LOAN AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (CANADA)
as Agent
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
and
MERISEL CANADA INC.
as Borrower
Dated: January 12, 2001
Cdn. $100,000,000 Revolving Credit Facility
- 80 -
LOAN AGREEMENT
This Loan Agreement dated January 12, 2001 is entered into by and
between Congress Financial Corporation (Canada), an Ontario corporation in its
capacity as administrative and collateral agent for Lenders (together with its
successors in such capacity, "Agent"), the financial institutions from time to
time parties hereto as lenders, whether by execution of this Agreement or an
Assignment and Acceptance (each individually, a "Lender" and, collectively
"Lenders"), and Merisel Canada Inc., an Ontario corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Agent and Lenders enter into
certain financing arrangements with Borrower pursuant to which Lenders may make
loans and provide other financial accommodations to Borrower; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrower on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as administrative and
collateral agent for Lenders on the terms and conditions set forth herein and
the other Financing Agreements;
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 parties hereto
agree as follows:
Article 1
DEFINITIONS
1.1 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, Agent and any 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 or provision thereof. 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 Agent, if such Event of Default is capable of being cured. 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:
(a) "Accounts" shall mean all present and future rights of Borrower to payment
for goods sold or leased or for services rendered, whether or not evidenced
by instruments or chattel paper, and whether or not earned by performance,
but in any event, excluding Accounts due from Borrower's suppliers for
services rendered by Borrower to such suppliers to the extent that such
Accounts are not assignable without the consent of such suppliers.
(b) "Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined
by dividing (i) the Eurodollar Rate for such Interest Period by (ii) a
percentage equal to (A) one (1) minus (B) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or
an international banking office of US Reference Bank used to fund a
Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of
such deposit, whether or not the US Reference Bank actually holds or has
made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve
Percentage.
(c) "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 assets other than goodwill of such Person
and its Subsidiaries, calculating the book value of inventory for this
purpose on a weighed average cost 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 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 Indebtedness.
(d) "Affiliates" shall mean, with respect to a specified Person, a partnership,
corporation or any other person which directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common
control with such Person, and without limiting the generality of the
foregoing, includes (i) any Person which beneficially owns or holds five
(5%) percent or more of any class of Voting Stock of such Person or other
equity interests in such Person, (ii) any Person of which such Person
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock or in which such Person beneficially owns or holds five (5%) percent
or more of the equity interests and (iii) any director or officer of
Merisel, Inc. or any of its direct or indirect Subsidiaries. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting Stock
or by contract or otherwise.
(e) "Agent" shall mean Congress Financial Corporation (Canada) in its capacity
as administrative and collateral Agent on behalf of Lenders pursuant to the
terms hereof and any replacement or successor administrative and collateral
Agent hereunder.
(f) "Agent's Cash Dominion" shall mean any time that funds received or
deposited in Blocked Accounts are being transferred to the Payment Account
pursuant to a notice given by Agent under Section 6.3(2) hereof.
(g) "Assignment and Acceptance" shall mean an Assignment and Acceptance in form
and substance satisfactory to Agent delivered to Agent in connection with
an assignment of a Lender's interest hereunder in accordance with the
provisions of Section 13.5 thereof.
(h) "Availability Reserves" shall mean, as of any date of determination, such
amounts as Agent 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 Agent, do or may reasonably be expected to affect
either (i) the Collateral or its value, (ii) the assets or business of
Borrower or any Obligor or (iii) the security interests and other rights of
Agent and Lenders in the Collateral (including the enforceability,
perfection and priority thereof); or (b) to reflect Agent's good faith
belief that any collateral report or financial information furnished by or
on behalf of Borrower or any Obligor to Agent and Lenders 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 Agent's good faith estimate of the
amount of any Priority Payables Reserve, or (e) $700,000 plus any other
amounts required to reflect Agent's estimate of rent or the payments due
and unpaid or which Agent reasonably expects will not be paid when due with
respect to premises occupied by Borrower where Collateral is located; or
(f) to reflect monies due to vendors or suppliers of Borrower which have
been accrued on Borrower's general ledger as royalties, fees or other
similar charges or as a general reserve for a "safety factor" relating to
cross-border foreign currency adjustments; or (g) as the Syndication
Reserve; or (h) in respect of any state of facts which Agent determines
constitutes an Event of Default or would, with notice or passage of time or
both, constitute an Event of Default. The amount of any Availability
Reserve established by Agent shall have a reasonable relationship to the
event, condition or circumstance which is the basis for such Availability
Reserve as determined by Agent in good faith.
(i) "BIA" shall mean the Bankruptcy and Insolvency Act (Canada).
(j) "Blocked Accounts" shall have the meaning set forth in Section 6.3 hereof.
(k) "Business Day" shall mean a day (other than a Saturday, Sunday or statutory
holiday in Ontario or New York) on which Agent's Toronto office, the
Canadian Reference Bank's main Toronto office and banks in New York City
are open for business in the normal course, except that if a determination
of a Business Day shall relate to any Eurodollar Rate Loans, the term
Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
(l) "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 Agent at such time on the basis of the
Spot Rate for the purchase of Canadian Dollars with such currency.
(m) "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.
(n) "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.
(o) "Canadian Reference Bank" shall mean Bank of Montreal, or its successors
and assigns, or such other bank as Agent may from time to time designate.
(p) "Capital Leases" shall mean, as applied to any Person, any lease of (or any
agreement conveying the right to use) any property (whether real, personal
or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such
Person.
(q) "Capital Stock" shall mean, with respect to any Person, any and all shares,
interests, participations, limited liability company interests or other
equivalents (however designated) of such Person's capital stock at any time
outstanding, and any and all rights, warrants or options exchangeable for
or convertible into such capital stock or interests (but excluding any debt
security that is exchangeable for or convertible into such capital stock).
(r) "Cash Equivalents" shall mean any of the following denominated in Canadian
Dollars or US Dollars,:
(i) any evidence of Indebtedness with a maturity date of one hundred eighty
(180) days or less issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof, or
Canada or any agency or instrumentality thereof; provided, that, the full
faith and credit of the United States of America or Canada, as the case may
be, is pledged in support thereof;
(ii) certificates of deposit or bankers' acceptances with a maturity of one
hundred eighty (180) days or less (after the date of the purchase thereof)
of any financial institution that is a member of the Federal Reserve System
or a bank organized under the laws of Canada, in any case having combined
capital and surplus and undivided profits of not less than the
Canadian Dollar Amount of $250,000,000;
(iii)commercial paper (including variable rate demand notes) with a maturity of
one hundred eighty (180) days or less (after the date of the purchase
thereof) issued or guaranteed by a corporation (except an Affiliate of
Borrower or any Obligor) organized under the laws of any State of the
United States of America, the District of Columbia, Canada or any Province
thereof, or a bank organized under the laws of any State of the United
States of America or the laws of Canada or constituting a national banking
association under the laws of the United States of America, in each case
having a rating of at least A-1 by Standard & Poor's Ratings Service, a
division of The XxXxxx-Xxxx Companies, Inc. or the Canadian Bond Rating
Service or at least P-1 by Xxxxx'x Investors Service, Inc.
(iv) repurchase obligations with a term of not more than thirty (30) days (after
the date of the purchase thereof) for underlying securities of the types
described in clause (i) above entered into with any financial institution
having combined capital and surplus and undivided profits of not less than
the Canadian Dollar Amount of $250,000,000;
(v) repurchase agreements and reverse repurchase agreements relating to
marketable direct obligations issued or unconditionally guaranteed by the
United States of America or Canada or issued by any governmental agency
thereof and backed by the full faith and credit of the United States of
America or Canada, in each case maturing within one hundred eighty (180)
days or less from the date of acquisition; provided, that, the terms of
such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency on October 31, 1985;
and
(vi) investments in money market funds and mutual funds which invest
substantially all of their assets in securities of the types described in
clauses (i) through (v) above.
(s) "CCAA" shall mean the Companies' Creditors Arrangement Act (Canada).
(t) "CDOR 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 Agent as of 10:00 a.m. on such day.
(u) "Closing Date" shall mean the date of the first to occur of the making of
the initial Loan or the issuance of the initial Letter of Credit
Accommodations.
(v) "Closing Intercompany Indebtedness" shall mean Intercompany Indebtedness,
the proceeds of which have been advanced on the Closing Date to or for the
account of Borrower by Merisel Americas, Inc. in the amount approved by
Agent.
(w) "Collateral" shall mean, collectively, Collateral as such term is defined
in the General Security Agreement and Collateral as such term is defined in
the Hypothec.
(x) "Commitment" shall mean, at any time, as to each Lender, the principal
amount set forth below such Lender's signature on the signature pages
hereto designated as the Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.5 hereof, as the
same may be adjusted from time to time in accordance with the terms hereof;
sometimes being collectively referred to herein as "Commitments".
(y) "Congress" shall mean Congress Financial Corporation (Canada), an Ontario
corporation, in its individual capacity and its successors and assigns.
(z) "Credit Facility" shall mean the Loans and Letter of Credit Accommodations
provided to Borrower pursuant to Sections 2.1 and 2.2 hereof.
(aa) "Defaulting Lender" shall have the meaning set forth in Section 6.10
hereof.
(bb) "Eligible Accounts" shall mean Accounts created by Borrower which satisfy
the following criteria:
(i) such Accounts arise from the actual and bona fide sale of goods by Borrower
or rendition of services by Borrower to Persons other than vendors or
suppliers of 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;
(ii) such Accounts have credit terms not exceeding forty-five (45) days from
invoice date and are not unpaid more than forty-five (45) days after the
original due date thereof;
(iii)such Accounts comply with the terms and conditions contained in Section
7.2(c) of this Agreement;
(iv) 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 (other than any of the
foregoing to the extent related to stock rotation programs customary for
the industry and in the ordinary course of business of Borrower);
(v) the chief executive office of the account debtor with respect to such
Accounts is located in Canada or United States of America, or, the Account
is payable in Canadian Dollars or US Dollars and, at Agent's option, if the
chief executive officer of the account debtor is located other than in
Canada or United States of America, then if either: (i) the account debtor
has delivered to Borrower an irrevocable letter of credit issued or
confirmed by a bank satisfactory to Agent 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 Agent and, if required by
Agent, the original of such letter of credit has been delivered to Agent or
Agent's agent and the issuer thereof notified of the assignment of the
proceeds of such letter of credit to Agent, or (ii) such Account is subject
to credit insurance payable to Agent issued by an insurer and on terms and
in an amount acceptable to Agent, or (iii) such Account is otherwise
acceptable in all respects to Agent (subject to such lending formula with
respect thereto as Agent may determine);
(vi) such Accounts do not consist of progress xxxxxxxx, xxxx and hold invoices
or retainage invoices, except as to xxxx and hold invoices, if Agent shall
have received an agreement in writing from the account debtor, in form and
substance reasonably satisfactory to Agent, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay
such invoice;
(vii)the account debtor with respect to such Accounts has not asserted a bona
fide 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 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);
(viii) there are no facts, events or occurrences known to Borrower or any Agent
which would materially impair the validity, enforceability or
collectability of such Accounts or reduce the amount payable or delay
payment thereunder;
(ix) such Accounts are subject to the first priority, valid and perfected
security interest of Lender;
(x) neither the account debtor nor any officer or employee of the account
debtor with respect to such Accounts is an Affiliate of Borrower or any
Obligor;
(xi) 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
foreign, provincial or local law, if applicable, has been complied with in
a manner satisfactory to Agent;
(xii)there are no proceedings or actions known to Borrower, Agent or any Lender
which are threatened or pending against the account debtors with respect to
such Accounts which might reasonably be expected to result in any material
adverse change in any such account debtor's financial condition;
(xiii) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty-five percent (25%) (or such greater percentage
as may be approved by Congress) of all otherwise Eligible Accounts (but the
portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(xiv)such Accounts are not owed by an account debtor who has Accounts unpaid
more than forty-five (45) days after the original due date thereof which
constitute more than fifty percent (50%) of the total Accounts of such
account debtor; and
(xv) 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 Agent, acting reasonably, from time to time (but
the portion of the Accounts not in excess of such credit limit may still be
deemed Eligible Accounts).
General criteria for Eligible Accounts may be established and revised from time
to time by Agent in the good faith exercise of its reasonable credit
judgement. Any Accounts which are not Eligible Accounts shall nevertheless
be part of the Collateral.
(cc) "Eligible Hardware" shall mean finished goods Inventory consisting of
finished goods (including components) other than Eligible Software.
(dd) "Eligible Inventory" shall mean Eligible Hardware and Eligible Software
held for resale in the ordinary course of the business of Borrower and
which satisfy the criteria set forth below. In general, Eligible Inventory
shall not include (a) raw materials; (b) work-in-process; (c) components
which are not part of finished goods; (d) spare parts for Equipment used by
Borrower; (e) packaging and shipping materials; (f) supplies used or
consumed in Borrower's business; (g) Inventory at premises which are not
owned and controlled by Borrower, except if Agent 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 reasonably
satisfactory to Agent acknowledging Agent's first priority security
interest in the Inventory, waiving or subordinating security interests,
hypothecs and claims by such person against the Inventory and permitting
Agent access to, and the right to remain on, the premises so as to exercise
Agent's rights and remedies and otherwise deal with the Collateral; (h)
Inventory subject to a security interest, hypothec or lien (including any
purchase money security interest) in favour of any Person other than Lender
except for purchase money security interests on Inventory supplied by such
vendors and suppliers in favour of Borrower's vendors or suppliers which
have been subordinated to Agent and Lenders on terms and conditions
satisfactory to Agent; (i) xxxx and hold goods; (j) unserviceable, obsolete
or slow moving Inventory; (k) Inventory which is not subject to the first
priority, valid and perfected security interest, lien or hypothec of Agent;
(l) damaged and/or defective Inventory; (m) Inventory purchased or sold on
consignment; and (n) Inventory in transit from vendors to Borrower not
purchased with Letter of Credit Accommodations and Inventory in transit
between locations of Borrower for more than one (1) week. General criteria
for Eligible Inventory may be established and revised from time to time by
Agent in the good faith exercise of its reasonable credit judgement. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
(ee) "Eligible Software" shall mean finished goods Inventory consisting of
software products and applications including operating systems, desktop
applications, virus and security programs, financial programs and games.
(ff) "Eligible Transferee" shall mean (a) any Lender; (b) any Affiliate of a
Lender; and (c) any other commercial bank, financial institution or
"accredited investor" (as defined in Regulation D under the Securities
Exchange Act) or any Canadian Subsidiary thereof approved by Agent and,
unless an Event of Default has occurred and is continuing at the time any
assignment is effected hereunder, Borrower, such approval not to be
unreasonably withheld, conditioned or delayed by Borrower, and such
approval to be deemed given by Borrower if no objection from Borrower is
received by the assigning Lender and Agent within five (5) Business Days
after notice of such proposed assignment has been provided by the assigning
Lender or Agent to Borrower; provided, that, neither Borrower nor any
Affiliate of Borrower shall qualify as an Eligible Transferee.
(gg) "Environmental Laws" shall mean with respect to any Person all Canadian
federal, 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.
(hh) "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 (but excluding Borrower's Inventory).
(ii) "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary,
to the next one-sixteenth (1/16) of one (1%) percent) at which US Reference
Bank is offered deposits of United States dollars in the London interbank
market (or other Eurodollar Rate market selected by Borrower and approved
by Agent) on or about 9:00 a.m. (New York time) two (2) Business Days prior
to the commencement of such Interest Period in amounts substantially equal
to the principal amount of the Eurodollar Rate Loans requested by and
available to Borrower in accordance with this Agreement, with a maturity of
comparable duration to the Interest Period selected by Borrower.
(jj) "Eurodollar Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
(kk) "Event of Default" shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.
(ll) "Excess Availability" shall mean the Canadian Dollar Amount, as determined
by Agent, calculated at any time, equal to: (a) the lesser of: (i) the
aggregate amount of the Revolving Loans available to Borrower as of such
time under Section 2.1(1) subject to the sublimits and Availability
Reserves (except that the Syndication Reserve shall not be included in the
Availability Reserves for the purpose of calculating Excess Availability on
the Closing Date) from time to time established by Agent 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 trade payables of Borrower which are
more than 60 days past due as of such time (other than those being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and appropriate reserves therefor established in
accordance with GAAP).
(mm) "Fee Letter" shall mean the letter agreement, dated on or about the date
hereof, between Borrower and Agent, setting forth certain fees payable by
Borrower to Agent for the benefit of itself and Lenders, as the same now
exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(nn) "Financing Agreements" shall mean, collectively, this Agreement, the
General Security Agreement, the Hypothec, the guarantee by Merisel Inc. of
the Obligations in favour of Agent, 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 same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(oo) "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. If at any time any change in GAAP would affect the
computation of the financial covenant set forth in Section 9.13 of this
Agreement, and Borrower, Agent or Requisite Lenders shall so request,
Agent, Lenders and Borrower shall negotiate in good faith to amend such
covenant to preserve the original intent thereof in light of such change in
GAAP (subject to the approval of Requisite Lenders), provided that, until
so amended, such covenant shall continue to be computed in accordance with
GAAP prior to such change therein and Borrower shall provide to Agent and
Lenders reconciliation statements.
(pp) "General Security Agreement" shall mean the general security
agreement dated on or about the date hereof given by Borrower
in favour of Agent in respect of the Obligations.
(qq) "Governmental Authority" shall mean any nation or government,
any state, province, or other political subdivision thereof,
any central bank (or similar monetary or regulatory authority)
thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
(rr) "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 any that are or become classified as
hazardous or toxic under any Environmental Law).
(ss) "Hedging Obligations" shall mean, with respect to any Person,
the obligations of such Person under any of the following
agreements or arrangements to the extent that the primary
purpose thereof is the reduction of risk for fluctuations in
interest rates or currency or commodity values relating to its
customary business and not for speculative purposes: (i)
interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements and (ii) other agreements
or arrangements designed to protect such person against
fluctuations in interest rates or currency or commodity
values.
(tt) "Hypothec" shall mean the hypothec on movable property dated
on or about the date hereof given by Borrower in favour of
Congress in respect of the Obligations.
(uu) "Indebtedness" shall mean, with respect to any Person, any liability,
(i) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof) or
evidenced by bonds, notes, indentures or similar
instruments;
(ii) representing the balance deferred and unpaid of the
purchase price of any property or services, other
than ordinary course compensation to employees
(except any such balance that (A) constitutes an
account payable in the ordinary course of business of
such Person in connection with obtaining goods,
materials or services, to the extent such balance is
not unpaid more than ninety (90) days past the
original invoice date therefor unless otherwise
agreed by Agent or (B) is being contested in good
faith by appropriate proceedings diligently pursued);
(iii) all Capital Leases;
(iv) any contractual obligations, contingent or otherwise, of such Person to pay
or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by such Person, or in respect of which
such Person is otherwise directly or indirectly liable, including
contractual obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for
the payment or discharge thereof (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, or other financial condition, or to make
payment other than for value received;
(v) all obligations with respect to redeemable stock and
redemption or repurchase obligations under any
Capital Stock or other equity securities issued by
such Person, to the extent the holder thereof may
require redemption prior to the termination of this
Agreement;
(vi) all reimbursement obligations and other liabilities,
contingent or otherwise, of such Person with respect
to bonds, letters of credit, banker's acceptances or
similar documents or instruments issued for such
Person's account;
(vii) all indebtedness of such Person in respect of
indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in
this definition which is secured by any security
interest in, or mortgage or lien upon the interest in
any asset of such Person, whether or not such
obligations, liabilities or indebtedness are assumed
by or are a personal liability of such Person, all as
of such time; and
(viii) all obligations, liabilities and indebtedness of such
Person (marked to market) constituting Hedging
Obligations.
(vv) 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
Agent in connection with the preparation of this Agreement and
the other Financing Agreements and the financing arrangements
provided for herein.
(ww) "Intellectual Property" shall mean Borrower's now owned and hereafter
arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service
xxxx applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards; goodwill; customer and
other lists in whatever form maintained; trade secret rights, copyright
rights, rights in works of authorship, and contract rights relating to
computer software programs, in whatever form created or maintained.
(xx) "Intercompany Indebtedness" means unsecured Indebtedness owing by Borrower
to Merisel, Inc. or Merisel Americas, Inc. or any other Subsidiary of
Merisel, Inc.
(yy) "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months
duration as Borrower may elect, the exact duration to be
determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided that, Borrower may
not elect an Interest Period which will end after the last day
of the then-current term of this Agreement.
(zz) "Interest Rate" shall mean, as to Canadian Prime Rate Loans and other
non-contingent Obligations denominated in Canadian Dollars, a rate of
three-quarters of one percent (3/4%) per annum in excess of the Canadian
Prime Rate, as to US Prime Rate Loans and other non-contingent Obligations
denominated in US Dollars (except for Eurodollar Rate Loans), a rate of
one-quarter of one percent (1/4%) per annum in excess of the US Prime Rate,
as to Eurodollar Rate Loans, a rate of two (2%) percent per annum in excess
of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Agent of the request by or on
behalf of Borrower for such Eurodollar Rate Loans in accordance with the
terms hereof, whether such rate is higher or lower than any rate previously
quoted to Borrower; provided that, the Interest Rate shall mean the rate of
three percent (3%) per annum in excess of the Canadian Prime Rate as to
Canadian Prime Rate Loans and other non-contingent Obligations denominated
in Canadian Dollars, the rate of two and one-half percent (2 1/2%) per
annum in excess of the US Prime Rate as to US Prime Loans and other
non-contingent Obligations denominated in US Dollars (except for Eurodollar
Rate Loans), the rate of four and one-quarter (4 1/4%) percent per annum in
excess of the Adjusted Eurodollar Rate, as to Eurodollar Rate Loans at
Agent's option, without notice, (a) on Loans and non-contingent Obligations
(i) for the period on and after the date of termination or non-renewal
hereof until such time as Agent and Lenders have 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 (notwithstanding entry of any judgment against
Borrower) and (b) on the Revolving Loans at any time outstanding in excess
of the amounts available to Borrower under Article 2 hereof (unless Agent
and Lenders have consented in writing to making such amount available to
Borrower).
(aaa) "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.
(bbb) "Lenders" shall mean the financial institutions who are
signatories hereto as lenders and other persons made a party
to this Agreement as a Lender in accordance with Section 13.5
hereof, and their respective successors and assigns; sometimes
being referred to herein individually as a "Lender".
(xx) "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 Agent or any Lender for the
account of Borrower or any Obligor or (b) with respect to
which Agent on behalf of Lenders has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower
of its obligations to such issuer.
(yy) Loans" shall mean the Revolving Loans.
(zz) "Material Adverse Effect" shall mean a material adverse effect on (i) the
financial condition, business, performance, operations or properties of
Borrower, or (ii) the legality, validity or enforceability of this
Agreement or any of the other Financing Agreements; (iii) the legality,
validity, enforceability, perfection or priority of the security interests
and liens of Agent or any Lender upon the Collateral or any other property
which is security for the Obligations; (iv) the Collateral of Borrower or
the value of the Collateral; (v) the ability of Borrower to repay the
Obligations or of Borrower or Merisel, Inc. to perform its obligations
under this Agreement or any of the other Financing Agreements; or (vi) the
ability of Agent or any Lender to enforce the Obligations or realize upon
the Collateral or otherwise with respect to the rights and remedies of
Agent or any Lender under this Agreement or any of the other Financing
Agreements.
(aaa) "Maximum Credit" shall mean an amount not exceeding
$100,000,000 or such other lesser amount determined in
accordance with Section 2.5 less, in each case, the
Syndication Reserve.
(bbb) "Monthly Average Excess Availability" shall have the meaning set forth in
Section 6.3(2).
(ccc) "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)
until applied to reduce Eligible Accounts, returns, discounts,
claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available with respect to
such Eligible Accounts and bona fide claims made with respect
to such Eligible Accounts; provided that the amounts deducted
under clauses (a) or (b) to reduce such gross amount shall not
duplicate items for which Availability Reserves have been
established by Agent.
(ddd) "Net OLV" shall mean the Canadian Dollar Amount to be realized
from any orderly liquidation of Inventory at such time on a
"going out of business sale" basis as set forth in the most
recent acceptable appraisal of Inventory received by Lender in
accordance with Section 7.3, net of deductions for all
commissions, taxes, duties, delivery, operating expenses and
other liquidation costs.
(eee) "Net Recovery Cost Percentage" shall mean the fraction,
expressed as a percentage, (a) the numerator of which is Net
OLV of such Inventory, and (b) the denominator of which is the
cost determined on a weighted average cost basis in accordance
with GAAP of the aggregate amount of Inventory subject to such
appraisal.
(fff)"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 Agent or any Lender
arising under this Agreement or the other Financing Agreements, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor 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.
(ggg)"Obligor" shall mean Merisel, Inc. and any other 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.
(hhh)"Other Taxes" shall mean any present or future stamp or
documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any of the
other Financing Agreements.
(iii)"Participant" shall mean any financial institution that
acquires and holds a participation in the interest of Lender
in any of the Loans and Letter of Credit Accommodations in
conformity with the provisions of Section 13.8 of this
Agreement governing participations.
(jjj) "Payment Account" shall have the meaning set forth in Section 6.3 hereof.
(kkk) "Pension Plans" 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.
(lll) "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.
(mmm) "PPSA" shall mean the Personal Property Security Act as in
effect in the Province of Ontario, the Civil Code of Quebec as
in effect in the Province of Quebec or any other Canadian
Federal or Provincial statute pertaining to the granting,
perfecting, priority or ranking of security interests, liens,
hypothecs on personal property, and any successor statutes,
together with any regulations thereunder, in each case as in
effect from time to time.
(nnn)"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, vacation pay, government royalties or pension fund
obligations, together with the aggregate value, determined in accordance
with GAAP, of all Eligible Inventory which Agent, acting reasonably,
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.
(ooo) "Pro Rata Share" shall mean as to any Lender, the fraction
(expressed as a percentage) the numerator of which is such
Lender's Commitment and the denominator of which is the
aggregate amount of all of the Commitments of Lenders, as
adjusted from time to time in accordance with the provisions
of Section 13.5 hereof; provided, that, if the Commitments
have been terminated, the numerator shall be the unpaid amount
of such Lender's Loans and its interest in the Letter of
Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit
Accommodations.
(ppp) "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).
(qqq) "Renewal Date" shall have the meaning set forth in Section 13.1(1) hereof.
(rrr) "Required Lenders" shall mean, at any time, those Lenders
whose Pro Rata Shares aggregate sixty-six and two-thirds
(662/3%) percent or more of the aggregate of the Commitments
of all Lenders, or if the Commitments shall have been
terminated, Lenders to whom at least sixty-six and two-thirds
(662/3%) percent of the then outstanding Obligations are
owing.
(sss) "Revolving Loans" shall mean the loans now or hereafter made
by Lenders to or for the benefit of Borrower on a revolving
basis (involving advances, repayments and readvances) as set
forth in Section 2.1 hereof.
(ttt) "Special Agent Advances" shall have the meaning set forth in Section 12.10
hereof.
(uuu) "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 the close of business on the Business Day
immediately preceding the date on which the foreign exchange
computation is made.
(vvv) "Subordinated Indebtedness" shall mean Indebtedness of any
Person that is unsecured and that is subordinated in right of
payment to the full and final payment of all Obligations on
terms and conditions acceptable to Agent and irrevocably
designated in writing to Agent as "Subordinated Indebtedness"
by Borrower and the holder of such Indebtedness.
(www)"Subsidiary" shall mean, with respect to any Person, any corporation,
limited or general partnership, trust, association or other business entity
of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time,
Capital Stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency),
managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned by such Person and/or one or more Subsidiaries of such
Person.
(xxx) "Syndication Reserve" shall mean an amount of $5,000,000 to be
included as an Availability Reserve until such time as
Congress has reduced its Commitment to an amount not exceeding
$62,500,000.
(yyy) "Taxes" shall mean any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of
any Lender, such taxes (including income taxes, franchise
taxes or capital taxes) as are imposed on or measured by such
Lender's net income or capital by any jurisdiction (or any
political subdivision thereof).
(zzz) "Transferee" shall have the meaning set forth in Section 6.5 hereof.
(aaaa) "US Prime Rate" shall mean the rate announced by the US
Reference Bank, from time to time as its prime rate, whether
or not such announced rate is the best rate available at such
bank.
(bbbb) "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.
(cccc) "US GAAP" shall mean generally accepted accounting principles
in the United States of America as in effect from time to time
as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards
which are applicable to the circumstances as of the date of
determination consistently applied.
(dddd) "US Reference Bank" shall mean First Union National Bank, or
its successors and assigns, or such other bank as Agent may
from time to time designate, acting reasonably.
(eeee) "Value" shall mean, with respect to Inventory, the Canadian
Dollar Amount of the lower of (a) cost determined on a
weighted average cost basis in accordance with GAAP or (b) net
realizable value calculated by Borrower in accordance with
GAAP.
(ffff) "Voting Stock" shall mean with respect to any Person, (i) one
(1) or more classes of Capital Stock of such Person having
general voting powers to elect at least a majority of the
board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of
the happening of any contingency, and (ii) any Capital Stock
of such Person convertible or exchangeable without restriction
or further investment at the option of the holder thereof into
Capital Stock of such Person described in clause (i) of this
definition.
Article 2
CREDIT FACILITIES
2.1 Revolving Loans
(1) Subject to, and upon the terms and conditions contained herein, each Lender
severally (and not jointly) agrees to fund its Pro Rata Share of Revolving Loans
by way of Canadian Prime Rate Loans, US Prime Rate Loans and Eurodollar Rate
Loans to Borrower from time to time in amounts requested by Borrower up to the
aggregate principal amount equal to the sum of:
(a) eighty-five (85%) percent of the Net Amount of Eligible Accounts,
plus
(b) the lesser of:
(i) the sum of (A) the lesser of (x) fifty (50%) percent
of the Value of Eligible Inventory consisting of
Eligible Hardware and (y) 80% of the Net OLV of such
Eligible Inventory and (B) the least of (x)
twenty-five (25%) percent of the Value of Eligible
Inventory consisting of Eligible Software, (y) 80% of
the Net OLV of such Eligible Inventory and (z)
$5,000,000, and
(ii) $20,000,000
less
(c) any Availability Reserves.
(2) Agent may, in its discretion acting reasonably, from time to time, (a)
reduce the percentage referred to in Section 2.1(1)(a) to the extent that Agent
determines: that 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) has
increased or may be reasonably anticipated to increase above five (5%) percent,
(in which case such percentage shall be decreased by an amount not to exceed the
excess of such dilution ratio over 5%) or (b) reduce the percentages referred to
in Section 2.1(1)(b)(i) to the extent that Agent determines that: (i) the number
of days of the turnover of the Inventory for any period has changed in any
material respect or (ii) the liquidation value of the Eligible Inventory, or any
category thereof, has decreased in any material respect, or (iii) there is a
decrease in the Net Recovery Cost Percentage after the date hereof, or (iv) the
nature and quality of the Inventory has deteriorated. In determining whether to
reduce the applicable percentage(s), Agent may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing Availability Reserves. The
amount of any reduction in any advance percentage by Agent pursuant to this
Section 2.1(2) shall have a reasonable relationship to the matter described
herein which is the basis for such reduction in the good faith determination of
Agent. To the extent an Availability Reserve shall have been established which
is sufficient to address any event, condition or matter in a manner satisfactory
to Agent, in its good faith determination, Agent shall not exercise its rights
under this Section 2.2(2) to reduce the advance percentage, to address such
event, condition or matter.
(3) Except in Agent's discretion, with the consent of all Lenders, 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(4) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Agent or any 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 Agent the entire amount of any
such excess(es) for which payment is demanded.
(4) The aggregate amount of each Lender's Pro Rata Share of the Loans and Letter
of Credit Accommodations shall not exceed the amount of such Lender's
Commitment, as the same may from time to time be amended with the written
acknowledgment of Agent.
(5) Subject to the terms of this Agreement, Agent shall exclude Eligible
Inventory being purchased with Letter of Credit Accommodations from the Value of
Eligible Inventory for the purpose of Section 2.1(1)(b) and shall reduce the
amount of Loans available to Borrower by the then undrawn amounts of outstanding
Letter of Credit Accommodations for the purpose of purchasing such Eligible
Inventory as Revolving Loans to the extent required by Section 2.2(3)(a).
2.2 Letter of Credit Accommodations
(1) Subject to, and upon the terms and conditions contained herein, at the
request of Borrower, Agent agrees, for the ratable risk of each Lender according
to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations
for the account of Borrower containing terms and conditions reasonably
acceptable to Agent and the issuer thereof. Any payments made by Agent or any
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Canadian Prime Rate
Loans or US Prime Rate Loans, as applicable, to Borrower pursuant to this
Article 2. Agent shall administer Letter of Credit Accommodations in accordance
with its customary practises and policies as from time to time in effect.
(2) In addition to any usual and customary charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Agent, for the benefit of Lenders, a letter of credit fee
at a rate equal to three-quarters of one (3/4%) 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 Agent may, and upon the written direction of
Required Lenders shall, require Borrower to pay to Agent such letter of credit
fee at a rate equal to three (3%) percent per annum on such daily outstanding
balance for: (i) the period from and after the date of termination or
non-renewal hereof until Agent and Lenders have 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. 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.
(3) 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: (a) if the proposed Letter of Credit
Accommodation is for the purpose of purchasing Eligible Inventory which is not
being air freighted 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 (i) the percentage equal to one hundred (100%) percent
minus the then applicable percentages set forth in Section 2.1(1)(b)(i) above of
the Value of such Eligible Inventory, plus (ii) freight, taxes, duty and other
amounts which Agent 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 (b) if the proposed Letter of Credit Accommodation
is for any other purpose or the documents of title with respect thereto have not
been consigned to the issuer, an amount equal to one hundred (100%) percent of
the face amount thereof and, without duplication, all other commitments and
obligations made or incurred by Agent or any 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(3)(a) or Section 2.2(3)(b).
(4) Except in Agent's discretion, with the consent of all Lenders (i) the
Canadian Dollar Amount of all outstanding Letter of Credit Accommodations and
all other commitments and obligations made or incurred by Agent or any Lender in
connection therewith, shall not at any time exceed $10,000,000 at the time of
the issuance thereof. At any time an Event of Default exists or has occurred and
is continuing, upon Agent'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 collateral to Agent for
the Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(3) to the extent of such cash collateral.
(5) Borrower shall indemnify and hold Agent and Lenders harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Agent or any 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 except to the extent that any such losses,
claims, damages, liabilities, costs or expenses relate to the gross negligence
or wilful misconduct of Agent and Lenders as determined by a final and
non-appealable order of a court of competent jurisdiction. 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
except as caused by Lender's own gross negligent or wilful misconduct as
determined by a final and non-appealable order of a court of competent
jurisdiction. The provisions of this Section 2.2(5) shall survive the payment of
Obligations and the termination or non-renewal of this Agreement.
(6) Nothing contained herein shall be deemed or construed to grant Borrower any
right or authority to pledge the credit of Agent or Lenders in any manner. Agent
and Lenders shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lenders unless Agent 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 in good faith by Agent, 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. Agent shall have the sole and exclusive right and
authority to, and Borrower shall not: (a) at any time an Event of Default exists
or has occurred and is continuing, (i) approve or resolve any questions of
non-compliance of documents, (ii) give any instructions as to acceptance or
rejection of any documents or goods or (iii) execute any and all applications
for steamship or airway guaranties, indemnities or delivery orders, and (b) at
any time without Lender's written consent, (i) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents, and (ii) 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. Agent may take such actions either in its own name or in
Borrower's name provided that if Agent proposes to take any action in Borrower's
name prior to an Event of Default, Agent will use reasonable efforts to obtain
Borrower's consent to such action prior to the taking thereof.
(7) 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 Agent. Any duties or obligations
undertaken by Agent to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Agent in favour of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Agent, for the ratable benefit of
Lenders and to apply in all respects to Borrower so long as Borrower has
consented to the terms thereof.
2.3 Commitments
The aggregate amount of each Lender's Pro Rata Share of the Loans and
Letter of Credit Accommodations shall not exceed the amount of such Lender's
Commitment, as the same may from time to time be amended with the written
acknowledgment of Agent.
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.
2.5 Changes in Maximum Credit
(1) If Borrower has reduced the Maximum Credit pursuant to Section 2.5(2), Agent
may from time to time increase the amount of the Maximum Credit by $25,000,000
up to an amount not to exceed $100,000,000 and each Lender's Commitment shall be
increased by its Pro Rata Share of such increase if Borrower requests a Loan
which, if made, would cause the aggregate amount of Loans and Letter of Credit
Accommodations outstanding to exceed the then existing Maximum Credit subject to
the following:
(a) no 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
(b) Borrower shall pay to Lender a fee of $125,000 which shall be fully earned
as of and payable on the date of such increase.
(2) Borrower may upon not less than five (5) Business Days notice (which notice
shall be irrevocable) to Agent, reduce from time to time the Maximum Credit to
an amount not less than $50,000,000 and each Lender's Commitment shall be
reduced proportionately subject to the following:
(a) no 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
(b) any such reduction shall be in an amount not less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof; and
(c) Borrower shall pay to Agent a fee equal to one-quarter of one
percent (1/4 %) of the amount of such reduction which shall be
fully earned and payable as of the date of notice is given by
Borrower with respect to such reduction.
Article 3
INTEREST AND FEES
3.1 Interest
(1) Borrower shall pay to Agent interest on the outstanding principal amount of
Loans and other non-contingent Obligations not paid when due at the applicable
Interest Rate. All interest accruing hereunder on and after an Event of Default
or termination or non-renewal hereof shall be payable at the applicable Interest
Rate on demand.
(2) Borrowers may from time to time request Eurodollar Rate Loans or that US
Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such request
from or on behalf of Borrower shall specify the amount of the US Prime Rate
Loans which will constitute Eurodollar Rate Loans (subject to the limits set
forth below) and the Interest Period to be applicable to such Eurodollar Rate
Loans. Subject to the terms and conditions contained herein, three (3) Business
Days after receipt by Agent of such a request from or on behalf of Borrower,
such Eurodollar Rate Loans shall be made or US Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, (i) no Event of Default, or act, condition
or event which with notice or passage of time or both would constitute an Event
of Default exists or has occurred and is continuing, (ii) no Interest Period
shall extend beyond the then current Renewal Date or if any party hereto shall
have sent any notice of termination of this Agreement, the date of termination
of this Agreement, (iii) Borrower shall have complied with such customary
procedures as are established by Agent and specified by Agent to Borrower from
time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no more
than five (5) Interest Periods may be in effect at any one time (unless
otherwise agreed by Agent and Borrower), (v) the aggregate amount of the
Eurodollar Rate Loans to Borrower must be in an amount not less than
US$5,000,000 or an integral multiple of US$1,000,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by Borrower,
shall not exceed eighty (80%) percent of the lowest principal amount of the
Loans, which it is anticipated will be outstanding during the applicable
Interest Period, in each case as determined by Agent (but with no obligation of
Agent or any Lender to make such Loans), and (vii) Agent shall have determined
that the Interest Period or Adjusted Eurodollar Rate is available to the Lenders
and can be readily determined as of the date of request for such Eurodollar Rate
Loan by Borrower. Any request by Borrower for any Eurodollar Rate Loans or to
convert US Prime Rate Loans to Eurodollar Rate Loans or to continue any existing
Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the
contrary contained herein, Agent, Lenders and US Reference Bank shall not be
required to purchase United States Dollar deposits in the London interbank
market or other applicable Eurodollar Rate market to fund any Eurodollar Rate
Loans, but the provisions hereof shall be deemed to apply as if Agent, Lenders
and US Reference Bank had purchased such deposits to fund the Eurodollar Rate
Loans.
(3) Any Eurodollar Rate Loans shall automatically convert to US Prime Rate Loans
upon the last day of the applicable Interest Period, unless Agent has received
and approved a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms hereof. Any
Eurodollar Rate Loans shall, unless otherwise agreed by Agent, at the end of the
applicable Interest Period convert to US Prime Rate Loans in the event that the
then current Renewal Date or the termination date of this Agreement would occur
before the expiration of the next applicable Interest Period.
(4) 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) year in the case of US Prime Rate
Loans and Eurodollar Loans, as applicable and actual days elapsed. The interest
rate on non-contingent Obligations (other than Eurodollar Rate Loans) 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. 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.
(5) For purposes of disclosure under the Interest Act (Canada), where interest
is calculated pursuant hereto at a rate based upon a 360 or 365 day year (the
"First Rate"), it is hereby agreed that the rate or percentage of interest on a
yearly basis is equivalent to such First Rate multiplied by the actual number of
days in the year divided by 360 or 365, as applicable.
(6) Notwithstanding the provisions of this Article 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 Agent will be conclusive for the purposes of such
determination.
(7) A certificate of an authorized signing officer of Agent 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.
(8) 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 Unused Line Fee
Borrower shall pay to Agent monthly an unused line fee in Canadian
Dollars equal at a rate equal to one-quarter of one (1/4%) percent per annum
calculated upon the amount by which Maximum Credit then in effect exceeds the
average daily principal balance (in Canadian Dollar Amount) 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 with the first payment thereof
to be made on February 1, 2001.
3.3 Other Fees
Borrower shall pay to Agent for the benefit of itself and Lenders as
set forth therein the fees and other amounts set forth in the Fee Letter by
Borrower and Agent in the amounts and at the times specified therein.
3.4 Payments
Unless otherwise specified by Agent, all interest, fees and other
payments by Borrower hereunder shall be in the currency in which such
Obligations are denominated.
3.5 Changes in Laws and Increased Costs of Loans
(1) Notwithstanding anything to the contrary contained herein, all Eurodollar
Rate Loans shall, upon notice by Agent to Borrower, (a) convert to US Prime Rate
Loans in the event that any change in applicable law or regulation (or the
interpretation or administration thereof) shall make it unlawful for a Lender,
US Reference Bank or any Participant to make or maintain Eurodollar Rate Loans
or to comply with the terms hereof in connection with the Eurodollar Rate Loans,
or (b) convert to US Prime Rate Loans at the end of the applicable Interest
Period in the event that any change in applicable law or regulation (or the
interpretation or administration thereof shall either (i) result in the increase
in the costs to a Lender, US Reference Bank or any Participant of making or
maintaining any Eurodollar Rate Loans by an amount reasonably deemed by Lender
to be material, or (ii) reduce the amounts received or receivable by any Lender
or Participant in respect thereof, by an amount deemed by Agent to be material
or (c) convert to US Prime Loans at the end of the applicable Interest Period if
the cost to a Agent, US Reference Bank or any Lender or Participant of making or
maintaining any Eurodollar Rate Loans shall otherwise increase by an amount
deemed by Agent to be material. Borrower shall pay to Agent, for ratable benefit
of the Lenders, upon demand by Agent (or Agent may, at its option, charge any
loan account of Borrower) any amounts required to compensate Agent, any Lender,
the US Reference Bank or any Participant for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Agent or any Lender setting forth the basis
for the determination of such amount necessary to compensate such Lender as
aforesaid shall be delivered to Borrower and shall be conclusive, absent
manifest error.
(2) If any payments or prepayments in respect of the Eurodollar Rate Loans are
received by Agent other than on the last day of the applicable Interest Period
(whether pursuant to acceleration, upon maturity or otherwise), including any
payments pursuant to the application of collections under Section 6.3 or any
other payments made with the proceeds of Collateral, Borrower shall pay to Agent
for the ratable benefit of Lenders, upon demand by Agent (or Agent may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Agent, such Lender, the US Reference Bank or any Participant for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
Article 4
CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations
Each of the following is a condition precedent to Lenders (or Agent on
behalf of Lenders) making the initial Loans and providing the initial Letter of
Credit Accommodations hereunder:
(1) Agent shall have received evidence (including, without limitation, any
subordinations or releases of any other liens or security interests in the
Collateral required by Agent), in form and substance satisfactory to Agent, that
(a) Agent 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; and (b) any purchase money security interest in Borrower's Inventory
existing on the date hereof does not extend to the proceeds thereof (other than
insurance proceeds and cash proceeds not constituting Accounts, where
applicable) unless such purchase money security interest has been subordinated
to the security interests of Agent and Lenders in such assets in a manner
satisfactory to Agent.
(2) all requisite corporate action and proceedings in connection with this
Agreement and the other Financing Agreements shall be reasonably satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Agent may have requested in connection
therewith, such documents where requested by Agent or its counsel to be
certified by appropriate corporate officers or Governmental Authorities;
(3) no act, condition or event shall have occurred in the assets, business or
prospects of Borrower or Obligor since the date of Agent's latest field
examination which has or is reasonably likely to have a Material Adverse Effect;
(4) Agent shall have completed a field review of the Borrower's reporting and
record keeping methods, Records and such other information with respect to the
Collateral as Agent may require to determine the amount of Revolving Loans
available to Borrower, the results of which shall be satisfactory to Agent, not
more than three (3) Business Days prior to the date hereof;
(5) Agent shall have received, in form and substance satisfactory to Agent, all
consents, waivers, acknowledgements 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 Agent's
security interests in the Collateral, waivers or subordinations by such persons
of any security interests, liens or other claims by such persons to the
Collateral and agreements permitting Agent access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(6) Agent shall have received evidence of insurance and loss payee endorsements
required hereunder and under the other Financing Agreements, in form and
substance satisfactory to Agent, and certificates of insurance policies and/or
endorsements naming Agent as first loss payee and additional insured as required
by Agent;
(7) the terms and conditions of the material distribution arrangements between
Borrower and Compaq Canada, Hewlett Packard Canada, Toshiba Canada, Microsoft
and IBM Canada shall be satisfactory to Agent and its counsel;
(8) the arrangements for termination of Borrower's existing receivables
securitization program and the satisfaction of Borrower's outstanding
obligations thereunder shall be satisfactory to Agent;
(9) Agent 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 Agent may request;
(10) the other Financing Agreements and all instruments and documents hereunder
and thereunder shall have been duly executed and delivered to Agent, in form and
substance satisfactory to Lender;
(11) the Excess Availability as determined by Agent shall be at least
$25,000,000 after giving effect to the initial Revolving Loans and Letter of
Credit Accommodations made or to be made hereunder;
(12) Agent shall have received, in form and substance satisfactory to Agent,
evidence that Merisel, Inc. shall have (a) repurchased all of its outstanding 12
1/2% Senior Notes due 2004 (the "Senior Notes") or (b) received the necessary
consents from the holders of the Senior Notes satisfactory to Agent required to
permit the transactions contemplated hereby or (c) deposited with an escrow
agent satisfactory to Agent an amount equal to the outstanding principal amount
of the Senior Notes on or before the Closing Date plus any repayment premiums
and other amounts required to retire the Senior Notes, that such amounts to be
used for the sole purpose of funding the repurchase of Senior Notes and the cash
control and escrow arrangements satisfactory to Agent have been established or
(d) deposited an amount sufficient to redeem or defease the outstanding Senior
Notes pursuant to the terms of the indenture governing the Senior Notes; and
(13) Borrower shall have established the Blocked Accounts and drawcheque
arrangements and Agent shall have received, in form and substance satisfactory
to Agent, all agreements with the depository banks and Borrower with respect to
such Blocked Account as Agent may require pursuant to Section 6.3 hereof, duly
authorized, executed and delivered by such depository banks and Borrower.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations
Each of the following is an additional condition precedent to Loans and
Letter of Credit Accommodations to Borrower, including the initial Loans and
Letter of Credit Accommodations and any future Loans and Letter of Credit
Accommodations:
(1) 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 (except to the extent such
representations and warranties relate to an earlier date, in which case, such
representations and warranties shall be true and correct in all material
respects as of such earlier date);
(2) 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; and
(3) no law, regulation, order, judgment or decree of any Governmental Authority
shall exist which, and neither Agent nor any Lender shall have received any
notice that any action, suit, investigation, litigation or proceeding is pending
or threatened in any court or before any arbitrator or Governmental Authority
which (A) purports to enjoin, prohibit, restrain or otherwise affect (1) the
making of the Loans or the provision of Letter of Credit Accommodations or (2)
the consummation of the transactions contemplated pursuant to the terms hereof
of the Financing Agreements, or (B) has or could reasonably be expected to have
a Material Adverse Effect.
Article 5
INTENTIONALLY DELETED
Article 6
COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account
Agent 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
the loan account(s) shall be made in accordance with Agent's customary practices
as in effect from time to time.
6.2 Statements
Agent shall render to Borrower each month a statement setting forth the
balance in the Borrower's loan account(s) maintained by Agent for Borrower
pursuant to the provisions of this Agreement, including principal, interest,
fees, costs and expenses. Each such statement may be subject to subsequent
adjustment by Agent and notice of such adjustment shall be given to Borrower but
each such statement 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 Agent receives a written notice
from Borrower of any specific exceptions of Borrower thereto within thirty (30)
days after the date such statement has been deemed to have been given or made by
Agent in accordance with Section 13.2. Until such time as Agent 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 Agent by Borrower.
6.3 Collection of Accounts
(1) Borrower shall establish and maintain, at its expense, blocked accounts or
lockboxes and related blocked accounts (in either case, "Blocked Accounts"), as
Agent may specify, and Agent may establish and maintain bank accounts of Agent
("Payment Accounts") in each case with such banks as are acceptable to Agent
into which Borrower shall, in accordance with Agent'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 Agent, providing that all items received or
deposited in the Blocked Accounts are subject to the first priority security
interest of Agent, 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, on a daily basis after receipt of written notice
from Agent, in immediately available funds, all funds received or deposited into
the Blocked Accounts to the Payment Accounts or such other bank account of Agent
as Agent may from time to time designate for such purpose. Borrower agrees that
all payments made to such Blocked Accounts shall be subject to the first
priority security interest of Agent and that all payments made to such Payment
Accounts or other funds received and collected by Agent, whether on the Accounts
or as proceeds of Inventory or other Collateral or otherwise shall be the
property of Agent.
(2) From the date of this Agreement and until such time as the Four Month
Average calculated by Agent is at least $20,000,000 and provided that no Event
at Default has occurred and is continuing and no event, act, or condition has
occurred which has or is reasonably likely to have a Material Adverse Effect,
Agent shall instruct the depository banks at which the Blocked Accounts of
Borrower are maintained to transfer all funds received or deposited into such
Blocked Accounts to the Payment Account at any time that there are outstanding
Loans made to or Letters of Credit Accommodations provided to Borrower.
Thereafter, Agent shall instruct the depository banks at which the Blocked
Accounts of Borrower are maintained to transfer the funds on deposit in such
Blocked Accounts to such operating bank account of Borrower as the Borrower may
specify in writing to Agent until such time as Agent shall notify the depository
bank otherwise. Agent may from time to time further instruct the depository
banks at which the Blocked Accounts of Borrower are maintained to transfer all
funds received or deposited into such Blocked Accounts to the Payment Account at
any time that the there are outstanding Loans made to, or Letter of Credit
Accommodations provided for, Borrower, if any of the following have occurred:
(i) an Event of Default shall exist or have occurred and be continuing, or (ii)
the Four Month Average calculated by Agent is less than $20,000,000 or (iii)
Excess Availability is less than $20,000,000 for a period of ten (10)
consecutive days or (iv) Excess Availability is less than $10,000,000 on any
day. For the purposes of this Section 6.3(2), "Four Month Average" means the
quotient of (x) the sum of the Monthly Average for each fiscal month during any
period of four (4) consecutive months divided by (y) four (4). "Monthly Average"
means the average daily Excess Availability during any fiscal month.
(3) 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 Agent of immediately available
funds in the Payment Account provided such payments and notice thereof are
received in accordance with Agent'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 on the
date of receipt of immediately available funds by Agent in the Payment Account
provided such payments or other funds and notice thereof are received in
accordance with Agent'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.
(4) Borrower and all of its affiliates, subsidiaries, shareholders, directors,
employees or agents shall, acting as trustee for Agent and Lenders, receive,
subject to the first priority security interest of Agent, 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 remit the same or cause the same to be
remitted, in kind, to Agent to the extent Borrower would be required to deposit
same in Blocked Accounts or remit same to Agent under this Agreement provided
that Borrower may transfer funds in Blocked Accounts as provided in Section
6.3(2). In no event shall the same be commingled with Borrower's own funds not
held in the Blocked Accounts. Borrower agrees to reimburse Agent on demand for
any amounts owed or paid to any bank at which a Blocked Account is established
or any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Agent's payments to or indemnification of such
bank or person. The obligation of Borrower to reimburse Agent for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 Payments
(1) All Obligations shall be payable to the Payment Account as provided in
Section 6.3 or such other place as Agent may designate from time to time. Agent
shall apply payments received or collected from Borrower or Obligor or for the
account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Agent or any Lender from Borrower; second,
to pay interest due in respect of any Loans; third, to pay principal due in
respect of the Loans; fourth, to pay or prepay any other Obligations whether or
not then due, in such order and manner as Agent determines. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by
Borrower, or unless an Event of Default shall exist or have occurred and be
continuing, Agent and Lenders shall not apply any payments which it receives to
any Eurodollar Rate Loans, except (i) on the expiration date of the Interest
Period applicable to any such Eurodollar Rate Loans, or (ii) in the event that
there are no outstanding Prime Rate Loans. At Agent option, all principal,
interest, fees, costs, expenses and other charges provided for in this Agreement
or the other Financing Agreements may be charged directly to the loan account(s)
of Borrower. To the extent Agent or any Lender receives any payments or
collections in respect of the Obligations in a currency other than Canadian
Dollars or US Dollars, Agent may, at its option (but is not obligated to),
convert such other currency to Canadian Dollars or US Dollars at the conversion
rate on such date and in such market as Agent may reasonably select (regardless
of whether such rate is the best available rate). Borrower shall pay the costs
of such conversion (or Agent may, at its option, charge such costs to the loan
account of Borrower maintained by Agent). Payments and collections received in
any currency other than the currency in which any outstanding Obligations are
denominated will be accepted and/or applied at the discretion of Agent. At Agent
option, all principal, interest, fees, costs, expenses and other 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
Agent and Lenders free and clear of, and without deduction or withholding for or
on account of, any setoff, counterclaim or defense of any kind.
(2) If after receipt of any payment of, or proceeds of Collateral applied to the
payment of, any of the Obligations, Agent or any 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 Agent and Lenders and does hereby indemnify and hold
Agent and Lenders harmless for the amount of any payments or proceeds
surrendered or returned to the extent that such Obligations are not validly
reinstated and collectible. This Section 6.4 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 Taxes.
(1) Any and all payments by or on behalf of Borrower hereunder and under any
other Financing Agreement shall be made, in accordance with Section 6.4 free and
clear of and without deduction for any and all Taxes, excluding (i) income taxes
imposed on the net income of any Lender (or any transferee or assignee of such
Lender, including any Participant, any such transferee or assignee being
referred to as a "Transferee"), and (ii) capital, franchise or similar taxes
imposed on or determined by reference to the net income or capital of any Lender
(or Transferee), in each case by Canada or by the jurisdiction under the laws of
which such Lender (or Transferee) (A) is organized or any political subdivision
thereof, or (B) has its applicable lending office located. In addition, Borrower
agrees to pay to the relevant Governmental Authority in accordance with
applicable law any Other Taxes.
(2) If Borrower shall be required by law to deduct or withhold in respect of any
Taxes or Other Taxes from or in respect of any sum payable hereunder to Agent or
any Lender, then:
(i) the sum payable shall be increased as necessary so
that after making all required deductions and
withholdings (including deductions and withholdings
applicable to additional sums payable under this
Section) such Lender (or Agent on behalf of such
Lender) receives an amount equal to the sum it would
have received had no such deductions or withholdings
been made;
(ii) Borrower shall make such deductions and withholdings;
(iii) Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) to the extent not paid to Agent and Lenders pursuant
to clause (i) above, the Borrower shall also pay to
Agent or any Lender, at the time interest is paid,
all additional amounts which Agent or any Lender
specifies as necessary to preserve the after-tax
yield such Lender would have received if such Taxes
had not been imposed.
(3) Within thirty (30) days after the date of any payment by Borrower of Taxes
or Other Taxes, upon Agent request, Borrower shall furnish to Agent the original
or a certified copy of a receipt evidencing payment thereof, or other evidence
of payment reasonably satisfactory to Agent.
(4) Borrower will indemnify Agent and each Lender or Transferee for the full
amount of Taxes and Other Taxes paid by Agent or such Lender (or Transferee, as
applicable). If Agent or such Lender receives a refund in respect of any Taxes
or Other Taxes for which Lender (or Transferee) has received payment from
Borrower hereunder, shall credit to the loan account of Borrower the amount of
such refund plus any interest received (but only to the extent of indemnity
payments made, or additional amounts paid, by Borrower under this Section 6.5
with respect to the Taxes (to the extent lender determines that such refund is
allocable to such Taxes or Other Taxes) or Other Taxes giving rise to such
refund).
(5) Borrower shall not be required to indemnify any Non-Canadian Lender or to
pay any additional amounts to any Non-Canadian Lender, in respect of federal
withholding tax pursuant to subsections (1) or (3) above to the extent that the
(i) the obligation to withhold amounts with respect to Canadian federal
withholding tax was applicable on the date such Non-Canadian Lender became a
party to this Agreement (or, in the case of a Transferee that is a Participant,
on the date such Participant became a Transferee hereunder) or, that, this
subsection (4) shall not apply (A) to any Transferee that becomes a Transferee
as a result of an assignment, participation, transfer or designation made at the
request of Borrower.
6.6 Authorization to Make Loans
Agent and each Lender is authorized to make the Loans and provide the
Letter of Credit Accommodations (a) based upon written instructions received
from anyone purporting to be an officer of Borrower or other person authorized
in writing by Borrower or (b) at the discretion of Agent, in accordance with the
provisions of this Agreement, 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 12:00 noon 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.
6.7 Use of Proceeds
Borrower shall use the initial proceeds of the Loans provided by
Lenders to Borrower hereunder only for: (a) payments to each of the persons
listed in the disbursement direction letter furnished by Borrower to Agent on or
about the Closing Date 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 Lenders 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.
6.8 Pro Rata Treatment.
Except to the extent otherwise provided in this Agreement: (a) the
making and conversion of Loans shall be made among the Lenders based on their
respective Pro Rata Shares as to the Loans, and (b) each payment on account of
any Obligations to or for the account of one or more of Lenders in respect of
any Obligations due on a particular day shall be allocated among the Lenders
entitled to such payments based on their respective Pro Rata Shares and shall be
distributed accordingly.
6.9 Sharing of Payments, Etc.
(1) Borrower agrees that, in addition to (and without limitation of) any right
of setoff, banker's lien or counterclaim any Agent or Lender may otherwise have,
each Lender shall be entitled, at its option when an Event of Default has
occurred and is existing hereof (but subject, as among Agent and Lenders, to the
provisions of Section 12.3(2)), to offset balances held by it for the account of
Borrower at any of its offices, in dollars or in any other currency, against any
principal of or interest on any Loans owed to such Lender or any other amount
payable to such Lender hereunder, that is not paid when due (regardless of
whether such balances are then due to Borrower), in which case it shall promptly
notify Borrower and Agent thereof; provided, that, such Lender's failure to give
such notice shall not affect the validity thereof. If any Lender (including
Agent) shall obtain from Borrower payment of any principal of or interest on any
Loan owing to it or payment of any other amount under this Agreement or any of
the other Financing Agreements through the exercise of any right of setoff,
banker's lien or counterclaim or similar right or otherwise (other than from
Agent as provided herein), and, as a result of such payment, such Lender shall
have received more than its Pro Rata Share of the principal of the Loans or more
than its share of such other amounts then due hereunder or thereunder by
Borrower to such Lender than the percentage thereof received by any other
Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount
of such excess and simultaneously purchase from such other Lenders a
participation in the Loans or such other amounts, respectively, owing to such
other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with their respective Pro Rata
Shares or as otherwise agreed by Lenders. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.
(2) Borrower agrees that any Lender so purchasing such a participation (or
direct interest) may exercise, in a manner consistent with this Section, all
rights of setoff, banker's lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender were a direct holder of Loans or
other amounts (as the case may be) owing to such Lender in the amount of such
participation.
(3) Nothing contained herein shall require any Lender to exercise any such right
or shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness or obligation
of Borrower. If, under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, assign such
rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
6.10 Settlement Procedures
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and
Lenders, Agent may, subject to the terms of this Section, make
available, on behalf of Lenders, the full amount of the Loans
requested or charged to Borrower's loan account(s) or
otherwise to be advanced by Lenders pursuant to the terms
hereof, without any requirement of prior notice to Lenders of
the proposed Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders as provided in
this Section, the amount of each Lender's Pro Rata Share of the outstanding
Loans shall be computed weekly, and shall be adjusted upward or downward on
the basis of the amount of the outstanding Loans as of 5:00 p.m. Toronto
time on the Business Day immediately preceding the date of each settlement
computation; provided, that Agent retains the absolute right at any time or
from time to time to make the above described adjustments at intervals more
frequent than weekly, but in no event more than twice in any week. Agent
shall deliver to each of the Lenders after the end of each week, or at such
lesser period or periods as Agent shall determine, a summary statement of
the amount of outstanding Loans for such period (such week or lesser period
or periods being hereinafter referred to as a "Settlement Period"). If the
summary statement is sent by Agent and received by a Lender prior to 2:00
p.m. Toronto time, then such Lender shall make the settlement transfer
described in this Section by no later than 2:00 p.m. Toronto time on the
next Business Day following the date of receipt. If, as of the end of any
Settlement Period, the amount of a Lender's Pro Rata Share of the
outstanding Loans is more than such Lender's Pro Rata Share of the
outstanding Loans as of the end of the previous Settlement Period, then
such Lender shall forthwith (but in no event later than the time set forth
in the preceding sentence) transfer to Agent by wire transfer in
immediately available funds the amount of the increase. Alternatively, if
the amount of a Lender's Pro Rata Share of the outstanding Loans in any
Settlement Period is less than the amount of such Lender's Pro Rata Share
of the outstanding Loans for the previous Settlement Period, Agent shall
forthwith transfer to such Lender by wire transfer in immediately available
funds the amount of the decrease. The obligation of each of the Lenders to
transfer such funds and effect such settlement shall be irrevocable and
unconditional and without recourse to or warranty by Agent. Agent and each
Lender agrees to xxxx its books and records at the end of each Settlement
Period to show at all times the dollar amount of its Pro Rate Share of the
outstanding Loans and Letter of Credit Accommodations. Each Lender shall
only be entitled to receive interest on its Pro Rata Share of the Loans to
the extent such Loans have been funded by such Lender. Because the Agent on
behalf of Lenders may be advancing and/or may be repaid Loans prior to the
time when Lenders will actually advance and/or be repaid such Loans,
interest with respect to Loans shall be allocated by Agent in accordance
with the amount of Loans actually advanced by and repaid to each Lender and
the Agent and shall accrue from and including the date such Loans are so
advanced to but excluding the date such Loans are either repaid by Borrower
or actually settled with the applicable Lender as described in this
Section.
(c) To the extent that Agent has made any such amounts available and the
settlement described above shall not yet have occurred, upon repayment of
any Loans by Borrower, Agent may apply such amounts repaid directly to any
amounts made available by any Agent pursuant to this Section. In lieu of
weekly or more frequent settlements, Agent may at any time require each
Lender to provide Agent with immediately available funds representing its
Pro Rata Share of each Loan, prior to Agent disbursement of such Loan to
Borrower. In such event, all Loans under this Agreement shall be made by
the Lenders simultaneously and proportionately to their Pro Rata Shares. No
Lender shall be responsible for any default by any other Lender in the
other Lender's obligation to make a Loan requested hereunder nor shall the
Commitment of any Lender be increased or decreased as a result of the
default by any other Lender in the other Lender's obligation to make a Loan
hereunder.
(d) If Agent is not funding a particular Loan to Borrower pursuant to this
Section above on any day, Agent may assume that each Lender will make
available to Agent such Lender's Pro Rata Share of the Loan requested or
otherwise made on such day and Agent may, in its discretion, but shall not
be obligated to, cause a corresponding amount to be made available to
Borrower on such day. If Agent makes such corresponding amount available to
such Borrower and such corresponding amount is not in fact made available
to Agent by such Lender, Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest
thereon for each day from the date such payment was due until the date such
amount is paid to Agent at the Interest Rate. During the period in which
such Lender has not paid such corresponding amount to Agent,
notwithstanding anything to the contrary contained in this Agreement or any
of the other Financing Agreements, the amount so advanced by Agent to
Borrower shall, for all purposes hereof, be a Loan made by Agent for its
own account. Upon any such failure by a Lender to pay Agent, Agent shall
promptly thereafter notify Borrower of such failure and Borrower shall
immediately pay such corresponding amount to Agent for its own account. A
Lender who fails to pay Agent its Pro Rata Share of any Loans made
available by the Agent on such Lender's behalf, or any Lender who fails to
pay any other amount owing by its Agent, is a "Defaulting Lender". Agent
shall not be obligated to transfer to a Defaulting Lender any payments made
by or on behalf of Borrower or any Obligor to Agent for the Defaulting
Lender's benefit, nor shall a Defaulting Lender be entitled to the sharing
of any payments hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. Agent may hold and, in its
discretion, relend to Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender. For purposes of
voting or consenting to matters with respect to this Agreement and the
other Financing Agreements and determining Pro Rata Shares, such Defaulting
Lender shall be deemed not to be a "Lender" and such Lender's Commitment
shall be deemed to be zero (0). This Section shall remain effective with
respect to a Defaulting Lender until such default is cured. The operation
of this Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, or relieve or excuse the performance by Borrower
or Obligor of their duties and obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to
advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to
prejudice any rights that Borrower may have against any Lender
as a result of any default by any Lender hereunder in
fulfilling its Commitment.
Article 7
COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting
Borrower shall provide Agent with the following documents in a form
satisfactory to Lender:
(a) with respect to Accounts:
(i) summary aged trial balance of Accounts for all
customers with Account balances in excess of the
Canadian Dollar Amount of $1,000,000 by due date on a
weekly basis as of the last Business Day of each week
by the second Business Day of the next week;
(ii) an aggregate aged balance of Accounts for all other
customers by due date on a weekly basis as of the
last Business Day of each week by the second Business
Day of the next week;
(iii) a summary aged trial balance for all customers on a
monthly basis as of the last Business Day of the
preceding month within 20 days after the end of each
month;
(iv) a roll forward of Accounts which includes total daily
sales, total daily credits, total daily cash
applications and total daily write-offs as of the
close of business of the preceding Business Day by
11:00 a.m. each Business Day; and
(v) a listing of all credit notes for amounts in excess
of the Canadian Dollar Amount of $500,000 on a weekly
basis to the extent not previously provided by the
second Business Day of each week.
(b) on a monthly basis within twenty (20) days after the end of each
month end or more frequently as Agent may request:
(i) perpetual Inventory reports;
(ii) Inventory reports by category, location, vendor aging and average
costs;
(iii) summary aged trial balance of accounts payable based on invoice date;
(iv) Priority Payables report by category and amount;
(v) Inventory obsolescence report; and
(vi) general ledger trial balance of Borrower (except for
the last month of each fiscal quarter) and such other
amount as Agent may reasonably request with respect
to Borrower's general ledger accruals.
(c) a listing of Inventory subject to any purchase money security
interest by vendor and average cost on a weekly basis as of
the last Business Day of each week by the second Business Day
of the next week.
(d) upon Agent's reasonable 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.
(e) such other reports as to the Collateral as Agent shall
reasonably 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 Agent and to follow Agent'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 Agent promptly of: (a) 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, in each case, involving an amount in
excess of the Canadian Dollar Amount of $500,000 in aggregate, (b) all
information relating to a material adverse change in the financial
condition of any account debtor with an Account balance in excess of
$500,000 to the extent known to Borrower and (c) any event or circumstance
which, to Borrower's knowledge would cause Agent to consider any then
existing Account in an amount in excess of the Canadian Dollar Amount of
$500,000 as no longer constituting an Eligible Account. No credit,
discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor without Agent's consent, except in
the ordinary course of Borrower's business in accordance with practices and
policies previously disclosed in writing to Agent. 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, Agent 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 Agent any return
of Inventory by any one account debtor if the Inventory so returned in such
case has a value in excess of $500,000. At any time that Inventory is
returned, reclaimed or repossessed to or for the account of Borrower, 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
under Section 10.1(1)(a) exists or has occurred and is continuing, Borrower
shall, upon Agent's request, not issue any credits, discounts or allowances
with respect thereto without Agent's prior written consent except to the
extent that Borrower is obligated to do so pursuant to agreements entered
into with such account debtor in the ordinary course of business prior to
the occurrence of or such Event of Default.
(c) With respect to each Eligible Account: (a) the amounts shown on any invoice
delivered to Agent or schedule thereof delivered to Agent shall be true and
complete, (b) no payments shall be made thereon except payments immediately
delivered to Agent or Borrower pursuant to Section 6.3 of this Agreement,
(c) no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to
Agent in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed to
Lender, (d) there shall be no setoffs, deductions, contras, defences,
counterclaims or disputes existing or asserted with respect thereto except
as reported to Agent in accordance with the terms of this Agreement (e)
none of the transactions giving rise thereto will violate any applicable
federal or provincial laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all
such documentation will be legally enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, winding-up,
moratorium and other similar laws generally affecting the rights of
creditors and the fact that specific performance and injunction are
equitable remedies available only in the discretion of the court and the
fact that a Canadian court will render judgement denominated only in
Canadian Dollars.
(d) Agent shall have the right at any time or times, in the name
of a nominee of Agent, or in Agent's name, after the
occurrence of an Event of Default to verify the validity,
amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or
otherwise.
(e) Upon Agent's request, Borrower shall deliver or cause to be
delivered to Agent, with appropriate endorsement and
assignment, with full recourse to Borrower until the
Obligations are indefeasibly paid in full, all chattel paper
and instruments which Borrower now owns or may at any time
acquire promptly upon Borrower's receipt thereof, except as
Agent may otherwise agree.
(f) Agent may, at any time or times that an Event of Default exists or has
occurred and is continuing, (a) notify any or all account debtors that the
Accounts have been assigned to Agent and that Agent has a security
interest, lien or hypothec therein and Agent may direct any or all accounts
debtors to make payment of Accounts directly to Agent, (b) 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, (c) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and Agent 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 (d) take
whatever other action Agent may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default has
occurred and is continuing, at Agent's request, all invoices and statements
sent to any account debtor shall state that the Accounts and such other
obligations have been assigned to Agent and are payable directly and only
to Agent and Borrower shall deliver to Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services
giving rise to any Accounts as Agent may require.
(g) Borrower shall provide Agent with evidence satisfactory to it
within 30 days after the Closing Date that Borrower has
established a transactional coding system satisfactory to
Agent.
7.3 Inventory Covenants
With respect to the Inventory: (a) Borrower shall at all times maintain
inventory records reasonably satisfactory to Agent, 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 conduct cycle counts in accordance with
its current practice such that each stock keeping unit ("SKU") is counted at
least once each year, but at any time or times as Agent may request on or after
an Event of Default, and promptly following each such cycle count, Borrower
shall supply Agent with a report in the form and with such specificity as may be
reasonably satisfactory to Agent concerning such cycle count; (c) Borrower shall
not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Agent, except for sales or returns of
Inventory in the ordinary course of Borrower's business and Inventory that is
under repair by a third party and except to move Inventory directly from one
location set forth or permitted herein to another such location; (d) upon
Agent's request, Borrower shall, at its expense, no more than once in any twelve
(12) month period, but at any time or times as Agent may request on or after an
Event of Default, deliver or cause to be delivered to Agent written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Agent and by an appraiser acceptable to Agent, addressed to Agent or upon which
Agent is expressly permitted to rely; (e) Borrower shall, at its expense, no
more than once as directed by Agent in any three (3) month period, but at any
time or times as Agent may request on or after an Event of Default, deliver or
cause to be delivered to Agent written desktop appraisals as to the Inventory in
form, scope and methodology acceptable to Agent and by an appraiser acceptable
to Agent and upon which Agent is expressly permitted to rely; (f) Borrower shall
produce, use, store and maintain the Inventory, with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity in all material respects with applicable laws; (g) Borrower assumes
all responsibility and liability arising from or relating to the production,
use, sale or other disposition of the Inventory; (h) Borrower shall keep the
Inventory in good and marketable condition (ordinary wear and tear, and
defective or damaged Inventory upon receipt excepted); (i) Borrower shall not,
without prior written notice to Agent, acquire or accept any Inventory on
consignment or approval; and (j) Borrower shall notify Agent in writing at least
ten (10) days in advance if it intends to acquire Inventory from Compaq Canada
Inc. or an Affiliate thereof if such Inventory is not clearly identifiable as
Compaq product.
7.4 Equipment Covenants
With respect to the Equipment: (a) Borrower shall, at its expense, at
any time or times as Agent may request on or after an Event of Default, deliver
or cause to be delivered to Agent written reports or appraisals as to the
Equipment in form, scope and methodology acceptable to Agent and by an appraiser
acceptable to Agent; (b) Borrower shall keep the Equipment in good order,
repair, running and marketable condition as necessary to carry on its business
as currently conducted (ordinary wear and tear excepted); (c) Borrower shall use
the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity in all material respects
with all applicable laws; (d) the Equipment is and shall be used in Borrower's
business and not primarily for personal, family, household or 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 and obsolete Equipment
not necessary for Borrower's business or Equipment permitted to be sold under
Section 9.7; (f) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment having a book value in excess of
$250,000 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 Agent (and all
persons designated by Agent) as Borrower's true and lawful attorney-in-fact, and
authorizes Agent, in Borrower's or Agent's name, to: (a) at any time 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 Agent 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) to have access to any postal box into which
Borrower's mail is deposited and to notify the post office authorities to change
the address for delivery of Borrower's mail to an address designated by Agent,
and open and dispose of all mail addressed to Borrower, and (ix) do all acts and
things which are necessary, in Agent's determination, to fulfil Borrower's
obligations under this Agreement and the other Financing Agreements and sign
Borrower's name on any verification of Accounts and notices thereof to account
debtors and (b) at any time an Event of Default exists or has occurred and is
continuing or Agent's Cash Dominion exists (i) to take control in any manner of
any item of payment or proceeds thereof, (ii) to have access to any lockbox of
Borrower, (iii) to endorse Borrower's name upon any items of payment or proceeds
thereof and deposit the same in the Agent'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, and (c) execute and file
any PPSA or other financing statements or amendments thereto necessary or
desirable to protect or preserve Agent's security interest or lien in the
Collateral Agent; provided that Agent shall provide Borrower with a copy of any
such filings. Borrower hereby releases Agent and Lenders and their 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 Agent's or 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
Agent 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 which default has or could reasonably be expected to have a
Material Adverse Effect, (b) discharge Taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
that are not permitted hereunder and (c) pay any amount, incur any expense or
perform any act which, in Agent's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Agent
with respect thereto. Agent may add any amounts so expended to the Obligations
and charge Borrower's account therefor, such amounts to be repayable by Borrower
on demand. Agent 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 Agent under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly. Nothing in this Section 7.6 shall
limit Agent's right to exercise any remedy available to it under Section 10.2 if
an Event of Default has occurred.
7.7 Access to Premises
From time to time as requested by Agent, at the cost and expense of
Borrower, (a) Agent 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
Agent such copies of such books and records or extracts therefrom as Agent may
request subject to the limitation that Agent shall be required to act reasonably
in making such request prior to the occurrence of an Event of Default, and (c)
use during normal business hours such of Borrower's personnel, equipment,
supplies and premises as may be reasonably 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.
Article 8
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Agent and Lenders as of the
Closing Date and each making of Loans or provision of Letter of Credit
Accommodations hereunder the following (which shall survive the Closing Date),
the truth and accuracy of which in all material respects are a continuing
condition of the making of Loans and providing Letter of Credit Accommodations
by Lenders 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. The execution, delivery and
performance of this Agreement and, the other Financing Agreements to which
Borrower is a party 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 which contravention would have a Material Adverse
Effect 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 subject to bankruptcy, insolvency, reorganization, winding-up, moratorium
and other laws affecting the rights of creditors and the fact that specific
performance and injunction are equitable remedies available only in the
discretion of the court and the fact that a Canadian court will render judgment
demonstrated only in Canadian Dollars. 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 or Merisel, Inc. which
have been or may hereafter be delivered by Borrower to Agent have been prepared
in accordance with GAAP or US GAAP, as the case may be, and fairly present the
financial condition and the results of operation of Borrower or Merisel, Inc.,
as the case may be, as at the dates and for the periods set forth therein
(provided that monthly or quarterly statements are subject to normal year-end
adjustments and may not contain footnotes required by GAAP or US GAAP, as
applicable). Except as disclosed in any interim financial statements furnished
by Borrower to Lender prior to the date of this Agreement, there has been no
event, condition or act which has had or is reasonably likely to have a Material
Adverse Effect, since the date of the most recent financial statements furnished
by Borrower to Agent 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 at the end of this
Agreement 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.
8.4 Priority of Liens; Title to Properties
The security interests and liens granted to Agent, for itself and the
ratable benefit of Lenders, 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 Agent requires the discharge
thereof prior to the Closing Date) and the other liens permitted under Section
9.8 hereof. Borrower has good and marketable title to, or valid leasehold
interests in, all of its properties and assets that are owned or leased by it
subject to no liens, mortgages, pledges, security interests, hypothecs,
encumbrances or charges of any kind, except those granted to Agent, for itself
and the ratable benefit of Lenders, and such others as are specifically listed
on Schedule 8.4 hereto (except to the extent that Agent requires the discharge
thereof prior to the Closing Date) 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 Agent). All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. To the best of Borrower's knowledge, 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 in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books in accordance with GAAP. 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 as of the
date hereof 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 or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would reasonably be expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws
Borrower is not in default under, or in violation 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 with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, federal, provincial or local
Governmental Authority except in each case as set forth on Schedule 8.7 or where
such default, violation or non-compliance does not have or could not be
reasonably expected to have a Material Adverse Effect.
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 9.15 below.
8.9 Accuracy and Completeness of Information
All information furnished by or on behalf of Borrower in writing to
Agent 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 in any
material respect. No event or circumstance has occurred which has had or could
reasonably be expected to have a Material Adverse Effect which has not been
fully and accurately disclosed to Agent in writing.
8.10 Status of Pension Plans
To the extent any Pension Plans are established after the date hereof,
to the best knowledge of Borrower:
(1) Each of The Pension Plans are duly registered under all applicable
provincial pension benefits legislation.
(2) 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 material disputes concerning the assets held
pursuant to any such funding agreement.
(3) 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, other than current
contributions not in arrears.
(4) 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, other than current
contributions not in arrears.
(5) 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 other than current contributions not in arrears.
(6) There have been no improper withdrawals, or applications of, the assets of
any of the Pension Plans.
(7) No amount is owing by any of the Pension Plans under the Income Tax Act
(Canada) or any provincial taxation statute.
(8) The Pension Plans which are not defined contribution 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) as at the date of the most recent actuarial
report filed with the applicable Governmental Authorities.
(9) 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 reasonably be expected to give rise
to any such proceeding, action or claim.
8.11 Environmental Compliance
(1) 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 except to
the extent any of foregoing have not or could not reasonably be expected to
result in a Material Adverse Effect.
(2) 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 except to the extent
any of foregoing have not or could not reasonably be expected to result in a
Material Adverse Effect.
(3) 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 except
to the extent any of foregoing have not or could not reasonably be expected to
result in a Material Adverse Effect.
(4) 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 except to the extent any of foregoing have not or could not
reasonably be expected to result in a Material Adverse 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 Agent and Lenders
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 Agent and Lenders. 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 Agent and Lenders.
Article 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 necessary 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
Agent at least 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 Agent and 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 Agent at least thirty (30) days prior written notice of the intended
opening of any such new location if new security filings will be required to
maintain Agent's lien for collateral and, if no filing is required, at least ten
(10) days prior written notice of such opening and (b) executes and delivers, or
causes to be executed and delivered, to Lender such agreements, documents, and
instruments as Lender may deem reasonably necessary or desirable to protect its
interests in the Collateral at such location, including landlord agreements,
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 in the Collateral where required by Lender.
9.3 Compliance with Laws, Regulations, Etc.
(1) Borrower shall, at all times, comply in all material respects with all laws,
rules, regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements of any federal, provincial or local governmental
authority, including all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee health and safety,
including all Environmental Laws except for any matter that Borrower is
contesting in good faith by appropriate proceedings diligently pursued and which
is not reasonably expected to have a Material Adverse Effect.
(2) Borrower shall give both oral and written notice to Agent immediately upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining knowledge
(except to the extent that any of the following could not reasonably be expected
to result in a Material Adverse Effect) of, (a) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (b) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (i) any non-compliance
with or violation of any Environmental Law by Borrower or (ii) the release,
spill or discharge, threatened or actual, of any Hazardous Material or (iii) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (iv) any other
environmental, health or safety matter, which affects Borrower or its business,
operations or assets or any properties at which Borrower transported, stored or
disposed of any Hazardous Materials.
(3) Borrower shall indemnify and hold harmless Agent, each Lender and, its
directors, officers, employees, agents, 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, for which Borrower is responsible including 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 except to the extent any such losses, claims,
damages, liabilities, costs or expenses related gross negligence or wilful
misconduct of Agent or the applicable Lender or its directors, officers,
employees, agents, successors and assigns as determined by a final
non-appealable order of a court of competent jurisdiction. All representations,
warranties, covenants and indemnifications in this Section 9.3(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, assessments, contributions and charges the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books in accordance with GAAP. 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 reasonably satisfactory to Agent as to form, amount and
insurer. Borrower shall furnish certificates, policies or endorsements to Agent
as Agent shall require as proof of such insurance, and, if Borrower fails to do
so, Agent is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies (except policies for directors and officers'
insurance, surety bonds, kidnap and xxxxxx coverage, employed lawyers' liability
and worker's compensation) shall provide for at least thirty (30) days prior
written notice to Agent of any cancellation or reduction of coverage and that
Agent may act as attorney for Borrower (in the absence of evidence satisfactory
to Agent that Borrower will obtain the insurance required hereunder), 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 Agent to be named as a loss payee or an additional insured
as determined appropriate (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 Agent (except policies for directors and officers' insurance,
surety bonds, kidnap and xxxxxx coverage, employed lawyers' liability and
worker's compensation). Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Agent, for benefit of
Lenders, as its interests may appear and further specify that Agent shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Agent may apply any insurance proceeds received by Agent 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 Agent
may determine or hold such proceeds as cash collateral for the Obligations. In
the absence of an Event of Default, Agent shall make insurance proceeds in an
amount less than the Canadian Dollar Amount of $1,500,000, available to Borrower
for replacement or repair of the Collateral.
9.6 Financial Statements and Other Information.
(1) 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
Agent: (a) within thirty (30) days after the end of each fiscal month (other
than a month which is the last month of a fiscal quarter) and within fifty (50)
days after the month which is the last month of a fiscal quarter, monthly
unaudited consolidated financial statements (including in each case balance
sheets and statements of income and loss, all in reasonable 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 subject to
year-end adjustments and the absence of footnotes) together with a calculation
of Adjusted Net Worth as of the end of such month; and (b) within one hundred
and twenty (120) days after the end of the fiscal year ending December 31, 2000,
financial statements for the fiscal year ending December 31, 2000, together with
an unaudited balance sheet as at December 31, 2000 and a review engagement
report of Deloitte & Touche LLP or another independent chartered accountant firm
selected by Borrower and reasonably acceptable to Agent; and (c) within one
hundred and twenty (120) days after the end of each fiscal year commencing with
the fiscal year ending December 31, 2001, audited consolidated financial
statements (including in each case balance sheets, statements of income and
loss, statements of changes in financial position and statements of
shareholders' equity) and, if Borrower has any Subsidiaries, unaudited
consolidating financial statements of Borrower and its subsidiaries and the
accompanying notes thereto, all in reasonable 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 (subject in the case of
such consolidating financial statements to the absence of footnotes), together
with the unqualified opinion of Deloitte & Touche LLP or another firm of
independent chartered accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Agent, that
such audited consolidated 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.
(2) Borrower shall furnish or cause to be furnished to Agent (a) within thirty
(30) days after the end of each fiscal month, (other than a month which is the
last month of a fiscal quarter) monthly unaudited consolidated financial
statements (including balance sheets and statements of income and loss, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Merisel, Inc. and its Subsidiaries as of the end of and
through such fiscal month subject to year-end adjustments and the absence of
footnotes; (b) within fifty (50) days after the end of each fiscal quarter
(other than the last fiscal quarter of each year), quarterly unaudited
consolidated financial statements (including balance sheets, statements of
income and loss statements of cash flow and statements of cash flow and
statement of shareholders' equity), all in reasonable detail, fairly
representing the financial position and the results of the operations of
Merisel, Inc. as of the end and through such fiscal quarter subject to year end
adjustments and the absence of footnotes; and (c) within 120 days after the end
of each fiscal year of Merisel, Inc. audited consolidated financial statements
of Merisel, Inc., (including 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 reasonable detail, fairly
presenting the financial position and the results of the operations of Merisel,
Inc. and its Subsidiaries as of the end of and for such fiscal year, together
with the unqualified opinion of Deloitte & Touche LLP or another firm of
independent certified public accountants, which accountants shall be an
independent certified public accounting firm selected by Merisel, Inc. and
reasonably acceptable to Agent, that such financial statements have been
prepared in accordance with US GAAP, and present fairly the results of
operations and financial condition of Merisel, Inc. and its subsidiaries as of
the end of and for the fiscal year then ended.
(3) Borrower shall furnish or cause to be furnished to Agent within five (5)
days after the end of each fiscal month a certificate of Borrower specifying the
Monthly Average Excess Availability for the month just ended and the Four Month
Average for the four (4) month period just ended together with detailed
calculations thereof.
(4) Borrower shall promptly notify Agent in writing of the details of (a) any
loss, damage, investigation, action, suit, proceeding or claim relating to the
Collateral involving an amount in excess of the Canadian Dollar Amount $500,000
or which would result in any Material Adverse Effect and (b) 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.
(5) Borrower shall promptly after the sending or filing thereof furnish or cause
to be furnished to Agent copies of all reports which Merisel, Inc. sends to its
shareholders generally and, if applicable, copies of all public reports and
registration statements which Merisel, Inc. files with any securities commission
or securities exchange having jurisdiction over Merisel, Inc..
(6) Borrower shall furnish or cause to be furnished to Agent such budgets,
forecasts, projections and other information with respect to the Collateral and
the business of Borrower, as Agent may, from time to time, reasonably request.
Borrower's annual forecasts shall be prepared on a monthly basis and shall
include balance sheets, income statements, cash flows, Loan and availability
schedules detailing projected monthly capital expenditures, acquisitions, Loan
availability and financing requirements. Such forecasts shall be in a form
consistent with the forecasts provided to Lender prior to the date hereof and
shall be delivered to Lender at least 14 days prior to the commencement of each
fiscal year. It is understood that such budgets, forecasts and projections are
subject to significant contingencies, many of which are beyond the control of
Borrower or Obligor and no assurance can be given that such budgets, forecasts
or projections will be realized. Lender is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrower any Participant or assignee or prospective Participant or assignee that
agrees to maintain the confidentiality thereof pursuant to Section11.4. Borrower
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Agent, 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 Agent such information as they may have
regarding the business of Borrower which may reasonably be requested by Agent.
Any documents, schedules, invoices or other papers delivered to Agent may be
destroyed or otherwise disposed of by Agent one (1) year after the same are
delivered to Agent, except as otherwise designated by Borrower to Agent in
writing.
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 (b) 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; (ii) the
disposition of worn-out or obsolete Equipment or other tangible property or
assets (other than Inventory) or Equipment or other tangible property or assets
(other than Inventory) 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 or other tangible
property or assets (other than Inventory) having an aggregate fair market value
in excess of the Canadian Dollar Amount of $500,000 for all such Equipment,
property or assets disposed of in any fiscal year of Borrower), (iii) sales of
Equipment or other tangible property or assets subject to an eminent domain or
condemnation proceeding or an insurance claim, (iv) sales of securities or other
assets received in full or partial satisfaction of past due accounts so long as
the book value thereof with respect to a particular sale does not exceed the
Canadian Dollar Amount of $250,000 unless Agent has requested delivery to it of
such security in accordance with Section 7.2(e), or Section 9.10(m) (v)
assignments of leases, subleases, licenses or sublicenses of real property
leased by Borrower with at least ten (10) days prior written notice to Agent or
(vi) except as permitted by Section 9.7(b)(v), assignments of leases, subleases,
licenses or sublicenses of property other than Inventory or real property of
Borrower with Agent's prior written consent not to be unreasonably withheld, or
(c) form or acquire any subsidiaries without Agent's prior written consent, or
(d) wind up, liquidate or dissolve.
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, including the Collateral,
except:
(a) liens, security interests and hypothecs of Agent for itself and the
benefit of Lenders;
(b) liens securing the payment of Taxes, either not yet overdue or
the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to
Borrower and with respect to which adequate reserves have been
set aside on its books in accordance with GAAP;
(c) non-consensual statutory liens (other than liens securing the payment of
Taxes but including liens securing the claims or demands of materialmen,
mechanics, carriers or warehousemen) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness or
obligations which are not overdue or (ii) such liens secure indebtedness or
obligations 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 (subject to customary deductions) or are being contested in good
faith 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 in accordance with GAAP;
(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 $5,000,000 in the
aggregate principal amount 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 plus related interest, fees and expenses;
(f) deposits made in the ordinary course of business of Borrower
in connection with payroll administration fees, worker's
compensation, unemployment insurance or other types of social
security benefits in each case consistent with the current
practices of Borrower as of the date hereof or applicable
legal requirements;
(g) liens arising from operating leases of Borrower and
precautionary lien filings in respect thereof for Equipment
having a value not in excess of the Canadian Dollar Amount of
$2,000,000 in aggregate;
(h) purchase money security interests on Inventory and Accounts in
favour of a vendor of Inventory approved by Agent securing
amounts owing to such vendor not exceeding the principal
amount of $10,000,000 in aggregate (pursuant to security
documents reasonably acceptable to Agent and provided to Agent
at least seven (7) days in advance of execution) subject to
the limitation that such a purchase money security interest
will only be permitted on Accounts and Proceeds if such
security interest is subordinated to the security interests of
the Agent and Lenders in the manner satisfactory to Agent;
(i) cash deposits (including rights of set-off) made by Borrower
in the ordinary course of business with its insurance carriers
to secure Borrower's liability for premiums payable to
Borrower's insurance carriers in an aggregate amount not
exceeding the Canadian Dollar Amount of $1,000,000;
(j) cash deposits with the owner or lessor of premises leased and
operated by Borrower in the ordinary course of its business to
secure performance by Borrower of its obligations under the
terms of the lease for such premises in an aggregate amount
not exceeding the Canadian Dollar Amount of $250,000;
(k) cash deposits with utilities or other providers of services to
Borrower made by Borrower in the ordinary course of business
to secure performance by Borrower of its obligations to such
utilities or service providers in an aggregate amount not
exceeding the Canadian Dollar Amount of $100,000;
(l) liens on amounts not to exceed the Canadian Dollar Amount of
$2,000,000 in aggregate in Borrower's deposit or investment
accounts, investment securities and Proceeds thereof (other
than accounts where Collateral is held) to secure Hedging
Obligations permitted under Section 9.9(g);
(m) cash deposits with banking or other financial institutions to
secure Borrower's obligations to such banks or financial
institutions in respect of cash management or payment
processing arrangements entered into by Borrower and such bank
or financial institution in the ordinary course of Borrower's
business and in an amount not exceeding the Canadian Dollar
Amount of $250,000 in the aggregate;
(n) judgments and other similar liens on property other than
Inventory or Accounts arising in connection with court
proceedings to the extent that such liens do not result in an
Event of Default under Section 10.1(4);
(o) any interest or title of a lessor, sublessor, licensee or
licensor under any personal property lease, sublease or
license agreement with Borrower as lessee, sublessee, licensor
or licensee permitted under this Agreement; and
(p) liens on accounts due from Borrower's vendors and suppliers
(other than in respect of returned Inventory) incurred with
the prior written consent of Agent and Lender, not to be
unreasonably withheld, and securing Indebtedness in the
aggregate principal amount not exceeding $10,000,000;
(q) the security interests and liens set forth on Schedule 8.4
hereto (except to the extent that Agent requires the discharge
thereof prior to the advance of the initial Loans hereunder;
and
(r) licenses, leases or subleases entered into by Borrower as permitted
under Section 9.7 (b)(v) or (vi).
9.9 Indebtedness
Borrower shall not incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, except (a) the
Obligations; (b) 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, with respect to the Indebtedness set forth
on Schedule 9.9 (other than the Indebtedness described in Section 1.1(uu)(ii))
(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, (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 Agent 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; (e) Subordinated Indebtedness bearing
interest at a rate not exceeding thirteen percent (13%) per annum of Borrower
owing to (i) Merisel, Inc. or Merisel Americas, Inc. or (ii) subject to
execution and delivery of an intercreditor and subordination agreement with
respect to such Indebtedness on terms and conditions satisfactory to Agent, to
an Affiliate of Merisel, Inc.; (f) Intercompany Indebtedness (other than
Subordinated Indebtedness) bearing an interest rate which does not exceed
thirteen 13% per cent per annum; (g) Hedging Obligations of Borrower consisting
of interest rate protection obligations entered into by Borrower in the ordinary
course of the business of Borrower consistent with current practices of Borrower
as of the date hereof; provided that such arrangements are not for speculative
purposes and such Indebtedness is unsecured except to the extent otherwise
permitted under Section 9.8(l); and Indebtedness secured by liens permitted
under Sections 9.8(b), (c), (f), (g), (h), (i), (j), (k), (m), (n) and (p).
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; (b) investments in: (i) cash
deposited in accounts permitted under Section 9.15 and Cash Equivalents held in
such accounts for a period not exceeding five (5) Business Days; and (ii)
investments in cash and Cash Equivalents other than as permitted under Section
9.10(b)(i) provided that (a) there are no Loans outstanding at the time such
investments are made; and (b) unless waived in writing by Agent Borrower shall
take such actions as are deemed necessary by Agent to perfect the security
interest of Agent and Lenders in such investments and such investments are
pledged and delivered to Agent upon Agent's request; (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
Agent 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; (d) unsecured guarantees of obligations of Borrower's account debtors to
flooring plan providers relating to the sale of Inventory by Borrower in an
amount not to exceed $2,500,000 individually outstanding at any time with
respect to any account debtor or $10,000,000 outstanding at any time in the
aggregate, (e) investments in connection with Hedging Obligations to the extent
permitted under Sections 9.9(g) and 9.8(l), (f) obligations of Borrower to
repurchase Inventory from flooring plan providers; provided that following the
repurchase of Inventory pursuant to such obligations for an aggregate amount in
excess of $5,000,000, no further such agreements will be entered into until such
Inventory is sold for an aggregate amount at least equal to the aggregate
purchase price paid by the Borrower upon such repurchase, (g) advances or
deposits in connection with obligations under payroll administration plans,
employee benefit programs, leases or credit card plans to the extent such
advances and deposits are permitted under Section 9.8(f), (h) unsecured
guarantees issued to credit card providers in a principal amount not to exceed
$100,000 outstanding at any time, (i) advances or loans to employees or
directors of Borrower in the ordinary course of business in a principal amount
not to exceed the Canadian Dollar Amount of $500,000 in aggregate outstanding at
any time, for necessary work-related travel or other ordinary expenses to be
incurred by such employees or directors in connection with their work for
Borrower; and necessary relocation expenses of such employees, (j) stock, debt
and securities or other property received in connection with the bankruptcy or
reorganization of, or in settlement of delinquent obligations of or disputes
with Borrower's customers or suppliers provided, that, the original of any such
stock or investment evidencing such obligations shall be promptly delivered to
Agent, upon Agent's request, together with such stock power assignment or
endorsement by Borrower as Agent may request; and (m) obligations of account
debtors to Borrower arising from Accounts which are past due evidenced by a
promissory note made by such account debtor payable to Borrower; provided, that,
promptly upon the receipt of the original of any such promissory note by
Borrower, such promissory note shall be endorsed to the order of Agent and the
rateable benefit of Lenders, by Borrower and promptly delivered to Agent as so
endorsed.
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 except that Borrower may declare
and pay dividends in respect of any fiscal year of Borrower ending December 31,
2002 or thereafter subject to the satisfaction of the following conditions:
(a) as of the date of the declaration or payment of such dividend
and after giving effect to the payment of such dividend, no
Event of Default or act, condition or event which with notice
or passage of time or both would constitute an Event of
Default shall exist or have occurred;
(b) the declaration and payment of such dividend shall be done in
accordance with the requirements of all applicable laws and
regulations including section 38 of the Ontario Business
Corporations Act;
(c) Agent shall have received evidence satisfactory to it that (i)
for the four (4) months preceding the date of declaration or
payment of such dividend the Four Month Average was at least
$20,000,000; (ii) projections establishing to the satisfaction
of Agent that the Four Month Average for the month in which
the dividend is to be paid and the three (3) months thereafter
will be at least $20,000,000 and (iii) Excess Availability
after giving effect to payment of such dividend will be at
least $20,000,000; and
(d) Agent shall have received annual audited financial statements
of Borrower which comply with the requirements of Section 9.6
for the fiscal year immediately preceding the fiscal year in
which the dividend is to be paid.
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, shareholder or any other Affiliate of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to the Borrower
than Borrower would obtain in a comparable arm's length transaction with a
Person who is not an Affiliate 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, director or other Affiliate of
Borrower except (i) reasonable compensation to officers, employees and directors
for services rendered to Borrower in the ordinary course of business; (ii)
payments of trade payables owing to Merisel, Inc., Merisel Americas, Inc. or any
Affiliate thereof provided, that Borrower's Excess Availability at the time of
such payment is at least $2,000,000; (iii) payments of interest on account of
Subordinated Indebtedness and Intercompany Indebtedness provided that as of the
date of such payment and after giving effect to such payment, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall have occurred, (iv) payments of
principal on account of Intercompany Indebtedness and Subordinated Indebtedness
subject to satisfaction of the following conditions:
(A) as of the date of such payment and after giving effect to such
payment, no Event of Default or act, condition or event which
with notice or passage of time or both would constitute an
Event of Default shall exist or have occurred;
(B) such payment shall be done in accordance with the requirements of all
applicable laws and regulations;
(C) in the case of principal payments on account of Subordinated
Indebtedness, Agent shall have received evidence satisfactory
to it that (i) for the four (4) months preceding the date of
such payment the Four Month Average was at least $20,000,000;
(ii) projections establishing to the satisfaction of Agent
that the Four Month Average for the month in which such
payment is to be paid and the three (3) months thereafter will
be at least $20,000,000 and (iii) Excess Availability after
giving effect to such payment will be at least $20,000,000;
(D) in the case of principal payments on account of Closing
Intercompany Indebtedness, no such payments may be made until
after January 12, 2002 and Borrower must maintain Monthly
Average Excess Availability of at least $5,000,000 for a
period of twelve (12) consecutive fiscal months after the date
of such payment;
(iii) payment to be made to Merisel, Inc., Merisel Americas, Inc. or their
respective Affiliates for management and management information systems services
and the other services listed in Schedule 9.12 provided the arrangements for
such services comply with Section 9.12(a) in an aggregate amount not to exceed
$8,000,000 in 2001, $10,000,000 in 2002 and $12,000,000 in 2003 and except that
such amount may be increased to $15,000,000 for 2003 if Merisel, Inc. materially
upgrades its SAP system and provided that no such payment may be made at any
time when an Event of Default or act, condition or event which with notice or
the passage of time or both would constitute an Event of Default shall exist or
have occurred.
9.13 Adjusted Net Worth
Borrower shall, at all times, that Monthly Average Excess Availability
as reported by Borrower or determined by Agent is less than $20,000,000,
maintain Adjusted Net Worth of not less than $25,000,000. Adjusted Net Worth
shall be determined by Lender as of the end of each month in which Borrower
delivers the certificate contemplated by Section 9.6(3) based upon the most
recently delivered monthly financial statements of Borrower which comply with
the requirements of Section 9.6 in all respects.
9.14 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 Agent thereof and shall provide to Agent 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 Agent an intellectual property security
agreement or other security documentation in form and substance satisfactory to
Lender, granting to Lender a perfected security interest in such intellectual
property rights.
9.15 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 Agent and
subject to such conditions thereto as Agent may establish and (b) as to any
accounts used by Borrower to make payments of payroll, Taxes or other
obligations to third parties or established in connection with its Hedging
Obligations, after prior written notice to Agent.
9.16 Applications under the Companies' Creditors Arrangement Act
Borrower acknowledges that its business and financial relationships
with Agent and Lenders 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, Agent or any Lender to be classified with any other creditor of
Borrower for purposes of such CCAA Plan or otherwise.
9.17 Operation of Pension Plans
With respect to any Pension Plans established after the date of this
Agreement:
(1) 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.
(2) Borrower shall use reasonable efforts to deliver to Agent 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.
(3) Borrower shall not accept payment of any amount from any of the Pension
Plans without the prior written consent of Agent except for the reimbursement of
reasonable expenses.
(4) Without the prior written consent of Agent, Borrower shall not terminate, or
cause to be terminated, any of the Pension Plans (other than defined benefit
plans), if such plan would have a solvency deficiency on termination.
(5) Borrower shall promptly provide Agent with any documentation relating to any
of the Pension Plans as Agent may reasonably request. Borrower shall notify
Lender within 30 days of (a) a material increase in the liabilities of any of
the Pension Plans and receipt of an actuarial report disclosing a material
increase; (b) the establishment of a new registered pension plan; and (c)
commencing payment of contributions to a Pension Plan to which Borrower had not
previously been contributing.
9.18 Costs and Expenses
Borrower shall pay to Lender promptly upon demand all reasonable 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, the rights
of Agent and Lenders 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
but excluding Agent or Lender franchise or income taxes); (b) all insurance
premiums paid by Agent or any Lender in accordance with this Agreement or any
other Financing Agreement, 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, together
with Agent's or Lender's customary charges and fees with respect thereto -
Congress to advise; (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 Agent for ratable benefit of Lenders, 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 Agent or any Lender arising out of the transactions
contemplated hereby and thereby (including, without limitation, preparations for
and consultations concerning any such matters but excluding any of the foregoing
relating to the gross negligence or wilful misconduct of Agent or any Lender
with respect to such matter as determined by a final non-appealable order of a
court of competent jurisdiction); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Agent or any 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 Agent's or any Lender's examiners in the field and office; and (h) the
reasonable fees and disbursements of counsel (including legal assistants) to
Agent and Lender in connection with any of the foregoing.
9.19 Further Assurances
At the request of Agent 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 proper to evidence,
perfect, maintain and enforce the security interests and liens and the priority
thereof in the Collateral and otherwise reasonably required to effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent 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 on the date thereof. In the event of such request by Agent, Agent
and Lenders may, at their option, cease to make any further Loans or provide any
further Letter of Credit Accommodations until Agent has received such
certificate and, in addition, Agent has determined in good faith that such
conditions are satisfied. Where permitted by law, Borrower hereby authorizes
Agent to execute and file one or more PPSA or other financing statements or
notices signed only by Lender or Lender's representative, provided that Agent
shall provide Borrower with a copy of PPSA or other financing statements.
Article 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":
(1) (a) Borrower fails to pay when due any of the Obligations (b) Borrower fails
to perform any of the covenants contained in Sections 6.3, 6.7, 7.7, 9.1, 9.2,
9.5, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.16 of this Agreement or (c) Borrower
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements other than those
described in Sections 10.1(1)(a) and 10.1(1)(b) above and such failure shall
continue for ten (10) days (except in the case of Section 7.1, 7.2, 7.3 and 9.13
the period shall be five (5) days); provided, that, such five (5) or ten (10)
day period, as applicable, shall not apply in the case of: an intentional breach
by Borrower of any such covenant.
(2) any representation, warranty or statement of fact made by Borrower or any
Obligor to Agent or any 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;
(3) 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;
(4) (a) any judgment or judgments for the payment of money is rendered against
Borrower or any Obligor in excess of the Canadian Dollar Amount of $2,000,000 in
any one case or 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 (b) 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 which judgment involves Collateral having
value in excess of $500,000, or which would have or could reasonably be expected
to have a Material Adverse Effect and remains undischarged or unvacated for a
period in excess of thirty (30) days or such injunction, execution, attachment
or garnishment shall at any time not be effectively stayed;
(5) 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 or gives notice of its intention to
do so;
(6) Borrower or any Obligor becomes insolvent under applicable law, makes an
assignment for the benefit of creditors or proposes to make, makes or sends
notice of a bulk sale or calls a meeting of its creditors or principal
creditors;
(7) 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 forty-five (45) 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;
(8) 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:
(a) 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;
(b) be unable, or admit in writing its inability, to pay its debts as
they mature, or commit any other act of bankruptcy;
(c) make a general assignment for the benefit of creditors;
(d) file a voluntary petition or assignment in bankruptcy or a
proposal seeking a reorganization, compromise, moratorium or
arrangement with its creditors;
(e) 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
(f) take any corporate action for the purpose of effecting any of the
foregoing;
(9) (a) any default by Borrower under any agreement creating a purchase money
security interest in its inventory in respect of which (i) the creditor has
notified Borrower in writing of such default and its intention to terminate its
relationship with Borrower and its intention to accelerate all or a material
part of Indebtedness due to it or exercise any other remedy available to it
other than ceasing to extend credit to Borrower or (ii) such creditor has
accelerated such Indebtedness or exercised any such remedy, or (b) any default
by Borrower or any Obligor under any agreement, document or instrument relating
to any Indebtedness (other than as referenced to in Section 10.1(1)(a) or
10.1(9)(a) owing to any person other than Agent and Lenders or creditors
referred to in Section 10.1(9)(a), in any case in an amount in excess of the
Canadian Dollar Amount of $2,000,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or (c) any default by
Borrower or any Obligor under any material contract, distribution or supply
agreement, 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 and such default has or could be reasonably expected to have a
Material Adverse Effect;
(10) any change in the ownership of Borrower;
(11) 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 material property of
Borrower or such Obligor;
(12) there shall be an act, condition or event which has a Material Adverse
Effect after the date hereof;
(13) there shall be a breach or failure to comply with any material provision of
any intercreditor agreement or subordination agreement with respect to Borrower
or any Obligor by any party thereto other than Agent or any Lender; or
(14) 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 or any other Person in respect of Borrower of the
Excise Tax Act (Canada) or any comparable provision of similar legislation shall
have been received by Agent or any other Person in respect of Borrower or
otherwise issued in respect of Borrower.
10.2 Remedies
(1) At any time an Event of Default exists or has occurred and is continuing,
Agent and Lenders shall have all rights and remedies provided in this Agreement,
the other Financing Agreements, the PPSA 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 Agent and Lenders hereunder, under any of the other Financing Agreements, the
PPSA or other applicable law, are cumulative, not exclusive and enforceable, in
Agent and 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 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. In
exercising its remedies hereunder Agent and Lenders shall utilize commercially
reasonable efforts to preserve the value of the Collateral to the extent
required by law.
(2) Without limiting the foregoing, at any time an Event of Default exists or
has occurred and is continuing, Agent may, and upon direction of the Required
Lenders, Agent shall (a) accelerate the payment of all Obligations and demand
immediate payment thereof to Agent for rateable benefit of Lenders (provided,
that, upon the occurrence of any Event of Default described in Sections 10.1(7)
or 10.1(8), all Obligations shall automatically become immediately due and
payable), (b) 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, (c) 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 Agent, (d) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (e) 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, (f) 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 Agent or elsewhere) at such prices or terms as Agent may deem
reasonable, for cash, upon credit or for future delivery, with the Agent 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, (g) 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, (h) 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
Agent's right to hold and realize the security interest created under any
Financing Agreement, and/or (i) terminate this Agreement. If any of the
Collateral is sold or leased by or on behalf of Agent upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Agent. If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Agent 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 reasonable notice thereof and Borrower waives any other notice. In
the event Agent institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment remedy, Borrower waives the posting of
any bond which might otherwise be required.
(3) Agent may apply the cash proceeds of Collateral actually received by Agent
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 and using such
conversion rates as Agent may elect, whether or not then due. Borrower shall
remain liable to Agent and Lenders 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.
(4) Subject to compliance with the requirements of Section13.1, Agent shall
remit any cash proceeds remaining after final payment in full of the Obligations
to Borrower.
(5) Without limiting the foregoing, upon the occurrence of an Event of Default,
Agent may, and upon the direction of Required Lenders shall, without notice, (a)
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 (b) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made to Borrower.
(6) Agent may appoint, remove and reappoint any person or persons, including an
employee or agent of Agent 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 responsibilities for his
acts, be deemed to be the agent of Borrower and not of Agent or Lender, and
neither Agent nor any Lender shall not in any way be responsible for any
misconduct, negligence or non-feasance of such Receiver, his employees or agents
except to the extent caused by the gross negligence or wilful misconduct of
Agent or such Lender as determined by a final non-appealable order of a court of
competent jurisdiction. Except as otherwise directed by Agent, all money
received by such Receiver shall be received in trust for and paid to Agent for
rateable benefit of Lender. Such Receiver shall have all of the powers and
rights of Agents and Lenders described in this Section 10.2(6). Lender may,
either directly or through its agents or nominees, exercise any or all powers
and rights of a Receiver.
(7) Borrower shall pay all costs, charges and expenses incurred by Agent or
Lender or any Receiver or any nominee or agent of Agent or any 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.
Article 11
JURY TRIAL WAIVER, OTHER WAIVERS AND CONSENTS, GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver
(1) 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.
(2) Borrower, Agent and Lenders 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 Agent or any Lender shall
have the right to bring any action or proceeding against Borrower or its
property in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against Borrower or its property).
(3) 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 Agent'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.
(4) BORROWER, AGENT AND EACH 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, AGENT,
AND EACH LENDER EACH 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, AGENT OR ANY 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.
(5) Agent and Lenders 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 Agent and such
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 in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement or any other Financing Agreement.
(6) 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 Agent 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
(1) 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 as provided in Section 11.3(2) hereof. Agent and Lenders shall
not, by any act, delay, omission or otherwise be deemed to have expressly or
impliedly waived any of its or their rights, powers and/or remedies unless such
waiver shall be in writing and signed as provided in Section 11.3(2) hereof. Any
such waiver shall be enforceable only to the extent specifically set forth
therein. A waiver by Agent or any 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 or remedy which Agent or any Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
(2) Neither this Agreement nor any other Financing Agreement nor any terms
hereof or thereof may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed by Agent and the
Required Lenders, and as to amendments to any of the Financing Agreements, by
Borrower; except, that, any change, waiver, discharge or termination with
respect to the following shall require the consent of Agent and all Lenders:
(a) reduction in the interest rate or any fees or the extension of
the time of payment of interest or any fees or reduction in
the principal amount of any Loan or Letter of Credit
Accommodations or any extensions of the term of this Agreement
pursuant to Section 13.1(1),
(b) increase in the Commitment of any Lender over the amount
thereof then in effect or provided hereunder except as
contemplated by Section 2.5(1) (it being understood that a
waiver of any Event of Default shall not constitute a change
in the terms of any Commitment of any Lender),
(c) the release of any Collateral (except as expressly required by the
Financing Agreements and except as permitted under Section 12.10(1)
hereof),
(d) the reduction of any percentage specified in the definition of Required
Lenders,
(e) the consent to the assignment or transfer by Borrower of any of its
rights and obligations under this Agreement, or
(f) the increase in the percentage advance rates noted in Section 2.1(a)
and 2.1(b).
(3) Notwithstanding anything to the contrary contained in Section 11.3(2) above,
in the event that Borrower requests that this Agreement or any other Financing
Agreements be amended or otherwise modified in a manner which would require the
unanimous consent of all of the Lenders and such amendment or other modification
is agreed to by the Required Lenders, then, with the consent of Borrower and the
Required Lenders, Borrower and the Required Lenders may amend this Agreement
without the consent of the Lender or Lenders which did not agree to such
amendment or other modification (collectively, the "Minority Lenders") to
provide for (a) the termination of the Commitment of each of the Minority
Lenders, (b) the addition to this Agreement of one or more other Lenders, or an
increase in the Commitment of one or more of the Required Lenders, so that the
Commitments, after giving effect to such amendment, shall be in the same
aggregate amount as the Commitments immediately before giving effect to such
amendment, (c) if any Loans are outstanding at the time of such amendment, the
making of such additional Loans by such new Lenders or Required Lenders, as the
case may be, as may be necessary to repay in full the outstanding Loans of the
Minority Lenders immediately before giving effect to such amendment, and (d) the
payment of all interest, fees and other Obligations payable or accrued in favor
of the Minority Lenders and such other modifications to this Agreement as
Borrower and the Required Lenders may determine to be appropriate.
(4) consent of Agent shall be required for any amendment, waiver or consent
affecting the rights or duties of Agent hereunder or under any of the other
Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section.
11.4 Confidentiality.
(1) Agent and each Lender shall use all reasonable efforts to keep confidential,
in accordance with its customary procedures for handling confidential
information and safe and sound lending practices, any non-public information
supplied to it by Borrower or any Obligor pursuant to this Agreement, provided,
that, nothing contained herein shall limit the disclosure of any such
information: (a) to the extent required by statute, rule, regulation, subpoena
or court order, (b) to bank examiners and other regulators, auditors and/or
accountants, (c) in connection with any litigation to which such Lender is a
party, (d) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) shall have been instructed to treat such information as
confidential in accordance with this Section 11.4 and shall have acknowledged
such instructions and agreed to comply therewith or, (e) to counsel for Agent or
any Lender or any participant or assignee (or prospective participant or
assignee) or (f) field auditors, appraisers and other agents retained by Agent.
In the event that any Lender receives a request or demand to disclose any
confidential information pursuant to any subpoena or court order, such Lender
agrees (i) to the extent permitted by applicable law or if permitted by
applicable law, statute, rule or regulation to the extent such Lender determines
in good faith that it will not create any risk of liability to such Lender, that
such Lender will promptly notify Borrower of such request so that Borrower may
seek a protective order or other appropriate relief or remedy, and (ii) if
disclosure of such information is required, disclose such information and,
subject to reimbursement by Borrower of such Lender's reasonable expenses,
cooperate with Borrower in its efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of the
disclosed information which Borrower so designates, to the extent permitted by
applicable law or if permitted by applicable law, to the extent such Lender
determines in good faith that it will not create any risk of liability to such
Lender.
(2) In no event shall this Section 11.4 or any other provision of this Agreement
or applicable law be deemed: (i) to apply to or restrict disclosure of
information that has been or is made public by Borrower or any third party
without breach of this Section 11.4 or otherwise become generally available to
the public other than as a result of a disclosure in violation hereof, or in
violation of any other confidentiality agreement in favor of Borrower to the
extent Agent has actual knowledge of such agreement and the violation thereof at
the time it receives such information, (ii) to apply to or restrict disclosure
of information that was or becomes available to Agent or any Lender on a
non-confidential basis from a person other than Borrower other than in violation
of a confidentiality agreement in favor of a Borrower by such person to the
extent Agent has actual knowledge of such agreement and the violation thereof at
the time it receives such information, (iii) require Agent or any Lender to
return any materials furnished by Borrower to Agent or any Lender, or (iv)
prevent Agent or any Lender from responding to routine informational requests in
accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The Xxxxxx Xxxxxx Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Agent and Lenders under this Section 11.4 shall supersede and replace the
obligations of Agent and any Lender under any confidentiality letter signed
prior to the date hereof.
11.5 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.
11.6 Indemnification
Borrower shall indemnify and hold Agent and each 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 except to the extent that any of such losses,
claims, damages or liabilities, costs or expenses are caused by the gross
negligence or wilful misconduct of Agent or such Lender or such director, agent,
employee or 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.
Article 12
THE AGENT
12.1 Appointment, Powers and Immunities.
Each Lender hereby irrevocably designates, appoints and authorizes
Congress to act as Agent hereunder and under the other Financing Agreements with
such powers as are specifically delegated to Agent by the terms of this
Agreement and of the other Financing Agreements, together with such other powers
as are reasonably incidental thereto. Agent (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Lender; (b) shall
not be responsible to Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Financing Agreement, or
in any certificate or other document referred to or provided for in, or received
by any of them under, this Agreement or any other Financing Agreement, or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Financing Agreement or any other document
referred to or provided for herein or therein or for any failure by Borrower or
Obligor or any other Person to perform any of its obligations hereunder or
thereunder; and (c) shall not be responsible to Lenders for any action taken or
omitted to be taken by it hereunder or under any other Financing Agreement or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. Agent may
deem and treat the payee of any note as the holder thereof for all purposes
hereof unless and until the assignment thereof pursuant to an agreement (if and
to the extent permitted herein) in form and substance satisfactory to Agent
shall have been delivered to and acknowledged by Agent.
12.2 Reliance by Agent.
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telecopy, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by Agent. As
to any matters not expressly provided for by this Agreement or any other
Financing Agreement, Agent shall in all cases be fully protected in acting, or
in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Lenders or all of Lenders as is required in
such circumstance, and such instructions of such Lenders and any action taken or
failure to act pursuant thereto shall be binding on all Lenders.
12.3 Events of Default.
(1) Agent shall not be deemed to have knowledge or notice of the occurrence of
an Event of Default or other failure of a condition precedent to the Loans and
Letter of Credit Accommodations hereunder, unless and until Agent has received
written notice from a Lender, or Borrower or Obligor specifying such Event of
Default or any unfulfilled condition precedent, and stating that such notice is
a "Notice of Default or Failure of Condition". In the event that Agent receives
such a Notice of Default or Failure of Condition, Agent shall give prompt notice
thereof to the Lenders. Agent shall (subject to Section12.7) take such action
with respect to any such Event of Default or failure of condition precedent as
shall be directed by the Required Lenders; provided, that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to or by
reason of such Event of Default or failure of condition precedent, as it shall
deem advisable in the best interest of Lenders. Without limiting the foregoing,
and notwithstanding the existence or occurrence and continuance of an Event of
Default or any other failure to satisfy any of the conditions precedent set
forth in Article 4 of this Agreement to the contrary, Agent may, but shall have
no obligation to, continue to make Loans and issue or cause to be issued Letter
of Credit Accommodations for the ratable account and risk of Lenders from time
to time if Agent believes making such Loans or issuing or causing to be issued
such Letter of Credit Accommodations is in the best interests of Lenders.
(2) Except with the prior written consent of Agent, no Lender may assert or
exercise any enforcement right or remedy in respect of the Loans, Letter of
Credit Accommodations or other Obligations, as against Borrower or Obligor or
any of the Collateral or other property of Borrower or Obligor.
12.4 Congress in its Individual Capacity.
With respect to its Commitment and the Loans made and Letter of Credit
Accommodations issued or caused to be issued by it (and any successor acting as
Agent), so long as Congress shall be a Lender hereunder, it shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include Congress in its individual
capacity as Lender hereunder. Congress (and any successor acting as Agent) and
its Affiliates may (without having to account therefor to any Lender) lend money
to, make investments in and generally engage in any kind of business with
Borrower and any Obligor (and any of their Subsidiaries or Affiliates) as if it
were not acting as Agent, and Congress and its Affiliates may accept fees and
other consideration from Borrower and any Obligor for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
12.5 Indemnification.
Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrower hereunder and without limiting the Obligations of Borrower hereunder)
ratably, in accordance with their Pro Rata Shares, for any and all claims of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against Agent (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement or
any other Financing Agreement or any other documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or thereby
(including the costs and expenses that Agent is obligated to pay hereunder) or
the enforcement of any of the terms hereof or thereof or of any such other
documents, provided, that, no Lender shall be liable for any of the foregoing to
the extent it arises from the gross negligence or willful misconduct of the
party to be indemnified as determined by a final non-appealable judgment of a
court of competent jurisdiction.
12.6 Non-Reliance on Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on
Agent or other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of Borrower and Obligor and has
made its own decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Financing Agreements. Agent shall not
be required to keep itself informed as to the performance or observance by
Borrower or Obligor of any term or provision of this Agreement or any of the
other Financing Agreements or any other document referred to or provided for
herein or therein or to inspect the properties or books of Borrower or any
Obligor. Agent will use reasonable efforts to provide Lenders with any
information received by Agent from Borrower or Obligor which is required to be
provided to Lenders hereunder and with a copy of any Notice of Default or
Failure of Condition received by Agent from Borrower or any Lender; provided,
that, Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable to Agent's own gross negligence
or willful misconduct as determined by a final non-appealable judgment of a
court of competent jurisdiction. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any other credit
or other information concerning the affairs, financial condition or business of
Borrower or any Obligor that may come into the possession of Agent.
12.7 Failure to Act.
Except for action expressly required of Agent hereunder and under the
other Financing Agreements, Agent shall in all cases be fully justified in
failing or refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction from Lenders of their indemnification
obligations under Section 12.5 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
12.8 Concerning the Collateral and the Related Financing Agreements.
Each Lender authorizes and directs Agent to enter into this Agreement
and the other Financing Agreements relating to the Collateral, for the ratable
benefit of Lenders and Agent. Each Lender agrees that any action taken by Agent
or Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements relating to the Collateral, and the exercise by Agent or
Required Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.
12.9 Field Audit, Examination Reports and other Information; Disclaimer by
Lenders.
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field
audit or examination report and a weekly report with respect
to the borrowing base prepared by Agent (each field audit or
examination report and weekly report with respect to the
borrowing base being referred to herein as a "Report" and
collectively, "Reports");
(b) expressly agrees and acknowledges that Agent (A) does not make
any representation or warranty as to the accuracy of any
Report, or (B) shall not be liable for any information
contained in any Report; provided, that, nothing contained in
this Section 12.9 shall be construed to limit the liability of
Agent under Section 12.1(c) hereof in the event of the gross
negligence or wilful misconduct of Agent as determined
pursuant to a final non-appealable order of a court of
competent jurisdiction;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other
party performing any audit or examination will inspect only
specific information regarding Borrower and will rely
significantly upon Borrower's books and records, as well as on
representations of Borrower's personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 11.4
hereof, and not to distribute or use any Report in any other
manner.
12.10 Collateral Matters.
(1) Agent may, at its option, from time to time, at any time on or after an
Event of Default and for so long as the same is continuing, make such
disbursements and advances ("Special Agent Advances") which Agent, in its sole
discretion, deems necessary or desirable either (i) to preserve or protect the
Collateral or any portion thereof (provided that in no event shall Special Agent
Advances for such purpose exceed an amount equal to ten (10%) percent of the
then existing Maximum Credit in the aggregate outstanding at any time), or (ii)
to pay any other amount chargeable to Borrower pursuant to the terms of this
Agreement consisting of costs, fees and expenses and payments to any issuer of
Letter of Credit Accommodations. Special Agent Advances shall be repayable on
demand and be secured by the Collateral. Special Agent Advances shall not
constitute Loans but shall otherwise constitute Obligations hereunder. Agent
shall notify each Lender and Borrower in writing of each such Special Agent
Advance, which notice shall include a description of the purpose of such Special
Agent Advance. Without limitation of its obligations pursuant to Section 6.10,
each Lender agrees that it shall make available to Agent, upon Agent's demand,
in immediately available funds, the amount equal to such Lender's Pro Rata Share
of each such Special Agent Advance. If such funds are not made available to
Agent by such Lender, Agent shall be entitled to recover such funds, on demand
from such Lender together with interest thereon, for each day from the date such
payment was due until the date such amount is paid to Agent at the Interest Rate
then payable by Borrower in respect of the Loans in accordance with Section 3.1
hereof.
(a) Lenders hereby irrevocably authorize Agent, at its option and in its
discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to
the extent required under Section 13.1 below, or (ii) constituting property
being sold or disposed of if Borrower certifies to Agent that the sale or
disposition is made in compliance with Section 9.7 hereof (and Agent may
rely conclusively on any such certificate, without further inquiry), or
(iii) constituting property in which Borrower did not own an interest at
the time the security interest, mortgage or lien was granted or at any time
thereafter, or (iv) having a value of less than $5,000,000, or (v) if
approved, authorized or ratified in writing by all of Lenders. Except as
provided above, Agent will not release any security interest in, mortgage
or lien upon, any of the Collateral without the prior written authorization
of all of Lenders (and any Lender may require that the proceeds from any
sale or other disposition of the Collateral to be so released be applied to
the Obligations in a manner satisfactory to such Lender). Upon request by
Agent at any time, Lenders will promptly confirm in writing Agent's
authority to release particular types or items of Collateral pursuant to
this Section.
(b) Without in any manner limiting Agent's authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority
to release Collateral conferred upon Agent under this Section. Agent shall
(and is hereby irrevocably authorized by Lenders to) execute such documents
as may be necessary to evidence the release of the security interest,
mortgage or liens granted to Agent for itself and the benefit of the
Lenders upon any Collateral to the extent set forth above; provided, that,
(i) Agent shall not be required to execute any such document on terms
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such
security interest, mortgage or liens without recourse or warranty, and (ii)
such release shall not in any manner discharge, affect or impair the
Obligations or any security interest, mortgage or lien upon (or obligations
of Borrower in respect of) the Collateral retained by Borrower.
(c) Agent shall have no obligation whatsoever to any Lender or any other Person
to investigate, confirm or assure that the Collateral exists or is owned by
Borrower or is cared for, protected or insured or has been encumbered, or
that any particular items of Collateral meet the eligibility criteria
applicable in respect of the Loans or Letter of Credit Accommodations
hereunder, or whether any particular reserves are appropriate, or that the
liens and security interests granted to Agent herein or pursuant hereto or
otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular
priority, or to exercise at all or in any particular manner or under any
duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this
Agreement or in any of the other Financing Agreements, it being understood
and agreed that in respect of the Collateral, or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in
its discretion, given Agent's own interest in the Collateral as a Lender
and that Agent shall have no duty or liability whatsoever to any other
Lender.
12.11 Agency for Perfection.
Agent and each Lender hereby appoints each Lender as Agent for the
purpose of perfecting the security interests in and liens upon the Collateral of
Agent for itself and the ratable benefit of Lenders in assets which, in
accordance with the PPSA can be perfected only by possession. Should any Lender
obtain possession of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent's request therefor shall deliver such
Collateral to Agent or in accordance with Agent's instructions.
Article 13
TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term
(1) 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 as
it may be extended under this Section 13.1 (the "Renewal Date"), unless sooner
terminated pursuant to the terms hereof; provided, that, Agent, Lenders and
Borrower may extend the Renewal Date to the date four (4) years from the date
hereof by mutual agreement reached at least sixty (60) days prior to the third
anniversary of this Agreement. Thereafter, the term of this Agreement may be
extended year to year by Borrower, Agent and Lenders for a period of one (1)
year by extending the Renewal Date to a date which is one (1) year from the
anniversary of the then current Renewal Date in any year by mutual agreement
reached at least sixty (60) days prior to then current Renewal Date unless
sooner terminated pursuant to the terms hereof. Agent or Borrower (subject to
the right of Agent, Lenders and Borrower to extend the Renewal Date as provided
above) may terminate this Agreement and the other Financing Agreements effective
on the then current Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. In addition
Borrower may terminate this Agreement at any time upon fifteen (15) days prior
written notice to Agent (which notice shall be irrevocable) and Agent may
terminate this Agreement at any time upon an Event of Default. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrower shall pay to Agent, for rateable benefit of Lenders, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Agent,
for rateable benefit of Lenders in such amounts as Agent determines are
reasonably necessary to secure Agent from loss, cost, damage or expense,
including legal fees and expenses, in connection with any contingent Obligations
(excluding indemnities under this Agreement for which no claim has been made),
including issued and outstanding Letter of Credit Accommodations and cheques or
other payments provisionally credited to the Obligations and/or as to which
Agent for rateable benefit of Lenders 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 or US Dollars,
as applicable, to such bank account of Agent, as Agent 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.
(2) 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 Agent for
itself and rateable benefit of Lenders has received release documentation
satisfactory to it and 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 Agent and Lender, hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until such release
documentation has been received and all such Obligations have been fully and
finally discharged and paid. Agent shall be required to execute such release
documentation satisfactory to it upon payment of all Obligations. Upon
termination of this Agreement in accordance with this Section, Agent, at the
request and expense of Borrower shall execute such documents and instructions
and take such other actions as may be reasonably required to terminate any lien
or security interest held by Agent and Lenders for itself and shall transfer its
interest therein to Borrower.
(3) If for any reason this Agreement is terminated (whether voluntarily or
involuntarily or as a result of an Event of Default) on or prior to the second
anniversary of the Closing Date, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits as a result thereof,
Borrower agrees to pay to Agent's and each 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
(a) $1,500,000 (1.5% of $100,000,000) From the Closing Date hereof
to and including the first
anniversary thereof
(b) $750,000 (0.75% of $100,000,000) Thereafter to and including the
second anniversary of the Closing
Date
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 reasonable under the circumstances currently existing. In addition,
Agent and Lenders shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(6) and 10.1(7)
hereof, even if Agent 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 13.1 shall be deemed
included in the Obligations.
(4) Any reference in this Agreement to the termination or non-renewal
of this Agreement shall mean the date on which this Agreement is terminated or
expires and not the date on which notice to do so is given.
13.2 Notices
All notices, requests and demands hereunder shall be in writing and (a)
made to Agent and Lenders at their addresses set forth below and to Borrower at
its chief executive office set forth below with a copy to Merisel, Inc., 000
Xxxxxxxxxxx Xxxx. Xx Xxxxxxx, XX 00000, Fax: (000) 000-0000, 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.
13.3 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.
13.4 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 Lenders, Agent, Borrower and its 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 Agent and Lenders. No Lender may
assign its rights and obligations under this Agreement (or any part thereof)
without the prior written consent of all Lenders and Agent, except as permitted
under Section 13.5 hereof. Any purported assignment by a Lender without such
prior express consent or compliance with Section 13.5 where applicable, shall be
void. The terms and provisions of this Agreement and the other Financing
Agreements are for the purpose of defining the relative rights and obligations
of Borrower, Agent and Lenders with respect to the transactions contemplated
hereby and there shall be no third party beneficiaries of any of the terms and
provisions of this Agreement or any of the other Financing Agreements.
13.5 Assignments; Participations
(a) Each Lender may (i) assign all or a portion of its rights and obligations
under this Agreement (including, without limitation, a portion of its
Commitment, the Loans owing to it and its rights and obligations as a
Lender with respect to Letters of Credit Accommodations) and the other
Financing Agreements; to its parent company and/or any Affiliate of such
Lender which is at least fifty (50%) percent owned by such Lender or its
parent company or to one or more Lenders, or (ii) assign all, or if less
than all a portion equal to at least $5,000,000 in the aggregate for the
assigning Lender or assigning Lenders, of such rights and obligations under
this Agreement to one or more Eligible Transferees, each of which assignees
shall become a party to this Agreement as a Lender by execution of an
Assignment and Acceptance; provided, that, (A) the consent of Agent shall
be required in connection with any assignment to an Eligible Transferee
pursuant to clause (ii) above.
(b) Agent shall maintain a register of the names and addresses of Lenders,
their Commitments and the principal amount of their Loans (the "Register").
Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give
effect to each Assignment and Acceptance. The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and
Borrower, Agent and Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Borrower and any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations (including, without limitation, the obligation to
participate in Letter of Credit Accommodations) of a Lender hereunder and
thereunder, and (ii) the assigning Lender shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the assignor and
assignee thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the
other Financing Agreements or the execution, legality, enforceability,
genuineness, sufficiency or value of this Agreement or any of the other
Financing Agreements furnished pursuant hereto, (ii) the assigning Lender
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrower, any Obligor or any of their
Subsidiaries or the performance or observance by Borrower or any Obligor of
any of the Obligations; (iii) such assignee confirms that it has received a
copy of this Agreement and the other Financing Agreements, together with
such other documents and information it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such assignee will, independently and without reliance
upon the assigning Lender, Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Financing Agreements, (v) such assignee
appoints and authorizes Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto, and (vi)
such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement and the other
Financing Agreements are required to be performed by it as a Lender. Agent
and Lenders may furnish any information concerning Borrower, any Obligor or
its Subsidiaries in the possession of Agent or any Lender from time to time
to assignees and Participants.
(e) Each Lender may sell participations to one or more banks or other entities
in or to all or a portion of its rights and obligations under this
Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it
and its participation in the Letter of Credit Accommodations, without the
consent of Agent or the other Lenders); provided, that, (i) such Lender's
obligations under this Agreement (including, without limitation, its
Commitment hereunder) and the other Financing Agreements shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, and Borrower, any
Obligor, Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Financing Agreements, and
(iii) the Participant shall not have any rights under this Agreement or any
of the other Financing Agreements and (the Participant's rights against
such Lender in respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the Participant relating
thereto) and all amounts payable by any Borrower or Obligor hereunder shall
be determined as if such Lender had not sold such participation,
13.6 Participant's Security Interests.
If a Participant shall at any time participate with any Lender
in the Loans and Letter of Credit Accommodations, Borrower hereby grants to such
Participant and such Participant shall have and is hereby given, a continuing
lien on and security interest in any money, securities and other property of
Borrower in the custody or possession of the Participant, including the right of
setoff, to the extent of the Participant's participation in the Obligations, and
such Participant shall be deemed to have the same right of setoff to the extent
of its participation in the Obligations, as it would have if it were a direct
Lender.
13.7 Entire Agreement
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.
13.8 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.
13.9 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.
13.10 Execution in Counterparts
This Agreement may be executed and delivered in any number of
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.
13.11 Facsimile
This Agreement may be executed and delivered by facsimile transmission
and the parties may rely on all such facsimile signatures as though such
facsimile signatures were original signatures.
13.12 Choice of Language
The parties hereto confirm that they have requested that this Agreement
and all documents related hereto be drafted in English. Les parties aux
presentes ont exige que cette convention ainsi que tout document connexe soient
rediges en anglais.
IN WITNESS WHEREOF, Agent, Lenders and Borrower have caused these
presents to be duly executed as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION (CANADA)
By:
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Senior Vice President
Address:
-------
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Fax: (000) 000-0000
MERISEL CANADA INC.
By:
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President and Treasurer
By:
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President and Secretary
Chief Executive Office:
000 Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: Senior Financial Officer
