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Exhibit K.3
JOINT VENTURE AGREEMENT
A M O N G
SIRROM CAPITAL CORPORATION
- and -
THE TORONTO-DOMINION BANK
- and -
SCC CANADA INC.
File No. 9700090 - MGC\TD\SCC\JV11.AGT
MGC:wpc
XXXXXXX AND XXXX
Suite 2300
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
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TABLE OF CONTENTS
ARTICLE DESCRIPTION PAGE NO.
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1 - INTERPRETATION.......................................................... 2
1 Definitions................................................... 2
2 Schedules..................................................... 8
3 Currency...................................................... 8
4 Gender and Number............................................. 8
5 Table of Contents and Headings................................ 9
6 Calculation of Time Periods................................... 9
7 Applicable Law................................................ 9
8 Severable..................................................... 9
9 Entire Agreement.............................................. 9
10 Amendments.................................................... 10
11 Waiver........................................................ 10
12 Time of Essence............................................... 10
13 Successors and Assigns........................................ 10
14 Giving Effect to this Agreement............................... 10
2 - SECURED LOANS AND EQUITY INVESTMENTS.................................... 10
1 Agreement to make Secured Loans and Equity Investments........ 10
2 Senior Loan and Equity Investment Criteria.................... 11
3 Maximum Aggregate Principal Amount of Secured Loans and
Capital....................................................... 13
3 - SCC CANADA.............................................................. 13
1 Business of SCC Canada........................................ 13
2 Dealings with Investees....................................... 15
3 Capitalization and Financing of SCC Canada.................... 15
0 Xxxxxxxxx Xxxxx of Business of SCC Canada..................... 17
5 Board of Directors............................................ 17
6 Matters Requiring Unanimous Approval
of SCC Canada Board of Directors.............................. 19
7 Resolutions in Writing........................................ 20
8 Conference Telephone Meetings................................. 21
9 SCC Canada Management......................................... 21
10 Administrative and Management Services........................ 21
11 Special Services to be provided to SCC Canada by Sirrom....... 22
12 Filing of Certificates and Compliance with Laws............... 23
4 - THE INVESTMENT COMMITTEE................................................ 23
1 Establishment of the Investment Committee..................... 23
2 Appointment of the Investment Committee....................... 24
3 Approval of the Investment Committee.......................... 24
4 Advisors...................................................... 25
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ARTICLE DESCRIPTION PAGE NO.
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5 Investment Committee Meetings Generally....................... 26
6 Notice of Investment Committee Meetings....................... 26
7 Conference Telephone Meetings................................. 26
8 Location of Meetings.......................................... 26
9 Quorum........................................................ 27
10 Resolutions in Writing........................................ 27
5 - INTERESTS OF LENDERS IN
SECURED LOAN INVESTMENTS................................................ 27
1 (a) Secured Loans........................................ 27
(b) Bonus Equity Interests............................... 28
(c) Equity Investments................................... 28
2 Loss Payment by Sirrom to TD.................................. 29
3 Processing Fee................................................ 30
4 Investment Servicing Fee...................................... 30
5 Payments Generally............................................ 30
6 - REPRESENTATIONS AND WARRANTIES.......................................... 30
1 Representations and Warranties................................ 30
2 Survival of Representations and Warranties.................... 33
7 - TRANSFER OF INTERESTS................................................... 33
1 Prohibition Against Transfers and Encumbrances................ 33
8 - ACKNOWLEDGMENT REGARDING
ACTIVITIES OF TD AND SIRROM............................................. 34
1 Non-Competition............................................... 34
9 - TERMINATION............................................................. 35
1 Termination................................................... 35
10 - INDEMNITY............................................................... 36
1 Indemnity..................................................... 36
11 - GENERAL CONTRACT PROVISIONS............................................. 36
1 Notices....................................................... 36
2 Further Assurances............................................ 37
3 Execution..................................................... 38
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THIS AGREEMENT made this 17th day of January, 1997,
A M O N G:
SIRROM CAPITAL CORPORATION, a corporation
incorporated under the laws of the State of
Tennessee, in the United States of America,
(hereinafter called "Sirrom")
OF THE FIRST PART;
- and -
THE TORONTO-DOMINION BANK, a
Canadian chartered bank,
(hereinafter called "TD")
OF THE SECOND PART;
- and -
SCC CANADA INC., a corporation incorporated
under the Business Corporations Act (Ontario),
(hereinafter called "SCC Canada")
OF THE THIRD PART.
WHEREAS Sirrom and TD intend to jointly make Secured Loans (as hereinafter
defined) from time to time;
AND WHEREAS Sirrom and TD wish to confirm their agreement regarding the
terms and conditions on which Secured Loans (as hereinafter defined) will be
jointly made and
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administered by SCC Canada from time to time, which terms and conditions are
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby covenant and agree as follows:
ARTICLE 1 - INTERPRETATION
1 Definitions
Unless the context otherwise requires, in addition to any other terms
defined herein, the following terms shall have the respective meanings set out
below as follows:
(a) "ADMINISTRATIVE SERVICE COSTS" has the meaning given thereto in Section
3.10 hereof.
(b) "ADMINISTRATIVE SERVICES" has the meaning given thereto in Section 3.10
hereof.
(c) "AFFILIATE" has the meaning attributed to such term in the Canada
Business Corporations Act as in effect on the date hereof.
(d) "AGREEMENT" means this Agreement, including the schedules hereto, as
amended from time to time.
(e) "APPROVAL OF THE INVESTMENT COMMITTEE" or "APPROVED BY THE INVESTMENT
COMMITTEE" with respect to any matter to be decided by the Investment
Committee means the affirmative decision of the Investment Committee on
such matter given in accordance with Section 4.3.
(f) "ASSOCIATE" has the meaning attributed to such term in the Canada
Business Corporations Act as in effect on the date hereof.
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(g) "BOARD OF DIRECTORS" means the board of directors of SCC Canada as
constituted from time to time.
(h) "BONUS EQUITY INTERESTS" means all equity securities, warrants to
acquire equity securities and all similar rights and entitlements issued to
the Lenders for nominal consideration as a condition to the making of
Secured Loans, and all equity securities acquired by the Lenders for
nominal consideration on the exercise of such warrants or rights, or
received by the Lenders in exchange or in consideration therefor.
(i) "BUSINESS DAY" means any day, other than a Saturday, Sunday, or
statutory holiday in Ontario, on which banks are generally open to the
public in Toronto for the transaction of business in the ordinary course.
(j) "BUSINESS PLAN" has the meaning given thereto in Section 3.3(b).
(k) "CARRYING VALUE" of Secured Loans, Bonus Equity Interests and Equity
Investments held by a Lender means, at the time of determination, the fair
value of such Secured Loans, Bonus Equity Interests and Equity Investments
calculated in accordance with the Valuation Policy.
(l) INTENTIONALLY DELETED
(m) "COMPETITIVE BUSINESS" means the business of systematically making
Secured Loans having the criteria set out in Section 2.2 hereof as in
effect at the date hereof, and from which the expected rate of return
materially exceeds the prevailing rate of return on commercial bank loans,
using Sirrom's models for marketing, Secured Loan selection, investment
structure and documentation and investment management.
(n) "DISCLOSURE FILINGS" has the meaning given thereto in Section 6.1(k).
(o) "EQUITY INVESTMENTS" means equity securities (other than Bonus Equity
Interests, but including equity securities acquired on the conversion of
Secured Loans to equity, and including equity securities acquired by the
Lenders for consideration other than nominal consideration on the exercise
of warrants or rights constituting Bonus Equity Interests) acquired by the
Lenders in Investees which meet the criteria set
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out in Article 2, and which investment in equity securities is made in
accordance with the provisions of Article 2.
(p) "EQUITY INVESTMENTS PROCEEDS" means all proceeds (for greater
certainty, other than Processing Fees) received by the Lenders (or by
SCC Canada as agent of the Lenders) from Equity Investments in an
Investee and all property and assets (real or personal) derived
directly or indirectly from such Equity Investments, including,
without limitation, any property or assets which may be received by a
Lender (or by SCC Canada as agent of a Lender) on a reorganization,
amalgamation, or merger in consideration for the Equity Investments or
in consideration for any other property or assets described in this
paragraph (p).
(q) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means the
then current accounting principles recommended by the Canadian
Institute of Chartered Accountants in the "CICA Handbook" at the
relevant time, or in the event that the matter is not covered in the
CICA Handbook, principles having general acceptance among accounting
professionals in Canada at the particular time.
(r) "GOVERNMENTAL BODY" means any government, parliament, legislature
or any regulatory authority, agency, commission or board of any
government, parliament or legislature, or any court or (without
limitation to the foregoing) any other law, regulation or rule making
entity (including, without limitation, any central bank, fiscal or
monetary authority or authority regulating banks), having or
purporting to have jurisdiction in the relevant circumstances, or any
Person acting or purporting to act under the authority of any of the
foregoing (including, without limitation, any arbitrator).
(s) "INVESTED CAPITAL" has the meaning given thereto in Section
5.1(c).
(t) "INVESTEE" means a Person other than a natural person in whom a
Secured Loan Investment is made.
(u) "INVESTMENT AGREEMENTS" means the loan agreement, security
agreements, warrant agreements, shareholder agreements and all other
agreements to be entered into between the Lenders and the Investee
and, if appropriate, the shareholders of the Investee and all other
relevant parties in respect of a Secured Loan Investment.
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(v) "INVESTMENT COMMITTEE" means the committee of the Board of
Directors established pursuant to the provisions of Article 4 hereof.
(w) "INVESTMENT SERVICING FEE" has the meaning given thereto in
Section 5.4.
(x) "LENDER" means each of Sirrom and TD, and "Lenders" means Sirrom
and TD, collectively, and includes any successor or assignee thereof
to the extent permitted under this Agreement.
(y) "LOAN RECOVERY AMOUNT" has the meaning given thereto in Section
5.2 hereof.
(z) "MANAGEMENT INCENTIVE FEE" has the meaning given thereto in
Section 3.9.
(aa) "MANAGERS" has the meaning given thereto in Section 3.9.
(bb) "MATERIAL AUTHORIZATION" means, with respect to any Person, any
approval, permit, license or similar authorization (including any
trade xxxx, trade name or patent) from, and any filing or registration
with, any Governmental Body required by such Person to own its
property and assets or to carry on its business as presently carried
on by it or as contemplated hereunder to be carried on by it
(including the making of Secured Loans and Equity Investments as
contemplated in this Agreement) in each jurisdiction in which it does
so or is contemplated to do so where the failure to have such
approval, permit, license, authorization, filing or registration would
have a material adverse effect upon its business, financial condition
or prospects or upon its ability to perform its obligations hereunder
or to make Secured Loans or Equity Investments as contemplated
hereunder.
(cc) "MAXIMUM OPERATING COMMITMENT" has the meaning given thereto in
Section 3.3(c).
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(dd) "PERMITTED TRANSFEREE" means:
(i) with respect to TD, or any Permitted Transferee of TD, any
directly or indirectly wholly-owned subsidiary of TD; and
(ii) with respect to Sirrom, or any Permitted Transferee of
Sirrom, any directly or indirectly wholly-owned subsidiary of
Sirrom.
(ee) "PERSON" means a natural person, firm, trust, partnership,
association, corporation, government or governmental board, agency or
instrumentality.
(ff) "PRIME RATE" means the commercial lending rate of interest expressed
as an annual rate, which TD quotes in Toronto as the reference rate of
interest from time to time, (commonly known as "prime") for the purposes of
determining the rate of interest that it charges to its commercial
customers for loans in Canadian funds.
(gg) "PROCESSING FEE" means the up-front processing fee paid in cash by an
Investee to SCC Canada in connection with the Secured Loan Investment made
in such Investee.
(hh) "SCC CANADA ANNUAL BUDGET" means an annual operating plan and
operating budget for SCC Canada as described in Section 3.3(d) hereof.
(ii) "SCC CANADA INITIAL BUDGET" has the meaning given thereto in Section
3.3(c) hereof.
(jj) "SECURED LOAN" means a loan extended by each of the Lenders to an
Investee which meets the criteria set out in Article 2, and which loan is
made in accordance with the provisions of Article 2.
(kk) "SECURED LOAN INVESTMENTS" means, collectively, all Secured Loans, all
Secured Loan Security, all Secured Loan Proceeds, all Bonus Equity
Interests, all Equity Investments and all Equity Investments Proceeds
acquired by the Lenders (or, in the case of Secured Loan Security, by SCC
Canada as agent of the Lenders).
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(ll) "SECURED LOAN PROCEEDS" means all proceeds (for greater certainty,
other than Processing Fees) received by the Lenders (or by SCC Canada as
agent of the Lenders) from Secured Loans to an Investee (including all
payments of principal and interest) and from the Secured Loan Security for
such Secured Loans held from time to time by the Lenders (or by SCC Canada
as agent of the Lenders) and all property and assets (real or personal)
derived directly or indirectly from such Secured Loans and/or such Secured
Loan Security, including, without limitation, any property or assets
distributed in specie on the Secured Loan Security, interests or rights in
or to the assets comprising the Secured Loan Security, and any other
securities or other property or assets which may be received by a Lender
(or by SCC Canada as agent of a Lender) on a reorganization, amalgamation
or merger in consideration for the Secured Loan Security, in connection
with the enforcement of the Secured Loan Security or in consideration for
any other property or assets described in this paragraph (al).
(mm) "SECURED LOAN SECURITY" means all security interests, charges or
encumbrances on or in respect of the property and assets of an Investee or
any other Person granted to the Lenders (or to SCC Canada as agent of the
Lenders) as security for Secured Loans, including any guarantees of Secured
Loans provided by any Persons, and all security interests, charges and
encumbrances granted as security for such guarantees.
(nn) "SECURITIES LAWS" has the meaning given thereto in Section 6.1(k).
(oo) "TAXES" has the meaning given thereto in Section 10.1.
(pp) "TERMINATION COSTS" has the meaning given thereto in Section 3.10.
(qq) "TERMINATION DATE" has the meaning given thereto in Section 9.1.
(rr) "TERMINATION NOTICE" has the meaning given thereto in Section 9.1.
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(ss) "VALUATION POLICY" means the valuation policy attached as Schedule
"1.1(as)" hereto.
2 Schedules
The following are the schedules attached hereto which shall be deemed to be
a part of this Agreement and are incorporated herein by this reference:
Section Reference Description of Schedule
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3.3(b)
Business Plan
3.3(c)
SCC Canada Initial Budget
3.9
Calculation of Management
Incentive Amount
1.1(as) Valuation Policy
3 Currency
Any reference herein to currency is to Canadian currency (unless otherwise
expressly stated) and any amount advanced, paid or calculated pursuant hereto is
to be advanced, paid or calculated in Canadian currency (unless otherwise
expressly provided herein).
4 Gender and Number
Words importing the singular number only shall include the plural, and vice
versa, and words importing the masculine gender shall include the feminine
gender and neuter gender.
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5 Table of Contents and Headings
The division of this Agreement into Articles and Sections and the Article
and Section headings and the Table of Contents preceding are for convenience of
reference only and shall not affect the interpretation or construction of this
Agreement.
6 Calculation of Time Periods
When calculating the period of time within which or following which any act
is to be done or step taken pursuant to this Agreement, the date upon which the
period commences shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next Business Day.
7 Applicable Law
This Agreement shall be governed by the laws of the Province of Ontario and
the laws of Canada where applicable. The parties hereto attorn to the laws of
Ontario and the non-exclusive jurisdiction of the courts of Ontario and agree
not to dispute their competence or convenience.
8 Severable
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby and such invalid, illegal or unenforceable provision shall be severable
from the remainder of this Agreement.
9 Entire Agreement
This Agreement constitutes the entire agreement among the parties relating
to the matters herein addressed and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, among the
parties with respect thereto.
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10 Amendments
No amendment or modification of this Agreement shall be binding unless in
writing and signed by the parties.
11 Waiver
No waiver by a party to this Agreement of any breach of any of the
provisions of this Agreement by any other party to this Agreement shall take
effect or be binding upon the party unless in writing and signed by such party.
Unless otherwise provided therein, such waiver shall not limit or affect the
rights of the party with respect to any other breach.
12 Time of Essence
Time shall be of the essence of this Agreement.
13 Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors and
assigns permitted under this Agreement.
14 Giving Effect to this Agreement
Each Lender hereby covenants and agrees to vote or cause the shares of SCC
Canada to be voted, and to use its best efforts and exercise its vote and
influence to cause its nominees on the Board of Directors and on the Investment
Committee to act so as to give effect to the provisions of this Agreement, and
to otherwise exercise its vote and influence to give effect to the provisions of
this Agreement.
ARTICLE 2 - SECURED LOANS AND EQUITY INVESTMENTS
1 Agreement to make Secured Loans and Equity Investments
The Lenders agree to jointly make Secured Loans and Equity Investments that
are Approved by the Investment Committee, and which have been approved, prior to
such Approval of the Investment Committee, by Sirrom and TD, individually, on
and subject to the terms and provisions of this Agreement.
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2 Senior Loan and Equity Investment Criteria
Subject to Sections 3.6(d) hereof, Secured Loans and Equity Investments
jointly made by the Lenders pursuant to this Agreement shall meet the following
criteria:
(a) such loans shall be made to or investments made in Investees which
generally have or meet at least five of the following six criteria:
(i) a demonstrated compounded annual growth rate;
(ii) existing sophisticated equity shareholders;
(iii) experienced management with net worth at stake;
(iv) demonstrated operating profitability;
(v) demonstrated Secured Loan collateral coverage;
(vi) available exit strategy for the Lenders;
(b) such loans or investments shall generally not be made:
(i) for or in "turnaround" situations;
(ii) if the Secured Loan Investment will result in unacceptably high
leverage for an Investee whose business is highly cyclical;
(iii) if the Secured Loan Investment would constitute a deeply
subordinated position in an Investee with low growth rates, low
margins and high operating leverage;
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(iv) for specific project financing;
(c) the total aggregate principal amount advanced by the Lenders to, or
invested by the Lenders in, a single Investee (including its
affiliates and associates) shall be between $500,000 and $5,000,000;
(d) 60% of the total aggregate principal amount of Secured Loans advanced
by the Lenders to, or 60% of the total capital invested by the Lenders
in consideration for Equity Investments in, any one Investee shall be
advanced or paid, as the case may be, by TD, and 40% of such total
aggregate principal amount or capital shall be advanced or paid, as
the case may be, by Sirrom;
(e) Secured Loans shall be secured by a charge and security interest on
the property and assets of the relevant Investee, registered in the
name of the Lenders (or SCC Canada as agent of the Lenders);
(f) each Investee in whom a Secured Loan Investment is made shall be
required to pay a Processing Fee to SCC Canada;
(g) Secured Loans shall have a term to maturity of no less than 5 years
and shall be non-amortizing;
(h) each Secured Loan shall bear interest at a fixed annual rate
determined on the date the Secured Loan is advanced, payable monthly;
(i) as a condition to the advance of Secured Loans to an Investee, the
Lenders shall be issued equity securities, warrants or similar rights
which entitle the holder to purchase equity securities of the Investee
generally representing 3% to 25% of the outstanding equity securities
of the Investee, or other similar entitlements, for nominal
consideration;
(j) any advance of Secured Loans to, or Equity Investments in, a
particular Investee shall be conditional upon the prior Approval of
the Investment Committee given after the prior approval of each
Lender, of such Secured Loans or Equity Investments, and shall also be
conditional upon the execution
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and delivery of Investment Agreements for such Secured Loans or Equity
Investments.
For greater certainty, Secured Loans and Equity Investments shall meet such
additional criteria, or such variations of the above criteria, as the Board of
Directors may specify from time to time in accordance with Section 3.6(d)
hereof. Each particular Secured Loan Investment in a particular Investee shall
be made on such additional terms and provisions applicable to such Secured Loan
Investment as are Approved by the Investment Committee after the prior approval
of each Lender in connection with such Secured Loan Investment.
3 Maximum Aggregate Principal Amount of Secured Loans and Capital
Unless the Lenders otherwise agree, the maximum aggregate principal amount
of all Secured Loans and capital invested in Equity Investments made by them
hereunder prior to the Termination Date shall not exceed $50,000,000.
ARTICLE 3 - SCC CANADA
1 Business of SCC Canada
The parties confirm that SCC Canada has been incorporated for the purpose
of acting as loan originator and servicer and providing related services in
connection with Secured Loan Investments. The services to be performed by SCC
Canada in connection with Secured Loan Investments shall include the following:
(a) identifying and liaising with potential Investees in whom Secured Loan
Investments may be made;
(b) reviewing and analyzing investment proposals received from potential
Investees in whom Secured Loan Investments may be made;
(c) conducting due diligence with respect to potential Investees and
potential Secured Loan Investments;
(d) negotiating the Investment Agreements relating to each Secured Loan
Investment with Investees and other relevant parties;
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(e) retaining lawyers, accountants and other required professional
advisors to assist in due diligence investigations relating to Secured
Loan Investments where necessary, and procuring all legal and other
appropriate professional opinions and advice (including with respect
to enforceability of Investment Agreements and registration of Secured
Loan Security) relating to a Secured Loan Investment;
(f) delivering Investment Agreements on behalf of the Lenders;
(g) disbursing proceeds of Secured Loans and payments for Equity
Investments to Investees, collecting Secured Loan Proceeds and Equity
Investments Proceeds from Investees and remitting same to the Lenders
in accordance with Section 5.1 hereof, and calculating and providing
to the Lenders particulars of the methods of calculating the
Investment Servicing Fee provided for in Section 5.4 hereof;
(h) exercising warrants or other similar rights included in Bonus Equity
Interests and Equity Investments of the Lenders and exercising voting
rights and all other rights attaching to Bonus Equity Interests and
Equity Investments in the manner Approved by the Investment Committee;
(i) disposing of Bonus Equity Interests and Equity Investments in the
manner Approved by the Investment Committee;
(j) enforcing the rights of the Lenders upon default under the Investment
Agreements governing Secured Loans and Secured Loan Security; and
(k) acting as collateral agent on behalf of the Lenders in respect of
Secured Loan Security.
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2 Dealings with Investees
Each Lender hereby authorizes SCC Canada to take such actions and exercise
all powers that the Lenders are entitled to exercise in connection with Secured
Loan Investments, provided that all such actions and powers are taken and
exercised in accordance with this Agreement, and provided that SCC Canada
complies in all respects with the provisions of this Agreement. Each Lender
agrees that, subject to the immediately preceding sentence, all dealings and
communications with Investees and all other relevant Persons relating to Secured
Loan Investments shall be effected and made exclusively by SCC Canada, and not
by the Lenders or either one of them.
3 Capitalization and Financing of SCC Canada
(a) Each of TD and Sirrom agree to subscribe, or to cause its Permitted
Transferee which has complied with Section 7.1 to subscribe for the number
and class of shares of SCC Canada for the subscription price listed
opposite its respective name below, and agrees that there shall be no other
shares or rights convertible into shares of SCC Canada issued except for
the following, which shall be owned beneficially and of record as follows:
Number and Class Subscription
Name of Shares Price
---- ---------------- ------------
TD (or its 580 common $112.50 per share
Permitted Transferee)
Sirrom (or its 420 common $112.50 per share
Permitted Transferee)
(b) The Business Plan for SCC Canada and the Lenders shall be as set forth
in Schedule 3.3(b) hereof (for the period of time covered by such
schedule), subject to Section 3.6 hereof.
(c) The budget of SCC Canada for the period from February 1, 1997 to
October 31, 1997 shall be as set forth in Schedule 3.3(c) hereof (the "SCC
Canada Initial Budget"), subject to Section 3.6 hereof. Initial operating
financing requirements of SCC Canada provided for in the SCC Canada Initial
Budget shall be funded by loans from the Lenders to SCC Canada of up to
$337,500 (the "Maximum Operating Commitment") when requested by management
of SCC Canada. TD shall advance
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60% and Sirrom shall advance 40%, on a pro rata basis, of any such loans
that are required. All advances made to SCC Canada pursuant to this Section
shall be treated as shareholder's loans, and shall bear interest (subject
to such withholdings as are required pursuant to the Income Tax Act
(Canada) at the Prime Rate. None of these loans shall be called by a Lender
or repaid to a Lender, in whole or in part, except as is approved by the
Board of Directors; provided that whenever any amounts on account of such
loans are repaid to the Lenders, they shall be repaid to them on a pro rata
basis proportionate to their then total outstanding advances to SCC Canada.
The foregoing shareholder loans shall be made until such time as SCC
Canada's forecasted aggregate revenues and reimbursable expenses (based on
actual commitments) from Processing Fees, expense reimbursement commitments
from Investees, the Investment Servicing Fee, and all other revenues can
reasonably be considered to be sufficient to fund forecasted annual
operating expenses of SCC Canada. Notwithstanding the foregoing, however,
if at any time SCC Canada's operating expenses and financial requirements
contemplated in the SCC Canada Initial Budget or in the SCC Canada Annual
Budget then in effect, or its obligations to TD in respect of Termination
Costs as provided in Section 3.10 hereof, exceeds its revenues at any time,
each Lender shall make additional shareholder loans to SCC Canada on the
same basis as provided above to fund such shortfall, at such times and in
such amounts as management of SCC Canada reasonably requests, provided that
subject to the following sentence unless each Lender otherwise agrees, the
Lenders shall only be required to make shareholder loans (which loans shall
be made on a revolving basis), to fund operating expenses of SCC Canada
such that the maximum aggregate principal amount of such loans outstanding
at any time shall not exceed the Maximum Operating Commitment.
Notwithstanding anything to the contrary herein contained, and for greater
certainty, the obligations of the Lenders to make shareholder loans to fund
SCC Canada's obligation to pay Termination Costs shall not be limited to
the Maximum Operating Commitment (provided that the amounts required to be
contributed by the Lenders to SCC Canada to fund payment of Termination
Costs in excess of the Maximum Operating Commitment shall be contributed as
to 25% of such amount, as subscriptions for shares of SCC Canada, and as to
the balance of such amount as shareholder loans.
(d) Management of SCC Canada shall prepare and present to the Board of
Directors for its consideration an annual operating plan and operating
budget for SCC Canada (an "SCC Canada Annual Budget") at least twenty (20)
days prior to the commencement of each fiscal year of SCC Canada beginning
with the fiscal year commencing November 1, 1997. Such annual operating
plan and budget, when approved by the Board of Directors in accordance with
Section 3.6 hereof, shall become the SCC Canada Annual Budget for the
fiscal year to which it relates. The SCC Canada Initial Budget or SCC
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Canada Annual Budget currently in effect at any time may only be amended
with the prior approval of the Board of Directors given in accordance with
Section 3.6 hereof.
(e) Management of SCC Canada shall cause to be prepared and provided to the
Lenders audited financial statements of SCC Canada prepared in accordance
with GAAP within sixty (60) days of SCC Canada's fiscal year end, and
unaudited monthly income statements for SCC Canada, including an unaudited
report of expenditures during each month, within fifteen (15) days after
the end of each month for the month then ended.
The monthly and annual financial statements shall be accompanied by a
statement prepared by SCC Canada management showing particulars of how the
Investment Servicing Fee and Management Incentive Fee for the period
covered by such statements has been calculated.
(f) SCC Canada shall establish and maintain a trust account or trust
accounts with TD into which all funds collected by SCC Canada on behalf of
the Lenders constituting Secured Loan Proceeds, and all proceeds from Bonus
Equity Interests and Equity Investments, shall be deposited and from which
SCC Canada shall disburse such funds to the Lenders in accordance with this
Agreement. In no event shall any funds required to be deposited in such
trust accounts be commingled with any funds of SCC Canada. All
disbursements and payments required to be made by SCC Canada in connection
with its operations shall be paid only out of SCC Canada's funds.
0 Xxxxxxxxx Xxxxx xx Xxxxxxxx xx XXX Xxxxxx
The principal place of business of SCC Canada shall be in the
Xxxxxxx-Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx.
5 Board of Directors
Subject to the provisions of this Agreement, the business and affairs of
SCC Canada shall be managed by a board of directors which shall at all times
consist of five directors, three of whom shall be nominees of TD (such nominees
of TD to include the President of SCC Canada), and two of whom shall be nominees
of Sirrom. Should any vacancy occur on the Board of Directors, such vacancy
shall be filled by the appointment of a nominee or nominees by the Lender who is
not then represented by the nominee or nominees to which it is entitled
hereunder. Until such vacancy is filled, the Board of Directors shall not
transact any business
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or exercise any of its powers or functions, save and except as may be necessary
to preserve the business and assets of SCC Canada. If a replacement nominee is
not appointed within ten (10) days of such vacancy occurring, then thereafter
the directors of SCC Canada then in office shall be entitled to transact
business and exercise all of the powers and functions the Board of Directors may
exercise in accordance with this Agreement.
The nominees to the Board of Directors appointed by TD shall be, until
changed by TD, Xxxx Xxxxxxxxx, Xxxx XxxXxxxxx and one additional nominee
designated by TD, and the nominees of Sirrom, until changed by Sirrom, shall be
Xxxxxx X. Xxxxxx, XX and Xxxx X. Xxxxxxxx.
Subject to Section 3.6, all decisions of the Board of Directors shall be
decided by a majority of votes cast (or by such greater percentage as may be
required by law). Notwithstanding any statutory rule or rule of procedure to the
contrary, the chairman at any meeting of the board shall not be entitled to a
second, extra or casting vote in the case of a tie vote at any such meeting.
A quorum for meetings of the Board of Directors (other than a meeting at
which a matter requiring unanimous approval of the Board of Directors pursuant
to Section 3.6 will be considered and/or voted upon) shall be a majority of the
directors then in office, provided that the quorum shall require the presence
(in person or by conference telephone) of one nominee of TD (unless TD's nominee
shall have given written notice to SCC Canada prior to the meeting of such
nominee's intention not to be present and of such nominee's consent to the
meeting proceeding in such nominee's absence), and of one nominee of Sirrom
(unless Sirrom's nominee shall have given written notice to SCC Canada prior to
the meeting of such nominee's intention not to be present and of such nominee's
consent to the meeting proceeding in such nominee's absence). Notwithstanding
the immediately preceding sentence, but subject to the next paragraph, if within
one hour of the time appointed for a meeting of the Board of Directors, a quorum
is not present, the meeting shall stand adjourned to the same hour on the next
Business Day at the same place and if at the adjourned meeting a quorum as
hereinbefore specified is not present, the quorum for the adjourned meeting
shall consist of a majority of the directors then in office.
A quorum for a meeting of the Board of Directors at which a matter
requiring the unanimous approval of the Board of Directors pursuant to Section
3.6 will be considered and/or voted upon shall be four directors, including two
nominees of TD and two nominees of Sirrom.
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The Board of Directors shall meet at such intervals as the directors may
determine at the principal place of business of SCC Canada in Toronto, or in
such other place in Canada or the United States as a majority of the directors
of SCC Canada then in office may agree upon from time to time. Meetings of the
directors may be called by the President of SCC Canada or by any two directors
upon not less than five (5) Business Days' notice (unless such notice is waived
by each director). The giving or the period of notice required to be given
hereunder may be waived with the consent in writing of a director either before
or after the meeting to which such waiver relates, and, to the extent permitted
by law, the presence in person or by conference telephone of such member at any
meeting of the Board of Directors shall constitute such director's waiver of any
such notice requirement for such meeting.
0 Xxxxxxx Xxxxxxxxx Xxxxxxxxx Xxxxxxxx
xx XXX Xxxxxx Board of Directors
Notwithstanding any provision herein to the contrary, none of the following
matters may be implemented or effected by SCC Canada without the prior approval
of at least two of the nominees to the Board of Directors appointed by TD, and
of two of the nominees appointed by Sirrom:
(a) the approval of the SCC Canada Annual Budget for any fiscal year of SCC
Canada, and any amendments to or variations of the SCC Canada Initial
Budget or the SCC Canada Annual Budget currently in effect from time to
time, and any expenditures or the making of any financial commitments by
SCC Canada other than as provided for in the SCC Canada Initial Budget or
the SCC Canada Annual Budget then in effect which has been unanimously
approved by the Board of Directors (provided that management of SCC Canada
shall be entitled to make expenditures which vary from budgeted line items
in the SCC Canada Initial Budget or the SCC Canada Annual Budget then in
effect by no more than 10 percent, as long as revenues are at least 80% of
budget, without the prior approval of the Board of Directors given in
accordance with this Section 3.6);
(b) any change in the composition or powers of the Investment Committee
provided for in this Agreement (it being understood that the Investment
Committee of the Board of Directors shall, unless otherwise approved by at
least four of the directors, including two of the TD nominees and the two
Sirrom nominees), have the power and authority described in Article 4
hereof;
(c) the creation of any committee of the Board of Directors (other than the
Investment Committee), and the delegation of any power or authority of the
Board of
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Directors to any such committee (other than the power and authority
delegated to the Investment Committee described in Article 4 hereof);
(d) any change to the general criteria for Secured Loans or Equity
Investments or the manner in which Secured Loan Investments will be made
set out in Section 2.2 hereof;
(e) any changes to the Business Plan, and the implementation of any
business plan for any period not covered by the Business Plan;
(f) any changes to the Management Incentive Fee or the method of
calculation thereof;
(g) any changes to the Investment Servicing Fee provided for in Section 5.4
hereof;
(h) any change of the fiscal year end of SCC Canada (which shall be October
31 of each year, unless otherwise approved by the Board of Directors in the
manner provided in this Section 3.6);
(i) the appointment of executive officers and management employees of SCC
Canada (and for greater certainty, portfolio managers/loan officers shall
be considered management employees of SCC Canada, for these purposes); and
(j) the allocation among the Managers of the amount in respect of the
Management Incentive Fee paid to the Managers pursuant to Section 3.9.
7 Resolutions in Writing
Any matter within the competence of the Board of Directors that is agreed
or consented to in writing by a director who is entitled to attend and vote at
meetings of the Board of Directors shall constitute the decision of that
director on such matter as if made at a duly constituted meeting of the Board of
Directors.
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8 Conference Telephone Meetings
Any director of SCC Canada may participate in a meeting of the Board of
Directors by means of conference telephone or other communications equipment by
means of which all persons participating in the meeting are able to hear each
other, and a member participating in a meeting in such manner shall be deemed to
be present in person at the meeting.
9 SCC Canada Management
The executive officers and management employees of SCC Canada (the
"Managers") shall be such individuals as are designated to act as such by TD
from time to time and approved by the Board of Directors as provided in Section
3.6(i).
The Lenders shall pay to SCC Canada semi-annually, by no later than 30 days
following the end of each period of 6 months (a "Calculation Period") ending on
the last day of April and October of each year, an amount (the "Management
Incentive Fee") calculated as provided in Schedule 3.9 hereto. TD shall pay 58%,
and Sirrom shall pay 42%, of the Management Incentive Fee payable by the Lenders
to SCC Canada for each Calculation Period. SCC Canada shall pay to TD (for
payment to the Managers as determined in accordance with Section 3.6(j)) within
10 days of the receipt by SCC Canada of the Management Incentive Fee for a
Calculation Period, an amount equal to the amount of such Management Incentive
Fee paid to SCC Canada as aforesaid for such Calculation Period. Notwithstanding
the foregoing, if the Managers are employees of SCC Canada, SCC Canada shall pay
the amounts payable to TD as provided for in the preceding sentence to the
Managers (as determined in accordance with Section 3.6(j)), rather than to TD.
10 Administrative and Management Services
TD shall provide SCC Canada with appropriate office space and operating
facilities at its offices in the City of Toronto located in the Xxxxxxx-Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx (including appropriate office furniture, fixtures and
equipment) and professional staff and administrative staff and executive
officers and management employees sufficient to enable SCC Canada to carry on
its business contemplated hereunder (the "Administrative Services"). SCC Canada
shall reimburse TD for its cost of providing such services from time to time as
provided in the SCC Canada Initial Budget and the SCC Canada Annual Budget then
in effect ("Administrative Services Costs"), upon request and receipt of
appropriate particulars and vouchers with respect to those items to be
reimbursed.
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Notwithstanding anything to the contrary herein contained, TD shall be
reimbursed by SCC Canada for any and all Termination Costs (as hereinafter
defined) of TD in connection with the termination of the arrangements
contemplated herein, upon request and receipt of appropriate particulars and
vouchers with respect to those items to be reimbursed. For the purposes hereof,
"Termination Costs" means all costs and expenses incurred directly or indirectly
by TD to downsize its business, operations and management as a result of no
longer requiring professional and administrative employees and administrative
infrastructure which, in accordance with the SCC Canada Initial Budget or SCC
Canada Annual Budget in effect prior to such termination, were desirable or
reasonably necessary for TD to provide the Administrative Services to SCC
Canada, calculated as if such professional and administrative employees had been
employees of SCC Canada and as if SCC had directly acquired and entered into
commitments for the use and supply of the operating facilities and office space
included in the Administrative Services, and as if such termination costs had,
as a result, been incurred by SCC directly, including, without limitation
employee termination costs, costs and expenses of disposing of equipment and
supplies which are rendered surplus to TD's requirements as a result of such
termination, and break-up costs of terminating contracts with third parties.
Notwithstanding anything to the contrary herein contained, SCC Canada may
hire directly the employees whose services would otherwise be provided to SCC
Canada by TD as part of the Administrative Services, and enter into commitments
directly for such office facilities, equipment and space as would otherwise have
been provided to SCC Canada by TD as part of the Administrative Services
(provided that such hirings and commitments receive such prior approval of the
Board of Directors as is required pursuant to Sections 3.6(a), (e), (f) and (i)
hereof). Those employees, facilities and equipment so contracted for directly by
SCC Canada shall not be included in the Administrative Services.
11 Special Services to be provided to SCC Canada by Sirrom
Sirrom shall provide to the executive officers and management employees of
SCC Canada, commencing immediately upon the execution of this Agreement and in
sufficient time to permit SCC Canada and the Lenders to carry out the Business
Plan within the time period contemplated therein, and on a continuing basis up
to the Termination Date, the following services, information and assistance:
(a) training in and access to information regarding methods of marketing,
investment analysis, reporting and loan and investment monitoring and all
other relevant aspects of the business of making loans similar to the
Secured Loans contemplated herein heretofore, and hereafter carried on by
Sirrom in the United States;
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(b) copies of standard forms of investment agreements relating to its
loans, security therefor and equity investments heretofore made by Sirrom
in the United States, and all forms of documentation generally employed by
Sirrom in giving effect to investments heretofore and hereafter made by
Sirrom in the United States; and
(c) at the request of the executive officers and management employees of
SCC Canada, the services of Sirrom's workout specialist personnel to assist
with the administration and management, where necessary, of deteriorating
or increased risk Secured Loan Investments.
SCC Canada shall reimburse Sirrom, upon request and receipt of appropriate
vouchers therefor, for its reasonable out-of-pocket expenses incurred in
providing the services described in paragraphs (a), (b) and (c) above, and shall
pay Sirrom such reasonable per diem fees for the services provided by Sirrom's
personnel described in paragraph (c) above that Sirrom and SCC Canada may agree
to when such services are requested by SCC Canada management. If any such
payments by SCC Canada are subject to withholding under the Income Tax Act
(Canada) and the Regulations thereunder, such payments to Sirrom shall be made
by SCC Canada net of such withholding.
12 Filing of Certificates and Compliance with Laws
SCC Canada shall cause to be executed and filed such certificates,
instruments and documents as may be required under the laws as may be
appropriate to comply with the requirements of the laws of all jurisdictions
where SCC Canada may carry on business.
ARTICLE 4 - THE INVESTMENT COMMITTEE
1 Establishment of the Investment Committee
The Board of Directors shall establish a loan committee of the Board of
Directors (the "Investment Committee") for the purposes hereinafter set forth.
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2 Appointment of the Investment Committee
(a) The Investment Committee shall consist of three directors of SCC
Canada, two of whom shall be nominees of TD (and such nominees of TD shall
include the President of SCC Canada), and one of whom shall be a nominee of
Sirrom. Until changed by TD, Xxxx Xxxxxxxxx and Xxxx XxxXxxxxx shall be the
Investment Committee nominees of TD, and until changed by Sirrom, Xxxxxx X.
Xxxxxx, XX shall be the Investment Committee nominee of Sirrom.
(b) Should any vacancy occur on the Investment Committee, such vacancy
shall be filled by TD or Sirrom in accordance with paragraph (a) hereof.
Until such vacancy is filled, the Investment Committee shall not transact
any business or exercise any of its powers or functions. If a replacement
representative(s) is not appointed within ten (10) days of such vacancy
occurring, then thereafter the member(s) of the Investment Committee then
in office shall be entitled to transact business and exercise all of the
powers and functions of the Investment Committee and, further, the
unanimous decision of such member(s) then in office shall constitute the
unanimous decision of all members of the Investment Committee until such
time as the said replacement member(s) is properly appointed.
3 Approval of the Investment Committee
Any matter requiring the approval of the Investment Committee pursuant to
this Agreement shall require the unanimous consent and approval of all of the
members of the Investment Committee who are then entitled to attend and vote at
a meeting of the Investment Committee, given at a duly called and constituted
meeting of the Investment Committee, or by written resolution duly signed by all
members of the Investment Committee then in office as provided in Section 4.10
hereof. A matter which has been approved by the Investment Committee as provided
in the immediately preceding sentence shall be deemed to have been "Approved by
the Investment Committee" for the purpose of this Agreement.
Any matter requiring the Approval of the Investment Committee pursuant to
this Agreement which is Approved by the Investment Committee in accordance with
this Agreement shall be binding on SCC Canada.
Notwithstanding any provision herein to the contrary, in addition to the
matters which are specified elsewhere in this Agreement as matters which the
Lenders and/or SCC Canada may not effect or undertake unless Approved by the
Investment Committee, none of the
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following matters shall be effected or implemented by the Lenders or SCC Canada
without the prior Approval of the Investment Committee:
(i) the making of any Secured Loan or Equity Investment;
(ii) the entering into of any Investment Agreements governing a
Secured Loan Investment, or the making of any amendment to any
Investment Agreement;
(iii) the exercise or sale of warrants or any other similar rights
comprising Bonus Equity Interests or Equity Investments;
(iv) the granting of any waivers in respect of any default provided
for in the Investment Agreements governing Secured Loans and
Secured Loan Security;
(v) the manner in which the rights of the Lenders, upon default under
the Investment Agreements governing a Secured Loan and the
Secured Loan Security therefor, or the manner in which the rights
of the Lenders arising at law as a result of the default by the
Investee to whom a Secured Loan has been made, will be exercised
or enforced; or
(vi) the conversion of Secured Loans to equity.
4 Advisors
A member of the Investment Committee shall be entitled to invite advisors
to attend any meeting of the Investment Committee, subject to such restrictions
on their attendance at and their participation in meetings as the Investment
Committee, acting reasonably, may impose.
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5 Investment Committee Meetings Generally
The Investment Committee shall hold meetings when necessary in connection
with such matters as are within the authority of the Investment Committee in
accordance with this Agreement, on such date and at such time as the Investment
Committee may determine, and shall hold such other meetings as the Investment
Committee may decide from time to time.
6 Notice of Investment Committee Meetings
Any chairman of the Investment Committee appointed by a majority of the
members of the Investment Committee then in office, from time to time, shall
give each member of the Investment Committee written notice of the time and
place of each meeting of the Investment Committee and a brief description of
matters to be considered thereat at least five (5) Business Days prior to the
date of the meeting. A notice of a meeting of the Investment Committee shall be
accompanied by an agenda of the matters to be considered at such meeting,
together with any relevant supporting materials that are sufficiently detailed
to inform each member of the matters to be considered thereat. The giving or the
period of notice required to be given hereunder may be waived with the consent
in writing of a member either before or after the particular meeting to which
such waiver relates, and, to the extent permitted by law, the presence in person
or by conference telephone of such member at any meeting of the Investment
Committee shall constitute such member's waiver of any such notice requirement
for such meeting.
7 Conference Telephone Meetings
Any member of the Investment Committee may participate in a meeting of the
Investment Committee by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting are able to
hear each other, and a member participating in a meeting in such manner shall be
deemed to be present in person at the meeting.
8 Location of Meetings
Meetings of the Investment Committee shall be held at the offices of SCC
Canada in Toronto, Ontario or at such other place as may be Approved by the
Investment Committee from time to time.
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9 Quorum
A quorum for a meeting of the Investment Committee shall be all of the
members who are entitled to attend and vote at such meeting.
10 Resolutions in Writing
Any matter within the competence of the Investment Committee that is agreed
or consented to in writing by a member who is entitled to attend and vote at
meetings of the Investment Committee shall constitute the decision of that
member on such matter as if made at a duly constituted meeting of the Investment
Committee.
ARTICLE 5 - INTERESTS OF LENDERS IN
SECURED LOAN INVESTMENTS
1 (a) Secured Loans
The Lenders hereby agree that:
(i) 60% of the aggregate principal amount of the Secured Loans
made by the Lenders to a single Investee shall be made by, and
shall be repayable by the Investee to TD, and 40% of the
aggregate principal amount of Secured Loans made by the Lenders
to a single Investee shall be made by, and shall be repayable by
the Investee to Sirrom (regardless of whether such principal
repayment is made before, after or upon scheduled maturity, or
before or after default, or through a realization on any Secured
Loan Security or other enforcement of the Investment Agreements
governing the Secured Loans made to the Investee or the Secured
Loan Security therefor or otherwise, or as a Loan Recovery
Amount); and
(ii) notwithstanding that an Investee to whom Secured Loans are
made will be required by the relevant Investment Agreements to
pay interest on the aggregate principal amount of the Secured
Loans to such Investee outstanding during a particular period,
calculated at a single rate (the "Investee Rate") for such
period:
(A) the effective rate of interest which TD shall be
entitled to receive on the principal amount of the Secured
Loan made by TD to that
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particular Investee outstanding during such period shall be
the result obtained by multiplying 58/60 by the Investee
Rate; and
(B) the effective rate of interest which Sirrom shall be
entitled to receive on the principal amount of the Secured
Loan made by Sirrom to that particular Investee outstanding
during such relevant period shall be the result obtained
when the amount of interest payable to TD for such period,
calculated as provided in paragraph 5.1(a)(ii)(A), is
subtracted from the total amount of interest payable by the
Investee pursuant to the Investment Agreements on the total
aggregate principal amount of all Secured Loans to that
Investee outstanding during such period, and the result is
divided by the principal amount of the Secured Loan made by
Sirrom to such Investee outstanding during such period.
Each dollar of principal or interest, as the case may be, paid by an
Investee (or out of the assets of an Investee or any other Person) on account of
Secured Loans made to such Investee by the Lenders shall be deemed to be a
payment made to TD and Sirrom, on account of the outstanding principal amount of
their respective Secured Loans, or interest thereon, as the case may be, in the
proportions set forth in paragraphs (i) or (ii) above, as applicable, and shall
be distributed forthwith upon receipt by SCC Canada, if received by SCC Canada
on behalf of the Lenders, to the Lenders accordingly.
(b) Bonus Equity Interests
58% of the Bonus Equity Interests acquired by the Lenders (or by SCC Canada
as agent for the Lenders) in connection with the Secured Loans made by the
Lenders to a particular Investee shall be acquired by TD, and 42% of such Bonus
Equity Interests shall be acquired by Sirrom, and all proceeds of or from such
Bonus Equity Interests (other than proceeds which are Equity Investments, which
are subject to Section 5.1(c)), if held or received by SCC Canada as agent of
the Lenders, shall be distributed forthwith upon receipt by SCC Canada to the
Lenders accordingly.
(c) Equity Investments
Notwithstanding that TD shall pay 60% and Sirrom shall pay 40% of the
capital amount ("Invested Capital") paid to acquire Equity Investments in an
Investee:
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(i) TD shall be entitled to receive 58%, and Sirrom shall be entitled
to receive 42%, of the aggregate amount of all dividends and other
distributions (excluding capital distributions) paid on or in respect
of Equity Investments in such Investee;
(ii) TD shall be entitled to receive 60%, and Sirrom shall be entitled
to receive 40%, of all capital distributions paid on or in respect of
Equity Investments in such Investee;
(iii) TD shall be entitled to receive 60%, and Sirrom shall be
entitled to receive 40%, of all proceeds arising from the sale or
other disposition of such Equity Investments, until TD and Sirrom have
received repayment, by way of capital distributions on such Equity
Investments or by way of receipt of proceeds of sale or disposition of
such Equity Investments, of the amount of Invested Capital in such
Investee; and
(iv) TD shall be entitled to receive 58%, and Sirrom shall be entitled
to receive 42%, of the aggregate amount of all proceeds of sale
arising from the sale or other disposition of Equity Investments in
such Investee, after Sirrom and TD have received repayment of the
Invested Capital invested in such Investee as contemplated in
paragraph (iii) above.
2 Loss Payment by Sirrom to TD
(a) Sirrom shall pay to TD, within 30 days following the end of each fiscal
quarter of Sirrom in which Sirrom has realized a loss in accordance with
the requirements of the Internal Revenue Code and determined in accordance
with the Valuation Policy on one or more Secured Loan Investments, an
amount (a "Loan Loss Amount") equal to 2% of the product obtained by
multiplying the aggregate outstanding principal amount of Secured Loans
made by the Lenders to, or capital invested by the Lenders in Equity
Investments in, each Investee in respect of which Sirrom has so realized a
loss by the percentage of the principal amount of Sirrom's Senior Loan to
such Investee, or capital invested in such Investee, in respect of which
Sirrom has so realized a loss.
In the event that in any fiscal quarter of SCC Canada, the Lenders
shall recover payment of the principal amount or capital invested in a
Secured Loan Investment which has been previously accounted for as a Loan
Loss Amount in accordance with the preceding paragraph (the aggregate
amount of such recovered payments to the Lenders, less the costs of
recovery thereof, being herein referred to as "Loan Recovery Amounts"), TD
shall pay to Sirrom, within 30 days following the end of the fiscal quarter
of SCC Canada in which the Lenders receive such Loan Recovery Amounts, an
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amount equal to 2% of the aggregate of the Loan Recovery Amounts received
by the Lenders in such quarter.
(b) Sirrom shall pay to TD, within 30 days following the end of each fiscal
quarter of SCC Canada, an amount equal to 2% of the losses of SCC Canada
for such quarter, determined in accordance with GAAP.
3 Processing Fee
The Lenders confirm that all Processing Fees shall be paid to SCC Canada,
for its own account, and shall not form part of the Secured Loan Proceeds or
proceeds from Bonus Equity Interests payable to the Lenders pursuant hereto.
4 Investment Servicing Fee
In order to defray expenses of SCC Canada, each Lender shall pay to SCC
Canada in accordance with the SCC Canada Initial Budget or the SCC Canada Annual
Budget in effect from time to time a monthly fee equal to, for each month, 1/12
of 1% of the Carrying Value of: (i) Secured Loans made by such Lender; and (ii)
the Bonus Equity Interests and Equity Investments owned by such Lender under
administration or serviced by SCC Canada during such month (or in such other
amount as is approved by the Board of Directors in accordance with Section
3.6(g)) (the "Investment Servicing Fee"). The Investment Servicing Fee shall be
renegotiated annually, taking into account expenses of SCC Canada.
5 Payments Generally
If any payments to any party contemplated hereunder are subject to
withholding pursuant to the Income Tax Act (Canada) or Regulation thereunder, or
any similar applicable laws, such payments shall be subject to and made net of
such withholding.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
1 Representations and Warranties
In consideration of and to induce the other Lender to enter into this
Agreement, each Lender represents and warrants to and in favour of the other
Lender as follows:
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(a) CORPORATE EXISTENCE, GOOD STANDING, AUTHORIZED AND ISSUED CAPITAL. Such
Lender is a corporation duly and validly incorporated and organized, and is
validly existing in good standing under the laws of its jurisdiction of
incorporation and it has the necessary power to own its property and to
carry on the business to be carried on by it (including the business of
making Secured Loan Investments contemplated herein) in every jurisdiction
in which it holds property or carries on business (or in which this
Agreement contemplates it will carry on business).
(b) COMPLIANCE WITH LAW. Such Lender is and has been conducting its
business in compliance in all material respects with all applicable laws,
rules, regulations and policies (including, without limitation, securities
laws, regulations and policies) of each jurisdiction in which its business
is carried on.
(c) CORPORATE POWER. Such Lender has the full power, authority and legal
right to execute and deliver this Agreement and to perform the terms and
provisions of this Agreement on its part to be performed, and to make
Secured Loan Investments as contemplated herein.
(d) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly executed
and delivered by such Lender and constitutes a legal, valid and binding
obligation of such Lender, enforceable against it in accordance with the
terms of such documents, subject to the effect of:
(i) any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally; and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(e) CONFLICT WITH OTHER INSTRUMENTS. The execution and delivery by such
Lender of this Agreement, and the performance by it of its obligations
thereunder and compliance with the terms, conditions and provisions
thereof, will not, as applicable:
(i) conflict with or result in a breach of any of the terms,
conditions or provisions of (A) its charter documents or by-laws; (B)
any law, rule or regulation having the force of law; (C) any
indenture, mortgage, lease,
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agreement or instrument binding or affecting it or its properties; or
(D) any judgment, injunction, determination or award which is binding
on it or its properties; or
(ii) result in, require or permit (A) the imposition of any security
interest, lien, charge or claim in or with respect to the properties
now owned or hereafter acquired by it; or (B) the acceleration of or
the maturity of any debt under any indenture, mortgage, lease,
agreement or instrument binding or affecting it or its properties.
(f) APPROVALS AND CONSENTS. No authorization, consent, approval, licence or
exemption under any law, rule or regulation of any governmental authority
or other Person is required by such Lender which has not been obtained in
connection with the execution and delivery by it of, and the performance by
it of its obligations under this Agreement, or in order for such Lender to
make Secured Loan Investments as contemplated herein. Such Lender holds all
Material Authorizations.
(g) SOLVENCY. Such Lender has not committed an act of bankruptcy, proposed
a compromise or arrangement to its creditors generally, had any petition
for a receiving order in bankruptcy filed against it, taken any proceeding
to have itself declared bankrupt or wound up or taken any proceeding to
have a receiver appointed of any part of its assets.
(h) ADEQUATE COMMITTED RESOURCES. Such Lender currently has sufficient
financial resources to make the maximum amount of Secured Loan Investments
that this Agreement contemplates will be made by such Lender (subject to
the terms and provisions hereof).
(i) NO RESTRICTIVE AGREEMENTS. Such Lender is not a party to or aware of
any agreement, written or oral, express or implied that restricts the
ability, legal right or authority of such Lender to perform its obligations
under this Agreement or to make Secured Loan Investments as contemplated
herein.
(j) NO LITIGATION. There are no actions, suits or proceedings pending,
taken or, to the knowledge of such Lender, threatened before or by any
domestic or foreign court or tribunal or governmental agency or other
regulatory or administrative agency or commission or by an elected or
appointed public official or private person in Canada or
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elsewhere, whether or not having the force of law which seeks to rescind,
vary or terminate any Material Authorizations of the Lender or which may
materially adversely affect such Lender or its properties or its ability to
perform its obligations hereunder or to make Secured Loan Investments as
contemplated herein.
(k) PUBLIC INFORMATION. All continuous disclosure materials and information
(including financial information), prospectuses, offering documents and
related documentation (collectively, "Disclosure Filings") heretofore filed
by such Lender under the securities laws of the provinces of Canada or of
the United States, as the case may be, and the regulations, rules, policies
and/or orders made thereunder (collectively, the "Securities Laws"), fully
complied, at the time of the filing thereof as aforesaid, with all
applicable requirements of the Securities Laws and, since the time of the
filing thereof, there has been no material change (actual, contemplated or
threatened) in or affecting the business, prospects, affairs, management,
operations, assets, liabilities (contingent or otherwise), capital or
ownership of such Lender, which change is or may be of such a nature as to
render the current Disclosure Filings of such Lender untrue, inaccurate,
incomplete or misleading in any material respect.
2 Survival of Representations and Warranties
The representations and warranties contained herein shall continue in full
force and effect until the later of January 17, 2002 and the Termination Date.
ARTICLE 7 - TRANSFER OF INTERESTS
1 Prohibition Against Transfers and Encumbrances
Except as expressly permitted in this Agreement, a Lender shall not,
without the prior written consent of the other Lender (which consent may be
unreasonably withheld), sell, transfer, assign, convey or otherwise dispose of,
or encumber or pledge or otherwise charge or create a security interest in, its
rights under this Agreement or of its interests in any Secured Loan Investments,
except, on no less than ten (10) days' prior written notice to the other Lender,
and subject to the following provisions of this Section 7.1, to a Permitted
Transferee of such Lender. No such transfer by a Lender to a Permitted
Transferee of such Lender shall release the transferor from its obligations
hereunder, unless the other Lender otherwise agrees. Any such Permitted
Transferee shall be required to execute an assumption agreement in form
satisfactory to the other parties hereto, pursuant to which such Permitted
Transferee agrees to be bound by the provisions hereof as if the Permitted
Transferee had been an original party hereto to the same extent as the
transferor. If a Lender effects a transfer of its rights and obligations under
this agreement to a transferee who is not a Permitted
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Transferee with the prior written consent of the other Lender, upon such
transfer being completed in accordance with any requirements imposed by the
other Lender as a condition of such Lender's consent to such transfer, the
transferor shall be released from its obligations hereunder.
ARTICLE 8 - ACKNOWLEDGMENT REGARDING
ACTIVITIES OF TD AND SIRROM
1 Non-Competition
(a) Subject to the provisions of this Section 8.1, TD hereby covenants and
agrees with Sirrom that: (i) it will not carry on or be engaged in a
Competitive Business within Canada or the United States, at any time prior
to the Termination Date, and (ii) that it will not, in Canada, for a period
of 18 months from the Termination Date, acquire or establish a separate
business division whose principal business is a Competitive Business
(provided that TD shall be subject to the restriction in this subparagraph
(ii) only if the Termination Date has occurred as a result of TD giving a
Termination Notice pursuant to Section 9.1), and (iii) that it will not,
for a period of 18 months from the Termination Date carry on or be engaged
in a Competitive Business within the United States.
The parties acknowledge that TD is a full service financial institution
which carries on the business of commercial banking at branches throughout
Canada through which commercial loans (for which TD may receive
consideration including warrants or similar entitlements) have heretofore
been, and shall hereafter be, made in the ordinary course of business, and
that such ordinary course branch business will not be affected by this
Agreement. The parties agree and confirm that TD shall not be in breach of
the covenant provided for in this paragraph 8.1(a) if at any time one or
more commercial loans having attributes similar to Secured Loan Investments
are made or extended through one or more branches if such commercial loan
is made in the ordinary course of TD's branch business as hereafter carried
on. TD covenants and agrees that it will not advise its branches of the
particulars of the business model, in substantially its entirety, applied
by Sirrom in carrying on its business, as disclosed by Sirrom to SCC Canada
or its representatives, provided that the foregoing shall not prevent TD
from advising its branches of the general investment criteria applicable to
appropriate Secured Loan Investments for the Lenders.
For greater certainty, the parties further acknowledge and agree that TD
shall not be in breach of the covenant provided for in this paragraph
8.1(a) if it acquires a business whose principal business is a business
which is not a Competitive Business, provided
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that the principal business of such acquired business owned by TD continues
not to be a Competitive Business carried on: (i) in Canada or the United
States, up to the Termination Date, or (ii) in the United States, for 18
months from the Termination Date, or (iii) in Canada, for 18 months from
the Termination Date (provided that the restriction in this subparagraph
(iii) shall only apply if the Termination Date has occurred as a result of
TD giving a Termination Notice pursuant to Section 9.1.)
(b) Subject to the provisions of this Section 8.1, Sirrom hereby covenants
and agrees with TD that it will not carry on or be engaged in a Competitive
Business within Canada at any time prior to the Termination Date and for a
period of 18 months thereafter.
(c) For the purposes of this Section 8.1, "carrying on a Competitive
Business" in a specified jurisdiction means carrying on a Competitive
Business with borrowers whose principal place of business is located in the
specified jurisdiction.
ARTICLE 9 - TERMINATION
1 Termination
Either TD or Sirrom shall be entitled, at any time following the execution
and delivery of this Agreement, to deliver a notice in writing to the other of
them (a "Termination Notice") stating that the party delivering such notice
wishes to terminate the arrangements provided for herein as of the date (the
"Termination Date") specified in the Termination Notice, which Termination Date
shall be no less than 90 days from the date the Termination Notice is given to
the recipient thereof pursuant hereto. In the event that a Termination Notice is
given by one Lender to the other pursuant hereto, the following provisions shall
apply:
(a) TD and Sirrom shall have no further obligation to make new Secured Loan
Investments pursuant hereto following the date the Termination Notice is
given, other than those which have been Approved by the Investment
Committee, and previously approved by TD and Sirrom, individually, prior to
such date; and
(b) this Agreement will continue to apply to all existing Secured Loans,
Bonus Equity Interests and Equity Investments held by the Lenders on or
after the Termination Date, until all such Secured Loan Investments have
been liquidated.
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For greater certainty, following the Termination Date, SCC Canada shall
continue to administer existing Secured Loan Investments made by the Lenders in
accordance with this Agreement, until all such Secured Loan Investments have
been liquidated, and all of the provisions of this Agreement regarding the
operations and financing of SCC Canada and the administration and management of
Secured Loan Investments shall continue, including the obligations of the
Lenders under Article 3 hereof.
Following the Termination Date, the Lenders agree to cause the name of SCC
Canada to be changed to a name which does not contain the words "SCC Canada",
and TD agrees that it shall not, thereafter, carry on business using the name
"SCC Canada".
ARTICLE 10 - INDEMNITY
1 Indemnity
Sirrom hereby indemnifies and saves harmless TD, SCC Canada, and their
respective directors and officers (each, an "Indemnitee") from and against any
and all claims, demands, actions, suits, losses, costs, charges, expenses,
damages and liabilities whatsoever which the Indemnitees or any of them may pay,
sustain, suffer or incur by reason of or in connection with any legal
requirement applicable to the Indemnitees or any one of them relating to the
obligation of TD or SCC Canada to withhold or deduct from any payment made to
Sirrom (including, without limitation, payments made as a remittance of
principal or interest on Secured Loans, or of Secured Loan Proceeds, or as
distributions on or proceeds from Bonus Equity Interests or Equity Investments)
any amount on account of any Taxes (as hereinafter defined). For these purposes,
"Taxes" means all taxes of any kind or nature whatsoever, including without
limitation, income taxes, sales or value-added taxes, levies, stamp taxes,
royalties, duties and all fees, deductions, compulsory loans and withholdings
imposed, collected, withheld or assessed at any time, by any Governmental Body
of or within Canada or any other jurisdiction whatsoever having the power to
tax, together with penalties, fines, additions to tax and interest thereon.
ARTICLE 11 - GENERAL CONTRACT PROVISIONS
1 Notices
All notices, requests, demands or other communications by the terms hereof
required or permitted to be given by one party to another shall be given in
writing by courier delivery or by facsimile transaction sent to the other
parties to the address or telecopy number indicated below follows:
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(a) to TD and SCC Canada at: Xxxxx 000
Xxxxxxx-Xxxxxxxx Xxxxx
Xxxxxxx-Xxxxxxxx Xxxxxx
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx XxxXxxxxx or
Xxxx Xxxxxxxxx
Telecopy: (000) 000-0000
(b) to Sirrom at: 000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx
X.X.X.
00000
Attention: Xxxxxx X. Xxxxxx, XX or
Xxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
or at such other address or telecopy number as may be given by any of them to
the others in writing from time to time, and such notices, requests, demands,
acceptances and other communications shall be deemed to have been received when
delivered (if sent by courier delivery) or upon receipt of electronic
confirmation of successful transmission (if sent by facsimile transmission).
2 Further Assurances
Each of the parties shall from time to time and at all times, do such
further acts and deliver all such further assurances, deeds and documents as
shall be reasonably required in order to fully perform and carry out the terms
of this Agreement.
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3 Execution
This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original and such counterparts together shall
be considered one and the same instrument, and notwithstanding the date of
execution thereof, shall be deemed to be executed on the date indicated below.
In addition, a facsimile copy of a signed copy of this Agreement shall be deemed
an original.
IN WITNESS WHEREOF this Agreement has been duly executed and delivered by
the parties hereto this 17th day of January, 1997.
SIGNED, SEALED AND DELIVERED ) SIRROM CAPITAL CORPORATION
in the presence of: )
)
Per:______________________________
)
)
)
Per:______________________________
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) THE TORONTO-DOMINION BANK
)
)
Per:______________________________
)
)
)
Per:______________________________
)
)
) SCC CANADA INC.
)
)
Per:______________________________
)
)
)
Per:______________________________
)
)
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SCHEDULE "3.9"
1. For the purposes of this Schedule 3.9, the following words and phrases
shall have the following meanings:
(a) "CALCULATION PERIOD" has the meaning given thereto in Section 3.9
hereof.
(b) "COST OF CAPITAL" for any period means the result obtained by
(i) multiplying the average of the aggregate principal balance of all
Secured Loans outstanding and capital invested in Equity
Investments on each day of such period by TD's average daily cost
of funds for such period; and
(ii) multiplying the product calculated pursuant to subparagraph (i)
by the number of days in such period.
(c) "LOSS AMOUNT" for any period means, for each Secured Loan Investment in
an Investee in respect of which Sirrom has realized a loss in accordance
with the requirements of the U.S. Internal Revenue Code and in accordance
with the Valuation Policy in such period, the product obtained by
multiplying the aggregate outstanding principal amount of Secured Loans
made by the Lenders to, or capital invested by the Lenders in Equity
Investments or Bonus Equity Investments in, such Investee, by the
percentage of the principal amount of Sirrom's Secured Loan to such
Investee, or capital invested in such Investee, in respect of which Sirrom
has so realized a loss.
(d) "LOSS RECOVERY AMOUNT" for any period means a payment received by the
Lenders of the principal amount of a Secured Loan to such Investee or
capital invested in an Equity Investment made in such Investee which, in
either case, has been previously accounted for in the calculation of
Project Profit for any period as a Loss Amount.
(e) "NET SALE PROCEEDS" means the amount, of all cash proceeds of a sale or
other disposition of all or a portion of a Secured Loan Investment, after
payment of the expenses thereof, received by the Lenders.
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(f) "PROJECT OUTLAYS" for any period means the aggregate of the following
amounts:
(i) all expenses of SCC Canada (including any amounts paid to TD or
Sirrom pursuant to Section 3.10 and 3.11) for such period;
(ii) the Cost of Capital for such period; and
(iii) the aggregate Loss Amount for all Secured Loan Investments for
such period.
(g) "PROJECT LOSS" for any period means the amount, if any, by which all
Project Outlays for such period exceeds all Project Receipts for such
period.
(h) "PROJECT PROFIT" for any period means the amount, if any, by which all
Project Receipts for such period exceeds all Project Outlays for such
period.
(i) "PROJECT RECEIPTS" for any period means the aggregate of the following
amounts, without duplication:
(i) all cash interest on Secured Loans received by the Lenders in
such period;
(ii) all cash distributions and dividends on Bonus Equity Interests
(other than capital distributions) received by the Lenders in
such period;
(iii) all cash distributions and dividends (other than capital
distributions) on Equity Investments received by the Lenders in
such period;
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(iv) all Net Sale Proceeds arising from the sale or disposition of
Bonus Equity Interests received by the Lenders in such period in
excess of the Invested Capital, if any, in such Bonus Equity
Investments;
(v) all Net Sale Proceeds arising from the disposition of Equity
Investments received by the Lenders in such period in excess of
the Invested Capital in such Equity Investments;
(vi) all Processing Fees and all other cash receipts, excluding
Investment Servicing Fees, received by SCC Canada in such
period; and
(vii) all Loss Recovery Amounts received by the Lenders during such
period.
2. The Management Incentive Fee for each Calculation Period, for the purposes
of Section 3.9 of all of the Agreement, unless and until changed by the
Board of Directors in accordance with Section 3.6(f) of the Agreement,
shall be equal to 15% of Project Profit, calculated over such Calculation
Period, provided that notwithstanding the foregoing, for the purposes of
this calculation, Project Profit in any Calculation Period shall be reduced
by the Project Loss in any prior periods not previously deducted from
Project Profit for the purpose of calculating the Management Incentive Fee
hereunder.
3
