Loan and Security Agreement
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Greystone
Business Credit II
LLC
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This
Loan
and Security Agreement (as it may be amended, this "Agreement")
is
entered into on September 7, 2006, between Greystone
Business Credit II LLC ("Lender"),
a
Delaware limited liability company having an address at 000 Xxxx 00xx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and Pneutech
Inc.
("Borrower"),
a
corporation organized under the laws of Canada whose principal office is located
at 0000 00xx Xxxxxx, Xxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 ("Borrower's
Address"),
as
debtor under an insolvency proceeding commenced in the Commercial Division
of
the Superior Court of the Province of Quebec, District of Montreal, under the
Companies' Creditors Arrangement Act R.S.C. 1985, c. C-36. The Schedules to
this
Agreement are an integral part of this Agreement and are incorporated herein
by
reference. Terms used, but not defined elsewhere, in this Agreement are defined
in Schedule B.
RECITALS
A.
On
September 6, 2006 (the "Filing
Date"),
Borrower Affiliates filed an insolvency proceeding (the "CCAA
Proceeding")
in the
Commercial Division of the Superior Court of the Province of Quebec, District
of
Montreal (the "Court")
under
the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the
"CCAA"),
bearing Case No. 000-00-000000-000, and Borrower Affiliates continue to operate
their businesses and manage their properties pursuant to the provisions of
the
CCAA.
B.
Borrower Affiliates have requested that Lender provide a senior secured,
super-priority revolving credit facility of up to U.S.$15,000,000 (the
"Facility")
to
fund (i) the repayment in full in cash of all indebtedness owing by Borrower
Affiliates to Royal Bank of Canada (whether arising before or after the filing
of the CCAA Proceeding) (the "RBC
Indebtedness"),
(ii)
ongoing working capital and general corporate needs of Borrower during the
CCAA
Proceeding; (iii) expenses arising in the CCAA Proceeding, as may be approved
by
the Court; and (d) closing costs and expenses in connection with the
transactions contemplated herein.
C.
Lender
is willing to provide such loans and other extensions of credit to Borrower
Affiliates only upon the terms and conditions set forth herein, including the
requirement that such loans and other extensions of credit are secured by first
priority Liens, superior to all other Liens held by any other lienholder, all
of
which shall be acceptable to Lender, on all of the assets of Borrower
Affiliates, except in each instance as otherwise set forth in this
Agreement;
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D.
Borrower Affiliates are unable to obtain funds or credit on any other terms
and
there is no prejudice to the interests of the other lienholders whose Liens
are
being subordinated to Lender's senior Liens provided for in this
Agreement.
E.
Borrower has agreed to secure all of its Obligations under this Agreement and
the Other Documents by granting to Lender a security interest in and lien upon
the Collateral; and
THEREFORE,
in consideration of the mutual covenants and undertakings herein contained,
Borrower and Lender hereby covenant and agree as follows:
1. LOANS
AND CREDIT ACCOMMODATIONS.
1.1 Amount.
Subject
to the terms and conditions contained in this Agreement, Lender
will:
(a) Revolving
Loans and Credit Accommodations. From
time
to time during the Term at Borrower's request, make revolving loans to Borrower
("Revolving
Loans"),
and
make letters of credit, bankers acceptances and other credit accommodations
("Credit
Accommodations")
available to Borrower, in each case to the extent that there is sufficient
Availability at the time of such request to cover, dollar for dollar, the
requested Revolving Loan or Credit Accommodation; provided,
that
after giving effect to such Revolving Loan or Credit Accommodation, (x) the
outstanding balance of all monetary Obligations (including
the
principal balance of any Term Loan and, solely for the purpose of determining
compliance with this provision, the Credit Accommodation Balance) will not
exceed the Maximum Facility Amount set forth in Section 1(a) of
Schedule A and (y) none of the other Loan Limits set forth in
Section 1 of Schedule A will be exceeded. For this purpose,
"Availability"
means:
(i) the
aggregate amount of Eligible Accounts (less maximum existing or asserted taxes,
discounts, credits and allowances) multiplied by the Accounts Advance Rate
set forth in Section 1(b)(i) of Schedule A but not to exceed the
Accounts Sublimit set forth in Section 1(c) of
Schedule A;
plus
(ii) the
lower
of cost or market value of Eligible Inventory multiplied by the Inventory
Advance Rate(s) set forth in Section 1(b)(ii) of Schedule A, but
not to exceed the Inventory Sublimit(s) set forth in Section 1(d) of
Schedule A;
minus
(iii) all
Reserves which Lender has established pursuant to Section 1.2 (including
those to be established in connection with the requested Revolving Loan or
Credit Accommodation);
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minus
(iv) the
outstanding balance of all of the monetary Obligations (excluding
the
Credit Accommodation Balance and the principal balance of the Term
Loans).
(b) Term
Loan A.
Make (i)
on the date of this Agreement an advance to Borrower computed with respect
to
(A) the value of Borrower's Eligible Equipment owned by Borrower on the date
of
this Agreement (the "Equipment
Advance")
in the
principal amount, if any, set forth in Section 2(a)(i) of Schedule A
and (B) the value of Borrower's Eligible Real Property (the "Real
Property Advance")
in the
principal amount, if any, set forth in Section 2(a)(ii) of Schedule A.
The Equipment Advance and the Real Property Advance are collectively referred
to
as "Term
Loan A".
Term
Loan A will be evidenced by a term note in the form attached hereto as Exhibit
A
hereto.
(c) Term
Loan B.
Make,
from time to time, advances to Borrower in the amount set forth in Section
3(a)(i) of Schedule A at the direction of Lender to pay expenditures approved
by
Lender. Term Loan B will be evidenced by a term note in the form attached hereto
as Exhibit B hereto.
1.2 Reserves.
Lender
may from time to time establish and revise such reserves as Lender deems
appropriate in its sole discretion ("Reserves")
to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests,
hypothecs and other rights of Lender in the Collateral or (B) the assets,
business or prospects of Borrower or any Obligor, (ii) Lender's good faith
concern that any Collateral report or financial information furnished by or
on
behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect, (iii) any fact or
circumstance which Lender determines in good faith constitutes, or could
constitute, a Default or Event of Default, (iv) federal, provincial and general
sales tax, potential reclamation claims, crown claims and other claims having
potential priority over Lender's liens, hypothecs, and security interests,
(v)
the amount of the Carve-Out or (vi) any other events or circumstances which
Lender determines in good faith make the establishment or revision of a Reserve
prudent. Without limiting the foregoing, Lender shall (x) in the case of
each Credit Accommodation issued for the purchase of Inventory (a) which meets
the criteria for Eligible Inventory set forth in clauses (i), (ii), (iii),
(v)
and (vi) of the definition of Eligible Inventory, (b) which is or will be in
transit to one of the locations set forth in Section 10(d) of Schedule A,
(c) which is fully insured in a manner satisfactory to Lender and (d) with
respect to which Lender is in possession of all bills of lading and all other
documentation which Lender has requested, all in form and substance satisfactory
to Lender in its sole discretion, establish a Reserve equal to the cost of
such
Inventory (plus all duties, freight, taxes, insurance, costs and other charges
and expenses relating to such Credit Accommodation or such Eligible Inventory)
multiplied by a percentage equal to 50% and (y) in the case of any other
Credit Accommodation issued for any purpose, establish a Reserve equal to the
full amount of such Credit Accommodation plus all costs and other charges and
expenses relating to such Credit Accommodation. In addition, (x) Lender
shall establish a permanent Reserve in the amount set forth in Section 1(f)
of Schedule A, and (y) if the outstanding principal balance of the
Term Loan A advance with respect to Eligible Equipment and the Eligible Real
Property exceeds the percentage set forth in Section 2(a)(i) or 2(a)(ii) of
Schedule A of the appraised value of such Eligible Equipment and Eligible
Real Property, Lender may establish an additional Reserve in the amount of
such
excess (and, for this purpose, if payments of principal on Term Loan A advances
against Eligible Equipment and Real Property are not calculated separately,
payments of principal of Term Loan A made by Borrower
shall be deemed to apply to the Term Loan A advance with respect to Eligible
Equipment and Real Property, respectively, in proportion to the original
principal amounts of such advances). Lender may, in its discretion, establish
and revise Reserves by deducting them in determining Availability or by
reclassifying Eligible Accounts or Eligible Inventory as ineligible. In no
event
shall the establishment of a Reserve in respect of a particular actual or
contingent liability obligate Lender to make advances hereunder to pay such
liability or otherwise obligate Lender with respect thereto.
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1.3 Other
Provisions Applicable to Credit Accommodations. Lender
may, in its sole discretion and on terms and conditions acceptable to Lender,
make Credit Accommodations available to Borrower either by issuing them, or
by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; provided,
that
after giving effect to each Credit Accommodation, the Credit Accommodation
Balance will not exceed the Credit Accommodation Limit set forth in Section
1(e)
of Schedule A. Any amounts paid by Lender in respect of a Credit Accommodation
will be treated for all purposes as a Revolving Loan which shall be secured
by
the Collateral and bear interest, and be payable, in the same manner as a
Revolving Loan. Borrower agrees to execute all documentation required by Lender
or the issuer of any Credit Accommodation in connection with any such Credit
Accommodation.
1.4 Repayment.
Accrued
interest on all monetary Obligations shall be payable on the first day of each
month. Principal of the Term Loans shall be repaid as set forth in
Section 2(b) and Section 3(b) of Schedule A. If at any time any of the
Loan Limits are exceeded (including, without limitation, as a result of currency
fluctuations), Borrower will immediately pay to Lender such amounts (or provide
cash collateral to Lender with respect to the Credit Accommodation Balance
in
the manner set forth in Section 7.3), as shall cause Borrower to be in full
compliance with all of the Loan Limits. Notwithstanding the foregoing, Lender
may, in its sole discretion, make or permit Revolving Loans, the Term Loan,
any
Credit Accommodations or any other monetary Obligations to be in excess of
any
of the Loan Limits; provided,
that
Borrower shall, upon Lender's demand, pay to Lender such amounts as shall cause
Borrower to be in full compliance with all of the Loan Limits, unless otherwise
agreed to in writing by Borrower and Lender. All unpaid monetary Obligations
shall be payable in full on the Maturity Date (as defined in Section 7.1)
or, if earlier, the date of any early termination pursuant to
Section 7.2.
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1.5 Minimum
Borrowing.
Subject
to the terms and conditions of this Agreement, Borrower agrees to
(i) borrow sufficient amounts to cause the outstanding principal balance of
the Loans to equal or exceed, at all times prior to the Maturity Date, the
Minimum Loan Amount set forth in Section 5 of Schedule A and
(ii) maintain Availability sufficient to enable Borrower to do so. However,
Lender shall not be obligated to loan Borrower the Minimum Loan Amount other
than in accordance with all of the terms and conditions of this
Agreement.
2. INTEREST
AND FEES.
2.1 Interest.
All
Loans and other monetary Obligations shall bear interest at the Interest Rate(s)
set forth in Section 4 of Schedule A, except where expressly set forth
to the contrary in this Agreement or another Loan Document; provided,
that
after the occurrence of an Event of Default, all Loans and other monetary
Obligations shall, at Lender's option, bear interest at a rate per annum equal
to two percent (2%) in excess of the rate otherwise applicable thereto (the
"Default
Rate")
until
paid in full (notwithstanding the entry of any judgment against Borrower or
the
exercise of any other right or remedy by Lender), and all such interest shall
be
payable on demand. Changes in the Interest Rate shall be effective as of the
date of any change in the Prime Rate. Notwithstanding anything to the contrary
contained in this Agreement, the aggregate of all amounts deemed to be interest
hereunder and charged or collected by Lender is not intended to exceed the
highest rate permissible under any applicable law, but if it should, such
interest shall automatically be reduced to the extent necessary to comply with
applicable law and Lender will refund to Borrower any such excess interest
received by Lender. Without limiting the generality of the foregoing in this
Section 2.1, if any provision of this Agreement or any of the Loan Documents
would obligate the Borrower or any Obligor to make any payment of interest
or
other amount payable to the Lender in an amount or calculated at a rate which
would be prohibited by law or would result in a receipt by the Lender of
interest at a criminal rate (as construed under the Criminal
Code
(Canada)), then notwithstanding that provision, that amount or rate shall be
deemed to have been adjusted with retroactive effect to the maximum amount
or
rate of interest, as the case may be, as would not be so prohibited by law
or
result in a receipt by the Lender of interest at a criminal rate, the adjustment
to be effected, to the extent necessary, as follows:
(a) firstly,
by reducing the amount or rate of interest required to be paid to the Lender
under this Agreement or any other Loan Document; and
(b) thereafter,
by reducing any fees, commissions, premiums and other amounts required to be
paid to the Lender which would constitute interest for purposes of Section
347
of the Criminal
Code
(Canada).
Notwithstanding
this Section 2.1, and after giving effect to all adjustments contemplated
thereby, if the Lender shall have received an amount in excess of the maximum
permitted by the Criminal Code (Canada), then the Borrower or the relevant
Obligor shall be entitled, by notice in writing to the Lender, to obtain
reimbursement from the Lender in an amount equal to the excess, and pending
reimbursement, the amount of the excess shall be deemed to be an amount payable
by the Lender to the Borrower or the relevant Obligor.
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Any
amount or rate of interest referred to in this Section 2.1 shall be determined
in accordance with generally accepted actuarial practices and principles as
an
effective annual rate of interest over the Term on the assumption that any
charges, fees or expenses that fall within the meaning of interest (as defined
in the Criminal
Code
(Canada)) shall, if they relate to a specific period of time, be prorated over
that period of time and otherwise be prorated over the period from the date
of
this Agreement to the Term and, in the event of a dispute, a certificate of
a
Fellow of the Canadian Institute of Actuaries appointed by the Lender shall
be
conclusive for the purposes of that determination.
2.2 Fees
and Warrants. Borrower
shall pay Lender the following fees, which are in addition to all interest
and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) Closing
Fee.
A
closing fee (the "Closing
Fee")
in the
amount set forth in Section 7(a) of Schedule A.
(b) Facility
Fees.
A
facility fee for the Initial Term (the "Initial
Term Facility Fee")
in the
amount set forth in Section 7(b)(i) of Schedule A (which shall be
fully earned as of the date of this Agreement and shall be payable in equal
installments due, respectively, on each anniversary of the date of this
Agreement during the Initial Term, other than the Maturity Date), and a facility
fee for each Renewal Term (the "Renewal
Term Facility Fee")
in the
amount set forth in Section 7(b)(ii) of Schedule A (which shall be
fully earned as of the first day of such Renewal Term and shall be payable
in
equal installments due, respectively, on the first day of such Renewal Term
and
on each anniversary thereof during such Renewal Term, other than the Maturity
Date).
(c) Servicing
Fee.
A
monthly servicing fee (the "Servicing
Fee")
in the
amount set forth in Section 7(c) of Schedule A, in consideration of
Lender's administration and other services for each month (or part thereof),
which shall be fully earned as of, and payable in advance on, the date of this
Agreement and on the first day of each month thereafter so long as any of the
Obligations are outstanding.
(d) Unused
Line Fee.
An
unused line fee (the "Unused
Line Fee")
at a
rate equal to the percentage per annum set forth in Section 7(d) of
Schedule A of the amount by which the Maximum Facility Amount exceeds the
average daily outstanding principal balance of the Loans and the Credit
Accommodation Balance during the immediately preceding month (or part thereof),
which fee shall be payable, in arrears, on the first day of each month so long
as any of the Obligations are outstanding and on the Maturity Date.
(e) Minimum
Borrowing Fee.
A
minimum borrowing fee (the "Minimum
Borrowing Fee")
equal
to the excess, if any, of (i) interest which would have been payable in
respect of each period set forth in Section 7(e)(i) of Schedule A if,
at all times during such period, the principal balance of the Loans was equal
to
the Minimum Loan Amount over (ii) the actual interest payable in respect of
such period, which fee shall be fully earned as of the last day of such period
and payable on the date set forth in Section 7(e)(ii) of Schedule A and on
the
Maturity Date, commencing with the immediately following period.
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(f) Intentionally
Omitted.
(g) Warrants.
As
additional consideration for extending the Facility to Borrower, Lender shall
receive, for no additional consideration, warrants to purchase 1,000,000 shares
of common stock of Parent, which will have an exercise price of U.S.$.50 per
share, and will be immediately exercisable and freely transferable by Lender
separate from the Facility. Within six months following the closing, the shares
of Parent subject to such warrants will be registered by Parent with the
Securities and Exchange Commission so that they will be freely tradable and
shall be listed for trading on the principal market on which Parent's securities
are then trading.
(h) Credit
Accommodation Fees.
The fees
relating to Credit Accommodations (or guaranties thereof by Lender) in the
amount set forth in Section 7(i) of Schedule A (the "Credit
Accommodation Fees"),
payable, in arrears, on the first day of each month so long as any of the
Obligations are outstanding and on the Maturity Date, plus all costs and fees
charged by the issuer, payable as and when such costs and fees are
charged.
2.3 Computation
of Interest and Fees. Except
as
otherwise provided herein, all
interest and fees shall be calculated daily on the closing balances in the
Loan
Account based on the actual number of days elapsed in a year of 360 days. For
purposes of calculating interest and fees, if the outstanding daily principal
balance of the Revolving Loans is a credit balance, such balance shall be deemed
to be zero. For the purposes of the Interest
Act
(Canada), any amount of interest or fees calculated hereunder using 360, 365
or
366 days per year and expressed as an annual rate is equal to the said rate
of
interest or fees multiplied by the actual number of days comprised within the
calendar year, divided by 360, 365 or 366, as the case may be.
2.4 Loan
Account; Monthly Accountings. Lender
shall maintain a loan account for Borrower reflecting all advances, charges,
expenses and payments made pursuant to this Agreement (the "Loan
Account"),
and
shall provide Borrower with a monthly accounting reflecting the activity in
the
Loan Account. Each accounting shall be deemed correct, accurate and binding
on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Lender), unless Borrower
notifies Lender in writing to the contrary within sixty days after such account
is rendered, describing the nature of any alleged errors or omissions. However,
Lender's failure to maintain the Loan Account or to provide any such accounting
shall not affect the legality or binding nature of any of the Obligations.
Interest, fees and other monetary Obligations due and owing under this Agreement
(including fees and other amounts paid by Lender to issuers of Credit
Accommodations) may, in Lender's discretion, be charged to the Loan Account,
and
will thereafter be deemed to be Revolving Loans and will bear interest at the
same rate as other Revolving Loans.
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2.5 Taxes.
All
payments made by Borrower hereunder or under any other Loan Document shall
be
made without setoff, compensation, counterclaim, or other defense. To the extent
permitted by applicable law, all payments hereunder or under the Loan Documents
(including any payment of principal, interest, or fees) to, or for the benefit,
of any Person shall be made by Borrower free and clear of and without deduction
or withholding for, or account of, any taxes now or hereinafter imposed by
any
taxing authority.
If
Borrower makes any payment hereunder or under any other Loan Document in respect
of which it is required by applicable law to deduct or withhold any taxes,
Borrower shall increase the payment hereunder or under any such Loan Document
such that after the reduction for the amount of taxes withheld (and any taxes
withheld or imposed with respect to the additional payments required under
this
Section 2.5), the amount paid to Lender equals the amount that was payable
hereunder or under any such Loan Document without regard to this
Section 2.5. To the extent Borrower withholds any taxes on payments
hereunder or under any Loan Document, Borrower shall pay the full amount
deducted to the relevant taxing authority within the time allowed for payment
under applicable law and shall deliver to Lender within 30 days after it has
made payment to such authority a receipt issued by such authority evidencing
the
payment of all amounts so required to be deducted or withheld from such payment.
Upon submission of proof of payment of any Canadian withholding tax in respect
of Borrower's payments of interest to Lender under this Agreement, Lender shall
credit Borrower's account in an amount equal to 50% of the amount of Canadian
withholding tax so paid.
Other
than Lender's income taxes, if Lender is required by law to make any payments
of
any taxes on or with respect to any amounts received or receivable hereunder
or
under any other Loan Document, or any tax is assessed against Lender with
respect to amounts received or receivable hereunder or under any other Loan
Document, Borrower will indemnify Lender against (i) such tax (and any
reasonable counsel fees and expenses associated with such tax) and (ii) any
taxes imposed as a result of the receipt of the payment under this
Section 2.5. A certificate prepared in good faith as to the amount of such
payment by Lender shall, absent manifest error, be final, conclusive, and
binding on all parties unless Borrower notifies Lender in writing to the
contrary within sixty days after such certificate is rendered, describing the
nature of any alleged errors or omissions.
3. SECURITY
INTEREST.
3.1 Grant
of Security Interest. To
secure
the full payment and performance of all of the Obligations, and in addition
to
any security interests, liens, mortgages and hypothecs granted by Borrower
to
Lender under the Canadian Security Documents, Borrower hereby assigns to Lender
and grants to Lender a continuing security interest in the following property
of
Borrower, whether tangible or intangible, now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located, and whether or not
eligible for lending purposes: (i) all Accounts (whether or not Eligible
Accounts) and all Goods whose sale, lease or other disposition by Borrower
has
given rise to Accounts and have been returned to, or repossessed or stopped
in
transit by, Borrower; (ii) all Chattel Paper, Instruments, Documents and
General Intangibles (including, without limitation, all patents, patent
applications, trademarks, trademark applications, tradenames, trade secrets,
goodwill, copyrights, copyright applications, registrations, licenses, software,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contracts rights, payment intangibles, security
interests, security deposits and rights to indemnification); (iii) all
Inventory (whether or not Eligible Inventory); (iv) all Goods (other than
Inventory), including, without limitation, Equipment (whether or not Eligible
Equipment), vehicles and Fixtures; (v) all Investment Property;
(vi) all Deposit Accounts, bank accounts, deposits and cash; (vii)
all Letter-of-Credit Rights; (viii) Commercial Tort Claims listed on
Exhibit C hereto; (ix) all Supporting Obligations; (x) any other property of
Borrower now or hereafter in the possession, custody or control of Lender or
any
agent or mandatary or any parent, Affiliate or Subsidiary of Lender or any
participant with Lender in the Loans, for any purpose (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise), (xi)
all
proceeds
arising from claims and causes of action in the CCAA or any subsequent
insolvency or bankruptcy proceeding, or outside of any such proceeding; and
(xii) all
additions and accessions to, substitutions for, and replacements, products
and
Proceeds of the foregoing property, including, without limitation, proceeds
of
all insurance policies insuring the foregoing property, and all of Borrower's
books and records relating to any of the foregoing and to Borrower's business.
The security interest granted in this Section 3.1 shall be in addition to all
other liens, mortgages, hypothecs and security interests granted by Borrower
to
Lender under any other agreements, instruments and documents.
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3.2 Possessory
Collateral. Immediately
upon Borrower's receipt of any portion of the Collateral evidenced by an
agreement, Instrument or Document, including without limitation, any Tangible
Chattel Paper and any Investment Property consisting of certificated securities,
Borrower shall deliver the original thereof to Lender together with an
appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If an endorsement or
assignment of any such items shall not be made for any reason, Lender is hereby
irrevocably authorized, as Borrower's attorney, agent-in-fact and mandatary
to
endorse or assign the same on Borrower's behalf.
3.3 Preservation
of Collateral and Perfection of Security Interest Therein. Borrower
shall, at Lender's request, at any time and from time to time, authenticate,
execute and deliver to Lender such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same
in
all public offices deemed necessary or desirable by Lender) and do such other
acts and things or cause third parties to do such other acts and things as
Lender may deem necessary or desirable in its sole discretion in order to
establish and maintain a valid, attached and perfected security interest in
the
Collateral in favor of Lender (free and clear of all other liens, hypothecs,
claims, prior claims, encumbrances and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Obligations, and in order to facilitate the collection of the
Collateral. Borrower authorizes Lender to file, transmit, or communicate, as
applicable, financing statements and amendments describing the Collateral as
"all personal property of debtor" or "all assets of debtor" or words of similar
effect, in order to perfect Agent's security interest in the Collateral without
Borrower's signature. Borrower also hereby ratifies its authorization for Lender
to have filed in any jurisdiction any financing statements filed prior to the
date hereof.
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Loan
and Security
Agreement
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4. ADMINISTRATION.
4.1 Lock
Boxes and Blocked Accounts.
Borrower
will, at its expense, establish (and revise from time to time as Lender may
require) collection procedures acceptable to Lender, in Lender's sole
discretion, for the collection of checks, wire transfers and other proceeds
of
Accounts ("Account
Proceeds"),
which
may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's
option, in the name of Lender (a "Lock
Box")
or
(ii) depositing all Account Proceeds received by Borrower into one or more
bank accounts maintained in Lender's name (each, a "Blocked
Account"),
under
an arrangement acceptable to Lender with a depository bank acceptable to Lender,
pursuant to which all funds deposited into each Blocked Account are to be
transferred, in United States Dollars, to Lender in such manner, and with such
frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing.
4.2 Remittance
of Proceeds. Except
as
provided in Section 4.1, all Proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to Lender
in the original form in which received by Borrower not later than the following
Business Day after receipt by Borrower. Until so delivered to Lender, Borrower
shall hold such Proceeds separate and apart from Borrower's other funds and
property in an express trust for and on behalf of Lender. Nothing in this
Section 4.2 shall limit the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
4.3 Application
of Payments. Lender
may, in its sole discretion, apply, reverse and re-apply all cash and non-cash
Proceeds of Collateral or other payments received with respect to the
Obligations, in such order and manner as Lender shall determine, whether or
not
the Obligations are due, and whether before or after the occurrence of a Default
or an Event of Default. For purposes of determining Availability, such amounts
will be credited to the Loan Account and the Collateral balances to which they
relate upon Lender's receipt of advice from Lender's Bank (set forth in
Section 12 of Schedule A) that such items have been credited to
Lender's account at Lender's Bank (or upon Lender's deposit thereof at Lender's
Bank in the case of payments received by Lender in kind), in each case subject
to final payment and collection. However, for purposes of computing interest
on
the Obligations, such items shall be deemed applied by Lender three Business
Days after Lender's receipt of advice of deposit thereof at Lender's
Bank.
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4.4 Notification;
Verification. Lender
or
its designee may, from time to time, whether or not a Default or Event of
Default has occurred: (i) verify directly with the Account Debtors the
validity, amount and other matters relating to the Accounts and Chattel Paper,
by means of mail, telephone or otherwise, either in the name of Borrower or
Lender or such other name as Lender may choose; (ii) notify Account Debtors
that Lender has a security interest and hypothec in the Accounts and that
payment thereof is to be made directly to Lender; and (iii) demand, collect
or enforce payment of any Accounts and Chattel Paper (but without any duty
to do
so).
4.5 Power
of Attorney. Borrower
hereby grants to Lender an irrevocable power of attorney and mandate, coupled
with an interest, authorizing and permitting Lender (acting through any of
its
officers, employees, attorneys, mandataries or agents), at any time
(whether or not a Default or Event of Default has occurred and is continuing,
except as expressly provided below), at Lender's option, but without obligation,
with or without notice to Borrower (except that Lender will provide notice
to
Borrower so long as no Default or Event of Default has occurred and is
continuing), and at Borrower's expense, to do any or all of the following,
in
Borrower's name or otherwise: (i) execute on behalf of Borrower any
documents that Lender may, in its sole discretion, deem advisable in order
to
perfect and maintain Lender's security interests and hypothecs in the
Collateral, to exercise a right of Borrower or Lender, or to fully consummate
all the transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements
and
similar instruments or forms necessary in other relevant jurisdictions and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) upon the occurrence and during the continuance of
an
Event of Default, execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose
of
or lease (as lessor or lessee) any real (immovable) or personal (movable)
property which is part of the Collateral or in which Lender has an interest;
(iii) execute on behalf of Borrower any invoices relating to any Accounts,
any draft against any Account Debtor, any proof of claim in bankruptcy, any
notice of Lien or claim, and any assignment or satisfaction of mechanic's,
materialman's or other Lien; (iv) execute on behalf of Borrower any notice
to any Account Debtor; (v) receive and otherwise take control in any manner
of any cash or non-cash items of payment or Proceeds of Collateral;
(vi) endorse Borrower's name on all checks and other forms of remittances
received by Lender; (vii) upon the occurrence and during the continuance of
an
Event of Default, pay, contest or settle any Lien, charge, encumbrance, security
interest, hypothec and adverse claim in or to any of the Collateral, or any
judgment based thereon, or otherwise take any action to terminate, cancel or
discharge the same; (viii) after the occurrence of a Default or Event of
Default, grant extensions of time to pay, compromise claims relating to, and
settle Accounts, Chattel Paper and General Intangibles for less than face value
and execute all releases and other documents in connection therewith;
(ix) pay any sums required on account of Borrower's taxes or to secure the
release of any Liens therefor; (x) pay any amounts necessary to obtain, or
maintain in effect, any of the insurance described in Section 5.14; (xi)
upon the occurrence and during the continuance of an Event of
Default, settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor;
(xii) instruct any third party having custody or control of any Collateral
or books or records belonging to, or relating to, Borrower to give Lender the
same rights of access and other rights with respect thereto as Lender has under
this Agreement; (xiii) after the occurrence of a Default or Event of
Default, change the address for delivery of Borrower's mail and receive and
open
all mail addressed to Borrower; and (xiv) endorse or assign to Lender on
Borrower's behalf any portion of Collateral evidenced by an agreement,
Instrument or Document if an endorsement or assignment of any such items is
not
made by Borrower pursuant to Section 3.2. Any and all sums paid, and any and
all
costs, expenses, liabilities, obligations and reasonable attorneys' fees
incurred, by Lender with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest
at
a rate equal to the highest interest rate applicable to any of the Obligations.
Borrower agrees that Lender's rights under the foregoing power of attorney
and
mandate or any of Lender's other rights under this Agreement or the other Loan
Documents shall not be construed to indicate that Lender is in control of the
business, management or properties of Borrower.
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4.6 Disputes.
Borrower
shall promptly notify Lender of all disputes or claims relating to Accounts
and
Chattel Paper that exceed U.S.$10,000. Borrower will not, without Lender's
prior
written consent, compromise or settle any Account or Chattel Paper for less
than
the full amount thereof, grant any extension of time of payment of any Account
or Chattel Paper, release (in whole or in part) any Account Debtor or other
person liable for the payment of any Account or Chattel Paper or grant any
credits, discounts, allowances, deductions, return authorizations or the like
with respect to any Account or Chattel Paper; except that prior to the
occurrence of an Event of Default, Borrower may take any of such actions in
the
ordinary course of its business without Lender's prior written consent;
provided,
that
Borrower promptly reports the same to Lender.
4.7 Invoices.
At
Lender's request, Borrower will cause all invoices and statements which it
sends
to Account Debtors or other third parties to be marked, in a manner satisfactory
to Lender, to reflect Lender's security interest and hypothec
therein.
4.8 Inventory.
(a) Returns.
Provided
that no Event of Default has occurred and is continuing, if any Account Debtor
returns any Inventory to Borrower in the ordinary course of its business,
Borrower will promptly determine the reason for such return and promptly issue
a
credit memorandum to the Account Debtor in the appropriate amount (sending
a
copy to Lender for any return that exceeds U.S.$5,000). After the occurrence
of
an Event of Default, Borrower will not accept any return without Lender's prior
written consent. Upon Lender's demand, regardless of whether an Event of Default
has occurred, Borrower will (i) hold the returned Inventory in trust for
Lender; (ii) segregate all returned Inventory from all of Borrower's other
property; (iii) conspicuously label the returned Inventory as Lender's
property; and (iv) immediately notify Lender of the return of such
Inventory, specifying the reason for such return, the location and condition
of
the returned Inventory and, at Lender's request, deliver such returned Inventory
to Lender at an address specified by Lender.
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(b) Other
Covenants. Borrower
will not, without Lender's prior written consent, (i) store any Inventory
with any warehouseman or other third party other than as set forth in Section
10(d) of Schedule A or (ii) sell any Inventory on a sale-or-return,
guaranteed sale, consignment, or other contingent basis. All of the Inventory
has been produced only in accordance with the applicable laws and all rules,
regulations and orders promulgated thereunder.
4.9 Access
to Collateral, Books and Records. At
reasonable times, and on one Business Day's notice, prior to the occurrence
of a
Default or an Event of Default, and at any time and with or without notice
after
the occurrence of a Default or an Event of Default, Lender or its agents and
mandataries shall have the right to inspect the Collateral, and the right to
examine and copy Borrower's books and records. Lender shall take reasonable
steps to keep confidential all information obtained in any such inspection
or
examination, but Lender shall have the right to disclose any such information
to
its auditors, regulatory agencies, attorneys and participants, and pursuant
to
any subpoena or other legal process. Borrower agrees to give Lender access
to
any or all of Borrower's premises to enable Lender to conduct such inspections
and examinations. Such inspections and examinations shall be at Borrower's
expense and the charge therefor shall be U.S.$950 per person per day (or such
higher amount as shall represent Lender's then current standard charge), plus
reasonable out-of-pocket expenses. Lender may, at Borrower's expense, use
Borrower's personnel to the extent reasonably available, computer and other
equipment, programs, printed output and computer readable media, supplies and
premises for the collection, sale or other disposition of Collateral to the
extent Lender, in its sole discretion, deems appropriate. Borrower hereby
irrevocably authorizes all accountants and third parties to disclose and deliver
to Lender, at Borrower's expense, all financial information, books and records,
work papers, management reports and other information in their possession
regarding Borrower. Borrower will not enter into any agreement with any
accounting firm, service bureau or third party to store Borrower's books or
records at any location other than Borrower's Address without first obtaining
Lender's written consent (which consent may be conditioned upon such accounting
firm, service bureau or other third party agreeing to give Lender the same
rights with respect to access to books and records and related rights as Lender
has under this Agreement).
5. REPRESENTATIONS,
WARRANTIES AND COVENANTS.
To
induce
Lender to enter into this Agreement, Borrower represents, warrants and covenants
as follows (it being understood that (i) each such representation and
warranty will be deemed remade as of the date on which each Loan is made and
each Credit Accommodation is provided and shall not be affected by any knowledge
of, or any investigation by, Lender, and (ii) the accuracy of each such
representation, warranty and covenant will be a condition to each Loan and
Credit Accommodation):
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5.1 Existence
and Authority.
Borrower
is duly incorporated, organized, validly existing and in good standing under
the
laws of Canada. Borrower is qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The Borrower has all necessary corporate power and capacity to
enter into this Agreement and the other Loan Documents and to hold and operate
its property and to carry on the business currently carried on by it or which
it
proposes to carry on hereafter in each jurisdiction where such business is
carried on. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation
or amalgamation, by-laws, other organizational documents or any shareholders
agreement or declaration applicable to it, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property,
do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property,
and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable against,
Borrower, and all other Obligors who have signed them, in accordance with their
respective terms. Sections 9(g) and 9(h) of Schedule A set forth the
ownership of Borrower and the names and ownership of Borrower's Subsidiaries
as
of the date of this Agreement.
5.2 Name;
Trade Names and Styles. The
name
of Borrower set forth in the heading to this Agreement is its correct and
complete legal name as of the date hereof. Listed in Sections 10(a), 10(b)
and 10(c) of Schedule A are all prior names of Borrower and all of
Borrower's present and prior trade names. Borrower shall give Lender at least
thirty days' prior written notice before changing its name or doing business
under any other name. Borrower has complied with all laws relating to the
conduct of business under a fictitious business name. Borrower represents and
warrants that (i) each trade name does not refer to another corporation or
other legal entity; (ii) all Accounts invoiced under any such trade names
are owned exclusively by Borrower and are subject to the security interest
and
hypothec of Lender and the other terms of this Agreement and (iii) all
schedules of Accounts, including any sales made or services rendered using
any
trade name shall show Borrower's name as assignor.
5.3 Title
to Collateral; Permitted Liens. Borrower
has good and marketable title to the Collateral. The Collateral now is and
will
remain free and clear of any and all liens, charges, security interests,
hypothecs, prior claims, encumbrances and adverse claims, except for Permitted
Liens. Lender now has, and will continue to have, a first-priority perfected
and
enforceable security interest and hypothec in all of the Collateral as more
fully provided in the Order, subject only to the Permitted Liens, and Borrower
will at all times defend Lender and the Collateral against all claims of others.
None of the Collateral which is Equipment is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture. Except
for leases or subleases as to which Borrower has delivered to Lender a
landlord's waiver in form and substance satisfactory to Lender, Borrower is
not
a lessee or sublessee under any real (immovable) property lease or sublease
pursuant to which the lessor or sublessor may obtain any rights in any of the
Collateral, and no such lease or sublease now prohibits, restrains, impairs
or
conditions, or will prohibit, restrain, impair or condition, Borrower's right
to
remove any Collateral from the premises. Except for warehouses as to which
Borrower has delivered to Lender a warehouseman's waiver in form and substance
satisfactory to Lender, Borrower is not a xxxxxx of any Goods at any warehouse
under an arrangement pursuant to which the warehouseman may obtain any rights
in
any of the Collateral. Prior to causing or permitting any Collateral to be
located upon premises in which any third party has an interest (whether as
owner, processor, depositary, mortgagee, beneficiary under a deed of trust,
lien
or otherwise), Borrower shall, whenever requested by Lender, cause each such
third party to execute and deliver to Lender, in form and substance acceptable
to Lender, such waivers and subordinations as Lender shall specify, so as to
ensure that Lender's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full
force
and effect, and will comply with all the terms of, any lease of real (immovable)
property where any of the Collateral now or in the future may be
located.
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5.4 Accounts
and Chattel Paper. As
of
each date reported by Borrower, all Accounts which Borrower has reported to
Lender as being Eligible Accounts comply in all respects with the criteria
for
eligibility established by Lender and in effect at such time. All Accounts
and
Chattel Paper are genuine and in all respects what they purport to be, arise
out
of a completed, bona fide and unconditional and non-contingent sale and delivery
of goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto, each Account Debtor thereunder
had the capacity to contract at the time any contract or other document giving
rise to such Accounts and Chattel Paper were executed, and the transactions
giving rise to such Accounts and Chattel Paper comply with all applicable laws
and governmental rules and regulations.
5.5 Electronic
Chattel Paper. To
the
extent that Borrower obtains or maintains any Electronic Chattel Paper, Borrower
shall create, store and assign the record or records comprising the Electronic
Chattel Paper in such a manner that (i) a single authoritative copy of the
record or records exists which is unique, identifiable and except as otherwise
provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the
authoritative copy identifies Lender as the assignee of the record or records,
(iii) the authoritative copy is communicated to and maintained by the Lender
or
its designated custodian, (iv) copies or revisions that add or change an
identified assignee of the authoritative copy can only be made with the
participation of Lender, (v) each copy of the authoritative copy and any copy
of
a copy is readily identifiable as a copy that is not the authoritative copy
and
(vi) any revision of the authoritative copy is readily identifiable as an
authorized or unauthorized revision.
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5.6 Investment
Property.
Borrower
will take any and all actions required or requested by Lender, from time to
time, to (i) cause Lender to obtain exclusive control of any Investment Property
in a manner acceptable to Lender and (ii) obtain from any issuers of Investment
Property and such other Persons as Lender shall specify, for the benefit of
Lender, written confirmation of Lender's exclusive control over such Investment
Property and take such other actions as Lender may request to perfect Lender's
security interest in such Investment Property. For purposes of this
Section 5.6, Lender shall have exclusive control of Investment Property if
(A) pursuant to Section 3.2, such Investment Property consists of certificated
securities and Borrower delivers such certificated securities to Lender (with
appropriate endorsements if such certificated securities are in registered
form); (B) such Investment Property consists of uncertificated securities and
either (x) Borrower delivers such uncertificated securities to Lender or (y)
the
issuer thereof agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with instructions originated by
Lender without further consent by Borrower, and (C) such Investment Property
consists of security entitlements and either (x) Lender becomes the entitlement
holder thereof or (y) the appropriate securities intermediary agrees, pursuant
to documentation
in form and substance satisfactory to Lender, that it will comply with
entitlement orders originated by Lender without further consent by
Borrower.
5.7 Commercial
Tort Claims. Borrower
has no Commercial Tort Claims pending other than those listed on Exhibit C
hereto, and Borrower
shall promptly notify Lender in writing upon incurring or otherwise obtaining
a
Commercial Tort Claim after the date hereof against any third party. Such notice
shall constitute Borrower's authorization to amend Exhibit B to add such
Commercial Tort Claim.
5.8 Jurisdiction
of Incorporation; Location of Collateral. Borrower's
Address is Borrower's chief executive office, its domicile and the location
of
its books and records. In addition, except as provided in the immediately
following sentence, Borrower has places of business and Collateral located
only
at the locations set forth on Sections 10(d) and 10(e) of Schedule A.
Borrower will give Lender at least thirty days' prior written notice before
changing Borrower's jurisdiction of incorporation, opening any additional place
of business, changing its chief executive office, its domicile or the location
of its books and records, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth in Sections 10(d)
and 10(e) of Schedule A, and will execute and deliver all financing
statements and other agreements, forms, instruments and documents in all
jurisdictions which Lender shall require as a result thereof.
5.9 Financial
Condition, Statements and Reports. All
financial statements delivered to Lender by or on behalf of Borrower or any
Obligor have been prepared in conformity with GAAP and completely and fairly
reflect the financial condition of Borrower, at the times and for the periods
therein stated. Between the last date covered by any such financial statement
provided to Lender and the date hereof (or, with respect to the remaking of
this
representation in connection with the making of any Loan or the providing of
any
Credit Accommodation, the date such Loan is made or such Credit Accommodation
is
provided), there has been no material adverse change in the financial condition
or business of Borrower. All schedules, reports and other information and
documentation delivered by Borrower to Lender with respect to the Collateral
are, or will be, when delivered, true, correct and complete as of the date
delivered or the date specified therein.
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5.10 Tax
Returns and Payments; Pension Contributions. Borrower
has timely filed all tax returns and reports required by applicable law, has
timely paid all applicable taxes, assessments, deposits and contributions owing
by Borrower to any taxing, pension or other authority and will timely pay all
such items in the future as they became due and payable. Borrower may, however,
defer payment of any contested taxes; provided,
that
Borrower (i) in good faith contests Borrower's obligation to pay such taxes
by appropriate proceedings promptly and diligently instituted and conducted;
(ii) notifies Lender in writing of the commencement of, and any material
development in, the proceedings; (iii) posts bonds or any other security or
takes any other steps required by Lender to keep the contested taxes from
becoming a Lien upon any of the Collateral and (iv) maintains adequate
reserves therefor in conformity with GAAP. Borrower is unaware of any claims
or
adjustments proposed for any of Borrower's prior tax years that could result
in
additional taxes becoming due and payable by Borrower. Borrower has paid, and
shall continue to pay, all amounts necessary to fund all present and future
pension, benefit, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in,
permitted partial or complete termination of, or permitted the occurrence of
any
other event with respect to, any such plan which could result in any liability
of Borrower, including any liability to any governmental agency. Without
limiting the generality of the foregoing, neither the Borrower nor any of its
Subsidiaries has any unfunded liabilities with respect to Canadian Plans,
whether valued on a going concern or a wind-up basis, and all obligations
(including wages, salaries, commissions and vacation pay) to current employees
and to former employees have been paid in full and all material fiduciary and
funding obligations required to be performed in connection with any Canadian
Plan have been performed. No promises of benefit improvements under Canadian
Plans have been made except where such improvement could not have a material
adverse effect. There have been no improper withdrawals or applications of
the
assets of the Canadian Plans. Each of the Canadian Plans has been administered
in accordance in all material respects with the Income
Tax Act (Canada)
and the regulations promulgated thereunder and all other applicable laws and
is
funded to the extent required by applicable law and there exist no going concern
unfunded actuarial liabilities or solvency deficiency in respect of such plans,
except to the extent that the failure to so comply could not reasonably be
expected to have a material adverse effect.
5.11 Compliance
with Laws. Borrower
has complied in all material respects with all provisions of all applicable
laws
and regulations, including those relating to Borrower's ownership of real
(immovable) or personal (movable) property, the conduct and licensing of
Borrower's business, the payment and withholding of taxes, pension, benefit
and
other employee matters, safety and environmental matters.
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5.12 Litigation.
Section 10(f)
of Schedule A discloses all claims, proceedings, litigation or
investigations pending or (to the best of Borrower's knowledge) threatened
against Borrower. There is no claim, suit, litigation, proceeding or
investigation pending or (to the best of Borrower's knowledge) threatened
by or against or affecting Borrower in any court or before any governmental
agency (or any basis therefor known to Borrower) which may result, either
separately or in the aggregate, in any material adverse change in the financial
condition or business of Borrower, or in any material impairment in the ability
of Borrower to carry on its business in substantially the same manner as it
is
now being conducted. Borrower will promptly inform Lender in writing of any
claim, proceeding, litigation or investigation in the future threatened or
instituted by or against Borrower.
5.13 Use
of Proceeds. All
proceeds of all Loans will be used (i) to repay the RBC Indebtedness in full,
(ii) to
fund
general corporate and working capital requirements of Borrower, permitted
payments and other expenses in accordance with Forecast Budgets approved by
Lender; provided, that Borrower agrees that it shall not disburse such funds
except in accordance with the Forecast Budget (subject to (i) a five percent
(5%) total variance for all line items measured weekly on a weekly basis; and
(ii) the net amount equal to receipts minus disbursements shall be subject
to a
five percent (5%) variance measured weekly on a cumulative basis from the Filing
Date) as such Forecast Budget is updated from time to time and approved by
Lender,
and no
payments may be made other than as expressly set forth in the Forecast Budget,
including, without limitation, with respect to Professional Fees; and, provided,
further, that no portion of the Loans or any Collateral shall be used to
prosecute claims against the Lenders under this Agreement or the validity,
perfection, priority or enforceability of any of the Liens securing such claims
or any payment made thereunder. The proceeds of the initial advance to be made
on the closing date
shall be
used, among other things, to repay the RBC Indebtedness in full and to fund
all
of Lender's costs and expenses, incurred both prior to and after the filing
of
the CCAA Proceeding) associated
with the transactions contemplated by this Agreement. Lender shall have the
right to approve all expenditures made by Borrower during the CCAA Proceeding,
including without limitation payments in respect of prepetition payables. All
expenditures by Borrower shall require the dual approval of X.X. Xxxxx and
Xxxxx
Xxxxx, or such other officers of Borrower as Lender shall specify, which
approval may be provided by electronic mail.
5.14 Insurance.
Borrower
will at all times carry property, liability and other insurance, with insurers
acceptable to Lender, in such form and amounts, and with such deductibles and
other provisions, as Lender shall require, and Borrower will provide evidence
of
such insurance to Lender, so that Lender is satisfied that such insurance is,
at
all times, in full force and effect. Each property insurance policy shall name
Lender as loss payee and shall contain a lender's loss payable endorsement
in
form acceptable to Lender, each liability insurance policy shall name Lender
as
an additional insured, and each business interruption insurance policy shall
be
collaterally assigned to Lender, all in form and substance satisfactory to
Lender. All policies of insurance shall provide that they may not be cancelled
or changed without at least thirty days' prior written notice to Lender, shall
contain breach of warranty coverage, and shall otherwise be in form and
substance satisfactory to Lender. Upon receipt of the proceeds of any such
insurance, Lender shall apply such proceeds in reduction of the Obligations
as
Lender shall determine in its sole discretion. Borrower will promptly deliver
to
Lender copies of all reports made to insurance companies.
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5.15 Financial
and Collateral Reports. Borrower
has kept and will keep adequate records and books of account with respect to
its
business activities and the Collateral in which proper entries are made in
accordance with GAAP reflecting all its financial transactions, and will cause
to be prepared and furnished to Lender the following (all to be prepared in
accordance with GAAP, unless Borrower's certified public accountants concur
in
any change therein and such change is disclosed to Lender):
(a) Collateral
Reports.
Each
week, on such days as shall be requested by Lender, a weekly Inventory report,
and on or before the fifteenth day of each month, (i) an aging of Borrower's
Accounts, Chattel Paper and notes receivable for the immediately preceding
month
and (ii) a monthly Inventory report for the immediately preceding month, all
in
such form, and together with such additional certificates, schedules and other
information with respect to the Collateral or the business of Borrower or any
Obligor, as Lender shall request; provided,
that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests, hypothecs and other rights in any of the Accounts,
nor shall Lender's failure to advance or lend against a specific Account affect
or limit Lender's security interest, hypothec and other rights therein. Together
with each such schedule, Borrower shall furnish Lender with copies (or, at
Lender's request, originals) of all contracts, orders, invoices, and other
similar documents, and all original shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts, and Borrower warrants the
genuineness of all of the foregoing. In addition, Borrower shall deliver to
Lender the originals of all Instruments, Chattel Paper, security agreements,
hypothecs, guaranties and other documents and property evidencing or securing
any Accounts, immediately upon receipt thereof and in the same form as received,
with all necessary endorsements. Lender may destroy or otherwise dispose of
all
documents, schedules and other papers delivered to Lender pursuant to this
Agreement (other than originals of Instruments, Chattel Paper, security
agreements, guaranties and other documents and property evidencing or securing
any Accounts) six months after Lender receives them, unless Borrower requests
their return in writing in advance and arranges for their return to Borrower
at
Borrower's expense.
(b) Annual
Statements.
Not
later than ninety days after the close of each fiscal year of Borrower,
unqualified (except for a qualification for a change in accounting principles
with which the accountant concurs) audited financial statements of Borrower
and
its Subsidiaries as of the end of such year, on a consolidated and consolidating
basis, certified by a firm of independent certified public accountants of
recognized standing selected by Borrower but acceptable to Lender, together
with
a copy of any management letter issued in connection therewith and a letter
from
such accountants acknowledging that Lender is relying on such financial
statements;
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(c) Interim
Statements.
Not
later than twenty-five days after the end of each month hereafter, including
the
last month of Borrower's fiscal year, unaudited interim financial statements
of
Borrower and its Subsidiaries as of the end of such month and of the portion
of
Borrower's fiscal year then elapsed, on a consolidated and consolidating basis,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the consolidated financial position
and results of operations of Borrower and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments and except
that such statements need not contain notes;
(d) Projections,
Etc.
Such
business projections, Availability projections, business plans, budgets and
cash
flow statements for Borrower and its Subsidiaries as Lender shall request from
time to time;
(e) Shareholder
Reports, Etc.
Promptly
after the sending or filing thereof, as the case may be, copies of any proxy
statements, financial statements or reports which Borrower has made available
to
its shareholders and copies of any regular, periodic and special reports,
declarations, or registration statements which Borrower files with any
securities commission or any governmental authority which may be substituted
therefor, or any national or provincial securities exchange;
(f) Benefit
Plan Reports.
Upon
request by Lender, copies of any annual report to be filed pursuant to the
requirements of applicable laws in connection with each pension or benefit
plan
subject thereto , including any Canadian Plan. Without limiting the generality
of the foregoing, the Borrower will (i) within three (3) days of receipt of
a
written request by Lender, furnish to the Lender a copy of the most recent
actuarial valuation submitted to the relevant authorities in respect of each
funded Canadian Plan and (ii) within three (3) days of receipt or dispatch,
furnish to the Lender any material correspondence from or to the relevant
authorities or any other person in respect of any Canadian Plan; and
(g) Other
Information.
Such
other data and information (financial and otherwise) as Lender, from time to
time, may reasonably request, bearing upon or related to the Collateral or
Borrower's and each of its Subsidiary's financial condition or results of
operations.
5.16 Litigation
Cooperation. Should
any third-party suit or proceeding be instituted by or against Lender with
respect to any Collateral or in any manner relating to Borrower, Borrower shall,
without expense to Lender, make available Borrower and its officers, employees,
agents and mandataries, and Borrower's books and records, without charge, to
the
extent that Lender may deem them reasonably necessary in order to prosecute
or
defend any such suit or proceeding.
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5.17 Maintenance
of Collateral, Etc. Borrower
will maintain all of its Equipment in good working condition, ordinary wear
and
tear excepted, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Lender in writing of any material
loss
or damage to the Collateral and of any investigation, action, suit, proceeding
or claim relating to the Collateral or which may result in an adverse impact
upon Borrower's business, assets or financial condition.
5.18 Notification
of Changes. Borrower
will promptly notify Lender in writing of any change in its officers or
directors, the opening of any new bank account or other deposit account, or
any
material adverse change in the business or financial affairs of Borrower or
the
existence of any circumstance which would make any representation or warranty
of
Borrower untrue in any material respect or constitute a material breach of
any
covenant of Borrower.
5.19 Further
Assurances. Borrower
agrees, at its expense, to take all actions, and execute or cause to be executed
and delivered to Lender all promissory notes, security agreements, hypothecs,
mortgages, debentures, agreements with landlords, mortgagees and processors
and
other bailees, subordination and intercreditor agreements and other agreements,
instruments and documents as Lender may request from time to time, to perfect
and maintain Lender's security interests and hypothecs in the Collateral and
to
fully effectuate the transactions contemplated by this Agreement.
5.20 Negative
Covenants. Except
as
set forth in Section 14 of Schedule A, Borrower will not, without
Lender's prior written consent, (i) merge, amalgamate or consolidate with
another Person, form any new Subsidiary or acquire any interest in any Person;
(ii) acquire any assets except in the ordinary course of business and as
otherwise permitted by this Agreement and the other Loan Documents;
(iii) enter into any transaction outside the ordinary course of business;
(iv) sell or transfer any Collateral or other assets, except that Borrower
may sell finished goods Inventory in the ordinary course of its business;
(v) make any loans to, or investments in, any Affiliate or other Person in
the form of money or other assets, except for intercompany loans to the Borrower
Affiliates and Parent in amounts approved in advance by Lender; (vi) incur
any debt outside the ordinary course of business; (vii) guaranty or
otherwise become liable with respect to the obligations of another party or
entity; (viii) pay or declare any dividends or other distributions on
Borrower's stock, if Borrower is a corporation (except for dividends payable
solely in capital stock of Borrower) or with respect to any equity interests,
if
Borrower is not a corporation; (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's capital stock or other equity
interests; (x) make any change in Borrower's capital structure;
(xi) dissolve or elect to dissolve; (xii) pay any principal or
interest on any indebtedness owing to an Affiliate, (xiii) enter into any
transaction with an Affiliate other than on arms-length terms disclosed to
Lender in writing; (xiv) change the jurisdiction of Borrower's incorporation
or
enter into any transaction which has the effect of changing Borrower's
jurisdiction of incorporation except as provided for in Section 5.8; (xv) fail
to contribute to any Canadian Plan any amount required to be contributed thereto
in accordance with applicable law or the terms of such Canadian Plan or permit
or take any action which would result in the aggregate going concern unfunded
liability or the aggregate solvency deficiency in respect of all the Canadian
Plans which are funded plans, determined pursuant to the actuarial assumptions
and methodology utilized in the most recent actuarial valuations therefor,
to
exceed U.S.$200,000; or (xvi) agree to do any of the foregoing.
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5.21 Financial
Covenants.
(a) Net
Losses.
Borrower
will not permit its cumulative net loss to exceed the amount set forth in
Section 9(e) of Schedule A. In the event that net losses exceed the
amount set forth in Section 9(e) of Schedule A, Lender may (i) declare an Event
of Default, (ii) on ten days' notice to Borrower, reduce the Advance Rates,
or
(iii) both (i) and (ii).
(b) Other
Financial Covenants.
Borrower
will comply with any additional financial covenants set forth in
Section 9(j) of Schedule A.
6. RELEASE
AND INDEMNITY.
6.1 Release.
Borrower
hereby releases Lender and its Affiliates and their respective directors,
officers, employees, attorneys agents and mandataries and any other Person
affiliated with or representing Lender (the "Released
Parties")
from
any and all liability arising from acts or omissions under or pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from gross negligence or willful misconduct. However, in
no
circumstance will any of the Released Parties be liable for lost profits or
other special, indirect or consequential damages. Such release is made on the
date hereof and remade upon each request for a Loan or Credit Accommodation
by
Borrower. Without limiting the foregoing:
(a) Lender
shall not be liable for (i) any shortage or discrepancy in, damage to, or
loss or destruction of, any goods, the sale or other disposition of which gave
rise to an Account; (ii) any error, act, omission, or delay of any kind
occurring in the settlement, failure to settle, collection or failure to collect
any Account; (iii) settling any Account in good faith for less than the
full amount thereof; or (iv) any of Borrower's obligations under any
contract or agreement giving rise to an Account; and
(b) In
connection with Credit Accommodations or any underlying transaction, Lender
shall not be responsible for the conformity of any goods to the documents
presented, the validity or genuineness of any documents, delay, default or
fraud
by Borrower, shippers and/or any other Person. Borrower agrees that any action
taken by Lender, if taken in good faith, or any action taken by an issuer of
any
Credit Accommodation, under or in connection with any Credit Accommodation,
shall be binding on Borrower and shall not create any resulting liability to
Lender. In furtherance thereof, Lender shall have the full right and authority
to clear and resolve any questions of non-compliance of documents, to give
any
instructions as to acceptance or rejection of any documents or goods, to execute
for Borrower's account any and all applications for steamship or airway
guaranties, indemnities or delivery orders, to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
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6.2 Indemnity.
Borrower
hereby agrees to indemnify the Released Parties and hold them harmless from
and
against any and all claims, debts, liabilities, demands, obligations, actions,
causes of action, penalties, costs and expenses (including attorneys' fees),
of
every nature, character and description, which the Released Parties may sustain
or incur based upon or arising out of any of the transactions contemplated
by
this Agreement or the other Loan Documents or any of the Obligations, including
any transactions or occurrences relating to the issuance of any Credit
Accommodation, the Collateral relating thereto, any drafts thereunder and any
errors or omissions relating thereto (including any loss or claim due to any
action or inaction taken by the issuer of any Credit Accommodation) (and
for this purpose any charges to Lender by any issuer of Credit Accommodations
shall be conclusive as to their appropriateness and may be charged to the Loan
Account), or any other matter, cause or thing whatsoever occurred, done, omitted
or suffered to be done by Lender relating to Borrower or the Obligations (except
any such amounts sustained or incurred as the result of the gross negligence
or
willful misconduct of the Released Parties). Notwithstanding any provision
in
this Agreement to the contrary, the indemnity agreement set forth in this
Section shall survive any termination of this Agreement.
6.3 Currencies.
(a) U.S.
Dollars.
All
advances, charges and fees of Borrower to Lender, all financial and collateral
reports, including, without limitation, those financial and collateral reports
listed in Section 5.15, and all borrowing base reports shall be in United States
dollars and all collections and payments of Borrower to Lender shall be in
United States dollars.
(b) Currency
Indemnity.
If, for
the purposes of obtaining or enforcing judgment in any court in any jurisdiction
with respect to this Agreement or any other Loan Document, it becomes necessary
to convert into the currency of such jurisdiction (the "Judgment
Currency")
any
amount due under this Agreement or under any other Loan Document in any currency
other than the Judgment Currency (the "Currency
Due"),
then,
to the extent permitted by law, conversion shall be made at the Currency
Exchange Rate on the Business Day before the day on which judgment is given.
In
the event that there is a change in the Currency Exchange Rate between the
Business Day before the day on which the judgment is given and the date of
receipt by the Lender of the amount due, Borrower shall to the extent permitted
by law, on the date of receipt by Lender, pay such additional amounts, if any,
or be entitled to receive reimbursement of such amount, if any as may be
necessary to ensure that the amount received by Lender on such date is the
amount in the Judgment Currency which (when converted at the currency exchange
rate on the date of receipt by Lender in accordance with normal banking
procedures in the relevant jurisdiction) is the amount then due under this
Agreement or such other Loan Document in the Currency Due. If the amount of
the
Currency Due which the Lender is so able to purchase is less than the amount
of
the Currency Due originally due to it, Borrower shall to the extent permitted
by
law indemnify and save Lender harmless from and against loss or damage arising
as a result of such deficiency. To the extent permitted by law, this indemnity
shall (i) constitute an obligation separate and independent from the other
obligations contained in this Agreement and the other Loan Documents,
(ii) give rise to a separate and independent cause of action,
(iii) apply irrespective of any indulgence granted by Lender from time to
time, (iv) survive the payment in full of the Obligations and the
termination of this Agreement, and (v) continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect of an
amount due under this Agreement or any other Loan Document or under any judgment
or order.
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7. TERM.
7.1 Maturity
Date.
Lender's
obligation to make Loans and to provide Credit Accommodations under this
Agreement shall initially continue in effect for a term (the "Initial
Term")
from
the date of this Agreement until the Initial Maturity Date set forth in
Section 8 of Schedule A, provided,
that
the Initial Maturity Date shall automatically be extended (the Initial Maturity
Date, as it may be so extended, being referred to as the "Maturity
Date")
for
successive additional terms of three years each (each a "Renewal
Term"),
unless one party gives written notice to the other, not less than sixty days
prior to the Maturity Date, that such party elects not to extend the Maturity
Date. Notwithstanding the foregoing, the Facility shall terminate, and
Borrower's obligations to Lender shall be due and payable in full, prior to
the
expiration of the Initial Term upon the earliest to occur of the following:
(i)
Lender's demand for payment of the Obligations following the occurrence of
an
Event of Default, (ii) the commencement of a liquidation case or other
insolvency or bankruptcy proceeding with respect to any Borrower Affiliate
or
any guarantor, (iii) the conversion of the CCAA Proceeding to a liquidation
case
or other insolvency proceeding, (iv) December 5, 2006, unless, on such date
or
prior thereto, a plan of arrangement in form and substance acceptable to Lender
has been filed in the CCAA Proceeding, (v) February 5, 2007, unless, on such
date or prior thereto, a plan of arrangement has been approved by the required
creditors and the Court, (vi) the dismissal of the CCAA Proceeding or the end
of
the stay of proceedings under the CCAA, unless such dismissal or end of the
stay
of proceedings is in connection with the filing and approval of the plan of
arrangement, (vii) the successful appeal or review of the Order unless the
plan
of arrangement and the Order confirm the priority of Lender's security interests
as set forth herein during the entire Term, (viii) the appointment of a trustee
or receiver for any Borrower Affiliate or (ix) the occurrence of a post-petition
judgment liability or event that will, in Lender's judgment, significantly
impair any Borrower Affiliate's financial condition, operations, or ability
to
perform under the Facility or any order of the Court. Notwithstanding any such
termination of the Facility prior to the expiration of the Initial Term, Lender
shall be entitled to receive the Early Termination Fee described in Section
7.2
below. This Agreement and the other Loan Documents and Lender's security
interests, hypothecs in and liens upon the Collateral, and all representations,
warranties and covenants of Borrower contained herein and therein, shall remain
in full force and effect after the Maturity Date until all of the monetary
Obligations are indefeasibly paid in full.
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7.2 Early
Termination.
Lender's
obligation to make Loans and to provide Credit Accommodations under this
Agreement may be terminated prior to the Maturity Date as follows: (i) by
Borrower, effective thirty business days after written notice of termination
is
given to Lender or (ii) by Lender at any time after the occurrence of an
Event of Default, without notice, effective immediately; provided,
that if
any Affiliate of Borrower is also a party to a financing arrangement with
Lender, no such early termination shall be effective unless such Affiliate
simultaneously terminates its financing arrangement with Lender. If so
terminated under this Section 7.2, Borrower shall pay to Lender (i) an
early termination fee (the "Early
Termination Fee")
in the
amount set forth in Section 7(h) of Schedule A plus (ii) any
earned but unpaid Facility Fee. Such fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate
equal
to the highest rate applicable to any of the Obligations. In addition, if
Borrower so terminates and repays the Obligations without having provided Lender
with at least thirty days' prior written notice thereof, an additional amount
equal to thirty days of interest at the applicable Interest Rate(s), based
on
the average outstanding amount of the Obligations for the six month period
immediately preceding the date of termination.
7.3 Payment
of Obligations. On
the
Maturity Date or on any earlier effective date of termination, Borrower shall
pay in full all Obligations, whether or not all or any part of such Obligations
are otherwise then due and payable. Without limiting the generality of the
foregoing, if, on the Maturity Date or on any earlier effective date of
termination, there are any outstanding Credit Accommodations, then on such
date
Borrower shall provide to Lender cash collateral in an amount equal to 110%
of
the Credit Accommodation Balance to secure all of the Obligations (including
estimated attorneys' fees and other expenses) relating to said Credit
Accommodations or such greater percentage or amount as Lender reasonably deems
appropriate, pursuant to a cash pledge agreement in form and substance
satisfactory to Lender.
7.4 Effect
of Termination.
No
termination shall affect or impair any right or remedy of Lender or relieve
Borrower of any of the Obligations until all of the monetary Obligations have
been indefeasibly paid in full. Upon indefeasible payment and performance in
full of all of the monetary Obligations (and the provision of cash collateral
with respect to any Credit Accommodation Balance as required by Section 7.3)
and
termination of this Agreement, Lender shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents
as
may be reasonably required to terminate Lender's security interests and
hypothecs in the Collateral.
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8. EVENTS
OF DEFAULT AND REMEDIES.
8.1 Events
of Default. The
occurrence of any of the following events shall constitute an "Event
of Default"
under
this Agreement, and Borrower shall give Lender immediate written notice thereof:
(i) if any warranty, representation, statement, report or certificate made
or delivered to Lender by Borrower or any of Borrower's officers, employees
or
agents is untrue or misleading; (ii) if Borrower fails to pay when due any
principal or interest on any Loan or any other monetary Obligation;
(iii) if Borrower breaches any covenant or obligation contained in this
Agreement or any other Loan Document or fails to perform any other non-monetary
Obligation; (iv) if any levy, assessment, attachment, seizure, lien,
security interest, hypothec, mortgage or encumbrance (other than a Permitted
Lien) is made or permitted to exist on all or any part of the Collateral;
(v) if one or more judgments aggregating in excess of U.S.$25,000, or any
injunction or attachment, is obtained against Borrower or any Obligor which
remains unstayed for more than ten days
or
is enforced; (vi) the occurrence of any default under any financing
agreement, security agreement, hypothec, mortgage or other agreement, instrument
or document executed and delivered by (A) Borrower with, or in favor of, any
Person other than Lender or Laurus Master Fund, Ltd. ("Laurus")
or
(B) Borrower or any Affiliate of Borrower with, or in favor of, Lender or
any Affiliate of Lender; (vii) except in respect of the CCAA Proceeding, the
dissolution, liquidation, death, termination of existence in good standing,
insolvency or business failure or suspension or cessation of business as usual
of Borrower or any Obligor (or of any general partner of Borrower or any Obligor
if it is a partnership) or the appointment of a receiver, liquidator, trustee,
monitor, interim receiver, receiver and manager or sequestrator (or similar
official) or custodian for all or any part of the property of, or an assignment
for the benefit of creditors by Borrower or any Obligor, or the commencement
of
any proceeding by Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or
statute of any jurisdiction, now or in the future in effect, or if Borrower
makes or sends a notice of a bulk transfer or calls a meeting of its creditors;
(viii) the commencement of any proceeding against Borrower or any Obligor
under any reorganization, bankruptcy, insolvency, arrangement, readjustment
of
debt, dissolution or liquidation law or statute of any jurisdiction, now or
in
the future in effect, other than pursuant to the CCAA Proceeding; (ix) the
actual or attempted revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations, or any security document
securing the Obligations, by any Obligor; (x) if Borrower makes any payment
on account of any indebtedness or obligation which has been subordinated to
the
Obligations other than as permitted in the applicable subordination agreement,
or if any Person who has subordinated such indebtedness or obligations attempts
to limit or terminate its subordination agreement; (xi) if there is any
actual or threatened indictment 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 the potential
penalties or remedies sought or available include forfeiture of any property
of
Borrower or such Obligor; (xii) if there is a change in the record or
beneficial ownership of an aggregate of more than 20% of the outstanding shares
of stock of Borrower (or partnership or membership interests if it is a
partnership or limited liability company), in one or more transactions, compared
to the ownership of outstanding shares of stock (or partnership or membership
interests) of Borrower as of the date hereof, without the prior written consent
of Lender; (xiii) if there is any change in the chief executive officer,
chief operating officer or chief financial officer of Borrower; (xiv) if an
Event of Default occurs under any Loan and Security Agreement between Lender
and
an Affiliate of Borrower; (xv) if Lender determines in good faith that the
Collateral is insufficient to fully secure the Obligations or that the prospect
of payment of performance of the Obligations is impaired; (xvi) the appointment
of a trustee or Receiver with enlarged powers to operate or manage the financial
affairs of Borrower; (xvii) the dismissal or conversion of the CCAA Proceeding,
or granting relief from the automatic stay in favor of third parties except
as
contemplated by any Loan Document; (xviii) the entry of a judgment that will,
in
Lender's judgment, significantly impair Borrower's financial condition,
operations, or ability to perform under the this Agreement or any order of
any
court; (xix) the granting to a creditor other than Lender, Laurus or Royal
Bank
of Canada of the status of an unaffected creditor in the CCAA Proceeding without
Lender's consent; (xx) any default under the Order or any plan of arrangement
contemplated in the Order; (xxi) any attempt by Laurus to enforce or exercise
its rights or remedies with respect to the capital stock of Pneutech
in
accordance with applicable law or the terms of the Stock Pledge Agreement dated
February 28, 2005 between Xxxxxx Equipment and Laurus
or
(xxii) Lender's determination that the Borrower is not performing in accordance
with the projections or that there is no reasonable prospect for a successful
reorganization of the Borrower.
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8.2 Remedies.
Upon the
occurrence of any Default, and at any time thereafter, Lender, at its option,
may cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document. Upon the occurrence of an Event of
Default, Lender may exercise from time to time any rights and remedies available
to it under the UCC and any other applicable law in addition to, and not in
lieu
of, any rights and remedies expressly granted in this Agreement or in any of
the
other Loan Documents and all of Lender's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by
way
of limitation of the foregoing, upon the occurrence of any Event of Default,
and
at any time thereafter, Lender, at its option, and without notice or demand
of
any kind (all of which are hereby expressly waived by Borrower), may do any
one
or more of the following: (i) cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document;
(ii) accelerate and declare all or any part of the Obligations to be
immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
of
the Obligations (and such acceleration and declaration shall occur immediately
upon the occurrence of an Event of Default under clause (vii), (viii), (xv)
or
(xvi) of Section 8.1); (iii) take possession of any or all of the
Collateral (in addition to Collateral of which it already has possession)
wherever it may be found, and for that purpose Borrower hereby authorizes
Lender, without judicial process, to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and (to the extent permitted by applicable law) remain
(or cause a custodian or similar official to remain) on the premises in
exclusive control thereof, without charge for so long as Lender deems it
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided,
that if
Lender seeks to take possession of any of the Collateral by court process,
Borrower hereby irrevocably waives (A) any bond and any surety or security
relating thereto required by law as an incident to such possession, (B) any
demand for possession prior to the commencement of any suit or action to recover
possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral
to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Lender shall have the right
to
use Borrower's premises, vehicles and other Equipment and all other property
without charge; (vi) sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Lender obtains possession of it or
after further manufacturing, processing or repair, at one or more public or
private sales, in lots or in bulk, for cash, exchange or other property, or
on
credit (a "Sale"),
and
to adjourn any such Sale from time to time without notice other than oral
announcement at the time scheduled for Sale (and, in connection therewith,
(A) Lender shall have the right to conduct such Sale on Borrower's premises
without charge, for such times as Lender deems reasonable, on Lender's premises,
or elsewhere, and the Collateral need not be located at the place of Sale;
(B) Lender may directly or through any of its Affiliates purchase or lease
any of the Collateral at any such public disposition, and if permissible under
applicable law, at any private
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disposition
and (C) any Sale of Collateral shall not relieve Borrower of any liability
Borrower may have if any Collateral is defective as to title, physical condition
or otherwise at the time of sale); (vii) demand payment of and collect any
Accounts, Chattel Paper, Instruments and General Intangibles included in the
Collateral and, in connection therewith, Borrower irrevocably authorizes Lender
to endorse or sign Borrower's name on all collections, receipts, Instruments
and
other documents, to take possession of and open mail addressed to Borrower
and
remove therefrom payments made with respect to any item of Collateral or
Proceeds thereof and, in Lender's sole discretion, to grant extensions of time
to pay, compromise claims and settle Accounts, General Intangibles and the
like
for less than face value; and (viii) demand and receive possession of any
of Borrower's federal, provincial and state income tax returns and the books
and
records utilized in the preparation thereof or relating thereto. Borrower
recognizes that if Borrower fails to perform, observe or discharge any of its
Obligations under this Agreement or any of the Loan Documents, no remedy at
law
will provide adequate relief to Lender, and agrees that Lender shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages. Any notification of intended disposition
of
any of the Collateral required by law will be deemed to be a reasonable
authenticated notification of disposition if given at least ten (10) days prior
to such disposition and such notice shall (i) describe Lender and Borrower,
(ii)
describe the Collateral that is the subject of the intended disposition, (iii)
state the method of the intended disposition, (iv) state that Borrower is
entitled to an accounting of the Obligations and state the charge, if any,
for
an accounting and (v) state the time and place of any public disposition or
the
time after which any private sale is to be made. Lender may disclaim any
warranties that might arise in connection with the sale, lease or other
disposition of the Collateral and has no obligation to provide any warranties
at
such time. Any Proceeds of any disposition by Lender of any of the Collateral
may be applied by Lender to the payment of expenses in connection with the
Collateral, including, without limitation, legal expenses and reasonable
attorneys' fees, and any balance of such Proceeds may be applied by Lender
toward the payment of such of the Obligations, and in such order of application,
as Lender may from time to time elect. In addition to the foregoing remedies,
upon the occurrence of any Event of Default resulting from a breach of any
of
the financial covenants set forth in Section 5.21, Lender may, at its
option, upon not less than ten days' prior notice to Borrower, reduce any or
all
of the Advance Rates set forth in Section 1(b) of Schedule A to the
extent Lender, in its sole discretion, deems appropriate. Exercise or partial
exercise by Lender of one or more of its rights or remedies shall not be deemed
an election or bar Lender from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Lender to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed. If any Collateral is sold or leased by Lender on
credit terms or for future delivery, the Obligations shall not be reduced as
a
result thereof until payment is collected by Lender.
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8.3 Application
of Proceeds. Subject
to any application required by law, all Proceeds realized as the result of
any
Sale shall be applied by Lender to the Obligations in such order as Lender
shall
determine in its sole discretion. Any surplus shall be paid to Borrower or
other
persons legally entitled thereto; but Borrower shall remain liable to Lender
for
any deficiency. If Lender, in its sole discretion, directly or indirectly enters
into a deferred payment or other credit transaction with any purchaser at any
Sale, Lender shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Lender of the cash therefor.
9. GENERAL
PROVISIONS.
9.1 Notices.
All
notices to be given under this Agreement shall be in writing and shall be given
either personally, by reputable private delivery service, by regular first-class
mail or certified mail return receipt requested, addressed to Lender or Borrower
at the address shown in the heading to this Agreement, or by facsimile to the
facsimile number shown in Section 10(i) of Schedule A, or at any other
address (or to any other facsimile number) designated in writing by one party
to
the other party in the manner prescribed in this Section 9.1. All notices
shall be deemed to have been given when received or when delivery is refused
by
the recipient.
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9.2 Severability.
If
any
provision of this Agreement, or the application thereof to any party or
circumstance, is held to be void or unenforceable by any court of competent
jurisdiction, such defect shall not affect the remainder of this Agreement,
which shall continue in full force and effect.
9.3 Integration.
This
Agreement and the other Loan Documents represent the final, entire and complete
agreement between Borrower and Lender and supersede all prior and
contemporaneous negotiations, oral representations and agreements, all of which
are merged and integrated into this Agreement. THERE ARE NO ORAL
UNDER-STANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES THAT ARE
NOT
SET FORTH IN THIS AGREE-MENT OR THE OTHER LOAN DOCUMENTS.
9.4 Waivers.
The
failure of Lender at any time or times to require Borrower to strictly comply
with any of the provisions of this Agreement or any other Loan Documents shall
not waive or diminish any right of Lender later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent, and whether or not similar. None
of
the provisions of this Agreement or any other Loan Document shall be deemed
to
have been waived by any act or knowledge of Lender or its agents, mandataries
or
employees, but only by a specific written waiver signed by an authorized officer
of Lender and delivered to Borrower. Borrower waives demand, protest, notice
of
protest and notice of default or dishonor, notice of payment and nonpayment,
release, compromise, settlement, extension or renewal of any commercial paper,
Instrument, Account, General Intangible, Document, Chattel Paper, Investment
Property or guaranty at any time held by Lender on which Borrower is or may
in
any way be liable, and notice of any action taken by Lender, unless expressly
required by this Agreement, and notice of acceptance hereof.
9.5 Amendment.
This
Agreement may not be amended or modified except in a writing executed by
Borrower and a duly authorized officer of Lender.
9.6 Time
of Essence. Time
is
of the essence in the performance by Borrower of each and every obligation
under
this Agreement and the other Loan Documents.
9.7 Attorneys'
Fees and Costs. Borrower
shall reimburse Lender for all reasonable attorneys' and paralegals' fees
(including in-house attorneys and paralegals employed by Lender) and all filing,
recording, search, title insurance, appraisal, audit, and other costs incurred
by Lender, pursuant to, in connection with, or relating to this Agreement,
including all reasonable attorneys' fees and costs Lender incurs to prepare
and
negotiate this Agreement and the other Loan Documents; to obtain legal advice
in
connection with this Agreement and the other Loan Documents or Borrower or
any
Obligor; to administer this Agreement and the other Loan Documents (including
the cost of periodic financing statement, tax lien and other searches conducted
by Lender); to enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; to commence, intervene in,
or
defend any action or proceeding; to enforce and protect, or to seek to enforce
and protect, any of its rights and interests in any bankruptcy case, insolvency
matter or any other similar proceedings relating to the relief of debtors
involving the Borrower, including, without limitation, by initiating and
prosecuting any motion for relief from the automatic stay and by initiating,
prosecuting or defending any other contested matter or adversary proceeding
in
bankruptcy or insolvency matters; to file or prosecute any probate claim,
bankruptcy or insolvency claim, third-party claim, or other claim; to examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; to protect, obtain possession of, lease, dispose of, or otherwise
enforce Lender's security interests in, the Collateral; and to otherwise
represent Lender in any litigation relating to Borrower or any Obligor. If
either Lender or Borrower files any lawsuit against the other predicated on
a
breach of this Agreement, the prevailing party in such action shall be entitled
to recover its reasonable costs and attorneys' fees, including reasonable
attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. All attorneys' fees and costs
to which Lender may be entitled pursuant to this Section shall immediately
become part of the Obligations, shall be due on demand, and shall bear interest
at a rate equal to the highest interest rate applicable to any of the
Obligations.
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9.8 Benefit
of Agreement; Assignability. The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the respective successors, assigns, heirs, legal representatives, beneficiaries
and representatives of Borrower and Lender; provided,
that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Lender, and any prohibited assignment
shall
be void. No consent by Lender to any assignment shall release Borrower from
its
liability for any of the Obligations. Lender shall have the right to assign
all
or any of its rights and obligations under the Loan Documents, and to sell
participating interests therein, to one or more other Persons, and Borrower
agrees to execute all agreements, instruments and documents requested by Lender
in connection with each such assignment and participation.
9.9 Headings;
Construction. Section
and subsection headings are used in this Agreement only for convenience and
do
not affect the meanings of the provisions that they precede.
9.10 GOVERNING
LAW; CONSENT TO FORUM, ETC.
THIS
AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED
TO
HAVE BEEN MADE, IN NEW YORK COUNTY, NEW YORK, AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. BORROWER HEREBY
CONSENTS AND AGREES THAT, AT ANY TIME WHEN THE CCAA PROCEEDING IS NOT PENDING,
THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK OR THE STATE
OR JURISDICTION IN WHICH ANY OF THE COLLATERAL IS LOCATED SHALL HAVE
NON-EXCLUSIVE JURIS-DICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENTS
OR
ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND WAIVES
ANY
OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT, AT ANY TIME
WHEN THE CCAA PROCEEDING IS NOT PENDING, ANY CLAIM OR DISPUTE BROUGHT BY
BORROWER AGAINST LENDER PURSUANT TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT
OR
ANY MATTER ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER AND SHALL BE
DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE EXTENT PERMITTED
BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT
OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF
ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM
OR JURISDICTION.
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9.11 WAIVER
OF JURY TRIAL, ETC. BORROWER WAIVES
(i)
THE
RIGHT TO TRIAL BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF
THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR
OMISSIONS OF LENDER OR BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS, AGENTS OR MANDATARIES OR ANY OTHER PERSONS AFFILIATED
WITH
LENDER OR BORROWER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE;
(ii)
THE
RIGHT TO INTERPOSE ANY CLAIMS, DEDUCTIONS, SET-OFFS, COMPENSATION OR
COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING INSTITUTED BY LENDER
WITH
RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING THERETO, EXCEPT FOR
COMPULSORY COUNTERCLAIMS; (iii) NOTICE
PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND
OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO
EXERCISE ANY OF LENDER'S REMEDIES AND (iv) THE
BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS. BORROWER ACKNOWLEDGES
THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO
THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS
FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL
AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT
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9.12 Conflict
of Provisions.
In the
event of a conflict between any provision herein and any provision in any Loan
Document, the provision herein shall control.
9.13 Right
of First Refusal. If,
prior
to or in connection with Borrower's exit from the CCAA Proceeding, Borrower
desires to obtain replacement or other proposed financing ("Proposed
Financing")
from
another lender, Lender shall have a right of first of refusal, exercisable
within fifteen (15) days after Lender's receipt of written notice from Borrower
of the terms and conditions of the Proposed Financing, to provide financing
to
Borrower on the same terms as offered by such other lender in connection with
the Proposed Financing.
9.14
Broker's Fees.
All
brokers' fees owing in respect of the financing provided herein shall be earned
at closing. Up to half of such fees may be paid at the closing, with the balance
due at such time as Greystone may determine in its discretion. Borrower
represents and warrants to Lender that the only such fee is a fee owing to
Capital Solutions in the amount of one percent (1%) of the Maximum Facility
Amount.
9.15 Language.
The
parties acknowledge that they have required that the present Agreement, as
well
as all agreements, documents, notices and legal proceedings entered into, given
or instituted pursuant hereto or relating directly or indirectly hereto be
drawn
up in English. Les parties reconnaissent avoir exigé la rédaction en anglais de
la présente convention ainsi que de tous documents exécutés, xxxx xxxxxx et
procédures judiciaires intentées, directement ou indirectement, relativement ou
à la suite de la présente convention.
[Signature
page follows]
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IN
WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of the date
first set forth above.
|
Borrower:
Pneutech
Inc.
By
/s/Xxxxx
Xxxxx
Its
Chairman
|
Lender:
GREYSTONE
BUSINESS CREDIT II LLC
By
/s/Xxxx
Xxxxxxx
Its
Authorized Signatory
|
Signature
page to Pneutech Inc. Loan and Security
Agreement
Schedule A
Description
of Certain Terms
This
Schedule is an integral part of the Loan and Security Agreement between
Pneutech
Inc. and
Greystone
Business Credit II LLC (the
"Agreement").
|
1. Loan
Limits for Revolving Loans:
|
|
|
(a) Maximum
Facility Amount:
|
U.S.$15,000,000
for all Borrower Affiliates
|
|
(b) Advance
Rates:
|
|
|
(i) Accounts
Advance Rate:
|
85%; provided,
that if the Dilution Percentage exceeds 2%, Lender may, at its option
(A) reduce such advance rate by the number of full or partial
percentage points of such excess or (B) establish a Reserve on
account of such excess
|
|
(ii) Inventory
Advance Rate(s):
|
|
|
(A) Finished
goods:
|
The
lesser of (i) 50% of the lower of cost or market value of Eligible
Inventory, and (ii) 85% of the net orderly liquidation value of the
Eligible Inventory, provided,
that without further order of the Court, commencing with the first
day of
the quarter immediately following the quarter in which the closing
of the
Facility occurs, and on the first day of each subsequent quarter,
Lender
shall reduce the above 85% Inventory Advance Rate by 1% per quarter
to
75%
|
|
(B) Work
in process:
|
U.S.$500,000
|
|
(C) In-Transit
Inventory:
|
U.S.$300,000
|
|
(c) Accounts
Sublimit:
|
Not
applicable
|
|
(d) Inventory
Sublimit(s):
|
A-1
|
(i)
Overall sublimit on advances against Eligible Inventory
|
U.S.$5,000,000
|
|
(e) Credit
Accommodation Limit:
|
U.S.$1,000,000
|
|
(f) Permanent
Reserve Amount:
|
U.S.$500,000,
to be released at such time as Xxxxxx-Xxxxxxxx Corporation begins
shipping
goods to Borrower Affiliates on terms acceptable to
Lender
|
|
(g) Overadvance
Amount:
|
Not
applicable
|
|
2. Loan
Limits for Term Loan A:
|
|
|
(a) Principal
Amount:
|
U.S.$558,000,
provided,
that upon receipt of the Real Property Appraisal or any Updated Real
Property Appraisal or Updated Equipment Appraisal, Borrower shall
promptly
pay to Lender the amount, if any, by which the then-outstanding principal
balance of Term Loan A exceeds the sum of the values reflected in
the most
recent of such appraisals
|
|
(i) Equipment
Advance
|
80%
of the Equipment Appraisal, not to exceed U.S.$208,000
|
|
(ii) Real
Property Advance:
|
50%
of the value of the Real Property Appraisal, not to exceed
U.S.$350,000
|
|
(iii) Capital
Expenditure Advances:
|
Not
applicable
|
|
(b) Repayment
Schedule:
|
A-2
|
(i) Term
Loan A Advance:
|
Term
Loan A, which is comprised of the Equipment Advance and the Real
Property
Advance, shall be repaid in consecutive monthly principal payments
of
$10,000 plus accrued interest beginning on October 1, 2006 with a
final
payment of the outstanding balance of principal and accrued interest
payable upon the expiration of the Term
|
|
(ii) Real
Property Advance:
|
Not
applicable
|
|
(iii) Capital
Expenditure Advances:
|
Not
applicable
|
|
3. Loan
Limits for Term Loan B:
|
|
|
(a) Principal
Amount:
|
U.S.$600,000
|
|
(i) Equipment
Advance
|
Not
applicable
|
|
(ii) Real
Property Advance:
|
Not
applicable
|
|
(iii) Capital
Expenditure Advances:
|
Not
applicable
|
|
(b) Repayment
Schedule:
|
A-3
|
(i) Term
Loan B Advance:
|
Term
Loan B shall be repaid in consecutive monthly principal payments
of
$10,000 plus accrued interest beginning on October 1, 2006 with a
final
payment of the outstanding balance of principal and accrued interest
payable one year from the closing date. Term Loan B may be repaid
with the
proceeds of capital, subordinated loans, or subordinated participations
in
the Facility on terms acceptable to Lender and, except for payments
made
pursuant to this sentence and the monthly installments described
in the
immediately preceding sentence, all payments and proceeds of collateral
in
respect of the Facility shall be applied to indebtedness other than
Term
Loan B before being applied to Term Loan B.
|
|
(ii) Real
Property Advance:
|
Not
applicable
|
|
(iii) Capital
Expenditure Advances:
|
Not
applicable
|
|
4. Interest
Rates:
|
|
|
(a) Revolving
Loans:
|
3%
per annum in excess of the Prime Rate, provided,
that (a) such interest shall be accrued commencing September 5, 2006
(the
date on which Lender ordered up funds for the closing ) and (b) the
interest rate shall be reduced by .75% after any 12-month rolling
period
(and only for that period) for which Borrower Affiliates' Net Profit
exceeds U.S.$2,000,000. If Borrower Affiliates' Net Profit exceeds
U.S.$2,000,000 in any 12-month rolling period, but at any time thereafter
does not exceed U.S.$2,000,000 in any 12-month rolling period, then
the
interest rate shall revert to 3% in excess of the Prime Rate
|
|
(b) Term
Loan:
|
Not
applicable
|
A-4
|
5. Minimum
Loan Amount:
|
U.S.$7,500,000
|
|
6. Maximum
Days:
|
|
|
(a) Maximum
days after original invoice
date
for Eligible Accounts:
|
90
days, provided,
that the Maximum Days for Eligible Accounts of Camoplast, Inc. shall
be
140 days
|
|
(b) Maximum
days after original invoice due
date
for Eligible Accounts:
|
60
days, provided,
that such time period shall not apply to the Eligible Accounts of
Camoplast, Inc.
|
|
7. Fees:
|
|
|
(a) Closing
Fee:
|
U.S.$150,000,
which shall be fully earned at closing and of which $75,000 shall
be
payable at closing, and the balance due at such time as determined
by
Greystone in its discretion
|
|
(b) Facility
Fee:
|
|
|
(i) Initial
Term Facility Fee:
|
.50%
of the Maximum Facility Amount
|
|
(ii) Renewal
Term(s) Facility Fee:
|
.50%
of the Maximum Facility Amount
|
|
(c) Servicing
Fee:
|
.2%
per month based on the average daily outstanding principal balance
of the
Loans and the Credit Accommodation Balance during the immediately
preceding month (or part thereof)
|
|
(d) Unused
Line Fee:
|
.25% per
annum
|
|
(e) Minimum
Borrowing Fee:
|
A-5
|
(i) Applicable
period:
|
Each
month
|
|
(ii) Date
payable:
|
The
first day of each month
|
|
(f) Success
Fee:
|
Not
applicable
|
|
(g) Warrants:
|
Lender
shall receive warrants to purchase 1,000,000 shares of common stock
of
Parent, which will have an exercise price of U.S.$.50 per share,
and will
be immediately exercisable and freely transferable by Lender separate
from
the Facility. Within six months following the closing, the shares
of
Parent subject to such warrants will be registered by Parent with
the
Securities and Exchange Commission so that they will be freely tradable
and shall be listed for trading on the principal market on which
Parent's
securities are then trading.
|
|
(h) Early
Termination Fee:
|
2 %
of the Maximum Facility Amount if terminated during the first year
of the
Initial Term or any Renewal Term, 2% of the Maximum Facility Amount
if
terminated during the second year of the Initial Term or any Renewal
Term,
and 1% of the Maximum Facility Amount if terminated thereafter and
prior
to the Maturity Date
|
|
(i) Credit
Accommodation Fees:
|
2%
per annum of the face amount of each open Credit Accommodation for
the
first 60-day period, or any part thereof, and 1% of such face amount
for
each additional 30-day period, or any part thereof
|
|
(j) Term
Loan B Fee:
|
U.S.$100,000,
which shall be earned on the disbursement of Term Loan B and shall
be
payable in two (2) installments of U.S.$50,000 each payable, respectively,
on the first anniversary and second anniversary of the
closing
|
A-6
|
8. Initial
Maturity Date:
|
The
expiration of three (3) years from the closing of the
Facility
|
|
9. Financial
Covenants:
|
|
|
(a) Capital
Expenditure Limitation:
|
Not
applicable
|
|
(b) Minimum
Net Worth Requirement:
|
Not
applicable
|
|
(c) Minimum
Tangible Net Worth:
|
Not
applicable
|
|
(d) Minimum
Working Capital:
|
Not
applicable
|
|
(e) Maximum
Cumulative Net Loss:
|
U.S.$500,000
for all Borrower Affiliates on a cumulative basis in any fiscal period,
provided,
that, this amount shall not exceed U.S.$300,000 in any ninety (90)
day
rolling period
|
|
(f) Minimum
Cumulative Net Income:
|
Not
applicable
|
|
(g) Maximum
Leverage Ratio:
|
Not
applicable
|
|
(h) Limitation
on Purchase Money Security Interests:
|
Not
applicable
|
|
(i) Limitation
on Equipment Leases:
|
Not
applicable
|
|
(j) Additional
Financial Covenants:
|
Immediately
after the application of the Loan proceeds, unused Availability shall
be
U.S.$1,800,000, which amount shall include Borrower's cash in any
Deposit
Account.
|
|
10. Borrower
Information:
|
A-7
|
(a) Prior
Names of Borrower:
|
Pneutech
Limitée
Pneutech
Ltée
4274458
Canada Inc.
D
& D Packing & Seals Inc.
Les
Joints et Garnitures D D Inc.
000000
Xxxxxx Inc.
Robot
Lab (1984) Limitée
164275
Canada Inc.
173006
Canada Inc.
Pneutech
Hydraulique Ltée
138428
Canada Inc.
171442
Canada Inc.
Spiraltec
Manufacturing Inc.
Federal
Industrial Products Co. Ltd.
Danro
Tool Company Inc.
|
|
(b) Prior
Trade Names of Borrower:
|
Pneutech
Limitée
Pneutech
Ltée
4274458
Canada Inc.
D
& D Packing & Seals Inc.
Les
Joints et Garnitures D D Inc.
000000
Xxxxxx Inc.
Robot
Lab (1984) Limitée
164275
Canada Inc.
173006
Canada Inc.
Pneutech
Hydraulique Ltée
138428
Canada Inc.
171442
Canada Inc.
Spiraltec
Manufacturing Inc.
Federal
Industrial Products Co. Ltd.
Danro
Tool Company Inc.
|
|
(c) Existing
Trade Names of Borrower:
|
Pneutech
Inc.
|
A-8
|
(d) Inventory
Locations:
|
0000,
00xx Xxxxxx, Xxxxxxx, Xxxxxx
000
Xxxxxxxx Xxxx. Xxxx #0, Xxxxxxxxxxx, XX
0000
Xxxx. Xx Xxxxxxx, Xxxxxxxxxx, XX
0000
Xxxxx Xxxxxxx, Xxxxx Xxxxxxxx, XX
000
Xxxxxxxxxx Xxxxxx, Xxxxxxx, XX
000
Xxx Xxxxxxxxxxx, Xxxxxxxx, XX
000
Xxxx Xxxx., Xxxxxxx, XX
000
Xxxxxx Xx., Xxxxxx, XX
00
Xxxxxxxx Xx., Xxxxxxx, XX
|
|
(e) Other
Locations:
|
Not
applicable
|
|
(f) Litigation:
|
Dux
v. Pneutech (in Nevada state court); relates to a claim in excess
of
$10,000
|
|
(g) Ownership
of Borrower:
|
Pneutech
is 100% held by Xxxxxx Equipment, Inc., a Delaware
corporation
|
|
(h) Subsidiaries
(and ownership thereof):
|
Xxxxxxxx
Controls Inc.—100%
Hydramen
Fluid Power Limited—100%
|
|
(i) Facsimile
Numbers:
|
|
|
Borrower:
|
(000)
000-0000
|
|
Lender:
|
(000)
000-0000
|
|
11. Description
of Real Property:
|
000
Xxx Xxxxxxxxxxx, Xxxxxxxx, XX
0000
Xxxx. Xx Xxxxxxx, Xxxxxxxxxx, XX
000
Xxxxxxxxxx Xxxxxx, Xxxxxxx, XX
|
|
12. Lender's
Bank:
|
Bank
of America
0000
Xxxxxxxx Xxxx
Xxxxxxx
Xxxx, XX 00000
Account
Number: 003284737253
ABA
Number: 000000000
|
A-9
|
13. Other
Covenants:
|
Not
earlier than 30 days before each anniversary of the date of the Agreement
during the Term, and not later than 60 days after each anniversary
of the
date of the Agreement during the Term, Borrower will cause to be
prepared
and delivered to Lender an updated auction sale value appraisal of
Borrower's Equipment (the "Updated
Equipment Appraisal")
and an updated fair market value appraisal of Borrower's Real Property
(the "Updated
Real Property Appraisal")
each by an independent appraiser acceptable to Lender, each of which
Updated Equipment Appraisals and Updated Real Property Appraisals
shall
include, without limitation, all Equipment and Real Property acquired
by
Borrower after the date of the Agreement
|
|
14. Exceptions
to Negative Covenants:
|
Not
applicable
|
[Signature
page follows]
A-10
IN
WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as of the
date
set forth in the heading to the Agreement.
|
Borrower:
Pneutech
Inc.
By
____________________________________
Its
________________________________
|
Lender:
Greystone
Business Credit II LLC
By
____________________________________
Its
________________________________
|
Signature
page to Schedule A to Pneutech Loan and Security
Agreement
Schedule B
Definitions
This
Schedule is an integral part of the Loan and Security Agreement between
Pneutech
Inc. and
Greystone
Business Credit II LLC (the
"Agreement").
As
used
in the Agreement, the following terms have the following meanings:
"Account"
has the
meaning set forth in the UCC and, for the purposes of the CCQ, shall include
"claims" within the meaning of the CCQ.
"Account
Debtor"
has the
meaning set forth in the UCC.
"Account
Proceeds"
has the
meaning set forth in Section 4.1.
"Accounts
Advance Rate"
means
the percentage set forth in Section 1(b)(i) of Schedule A.
"Accounts
Sublimit"
means
the amount set forth in Section 1(c) of Schedule A.
"Advance
Rates"
means,
collectively, the Accounts Advance Rate and the Inventory Advance
Rate.
"Affiliate"
means,
with respect to any Person, a relative, partner, shareholder, member, manager,
director, officer, or employee of such Person, any parent or subsidiary of
such
Person, or any Person controlling, controlled by or under common control with
such Person or any other Person affiliated, directly or indirectly, by virtue
of
family membership, ownership, management or otherwise. Without limiting the
foregoing, the term Affiliate shall include each of the Borrower Affiliates.
"Agreement"
and
"this
Agreement"
mean
the Loan and Security Agreement of which this Schedule B is a part and the
Schedules thereto.
"Availability"
has the
meaning set forth in Section 1.1(a)
"Bankruptcy
Code"
means
the United States Bankruptcy Code (11 U.S.C. § 101 et seq.) or the
Bankruptcy
and Insolvency Act
(Canada), the Companies
Creditors Arrangement Act (Canada)
or the Winding-up
Act
(Canada)
or any other applicable bankruptcy or insolvency law or any rule or regulation
promulgated thereunder.
"Blocked
Account"
has the
meaning set forth in Section 4.1.
"Borrower"
has the
meaning set forth in the heading to the Agreement.
"Borrower's
Address"
has the
meaning set forth in the heading to the Agreement.
B-1
"Borrower
Affiliates"
means,
collectively, (i) Borrower, (ii) Xxxxxxxx Controls Inc., a corporation organized
under the laws of Canada, and (iii) Hydramen Fluid Power Limited, a corporation
organized under the laws of Ontario.
"Business
Day"
means a
day other than a Saturday or Sunday or any other day on which Lender or banks
in
New York, Montreal or Toronto are authorized to close.
"Canadian
Plans"
shall
mean all the employee benefit, fringe benefit, supplemental unemployment
benefit, bonus, incentive, profit sharing, termination, change of control,
pension, retirement, stock option, stock purchase, stock appreciation, health,
welfare, medical, dental, disability, life insurance and similar plans,
programs, arrangements or practices relating to the current or former employees,
officers or directors of the Borrower and its Subsidiaries maintained, sponsored
or funded by any of them, whether written or oral, funded or unfunded, insured
or self insured, registered or unregistered.
"Canadian
Security Documents"
means
all the security agreements, mortgages, debentures, deeds of hypothec, pledges
and other security documents executed by the Borrower or any Obligor in relation
to this Agreement, as amended or replaced from time to time.
"Carve-Out"
means
(i)
the
Monitor's Fees and (ii) the Professional Fees, in an aggregate maximum amount
not to exceed CND$250,000. So long as no Event of Default shall have occurred
and be continuing, in accordance with the Forecast Budget, Borrower Affiliates
shall be permitted to pay Monitor's Fees and Professional Fees as the same
may
be due and payable, in amounts allowed by the Court and approved by
Lender.
"CCAA"
has the
meaning set forth in the Recitals to this Agreement.
"CCAA
Proceeding"
has the
meaning set forth in the Recitals to this Agreement.
"CCQ"
means
the Civil Code of Quebec and any successor code thereto together with all
regulations thereunder in effect from time to time in the Province of Quebec,
Canada.
"Chattel
Paper"
has the
meaning set forth in the UCC.
"Closing
Fee"
has the
meaning set forth in Section 2.2(a).
"Collateral"
means
all property and interests in property in or upon which a security interest,
hypothec or other Lien is granted pursuant to this Agreement or the other Loan
Documents or the Order, including, without limitation, all of the property
of
Borrower described in Section 3.1.
"Commercial
Tort Claims"
has the
meaning set forth in the UCC.
"Court"
has the
meaning set forth in the Recitals to this Agreement.
"Credit
Accommodation"
has the
meaning set forth in Section 1.1(a).
B-2
"Credit
Accommodation Balance"
means
the sum of (i) the aggregate undrawn face amount of all outstanding Credit
Accommodations and (ii) all interest, fees and costs due or, in Lender's
estimation, likely to become due in connection therewith.
"Credit
Accommodation Fees"
has the
meaning set forth in Section 2.2(h).
"Credit
Accommodation Limit"
means
the amount set forth in Section 1(e) of Schedule A.
"Currency
Exchange Rate"
means,
with respect to a currency, the rate quoted by the Reference Bank as the spot
rate for the purchase by the Reference Bank of such currency with another
currency at approximately 10:30 a.m. (New York time) on the date two (2)
Business Days prior to the date as of which the foreign exchange computation
is
made.
"Default"
means
any event which with notice or passage of time, or both, would constitute an
Event of Default.
"Default
Rate"
has the
meaning set forth in Section 2.1.
"Deposit
Account"
has the
meaning set forth in the UCC.
"Dilution
Percentage"
means
the gross amount of all returns, allowances, discounts, credits, write-offs
and
similar items relating to Borrower's Accounts computed as a percentage of
Borrower's gross sales, calculated on a twelve (12) month rolling
average.
"Document"
has the
meaning set forth in the UCC.
"Early
Termination Fee"
has the
meaning set forth in Section 7.2.
"Electronic
Chattel Paper"
has the
meaning set forth in the UCC.
B-3
"Eligible
Account"
means,
at any time of determination, an Account of Borrower which satisfies the general
criteria set forth below and which is otherwise acceptable to Lender
(provided,
that
Lender may, in its sole discretion, change the general criteria for
acceptability of Eligible Accounts upon at least fifteen days' prior notice
to
Borrower). An Account shall be deemed to meet the current general criteria
if
(i) neither the Account Debtor nor any of its Affiliates is an Affiliate,
creditor or supplier of Borrower; (ii) it does not remain unpaid more than
the earlier to occur of (A) the number of days after the original
invoice
date
set
forth in Section 6(a) of Schedule A or (B) the number of days
after the original invoice
due date
set
forth in Section 6(b) of Schedule A; (iii) the Account Debtor or its
Affiliates are not past due on other Accounts owing to Borrower comprising
more
than 50% of all of the Accounts owing to Borrower by such Account Debtor or
its
Affiliates; (iv) all Accounts owing by the Account Debtor or its Affiliates
do not represent more than 25% (or 30% in the case of Accounts owing by
Camoplast, Inc. or its Affiliates) of all otherwise Eligible Accounts
(provided,
that,
with respect to such Accounts, (A) Lender may elect to place such Accounts
on
direct notification; (B) Lender may require credit insurance on such Accounts
and (C) Accounts which are deemed to be ineligible solely by reason of this
clause (iv) shall be considered Eligible Accounts to the extent of the
amount thereof which does not exceed 25% of
all
otherwise Eligible Accounts); (v) no covenant, representation or warranty
contained in this Agreement with respect to such Account (including any of
the
representations set forth in Section 5.4) has been breached; (vi) the
Account is not subject to any contra relationship, counterclaim, dispute,
set-off or compensation (provided,
that
Accounts which are deemed to be ineligible solely by reason of this
clause (vi) shall be considered Eligible Accounts to the extent of the
amount thereof which is not affected by such contra relationships,
counterclaims, disputes, set-offs or compensation); (vii) the Account
Debtor's chief executive office or principal place of business is located in
the
United States or a province of Canada, unless (A) the sale is fully backed
by a letter of credit, guaranty or acceptance acceptable to Lender in its sole
discretion, and if backed by a letter of credit, such letter of credit has
been
issued or confirmed by a bank satisfactory to Lender, is sufficient to cover
such Account, and if required by Lender, the original of such letter of credit
has been delivered to Lender or Lender's agent (mandatary) and the issuer
thereof notified of the assignment of the proceeds of such letter of credit
to
Lender or (B) such Account is subject to credit insurance, including that
of the Export Development Corporation payable to Lender issued by an insurer
and
on terms and in an amount acceptable to Lender; (viii) it is absolutely
owing to Borrower and does not arise from a sale on a xxxx-and-hold, guarantied
sale, sale-or-return, sale-on-approval, consignment, retainage or any other
repurchase or return basis or consist of progress xxxxxxxx; (ix) Lender
shall have verified the Account in a manner satisfactory to Lender; (x) the
Account Debtor is not the United States of America or Canada or any state or
political subdivision (or any department, agency or instrumentality thereof),
unless Borrower has complied with the Assignment of Claims Act of 1940 (31
U.S.C. §203 et seq.) or other applicable similar law in a manner satisfactory to
Lender; (xi) the Account Debtor is not the government of Canada or any province
or territory thereof (or any ministry, department, agency or instrumentality
thereof), unless Borrower has complied with the Financial
Administration Act
(Canada)
or other applicable similar law in a manner satisfactory to Lender;
(xii) it is at all times subject to Lender's duly perfected, first priority
security interest and hypothec and to no other Lien that is not a Permitted
Lien, and the goods giving rise to such Account (A) were not, at the time
of sale, subject to any Lien except Permitted Liens and (B) have been
delivered to and accepted by the Account Debtor, or the services giving rise
to
such Account have been performed by Borrower and accepted by the Account Debtor;
(xiii) the Account is not evidenced by Chattel Paper or an Instrument of
any kind and has not been reduced to judgment; (xiv) the Account Debtor's
total indebtedness to Borrower does not exceed the amount of any credit limit
established by Borrower or Lender and the Account Debtor is otherwise deemed
to
be creditworthy by Lender (provided,
that
Accounts which are deemed to be ineligible solely by reason of this
clause (xiii) shall be considered Eligible Accounts to the extent the
amount of such Accounts does not exceed the lower of such credit limits);
(xv) there are no facts or circumstances existing, or which could
reasonably be anticipated to occur, which might result in any adverse change
in
the Account Debtor's financial condition or impair or delay the collectibility
of all or any portion of such Account; (xvi) Lender has been furnished with
all documents and other information pertaining to such Account which Lender
has
requested, or which Borrower is obligated to deliver to Lender, pursuant to
this
Agreement; (xvii) Borrower has not made an agreement with the Account
Debtor to extend the time of payment thereof beyond the time periods set forth
in clause (ii) above; and (xviii) Borrower has not posted a surety or other
bond in respect of the contract under which such Account arose.
B-4
"Eligible
Equipment"
means,
at any time of determination, Equipment owned by Borrower which is not subject
to any Lien (other than the Lien granted to Lender pursuant to the Agreement)
and which Lender, in its sole discretion, deems to be eligible for borrowing
purposes. The value of such Eligible Equipment shall be established by an
appraisal which is in form and substance satisfactory to Lender conducted by
an
appraiser acceptable to Lender pursuant to a methodology acceptable to Lender
(the "Equipment
Appraisal").
"Eligible
Inventory"
means,
at any time of determination, Inventory (other than packaging materials and
supplies) which satisfies the general criteria set forth below and which is
otherwise acceptable to Lender (provided,
that
Lender may, in its sole discretion, change the general criteria for
acceptability of Eligible Inventory upon at least fifteen days' prior written
notice to Borrower). Inventory shall be deemed to meet the current general
criteria if (i) it consists of raw materials or finished goods, or
work-in-process that is readily marketable in its current form; (ii) it is
in good, new and saleable condition; (iii) it is not slow-moving, obsolete,
unmerchantable, returned or repossessed; (iv) it is not in the possession
of a processor, consignee or bailee, or located on premises leased or subleased
to Borrower, or on premises subject to a mortgage or hypothec in favor of a
Person other than Lender, unless such processor, consignee, bailee or mortgagee
or hypothec or the lessor or sublessor of such premises, as the case may be,
has
executed and delivered all documentation which Lender shall require to evidence
the subordination or other limitation or extinguishment of such Person's rights
with respect to such Inventory and Lender's right to gain access thereto;
(v) it meets all standards imposed by any governmental agency or authority;
(vi) it conforms in all respects to any covenants, warranties and
representations set forth in the Agreement; (vii) it is at all times
subject to Lender's duly perfected, first priority security interest and
hypothec and no other Lien except a Permitted Lien; and (viii) it is
situated at an Inventory Location listed in Section 10(d) of
Schedule A or other location of which Lender has been notified as required
by Section 5.8. Any valuation of Eligible Inventory shall be established in
an appraisal which is in form and substance satisfactory to Lender conducted
by
an appraiser acceptable to Lender pursuant to a methodology acceptable to
Lender.
"Eligible
Real Property"
means,
at any time of determination, Real Property owned by Borrower which Lender,
in
its sole discretion, deems to be eligible for borrowing purposes. The value
of
such Eligible Real Property shall be established by a fair market value
appraisal which is in form and substance satisfactory to Lender conducted by
an
appraiser acceptable to Lender pursuant to a methodology acceptable to Lender
(the "Real
Property Appraisal").
"Equipment"
has the
meaning set forth in the UCC.
"Equipment
Advance"
has the
meaning set forth in Section 1.1(b).
"Event
of Default"
has the
meaning set forth in Section 8.1.
"Facility"
has the
meaning set forth in the Recitals to this Agreement.
"Facility
Fee"
means
the Initial Term Facility Fee.
B-5
"Filing
Date"
has the
meaning set forth in the Recitals to this Agreement.
"Fixtures"
has the
meaning set forth in the UCC.
"Forecast
Budget"
shall
mean each cash flow forecast prepared by Borrower Affiliates, in form and
substance satisfactory to Lender.
"GAAP"
means
generally accepted accounting principles as in effect from time to time, in
the
United States of America, consistently applied.
"General
Intangibles"
has the
meaning set forth in the UCC.
"Goods"
has the
meaning set forth in the UCC.
"Initial
Maturity Date"
means
the date set forth in Section 8 of Schedule A.
"Initial
Term"
has the
meaning set forth in Section 7.1.
"Initial
Term Facility Fee"
has the
meaning set forth in Section 2.2(b).
"Instrument"
has the
meaning set forth in the UCC.
"Inventory"
has the
meaning set forth in the UCC.
"Inventory
Advance Rate"
means
the percentage(s) set forth in Section 1(b)(ii) of Schedule A.
"Inventory
Sublimit"
means
the amount(s) set forth in Section 1(d) of Schedule A.
"Investment
Property"
has the
meaning set forth in the UCC.
"Lender"
has the
meaning set forth in the heading to the Agreement.
"Letter-of-Credit
Right"
has the
meaning set forth in the UCC.
"Lien"
means
any interest or hypothec in property securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is
based on common law, civil law, statute or contract, including prior claims,
rights of sellers under conditional sales contracts or title retention
agreements and reservations, leasings (credit bail), sales with a right of
redemption, installment sales, exceptions, encroachments, easements, servitudes,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting property. For the purpose of this
Agreement, Borrower shall be deemed to be the owner of any property which it
has
acquired or holds subject to a conditional sale agreement or other arrangement
pursuant to which title to the property has been retained by or vested in some
other Person for security purposes.
"Loan
Account"
has the
meaning set forth in Section 2.4.
B-6
"Loan
Documents"
means,
collectively, the Agreement and all notes, guaranties, security agreements,
hypothecs, mortgages, debentures, certificates, landlord's agreements, Lock
Box
and Blocked Account agreements and all other agreements, documents and
instruments now or hereafter executed or delivered by Borrower or any Obligor
in
connection with, or to evidence the transactions contemplated by, this
Agreement, including the Canadian Security Documents.
"Loan
Limits"
means,
collectively, the Availability limits and all other limits on the amount of
Loans and Credit Accommodations set forth in this Agreement.
"Loans"
means,
collectively, the Revolving Loans and any Term Loan.
"Lock
Box"
has the
meaning set forth in Section 4.1.
"Maturity
Date"
has the
meaning set forth in Section 7.1.
"Maximum
Facility Amount"
means
the amount set forth in Section 1(a) of Schedule A.
"Minimum
Borrowing Fee"
has the
meaning set forth in Section 2.2(e).
"Minimum
Loan Amount"
means
the amount set forth in Section 5 of Schedule A.
"Monitor's
Fees"
means
all fees payable to the Monitor in the CCAA Proceeding, as approved by the
Court.
"Net
Profit"
means,
for any given period, the net income for Borrower Affiliates for such period,
on
a consolidated basis, after interest, depreciation and the issuance of any
employee stock options that result in a non-operational, non-charge to the
applicable company.
"Obligations"
means
all present and future Loans, advances, debts, liabilities, obligations,
guaranties, covenants, duties and indebtedness at any time owing by Borrower
to
Lender, whether evidenced by this Agreement, any other Loan Document or
otherwise whether arising from an extension of credit, opening of a Credit
Accommodation, guaranty, indemnification or otherwise (including all fees,
costs
and other amounts which may be owing to issuers of Credit Accommodations and
all
taxes, duties, freight, insurance, costs and other expenses, costs or amounts
payable in connection with Credit Accommodations or the underlying goods),
whether direct or indirect (including those acquired by assignment and any
participation by Lender in Borrower's indebtedness owing to others), whether
absolute or contingent, whether due or to become due, and whether arising before
or after the commencement of a proceeding under the Bankruptcy Code or any
similar statute, including all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, Closing Fees,
Facility Fees, Servicing Fees, Unused Line Fees, Minimum Borrowing Fees, Success
Fees, amounts owing under Warrants, Credit Accommodation Fees and any other
sums
chargeable to Borrower under this Agreement or under any other Loan
Document.
B-7
"Obligor"
means
any guarantor, endorser, acceptor, surety or other person liable on, or with
respect to, the Obligations or who is the owner of any property which is
security for the Obligations, other than Borrower.
"Order"
shall
mean the order of the Court entered in the CCAA Proceeding in compliance with
the provisions of the CCAA, which order shall be satisfactory in form and
substance to Lender, together with all extensions, modifications and amendments
thereto, satisfactory to Lender, which, among other matters but not by way
of
limitation, authorizes Borrower Affiliates to obtain credit, incur (or guaranty)
Indebtedness and grant Liens under this Agreement and the Other Documents,
as
the case may be, includes customary rulings and findings by the Court binding
on
all parties, and provides for the superpriority of Lender's claims.
"Parent"
means
Xxxxxx Equipment, Inc., a Delaware corporation.
"Permitted
Liens"
means:
(i) purchase money security interests in specific items of Equipment in an
aggregate amount not to exceed the limit set forth in Section 9(h) of
Schedule A; (ii) leases of specific items of Equipment in an aggregate
amount not to exceed the limit set forth in Section 9(i) of
Schedule A; (iii) Liens for taxes not yet due and payable;
(iv) additional Liens which are fully subordinate to the security interests
of Lender and are consented to in writing by Lender on terms and conditions
acceptable to Lender and other Liens arising pursuant to the Order;
(v) security interests being terminated concurrently with the execution of
this Agreement; (vi) Liens of materialmen, mechanics or carriers (but
excluding Liens in favor of warehousemen) arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clause (i) or
(ii) above; provided,
that
any extension, renewal or replacement Lien is limited to the property encumbered
by the existing Lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase; (viii) Liens in favor of
customs and revenue authorities which secure payment of customs duties in
connection with the importation of goods; and (ix) security deposits posted
in connection with real (immovable) property leases or subleases. Lender will
have the right to require, as a condition to its consent under clause
(iv) above, that the holder of the additional Lien sign an intercreditor
agreement in form and substance satisfactory to Lender, in its sole discretion,
acknowledging that the Lien is subordinate to the security interests of Lender,
and agreeing not to take any action to enforce its subordinate Lien so long
as
any Obligations remain outstanding, and that Borrower agree that any uncured
default in any obligation secured by the subordinate Lien shall also constitute
an Event of Default under this Agreement.
"Person"
means
any individual, sole proprietorship, partnership, joint venture, limited
liability company, trust, unincorporated organization, association, corporation,
legal person, government or any agency or political division thereof, or any
other entity.
"Prime
Rate"
means,
at any given time, the prime rate expressed as an annual rate as quoted in
The
Wall Street Journal
as the
base rate on corporate loans posted as of such time by at least 75% of the
30
largest United States banks (which rate is not necessarily the lowest rate
offered by such banks).
B-8
"Proceeds"
has the
meaning set forth in the UCC.
"Professional
Fees"
means
all fees payable to the attorneys and other insolvency professionals engaged
by
Borrower Affiliates in the CCAA Proceeding, as approved by the
Court.
"RBC
Indebtedness"
has the
meaning set forth in the Recitals to this Agreement.
"Real
Property"
means
the real (immovable) property described in Section 11 of
Schedule A.
"Real
Property Advance"
has the
meaning set forth in Section 1.1(b).
"Reference
Bank"
means
The Bank of Nova Scotia, or such other bank as Lender may from time to time
designate.
"Released
Parties"
has the
meaning set forth in Section 6.1.
"Renewal
Term"
has the
meaning set forth in Section 1.2.
"Renewal
Term Facility Fee"
has the
meaning set forth in Section 2.2(b).
"Reserves"
has the
meaning set forth in Section 1.2.
"Revolving
Loans"
has the
meaning set forth in Section 1.1(a).
"Sale"
has the
meaning set forth in Section 8.2.
"Servicing
Fee"
has the
meaning set forth in Section 2.2(c).
"Subsidiary"
means
any corporation or other entity of which a Person owns, directly or indirectly,
through one or more intermediaries, more than 50% of the capital stock or other
equity interest at the time of determination.
"Success
Fee"
has the
meaning set forth in Section 2.2(f).
"Tangible
Chattel Paper"
has the
meaning set forth in the UCC.
"Term"
means
the period commencing on the date of this Agreement and ending on the Maturity
Date.
"Term
Loan A"
has the
meaning set forth in Section 1.1(b).
"Term
Loan B"
has the
meaning set forth in Section 1.1(c).
B-9
"UCC"
means,
at any given time, the Uniform Commercial Code as adopted and in effect at
such
time in the State of New York.
"Unused
Line Fee"
has the
meaning set forth in Section 2.2(d).
"Updated
Equipment Appraisal"
has the
meaning set forth in Section 13 of Schedule A.
"Updated
Real Property Appraisal"
has the
meaning set forth in Section 13 of Schedule A.
All
accounting terms used in this Agreement, unless otherwise indicated, shall
have
the meanings given to such terms in accordance with GAAP. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the UCC, to the extent such terms are defined therein. The term
"including,"
whenever used in this Agreement, shall mean "including but not limited to."
The
singular form of any term shall include the plural form, and vice versa, when
the context so requires. References to Sections, subsections and Schedules
are
to Sections and subsections of, and Schedules to, this Agreement. All references
to agreements and statutes shall include all amendments thereto and successor
statutes in the case of statutes.
[Signature
page follows]
B-10
IN
WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of the
date
set forth in the heading to the Agreement.
|
Borrower:
Pneutech
Inc.
By
____________________________________
Its
________________________________
|
Lender:
Greystone
Business Credit II LLC
By
____________________________________
Its
________________________________
|
Signature
page to Schedule B to Pneutech Loan and Security
Agreement
|
Greystone
Business Credit II
LLC
|
|
Exhibit A
| U.S.$558,000 |
New
York, New York
September
7,
2006
|
FOR
VALUE
RECEIVED, the undersigned, Pneutech Inc., a corporation organized under the
laws
of Canada ("Borrower"),
hereby unconditionally promises to pay to the order of Greystone Business Credit
II LLC ("Lender"),
at
its office at 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
at
such other place as the holder of this Term Note A ("Term
Note A")
may
from time to time designate in writing, in lawful money of the United States
of
America and in immediately available funds, the principal sum of Five Hundred
Fifty-Eight Thousand Dollars and 00/100 Cents (U.S.$558,000). Reference is
hereby made to the Loan and Security Agreement between Borrower and Lender
of
even date herewith (the "Loan
Agreement")
for a
statement of the terms and conditions under which the loan evidenced hereby
was
made and is to be repaid. Capitalized terms used herein which are not otherwise
specifically defined herein shall have the meanings ascribed to such terms
in
the Loan Agreement.
The
outstanding principal balance of this Term Note A shall be payable in full
on
the Maturity Date. Prior thereto, this Term Note A shall be repayable as set
forth in the Loan Agreement.
Borrower
further promises to pay interest on the outstanding principal amount hereof
from
the date hereof until payment in full hereof at the per annum rate equal to
the
Prime Rate in effect from time to time plus three percent (3.00%). Following
the
occurrence and during the continuance of an Event of Default the entire
outstanding principal balance of this Term Note A shall, at Lender's option,
bear interest until paid in full at a per annum rate equal to the interest
rate
applicable to Term Loan A from time to time in effect plus two percent (2.00%).
Until maturity, interest on the outstanding principal amount hereof shall be
payable in arrears on the first day of each month, commencing October 1, 2006,
and on the Maturity Date. After maturity, whether by acceleration or otherwise,
accrued interest shall be payable on demand. Interest as aforesaid shall be
charged for the actual number of days elapsed over a year consisting of three
hundred sixty (360) days on the actual daily outstanding balance hereof. For
the
purposes of the Interest
Act
of
Canada, any amount of interest or fees calculated hereunder using 360, 365
or
366 days per year and expressed as an annual rate is equal to the said rate
of
interest or fees multiplied by the actual number of days comprised within the
calendar year, divided by 360, 365 or 366, as the case may be. Changes in the
interest rate provided for herein which are due to changes in the Prime Rate
shall be effective on the date of the change in the Prime Rate.
Notwithstanding
anything to the contrary contained herein, the aggregate of all interest
hereunder and charged or collected by Lender is not intended to exceed the
highest rate permissible under any applicable law, but if it should, such
interest shall automatically be reduced to the extent necessary to comply with
applicable law and Lender will refund to Borrower any such excess interest
received by Lender.
Subject
to Section
7.2
of the
Loan Agreement, Borrower may prepay the outstanding principal balance hereof
in
whole or in part without premium or penalty. Any partial prepayment of Term
Loan
A shall be applied to the unpaid installments of Term Loan A in the inverse
order of their maturities.
Upon
and
after the occurrence of an Event of Default, this Term Note A may, at the option
of Lender, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Payments
received by Lender from Borrower on this Term Note A shall be applied to the
Obligations as provided in the Loan Agreement.
Presentment,
demand, protest and notice of presentment, demand, nonpayment and protest are
hereby waived by Borrower.
THIS
TERM
NOTE A SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. If
any
provision of this Term Note A or the application thereof shall be held to be
void or unenforceable by any court of competent jurisdiction, such defect shall
not affect the remainder of this Term Note A, which shall continue in full
force
and effect. Whenever in this Term Note A reference is made to Lender or
Borrower, such reference shall be deemed to include, as applicable, a reference
to their respective successors and assigns. The provisions of this Term Note
A
shall be binding upon Borrower and its successors and assigns, and shall inure
to the benefit of Lender and its successors and assigns.
|
Pneutech
Inc.
By
____________________________________
Its
________________________________
|
|
Greystone
Business Credit II
LLC
|
|
Exhibit
B
TERM
NOTE
B
| U.S.$600,000 |
New
York, New York
September
7,
2006
|
FOR
VALUE
RECEIVED, the undersigned, Pneutech Inc., a corporation organized under the
laws
of Canada ("Borrower"),
hereby unconditionally promises to pay to the order of Greystone Business Credit
II LLC ("Lender"),
at
its office at 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
at
such other place as the holder of this Term Note B ("Term
Note B")
may
from time to time designate in writing, in lawful money of the United States
of
America and in immediately available funds, the principal sum of Six Hundred
Thousand Dollars and 00/100 Dollars ($600,000). Reference is hereby made to
the
Loan and Security Agreement between Borrower and Lender of even date herewith
(the "Loan
Agreement")
for a
statement of the terms and conditions under which the loan evidenced hereby
was
made and is to be repaid. Capitalized terms used herein which are not otherwise
specifically defined herein shall have the meanings ascribed to such terms
in
the Loan Agreement.
The
outstanding principal balance of this Term Note B shall be payable in full
on
September 7, 2007 ("Term
Note B Maturity Date").
Prior
thereto, this Term Note B shall be repayable as set forth in the Loan
Agreement.
Borrower
further promises to pay interest on the outstanding principal amount hereof
from
the date hereof until payment in full hereof at the per annum rate equal to
the
Prime Rate in effect from time to time plus three percent (3.00%). Following
the
occurrence and during the continuance of an Event of Default the entire
outstanding principal balance of this Term Note B shall, at Lender's option,
bear interest until paid in full at a per annum rate equal to the interest
rate
applicable to Term Loan B from time to time in effect plus two percent (2.00%).
Until maturity, interest on the outstanding principal amount hereof shall be
payable in arrears on the first day of each month, commencing October 1, 2006,
and on the Term Note B Maturity Date. After maturity, whether by acceleration
or
otherwise, accrued interest shall be payable on demand. Interest as aforesaid
shall be charged for the actual number of days elapsed over a year consisting
of
three hundred sixty (360) days on the actual daily outstanding balance hereof.
For the purposes of the Interest
Act
of
Canada, any amount of interest or fees calculated hereunder using 360, 365
or
366 days per year and expressed as an annual rate is equal to the said rate
of
interest or fees multiplied by the actual number of days comprised within the
calendar year, divided by 360, 365 or 366, as the case may be. Changes in the
interest rate provided for herein which are due to changes in the Prime Rate
shall be effective on the date of the change in the Prime Rate.
Notwithstanding
anything to the contrary contained herein, the aggregate of all interest
hereunder and charged or collected by Lender is not intended to exceed the
highest rate permissible under any applicable law, but if it should, such
interest shall automatically be reduced to the extent necessary to comply with
applicable law and Lender will refund to Borrower any such excess interest
received by Lender.
Subject
to Section
7.2
of the
Loan Agreement, Borrower may prepay the outstanding principal balance hereof
in
whole or in part without premium or penalty. Any partial prepayment of Term
Loan
B shall be applied to the unpaid installments of Term Loan B in the inverse
order of their maturities.
Upon
and
after the occurrence of an Event of Default, this Term Note B may, at the option
of Lender, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
Payments
received by Lender from Borrower on this Term Note B shall be applied to the
Obligations as provided in the Loan Agreement.
Presentment,
demand, protest and notice of presentment, demand, nonpayment and protest are
hereby waived by Borrower.
THIS
TERM
NOTE B SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. If
any
provision of this Term Note B or the application thereof shall be held to be
void or unenforceable by any court of competent jurisdiction, such defect shall
not affect the remainder of this Term Note B, which shall continue in full
force
and effect. Whenever in this Term Note B reference is made to Lender or
Borrower, such reference shall be deemed to include, as applicable, a reference
to their respective successors and assigns. The provisions of this Term Note
B
shall be binding upon Borrower and its successors and assigns, and shall inure
to the benefit of Lender and its successors and assigns.
|
Pneutech
Inc.
By
____________________________________
Its
________________________________
|
Exhibit
C
COMMERCIAL
TORT CLAIMS
None.
