent promptly upon demand for its Pro Rata Share of any out-of-pocket expenses (including reasonable counsel fees)
incurred by such 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 and each other Loan Document, to the extent that such Agent is not reimbursed for such expenses by Borrower. 

9.7           Successor Agent.  

                An Agent may resign at any time by giving not less than thirty (30) days' prior written notice thereof to Lenders and Borrower. Upon
any such resignation,
Requisite Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by Requisite Lenders and shall have accepted such appointment within thirty
(30) days after the resigning Agent's giving notice of resignation, then the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is
willing to accept such appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of Canada or any province thereof and has a combined capital and surplus of at least Cdn$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing within thirty (30) days after the date such notice of resignation was given by the resigning Agent, such resignation shall become effective and Requisite Lenders shall thereafter
perform all the duties of such Agent hereunder until such time, if any, as Requisite Lenders appoint a successor Agent as provided above. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the earlier of the acceptance of any
appointment as Agent hereunder by a successor Agent or the effective date of the resigning Agent's resignation, the resigning Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents, except that any indemnity rights or other rights in favour of such resigning Agent shall continue. After any resigning Agent's resignation hereunder, the
provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was acting as Agent under this Agreement and
the other Loan Documents. 

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9.8           Setoff and Sharing of Payments.  

                In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the
continuance of any Event of Default and subject to Section 9.9(6), each Lender is hereby authorized at any time or from time to time, without prior notice to
Borrower or to any Person other than Administrative Agent, any such notice being hereby expressly waived, to offset and to appropriate and to apply any and all balances held by it at any of its
offices for the account of Borrower or its Subsidiaries (regardless of whether such balances are then due to Borrower or its Subsidiaries) and any other properties or assets at any time held or owing
by that Lender to or for the credit or for the account of Borrower against and on account of any of the Obligations that are not paid when due; provided that such Lender
exercising such offset rights shall give notice thereof to Borrower promptly after exercising such rights. Any Lender exercising a right of setoff or otherwise receiving any payment on account of the
Obligations in excess of its Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such participations in each such other Lender's or holder's
Pro Rata Share of the Obligations as would be necessary to cause such Lender to share the amount so offset or otherwise received with each other Lender or holder in accordance with their
respective Pro Rata Shares, (other than offset rights exercised by any Lender with respect to Sections 1.12, 1.13 or
1.14). Borrower agrees, to the fullest extent permitted by law, that (a) any Lender may exercise its right to offset with respect to amounts in excess of its
Pro Rata Share of the Obligations and may, sell participations in such amounts so offset to other Lenders and holders and (b) any Lender so purchasing a participation in the Loans made
or other Obligations held by other Lenders or holders may exercise all rights of offset, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of the Loans and the other Obligations in the amount of such participation. Notwithstanding the foregoing, if all or any portion of the offset amount or payment otherwise
received is thereafter recovered from Lender that has exercised the right of offset, the purchase of participations by that Lender shall be rescinded and the purchase price restored without interest. 

9.9           Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.  

(1)           Advances; Payments. 

                (a)           Administrative
Agent shall notify Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00 p.m. (Toronto time) on
the date such Notice of Revolving Credit Advance is received, by telecopy, telephone or other similar form of transmission. Subject to Sections 2, each Lender shall make the amount of such
Lender's Pro Rata Share of such Revolving Credit Advance available to Administrative Agent in same day funds by wire transfer to Administrative Agent's account as set forth in
Annex F not later than 3:00 p.m. (Toronto time) on the requested funding date; provided that a Lender
shall have two (2) Business Days grace period from such requested funding date to make such amount available to Administrative Agent in the event that such Lender, acting in good faith, did not
fund such amount as a direct result of administrative error or delay. After receipt of such wire transfers (or, in the Administrative Agent's sole discretion, before receipt of such wire
transfers), subject to the terms hereof, Administrative Agent shall make the requested Revolving Credit Advance to Borrower. All payments by each Lender shall be made without setoff, counterclaim or
deduction of any kind. 

                (b)           Not
less than once during each calendar month or more frequently at Administrative Agent's election (each, a "Settlement
Date"), Administrative Agent shall advise each Lender by telecopy of the amount of such Lender's Pro Rata Share of principal, interest and Fees paid for the benefit of
Lenders with respect to each Loan. Provided that a Lender has funded all advances and payments (other than in respect of an advance or payment not required to be funded or made by all Lenders as a
result of Requisite Lenders determining in their sole discretion that the conditions precedent in Section 2.1 and 2.2 have not
been satisfied) required to be made by it and purchased all participations required to be purchased by it under this Agreement and the other Loan Documents as of such Settlement Date, Administrative
Agent shall pay to such Lender such Lender's Pro Rata Share of principal, interest and Fees paid by Borrower since the previous Settlement Date for the benefit of such Lender on the Loans held
by it. To the extent that any Lender (a "Non-Funding Lender") has failed to fund all such advances or payments or failed to fund the
purchase of all such participations, Administrative Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender's Pro Rata Share of all
payments received from Borrower. Such payments shall be made by wire transfer to such 

32

 

Lender's
account (as specified by such Lender in Annex F or the applicable Assignment Agreement) not later than 2:00 p.m. (Toronto time) on the next Business
Day following each Settlement Date. 

(2)           Availability of Lender's Pro Rata Share and Commitment. 

                (a)           Administrative
Agent may assume that each Lender will make its Pro Rata Share of each Revolving Credit Advance available to Administrative Agent on each funding
date. If such Pro Rata Share is not, in fact, paid to Administrative Agent by such Lender when due, Administrative Agent will be entitled to recover such amount on demand from such Lender
without setoff, counterclaim or deduction of any kind. Nothing in this Section 9.9(2) or elsewhere in this Agreement or the other Loan Documents shall
be deemed to require Administrative Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that
Borrower may have against any Lender as a result of any default by such Lender hereunder. To the extent that Administrative Agent advances funds to Borrower on behalf of any Lender and is not
reimbursed therefor on the same Business Day as such
advance is made, Administrative Agent shall be entitled to retain for its account all interest accrued on, and Fees with respect to, such advance until reimbursed by the applicable Lender. 

                (b)           Each
Lender shall provide written notice to Administrative Agent no later than ten (10) Business Days prior to the applicable Commitment Increase Date of its
binding agreement to make available its Pro Rata Share of, and participate in, Revolving Loan Commitment No. 2, Revolving Loan Commitment No. 3 or Revolving Loan Commitment
No. 4, as the case may be, on the applicable Commitment Increase Date. A Lender shall be deemed a "Non-Committing Lender" upon (a) its failure to provide such notice by such
date or (b) receipt by it of notice from Administrative Agent, acting on the instructions of Requisite Lenders, that Requisite Lenders have determined, acting reasonably, that such Lender has
demonstrated that it will not make available its Pro Rata Share of, and participate in, Revolving Loan Commitment No. 2, Revolving Loan Commitment No. 3 or Revolving Loan
Commitment No. 4, as the case may be, on the applicable Commitment Increase Date; provided however that a Lender shall not be deemed a "Non-Committing
Lender" in respect of the applicable Revolving Loan Commitment in the event that all Lenders decide, pursuant to the terms and conditions of this Agreement, not to make available their respective
Pro Rata Share of, and participate in, the applicable Revolving Loan Commitment on the applicable Commitment Increase Date. A Non-Committing Lender shall immediately forfeit its
right to make available its Pro Rata Share of, and participate in, the applicable Revolving Loan Commitment and remaining Revolving Loan Commitments (collectively, the
"Forfeited Revolving Loan Commitments"). 

(3)           Return of Payments. 

                (a)           If
Administrative Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by
Administrative Agent from Borrower and such related payment is not received by Administrative Agent, then Administrative Agent will be entitled to recover such amount from such Lender on demand
without setoff, counterclaim or deduction of any kind. 

                (b)           If
Administrative Agent determines at any time that any amount received by Administrative Agent under this Agreement must be returned to Borrower or paid to any other
Person pursuant to any Insolvency Law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Administrative Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will repay to Administrative Agent on demand any portion of such amount that Administrative Agent has distributed to such Lender,
together with interest at such rate, if any, as Administrative Agent is required to pay to Borrower or such other Person, without setoff, counterclaim or deduction of any kind. 

(4)           Non-Funding Lenders and Non-Committing Lenders. 

                (a)           No
Responsibility for Failure to Fund or Commit.    The failure of any Non-Funding Lender or
Non-Committing Lender to make any advance of funds or any payment or a commitment or purchase a participation required of it hereunder, on the date specified therefor shall not relieve any
other Lender (each such other Lender, an "Other Lender") of its obligations to make an advance of funds or any payment or a 

33

 

commitment
or purchase a participation required of it on such date, but neither any Other Lender nor Administrative Agent shall be responsible for the failure of any Non-Funding Lender or
Non-Committing Lender to make an advance of funds or any payment or a commitment or purchase a participation required of it hereunder. 

                (b)           Voting
Rights.    Notwithstanding anything set forth herein to the contrary: 

	(i)
	a
Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a
"Lender" (or be included in the calculation of "Requisite Lenders" hereunder) for any voting or
consent rights under or with respect to any Loan Document; and

	(ii)
	a
Non-Committing Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a
"Lender" (or be included in the calculation of "Requisite Lenders" hereunder) for any voting or
consent rights under or with respect to any Loan Document save and except for those set forth in Section 11.2(2) and a Non-Committing
Lender's Forfeited Revolving Loan Commitments shall not be included in the calculation of a Lender's "Commitment" hereunder. 

                (c)           Sale
or Assumption of Loans and Commitments. 

	(i)
	Non-Funding
Lender.    A Non-Funding Lender's Loans and Commitment may be sold and assigned as follows:

	(1)
	firstly,
any Other Lender shall have the right (but shall have no obligation) to purchase from any such Non-Funding
Lender, and such Non-Funding Lender agrees that it shall, at such request, sell and assign to such Other Lender, such Other Lender's Pro Rata Share of such Non-Funding
Lender's Commitment (and the Pro Rata Share of any Other Lender not exercising its rights hereunder or other applicable amount) for an amount equal to such Pro Rata Share of the
principal balance of all Loans held by such Non-Funding Lender and all accrued interest and Fees with respect thereto through the date of sale, such sale and assignment to be consummated
pursuant to an executed Assignment Agreement; and

	(2)
	secondly,
at the request of Borrower or Requisite Lenders, a Person acceptable to Requisite Lenders (in their sole discretion) shall
have the right (but shall have no obligation) to purchase from any such Non-Funding Lender, and such Non-Funding Lender agrees that it shall, at such request, sell and
assign to such Person, the Commitment of that Non-Funding Lender (to the extent not sold or assigned pursuant to
Section 9.9(4)(c)(i)(1) above) for an amount equal to the principal balance of all Loans held by such Non-Funding Lender and all accrued interest
and Fees with respect thereto through the date of sale (to the extent not sold or assigned pursuant to Section 9.9(4)(c)(i)(1) above), such sale and
assignment to be consummated pursuant to an executed Assignment Agreement.

	(ii)
	Non-Committing
Lender.    A Non-Committing Lender's Forfeited Revolving Loan Commitment may be assumed
and assigned as follows:

	(1)
	firstly,
any Other Lender shall have the right (but shall have no obligation) to assume from any Non-Committing Lender,
and each such Non-Committing Lender agrees that it shall, at such request, assign to such Other Lender, such Other Lender's Pro Rata Share of that Non-Committing
Lender's Forfeited Revolving Loan Commitments (and the Pro Rata Share of any Other Lender not exercising its rights hereunder or other applicable amount), such assignment to be
consummated pursuant to an executed Assignment Agreement; and

	(2)
	secondly,
at Borrower's or Requisite Lenders' request, a Person acceptable to Requisite Lenders (in their sole discretion) shall have
the right (but shall have no obligation) to assume from any Non-Committing Lender, and such Non-Committing Lender agrees 

34

 

that
it shall, at such request, assign to such Person, that Non-Committing Lender's Forfeited Revolving Loan Commitments (to the extent not assumed and assigned pursuant to
Section 9.9(4)(c)(ii)(1) above), such assignment to be consummated pursuant to an executed Assignment Agreement 

(5)           Dissemination
of Information.    Administrative Agent or Collateral Agent, as the case may be, shall provide each Lender (to the extent
not already received by such Lender) with copies of all documents delivered to such Agent by or on behalf of Borrower or its Subsidiaries hereunder including the Financial Statements referred to in
Annex D hereto, any notice of Default or Event of Default received by such Agent from, or delivered by such Agent to, Borrower, with notice of any Event of Default
of which such Agent has actually become aware and with notice of any action taken by such Agent following any Event of Default; provided that
such Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to such Agent's gross negligence or wilful misconduct. 

(6)           Actions
in Concert.    Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no
Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Loan Documents (including exercising any rights of setoff) without first obtaining the prior written
consent of Administrative Agent (which consent shall not be unreasonably withheld or delayed) and Requisite Lenders, it being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Loan Documents shall be taken in concert and at the direction or with the consent of Administrative Agent (which consent shall not be unreasonably withheld or delayed) and
Requisite Lenders. 

 
 

SECTION 10
  SUCCESSORS AND ASSIGNS    
    

10.1         Successors and Assigns.  

                This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of Borrower, Agents, Lenders and their
respective successors and
assigns (including, in the case of Borrower, a debtor-in-possession on behalf of Borrower), except as otherwise provided herein or therein. Borrower shall not assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Requisite Lenders. Any such
purported assignment, transfer, hypothecation or other conveyance by Borrower without the prior express written consent of Requisite Lenders shall be void. The terms and provisions of this Agreement
are for the purpose of defining the relative rights and obligations of Borrower, Agents and Lenders with respect to the transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents. 

 
 

SECTION 11
  MISCELLANEOUS    
    

11.1         Complete Agreement; Modification of Agreement.  

                The Loan Documents constitute the complete agreement between the parties with respect to the subject matter thereof and may not be
modified, altered or amended
except as set forth in Section 11.2 below. Any letter of interest, commitment letter and fee letter between Borrower and Lenders or any of their respective
Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. 

11.2         Amendments and Waivers.  

(1)           No
Amendments and Waivers without Requisite Lenders.    Except for actions expressly permitted to be taken by an Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any other Loan Document, or any consent to any departure by Borrower or its Subsidiaries therefrom, shall in any event be
effective unless the same shall be in writing and signed by Administrative Agent and Borrower, and by Requisite Lenders or all affected Lenders, as applicable. Except as set forth in
paragraph (2) below, all such 

35

 

amendments,
modifications, terminations or waivers requiring the consent of any Lenders shall require the written consent of Requisite Lenders. 

(2)           Affected
Lender Consent.    Except as otherwise expressly provided in this Agreement, no amendment, modification,
termination or waiver shall, unless in writing and signed by Administrative Agent and each Lender directly affected thereby: 

                (a)           increase
the principal amount of any Lender's Commitment (which action shall be deemed only to affect those Lenders whose Commitments are increased); 

                (b)           reduce
the principal of, rate of interest on or Fees payable with respect to any Loans or other Obligations of any affected Lender; 

                (c)           extend
any scheduled payment date or final maturity date of the principal amount of any Loans or any other Obligation of any affected Lender; 

                (d)           waive,
forgive, defer, extend or postpone any payment of interest or Fees as to any affected Lender; 

                (e)           release,
or permit Borrower or any of its Subsidiaries to sell, or otherwise dispose of, any Collateral (which action shall be deemed to directly affect all Lenders); 

                (f)            change
the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that shall be required for Lenders or any of them to take any action
hereunder; and 

                (g)           amend
or waive this Section 11.2 or the definition of the term "Requisite Lenders", insofar as such definition affect the
substance of this Section 11.2. 

(3)           Agent
Consent.    No amendment, modification, termination or waiver affecting the rights or duties of any Agent under this Agreement or any
other Loan Document shall be effective unless in writing and signed by such Agent, in addition to Lenders required hereinabove to take such action. No amendment, modification, termination or waiver
shall be required for Agent to take additional Collateral pursuant to any Loan Document. 

(4)           Effect
of Amendments and Waivers.    Each amendment, modification, termination or waiver shall be effective only in the specific instance and
for the specific purpose for which it was given. No amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the holder of such
note. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 11.2 shall be binding upon each holder of the Notes at the time outstanding and each future holder of the such
notes. 

(5)           Non-Consenting
Lenders.    If, in connection with any proposed amendment, modification, waiver or termination
(a "Proposed Change") requiring the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other
Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained being referred to as "Non-Consenting
Lender") then, at Borrower's or Requisite Lenders' request, a Person acceptable to Requisite Lenders (in their sole discretion), shall have the right (but without
any obligation) to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon such request, sell and assign to such Person, all of the
Commitments of such Non-Consenting Lender for an amount equal to the principal balance of all Loans held by such Non-Consenting Lender and all accrued interest and Fees with
respect thereto through the date of sale, such sale and assignment to be consummated pursuant to an executed Assignment Agreement. 

(6)           Releases.    Upon
indefeasible payment in full in cash and performance of all of the Obligations (other than indemnification Obligations),
termination of the Commitments and a release of all claims against all Agents and Lenders, and so long as no suits, actions proceedings, or claims are pending or threatened against any Indemnified
Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Administrative Agent shall deliver to Borrower financing change statements, mortgage releases and other documents
necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations. 

36

 

11.3         Fees and Expenses.  

                Borrower shall reimburse all Agents and Lenders for all out-of-pocket expenses incurred in connection with the preparation of the Loan
Documents (including the reasonable fees and expenses of all of its special loan counsel and the fees and expenses of all other advisors, consultants and auditors retained in connection with the Loan
Documents and advice in connection therewith). Borrower shall reimburse all Agents and Lenders for all fees, costs and expenses (including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and appraisers) for advice, assistance, or other representation) in connection with: 

(1)           the
forwarding to Borrower or any other Person on behalf of Borrower by Administrative Agent of the proceeds of the Revolving Credit Advances; 

(2)           any
amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or advice in connection with the syndication and administration of the Loans made
pursuant hereto or rights hereunder or thereunder; 

(3)           any
litigation, contest, dispute, suit, proceeding or action (whether instituted by any Agent, any Lender, Borrower or any other Person) in any way relating to the Collateral, any of
the Loan Documents or any other agreement to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, contest, dispute, suit,
case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against Borrower or any other Person that may be obligated to any Agent or Lender by virtue of
the Loan Documents including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Obligations during the
pendency of one or more Events of Default; 

(4)           any
attempt to enforce any remedies of any Agent or Lender against Borrower or any other Person that may be obligated to any Agent or Lender by virtue of any of the Loan Documents
including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Obligations during the pendency of one or more Events of Default; 

(5)           any
work-out or restructuring of the Obligations during the pendency of one or more Events of Default; 

(6)           efforts
to (a) monitor the Loans or any of the other Obligations, (b) evaluate, observe or assess Borrower, its Subsidiaries or their affairs, and (c) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral; 

including,
as to each of paragraphs (1) through (6) above, all reasonable legal counsels' and all other
professional and service providers' fees arising from such services, including those in connection with any appellate proceedings and all expenses, costs, charges and other fees incurred by such
counsel and others in any way or respect arising in connection with or relating to any of the events or actions described in this Section 11.3 shall be payable, on
demand, by Borrower to Administrative Agent. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection
with the performance of such legal or other advisory services. 

11.4         No Waiver.  

                Any Agent's or Lender's failure, at any time or times, to require strict performance by Borrower or any other Person of any provision of
this Agreement and any
of the other Loan Documents shall not waive, affect or diminish any right of such Agent or Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver of an Event
of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of Borrower or any of its Subsidiaries 

37

 

contained
in this Agreement or any of the other Loan Documents and no Default or Event of Default by Borrower shall be deemed to have been suspended or waived by any Agent or Lender, unless such
waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of such Agent or Lender and directed to Borrower specifying such suspension or waiver. 

11.5         Remedies.  

                Each Agent's and Lender's rights and remedies under this Agreement and the other Loan Documents shall be cumulative and nonexclusive of
any other rights and
remedies which such Agent and Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 

11.6         Severability.  

                Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a 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. 

11.7         Conflict of Terms.  

                Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of
this Agreement, if any
provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. 

11.8         Confidentiality.  

                Each Agent and Lender agrees to use commercially reasonable efforts (equivalent to the efforts each Agent and Lender applies to maintain
the confidentiality of
its own confidential information) to maintain as confidential all confidential information provided to it by Borrower and designated as confidential, except that each Agent and Lender may disclose
such information (a) to Related Parties employed or engaged by such Agent or Lender in evaluating, approving, structuring or administering the Loans and the Total Revolving Loan Commitment;
(b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential assignee or participant may
disclose such information to Related Parties employed or engaged by them as described in paragraph (a) above); (c) as required or requested by any
Governmental Authority or reasonably believed by such Agent or Lender to be compelled by any court decree, subpoena or legal or administrative order or process; provided
that, such Agent or Lender shall make reasonable efforts to notify Borrower thereof before complying therewith; (d) as, on the advice of such Agent's or Lender's
counsel, 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 such Agent or Lender is a party; or
(f) which ceases to be confidential through no fault of such Agent or Lender. 

11.9         GOVERNING LAW.  

                EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THE LOAN
DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT PROVINCE AND
ANY LAWS APPLICABLE THEREIN. BORROWER HEREBY CONSENTS AND AGREES THAT THE COURTS OF THE PROVINCE OF ONTARIO SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN BORROWER, ANY AGENT OR LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR 

38

 

TO
ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY AGENT OR LENDER FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER. BORROWER EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN ANNEX F OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT WITH CANADA POST, PROPER POSTAGE PREPAID. 

11.10       Notices.  

                Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or
other communication shall
or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered
(1) upon the earlier of actual receipt and three (3) Business Days after deposit with Canada Post or US Mail, registered mail, return receipt requested, with proper postage prepaid,
(2) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or Canada
Post or US Mail as otherwise provided in this Section 11.10), (3) one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (4) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number
indicated on Annex F or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Administrative Agent) designated on Annex F to
receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 

11.11       Section Titles.  

                The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a
part of the agreement between the parties hereto. 

11.12       Counterparts.  

                This Agreement may be executed in any number of separate facsimile or original counterparts, each of which shall collectively and
separately constitute one
agreement. 

39

   11.13 Press Releases.  

        Borrower agrees that neither it nor its Affiliates or Related Parties will in the future issue any press releases or other public disclosure using the name of any
Agent or Lender or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days' prior written notice to Administrative Agent and without the
prior written consent of Administrative Agent unless (and only to the extent that) Borrower or its Affiliates is required to do so under law and then, in any event, Borrower or such Affiliate
will consult with Administrative Agent before issuing such press release or other public disclosure. Borrower consents to, and agrees to reimburse Administrative Agent for the cost and expense of, the
publication by Administrative Agent of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement. 

11.14 Reinstatement.  

        This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Borrower or any of its Subsidiaries
for liquidation or reorganization, should Borrower or any of its Subsidiaries become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of Borrower's or any of its Subsidiaries' property or assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof,
is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 

11.15 Advice of Counsel.  

        Each of the parties represents to each other party hereto that it has discussed this Agreement and, specifically, the provisions of
Section 11.9, with its counsel. 

11.16 No Strict Construction.  

        The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favouring or disfavouring any party by virtue of the authorship
of any provisions of this Agreement. 

11.17 Dollar References.  

        Unless otherwise specified, all references to dollar amounts in this Agreement shall mean Canadian Dollars. 

11.18 Judgment Currency.  

	(1)
	If,
for the purpose of obtaining or enforcing judgment against Borrower or any of its Subsidiaries in any court in any jurisdiction, it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 11.18 referred to as the "Judgment Currency") an
amount due under any Loan Document in any currency (the "Obligation Currency") other than the Judgment Currency, the conversion shall be made at
the rate of exchange prevailing on the Business Day immediately preceding the date of actual payment of the amount due, in the case of any proceeding in the courts of the Province of Ontario or in the
courts of any other jurisdiction that will give effect to such conversion being made on such date, or the date on which the judgment is given, in the case of any proceeding in the courts of any other
jurisdiction (the applicable date as of which such conversion is made pursuant to this Section 11.18 being hereinafter in this
Section 11.18 referred to as the "Judgment Conversion Date"). 

40

 
	(2)
	If,
in the case of any proceeding in the court of any jurisdiction referred to in Section 11.18(1), there is a change in the rate of
exchange prevailing between the Judgment Conversion Date and the date of actual receipt of the amount due in immediately available funds, Borrower shall pay such additional amount (if any, but
in any event not a lesser amount) as may be necessary to ensure that the amount actually received in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment,
will produce the amount of the Obligation Currency which could have been purchased with the amount of the Judgment Currency stipulated in the judgment or judicial order at the rate of exchange
prevailing on the Judgment Conversion Date. Any amount due from Borrower under Section 11.18(2) shall be due as a separate debt and shall not be affected by
judgment being obtained for any other amounts due under or in respect of any of the Loan Documents.

	(3)
	The
term "rate of exchange" in this Section 11.18 means the rate of exchange at which Agent would, on the relevant date at or about
12:00 noon (Toronto time), be prepared to sell the Obligation Currency against the Judgment Currency. 

11.19 Time of Day.  

        Unless otherwise specified, any reference to a time of day or date means local time or date in the City of Toronto, Province of Ontario. 

11.20 Formal Date.  

        Notwithstanding the date of execution hereof, this Agreement may be referred to as bearing formal date May 12, 2005. 

        [SIGNATURE PAGES FOLLOW]

41

 

        IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. 

	 	 	BORROWER:
	
 	
 	
SR TELECOM INC.
	
 	
 	

By:	

/s/  PIERRE ST-ARNAUD      

	 	 	Name:	Pierre St-Arnaud
	 	 	Title:	President and Chief Executive Officer
	
 	
 	

By:	

/s/  DAVID L. ADAMS      

	 	 	Name:	David L. Adams
	 	 	Title:	Sr.Vice-President, Finance and Chief Financial Officer

42

 

	 	 	ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

BNY TRUST COMPANY OF CANADA
	
 	
 	

By:	

/s/  HENRY HAMILTON      

	 	 	Name:	Henry Hamilton
	 	 	Title:	Authorized Officer
	
 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 

43

 

	Commitment:	 	LENDER:
	
 US$11,176,738	
 	
B IV CAPITAL PARTNERS, L.P.
	28.20628%	 	By: GP Capital IV, LLC, its General

Partner

By: DDJ Capital Management, LLC,

Manager
	
 	
 	

By:	

/s/  JUDY K. MENCHER      

	 	 	Name:	Judy K. Mencher
	 	 	Title:	Member

44

 

	Commitment:	 	LENDER:
	
 US$783,382	
 	
GMAM INVESTMENT FUNDS TRUST II
	1.97699%	 	By: DDJ Capital Management, LLC, on

behalf of GMAM Investment Funds Trust

II, in its capacity as investment manager
	
 	
 	

By:	

/s/  JUDY K. MENCHER      

	 	 	Name:	Judy K. Mencher
	 	 	Title:	Member

45

 

	Commitment:	 	LENDER:
	
 US$3,476,488	
 	
DDJ CANADIAN HIGH YIELD FUND
	8.77347%	 	By: DDJ Capital Management, LLC, its

attorney-in-fact
	
 	
 	

By:	

/s/  JUDY K. MENCHER      

	 	 	Name:	Judy K. Mencher
	 	 	Title:	Member

46

 

	Commitment:	 	LENDER:
	
 US$1,015,724	
 	
DDJ OCTOBER FUND ONSHORE
	2.56334%	 	FEEDER, LIMITED PARTNERSHIP

By: October G.P., LLC, its general partner

By: DDJ Capital Management, LLC, its

Manager
	
 	
 	

By:	

/s/  JUDY K. MENCHER      

	 	 	Name:	Judy K. Mencher
	 	 	Title:	Member

47

 

	Commitment:	 	LENDER:
	
 US$586,418	
 	
OCTOBER OS INVESTMENT SUB 2005,
	1.47992%	 	LTD.

By: DDJ Capital Management, LLC, in its

capacity as Investment Manager
	
 	
 	

By:	

/s/  JUDY K. MENCHER      

	 	 	Name:	Judy K. Mencher
	 	 	Title:	Member

48

 

	Commitment:	 	LENDER:
	
 US$7,132,500	
 	
GUARDIAN CAPITAL L.P., on behalf of
	18%	 	certain funds and/or accounts that it

manages and/or advises
	
 	
 	

By:	

/s/  STEVE KEARNS      

	 	 	Name:	Steve Kearns
	 	 	Title:	VP/Sr. Portfolio Manager
	
 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 

49

 

	Commitment:	 	LENDER:
	
 US$9,113,750	
 	
GREYWOLF LOAN PARTICIPATION
	23%	 	LLC
	
 	
 	

By:	

/s/  WILLIAM TROY      

	 	 	Name:	William Troy
	 	 	Title:	Partner
	
 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 

50

 

	Commitment:	 	LENDER:
	
 US$4,755,000	
 	
CATALYST FUND GENERAL
	12%	 	PARTNER I INC, as the General Partner

of Catalyst Fund Limited Partnership I
	
 	
 	

By:	

/s/  GABRIEL DE ALBA      

	 	 	Name:	Gabriel de Alba
	 	 	Title:	Managing Director and Partner
	
 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 

51

 

	Commitment:	 	LENDER:
	
 US$1,585,000	
 	
POLAR SECURITIES INC., on behalf of
	4%	 	North Pole Capital Master Fund
	
 	
 	

By:	

/s/  PAUL SABOURIN      

	 	 	Name:	Paul Sabourin
	 	 	Title:	Chairman and CEO
	
 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 

52

  

 
 

ANNEX A (Recitals)
  
    to
  
    CREDIT AGREEMENT
  
    DEFINITIONS    
    

        Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere in the Loan Documents) the following respective meanings and all
section references in the following definitions shall refer to sections of the Agreement: 

(1)           Account Debtor means any Person who may become obligated to Borrower under, with respect to, or on account of, an Account. 

(2)           Accounts means all "Claims" (as defined in the Security Agreement), all "accounts," as such term is defined in the PPSA, now
owned or hereafter acquired by Borrower and, in any event, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations
evidenced by chattel paper, securities or instruments) now owned or hereafter received or acquired by or belonging or owing to Borrower, whether arising out of goods sold or services rendered by it or
from any other transaction (including any such obligations which may be characterized as an account or contract right under the PPSA), (b) all of Borrower's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services, (c) all of Borrower's rights to any goods represented by any of the foregoing (including unpaid sellers' rights
of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all monies due or to become due to Borrower under all purchase orders
and contracts for the sale of goods or the performance of services or both by Borrower or in connection with any other transaction (whether or not yet earned by performance on the part of Borrower)
now or hereafter in existence, including the right to receive the proceeds of said purchase orders and contracts, and (e) all collateral security and guarantees of any kind, now or hereafter in
existence, given by any Person with respect to any of the foregoing. 

(3)           Administrative Agent means BNY Trust Company of Canada in its capacity as administrative agent for Lenders or its successor appointed
pursuant to Section 9.7. 

(4)           Advances means collectively Revolving Credit Advances and PIK Advances. 

(5)           Affected Lender shall have the meaning assigned to it in Section 1.14(3). 

(6)           Affiliate means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power in the election of directors of such Persons, (b) each
Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and partners and (d) in the case of SR
Group, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of SR Group. For the purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. 

(7)           Agents means collectively Administrative Agent and Collateral Agent. 

(8)           Agreement means the Credit Agreement dated May 19, 2005 by and between Borrower, Agents and Lenders, as the same may from time
to time be amended, restated, modified or supplemented. 

(9)           Appendices shall have the meaning assigned to it in the recitals to the Agreement. 

(10)         Assignment Agreement shall have the meaning assigned to it in Section 9.1(1). 

(11)         BIA means the Bankruptcy and Insolvency Act (Canada) as from time to time in effect. 

(12)         Borrower shall have the meaning assigned thereto in the recitals to the Agreement. 

(13)         Borrower Accounts shall have the meaning assigned to it in Annex B. 

(14)         Budget shall have the meaning assigned to it in Annex D. 

1

 

(15)         Business Day means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the city
of Toronto or New York. 

(16)         Canadian Benefit Plans means all material employee benefit plans of any nature or kind whatsoever that are not Canadian Pension Plans
and are maintained or contributed to by Borrower or any of its Subsidiaries. 

(17)         Canadian Dollars or Dollars or Cdn$
means lawful currency of Canada. 

(18)         Canadian Pension Plans means each plan which is considered to be a pension plan for the purposes of any applicable pension benefits
standards statute and/or regulation in Canada established, maintained or contributed to by Borrower or any of its Subsidiaries for its employees or former employees. 

(19)         Capital Expenditures means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of
Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and
that are required to be capitalized under GAAP. 

(20)         Capital Lease means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. 

(21)         Capital Lease Obligation means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder
that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. 

(22)         Cash Management Systems shall have the meaning assigned to it in Section 1.7. 

(23)         Cash Pay Interest shall have the meaning assigned to it in Section 1.4(1). 

(24)         Charges means all Taxes and Liens assessed, levied or imposed against Borrower or its Subsidiaries or upon (a) the Collateral,
(b) the Obligations, (c) the employees, payroll, gross receipts, income, gains or capital of Borrower or its Subsidiaries, (d) Borrower's or its Subsidiaries' ownership or use of
any properties or assets, or (e) any other aspect of Borrower's or its Subsidiaries' business or existence. 

(25)         Chattel Paper means any "Documents of Title" (as defined in the Security Agreement), any "chattel paper," as such term is
defined in the PPSA, now owned or hereafter acquired by Borrower, wherever located. 

(26)         Civil Code means the Civil Code of the Province of Quebec. 

(27)         Closing Date means May 20, 2005 or such later date as Borrower and Lenders may agree in writing. 

(28)         Closing Checklist means the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan Documents and the transactions contemplated thereunder, substantially in the form attached hereto as
Annex C. 

(29)         Collateral means all of the property covered by the Security Agreement, the Mortgages and the other Collateral Documents and any other
property or assets, real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, of any nature, form or description whatsoever, wherever situated, now existing or
hereafter acquired, that may at any time be or become subject to a Lien in favour of Collateral Agent, on behalf of Agents and Lenders, to secure the Obligations. 

(30)         Collateral Agent means BNY Trust Company of Canada in its capacity as (i) collateral agent for Agents and Lenders; and
(ii) the power of attorney and the "fondé de pouvoir" of Lenders, Collateral Agent and the "Bondholders" (as defined in the
Security Agreement) for the purposes of holding hypothecs over and against all of Borrower's present and future property, in general, and the Collateral and the Mortgaged Properties, in particular,
securing payment of bonds and other titles of indebtedness as envisaged by Article 2692 of the Civil Code or, in both cases, its successor
appointed pursuant to Section 9.7. 

(31)         Collateral Documents means the Security Agreement, the Mortgages and all similar agreements entered into guaranteeing payment of, or
granting a Lien upon property, assets or undertaking as security for payment 

2

 

and
performance of, the Obligations, as the same may from time to time be amended, restated, modified or supplemented. 

(32)         Collection Account means Administrative Agent's Canadian Dollar and US Dollar account as Administrative Agent shall specify from time
to time in writing to Borrower and Lenders. 

(33)         Commitment means, with respect to any Lender, the aggregate principal amount of the Total Revolving Loan Commitment set out opposite
its name on the execution pages hereof on the Closing Date (as such Commitment may be reduced or adjusted from time to time in accordance with the Agreement). 

(34)         Commitment Increase Date means (a) the first Business Day of the third (3rd) Fiscal Quarter of 2005 with respect
to Revolving Loan Commitment No. 2, (b) the first Business Day of the fourth (4th) Fiscal Quarter of 2005 with respect to Revolving Loan Commitment No. 3
or (c) the first Business Day of the first (1st) Fiscal Quarter of 2006 with respect to Revolving Loan Commitment No. 4. 

(35)         Commitment Termination Date means the earliest of (a) the Maturity Date, (b) the date of termination of each Lender's
obligation to make further Advances or permit existing Loans to remain outstanding in each case pursuant to Section 8.2(2) and (c) the Termination Date. 

(36)         Common Shares means common shares in the capital of Borrower with trading symbol "SRX"
on the Toronto Stock Exchange and "SRXA" on the NASDAQ Exchange. 

(37)         CCAA means the Companies' Creditors Arrangement Act (Canada) as from time to time in
effect. 

(38)         Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting Stock or by contract or otherwise and, when determining control based on ownership of voting Stock, means, with respect to control of a body corporate by
a Person, the holding (other than by way of security only) by or for the benefit of that Person, or Affiliates of that Person of Stock of such body corporate or the right to vote or direct the voting
of Stock of such body corporate to which, in the aggregate, are attached more than fifty percent (50%) of the votes that may be cast to elect directors of the body corporate, provided that the votes
attached to such Stock are sufficient, if exercised, to elect a majority of the directors of the body corporate. 

(39)         Convertible Bonds means the secured convertible bonds issued or to be issued to certain of the Debentureholders pursuant to the terms
of the Restructuring Term Sheet. 

(40)         Copyright Licence means any and all rights now owned or hereafter acquired by Borrower or any of its Subsidiaries under any written
agreement granting any right to use any Copyright or Copyright registration. 

(41)         Copyrights means all of the following now owned or hereafter acquired by Borrower or any of its Subsidiaries: (a) all
copyrights and general intangibles of like nature (whether registered or unregistered), now owned or existing or hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including all registrations, recordings and applications in the Canadian Copyright Office or in any similar office or agency in any other country or any political
subdivision thereof, and (b) all reissues, extensions or renewals thereof. 

(42)         CTR means Comunicacion y Telefonia Rural S.A. 

(43)         CTR Facility shall have the meaning assigned to it in the Restructuring Term Sheet. 

(44)         CTR Guarantee shall have the meaning assigned to it in the Restructuring Term Sheet. 

(45)         Debentureholders means the holders of the Debentures. 

(46)         Debentures means the 8.15% debentures (senior unsecured) due June 30, 2005 issued by Borrower pursuant to the terms of the
trust indenture dated April 22, 1998 between Borrower and Montreal Trust Company. 

(47)         Default means any event which, with the passage of time or notice or both, would become an Event of Default. 

(48)         Disbursement Accounts shall have the meaning assigned to it in Annex B. 

3

 

(49)         Distributable Value means, as of the date of determination, the amount equal to Total Capitalization minus the aggregate amount of the
Obligations. 

(50)         [EBITDA  shall mean, with respect to any Person for any fiscal
period, an amount equal to net income of such Person for such period determined in accordance with GAAP plus or minus, to the extent deducted or added in determining such net income for such period,
without duplication (a) depreciation, amortization and other non-cash charges, (b) interest expenses, (c) restructuring and other one-time charges,
(d) the provision for Taxes for such period and (e) extraordinary gains or losses.] [NTD: To be negotiated and determined in accordance with
Section 5.14.]

(51)         EDC means Export Development Canada. 

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

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

(54)         Environmental Permits means all permits, licenses, written authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws. 

(55)         Equipment means all "Equipment" (as defined in the Security Agreement), all "equipment," as such term is defined in the PPSA,
now owned or hereafter acquired by SR Group, wherever located and, in any event, including all SR Group's machinery and equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment (other than software constituting part of the Accounts), and all engineering, processing and manufacturing equipment, office
machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, all whether now owned or hereafter acquired, and wherever situated, together with all additions and
accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect
thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto. 

(56)         Equivalent Amount in one currency on any day means the amount of such currency that would result from Administrative Agent converting
into such currency another currency at approximately 12:00 noon (Toronto time) on such day in accordance with Administrative Agent's customary practice for commercial loans being administered
by it. 

(57)         Event of Default shall have the meaning assigned to it in Section 8.1. 

(58)         Fees means any and all fees and field audit charges payable to Agents or Lenders pursuant to the Agreement (including pursuant to
Section 1.8(1)) or any of the other Loan Documents. 

(59)         Financial Covenants shall have the meaning assigned to it in Section 6.9. 

4

 

(60)         Financial Statements means the financial statements including income statements, statements of cash flows and balance sheets of
Borrower and its Subsidiaries, as applicable, delivered in accordance with Section 3.4 and Section 4.1 of the Agreement and
Annex D. 

(61)         Fiscal Month means any of the monthly accounting periods of Borrower. 

(62)         Fiscal Quarter means any of the following quarterly accounting periods of Borrower in each Fiscal Year consisting of January 1
through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31. 

(63)         Fiscal Year means the annual accounting period of Borrower from January 1 through December 31. 

(64)         Fixed Cash Pay Interest Rate means the greater of (a) six and one-half percent (6.5%) and (b) LIBOR plus
three and eighty-five one hundredths of one percent (3.85%). 

(65)         [Fixed Charges  means, for any period, the sum of the
following determined on a consolidated basis, without duplication, for Borrower and its Subsidiaries in accordance with GAAP: (a) Interest Expense payable in cash, (b) scheduled
principal payments with respect to any Indebtedness and (c) cash taxes.] [NTD: To be negotiated and determined in accordance with
Section 5.14.]

(66)         Fixtures means all "fixtures" including trace fixtures, facilities and equipment however affixed or attached to real property or
buildings or other structures. 

(67)         Forfeited Revolving Loan Commitments shall have the meaning assigned to it in Section 9.9(2)(b). 

(68)         GAAP means generally accepted accounting principles in Canada consistently applied. 

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

(70)         Guaranteed Indebtedness means, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (A) for the purchase or
payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (d) to indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any
time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is made
and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness; or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect thereof. 

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

(72)         IDB means Inter-American Development Bank. 

(73)         Incumbency Certificate shall have the meaning assigned to it in Annex C. 

(74)         Indebtedness of any Person means without duplication (a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are not overdue by
more 

5

 

than
six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale
of such property), (e) all Capital Lease Obligations and the present value of future rental payments under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract,
currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations. 

(75)         Indemnified Liabilities shall have the meaning assigned to it in Section 1.12. 

(76)         Indemnified Person shall have the meaning assigned to it in Section 1.12. 

(77)         Insolvency Laws means any of the Bankruptcy and Insolvency Act (Canada), the  Companies' Creditors Arrangement Act
(Canada), the Winding-Up and Restructuring Act
(Canada), the Courts of Justice Act (Ontario) and Title 11 of the United States Code entitled "Bankruptcy", each as now and hereafter in effect,
any successors to such statutes and any other applicable insolvency or other similar law of any jurisdiction including any law of any jurisdiction permitting a debtor to obtain a stay or a compromise
of the claims of its creditors against it. 

(78)         Intellectual Property means all "Intangible Property" (as defined in the Security Agreement) as well as any and all Licences,
Patents, Copyrights, Trademarks, trade secrets and customer lists. 

(79)         Interest Determination Date means the date which is two (2) Business Days before the first day of an Interest Period. 

(80)         [Interest Expense  means, with respect to Borrower and its
Subsidiaries for any period determined on a consolidated basis, without duplication, in accordance with GAAP, the net interest expense
(including interest expense attributable to Capital Leases) of Borrower and its Subsidiaries.] [NTD: To be negotiated and determined in accordance with
Section 5.14.]

(81)         Interest Payment Date means the last Business Day of each month. 

(82)         Interest Period means the period of days from an Interest Payment Date to and including the next succeeding Interest Payment Date. 

(83)         Inventory means any "Inventory" (as defined in the Security Agreement), any "inventory," as such term is defined in the PPSA,
now or hereafter owned or acquired by Borrower, wherever located, and in any event including inventory, merchandise, goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of service, or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in
Borrower's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies. 

(84)         ITA means the Income Tax Act (Canada) as from time to time in effect. 

(85)         Lenders means the lenders identified as such on the execution pages hereof and their permitted successors and assigns from time to
time and Lender means any one of them. 

(86)         LIBOR means the rate of interest per annum (based on a 360 day year in accordance with market convention, rounded upwards, if
necessary, to the nearest whole multiple of 1/100th of 1%) at which major banks in the London interbank market are offering deposits in US Dollars for the relevant amount and for a three
(3) month period, appearing on the Telerate page 3750 (at or about 11:00 a.m. London time) on the Interest Determination Date. If, for any reason, such rate does not appear
on Telerate page 3750, then LIBOR

6

 

shall
be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in US Dollars in the relevant amount and for a three (3) month period would
be offered by first class banks in the London interbank market to Administrative Agent at approximately 11:00 a.m. London time on the Interest Determination Date. Each calculation by
Administrative Agent of LIBOR shall be conclusive and binding for all purposes, absent manifest error. 

(87)         Licence means any Copyright Licence, Patent Licence, Trademark Licence or other licence of rights or interests now held or hereafter
acquired by Borrower or any of its Subsidiaries. 

(88)         Lien means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, trust (actual or deemed), easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or
title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a
security interest under the PPSA, any publication effecting any hypothec, security interest or right under the Civil Code or comparable law of any
jurisdiction). 

(89)         Litigation shall have the meaning assigned to it in Section 3.12. 

(90)         Loans means the Revolving Loan and the PIK Loan until the Term-Out Date and thereafter  Loans means the Term Loan and the PIK Loan. 

(91)         Loan Accounts shall have the meaning assigned to it in Section 1.11. 

(92)         Loan Documents means the Agreement, the Notes, the Collateral Documents, the Original Budget, each Budget, the Restructuring Term
Sheet, the Post-Closing Matters Agreement and all other agreements, instruments, documents, certificates and acknowledgments identified in the Closing Checklist executed and delivered to,
or in favour of any Agent or Lender and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of Borrower, or any Affiliate or their respective Related Parties, and delivered to any Agent or Lender in connection with the Agreement or the transactions contemplated
hereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, modifications or
other supplements thereto, and shall refer to such Loan Document as the same may be in effect at any and all times such reference becomes operative. 

(93)         Material Adverse Effect means a material adverse effect on (a) the business, assets, operations, prospects or financial or
other condition of Borrower and its Material Subsidiaries (taken as a whole), (b) Borrower's and its Material Subsidiaries' ability (taken as a whole) to pay any of the Loans or any of the
other Obligations in accordance with the terms of the Agreement or the other Loan Documents, (c) the Collateral or Collateral Agent's Liens on the Collateral or the priority of such Liens, or
(d) Agents' or Lenders' rights and remedies under the Agreement and the other Loan Documents. 

(94)         Material Subsidiaries means the following Subsidiaries of Borrower: TDMA Services Co. Ltd., SR Telecom SAS, SR Telecom
Pty Ltd. and Telecomunicaciones Montreal, S.A. de C.V., and, for greater certainty, shall not include CTR, RTC and Servicios Rurales de
Telecomunicaciones S.A. but shall include any Subsidiary of Borrower that at any time and from time to time (a) generates more than five (5) percent of Borrower's revenues
(on a consolidated basis) in a Fiscal Quarter or (b) has property and assets worth more than Cdn$1,000,000. 

(95)         Maturity Date means the fifth (5th) anniversary of one (1) day after the Term-Out Date. 

(96)         Maximum Amount means Thirty-Nine Million Six Hundred Twenty-Five Thousand US Dollars (US$39,625,000). 

(97)         Mortgaged Properties shall have the meaning assigned to it in Annex C. 

(98)         Mortgages means the hypothecation of the Mortgaged Properties pursuant to the Security Agreement as well as each of the debentures,
debenture delivery agreements and other real estate/immovable property security/hypothecation documents delivered by Borrower and its Subsidiaries to Collateral Agent with respect to the Mortgaged
Properties or real/immovable property acquired by Borrower and its Subsidiaries after the 

7

 

Closing
Date, all in form and substance satisfactory to Requisite Lenders, in their sole discretion, as each may from time to time be amended, restated, modified or supplemented. 

(99)         Non-Committing Lender shall have the meaning assigned to it in Section 9.9(2)(b). 

(100)       Non-Consenting Lender shall have the meaning assigned to it in Section 11.2(5). 

(101)       Non-Funding Lender shall have the meaning assigned to it in Section 9.9(1)(b). 

(102)       Notes means collectively the Revolving Notes and the PIK Notes and Note means any one
of them. 

(103)       Notice of Revolving Credit Advance shall have the meaning assigned to it in Section 1.1(1)(a). 

(104)       Obligations means all loans, advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for
payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by Borrower to Agents or Lenders or their respective
Affiliates, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the
Agreement. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of, Borrower, whether or not allowed in such case or proceeding), Fees, Charges, expenses, legal fees and any other sum chargeable to Borrower under the Agreement. For greater
certainty, Obligations shall not include any of such obligations owing by Borrower pursuant to the Debentures or the Convertible Bonds. 

(105)       Operating Plan means an annual operating plan for Borrower and its Subsidiaries for each Fiscal Year, approved by the board of
directors of Borrower, which will include a statement of all of the material assumptions on which such plan is based, monthly balance sheets, income statements, cash flow statements, capitalization
statements and a monthly budget for the applicable Fiscal Year (all consistent with the historical Financial Statements of Borrower to the extent appropriate), plans for personnel, Capital
Expenditures and facilities and will integrate sales, gross profits, operating expenses, operating profit and cash flow projections all prepared on the same basis and in similar detail as that on
which operating results are reported (and in the case of cash flow projections, representing management's good faith estimates of future financial performance based on historical performance). 

(106)       Ordinary Course Indebtedness means Indebtedness (other than indebtedness for borrowed money) incurred in the ordinary course of
business of Borrower to trade creditors, suppliers, lessors or other Persons under letters of credit, surety bonds, leases or any other similar ordinary course of business contract or agreement
entered into from time to time for the purpose of conducting the ordinary course business of Borrower and consistent with past business practices of Borrower. 

(107)       Original Budget shall have the meaning assigned to it in Section 3.4(2). 

(108)       Other Lender shall have the meaning assigned to it in Section 9.9(4)(a). 

(109)       Patent Licence means rights under any written agreement now owned or hereafter acquired by Borrower or any of its Subsidiaries
granting any right with respect to any invention on which a Patent is in existence. 

(110)       Patents means all of the following in which Borrower or any of its Subsidiaries now holds or hereafter acquires any interest:
(a) all letters patent of invention and all applications for letters patent, all industrial designs, design patents and all registrations and recordings thereof, including registrations,
recordings and applications in the Canadian Patent and Trademark Office, Canadian Designs Office or in any similar office or agency in any country or political subdivision thereof, and (b) all
reissues, continuations, continuations-in-part or extensions thereof. 

(111)       Payout Fee shall have the meaning assigned to it in Section 1.8(1)(b). 

(112)       Permitted Encumbrances means the following encumbrances: (a) Liens for Taxes or assessments or other governmental Charges not
yet due and payable; (b) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar
legislation; (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which Borrower is a party as lessee made in the
ordinary course of business; 

8

 

(d) inchoate
and unperfected workers', mechanics' or similar Liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Estate;
(e) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess
of Cdn$50,000 at any time, so long as such Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which Borrower is a party;
(g) any attachment or judgment lien not constituting an Event of Default under Section 8.1(9); (h) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of
such Real Estate; (i) presently existing or hereinafter created Liens in favour of Collateral Agent, on behalf of Agents and Lenders; (j) Liens expressly permitted under
paragraphs (b) through (g) of Section 6.7 of the Agreement; and (k) to the extent not
included in paragraphs (a), (d) or (e) immediately above, Prior Claims that are unregistered and that
secure amounts that are not yet due and payable. 

(113)       Person means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, provincial, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof). 

(114)       PIK Advances shall have the meaning assigned to it in Section 1.4(2)(a). 

(115)       PIK Interest shall have the meaning assigned to it in Section 1.4(2). 

(116)       PIK Interest Rate means the greater of (a) seven and one-half percent (7.5%) and (b) LIBOR plus four and
eighty-five one hundredths of one percent (4.85%). 

(117)       PIK Loan means, at any time, the aggregate amount of PIK Advances outstanding to Borrower. 

(118)       PIK Note shall have the meaning assigned to it in Section 1.4(2)(a). 

(119)       Post-Closing Matters Agreement means the post-closing matters agreement of even date herewith by and between
Borrower, Agent and Lenders, as the same may from time to time be amended, restated, modified or supplemented. 

(120)       PPSA means the Personal Property Security Act (Ontario) and the Regulations
thereunder, as from time to time in effect; provided however, if attachment, perfection or priority of Agent's Liens in any Collateral are governed by the personal
property security laws of any jurisdiction other than Ontario, PPSA shall means those personal property security laws in such other jurisdiction for the purposes of the provisions hereof relating to
such attachment, perfection or priority and the definitions related to such provisions. 

(121)       Prior Claims means all Liens created by applicable law (in contrast with Liens voluntarily granted) which rank or are capable
of ranking prior or pari passu with Collateral Agent's Liens against all or part of the Collateral, including for amounts owing for wages,
employee deductions, goods and services taxes, sales taxes, employer health taxes, municipal taxes, workers' compensation, pension fund obligations and overdue rents. 

(122)       Prior Lender means London Life. 

(123)       Prior Lender Obligations means Indebtedness of Borrower owing to Prior Lender. 

(124)       Private Period means a period of time other than a Public Period. 

9

   
(125)       Proceeds means "Proceeds" (as defined in the Security Agreement), "proceeds," as such term is defined in the PPSA and, in any
event, shall include (a) any and all proceeds of any insurance, indemnity, warranty or guarantee payable to Borrower or its Subsidiaries from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and payable to Borrower or its Subsidiaries from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under colour of any Governmental Authority), (c) any claim of
Borrower or its Subsidiaries against third parties (i) for past, present or future infringement of any Patent or Patent Licence, or (ii) for past, present or future infringement or
dilution of any Copyright, Copyright Licence, Trademark or Trademark Licence, or for injury to the goodwill associated with any Trademark or Trademark Licence, (d) any recoveries by Borrower or
its Subsidiaries against third parties with respect to any litigation or dispute concerning any of the Collateral, and (e) any and all other amounts from time to time paid or payable under or
in connection with any of the Collateral, upon disposition or otherwise. 

(126)       Proposed Payment Date shall have the meaning assigned to it in Section 1.16(2). 

(127)       Pro Rata Share means with respect to all matters relating to any Lender: 

                (a)           prior
to the Term-Out Date, the percentage obtained by dividing (i) the Commitment of that Lender by (ii) the Total Revolving Loan
Commitment, as any such percentages may be adjusted by assignments permitted pursuant to Sections 9.1 and 9.9; and 

                (b)           after
the Term-Out Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Loans held by that Lender by
(ii) the aggregate outstanding principal balance of the Loans held by all Lenders. 

(128)       Public Period shall have the meaning assigned to it in Section 4.1(2)(b). 

(129)       Public Period Notice shall have the meaning assigned to it in Section 4.1(2). 

(130)       Purpose shall have the meaning assigned to it in the recitals to the Agreement. 

(131)       Qualified Assignee means (a) any Lender, any Affiliate of any Lender and, with respect to any Lender that is an investment
fund that invests in commercial loans, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of
such investment advisor and (b) any commercial bank or financial institution. 

(132)       Real Estate shall have the meaning assigned to it in Section 3.6. 

(133)       Related Parties shall mean a Person's officers, directors, partners, employees, accountants, legal counsel, agents, representatives
and other professional advisors from time to time. 

(134)       Relationship Bank shall have the meaning assigned to it in Annex B. 

(135)       Release means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air,
soil, surface water, ground water or property; and, when used as a verb, shall have a similar meaning. 

(136)       Replacement Lender shall have the meaning assigned to it in Section 1.14(3). 

(137)       Requisite Lenders means Lenders having (a) more than 662/3% of the Total Revolving Loan Commitment, or
(b) if the Total Revolving Loan Commitment has been terminated or after the Term-Out Date, more than 662/3% of the aggregate outstanding amount of the Loans. 

(138)       Restricted Payment means (a) the declaration or payment of any dividend or the incurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of a Person's Stock, (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement
of a Person's Stock or any other payment or distribution made in respect thereof, either directly or indirectly, (c) any payment or prepayment of principal of, premium, if any, or interest,
fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for 

10

 

rescission
with respect to, any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other
rights to acquire Stock of such Person now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase
or sale of, any shares of such Person's Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to any employee or holder of Stock of such Person other than payment of compensation in the ordinary course to employees or
holders of Stock who are employees of such Person; and (g) any payment of management fees (or other fees of a similar nature) by such Person to any holder of Stock of such Person or
their Affiliates. 

(139)       Restructuring means the restructuring transactions contemplated by the Restructuring Term Sheet and all documentation related
thereto. 

(140)       Restructuring Intercreditor Agreement means the intercreditor agreement of even date herewith entered into between Agents, Lenders,
EDC, IDB, holders of Convertible Bonds and certain members of SR Group. 

(141)       Restructuring Term Sheet means the SR Telecom — Amended and Restated Principles of
Restructuring term sheet dated May 19, 2005 entered into between Lenders, Borrower, IDB, EDC and CTR. 

(142)       Revolving Credit Advance shall have the meaning assigned to it in Section 1.1(1)(a) and,
for greater certainty, shall not include a PIK Advance. 

(143)       Revolving Loan means, at any time, the aggregate amount of Revolving Credit Advances outstanding to Borrower. 

(144)       Revolving Loan Commitment No. 1 means the commitment of Lenders to make Revolving Credit Advances, which aggregate commitment
shall be up to US$15,850,000 available on the Closing Date (as such amount may be adjusted, if at all, from time to time in accordance with the Agreement). 

(145)       Revolving Loan Commitment No. 2 means the commitment of Lenders to make Revolving Credit Advances, which aggregate commitment
shall be up to US$11,887,500 available on the first Business Day of
the third (3rd) Fiscal Quarter of 2005 (as such amount may be adjusted, if at all, from time to time in accordance with the Agreement). 

(146)       Revolving Loan Commitment No. 3 means the commitment of Lenders to make Revolving Credit Advances, which aggregate commitment
shall be up to US$7,925,000 available on the first Business Day of the fourth (4th) Fiscal Quarter of 2005 (as such amount may be adjusted, if at all, from time to time in
accordance with the Agreement). 

(147)       Revolving Loan Commitment No. 4 means the commitment of Lenders to make Revolving Credit Advances, which aggregate commitment
shall be up to US$3,962,500 available on the first Business Day of the first Fiscal Quarter of 2006 (as such amount may be adjusted, if at all, from time to time in accordance with the
Agreement). 

(148)       Revolving Note shall have the meaning assigned to it in Section 1.1(1)(b). 

(149)       Schedules means the Schedules prepared by Borrower and denominated as Schedules 1.1
through 6.7 in the Table of Contents to the Agreement. 

(150)       Security Agreement means collectively (i) the "Deed of Hypothec to Secure Bonds" bearing formal date May 12, 2005
(as the same may from time to time be amended, restated, modified or supplemented, the "Deed of Hypothec") between Borrower and BNY Trust Company
of Canada as trustee and therein defined "Fondé de Pouvoir" (for purposes of this paragraph, the
"Trustee"), (ii) each "Bond Pledge Agreement" bearing formal date May 12, 2005 between Borrower, each Lender (and any of their
respective present or future Affiliates) and BNY Trust Company of Canada, in its capacity as Collateral Agent, mandatary, agent and custodian of and for Lenders (and any of their respective
present or future Affiliates), as the same may from time to time be amended, restated, modified or supplemented, (iii) all "Bonds" (as defined in the Deed of Hypothec) which may, at any
time, be issued by Borrower under and secured by the hypothecs, security interests and rights created under the Deed of Hypothec, (iv) the general security agreement of even date herewith by
and between Borrower, Collateral Agent and others and (v) all other agreements and/or documents now or hereafter entered 

11

 

into
between Borrower and Trustee, Borrower and Collateral Agent or Borrower and any Lender creating and/or with respect to any Liens, security interests, hypothecs and/or rights in and against any of
Borrower's present and future property, in general, and the Collateral and/or the Mortgaged Properties, in particular, as the same may from time to time be amended, restated, modified or supplemented. 

(151)       [Senior Funded Debt means, at any time, the outstanding principal amount of the Loans and all other Indebtedness of Borrower and its Subsidiaries
secured by valid and perfected first priority Liens on any property, assets or undertaking of Borrower and its Subsidiaries.] [NTD: To be determined in accordance with
Section 5.14.]

(152)       Settlement Date shall have the meaning assigned to it in Section 9.9(1)(b). 

(153)       Solvent means, (a) with respect to any Person on a particular date that is subject to Canadian Insolvency Law, that on such
date (i) the property of such Person is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due,
(ii) the property of such Person is, at a fair valuation, greater than the total amount of liabilities, including contingent liabilities, of such Person; (iii) such Person has not ceased
paying its current obligations in the ordinary course of business as they generally become due; and (iv) such Person is not for any reason unable to meet its obligations as they generally
become due, and, (b) with respect to any Person on a particular date that is subject to US Insolvency Law, that on such date (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such Person; (ii) the present fair saleable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they become absolute and matured; (iii) such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (iv) such Person is not engaged in a business or transaction, and is not about to engage in a
business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan
liabilities) at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can reasonably be expected to become an
actual or matured liability. 

(154)       SR Group means collectively Borrower and its Subsidiaries and means individually any one of them. 

(155)       SR Group Pension Plans shall have the meaning assigned to it in Section 3.11. 

(156)       Stock means "Securities" (as defined in the Security Agreement) as well as all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including common shares, preferred
shares or any other "equity security". 

(157)       Subordinated Debt means the Indebtedness of Borrower and its Subsidiaries that is subordinated to the Obligations, in a manner and
form satisfactory to Requisite Lenders in their sole discretion, as to right and time of payment and as to any other rights and remedies thereunder. 

(158)       Subsidiary means, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of
the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of fifty percent (50%) or more of such Stock whether by proxy, agreement, operation of
law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting
or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner. 

(159)       Support Agreement shall have the meaning assigned to it in the Restructuring Term Sheet. 

(160)       Tax and Taxes includes all present and future taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, withholdings and
other charges of any nature (including income, capital gains, corporate, capital 

12

 

(including
large corporations), net worth, sales, consumption, use, transfer, goods and services, value-added, stamp, registration, franchise, withholding, payroll, employment, health, education,
employment insurance, pension, excise, business, school, property, occupation, customs, anti-dumping and countervail taxes, surtaxes, duties, levies, imposts, rates, fees, assessments,
withholdings and other charges) imposed by any Governmental Authority, together with any fines, interest, penalties or other additions on, to, in lieu of, for non-collection of or in
respect of those taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, withholdings and other charges. 

(161)       Term Loan shall have the meaning assigned to it in Section 1.1(3)(a). 

(162)       Term-Out Date shall have the meaning assigned to it in Section 1.1(3)(a). 

(163)       Termination Date means the date on which the Loans have been indefeasibly repaid in full and all other Obligations under the
Agreement and the other Loan Documents have been completely discharged and Borrower shall not have any further right to borrow any monies under the Agreement. 

(164)       Total Capitalization means, as of the date of determination, the sum of (a) Total Debt and (b) Total Shareholders'
Equity. 

(165)       Total Debt means, as of the date of determination, the total amount of the Indebtedness of Borrower and its Subsidiaries determined
on a consolidated basis. For greater certainty, Total Debt shall include Subordinated Debt and preferred shares that are then presently retractable at the option of the holder or which Borrower plans
to redeem and for which the retraction price or redemption price, as the case may be, is payable in cash or otherwise evidenced by Indebtedness in which case the aggregate retraction amount or
redemption amount, as applicable, shall be included. 

(166)       Total Revolving Loan Commitment means the aggregate amount of Revolving Loan Commitment No. 1, Revolving Loan Commitment
No. 2, Revolving Loan Commitment No. 3 and Revolving Loan Commitment No. 4 (as such amount may be adjusted, if at all, from time to time in accordance with the
Agreement). 

(167)       Total Shareholders' Equity means, as of the date of determination, (a) at any time that the Common Shares are traded on the
Toronto Stock Exchange, the average ten (10) Business Day trailing trading price of the Common Shares or (b) if the calculation in
paragraph (a) immediately above cannot be determined, the total amount of shareholders' equity of Borrower and its Subsidiaries determined on a consolidated
basis (including the stated capital of all shares, the stated capital that would be attributable to shares issued upon the conversion of any convertible debt instruments, accumulated retained earnings
and the amount, without duplication, of any contributed surplus, together with the amount of minority interests in Subsidiaries of Borrower or its Subsidiaries), all as determined in accordance with
GAAP. 

(168)       Trademark Licence means rights under any written agreement now owned or hereafter acquired by Borrower and its Subsidiaries granting
any right to use any Trademark. 

(169)       Trademarks means all of the following now owned or hereafter acquired by Borrower or any of its Subsidiaries: (a) all
trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the Canadian Trade-marks Office or in any similar office in any country or any political subdivision thereof; (b) all reissues, extensions or
renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. 

(170)       US Dollars or US$ means lawful currency of the United States of America. 

        Unless
otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or paragraph refer to such Section, subsection or paragraph as contained in the
Agreement. The words "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Appendices, as the same may from time to time be amended,
restated, modified or supplemented, and not to any particular section, subsection or paragraph contained in the Agreement or any such Appendices. 

13

 

        Wherever
from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations.
Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of a member of SR Group, such words are intended to signify that such member of SR Group has actual
knowledge or awareness of a particular fact or circumstance or that such member of SR
Group, if it had exercised reasonable diligence, would have known or been aware of such fact or circumstance. 

14

  

 
 

ANNEX B (Section 1.7)
  
    to
  
    CREDIT AGREEMENT
  
    CASH MANAGEMENT SYSTEMS  
    

        Borrower shall establish and maintain the Cash Management Systems described below within three (3) months from the Closing Date (or such later date
as Requisite Lenders may consent to in writing) and until the Term-Out Date: 

(1)           Borrower
shall have established one or more depository accounts in its name ("Borrower Accounts") and Disbursement Accounts at a bank
acceptable to Requisite Lenders (a "Relationship Bank") and that Relationship Bank shall have entered into a tri-party blocked
accounts agreement with Collateral Agent and Borrower with blocked account and other arrangements satisfactory to Requisite Lenders, in their reasonable opinion, and Collateral Agent, in its sole
discretion with respect to its duties and obligations thereunder, and such arrangements may include, without limitation, that: 

                (a)           all
items of payment deposited in Borrower Accounts are subject to the Lien in favour of Collateral Agent, on behalf of Agent and Lenders; 

                (b)           the
Relationship Bank has no rights of setoff or recoupment or any other claim against the Borrower Accounts, other than for payment of its service fees and other
charges directly related to the administration of the Borrower Accounts monitored by the Relationship Bank, for the amount of any required adjustments due to clerical error or calculation errors
directly relating to the Borrower Accounts, for returned cheques or for other items of payment in accordance with any court order, garnishment or any other applicable law in each case binding on the
Relationship Bank; and 

                (c)           the
Relationship Bank agrees to forward in accordance with such blocked accounts agreement all uncommitted amounts in excess of Cdn$3,000,000 (or the Equivalent
Amount in US Dollars) in each Borrower Account to the applicable Collection Account through bi-monthly sweeps from such Borrower Account into such Collection Account. 

(2)           So
long as no Default or Event of Default has occurred and is continuing, Borrower may amend Schedule 3.18 to add or replace a Relationship
Bank or Borrower Account or to replace any Disbursement Account; provided however, that: 

                (a)           Requisite
Lenders shall have consented in writing in advance to the opening of such account with the relevant bank; and 

                (b)           prior
to the time of the opening of such account, Borrower and such bank shall have executed and delivered to Collateral Agent a tri-party blocked account
agreement, in form and substance satisfactory to Requisite Lenders and Collateral Agent (with respect to its duties and obligations thereunder), in their sole discretion. Borrower shall close any of
its accounts (and establish replacement accounts in accordance with the foregoing sentence) promptly and in any event within thirty (30) days of notice from Requisite Lenders that the
creditworthiness of any bank holding an account is no longer acceptable in Requisite Lenders' judgment, or as promptly as practicable and in any event within thirty (30) days of notice from
Requisite Lenders that the operating performance, funds transfer and/or availability procedures or performance with respect to accounts of the bank holding such accounts or Collateral Agent's
liability under any tri-party blocked account agreement with such bank is no longer acceptable in Requisite Lenders' judgment. 

(3)           The
Borrower Accounts and Disbursement Accounts shall be cash collateral accounts, with all cash, cheques and other similar items of payment in such accounts securing payment of the
Obligations, and in which Borrower shall have granted a Lien to Collateral Agent pursuant to the Collateral Documents. 

(4)           All
amounts deposited in a Collection Account shall be deemed received by Administrative Agent in accordance with Section 1.9 of the Agreement and
shall be applied (and allocated) by Administrative Agent in accordance with Section 1.10 of the Agreement. In no event shall any amount be so applied unless
and until such amount shall have been credited for value to the Collection Account. Borrower hereby irrevocably instructs 

1

 

Administrative
Agent to convert the aggregate amount of Canadian Dollars in the Canadian Dollar Collection Account to the Equivalent Amount in US Dollars for application (and allocation) by
Administrative Agent in accordance with Section 1.10 of the Agreement. For greater certainty, unless and until applied by Administrative Agent against the
Obligations in accordance with Section 1.10, amounts deposited into a Collection Account shall remain the property of Borrower subject to a Lien in favour of
Collateral Agent, on behalf of Agents and Lenders. 

(5)           Borrower
may maintain, in its name, an account (each a "Disbursement Account" and, collectively, the
"Disbursement Accounts") at a bank acceptable to Requisite Lenders into which Administrative Agent shall, from time to time, deposit proceeds of each
Revolving Credit Advance made to Borrower pursuant to Section 1.1 (together with any amounts payable to Borrower pursuant to the last sentence of
Section 1.10(1) or otherwise) for use by Borrower solely in accordance with the Purpose. 

(6)           Borrower
shall, and shall cause its Affiliates and Related Parties, to (i) hold in trust for Collateral Agent all cheques, cash and other items of payment received by Borrower
or received by any such Affiliate or Related Party for or on behalf of Borrower, and (ii) within one (1) Business Day after receipt by Borrower or any such Affiliate or Related Party of
any cheques, cash or other items of payment in which Borrower has an interest, deposit the same into a Borrower Account. Borrower and each such Affiliate or Related Party thereof acknowledge and agree
that all cash, cheques or items of payment constituting proceeds of Collateral are subject to a Lien in favour of Collateral Agent, on behalf of Agents and Lenders. All proceeds of the sale or other
disposition of any Collateral shall be deposited directly into Borrower Accounts. 

2

  

 
 

ANNEX C (Section 2.1(1))
  
    to
  
    CREDIT AGREEMENT
  
    CLOSING CHECKLIST  
    

        In addition to, and not in limitation of, the conditions described in Section 2.1 of the Agreement, pursuant to
Section 2.1(1), the following items must be received by Administrative Agent in form and substance satisfactory to Requisite Lenders, in their sole
discretion, on or prior to the Closing Date, unless waived in writing by Requisite Lenders (each capitalized term used but not otherwise defined herein shall have the meaning ascribed thereto in
Annex A to the Agreement): 

(1)           Appendices.    All Appendices to the Agreement. 

(2)           Revolving Notes.    Duly executed originals of the Revolving Notes in respect of the Revolving Loan, each dated the Closing
Date. 

(3)           Collateral Documents.    Duly executed originals of the Collateral Documents, each dated the Closing Date. 

(4)           Insurance.    Satisfactory evidence that the insurance policies required by Section 5.4 are in full force and effect,
together with appropriate evidence showing loss payable and/or additional insured and mortgage clauses or endorsements, as requested by Administrative Agent, in favour of Collateral Agent and
non-renewal/cancellation/amendment riders to provide 30 days advance notice to Collateral Agent. 

(5)           Security Interest and PPSA Filings.    Evidence satisfactory to Requisite Lenders that Collateral Agent has a valid and
perfected first priority Lien, on behalf of Agents and Lenders, in and to all the Collateral, including (i) such documents duly executed by Borrower and its Subsidiaries (including financing
statements under the PPSA and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens) as any Agent may request in order to perfect Collateral Agent's
Lien, on behalf of
Agents and Lenders, in the Collateral and (ii) copies of search reports listing all effective financing statements (or the applicable equivalent thereto) that name Borrower or its
Subsidiaries as debtors, together with copies of such financing statements (or the applicable equivalent thereto), none of which shall cover the Collateral, except for those relating to
Permitted Encumbrances. 

(6)           Payout; Financing Change Statements.    Copies of a written confirmation evidencing repayment in full of all Prior Lender
Obligations, together with (a) financing change statements (or the applicable equivalent thereof) discharges, releases or other appropriate termination statements manually signed by each
Prior Lender or its applicable agents, if appropriate, releasing all Liens of each Prior Lender, if any, upon any of property, assets and undertaking of Borrower and its Subsidiaries, and
(b) termination of all blocked account agreements, bank agency agreements or other similar agreements or arrangements or arrangements in favour of each Prior Lender or relating to the Prior
Lender Obligations, if any. 

(7)           Letter of Direction.    Duly executed originals of a letter of direction from Borrower addressed to Administrative Agent and
Lenders with respect to the disbursement on the Closing Date of the proceeds of the first Revolving Credit Advance. 

(8)           Constating Documents and Status.    (a) Borrower's constating documents and all amendments thereto,
(b) certificates of status, compliance and/or good standing (as applicable) evidencing Borrower's qualification to conduct business in each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, each dated as of the Closing Date and certified by the applicable authorized Governmental Authority. 

(9)           Bylaws and Resolutions.    (a) Borrower's bylaws, together with all amendments thereto and (b) resolutions of
Borrower's board of directors and, if applicable, shareholders, approving and authorizing the execution, delivery and performance of the Loan Documents to which Borrower is a party and the
transactions to be consummated in connection therewith, each certified as of the Closing Date by the applicable corporate secretary or an assistant secretary as being in full force and effect without
any modification or amendment. 

1

 

(10)         Incumbency Certificates.    Signature and incumbency certificates (the "Incumbency
Certificate") of the officers of Borrower executing any of the Loan Documents and permitted to give instructions or notices (including Notices of Revolving Credit Advances) to
Agents hereunder, certified as of the Closing Date by the applicable corporate secretary or an assistant secretary as being true, accurate, correct and complete. 

(11)         Opinions of Counsel.    Duly executed originals of opinions of Fasken Martineau LLP, counsel for Borrower, together
with any local counsel opinions requested by Administrative Agent, each dated the Closing Date. 

(12)         Officer's Certificate.    Duly executed originals of a certificate of an officer of Borrower, dated the Closing Date. 

(13)         Intentionally Deleted.

(14)         Mortgages.    Mortgages covering all of the Real Estate (the "Mortgaged
Properties") together with: (a) title opinions from counsel for Borrower in respect of the Mortgaged Properties; and (b) evidence that counterparts of the
Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of Requisite Lenders, to create a valid and enforceable first priority Lien (subject to Permitted
Encumbrances) on each Mortgaged Property in favour of Collateral Agent (or in favour of such other trustee as may be required or desired under local law), on behalf of Agents and Lenders. 

(15)         Intentionally Deleted.

(16)         Intentionally Deleted.

(17)         Financial Statements.    Borrower shall have made publicly available its consolidated unaudited quarterly financial
statements for the period ending March 31, 2005 including a balance sheet and statement of income and cash flows for the period ending March 31, 2005 and Requisite Lenders shall be
satisfied, in their sole discretion, with all of the foregoing. 

(18)         Intentionally Deleted.

(19)         CIBC Acknowledgement.    Duly executed acknowledgment by Canadian Imperial Bank of Commerce. 

(20)         Other Documents.    Such other certificates, documents and agreements respecting Borrower and its Subsidiaries as Requisite
Lenders may, in their sole discretion, request. 

2

  

 
 

ANNEX D (Section 4.1(1))
  
    to
  
    CREDIT AGREEMENT
  
    REPORTING — FINANCIAL STATEMENTS, NOTICES, OPERATING PLAN, BUDGET, REPORTS AND OTHER INFORMATION

    

        Borrower shall deliver or cause to be delivered to Administrative Agent the following: 

(1)           Monthly Financials.    Within thirty (30) days after the end of each Fiscal Month (or within
forty-five (45) days after the end of a Fiscal Month that is the last month of a Fiscal Quarter), financial information regarding Borrower and its Subsidiaries, certified by an
officer of Borrower, consisting of: 

                (a)           unaudited
balance sheets as of the close of such Fiscal Month and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the
close of such Fiscal Month; 

                (b)           unaudited
statements of income and cash flow for such Fiscal Month, setting forth in comparative form the figures for the corresponding period in the prior year and
the figures contained in the Operating Plan for such Fiscal Year; and 

                (c)           a
summary of all payments made or owing to Affiliates during such Fiscal Month, indicating which payments are in respect of inventory purchases, Capital Expenditures
and/or management fees. 

Such
financial information shall be accompanied by the certification of an officer of Borrower that (i) such financial information presents fairly in accordance with GAAP (subject to normal
year-end adjustments) the financial position and results of operations of Borrower and its Subsidiaries, in each case as at the end of such Fiscal Month and for the period then ended and
(ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have occurred and be continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default; 

(2)           Monthly Budget.    Within three (3) Business Days prior to the end of each Fiscal Month, a budget (each, a
"Budget") of Borrower and its Subsidiaries, in substantially the form and containing similar information as the Original Budget, certified by an officer
of Borrower; 

(3)           Quarterly Deliveries.    Within forty-five (45) days after the end of each Fiscal Quarter, (A) a
statement in reasonable detail showing the calculations used in determining compliance with each Financial Covenant set forth on Annex E, and (B) a management
discussion and analysis which includes a comparison to the Budgets (including the Original Budget if applicable) covering that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to
the corresponding period in the prior year; 

(4)           Annual Operating Plan.    As soon as available, but not later than thirty (30) days prior to the commencement of each
Fiscal Year, an Operating Plan; 

(5)           Annual Audited Financials.    Within ninety (90) days after the end of each Fiscal Year, audited financial statements
for Borrower and its Subsidiaries, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which financial statements shall be prepared in accordance with GAAP, certified without qualification by an independent chartered public accounting firm of national standing or
otherwise acceptable to the Requisite Lenders. Such financial statements shall be accompanied by: 

                (a)           a
statement prepared in reasonable detail showing the calculations used in determining compliance with each of the Financial Covenants set forth on Annex
E; 

                (b)           a
report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a
Default or Event of Default has occurred (or specifying those Defaults and Events of Default that they became aware of); 

                (c)           the
annual letters to such accounting firm in connection with their audit examination detailing contingent liabilities and material litigation matters; 

1

 

                (d)           the
certification of the Chief Financial Officer of Borrower that all such financial statements present fairly in accordance with GAAP the financial position, results
of operations and statements of cash flows of Borrower and its Subsidiaries as at the end of such year and for the period then ended, and that there was
no Default or Event of Default in existence as of such time or, if a Default or Event of Default shall have occurred and be continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default; and 

                (e)           a
list of any applications for the registration of any Intellectual Property with the Canadian Industrial Design Office, Canadian Patent Office, Canadian Intellectual
Property Office, Canadian Copyright Office or any similar office or agency which Borrower or its Subsidiaries have filed in the prior Fiscal Year; 

(6)           Management Letters.    Within three (3) Business Days after receipt thereof by Borrower or its Subsidiaries, copies
of all management letters, exception reports or similar letters or reports received by Borrower or its Subsidiaries from its independent chartered public accountants; 

(7)           Default Notices.    As soon as practicable, and in any event within one (1) Business Day after an executive officer
of Borrower has actual knowledge of the existence of any Default, Event of Default or other event which has had or could reasonably be expected to have a Material Adverse Effect or default by any
Person in payment or other performance of its obligations with respect to Collateral, telephonic or telecopied notice specifying the nature of such Default or Event of Default or other event or
default, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day; 

(8)           Securities Filings and Press Releases.    Promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements made publicly available by Borrower to its security holders; (ii) all regular and periodic reports and all registration statements and
prospectuses, if any, filed by Borrower with any securities exchange, commission or governmental or public or private regulatory authority; and (iii) all press releases and other statements
made available by Borrower to the public concerning material changes or developments in its business; 

(9)           Subordinated Debt.    As soon as practicable, copies of all material written notices given or received by Borrower or any of
its Subsidiaries with respect to any Subordinated Debt, and, two (2) Business Days after Borrower or any of its Subsidiaries obtains knowledge of any matured or unmatured event of default with
respect to any Subordinated Debt, notice of such event of default; 

(10)         Supplemental Schedules.    Supplemental disclosures, if any, required by Section 5.6 of
the Agreement; 

(11)         Litigation.    In writing, promptly upon learning thereof, notice of any Litigation commenced or threatened against Borrower
or any of its Subsidiaries that (i) seeks damages, (ii) seeks injunctive relief, (iii) alleges criminal misconduct by Borrower or any of its Subsidiaries, (iv) alleges the
violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities, or (v) involves any product recall; 

(12)         Insurance Notices.    In writing, promptly upon learning thereof, disclosure of losses or casualties required by
Section 5.4 of the Agreement; 

(13)         Lease Default Notices.    (i) In writing, promptly upon learning thereof, copies of any and all default notices
received under or with respect to any leased location or warehouse where Collateral is located, and (ii) promptly such other notices or documents as Requisite Lenders may request in their sole
discretion; 

(14)         Lease Amendments.    As soon as practicable, copies of all material amendments to real estate leases; 

(15)         Appraisals/Verifications.    Appraisals or verifications of its property and assets as Requisite Lenders may request at any
time after the occurrence and during the continuance of a Default or an Event of Default, such appraisals or verifications to be conducted by an appraiser or other Person, and in form and substance,
satisfactory to Requisite Lenders, in their sole discretion. 

(16)         Other Documents.    Such other financial and other information, reports, statements and reconciliations respecting
Borrower's or any of its Subsidiaries' business or financial condition or the Collateral as Requisite Lenders shall, from time to time, request in their sole discretion. 

2

 

(17)         Liens.    Promptly upon learning thereof, notice of any Lien (other than Permitted Encumbrances) or claim made or asserted
against any of the Collateral. 

3

  

 
 

ANNEX E (Section 6.9)
  
    to
  
    CREDIT AGREEMENT
  
    FINANCIAL COVENANTS    
    

        [NTD: This Annex E is subject to delivery of Operating Plan and negotiation between Borrower and Requisite Lenders in
accordance with Section 5.14.]

        At
all times during the Public Period, Borrower shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated in accordance with
GAAP consistently applied: 

	(1)
	Senior Funded Debt Coverage Ratio.    As of the end of any Fiscal Quarter, Borrower shall not permit the ratio of
(a) Senior Funded Debt on such date to (b) EBITDA for the period of four (4) consecutive Fiscal Quarters ending on or immediately prior to such date to exceed  
[    •    ][NTD: To be negotiated and determined in
accordance with Section 5.14.]

	(2)
	Minimum Fixed Charge Coverage Ratio.    As of the end of any Fiscal Quarter, Borrower shall not permit the ratio of
(a) EBITDA for the period of four (4) consecutive Fiscal Quarters ending on or immediately prior to such date to (b) Fixed Charges for the period of four (4) consecutive
Fiscal Quarters ending on or immediately prior to such date to be less than [    •    ][NTD: To be negotiated and determined in accordance with
Section 5.14.].

	(3)
	Minimum Availability.    Borrower shall maintain no less than
US$[    •    ] of undrawn availability under the Total Revolving Loan Commitment.  [NTD: To be negotiated determined in accordance with
Section 5.14.]

	(4)
	Other. [NTD: To be negotiated and determined in accordance with
Section 5.14.]

        Unless
otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial
computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no
way be construed to limit the foregoing. If any "Accounting Changes" (as defined below) occur and such changes result in a change in the calculation of the Financial Covenants, standards or
terms used in the Agreement or any other Loan Document, then Borrower and Administrative Agent agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably
reflect such Accounting Changes with the desired result that the criteria for evaluating Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes
had not been made. "Accounting Changes" means (a) changes in accounting principles required by the promulgation of any rule, regulation
pronouncement or opinion by the Canadian Institute of Chartered Accountants (or successor thereto or any agency with similar functions); and (b) changes in accounting principles
concurred in by Borrower's independent chartered public accountants. If Borrower and Administrative Agent agree upon the required amendments, then after appropriate amendments have been executed and
the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting
Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change. If Borrower and Administrative Agent cannot agree upon the required amendments within
thirty (30) days following the date of implementation of any Accounting Change, then all Financial Statements delivered and all calculations of Financial Covenants and other standards and terms
in accordance with the Agreement and the other Loan Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. 

1

  

 
 

ANNEX F (Section 11.10)
  
    to
  CREDIT AGREEMENT
  
    NOTICES  
    

	(A)	If to Borrower, at:
	

 	

SR Telecom Inc.

8150 Trans-Canada Highway

St-Laurent, Quebec

H4S 1M5
	
 	

Attention:	
 	

David Adams

Senior Vice-President and CFO
	 	Telecopier No.:	 	(514) 956-4405
	 	Telephone No.:	 	(514) 335-1210
	

 	

Account Wire Details:
	
 	

Bank Name:	
 	

The Canadian Imperial Bank of Commerce

6341 Trans-Canada Hwy Suite 1200

Pointe-Claire

Quebec H9R 5A5
	
 	

Bank no.:	
 	

010
	
 	

Transit:	
 	

00941
	
 	
Cdn$ account no.: (for Canadian Dollar wire transfers)	
 	

82-04713
	
 	
US$ account no.: (for US Dollar wire transfers)	
 	

02-39518
	

 	

with a copy to:	
 	

 
	

 	

Fasken Martineau LLP

Stock Exchange Tower

PO Box 242, Suite 3400

800 Place Victoria

Montreal, Quebec

H4Z 1E9	
 	

 
	

 	

Attention:	
 	

Marc Novello
	 	Telecopier No.:	 	(514) 397-7400
	 	Telephone No.:	 	(514) 397-7581

1

 

	(B)	If to B IV Capital Partners, L.P., GMAM Investment Funds Trust II, DDJ Canadian High Yield Fund, DDJ October Fund Onshore Feeder, Limited Partnership and October OS Investment Sub 2005, Ltd. at:
	

 	

DDJ Capital Management, LLC

141 Linden Street, Suite S-4

Wellesley, Massachusetts

02482
	

 	

Attention:	
 	

Jackson Craig
	 	Telecopier No.:	 	(781) 283-8555
	 	Telephone No.:	 	(781) 283-8519
	
 	

Attention:	
 	

Mary Robinson
	 	Telecopier No.:	 	(781) 283-8567
	 	Telephone No.:	 	(781) 283-8528
	

 	

Account Wire Details:
	

 	
B IV Capital Partners, L.P.
	
 	

Bank Name:	
 	

JP Morgan Chase Bank, NY
	
 	

ABA#:	
 	

021000021
	
 	

F/A/O:	
 	

Goldman Sachs & Co., N.Y.
	
 	

A/C#:	
 	

930-1-011483
	
 	

F/F/C:	
 	

B IV Capital Partners LP
	
 	

A/C#:	
 	

002-091726
	

 	
 GMAM Investment Funds Trust II
	
 	

Bank Name:	
 	

State Street Bank & Trust Co., Boston
	
 	

ABA#:	
 	

011 000 028
	
 	

Ref:	
 	

GMAM Investment Funds Trust II
	
 	

Account Number:	
 	

7M2E
	
 	

DOA#:	
 	

26572875

2

 

	 	DDJ Canadian High Yield Fund
	
 	

Bank Name:	
 	

JP Morgan Chase Bank

New York, NY
	
 	

ABA:	
 	

021000021
	
 	

Account Number:	
 	

00111 53244
	
 	

Account Name:	
 	

Royal Bank of Canada
	
 	

FFC:	
 	

0959 1409 5675
	
 	

Name:	
 	

Royal Trust
	
 	

FBO:	
 	

110455024
	
 	

Name:	
 	

DDJ Canadian High Yield Fund
	
 	

Attention:	
 	

Albert Ochoa (416) 955-6217

Global Credit Reporting
	

 	
 DDJ October Fund Onshore Feeder, Limited Partnership
	
 	

Bank Name:	
 	

Citibank, N.A. New York
	
 	

ABA#:	
 	

021000089
	
 	

Account:	
 	

Morgan Stanley & Co., NY
	
 	

Account Number:	
 	

38890774
	
 	

Subaccount	
 	

 
	
 	

Account Name:	
 	

DDJ October Fund

Onshore Feeder,

Limited Partnership
	
 	

Account No.:	
 	

038C4323
	

 	
October OS Investment Sub 2005, Ltd.
	
 	

Bank Name:	
 	

Citibank, N.A. New York
	
 	

ABA#:	
 	

021-000-089
	
 	

F/A/O:	
 	

Morgan Stanley & Co., NY
	
 	

A/C#:	
 	

38890774
	
 	

F/F/C:	
 	

October OS Investment Sub 2005 Ltd.
	
 	

A/C#:	
 	

038C43257

3

 

	(C)	If to Guardian Capital L.P., at:
	

 	

199 Bay St. W. Commerce Court West, Ste. 3100

Toronto, Ontario M5L 1E8
	

 	

Attention: Steve Kearns
	 	Telecopier No.:	 	(416) 947-3745
	 	Telephone No.:	 	(416) 947-3701
	

 	

Attention: Gino Tullo
	 	Telecopier No.:	 	(416) 364-9922
	 	Telephone No.:	 	(416) 350-6898
	

 	

Account Wire Details:
	

 	
 ScotiaMcLeod Pinnacle High Yield (Commitment = 2.188%)
	

 	

CAD Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

Toronto Treasury (BIC: SBOSCATXXXX)
	
 	

City:	
 	

Toronto
	
 	

Account Number:	
 	

SBOSCATXXXX
	
 	

Reference:	
 	

JFQ3
	

 	

US Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

State Street Bank & Trust Co.
	
 	

ABA Number:	
 	

011000028
	
 	

Beneficiary Account:	
 	

54623947
	
 	

Beneficiary:	
 	

Pinnacle High Yield Income, JFQ3
	

 	
 GGOF Canadian High Yield Bond Fund (Commitment = 15.21%)
	

 	

CAD Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

Canadian Imperial Bank of Commerce
	
 	

Receiver/Intermediary:	
 	

CIBCCATT
	
 	

Account with Institution:	
 	

MELNUS3PGSS

4

 

	 	US Wire Transactions:	 	 
	
 	

Financial Institution Name:	
 	

Federal Reserve Bank of Boston
	
 	

City:	
 	

Boston
	
 	

ABA Number:	
 	

011001234
	
 	

DDA Number:	
 	

065447
	

 	
 Vector High Yield Bond Fund (Commitment = 0.146%)
	

 	

CAD Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

Canadian Imperial Bank of Commerce
	
 	

Receiver/Intermediary:	
 	

CIBCCATT
	
 	

Account with Institution:	
 	

MELNUS3PGSS
	

 	

US Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

Federal Reserve Bank of Boston
	
 	

City:	
 	

Boston
	
 	

ABA Number:	
 	

011001234
	
 	

DDA Number:	
 	

065447
	

 	
GGOF Diversified Monthly Income Fund (Commitment = 0.456%)
	

 	

CAD Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

Canadian Imperial Bank of Commerce
	
 	

Receiver/Intermediary:	
 	

CIBCCATT
	
 	

Account with Institution:	
 	

MELNUS3PGSS
	

 	

US Wire Transactions:	
 	

 
	
 	

Financial Institution Name:	
 	

Federal Reserve Bank of Boston
	
 	

City:	
 	

Boston
	
 	

ABA Number:	
 	

011001234
	
 	

DDA Number:	
 	

065447

5

 

	(D)	If to Greywolf Loan Participation LLC, at:
	

 	

411 West Putnam, Suite 265

Greenwich, CT 06807
	

 	

Attention:	
 	

Bill Troy
	 	Telecopier No.:	 	(203) 302-2244
	 	Telephone No.:	 	(203) 302-2223
	

 	

Account Wire Details:	
 	

 
	

 	

US$ Fed Wire Instructions
	
 	

Name:	
 	

Chase Manhattan Bank, N.Y.
	
 	

ABA#:	
 	

021-000-021
	
 	

F/A/O:	
 	

Goldman Sachs & Co., N.Y.
	
 	

A/C#:	
 	

930-1-011483
	
 	

F/F/C:	
 	

Greywolf Loan Participation LLC
	
 	

A/C#:	
 	

002-034155

6

 

	(E)	If to Catalyst Fund General Partner I Inc., at:
	

 	

79 Wellington St. West, Suite 3475

Toronto, ON

M5K 1J3
	
 	

Attention:	
 	

Gabriel de Alba
	 	Telecopier No.:	 	(416) 945-3020
	 	Telephone No.:	 	(416) 945-3060
	
 	

Attention:	
 	

Lori Bird
	 	Telecopier No.:	 	(416) 945-3002
	 	Telephone No.:	 	(416) 945-3060
	

 	

Account Wire Details:
	
 	

Account Name:	
 	

CCGI-CFLPI
	
 	

Account:	
 	

80002 6225810
	
 	

Branch Transit:	
 	

#80002
	
 	

Bank Code:	
 	

#02
	
 	

ABA:	
 	

#026002532
	
 	

Branch Location:	
 	

Scotiabank

Scotia Plaza Branch

44 King Street West

Toronto, Ontario M5H 1H1

7

 

	(F)	If to Polar Securities Inc., at:
	

 	

372 Bay Street, 21st Floor

Toronto, Ontario

M5H 2W9
	
 	

Attention:	
 	

Pat Wong
	 	Telecopier No.:	 	(416) 367-0564
	 	Telephone No.:	 	(416) 367-4364
	

 	

Account Wire Details:
	

 	

Cdn$ Wire Transactions:
	
 	

Swift Code:	
 	

BOFMCAM2
	
 	

Bank Name:	
 	

Bank of Montreal
	
 	

City:	
 	

Montreal
	
 	

Beneficiary:	
 	

00021157410

Nesbitt Burns Inc.,

Toronto, Ontario
	
 	

Sub Account:	
 	

402-20185-29
	

 	

US$ Wire Transactions:
	
 	

Bank Name:	
 	

Bank of New York
	
 	

Address:	
 	

48 Wall Street

New York, New York
	
 	

ABA Number:	
 	

021-000-018
	
 	

AC Number	
 	

8900-135-263
	
 	

Sub Account:	
 	

402-20185-29

8

 

	(G)	All notices to a Lender shall be copied to Bennett Jones LLP, at:
	

 	

3400 One First Canadian Place

PO Box 130

Toronto, Ontario

M5X 1A4	
 	

 
	
 	

Attention:	
 	

S. Richard Orzy
	 	Telecopier No.:	 	(416) 863-1716
	 	Telephone No.:	 	(416) 777-5737
	
 	

Attention:	
 	

Mark Bain
	 	Telecopier No.:	 	(416) 863-1716
	 	Telephone No.:	 	(416) 777-4845

9

 

	(H)	If to Administrative Agent and Collateral Agent, at:
	

 	

BNY Trust Company of Canada

Suite 1101

4 King Street West

Toronto, Ontario

M5H 1B6	
 	

 
	
 	

Attention:	
 	

Senior Trust Officer
	 	Telecopier No.:	 	(416) 360-1711
	 	Telephone No.:	 	(416) 933-8505
	

 	

Account Wire Details:	
 	

 
	

 	

US$ Wire Instructions for Wires that originate within the U.S.:
	
 	

Bank Name:	
 	

The Bank of New York
	
 	

ABA#:	
 	

021-000-018
	
 	

Account Name:	
 	

BNYAS Agent Services Clearing Account
	
 	

Account #:	
 	

8900415460
	
 	

Reference:	
 	

SR Telecom
	
 	

Attention:	
 	

Stacie Row (972) 401-8617
	

 	

US$ Wire Instructions for Wires that originate within Canada:
	
 	

Bank Name:	
 	

The Bank of New York
	
 	

City:	
 	

New York, NY
	
 	

SWIFT Code:	
 	

IRVTUS3N
	
 	

Beneficiary:	
 	

BNYAS Agent Services Clearing Account
	
 	

FFC: Acct.	
 	

8900415460
	
 	

Reference:	
 	

SR Telecom
	
 	

Attention:	
 	

Stacie Row (972) 401-8617

10

 

	 	with a copy to:	 	 
	

 	

The Bank of New York, Asset Solutions

600 East Las Colinas Boulevard

Suite 1300

Irving, Texas

75039
	
 	

Attention:	
 	

Agent Services — Steve Jerard
	 	Telecopier No.:	 	(972) 401-8556
	 	Telephone No.:	 	(972) 401-8500
	

 	

with a copy to:	
 	

 
	

 	

Stikeman Elliott LLP

5300 Commerce Court West

199 Bay Street

Toronto, Ontario

M5L 1B9
	
 	

Attention:	
 	

Peter Hamilton
	 	Telecopier No.:	 	(416) 947-0866
	 	Telephone No.:	 	(416) 869-5564

11

 
 

Schedule 1.3 — Use of Proceeds    
    

 
 

Schedule 3.2 — Executive Offices; Locations of Collateral    
    

 
 

Schedule 3.4(1) — Financial Statements    
    

 
 

Schedule 3.4(2) — Original Budget    
    

 
 

Schedule 3.6 — Ownership of Property; Liens    
    

 
 

Schedule 3.7 — Labour Matters    
    

 
 

Schedule 3.8 — Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness; Corporate Structure    
    

 
 

Schedule 3.10 — Taxes    
    

 
 

Schedule 3.11 — Canadian Pension and Benefit Plans; Subsidiary Pension Plans    
    

 
 

Schedule 3.12 — Litigation    
    

 
 

Schedule 3.14 — Intellectual Property    
    

 
 

Schedule 3.16 — Environmental Matters    
    

 
 

Schedule 3.17 — Insurance    
    

 
 

Schedule 3.18 — Deposit and Disbursement Accounts    
    

 
 

Schedule 3.19 — Intentionally Deleted    
    

 
 

Schedule 3.21 — Agreements and Other Documents    
    

 
 

Schedule 3.23 — Subordinated Debt    
    

 
 

Schedule 5.1 — Maintenance of Existence and Conduct of Business    
    

 
 

Schedule 5.2(1) — Contested Charges    
    

 
 

Schedule 6.3 — Indebtedness; Unfunded Pension and Benefit Plan Obligations    
    

 
 

Schedule 6.4 — Affiliate Transactions and Employee Loans    
    

 
 

Schedule 6.7 — Liens    
    

  

 
 

Exhibit 1.1(1)(a)    
    

 
 

FORM OF NOTICE OF REVOLVING CREDIT ADVANCE    
    

	TO:	 	BNY Trust Company of Canada, as Administrative Agent
	
AND TO:	
 	

The Lenders as defined in the Credit Agreement (defined below)
	
RE:	
 	

Revolving Credit Advance to be made pursuant to the Credit Agreement dated as of May 19, 2005 between the undersigned, Agents and Lenders (as the same may from time to time be amended, restated, modified or supplemented, the "Credit
Agreement"). All capitalized terms not otherwise defined in this Notice of Revolving Credit Advance shall have the meanings given to them in the Credit Agreement.
	
DATE:	
 	
[    •    ]

                                        
                                          
                                         
                                          
   
 

	A.
	The
undersigned, as Borrower pursuant to the Credit Agreement, irrevocably requests that Lenders make a Revolving Credit Advance on  [Date] in the aggregate amount of  
[US$    •    ] (the "Revolving Credit Advance
Amount") to: 

	Borrower:	SR Telecom Inc.
	
 Address:	

8150 Trans-Canada Highway

St-Laurent, Quebec

H4S 1M5
	
 Name of Contact at Borrower:	
[    •    ]

Telecopier No.: [    •    ]

Telephone No.: [    •    ]
	
 Bank:	

Canadian Imperial Bank of Commerce
	
 Bank Address:	

6341 Trans-Canada Highway

Suite 1200

Pointe-Claire, Quebec

H9R 5A5

Attention: [    •    ]

Telecopier No.: [    •    ]

Telephone No.: [    •    ]
	
 Wire Details:	

Bank No.: 010

Transit: 00941

Cdn$ account no.: 82-04713

US$ account no.: 02-39518

	B.
	The
undersigned, as Borrower pursuant to the Credit Agreement, hereby: 

(1)   represents
and warrants that all of the conditions contained in Section 2 of the Credit Agreement have been satisfied on and as of the date hereof,
and will continue to be satisfied on and as of the date of the
Revolving Credit Advance requested hereby, before and after giving effect thereto and to the application of the Revolving Credit Advance Amount; 

(2)   reaffirms
the continuance of Collateral Agent's valid and perfected first priority Liens pursuant to the Collateral Documents; and 

1

 

(3)   represents
and warrants, both before and after giving effect to the Revolving Credit Advance and to the application of the Revolving Credit Advance Amount, no Default or Event of
Default has occurred or is continuing. 

	 	 	SR TELECOM INC.
	

 	
 	
By:	

 Name:  

Title:      
	

 	
 	

By:	

 Name: 

Title:      
	

 	
 	

I/We have the authority to bind the Corporation.

2

  

 
 

Exhibit 1.1(1)(b)    
    

 
 

FORM OF REVOLVING NOTE    
    

Toronto,
Ontario 

[Date]

US$[    •    ]

        FOR
VALUE RECEIVED, the undersigned, SR Telecom Inc., a Canadian corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of  [NAME OF LENDER]
("Lender") at the offices of Lender, at its address at  [    •    ], or at such other place as Lender may
designate from time to time in writing, in
lawful money of the United States of America and in immediately available funds, the amount of  [    •    ]
(US$[    •    ]), or if less, the aggregate unpaid amount of its Pro Rata Share of the
Revolving Loan made to the undersigned and evidenced hereby or in the Loan Accounts. All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement
(as hereinafter defined) or in Annex A thereto. 

        This
Revolving Note is issued pursuant to that certain Credit Agreement dated as of the date hereof between Borrower, Agents and Lenders (including all annexes, exhibits and schedules
thereto and as the same may from time to time be amended, restated, modified or supplemented, the "Credit Agreement"), and is entitled to the benefit
and security of the Credit Agreement, the Collateral Documents and all of the other Loan Documents referred to therein. Reference is hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which the Revolving Loan evidenced hereby or in the Loan Accounts is made and is to be repaid. The principal balance of the Revolving Loan, the rates of interest applicable
thereto and the date and amount of each payment made on account of the principal thereof, shall be recorded by Administrative Agent in the Loan Accounts maintained in respect of the Revolving Loan;
provided that the failure of Administrative Agent to make any such recordation shall not affect the obligations of Borrower to make a payment when due of any amount owing under the Credit Agreement or
this Revolving Note. 

        The
principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement. Interest thereon shall be paid until such
principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference. 

        If
any payment on this Revolving Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. 

        Upon
and after the occurrence of any Event of Default, this Revolving Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable. 

        Time
is of the essence of this Revolving Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. 

        Except
as provided in the Credit Agreement, this Revolving Note may not be assigned by Lender to any Person. 

1

 

        THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
PROVINCE.

	 	 	SR TELECOM INC.
	

 	
 	
By:	

 Name:

Title:    
	

 	
 	

By:	

 Name:

Title:    

2

  

 
 

Exhibit 1.4(2)    
    

 
 

FORM OF PIK NOTE    
    

Toronto,
Ontario 

[Date]

US$[    •    ]

        FOR
VALUE RECEIVED, the undersigned, SR Telecom Inc., a Canadian corporation ("Borrower"), HEREBY PROMISES TO PAY to  [NAME OF ADMINISTRATIVE AGENT]
("Administrative Agent") at the offices of
Administrative Agent, at its address at [    •    ], or at such other place as Administrative
Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of  [    •    ] (US$    •    ) or if less, the aggregate unpaid
amount of the PIK Advances made to the undersigned on the date hereof and evidenced hereby or in the Loan Accounts. All capitalized terms used but not otherwise defined herein have the meanings given
to them in the Credit Agreement (as hereinafter defined) or in Annex A thereto. 

        This
PIK Note is issued pursuant to that certain Credit Agreement dated as of the date hereof between Borrower, Agents and Lenders (including all annexes, exhibits and schedules thereto
and as the same may from time to time be amended, restated, modified or supplemented, the "Credit Agreement"), and is entitled to the benefit and
security of the Credit Agreement, the Collateral Documents and all of the other Loan Documents referred to therein. Reference is made to the Credit Agreement for a statement of all of the terms and
conditions under which the PIK Advances evidenced hereby or in the Loan Accounts is made and is to be repaid. The principal balance of the PIK Loan evidenced hereby, the rates of interest applicable
thereto and the date and amount of each payment made on account of the principal thereof, shall be recorded by Administrative Agent in the Loan Accounts maintained in respect of each PIK Advance;
provided that the failure of Administrative Agent to make any such recordation shall not affect the obligations of Borrower to make a payment when due of any amount owing under the Credit Agreement or
this PIK Note. 

        The
principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement. Interest thereon shall be paid until such
principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement. The terms of the Credit Agreement are hereby
incorporated herein by reference. 

        If
any payment on this PIK Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. 

        Upon
and after the occurrence of any Event of Default, this PIK Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable. 

        Time
is of the essence of this PIK Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. 

        Except
as provided in the Credit Agreement, this PIK Note may not be assigned by Lender to any Person. 

1

 

        THIS PIK NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
PROVINCE.

	 	 	SR TELECOM INC.
	

 	
 	
By:	

 Name:

Title:    
	

 	
 	

By:	

 Name:

Title:    

2

  

 
 

Exhibit 9.1(a)    
    

 
 

ASSIGNMENT AGREEMENT    
    

        This Assignment Agreement (this "Agreement") is made as of  [    •    ]
 by and between  [    •    ] ("Assignor Lender") and  
[    •    ] ("Assignee Lender") and acknowledged
and consented to by [    •    ], as administrative agent
("Administrative Agent"). All capitalized terms used in this Agreement and not otherwise defined herein will have the respective meanings set forth in
the Credit Agreement as hereinafter defined. 

RECITALS:

        WHEREAS,
SR Telecom Inc., a Canadian corporation, BNY Trust Company of Canada, as Administrative Agent and Collateral Agent, and Lenders have entered into that certain Credit
Agreement dated as of May [    •    ], 2005 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") pursuant to which Lenders have agreed to make certain Loans to Borrower; 

        WHEREAS,
Assignor Lender desires to assign to Assignee Lender [all/a portion] of its interest in the Loans, the
Loan Documents and the Collateral and to delegate to Assignee Lender [all/a portion] of its Commitment and other duties with
respect to such Loans, Loan Documents and Collateral; 

        WHEREAS,
Assignee Lender desires to become a Lender under the Credit Agreement and to accept such assignment and delegation from Assignor Lender; and 

        WHEREAS,
Assignee Lender desires to appoint Administrative Agent and Collateral Agent to serve as agents for Assignee Lender under the Credit Agreement. 

        NOW,
THEREFORE, in consideration of the premises and the agreements, provisions, and covenants herein contained, Assignor Lender and Assignee Lender agree as follows: 

1.     ASSIGNMENT, DELEGATION, AND ACCEPTANCE  

        1.1    Assignment and Delegation.    Assignor Lender hereby transfers and assigns and
delegates to Assignee Lender, without recourse and without representations or warranties of any kind (except as set forth in Section 3.2),  [all/such percentage] of Assignor Lender's right,
title, and interest in, and its other duties and obligations under the Loans,
Loan Documents, Collateral and its Commitment as will result in Assignee Lender having as of the Effective Date (as hereinafter defined) Assignor Lender's right, title, interest, duties and
obligations set forth on Schedule 1.1 ("Assigned Interest"): 

        1.2    Acceptance by Assignee Lender.    By its execution of this Agreement, Assignee Lender irrevocably purchases,
assumes and accepts such assignment and delegation and agrees to be a Lender with respect to the delegated interest under the Loan Documents and to be bound by the terms and conditions thereof. By its
execution of this Agreement, Assignor Lender agrees, to the extent provided herein, to relinquish its rights and be released from its obligations and duties under the Loan Documents. 

        1.3    Effective Date.    Such assignment and delegation by Assignor Lender and acceptance by Assignee Lender will be
effective and Assignee Lender will become a Lender under the Loan Documents as of the date of this Agreement ("Effective Date") and upon payment of the
Assigned Amount and the Assignment Fee (as each term is defined below). Interest and Fees accrued prior to the Effective Date are for the account of Assignor Lender, and Interest and Fees accrued from
and after the Effective Date are for the account of Assignee Lender. 

2.     INITIAL PAYMENT AND DELIVERY OF NOTES  

        2.1    Payment of the Assigned Amount.    Assignee Lender will pay to Assignor Lender, in
immediately available funds, not later than 12:00 noon (Toronto time) on the Effective Date, an amount equal to that set forth in on Schedule 1.1 (the
"Assigned Amount"). 

        2.2    Payment of Assignment Fee.    Assignee Lender will pay to Administrative Agent, for its own account in
immediately available funds, not later than 12:00 noon (Toronto time) on the Effective Date, the assignment fee 

1

 

in
the amount of Cdn$1,000 (the "Assignment Fee") as required pursuant to Section 9.1(a) of the Credit Agreement. 

        2.3    Execution and Delivery of Notes.    Following payment of the Assigned Amount and the Assignment Fee, Assignor
Lender will deliver to Assignee Lender the Notes, as applicable, previously delivered to Assignor Lender duly endorsed in favour of Assignee Lender. 

3.     REPRESENTATIONS, WARRANTIES AND COVENANTS  

        3.1    Assignee Lender's Representations, Warranties and Covenants.    Assignee Lender hereby
represents, warrants, and covenants the following to Assignor Lender and Administrative Agent: 

        (a)   This
Agreement is a legal, valid, and binding agreement of Assignee Lender, enforceable according to its terms; 

        (b)   The
execution and performance by Assignee Lender of its duties and obligations under this Agreement and the Loan Documents will not require any registration with, notice
to, or consent or approval by any Governmental Authority; 

        (c)   Assignee
Lender has full power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill the obligations hereunder and to
consummate the transactions contemplated hereby; 

        (d)   Assignee
Lender is familiar with transactions of the kind and scope reflected in the Loan Documents and in this Agreement; 

        (e)   Assignee
Lender has made its own independent investigation and appraisal of the financial condition and affairs of Borrower and its Subsidiaries, has conducted its own
evaluation of the Loans, the Loan Documents and Borrower's and its Subsidiaries' creditworthiness, has made its decision to become a Lender to Borrower under the Credit Agreement independently and
without reliance upon Assignor Lender or Administrative Agent, and will continue to do so; 

        (f)    Assignee
Lender is entering into this Agreement in the ordinary course of its business, and is acquiring its interest hereunder for its own account and not with a view
to or for sale in connection with any subsequent distribution; 

        (g)   Assignee
Lender has no loans to, written or oral agreements with, or equity or other ownership interest in Borrower or its Subsidiaries; and 

        (h)   Assignee
Lender will not enter into any written or oral agreement with, or acquire any equity or other ownership interest in, Borrower without the prior written consent
of Administrative Agent (acting on the instructions of Requisite Lenders). 

        3.2    Assignor Lender's Representations, Warranties and Covenants.    Assignor Lender hereby represents, warrants and
covenants the following to Assignee Lender: 

        (a)   This
Agreement is a legal, valid and binding agreement of Assignor Lender, enforceable according to its terms; 

        (b)   The
execution and performance by Assignor Lender of its duties and obligations under this Agreement and the Loan Documents will not require any registration with, notice
to or consent or approval by any Governmental Authority; 

        (c)   Assignor
Lender has full power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill the obligations hereunder and to
consummate the transactions contemplated hereby; 

        (d)   Assignor
Lender is the legal and beneficial owner of the Assigned Interest, free and clear of any Lien; and 

        (e)   This
Assignment by Assignor Lender to Assignee Lender complies, in all material respects, with the terms of the Loan Documents. 

2

 

4.     LIMITATIONS OF LIABILITY  

        Neither Assignor Lender (except as provided in Section 3.2) nor Administrative Agent makes any representations or
warranties of any kind, nor assumes any responsibility or liability whatsoever, with regard to (a) the Loan Documents or any other document or instrument furnished pursuant thereto or the Loans
or other Obligations, (b) the creation, validity, genuineness, enforceability, sufficiency, value or collectibility of any of them, (c) the amount, value or existence of the Collateral,
(d) the perfection or priority of any Lien upon the Collateral, or (e) the financial condition of Borrower or other obligor or the performance or observance by Borrower or its
Subsidiaries of their obligations under any of the Loan Documents. Neither Assignor Lender nor Administrative Agent has or will have any duty, either initially or on a continuing basis, to make any
investigation, evaluation, appraisal of, or any responsibility or liability with respect to the accuracy or completeness of, any information provided to Assignee Lender which has been provided to
Assignor Lender or Administrative Agent by Borrower. Nothing in this Agreement or in the Loan Documents shall impose upon the Assignor Lender or Administrative Agent any fiduciary relationship in
respect of Assignee Lender. 

5.     NOTICES  

        Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given will be in writing and addressed to the
respective party as set forth below its signature hereunder, or to such other address as the party may designate in writing to the other. 

6.     AMENDMENTS AND WAIVERS  

        No amendment, modification, termination, or waiver of any provision of this Agreement will be effective without the written concurrence of Assignor Lender,
Administrative Agent and Assignee Lender. 

7.     SEVERABILITY  

        Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. In the event any
provision of this Agreement is or is held to be invalid, illegal, or unenforceable under applicable law, such provision will be ineffective only to the extent of such invalidity, illegality, or
unenforceability, without invalidating the remainder of such provision or the remaining provisions of the Agreement. In addition, in the event any provision of or obligation under this Agreement is or
is held to be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations in any other jurisdictions will not in any
way be affected or impaired thereby. 

8.     SECTION TITLES  

        Section and Subsection titles in this Agreement are included for convenience of reference only, do not constitute a part of this Agreement for any other purpose,
and have no substantive effect. 

9.     SUCCESSORS AND ASSIGNS  

        This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 

10.   APPLICABLE LAW  

        THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE PROVINCE OF ONTARIO. 

11.   COUNTERPARTS  

        This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of original or facsimile counterparts and by different parties
hereto in separate counterparts, each of which, when so executed and delivered, will be deemed an original and all of which shall together constitute one and the same instrument. 

[SIGNATURE PAGE FOLLOWS]

3

 

        IN
WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. 

	ASSIGNEE LENDER:	 	ASSIGNOR LENDER:
	[NAME]	 	[NAME]
	

By:	

 Name:  

Title:      	
 	

By:	

 Name: 

Title:      
	

By:	

 Name:  

Title:      	
 	

By:	

 Name:  

Title:      
	

Notice Address:	
 	

Notice Address:
	

	
 	

	

	
 	

	

	
 	

ACKNOWLEDGED
AND CONSENTED TO: 

[    •    ], as Administrative Agent 

	

By:	

 Name:  

Title:      	
 	

 
	

By:	

 Name:  

Title:      	
 	

 

4

 
 

SCHEDULE 1.1 TO ASSIGNMENT AGREEMENT    
    

        [NTD: To be completed as of Effective Date.]

QuickLinks

TABLE OF CONTENTS

ANNEXES

SCHEDULES

EXHIBITS

CREDIT AGREEMENT

SECTION 1 AMOUNT AND TERMS OF CREDIT FACILITIES

SECTION 2 CONDITIONS PRECEDENT

SECTION 3 REPRESENTATIONS AND WARRANTIES

SECTION 4 FINANCIAL STATEMENTS AND INFORMATION

SECTION 5 AFFIRMATIVE COVENANTS

SECTION 6 NEGATIVE COVENANTS

SECTION 7 TERM

SECTION 8 EVENTS OF DEFAULT: RIGHTS AND REMEDIES

SECTION 9 ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS

SECTION 10 SUCCESSORS AND ASSIGNS

SECTION 11 MISCELLANEOUS

ANNEX A (Recitals) to CREDIT AGREEMENT DEFINITIONS

ANNEX B ( Section 1.7 ) to CREDIT AGREEMENT CASH MANAGEMENT SYSTEMS

ANNEX C ( Section 2.1(1)) to CREDIT AGREEMENT CLOSING CHECKLIST

ANNEX D ( Section 4.1(1) ) to CREDIT AGREEMENT REPORTING — FINANCIAL STATEMENTS, NOTICES, OPERATING PLAN, BUDGET, REPORTS AND OTHER INFORMATION

ANNEX E ( Section 6.9 ) to CREDIT AGREEMENT FINANCIAL COVENANTS

ANNEX F (Section 11.10) to CREDIT AGREEMENT NOTICES

Schedule 1.3 — Use of Proceeds

Schedule 3.2 — Executive Offices; Locations of Collateral

Schedule 3.4(1) — Financial Statements

Schedule 3.4(2) — Original Budget

Schedule 3.6 — Ownership of Property; Liens

Schedule 3.7 — Labour Matters

Schedule 3.8 — Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness; Corporate Structure

Schedule 3.10 — Taxes

Schedule 3.11 — Canadian Pension and Benefit Plans; Subsidiary Pension Plans

Schedule 3.12 — Litigation

Schedule 3.14 — Intellectual Property

Schedule 3.16 — Environmental Matters

Schedule 3.17 — Insurance

Schedule 3.18 — Deposit and Disbursement Accounts

Schedule 3.19 — Intentionally Deleted

Schedule 3.21 — Agreements and Other Documents

Schedule 3.23 — Subordinated Debt

Schedule 5.1 — Maintenance of Existence and Conduct of Business

Schedule 5.2(1) — Contested Charges

Schedule 6.3 — Indebtedness; Unfunded Pension and Benefit Plan Obligations

Schedule 6.4 — Affiliate Transactions and Employee Loans

Schedule 6.7 — Liens

Exhibit 1.1(1)(a)

FORM OF NOTICE OF REVOLVING CREDIT ADVANCE

Exhibit 1.1(1)(b)

FORM OF REVOLVING NOTE

Exhibit 1.4(2)

FORM OF PIK NOTE

Exhibit 9.1(a)

ASSIGNMENT AGREEMENT

SCHEDULE 1.1 TO ASSIGNMENT AGREEMENT

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