EXHIBIT 99.2
LOAN AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (CANADA)
AS LENDER
AND
G.G.S. PLASTIC ENGINEERING INC. AS BORROWER
DATED: FEBRUARY 1, 2003
TABLE OF CONTENTS
Page
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SECTION 1 DEFINITIONS.............................................................................................1
1.1 "Accounts"............................................................................................1
1.2 "Adjusted Net Worth"..................................................................................2
1.3 "Availability Reserves"...............................................................................2
1.4 "BIA".................................................................................................2
1.5 "Blocked Accounts"....................................................................................2
1.6 "Business Day"........................................................................................2
1.7 "Canadian Dollar Amount"..............................................................................3
1.8 "Canadian Prime Rate".................................................................................3
1.9 "Canadian Prime Rate Loans"...........................................................................3
1.10 "Canadian Reference Bank".............................................................................3
1.11 "CDOR Rate"...........................................................................................3
1.12 "CCAA"................................................................................................3
1.13 "Collateral"..........................................................................................3
1.14 "Eligible Accounts"...................................................................................4
1.15 "Eligible Inventory"..................................................................................6
1.16 "Environmental Laws"..................................................................................7
1.17 "Equipment"...........................................................................................7
1.18 "Excess Availability".................................................................................7
1.19 "Event of Default"....................................................................................7
1.20 "Financing Agreements"................................................................................7
1.21 "GAAP"................................................................................................8
1.22 [INTENTIONALLY DELETED]...............................................................................8
1.23 "General Security Agreement"..........................................................................8
1.24 "Hazardous Materials".................................................................................8
1.25 [INTENTIONALLY DELETED]...............................................................................8
1.26 "Information Certificate".............................................................................8
1.27 "Intellectual Property Security Agreement"............................................................8
1.28 "Interest Rate".......................................................................................9
1.29 "Inventory"...........................................................................................9
1.30 "Letter of Credit Accommodations".....................................................................9
1.31 "Loans"...............................................................................................9
1.32 "Maximum Credit"......................................................................................9
1.33 "Net Amount of Eligible Accounts".....................................................................9
1.34 "Net Orderly Liquidation Value"......................................................................10
1.35 "Obligations"........................................................................................10
1.36 "Obligor"............................................................................................10
1.37 "Payment Account"....................................................................................10
1.38 "Pension Plans"......................................................................................10
1.39 "Person" or "person".................................................................................10
1.40 "PPSA"...............................................................................................11
1.41 "Priority Payables Reserve"..........................................................................11
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1.42 "Records"................................................................................................11
1.43 "Revolving Loans"........................................................................................11
1.44 "Spot Rate"..............................................................................................11
1.45 [INTENTIONALLY DELETED]..................................................................................11
1.46 "US Prime Rate"..........................................................................................12
1.47 "US Prime Rate Loans"....................................................................................12
1.48 "Value"..................................................................................................12
1.49 [INTENTIONALLY DELETED]..................................................................................12
SECTION 2 CREDIT FACILITIES......................................................................................12
2.1 Revolving Loans..........................................................................................12
2.2 Letter of Credit Accommodations..........................................................................13
2.3 [INTENTIONALLY DELETED]..................................................................................16
2.4 Availability Reserves....................................................................................16
SECTION 3 INTEREST AND FEES......................................................................................16
3.1 Interest.................................................................................................16
3.2 Closing Fee..............................................................................................17
3.3 Commitment Fee...........................................................................................17
3.4 Servicing Fee............................................................................................17
3.5 Unused Line Fee..........................................................................................18
3.6 Payments.................................................................................................18
SECTION 4 CONDITIONS PRECEDENT...................................................................................18
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations................................18
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations....................................20
SECTION 5 INTENTIONALLY DELETED..................................................................................20
SECTION 6 COLLECTION AND ADMINISTRATION..........................................................................20
6.1 Borrower's Loan Account..................................................................................20
6.2 Statements...............................................................................................21
6.3 Collection of Accounts...................................................................................21
6.4 Payments.................................................................................................22
6.5 Authorization to Make Loans..............................................................................23
6.6 Use of Proceeds..........................................................................................23
SECTION 7 COLLATERAL. REPORTING AND COVENANTS....................................................................23
7.1 Collateral Reporting.....................................................................................23
7.2 Accounts Covenants.......................................................................................24
7.3 Inventory Covenants......................................................................................26
7.4 Equipment Covenants......................................................................................26
7.5 Power of Attorney........................................................................................27
7.6 Right to Cure............................................................................................27
7.7 Access to Premises.......................................................................................28
SECTION 8 REPRESENTATIONS AND WARRANTIES.........................................................................28
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8.1 Corporate Existence, Power and Authority; Subsidiaries...................................................28
8.2 Financial Statements; No Material Adverse Change.........................................................28
8.3 Chief Executive Office; Collateral Locations.............................................................29
8.4 Priority of Liens; Title to Properties...................................................................29
8.5 Tax Returns..............................................................................................29
8.6 Litigation...............................................................................................29
8.7 Compliance with Other Agreements and Applicable Laws.....................................................30
8.8 Bank Accounts............................................................................................30
8.9 Accuracy and Completeness of Information.................................................................30
8.10 Status of Pension Plans..................................................................................30
8.11 Environmental Compliance.................................................................................31
8.12 Survival of Warranties; Cumulative.......................................................................32
SECTION 9 AFFIRMATIVE AND NEGATIVE COVENANTS.....................................................................32
9.1 Maintenance of Existence.................................................................................32
9.2 New Collateral Locations.................................................................................32
9.3 Compliance with Laws, Regulations, Etc...................................................................32
9.4 Payment of Taxes and Claims..............................................................................34
9.5 Insurance................................................................................................34
9.6 Financial Statements and Other Information...............................................................35
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc............................................36
9.8 Encumbrances.............................................................................................36
9.9 Indebtedness.............................................................................................37
9.10 Loans, Investments, Guarantees, Etc......................................................................38
9.11 Dividends and Redemptions................................................................................38
9.12 Transactions with Affiliates.............................................................................38
9.13 Capital Expenditures.....................................................................................38
9.14 Adjusted Net Worth.......................................................................................39
9.15 Intellectual Property....................................................................................39
9.16 Additional Bank Accounts.................................................................................39
9.17 Applications under the Companies' Creditors Arrangement Act..............................................39
9.18 Operation of Pension Plans...............................................................................39
9.19 Costs and Expenses.......................................................................................40
9.20 Further Assurances.......................................................................................40
SECTION 10 EVENTS OF DEFAULT AND REMEDIES........................................................................41
10.1 Events of Default........................................................................................41
10.2 Remedies.................................................................................................43
SECTION 11 JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW..........................................45
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver....................................45
11.2 Waiver of Notices........................................................................................47
11.3 Amendments and Waivers...................................................................................47
11.4 Waiver of Counterclaims..................................................................................48
11.5 Indemnification..........................................................................................48
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SECTION 12 TERM OF AGREEMENT; MISCELLANEOUS......................................................................48
12.1 Term.....................................................................................................48
12.2 Notices..................................................................................................50
12.3 Partial Invalidity.......................................................................................50
12.4 Successors...............................................................................................50
12.5 Entire Agreement.........................................................................................50
12.6 Headings.................................................................................................51
12.7 Judgment Currency........................................................................................51
Exhibit A Information Certificate
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
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LOAN AGREEMENT
This Loan Agreement dated as of February 1, 2003 is entered into by and
between Congress Financial Corporation (Canada), an Ontario corporation
("Lender") and G.G.S. Plastic Engineering Inc., an Ontario corporation (the
"Borrower").
WITNESSETH:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the panties hereto
agree as follows:
SECTION 1 DEFINITIONS
All terms used herein which are defined in the Personal Property Security Act
(Ontario) shall have the meanings given therein unless otherwise defined in this
Agreement. All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural unless the context otherwise
requires. All references to Borrower and Lender pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof', "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. The word
"including" when used in this Agreement shall mean "including, without
limitation". References herein to any statute or any provision thereof include
such statute or provision as amended, revised, re-enacted, and/or consolidated
from time to time and any successor statute thereto. An Event of Default shall
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 11.3 or is cured in a manner satisfactory to Lender, if
such Event of Default is capable of being cured as determined by Lender. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP.
Canadian Dollars and the sign "$" mean lawful money of Canada. "US Dollars" and
the sign "US$" mean lawful money of the United States of America. For purposes
of this Agreement, the following terms shall have the respective meanings given
to them below:
1.1 "Accounts"
"Accounts" shall mean all present and future rights of Borrower to payment for
goods sold or leased or for services rendered, which are not evidenced by
instruments or chattel paper, and whether or not earned by performance.
1.2 "Adjusted Net Worth"
"Adjusted Net Worth" shall mean as to any Person, at any time, in accordance
with GAAP (except as otherwise specifically set forth below), on a consolidated
basis for such Person and its subsidiaries (if any), the Canadian Dollar Amount
equal to: (a) the difference between: (i) the aggregate net book value of all
tangible assets (excluding non-tangible assets including but not limited to
deferred costs, prepaid expenses, investment tax credit receivables, and
goodwill) of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.3 "Availability Reserves"
"Availability Reserves" shall mean, as of any date of determination, such
amounts as Lender may from time to time establish and revise reducing the amount
of Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender, do or may affect either (i) the Collateral or any other property which
is security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Lender's belief that any collateral report
or financial information furnished by or on behalf of Borrower or any Obligor to
Lender is or may have been incomplete, inaccurate or misleading in any material
respect or (c) to reflect outstanding Letter of Credit Accommodations as
provided in Section 2.2 hereof or (d) to reflect Lender's estimate of the amount
of any Priority Payables Reserve, or (e) in respect of any state of facts which
Lender determines constitutes an Event of Default or may, with notice or passage
of time or both, constitute an Event of Default.
1.4 "BIA"
"BIA" shall mean the Bankruptcy and Insolvency Act (Canada).
1.5 "Blocked Accounts"
"Blocked Accounts" shall have the meaning set forth in Section 6.3 hereof.
1.6 "Business Day"
"Business Day" shall mean a day (other than a Saturday, Sunday or statutory
holiday in Ontario, Illinois or New York) on which Lender's Toronto office, the
Canadian Reference Bank's main Toronto office and banks in Chicago and New York
City are open for business in the normal course.
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1.7 "Canadian Dollar Amount"
"Canadian Dollar Amount" shall mean, at any time, (a) as to any amount
denominated in Canadian Dollars, the amount thereof at such time, and (b) as to
any amount denominated in any other currency, the equivalent amount in Canadian
Dollars as determined by Lender at such time on the basis of the Spot Rate for
the purchase of Canadian Dollars with such currency. All reference to Dollar
Amounts in this Agreement shall mean Canadian Dollars unless otherwise
indicated.
1.8 "Canadian Prime Rate"
"Canadian Prime Rate" shall mean, at any time, the greater of (i) the rate from
time to time publicly announced by the Canadian Reference Bank as its prime rate
in effect for determining interest rates on Canadian Dollar denominated
commercial loans in Canada, and (ii) the annual rate of interest equal to the
sum of (A) the CDOR Rate at such time and (B) one (1 %) percent per annum.
1.9 "Canadian Prime Rate Loans"
"Canadian Prime Rate Loans" shall mean any Loans or portion thereof denominated
in Canadian Dollars and on which interest is payable based on the Canadian Prime
Rate in accordance with the terms hereof.
1.10 "Canadian Reference Bank"
"Canadian Reference Bank" shall mean Bank of Montreal, or its successors and
assigns, or such other bank as Lender may from time to time designate.
1.11 "CDOR Rate"
"ODOR Rate" shall mean, on any day, the annual rate of interest which is the
rate based on an average 30 day rate applicable to Canadian Dollar bankers'
acceptances appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swap Dealer Association, Inc, definitions, as modified and amended
from time to time) as of 10:00 a.m. on such day; provided that if such rate does
not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR Rate
on any day shall be the 30 day rate applicable in Canadian Dollar bankers'
acceptances quoted by any major Schedule I chartered bank selected by Lender as
of 10:00 a.m. on such day.
1.12 "CCAA"
"CCAA" shall mean the Companies' Creditors Arrangement Act (Canada).
1.13 "Collateral"
"Collateral" shall mean, collectively, Collateral as such term is defined in the
General Security Agreement and, Collateral as such term is defined in the
Intellectual Property Security Agreement.
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1.14 "Eligible Accounts"
"Eligible Accounts" shall mean Accounts created by Borrower which are and
continue to be acceptable to Lender based on the criteria set forth below. In
general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery of
goods by Borrower or rendition of services by Borrower in the ordinary
course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid more than ninety (90) days after the date
of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed sale,
sale and return, sale on approval, or other terms under which payment
by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to such
Accounts is located in Canada or the United States of America, or, the
Account is payable in Canadian Dollars or US Dollars and, at Lender's
option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in Canada in the currency in
which the Account is denominated, sufficient to cover such Account, in
form and substance satisfactory to Lender and, if required by Lender,
the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of
the proceeds of such letter of credit to Lender, or (ii) such Account
is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to
such lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices,
if Lender shall have received an agreement in writing from the account
debtor, in form and substance satisfactory to Lender, confirming the
unconditional obligation of the account debtor to take the goods
related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff
against such Accounts (but the portion of the Accounts of such account
debtor in excess
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of the amount at any time and from time to time owed by Borrower to
such account debtor or claimed owed by such account debtor may be
deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
(i) neither the account debtor nor any officer or employee of the account
debtor with respect to such Accounts is an officer, employee or agent
of or affiliated with Borrower directly or indirectly by virtue of
family membership, ownership, control, management or otherwise;
(j) such Accounts are subject to the first priority, valid and perfected
security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens
except those permitted in this Agreement;
(k) the account debtors with respect to such Accounts are not any foreign
government, the federal government of Canada, any Province, political
subdivision, department, agency or instrumentality thereof unless,
upon Lender's request, the Financial Administration Act (Canada) or
any similar provincial or local law, if applicable, has been complied
with in a manner satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's
financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than:
(i) forty (40%) percent in the case of Magna Seatings Systems Inc.
and Magna Atoma Closure & Electronic Systems (on a combined
basis);
(ii) forty (40%) percent in the case of TRW Canada Limited;
(iii) forty (40%) percent in the case of Siemens VDO Automotive Inc.;
or
(iv) fifteen (15%) percent in any other case of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original
invoice for
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them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account
debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may still be deemed
Eligible Accounts);
(p) such Accounts are owed by account debtors deemed creditworthy at all
times by Lender, as determined by Lender; and such Accounts do not
arise from or relate to payments due in respect of tooling or related
sales except to the extent that such Accounts represent final ▇▇▇▇▇▇▇▇
for tooling which have been signed off for acceptance by the customer
or have been inspected and approved by the customer, and further
provided that the maximum eligible amount of such Accounts in respect
of tooling or related sales shall be limited to the sum of
$250,000.00.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender. Any Accounts which are not Eligible Accounts shall
nevertheless be part of the Collateral.
1.15 "Eligible Inventory"
"Eligible Inventory" shall mean Inventory consisting of finished goods held for
resale in the ordinary course of the business of Borrower and raw materials for
such finished goods which are acceptable to Lender based on the criteria set
forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises which are not owned
and controlled by Borrower, except if Lender shall have received an agreement in
writing from the person in possession of such Inventory and/or the owner or
operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests, hypothecs and claims by such person against the
Inventory and permitting Lender access to, and the right to remain on, the
premises so as to exercise Lender's rights and remedies and otherwise deal with
the Collateral; (g) Inventory subject to a security interest, hypothec or lien
in favour of any person other than Lender except those permitted in this
Agreement; (h) ▇▇▇▇ and hold goods; (i) unserviceable, obsolete or slow moving
Inventory; 0) Inventory which is not subject to the first priority, valid and
perfected security interest, lien or hypothec of Lender; (k) returned, damaged
and/or defective Inventory; (I) Inventory purchased or sold on consignment.
General criteria for Eligible Inventory may be established and revised from time
to time by Lender; and (m) Inventory which is not subject to a written Buy Back
Agreement from the proposed customer for the finished goods to be developed from
such inventory. Any Inventory which is not Eligible Inventory shall nevertheless
be part of the Collateral. For the purposes of this paragraph, a "Buy Back
Agreement" shall be an agreement whereby Borrower's customer has agreed to
purchase Inventory on the basis that it will guarantee the purchase from the
Borrower, at cost, of the raw materials, work in process and finished goods
related to such
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Inventory in the event that, for any reason whatsoever, the sale of the finished
goods to be created from such raw material and work in process does not occur.
1.16 "Environmental Laws"
"Environmental Laws" shall mean with respect to any Person all federal (United
States of America and Canada), state, provincial, district, local, municipal and
foreign laws, statutes, rules, regulations, ordinances, orders, directives,
permits, licenses and consent decrees relating to health, safety, hazardous,
dangerous or toxic substances, waste or material, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to such Person
and/or its business and facilities (whether or not owned by it), including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes: into the environment(including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes.
1.17 "Equipment"
"Equipment" shall mean all of Borrower's now owned and hereafter acquired
equipment, machinery, computers and computer hardware and software (whether
owned or licensed), vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
1.18 "Excess Availability"
"Excess Availability" shall mean the Canadian Dollar Amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, as determined by Lender, and subject to the
sublimits and Availability Reserves from time to time established by Lender
hereunder, and (ii) the Maximum Credit, minus (b) the sum of: (i) the amount of
all then outstanding and unpaid Obligations, plus (ii) the aggregate amount of
all due but unpaid tax obligations and past due trade payables of Borrower as of
such time.
1.19 "Event of Default"
"Event of Default" shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.
1.20 "Financing Agreements"
"Financing Agreements" shall mean, collectively, this Agreement, the General
Security Agreement, the Intellectual Property Security Agreement and all notes,
guarantees, security agreements and other agreements, documents and instruments
now or at any time hereafter executed and/or delivered by Borrower or any
Obligor in connection with this Agreement, as the
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same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.21 "GAAP"
"GAAP" shall mean generally accepted accounting principles in Canada as in
effect from time to time as set forth in the opinions and pronouncements of the
relevant Canadian public and private accounting boards and institutes which are
applicable to the circumstances as of the date of determination consistently
applied, except that, for the purposes of Section 9.14 hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.22 [INTENTIONALLY DELETED]
1.23 "General Security Agreement"
"General Security Agreement" shall mean the general security agreement dated on
or about the date hereof given by Borrower in favour of Lender in respect of the
Obligations.
1.24 "Hazardous Materials"
"Hazardous Materials" shall mean any hazardous, toxic or dangerous substances,
materials and wastes, including, without limitation, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any
other kind and/or type of pollutants or contaminants (including, without
limitation, materials which include hazardous constituents), sewage, sludge,
industrial slag, solvents and/or any other similar substances, materials, or
wastes and including any other substances, materials or wastes that are or
become regulated under any Environmental Law (including, without limitation any
that are or become classified as hazardous or toxic under any Environmental
Law).
1.25 [INTENTIONALLY DELETED]
1.26 "Information Certificate"
"Information Certificate" shall mean the Information Certificate of Borrower
constituting Exhibit A hereto containing material information with respect to
Borrower, its business and assets provided by or on behalf of Borrower to Lender
in connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.27 "Intellectual Property Security Agreement"
"Intellectual Property Security Agreement" shall mean the intellectual property
security agreement dated the date hereof given by Borrower in favour of Lender
in respect of the Obligations.
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1.28 "Interest Rate"
"Interest Rate" shall mean, as to Canadian Prime Rate Loans, at the rate of two
percent (2%) per annum in excess of the Canadian Prime Rate and, as to US Prime
Rate Loans, at the rate of two percent (2%) per annum in excess of the US Prime
Rate; provided that, the Interest Rate shall mean the rate of five percent (5%)
per annum in excess of the Canadian Prime Rate as to Canadian Prime Rate Loans
and the rate of five percent (5%) per annum in excess of the US Prime Rate as to
US Prime Loans, at Lender's option, without notice, (a) on non-contingent
Obligations (i) for the period on and after the date of termination or
non-renewal hereof until such time as Lender has received full and final payment
of all such Obligations and (ii) for the period from and after the date of the
occurrence of an Event of Default so long as such Event of Default is continuing
as determined by Lender (notwithstanding entry of any judgment against any
Borrower) and (b) on the Revolving Loans at any time outstanding in excess of
the amounts available to Borrowers under Section 2 hereof (whether or not such
excess(es) arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default).
1.29 "Inventory"
"Inventory" shall mean all of Borrower's now owned and hereafter existing or
acquired raw materials, work in process, finished goods and all other inventory
of whatsoever kind or nature, wherever located.
1.30 "Letter of Credit Accommodations"
"Letter of Credit Accommodations" shall mean the letters of credit, merchandise
purchase or other guarantees denominated in Canadian Dollars or US Dollars which
are from time to time either (a) issued or opened by Lender for the account of
Borrower or any Obligor or (b) with respect to which Lender has agreed to
indemnify the issuer or guaranteed to the issuer the performance by Borrower of
its obligations to such issuer.
1.31 "Loans"
"Loans" shall mean the Revolving Loans.
1.32 "Maximum Credit"
"Maximum Credit" shall mean the amount of Four Million Dollars ($4,000,000).
1.33 "Net Amount of Eligible Accounts"
"Net Amount of Eligible Accounts" shall mean the gross Canadian Dollar Amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any .time issued, owing, granted, outstanding, available or claimed with
respect to such Eligible Accounts; provided that the amounts deducted under
clause (a) shall not duplicate items for which Availability Reserves have been
established by Lender.
9
1.34 "Net Orderly Liquidation Value"
"Net Orderly Liquidation Value" shall mean with respect to any real or personal
property at any time, the Canadian dollar amount of the "orderly liquidation
value" of such property determined pursuant to a current appraisal net of (a)
liquidation expenses as estimated by the Lender in its sole discretion and (b)
the amount of all liens against such property ranking or capable of ranking
senior to or pari passu with the financing arrangements against such property
that secure the Obligations.
1.35 "Obligations"
"Obligations" shall mean any and all Revolving Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any proceeding with
respect to Borrower or any Obligor under the BIA, the CCAA, or any similar
statute in any jurisdiction (including the payment of interest and other amounts
which would accrue and become due but for the commencement of such proceeding,
whether or not such amounts are allowed or allowable in whole or in part in such
proceeding),whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.
1.36 "Obligor"
"Obligor" shall mean any guarantor, endorser, acceptor, surety or other person
liable on or with respect to the Obligations or who is the owner of any property
which is security for the Obligations, other than Borrower.
1.37 "Payment Account"
"Payment Account" shall have the meaning set forth in Section 6.3 hereof.
1.38 "Pension Plans"
"Pension Plan" means each of the pension plans, if any, registered in accordance
with the Income Tax Act (Canada) which Borrower sponsors or administers or into
which Borrower makes contributions.
1.39 "Person" or "person"
"Person" or "person" shall mean any individual, sole proprietorship,
partnership, limited partnership, corporation, limited liability company,
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
or political subdivision thereof.
10
1.40 "PPSA"
"PPSA" shall mean the Persona! Property Security Act (Ontario).
1.41 "Priority Payables Reserve"
"Priority Payables Reserve" shall mean, at any time, the full amount of the
liabilities at such time which have a trust imposed to provide for payment or
security interest, lien or charge ranking or capable of ranking senior to or
pari passu with security interests, liens or charges securing the Obligations on
any of the Collateral under federal, provincial, state, county, municipal, or
local law including, but not limited, to claims for unremitted and accelerated
rents, taxes, wages, workers' compensation obligations, government royalties or
pension fund obligations, together with the aggregate value, determined in
accordance with GAAP, of all Eligible Inventory which Lender, considers may be
or may become subject to a right of a supplier to recover possession thereof
under any federal or provincial law, where such supplier's right may have
priority over the security interests, liens or charges securing the Obligations
including, without limitation, Eligible Inventory subject to a right of a
supplier to repossess goods pursuant to Section 81.1 of the BIA.
1.42 "Records"
"Records" shall mean all of Borrower's present and future books of account of
every kind or nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.43 "Revolving Loans"
"Revolving Loans" shall mean the loans now or hereafter made by Lender to or for
the benefit of Borrower on a revolving basis (involving advances, repayments and
readvances) as set forth in Section 2.1 hereof.
1.44 "Spot Rate"
"Spot Rate" shall mean, with respect to a currency, the rate quoted by the
Canadian Reference Bank as the spot rate for the purchase by the Canadian
Reference Bank of such currency with another currency at approximately 10:00
a.m. (Toronto time) on the date two (2) Business Days prior to the date as of
which the foreign exchange computation is made.
1.45 [INTENTIONALLY DELETED]
11
1.46 "US Prime Rate"
"US Prime Rate" shall mean the rate announced by Wachovia Bank, National
Association, or its successors, from time to time as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.47 "US Prime Rate Loans"
"US Prime Rate Loans" shall mean any Loan or portion thereof denominated in US
Dollars and on which interest is payable based on the US Prime Rate in
accordance with the terms hereof.
1.48 "Value"
"Value" shall mean the Canadian Dollar Amount, as determined by Lender, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.49 [INTENTIONALLY DELETED]
SECTION 2 CREDIT FACILITIES
2.1 Revolving Loans
(a) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans by way of Canadian Prime Rate Loans and
US Prime Rate Loans to Borrower from time to time in amounts requested
by Borrower up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of Eligible Accounts,
plus
(ii) the least of: (A) the sum of sixty-five (65%) percent of the
Value of Eligible Inventory consisting of finished goods plus
fifty (50%) percent of the Value of Eligible Inventory consisting
of raw materials for such finished goods, or (B) eighty-five
(85%) percent of the net Orderly Liquidation Value of Eligible
Inventory, or (C) the sum of $1,500,000,
(iii) less any Availability Reserves.
(b) Lender may, in its discretion, from time to time (i) reduce the
lending formula with respect to Eligible Accounts to the extent that
Lender determines that: (A) the dilution with respect to the Accounts
for any period (based on the ratio of (1) the aggregate amount of
reductions in Accounts other than as a result of payments in cash to
(2) the aggregate amount of total sales) exceeds five (5%) percent or
has increased in any material respect or may be anticipated to
increase in any material respect above historical levels, or (B) the
general creditworthiness of account
12
debtors has declined or (ii) reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Lender determines
that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation
value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has
deteriorated. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks which
are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate Canadian Dollar Amount of
the Loans and the Letter of Credit Accommodations outstanding at any
time shall not exceed the Maximum Credit. In the event that the
outstanding Canadian Dollar Amount of any component of the Loans, or
the aggregate Canadian Dollar Amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under
the lending formulas, the sublimits for Letter of Credit
Accommodations set forth in Section 2.2(c) or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any
rights of Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Lender, which may be made at any time
or from time to time, immediately repay to Lender the entire amount of
any such excess(es) for which payment is demanded.
(d) For purposes only of applying the sublimit on Revolving Loans based on
Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may treat
the then undrawn amounts of outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory as
Revolving Loans to the extent Lender is in effect basing the issuance
of the Letter of Credit Accommodations on the Value of the Eligible
Inventory being purchased with such Letter of Credit Accommodations.
In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the
outstanding Revolving Loans and Availability Reserves shall be
attributed first to any components of the lending formulas in Section
2.1 (a) that are not subject to such sublimit, before being attributed
to the components of the lending formulas subject to such sublimit.
2.2 Letter of Credit Accommodations
(a) Borrower acknowledges and agrees that no Letter of Credit
Accommodations have been made available by the Lender pursuant to this
Loan Agreement, and that any reference to Letter of Credit
Accommodations herein as is inserted for the purpose of specifying the
impact of Letter of Credit Accommodations upon this Loan Agreement in
the event of that Lender shall at any time in the future agree, in
writing, to the provision of such a Letter of Credit Accommodations.
13
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to
three (3%) percent per annum on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately preceding month
(or part thereof), payable in arrears as of the first day of each
succeeding month, except that Borrower shall pay to Lender such letter
of credit fee, at Lender's option, without notice, at a rate equal to
six (6%) percent per annum on such daily outstanding balance for: (i)
the period from and after the date of termination or non-renewal
hereof until Lender has received full and final payment of all
Obligations (notwithstanding entry of a judgment against Borrower) and
(ii) the period from and after the date of the occurrence of an Event
of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on
the basis of a three hundred sixty five (365) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on the
date of the proposed issuance of any Letter of Credit Accommodations,
the Revolving Loans available to Borrower (subject to the Maximum
Credit and any Availability Reserves) are equal to or greater than:
(i) if the proposed Letter of Credit Accommodation is for the purpose
of purchasing Eligible Inventory and all negotiable documents of title
with respect to such Eligible Inventory have been consigned to the
issuer of the Letter of Credit Accommodation, the sum of (A) the
percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the
Value of such Eligible Inventory, plus (B) freight, taxes, duty and
other amounts which Lender estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of Borrower's
locations for Eligible Inventory within Canada and (ii) if the
proposed Letter of Credit Accommodation is for any other purpose, an
amount equal to one hundred (100%) percent of the face amount thereof
and all other commitments and obligations made or incurred by Lender
with respect thereto. Effective on the issuance of each Letter of
Credit Accommodation, an Availability Reserve shall be established in
the applicable amount set forth in Section 2.2(c) (i) or Section
2.2(c)(ii).
(d) Except in Lender's discretion, (i) the Canadian Dollar Amount of all
outstanding Letter of Credit Accommodations and all other commitments
and obligations made or incurred by Lender in connection therewith,
shall not at any time exceed $O. At any time an Event of Default
exists or has occurred and is continuing, upon Lender's request,
Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter
of Credit Accommodations or furnish cash cot lateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving
Loans otherwise available to Borrower shall not
14
be reduced as provided in Section 2.2(c) to the extent of such cash
collateral.
(e) Borrower shall indemnify and hold Lender harmless from and against any
and all losses, claims, damages, liabilities, costs and expenses which
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating
thereto, including, but not limited to, any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer
or correspondent with respect to any Letter of Credit Accommodation.
Borrower assumes all risks with respect to the acts or omissions of
the drawer under or beneficiary of any Letter of Credit Accommodation
and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay,
all foreign, federal, provincial and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations
or any documents, drafts or acceptances thereunder. Borrower hereby
releases and holds Lender harmless from and against any acts, waivers,
errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation. The provisions of this Section 2.2(e)
shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f) Nothing contained herein shall b e deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any
Letter of Credit Accommodation provided by an issuer other than Lender
unless Lender has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect
to such Letter of Credit Accommodation. Borrower shall be bound by any
interpretation made by Lender, or any other issuer or correspondent
under or in connection with any Letter of Credit Accommodation or any
documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower.
Lender shall have the sole and exclusive right and authority to, and
Borrower shall not: (i) at any time an Event of Default exists or has
occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to
acceptance or rejection of any documents or goods or (C) execute any
and all applications for steamship or airway guaranties, indemnities
or delivery orders, and (ii) at all times, (A) grant any extensions of
the maturity of, time of payment for, or time of presentation of, any
drafts, acceptances, or documents, and (B) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of
Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take
such actions either in its own name or in Borrower's name.
15
(g) Any rights, remedies, duties or obligations granted or undertaken by
Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favour of
any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by
Borrower to Lender. Any duties or obligations undertaken by Lender to
any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement by Lender in favour of
any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrower to
Lender and to apply in all respects to Borrower.
2.3 [INTENTIONALLY DELETED]
2.4 Availability Reserves
All Revolving Loans otherwise available to Borrower pursuant to the lending
formulas and subject to the Maximum Credit and other applicable limits hereunder
shall be subject to Lender's continuing right to establish and revise
Availability Reserves.
SECTION 3 INTEREST AND FEES
3.1 Interest
(a) Borrower shall pay to Lender interest on the outstanding principal
amount of the non-contingent Obligations at the applicable Interest
Rate.
(b) Interest shall be payable by Borrower to Lender monthly in arrears not
later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty five (365) day year
in the case of Canadian Prime Rate Loans and a three hundred and sixty
(360) day year in the case of US Prime Rate Loans, as applicable and
actual days elapsed. The interest rate shall increase or decrease by
an amount equal to each increase or decrease in the Canadian Prime
Rate or US Prime Rate, as applicable, effective on the first day of
the month after any change in such Prime Rate is announced. The
increase or decrease shall be based on the Canadian Prime Rate or US
Prime Rate, as applicable, in effect on the last day of the month in
which any such change occurs. All interest accruing hereunder on and
after an Event of Default or termination or non-renewal hereof shall
be payable on demand. In no event shall charges constituting interest
payable by Borrower to Lender exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any part or
provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform
thereto.
(c) For purposes of disclosure under the Interest Act (Canada), where
interest is calculated pursuant hereto at a rate based upon a 365 day
year (the "First Rate"), it is hereby agreed that the rate or
percentage of interest on a yearly
16
basis is equivalent to such First Rate multiplied by the actual number
of days in the year divided by 365.
(d) Notwithstanding the provisions of this Section 3 or any other
provision of this Agreement, in no event shall the aggregate
"interest" (as that term is defined in Section 347 of the Criminal
Code (Canada)) exceed the effective annual rate of interest on the
"credit advanced" (as defined therein) lawfully permitted under
Section 347 of the Criminal Code (Canada). The effective annual rate
of interest shall be determined in accordance with generally accepted
actuarial practices and principles over the term of the applicable
Loan, and in the event of a dispute, a certificate of a Fellow of the
Canadian Institute of Actuaries appointed by Lender will be conclusive
for the purposes of such determination.
(e) A certificate of an authorized signing officer of Lender as to each
amount and/or each rate of interest payable hereunder from time to
time shall be conclusive evidence of such amount and of such rate,
absent manifest error.
(f) For greater certainty, whenever any amount is payable under this
Agreement or any Financing Agreement by Borrower as interest or as a
fee which requires the calculation of an amount using a percentage per
annum, each party to this Agreement acknowledges and agrees that such
amount shall be calculated as of the date payment is due without
application of the "deemed reinvestment principle" or the "effective
yield method". As an example, when interest is calculated and payable
monthly, the rate of interest payable per month is 1/12 of the stated
rate of interest per annum.
3.2 Closing Fee
Borrower shall pay to Lender as a closing fee the amount of $50,000, which shall
be fully earned as of and payable on the date hereof.
3.3 Commitment Fee
Borrower shall pay to Lender annually a commitment fee in an amount equal to
$15,000 while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding, which fee shall be fully earned as of and
payable in advance on each anniversary of the date hereof.
3.4 Servicing Fee
Borrower shall pay to Lender monthly a servicing fee in an amount equal to
$1,500 in respect of Lender's services for each month (or part thereof) while
this Agreement remains in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be fully earned as of and payable
in advance on the date hereof and on the first day of each month hereafter.
17
3.5 Unused Line Fee
Borrower shall pay to Lender monthly an unused line fee equal at a rate equal to
one quarter of one (0.25%) percent per annum calculated upon the amount by which
$4,000,000 exceeds the Canadian Dollar Amount equal to average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.6 Payments
Unless otherwise specified by Lender, all interest, fees and other payments by
Borrower hereunder shall be in the currency in which such Obligations are
denominated.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations
Each of the following is a condition precedent to Lender making the initial
Loans and providing the initial Letter of Credit Accommodations hereunder:
(a) Lender shall have received evidence (including, without limitation,
any subordinations or releases of any other liens or security
interests in the Collateral required by Lender), in form and substance
satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any
other property which is intended to be security for the Obligations or
the liability of any Obligor in respect thereof, subject only to the
security interests and liens permitted herein or in the other
Financing Agreements;
(b) all requisite corporate action and proceedings in connection with this
Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings
which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the assets, business
or prospects of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would
impair the ability of Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;0)
(d) Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require
to
18
determine the amount of Revolving Loans available to Borrower, the
results of which shall be satisfactory to Lender, not more than three
(3) business days prior to the date hereof;
(e) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements
from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and
liens upon the Collateral or to effectuate the provisions or purposes
of this Agreement and the other Financing Agreements, including
acknowledgements by lessors, mortgagees and warehousemen of Lender's
security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the
Collateral and agreements permitting Lender access to, and the right
to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and
certificates of insurance policies and/or endorsements naming Lender
as first loss payee and additional insured;
(g) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower and the Obligors
with respect to the Financing Agreements and such other matters as
Lender may request;
(h) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender; and
(i) the Excess Availability as determined by Lender shall be at least
$500,000 after giving effect to the initial Revolving Loans and Letter
of Credit Accommodations made or to be made hereunder;
(j) Lender shall have received, in form and substance satisfactory to the
Lender, a personal guarantee from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ limited to the sum
of $1,000,000 plus interest and costs and a personal guarantee from
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ limited to the sum of $1,000,000 plus interest and
costs, together with such certificates of independent legal advice as
Lender and its counsel may require;
(k) Lender shall have received in form and substance satisfactory to the
Lender, an assignment of Keyman Life Insurance upon the lives of all
guarantors in a form and substance satisfactory to the Lender, in an
amount at least matching the personal guarantee amounts of the
respective individual;
19
(l) Lender shall have received, in form and substance satisfactory to the
Lender, a subordination of all loans from affiliates, directors and
shareholders, which subordination shall include an agreement that
repayment of the loans shall be based upon the profitability of the
Borrower and upon Lender's satisfaction of the financial condition of
the Borrower, and shall be subject to Lender's prior written approval;
(m) Borrower acknowledges that Lender will make no advances against
Eligible Inventory unless and until Borrower has installed a system of
perpetual inventory in a format and manner acceptable to Lender;
(n) Lender shall have received an inter-creditor agreement with any term
facility provider to the Borrower, on terms and in a form and
substance satisfactory to the Lender; and
(o) Borrower shall supply Lender with copies of all contracts in effect
between the Borrower and its customers, and Lender and its counsel
shall, in their sole discretion, be satisfied with the terms of such
contracts.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of each
such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto.
SECTION 5 INTENTIONALLY DELETED.
SECTION 6 COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account
Lender shall maintain one or more loan account(s) on its books in which shall be
recorded (a) all Loans, Letter of Credit Accommodations and other Obligations
and the Collateral, (b) all payments made by or on behalf of Borrower and (c)
all other appropriate debits and credits as provided in this Agreement,
including fees, charges, costs, expenses and interest. All entries in
20
the loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
6.2 Statements
Lender shall render to Borrower each month a statement setting forth the balance
in the Borrower's loan account(s) maintained by Lender for Borrower pursuant to
the provisions of this Agreement, including principal, interest, fees, costs and
expenses. Each such statement shall be subject to subsequent adjustment by
Lender but shall, absent manifest errors or omissions, be considered correct and
deemed accepted by Borrower and conclusively binding upon Borrower as an account
stated except to the extent that Lender receives a written notice from Borrower
of any specific exceptions of Borrower thereto within thirty (30) days after the
date such statement has been mailed by Lender. Until such time as Lender shall
have rendered to Borrower a written statement as provided above, the balance in
Borrower's loan account(s) shall be presumptive evidence of the amounts due and
owing to Lender by Borrower.
6.3 Collection of Accounts
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, and Lender may establish
and maintain bank accounts of Lender ("Payment Accounts") in each case
with such banks as are acceptable to Lender into which Borrower shall,
in accordance with Lender's instructions, promptly deposit and direct
its account debtors that remit payments by electronic funds transfers
to directly remit, all payments on Accounts and all payments
constituting proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether by cash,
cheque or other manner. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against the
Blocked Accounts, the items received for deposit therein, or the funds
from time to time on deposit therein and that the depository bank will
wire, or otherwise transfer, in immediately available funds, on a
daily basis, all funds received or deposited into the Blocked Accounts
to the Payment Accounts or such other bank account of Lender as Lender
may from time to time designate for such purpose. Borrower agrees that
all payments made to such Blocked Accounts or Payment Accounts or
other funds received and collected by Lender, whether on the Accounts
or as proceeds of Inventory or other Collateral or otherwise shall be
the property of Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by
Lender of immediately available funds in the Payment Account provided
such payments and
21
notice thereof are received in accordance with Lender's usual and
customary practices as in effect from time to time and within
sufficient time to credit Borrower's loan account on such day, and if
not, then on the next business day. For the purposes of calculating
interest on the Obligations, such payments or other funds received
will be applied (conditional upon final collection) to the Obligations
one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account provided such
payments or other funds and notice thereof are received in accordance
with Lender's usual and customary practices as in effect from time to
time and within sufficient time to credit Borrower's loan account on
such day, and if not, then on the next Business Day. If Lender
receives funds in a Payment Account at any time at which no
Obligations are outstanding or in excess of such outstanding
Obligations, Lender shall transfer such funds to Borrower at such
account as Borrower may direct, provided that Borrower shall, at
Lender's request, deposit such funds to an account maintained at the
bank at which the Payment Accounts are maintained and, prior to such
transfer, shall execute and deliver to Lender a cash collateral
agreement in form and substance satisfactory to Lender providing to
Lender a first priority security interest over such account.
(c) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, cheques, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts or the Payment Accounts, or remit
the same or cause the same to be remitted, in kind, to Lender. In no
event shall the same be commingled with Borrower's own funds. Borrower
agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account or Payment Account is established
or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts or the Payment Accounts arising out of
Lender's payments to or indemnification of such bank or person. The
obligation of Borrower to reimburse Lender for such amounts pursuant
to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 Payments
All Obligations shall be payable to the Payment Accounts as provided in Section
6.3 or such other place as Lender may designate from time to time. Lender may
apply payments received or collected from Borrower or for the account of
Borrower (including the monetary proceeds of collections or of realization
upon any Collateral) to such of the Obligations, whether or not then due, in
such order and manner as Lender determines. Payments and collections received
in any currency other than U S Dollars or Canadian Dollars will be accepted
and/or applied at the sole discretion of Lender. At Lender's option, all
principal, interest, fees, costs, expenses and of her
22
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section6.4 shall remain effective notwithstanding any contrary action which
may be taken by Lender in reliance upon such payment or proceeds. This Section
6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 Authorization to Make Loans
Lender is authorized to make the Loans and provide the Letter of Credit
Accommodations based upon facsimile or other instructions received from anyone
purporting to be an officer of Borrower or other authorized person or, at the
discretion of Lender, if such Loans are necessary to satisfy any Obligations.
All requests for Loans or Letter of Credit Accommodations hereunder shall
specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a business day) and the
amount of the requested Loan. Requests received after 11:00 a.m. Toronto time on
any day shall be deemed to have been made as of the opening of business on the
immediately following business day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
6.6 Use of Proceeds
Borrower shall use the initial proceeds of the Loans provided by Lender to
Borrower hereunder only for: (a) payments to each of the persons listed in the
disbursement direction letter furnished by Borrower to Lender on or about the
date hereof and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements. All other Loans made or Letter of Credit Accommodations provided by
Lender to Borrower pursuant to the provisions hereof shall be used by Borrower
only for general operating, working capital and other proper corporate purposes
of Borrower not otherwise prohibited by the terms hereof.
SECTION 7 COLLATERAL. REPORTING AND COVENANTS
7.1 Collateral Reporting
Borrower shall provide Lender with the following documents in a form
satisfactory to Lender: (a) on a regular basis as required by Lender, a schedule
of Accounts, sales made, credits issued and
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cash received; (b) on a monthly basis within 20 days after each month end or
more frequently as Lender may request, (i) perpetual inventory reports
reconciled to the financial statement for such month, (ii) inventory reports by
category including details of reground inventory, inventory held to be reground,
inventory unsold within 120 days of completion and inventory which is subject to
a Buy Back Agreement as defined in Section 1.15 of this Agreement; (iii) agings
of accounts payable and accrued liabilities reconciled against the financial
statements for such month, including a segregated aged listing of accounts
receivable in respect of final billed tooling, and (iv) a report providing an
analysis of finished goods versus purchase orders, (c) upon Lender's request,
(i) copies of customer statements and credit memos, remittance advices and
reports, and copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, and (iii) copies of purchase orders, invoices
and delivery documents for Inventory and Equipment acquired by Borrower; (d)
agings of accounts receivable, reconciled against the financial statements for
each month, provided on a monthly basis, on a monthly basis within 20 days after
each month end or more frequently as Lender may request; and (e) such other
reports as to the Collateral as Lender shall request from time to time. If any
of Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants
(a) Borrower shall notify Lender promptly of: (i) any material delay in
Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by
any account debtor, or any disputes with account debtors, or any
settlement, adjustment or compromise thereof, (ii) all material
adverse information relating to the financial condition of any account
debtor and (iii) any event or circumstance which, to Borrower's
knowledge would cause Lender to consider any then existing Accounts as
no longer constituting Eligible Accounts. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices
and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower
shall settle, adjust or compromise any claim, offset, counterclaim or
dispute with any account debtor. At any time that an Event of Default
exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any other
information to Lender, Borrower shall promptly report to Lender any
return of Inventory by any one account debtor if the inventory so
returned in such case has a value in excess of $15,000. At any time
that Inventory is
24
returned, reclaimed or repossessed, the Account (or portion thereof)
which arose from the sale of such returned, reclaimed or repossessed
Inventory shall not be deemed an Eligible Account. In the event any
account debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, Borrower shall, upon Lender's request,
(i) hold the returned Inventory in trust for Lender, (ii) segregate
all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions,
and (iv) not issue any credits, discounts or allowances with respect
thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except
payments immediately delivered to Lender pursuant to the terms of this
Agreement, (iii) no credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any account
debtor except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions made or
given in the ordinary with its terms.
(d) Lender shall have the right at any time or times, in Lender's name or
in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to
Borrower, all chattel paper and instruments which Borrower now owns or
may at any time acquire immediately upon Borrower's receipt thereof,
except as Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists or
has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a
security interest or lien therein and Lender may direct any or all
accounts debtors to make payment of Accounts directly to Lender, (ii)
extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the
Collateral and thereby discharge or release the account debtor or any
other party or parties in any way liable for payment thereof without
affecting any of the Obligations, (iii) demand, collect or enforce
payment of any Accounts or such other obligations, but without any
duty to do so, and Lender shall not be liable for its failure to
collect or enforce the payment thereof nor for the negligence of its
agents or attorneys with respect thereto and (iv) take whatever other
action Lender may deem necessary or desirable for the protection of
its interests. At any time that an Event of Default exists or has
25
occurred and is continuing, at Lender's request, all invoices and
statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrower shall deliver to
Lender such originals of documents evidencing the sale and delivery of
goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3 Inventory Covenants
With respect to the Inventory: (a) Borrower shall at all times maintain
inventory records satisfactory to Lender, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory,
Borrower's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrower shall cause to be conducted by an independent third party
acceptable to Lender, at least once every two weeks until such time as Lender is
satisfied with Borrower's inventory reporting and perpetual inventory system,
following which Borrower shall conduct a physical count of the Inventory at
least once each year, but at any time or times as Lender may request on or after
an Event of Default, and promptly following such physical inventory shall supply
Lender with a report in the form and with such specificity as may be
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Lender's request, Borrower shall, at its expense, no more than four times
during the initial twelve (12) month period, and thereafter at Lender's
discretion, but at least two times in any twelve (12) month period, but at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) Borrower shall produce, use, store and maintain
the Inventory, with all care and caution and in accordance with applicable
standards of any insurance and in conformity with applicable laws; (f) Borrower
assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (g) Borrower shall
not sell Inventory to any customer on approval, or any other basis which
entities the customer to return or may obligate Borrower to repurchase such
Inventory; (h) Borrower shall keep the Inventory in good and marketable
condition; and (i) Borrower shall not, without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants
With respect to the Equipment: (a) upon Lender's request, Borrower shall, at its
expense, at any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender; (b) Borrower shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrower shall use the Equipment with all care and
caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d) the Equipment is and shall be used in
Borrower's business and not for personal, family, household or
26
farming use; (e) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to
move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrower in the ordinary course of business; (f) the
Equipment is now and shall remain personal property and Borrower shall not
permit any of the Equipment to be or become a part of or affixed to real
property; and (g) Borrower assumes all responsibility and liability arising from
the use of the Equipment.
7.5 Power of Attorney
Borrower hereby irrevocably designates and appoints Lender (and all persons
designated by Lender) as Borrower's true and lawful attorney-in-fact, and
authorizes Lender, in Borrower's or Lender's name, to: (a) at any time an Event
of Default or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts or other proceeds of Inventory or other Collateral,
(ii) enforce payment of Accounts by legal proceedings or otherwise, (iii)
exercise all of Borrower's rights and remedies to collect any Account or other
Collateral, (iv) sell or assign any Account upon such terms, for such amount and
at such time or times as the Lender deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor, (viii) notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and open and dispose of all mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender's
determination, to fulfil Borrower's obligations under this Agreement and the
other Financing Agreements and (b) at any time to (i) take control in any manner
of any item of payment or proceeds thereof, (ii) have access to any lockbox or
postal box into which Borrower's mail is deposited, (iii) endorse Borrower's
name upon any items of payment or proceeds thereof and deposit the same in the
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Account or any goods pertaining thereto or any
other Collateral, (v) sign Borrower's name on any verification of Accounts and
notices thereof to account debtors and (vi) execute in Borrower's name and file
any PPSA or other financing statements or amendments thereto. Borrower hereby
releases Lender and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of Lender's own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure
Lender may, at its option, (a) cure any default by Borrower under any agreement
with a third party or pay or bond on appeal any judgment entered against
Borrower, (b) discharge taxes, liens, security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (c) pay any
amount, incur any expense or perform any act which, in Lender's judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Lender with respect thereto. Lender may add any amounts so
expended to the
27
Obligations and charge Borrower's account therefor, such amounts to be repayable
by Borrower on demand. Lender shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have assumed any
obligation or liability of Borrower. Any payment made or other action taken by
Lender under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises
From time to time as requested by Lender, at the cost and expense of Borrower,
(a) Lender or its designee shall have complete access to all of Borrower's
premises during normal business hours and after notice to Borrower, or at any
time and without notice to Borrower if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Borrower's books and records, including,
without limitation, the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be necessary for the foregoing and if an
Event of Default exists or has occurred and is continuing for the collection of
Accounts and realization of other Collateral.
SECTION 8 REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which shall
survive the execution and delivery of this Agreement), the truth and accuracy of
which are a continuing condition of the making of Loans and providing Letter of
Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries
Borrower is a corporation duly incorporated, validly existing and duly organized
under the laws of its jurisdiction of incorporation and is duly qualified or
registered as a foreign or extra-provincial corporation in all provinces, states
or other jurisdictions where the nature and extent of the business transacted by
it or the ownership of assets makes such qualification necessary, except for
those jurisdictions in which the failure to so qualify would not have a material
adverse effect on Borrower's financial condition, results of operation or
business or the rights of Lender in or to any of the Collateral. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within Borrower's
corporate powers, have been duly authorized and are not in contravention of law
or the terms of Borrower's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower or its property are bound. This
Agreement and the other Financing Agreements constitute legal, valid and binding
obligations of Borrower enforceable in accordance with their respective terms.
Borrower does not have any subsidiaries except as set forth on the Information
Certificate.
8.2 Financial Statements; No Material Adverse Change
All financial statements relating to Borrower which have been or may hereafter
be delivered by Borrower to Lender have been prepared in accordance with GAAP
and fairly present the
28
financial condition and the results of operation of Borrower as at the dates and
for the periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrower to Lender prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of Borrower, since the date of the most
recent audited financial statements furnished by Borrower to Lender prior to the
date of this Agreement.
8.3 Chief Executive Office; Collateral Locations
The chief executive office of Borrower and Borrower's Records concerning
Accounts are located only at the address set forth below and its only other
places of business and the only other locations of Collateral, if any, are the
addresses set forth in the Information Certificate, subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by Borrower and sets forth the owners and/or operators thereof and to the
best of Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties
The security interests and liens granted to Lender under this Agreement and the
other Financing Agreements constitute valid and perfected first priority liens
and security interests in and upon the Collateral subject only to the liens
indicated on Schedule 8.4 hereto (except to the extent that Lender requires the
discharge thereof prior to the advance of the initial Loans hereunder) and the
other liens permitted under Section 9.8 hereof. Borrower has good and marketable
title to all of its properties and assets subject to no liens, mortgages,
pledges, security interests, hypothecs, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto (except to the extent that Lender requires the discharge
thereof prior to the advance of the initial Loans hereunder) or permitted under
Section 9.8 hereof.
8.5 Tax Returns
Borrower has filed, or caused to be filed, in a timely manner all tax returns,
reports and declarations which are required to be filed by it (without requests
for extension except as previously disclosed in writing to Lender). All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Borrower has paid or caused to be paid all
taxes due and payable or claimed due and payable in any assessment received by
it, except taxes the validity of which are being contested by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books. Adequate provision has
been made for the payment of all accrued and unpaid federal, provincial,
municipal, local, foreign and other taxes whether or not yet due and payable and
whether or not disputed.
8.6 Litigation
Except as set forth on the Information Certificate, there is no present
investigation by any governmental agency pending, or to the best of Borrower's
knowledge threatened, against or affecting Borrower, its assets or business and
there is no action, suit, proceeding or claim by any Person pending, or to the
best of Borrower's knowledge threatened, against Borrower or its assets
29
or goodwill, or against or affecting any transactions contemplated by this
Agreement, which if adversely determined against Borrower would result in any
material adverse change in the assets, business or prospects of Borrower or
would impair the ability of Borrower to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws
Borrower is not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, federal, provincial or local governmental authority.
8.8 Bank Accounts
All of the deposit accounts, investment accounts or other accounts in the name
of or used by Borrower maintained at any bank or other financial institution are
set forth on Schedule 8.8 hereto, subject to the right of Borrower to establish
new accounts in accordance with Section 9.16 below.
8.9 Accuracy and Completeness of Information
All information furnished by or on behalf of Borrower in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could be expected to have a
material adverse affect on the business, assets or prospects of Borrower, which
has not been fully and accurately disclosed to Lender in writing.
8.10 Status of Pension Plans
To the best knowledge of Borrower:
(a) The Pension Plans are duly registered under all applicable provincial
pension benefits legislation.
(b) All obligations of Borrower (including fiduciary, funding, investment
and administration obligations) required to be performed in connection
with the Pension Plans or the funding agreements therefor have been
performed in a timely fashion. There are no outstanding disputes
concerning the assets held pursuant to any such funding agreement.
(c) All contributions or premiums required to be made by Borrower to the
Pension Plans have been made in a timely fashion in accordance with
the terms of the Pension Plans and applicable laws and regulations.
30
(d) All employee contributions to the Pension Plans required to be made by
way of authorized payroll deduction have been properly withheld by
Borrower and fully paid into the Pension Plans in a timely fashion.
(e) All reports and disclosures relating to the Pension Plans required by
any applicable laws or regulations have been filed or distributed in a
timely fashion.
(f) There have been no improper withdrawals, or applications of, the
assets of any of the Pension Plans.
(g) No amount is owing by any of the Pension Plans under the Income Tax
Act (Canada) or any provincial taxation statute.
(h) The Pension Plans are fully funded both on an ongoing basis and on a
solvency basis (using actuarial assumptions and methods which are
consistent with the valuations last filed with the applicable
governmental authorities and which are consistent with generally
accepted actuarial principles).
Borrower, after diligent enquiry, has neither any knowledge, nor any grounds for
believing, that any of the Pension Plans is the subject of an investigation, any
other proceeding, an action or a claim. There exists no state of facts which
after notice or lapse of time or both could be expected to give rise to any such
proceeding, action or claim.
8.11 Environmental Compliance
(a) Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or
any license, permit, certificate, approval or similar authorization
thereunder and the operations of Borrower comply in all material
respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder.
(b) There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or
any other person nor is any pending or to the best of Borrower's
knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by Borrower or
the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety
matter, which affects Borrower or its business, operations or assets
or any properties at which Borrower has transported, stored or
disposed of any Hazardous Materials.
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(c) Borrower has no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual,
of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals or similar
authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations
are valid and in full force and effect.
8.12 Survival of Warranties; Cumulative
All representations and warranties contained in this Agreement or any of the
other Financing Agreements shall survive the execution and delivery of this
Agreement and shall be deemed to have been made again to Lender on the date of
each additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations and
warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which Borrower shall now or hereafter give, or
cause to be given, to Lender.
SECTION 9 AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence
Borrower shall at all times preserve, renew and keep in full, force and effect
its corporate existence and rights and franchises with respect thereto and
maintain in full force and effect all permits, licenses, trademarks, tradenames,
approvals, authorizations, leases and contracts necessary to carry on the
business as presently or proposed to be conducted. Borrower shall give Lender
thirty (30) days prior written notice of any proposed change in its corporate
name, which notice shall set forth the new name and Borrower shall deliver to
Lender a certified copy of the Articles of Amendment of Borrower providing for
the name change immediately following its filing.
9.2 New Collateral Locations
Borrower may open any new location within Canada provided Borrower (a) gives
Lender thirty (30) days prior written notice of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem necessary or desirable to protect its interests in the Collateral at such
location, including PPSA and other financing statements and such other evidence
as Lender may require of the perfection of Lender's first priority security
interests and liens where required by Lender.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, at all times, comply in all material respects with all
laws, rules, regulations, licenses, permits, approvals and orders
applicable to it
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and duly observe all requirements of any Federal, Provincial or local
governmental authority, including, without limitation, all statutes,
rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including,
without limitation, all of the Environmental Laws except for any
matter that Borrower is contesting by appropriate proceedings
diligently pursued and which is not expected to have a material
adverse effect in Borrower or its property, operations, business,
prospects or conditions (financial or otherwise).
(b) Borrower shall establish and maintain, at its expense, a system to
assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual
reviews of such compliance by employees or agents of Borrower who are
familiar with the requirements of the Environmental Laws. Copies of
all environmental surveys, audits, assessments, feasibility studies
and results of remedial investigations shall be promptly furnished, or
caused to be furnished, by Borrower to Lender. Borrower shall take
prompt and appropriate action to respond to any non-compliance with
any of the Environmental Laws and shall regularly report to Lender on
such response.
(c) Borrower shall give both oral and written notice to Lender immediately
upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous
Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by Borrower
or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials or (D) any other environmental, health or safety
matter, which affects any properties at which Borrower transported,
stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
determines that there is non- compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall,
at Lender's request and Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of
the site where Borrower's non-compliance or alleged non-compliance
with such Environmental Laws has occurred as to such non-compliance
and prepare and deliver to Lender a report as to such non- compliance
setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an
estimate of the costs thereof and (ii) provide to Lender a
supplemental report of such engineer whenever the
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scope of such non-compliance, or Borrower's response thereto or the
estimated costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and
assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including legal fees and expenses)
directly or indirectly arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous
Material, including, without limitation, the costs of any required or
necessary repair, cleanup or other remedial work with respect to any
property of Borrower and the preparation and implementation of any
closure, remedial or other required plans. All representations,
warranties, covenants and indemnification's in this Section 9.3 shall
survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.4 Payment of Taxes and Claims
Borrower shall duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested by appropriate proceedings
diligently pursued and available to Borrower and with respect to which adequate
reserves have been set aside on its books. Borrower shall be liable for any tax
or penalties imposed on Lender as a result of the financing arrangements
provided for herein and Borrower agrees to indemnify and hold Lender harmless
with respect to the foregoing, and to repay to Lender on demand the amount
thereof, and until paid by Borrower such amount shall be added and deemed part
of the Loans, provided, that, nothing contained herein shall be construed to
require Borrower to pay any income or franchise taxes attributable to the income
of Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance
Borrower shall, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
satisfactory to Lender as to form, amount and insurer. Borrower shall furnish
certificates, policies or endorsements to Lender as Lender shall require as
proof of such insurance, and, if Borrower fails to do so, Lender is authorized,
but not required, to obtain such insurance at the expense of Borrower. All
policies shall provide for at least thirty (30) days prior written notice to
Lender of any cancellation or reduction of coverage and that Lender may act as
attorney for Borrower in obtaining, and at any time an Event of Default exists
or has occurred and is continuing, adjusting, settling, amending and cancelling
such insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender.
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Such lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Lender as its interests may appear and further
specify that Lender shall be paid regardless of any act or omission by Borrower
or any of its affiliates. At its option, Lender may apply any insurance proceeds
received by Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
9.6 Financial Statements and Other Information
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or
in relation to the Collateral and the business of Borrower and its
subsidiaries (if any) in accordance with GAAP and Borrower shall
furnish or cause to be furnished to Lender: (i) within twenty (20)
days after the end of each fiscal month, monthly unaudited
consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including
in each case balance sheets, statements of income and loss, statements
of cash flow, statements of shareholders' equity and including a
comparison to prior year and a comparison to forecast on a monthly
basis and on a year to date basis), all in detail, fairly presenting
the financial position and the results of the operations of Borrower
and its subsidiaries as of the end of and through such fiscal month
and (ii) within ninety (90) days after the end of each fiscal year,
audited consolidated financial statements and, if Borrower has any
subsidiaries, audited consolidating financial statements of Borrower
and its subsidiaries (including in each case balance sheets,
statements of income and loss, statements of changes in financial
position and statements of shareholders' equity), and the accompanying
notes thereto, all in detail, fairly presenting the financial position
and the results of the operations of Borrower and its subsidiaries as
of the end of and for such fiscal year, together with the unqualified
opinion of independent chartered accountants, which accountants shall
be an independent accounting firm selected by Borrower and acceptable
to Lender, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and
financial condition of Borrower and its subsidiaries as of the end of
and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the details of (i)
any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for
the Obligations or which would result in any material adverse change
in Borrower's business, properties, assets, goodwill or condition,
financial or otherwise and (ii) the occurrence of any Event of Default
or event which, with the passage of time or giving of notice or both,
would constitute an Event of Default.
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(c) Borrower shall promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which Borrower
sends to its shareholders generally and copies of all reports and
registration statements which Borrower files with any provincial
securities commission or securities exchange.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to
time, request (which shall include as a minimum an annual forecast of
Borrower's anticipated financial performance). Lender is hereby
authorized to deliver a copy of any financial statement or any other
information relating to the business of Borrower to any court or other
government agency or to any participant or assignee or prospective
participant or assignee. Borrower hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and
any reports or management letters prepared by such accountants or
auditors on behalf of Borrower and to disclose to Lender such
information as they may have regarding the business of Borrower. Any
documents, schedules, invoices or other papers delivered to Lender may
be destroyed or otherwise disposed of by Lender one (1) year after the
same are delivered to Lender, except as otherwise designated by
Borrower to Lender in writing.
(e) Borrower shall cause to be furnished to Lender within 5 days after the
first day of each month a rent roll in form satisfactory to Lender
confirming the payment of rent and other amounts when due in full to
owners and lessors of real estate used by Borrower during the
immediately preceding month certified by the Chief Financial Officer
of the Borrower as true and correct.
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc.
Borrower shall not, directly or indirectly, (a) amalgamate with any other Person
or permit any other Person to amalgamate with it, or (buy, sell, assign, lease,
transfer, abandon or otherwise dispose of any shares or indebtedness to any
other Person or any of its assets to any other Person (except for (i) sales of
Inventory in the ordinary course of business and (ii) the disposition of
worn-out or obsolete Equipment or Equipment no longer used in the business of
Borrower so long as (A) if an Event of Default exists or has occurred and is
continuing, any proceeds are paid to Lender and (B) such sales do not involve
Equipment having an aggregate fair market value in excess of the Canadian Dollar
Amount of $20,000 for all such Equipment disposed of in any fiscal year of
Borrower), or (c) form or acquire any subsidiaries, or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances
Borrower shall not create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties,
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including the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested by appropriate proceedings
diligently pursued and available to Borrower, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with the
use of such real property or ordinary conduct of the business of Borrower as
presently conducted thereon or materially impair the value of the real property
which may be subject thereto; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate not to
exceed the Canadian Dollar Amount of $50,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of Borrower other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; and (f) the security interests and
liens set forth on Schedule 8.4 hereto (except to the extent that Lender
requires the discharge thereof prior to the advance of the initial Loans
hereunder).
9.9 Indebtedness
Borrower shall not incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any obligations or indebtedness, except (a) the
Obligations; (b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which the Borrower is
contesting the amount or validity thereof by appropriate proceedings diligently
pursued and available to Borrower, and with respect to which adequate reserves
have been set aside on its books; (c) purchase money indebtedness (including
capital leases) to the extent not incurred or secured by liens (including
capital leases) in violation of any other provision of this Agreement; and (d)
the indebtedness set forth on Schedule 9.9 hereto; provided, that, (i) Borrower
may only make regularly scheduled payments of principal and interest in respect
of such indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
and limited to the extent as provided by any subordination or inter-creditor
agreement to which Lender is a party, (ii) Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such indebtedness or
any agreement, document or instrument related thereto as in effect on the date
hereof, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrower shall furnish to Lender all notices or demands in
connection with such indebtedness either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
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9.10 Loans, Investments, Guarantees, Etc.
Borrower shall not, directly or indirectly, make any loans or advance money or
property to any person, or invest in (by capital contribution, dividend or
otherwise) or purchase or repurchase the shares or indebtedness or all or a
substantial part of the assets or property of any person, or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
indebtedness, performance, obligations or dividends of any Person or agree to do
any of the foregoing, except: (a) the endorsement of instruments for collection
or deposit in the ordinary course of business; and (b) investments in: (i)
short-term direct obligations of the Canadian Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender, payable to
the order of the Borrower or to bearer and delivered to Lender, and (iii)
commercial paper rated A1 or P1; provided, that, as to any of the foregoing,
unless waived in writing by Lender, Borrower shall take such actions as are
deemed necessary by Lender to perfect the security interest of Lender in such
investments and (c) the loans, advances and guarantees set forth on Schedule
9.10 hereto; provided, that, as to such loans, advances and guarantees, (i)
Borrower shall not, directly or indirectly, (A) amend, modify, alter or change
the terms of such loans, advances or guarantees or any agreement, document or
instrument related thereto, or (B) as to such guarantees, redeem, retire,
defease, purchase or otherwise acquire the obligations arising pursuant to such
guarantees, or set aside or otherwise deposit or invest any sums for such
purpose, and (ii) Borrower shall furnish to Lender all notices or demands in
connection with such loans, advances or guarantees or other indebtedness subject
to such guarantees either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 Dividends and Redemptions
Borrower shall not, directly or indirectly, declare or pay any dividends on
account of any shares of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common shares or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates
Borrower shall not, directly or indirectly, (a) purchase, acquire or lease any
property from, or sell, transfer or lease any property to, any officer,
director, agent or other person affiliated with Borrower, except in the ordinary
course of and pursuant to the requirements of Borrower's business and upon fair
market terms no less favorable to the Borrower than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any officer, employee, shareholder,
director or other person affiliated with Borrower except compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business.
9.13 Capital Expenditures
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Borrower shall not expend or incur capital expenditures in excess of $50,000.00
in any fiscal year without the prior written consent of Lender.
9.14 Adjusted Net Worth
Borrower shall, at all times, maintain Adjusted Net Worth of not less than
$2,500,000.00.
9.15 Intellectual Property
In the event Borrower obtains or applies for any material intellectual property
rights or obtains any material licenses with respect thereto, Borrower shall
immediately notify Lender thereof and shall provide to Lender copies of all
written materials including, but not limited to, applications and licenses with
respect to such intellectual property rights. At Lender's request, Borrower
shall promptly execute and deliver to Lender an intellectual property security
agreement granting to Lender a perfected security interest in such intellectual
property rights in form and substance satisfactory to Lender.
9.16 Additional Bank Accounts
Borrower shall not, directly or indirectly, open, establish or maintain any
deposit account, investment account or any other account with any bank or other
financial institution, other than the Blocked Accounts and the accounts set
forth in Schedule 8.8 hereto, except: (a) as to any new or additional Blocked
Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Lender and subject to
such conditions thereto as Lender may establish and (b) as to any accounts used
by Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender.
9.17 Applications under the Companies' Creditors Arrangement Act
Borrower acknowledges that its business and financial relationships with Lender
are unique from its relationship with any other of its creditors. Borrower
agrees that it shall not file any plan of arrangement under the CCAA ("CCAA
Plan") which provides for, or would permit directly or indirectly, Lender to be
classified with any other creditor of Borrower for purposes of such CCAA Plan or
otherwise.
9.18 Operation of Pension Plans
(a) Borrower shall administer the Pension Plans in accordance with the
requirements of the applicable pension plan texts, funding agreements,
the Income Tax Act (Canada) and applicable provincial pension benefits
legislation.
(b) Borrower shall deliver to Lender an undertaking of the funding agent
for each of the Pension Plans stating that the funding agent will
notify Lender within 7 days of Borrower's failure to make any required
contribution to the applicable Pension Plan.
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(c) Borrower shall not accept payment of any amount from any of the
Pension Plans without the prior written consent of Lender.
(d) Without the prior written consent of Lender, Borrower shall not
terminate, or cause to be terminated, any of the Pension Plans, if
such plan would have a solvency deficiency on termination.
(e) Borrower shall promptly provide Lender with any documentation relation
to any of the Pension Plans as Lender may request. Borrower shall
notify Lender within 30 days of (i) a material increase in the
liabilities of any of the Pension Plans, (ii) the establishment of a
new registered pension plan, (iii) commencing payment of contributions
to a Pension Plan to which Borrower had not previously been
contributing.
9.19 Costs and Expenses
Borrower shall pay to Lender on demand all costs, expenses, filing fees and
taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the Collateral,
this Agreement, the other Financing Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including PPSA financing statement and other similar filing and recording fees
and taxes, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all insurance premiums, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting cheques and
other items of payment, and establishing and maintaining the Blocked Accounts,
if any, and the Payment Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions contemplated hereby
and thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the course
of periodic field examinations of the Collateral and Borrower's operations, plus
a per diem charge at the rate of $750 per person per day for Lender's examiners
in the field and office; and (h) the fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.20 Further Assurances
At the request of Lender at any time and from time to time, Borrower shall, at
its expense, duly execute and deliver, or cause to be duly executed and
delivered, such further agreements, documents and instruments, and do or cause
to be done such further acts as may be necessary or
40
proper to evidence, perfect, maintain and enforce the security interests and
liens and the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower hereby authorizes Lender to execute and file one or more PPSA or
other financing statements or notices signed only by Lender or Lender's
representative.
SECTION 10 EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default
The occurrence or existence of any one or more of the following events are
referred to herein individually as an "Event of Default", and collectively as
"Events of Default":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms, covenants, conditions or provisions
contained in this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by Borrower to
Lender in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when
made or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favour of Lender;
(d) any judgment for the payment of money is rendered against Borrower or
any Obligor in excess of the Canadian Dollar Amount of $25,000 in any
one case or in excess of the Canadian Dollar Amount of $50,000 in the
aggregate and shall remain undischarged or unvacated for a period in
excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered
against Borrower or any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an Obligor
which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited partnership, limited
liability partnership or a corporation, dissolves or suspends or
discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors proposes
to
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make, makes or sends notice of a bulk sale or calls a meeting of its
creditors or principal creditors;
(g) a petition, case or proceeding under the bankruptcy laws of Canada or
similar laws of any foreign jurisdiction now or hereafter in effect or
under any insolvency, arrangement, reorganization, moratorium,
receivership, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed or commenced against Borrower or any Obligor or
all or any part of its properties and such petition or application is
not dismissed within thirty (30) days after the date of its filing or
Borrower or any Obligor shall file any answer admitting or not
contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a petition, case or proceeding under the bankruptcy laws of Canada or
similar laws of any foreign jurisdiction now or hereafter in effect or
under any insolvency, arrangement, reorganization, moratorium,
receivership, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction now or hereafter in effect (whether at a
law or equity) is filed or commenced by Borrower or any Obligor for
all or any part of its property including, without limitation, if
Borrower or any Obligor shall:
(i) apply for or consent to the appointment of a receiver, trustee or
liquidator of it or of all or a substantial part of its property
and assets;
(ii) be unable, or admit in writing its inability, to pay its debts as
they mature, or commit any other act of bankruptcy;
(iii) make a general assignment for the benefit of creditors;
(iv) file a voluntary petition or assignment in bankruptcy or a
proposal seeking a reorganization, compromise, moratorium or
arrangement with its creditors;
(v) take advantage of any insolvency or other similar law pertaining
to arrangements, moratoriums, compromises or reorganizations, or
admit the material allegations of a petition or application filed
in respect of it in any bankruptcy, reorganization or insolvency
proceeding; or
(vi) take any corporate action for the purpose of effecting any of the
foregoing;
(i) any default by Borrower or any Obligor under any agreement, document
or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations,
contingent
42
indebtedness in connection with any guarantee, letter of credit,
indemnity or similar type of instrument in favour of any person other
than Lender, in any case in an amount in excess of the Canadian Dollar
Amount of $25,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default
by Borrower or any Obligor under any material contract, lease, license
or other obligation to any person other than Lender, which default
continues for more than the applicable cure period, if any, with
respect thereto;
(j) any change in the controlling ownership of Borrower;
(k) charging of Borrower or any Obligor under any criminal statute, or
commencement or threatened commencement of criminal or civil
proceedings against Borrower or any Obligor, pursuant to which statute
or proceedings the penalties or remedies sought or available include
forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business, assets or
prospects of Borrower or any Obligor after the date hereof;
(m) there shall be an event of default under any of the other Financing
Agreements;
(n) there shall be a breach or failure to comply with the provisions of
any intercreditor agreement or subordination agreement with respect to
Borrower or any Obligor by any party thereto other than Lender; or
(o) a requirement from the Minister of National Revenue for payment
pursuant to Section 224 or any successor section of the Income Tax Act
(Canada) or Section 317, or any successor section of the Excise Tax
Act (Canada) or any comparable provision of similar legislation shall
have been received by Lender or any other Person in respect of
Borrower or otherwise issued in respect of Borrower.
10.2 Remedies
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Personal Property
Security Act (Ontario) and other applicable law, all of which rights
and remedies may be exercised without notice to or consent by Borrower
or any Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing
Agreements, the Personal Property Security Act (Ontario) or other
applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on
any one or more occasions, and shall include, without limitation, the
right to apply to a court of equity for an
43
injunction to restrain a breach or threatened breach by Borrower of
this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor
to collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), all Obligations shall automatically become immediately due
and payable), (ii) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or
complete processing, manufacturing and repair of all or any portion of
the Collateral and carry on the business of Borrower, (iii) require
Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate,
setoff and realize upon any and all Collateral, (v) remove any or all
of the Collateral from any premises on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office
of Lender or elsewhere) at such prices or terms as Lender may deem,
for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any
such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption
is hereby expressly waived and released by Borrower, (vii) borrow
money and use the Collateral directly or indirectly in carrying on
Borrower's business or as security for loans or advances for any such
purposes, (viii) grant extensions of time and other indulgences, take
and give up security, accept compositions, grant releases and
discharges, and otherwise deal with Borrower, debtors of Borrower,
sureties and others as Lender may see fit without prejudice to the
liability of Borrower or Lender's right to hold and realize the
security interest created under any Financing Agreement, and/or (ix)
terminate this Agreement. If any of the Collateral is sold or leased
by Lender upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is
required by law, five (5) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be notice thereof and Borrower waives
any other notice. In the event Lender institutes an action to recover
any Collateral or seeks recovery of any Collateral by way of pre
judgment remedy,
44
Borrower waives the posting of any bond which might otherwise be
required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in
such order as Lender may elect, whether or not then due. Borrower
shall remain liable to Lender for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and
expenses of collection or enforcement, including legal costs and
expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without
notice, (i) cease making Loans or arranging Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving
Loans and Letter of Credit Accommodations available to Borrower and/or
(ii) terminate any provision of this Agreement providing for any
future Loans or Letter of Credit Accommodations to be made by Lender
to Borrower.
(e) Lender may appoint, remove and reappoint any person or persons,
including an employee or agent of Lender to be a receiver (the
"Receiver") which term shall include a receiver and manager of, or
agent for, all or any part of the Collateral. Any such Receiver shall,
as far as concerns responsibility for his acts, be deemed to be the
agent of Borrower and not of Lender, and Lender shall not in any way
be responsible for any misconduct, negligence or non-feasance of such
Receiver, his employees or agents. Except as otherwise directed by
Lender, all money received by such Receiver shall be received in trust
for and paid to Lender. Such Receiver shall have all of the powers and
rights of Lender described in this Section 10.2. Lender may, either
directly or through its agents or nominees, exercise any or all powers
and rights of a Receiver.
(f) Borrower shall pay all costs, charges and expenses incurred by Lender
or any Receiver or any nominee or agent of Lender, whether directly or
for services rendered (including, without limitation, solicitor's
costs on a solicitor and his own client basis, auditor's costs, other
legal expenses and Receiver remuneration) in enforcing this Agreement
or any other Financing Agreement and in enforcing or collecting
Obligations and all such expenses together with any money owing as a
result of any borrowing permitted hereby shall be a charge on the
proceeds of realization and shall be secured hereby.
SECTION 11 JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver
45
(a) The validity, interpretation and enforcement of this Agreement and the
other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort,
equity or otherwise, shall be governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein except to
the extent that the law of another jurisdiction is specified in a
Financing Agreement to be the governing law for that Financing
Agreement.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Ontario Superior Court of Justice
and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement
or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in
respect of this Agreement or any of the other Financing Agreements or
the transactions related hereto or thereto, in each case whether now
existing or hereafter arising, and whether in contract, tort, equity
or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against
Borrower or its property in the courts of any other jurisdiction which
Lender deems necessary or appropriate in order to realize on the
Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) To the extent permitted by law, Borrower hereby waives personal
service of any and all process upon it and consents that all such
service of process may be made by registered mail (return receipt
requested) directed to its address set forth on the signature pages
hereof and service so made shall be deemed to be completed five (5)
days after the same shall have been so deposited in the Canadian
mails, or, at Lender's option, by service upon Borrower in any other
manner provided under the rules of any such courts. Within thirty (30)
days after such service, Borrower shall appear in answer to such
process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH
46
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement or any
other Financing Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Lender shall
be entitled to the benefit of the rebuttable presumption that it acted
and with the exercise of ordinary care in the performance by it of the
terms of this Agreement or any other Financing Agreement.
(f) Borrower hereby expressly waives all rights of notice and hearing of
any kind prior to the exercise of rights by Lender from and after the
occurrence of an Event of Default to repossess the Collateral with
judicial process or to replevy, attach or levy upon the Collateral or
other security for the Obligations. Borrower waives the posting of any
bond otherwise required of Lender in connection with any judicial
process or proceeding to obtain possession of, replevy, attach or levy
upon the Collateral or other security for the Obligations, to enforce
any judgment or other court order entered in favour of Lender, or to
enforce by specific performance, temporary restraining order,
preliminary or permanent injunction, this Agreement or any other
Financing Agreement.
11.2 Waiver of Notices
Borrower hereby expressly waives demand, presentment, protest and notice of
protest and notice of dishonour with respect to any and all instruments and
commercial paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein. No notice to or demand on
Borrower which Lender may elect to give shall entitle Borrower to any other or
further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers
Neither this Agreement nor any provision hereof shall be amended, modified,
waived or discharged orally or by course of conduct, but only by a written
agreement signed by an authorized officer of Lender, and as to amendments, as
also signed by an authorized officer of
47
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims
Borrower waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other than compulsory counterclaims) in any action
or proceeding with respect to this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating hereto or thereto.
11.5 Indemnification
Borrower shall indemnify and hold Lender, and its directors, agents, employees
and counsel, harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the fees and expenses of counsel. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 12 TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three
(3) years from the date hereof (the "Renewal Date"), and from year to
year thereafter, unless sooner terminated pursuant to the terms
hereof; provided, that, Lender may, at its option, extend the Renewal
Date to the date four (4) years from the date hereof by giving
Borrower notice at least sixty (60) days prior to the third
anniversary of this Agreement. Lender or Borrower (subject to Lender's
right to extend the Renewal Date as provided above) may terminate this
Agreement and the other Financing Agreements effective on the Renewal
Date or on the anniversary of the Renewal Date in any year by giving
to the other party at least sixty (60) days prior written
48
notice; provided, that, this Agreement and all other Financing
Agreements must be terminated simultaneously. Upon the effective date
of termination or non-renewal of the Financing Agreements, Borrower
shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender
determines are necessary to secure Lender from loss, cost, damage or
expense, including legal fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and cheques or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such payments in respect of
the Obligations and cash collateral shall be remitted by wire transfer
in Canadian Dollars to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrower for such purpose.
Interest shall be due until and including the next Business Day, if
the amounts so paid by Borrower to the bank account designated by
Lender are received in such bank account later than 12:00 noon,
Toronto time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the
Collateral and the rights and remedies of Lender hereunder, under the
other Financing Agreements and applicable law, shall remain in effect
until all such Obligations have been fully and finally discharged and
paid.
(c) If for any reason this Agreement is terminated prior to the end of the
then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a calculation of Lender's
lost profits as a result thereof, Borrower agrees to pay to Lender,
upon the effective date of such termination, an early termination fee
in the amount set forth below if such termination is effective in the
period indicated:
Amount Period
(i) 3% of Maximum Credit From the date hereof to and including
January 31, 2004
(ii) 2% of Maximum Credit From February 1, 2004 to and
including January 31, 2005
(iii) .1% of Maximum Credit From February 1, 2005 to and
including January 31, 2006 or if the
term of this Agreement is extended
for an additional year as provided
above, then to and including January
31, 2007.
49
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is under the circumstances currently existing. In addition, Lender shall
be entitled to such early termination fee upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h) hereof, even if Lender does
not exercise its right to terminate this Agreement, but elects, at its option,
to provide financing to Borrower or permit the use of cash collateral under any
applicable reorganization or insolvency legislation. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 Notices
All notices, requests and demands hereunder shall be in writing and (a) made to
Lender at its address set forth below and to Borrower at its chief executive
office set forth below, or to such other address as either party may designate
by written notice to the other in accordance with this provision, and (b) deemed
to have been given or made: if delivered in person, immediately upon delivery;
if by facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
registered mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity
If any provision of this Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.
12.4 Successors
This Agreement, the other Financing Agreements and any other document referred
to herein or therein shall be binding upon and inure to the benefit of and be
enforceable by Lender, Borrower and their respective successors and assigns,
except that Borrower may not assign its rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Lender. Lender may, after notice to
Borrower, assign its rights and delegate its obligations under this Agreement
and the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Entire Agreement
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This Agreement, the other Financing Agreements, any supplements hereto or
thereto, and any instruments or documents delivered or to be delivered in
connection herewith or therewith represents the entire agreement and
understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
12.6 Headings
The division of this Agreement into Sections and the insertion of headings and a
table of contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
12.7 Judgment Currency
To the extent permitted by applicable law, the obligations of Borrower in
respect of any amount due under this Agreement shall, notwithstanding any
payment in any other currency (the "Other Currency") (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in the
currency in which it is due (the "Agreed Currency") that Lender may, in
accordance with normal banking procedures, purchase with the sum paid in the
Other Currency (after any premium and costs of exchange) on the Business Day
immediately after the day on which Lender receives the payment. If the amount in
the Agreed Currency that may be so purchased for any reason falls short of the
amount originally due, Borrower shall pay all additional amounts, in the Agreed
Currency, as may be necessary to compensate for the shortfall. Any obligation of
Borrower not discharged by that payment shall, to the extent permitted by
applicable law, be due as a separate and independent obligation and, until
discharged as provided in this Section, continue in full force and effect.
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IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
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LENDER BORROWER
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CONGRESS FINANCIAL G.G.S. PLASTIC ENGINEERING
CORPORATION (CANADA) INC.
By:_______________________________ By:____________________________
Title:____________________________ Title:_________________________
Address: Chief Executive Office:
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