EXHIBIT 4.1
Execution Copy
LOAN AGREEMENT
THIS AGREEMENT is made this 23rd day of November, 2004.
BETWEEN:
CLEARLY CANADIAN BEVERAGE CORPORATION, a corporation amalgamated under
the laws of the Province of British Columbia
(the "Borrower")
- and -
GLOBAL (GMPC) HOLDINGS INC., a corporation incorporated under the laws
of the Province of Ontario
(the "Lender")
WHEREAS the Borrower has requested that the Lender establish the loan
facilities described herein, the proceeds of which will be utilized by the
Borrower for the purposes set forth herein.
AND WHEREAS pursuant to a conditional offer of finance dated November 2,
2004 the Lender has agreed to lend to the Borrower and the Borrower has agreed
to borrow from the Lender the principal amount of $1,500,000 (the "Loan"), to be
advanced in two tranches, on the terms and conditions set out herein.
NOW THEREFORE WITNESSETH that in consideration of the Loan made available
by the Lender to the Borrower, the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereto covenant and agree to and in favour of the Lender as follows:
1.0 Definitions
In this Agreement:
(a) "Affiliate" shall have the meaning ascribed to it in the Business
Corporations Act (Ontario);
(b) "Blue Mountain" means Blue Mountain Springs Ltd., an Ontario corporation,
wholly-owned by the Borrower;
(c) "Bonus Shares" means collectively, the First Advance Bonus Shares and the
Second Advance Bonus Shares;
(d) "Business" means, collectively, the business carried on by the Borrower and
the Material Subsidiaries;
(e) "Business Day" means a day which is not a Saturday, Sunday or any statutory
holiday in the Province of Ontario;
(f) "Capco" means CAPCO Financial Company, a division of Greater Bay Bank N.A.;
(g) "CAPCO Facility" means the US$1,000,000 operating line of credit
established by CAPCO in favour of CCB (US), as amended from time to time,
together with all security granted thereunder;
(h) "CCB(US)" means CC Beverage (U.S.) Corporation, a Washington corporation
wholly-owned by the Borrower;
(i) "Collingwood Property" means the land located in the Township of Osprey, in
the County of Grey owned by Blue Mountain, as more particularly described
in Schedule "B" hereto;
(j) "Collingwood Property Mortgage" means the first charge security mortgage in
the principal amount of $800,000 registered against the Collingwood
Property in the names of Xxxxxxxx XxXxxxx and Xxxxx-Xxxx Dudart-XxXxxxx;
(k) "Convertible Debentures" means the $670,000 principal amount of secured
convertible debentures issued by the Borrower pursuant to the Convertible
Debenture Trust Indenture;
(l) "Convertible Debenture Trust Indenture" means the trust indenture dated
December 2, 2002 as amended by a supplemental trust indenture dated
December 1, 2003 between the Borrower and Pacific Corporate Trust Company,
under which the Borrower has issued the Convertible Debentures and granted
a security interest in all of its present and after-acquired personal
property;
(m) "Criterion" means Criterion Capital Corporation, a British Columbia
corporation wholly-owned by Xxxxxxx Xxxxx;
(n) "Debt" of any person means all indebtedness of such person for borrowed
money, including borrowings of commodities, bankers' acceptances, letters
of credit or letters of guarantee;
(o) "Default" means any event or circumstance, the occurrence or non-occurrence
of which would, with the giving of a notice, lapse of time or combination
thereof, constitute an Event of Default;
(p) "Environmental Law" means any and all applicable international, federal,
provincial, state, municipal or local laws, statutes, regulations,
treaties, orders, judgements, decrees and/or ordinances whether or not
having the force of law and all applicable official directives and
authorizations of any Governmental Authority relating to any contaminant,
the environment, public health, occupational health and safety, product
liability or any Environmental activity;
(q) "Exchange" means the Toronto Stock Exchange;
(r) "Financial Statements" means: (i) the audited consolidated financial
statements of the Borrower for the period ending December 31, 2003
consisting of the audited balance sheets; the consolidated statements of
change in shareholders' equity, the consolidated statements of operations
and the consolidated statement of cash flows; and (ii) the unaudited
interim consolidated financial statements of the Borrower for the
nine-month period ended September 30, 2004 consisting of the interim
unaudited consolidated balance sheets, the consolidated statements of
operation, and the consolidated statements of cash flows, in each case
together with notes to the consolidated financial statements;
(s) "First Advance" means the first advance of the Loan in the principal amount
of $1,000,000 to be advanced by the Lender to the Borrower upon
satisfaction or waiver of the conditions precedent set forth in Section 10
below;
2.
(t) "First Advance Bonus Shares" has the meaning ascribed to such term in
Section 6 below;
(u) "Formosa Property" means the land located in the Village of Formosa,
Ontario owned by the Borrower, as more particularly described in Schedule
"B" hereto;
(v) "GAAP" means generally accepted accounting principles in Canada (without
regard to any rules or principles relating to differential accounting) that
are issued by the Canadian Institute of Chartered Accountants and any
successor body in effect from time to time, applied on a consistent basis;
(w) "Governmental Authority" means any nation, federal government, province,
state, municipality or other political subdivision of any of the foregoing,
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions;
(x) "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of
pollutants or contaminants (including, without limitation, materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under
any Laws (including, without limitation, any that are or become classified
as hazardous or toxic under any Laws);
(y) "Laws" shall mean all statutes, codes, ordinances, decrees, rules,
regulations, customs, treaties, municipal by-laws, judicial or arbitral or
administrative or ministerial or departmental or regulatory judgments,
orders, decisions, rulings or awards, directives, customs, policies or
guidelines whether or not having the force of law, or any provisions of the
foregoing;
(z) "Lien" means any mortgage, charge, pledge, right of set-off, title
retention, hypothec, security interest, lien, assignment, claim or other
encumbrance of any nature or kind whatsoever, whether fixed or floating,
statutory or consensual, and howsoever created;
(aa) "Loan Documents" shall mean this Agreement and any and all documents
ancillary to this Agreement, including, without limitation, those documents
or instruments entered into in respect of the Security;
(bb) "Management Credit Facility" means the amended credit facility in the
aggregate amount of $394,030 among the Borrower, as borrower, and Criterion
and Xxxxxx Xxxxxxxxx, as lenders;
(cc) "Material Subsidiaries" means, collectively, Blue Mountain and CCB (US);
(dd) "Management Private Placement" means the proposed private placement equity
financing pursuant to which the Borrower will issue to certain officers and
directors of the Borrower and other persons up to 1,500,000 Common Shares
at a price of $0.25 per share which financing is expected to be completed
by December 31, 2004;
(ee) "Outstanding Balance" has the meaning ascribed to such term in Subsection
4(a) hereto;
(ff) "Permitted Encumbrance" means in respect of any person, any one or more of
the following:
3.
(i) inchoate or statutory priorities, liens or trust claims for taxes,
assessments and other governmental charges or levies which are not
delinquent or the validity of which are currently being contested in
good faith by appropriate proceedings provided that there shall have
been set aside a reserve to the extent required by GAAP in an amount
which is reasonably adequate with respect thereto;
(ii) the right reserved to, or vested in, any municipality or governmental
authority by the terms of any lease, license, franchise, grant, or
permit, or by any statutory provision, to terminate any such lease,
license, franchise, grant or permit, or to require annual or periodic
payment as a condition of the continuance thereof;
(iii)inchoate or statutory liens of contractors, subcontractors, mechanics,
suppliers, material men and others in respect of construction,
maintenance, repair or operation of assets or properties of the
person, or other like possessory liens and public utility liens
provided the same are not registered as encumbrances against the title
to any real or personal property of the person;
(iv) security given to a public utility or other governmental authority or
other public authority when required by such utility or governmental
authority in connection with the operations of the person in the
ordinary course of business;
(v) title defects which are of a minor nature and in the aggregate will
not materially impair the value or use of this property for the
purposes for which it is held or applicable municipal and other
governmental restrictions, including municipal by-laws and regulations
affecting the use of land or the nature of any structures which may be
erected thereon, provided such restrictions have been complied with;
(vi) reservations, limitations, provisos and conditions, if any, expressed
in any original grants from the Crown of any real property or any
interest therein and the easements, rights-of-way, servitudes and
similar rights in real property comprised in the assets of the person
or interests therein granted or reserved to other persons;
(vii) the Security (as defined below);
(viii) personal property security interests securing purchase money
security obligations, provided that such security interests charge
only the assets which are subject of the purchase money security
obligations (and the proceeds thereof to the extent permitted by
applicable law) and no other assets, and security interests arising
under capitalized lease obligations, including security interests
registered in favour of Telecom Leasing Canada (TLC) Limited;
(ix) lien and charge on accounts receivable and inventories of CCB(US) in
favour of CAPCO, as security for CAPCO Facility;
(x) the Collingwood Property Mortgage; and
(xi) the security interest granted pursuant to the trust indenture dated
December 2, 2002, as amended by a supplemental trust indenture dated
4.
December 1, 2003, between the Borrower and Pacific Corporate Trust
Company, securing the Convertible Debentures;
(gg) "Person" means an individual, partnership, corporation, trustee, trust,
unincorporated organisation, non-share capital corporation, or any federal,
provincial or municipal governmental body, corporation, commission, board,
agency, foundation, association, counsel or other governmental authority of
any kind whatsoever, or any other entity whatsoever;
(hh) "Promissory Note" has the meaning ascribed to such term in Section 3
hereto;
(ii) "Quest" means Quest Capital Corp., a British Columbia corporation;
(jj) "Quest Credit Facility" means the loan agreement dated March 4, 2004, as
amended on March 19, April 6 and September 20, 2004, between Quest, as
lender, and the Borrower, as borrower;
(kk) "Quest Debt" means any and all amounts due from the Borrower to Quest
pursuant to the Quest Credit Facility which, as at the date hereof,
equalled $664,747.38;
(ll) "Second Advance" means the second advance of the Loan in the principal
amount of $500,000, to be advanced by the Lender to the Borrower upon the
satisfaction or waiver of the conditions precedent set forth in Section 11
hereto;
(mm) "Second Advance Bonus Shares" has the meaning ascribed to such term in
Section 6 hereto;
(nn) "Security" means the security granted by the Borrower in favour of the
Lender, as more particularly described in Section 9 hereto; and
(oo) "Subordinated Convertible Debentures" means the aggregate $345,000
principal amount of Convertible Debentures issued by the Borrower in favour
of Criterion (as to $290,000), Xxxxxx Xxxx (as to $35,000) and Xxxxx Xxxxxx
(as to $20,000), each of which will be subordinated to the Lender's
Security.
1.1 Headings
The division of this Agreement into Articles and Sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The term "this Agreement",
refers to this Agreement in its entirety and not to any particular Article,
Section or other portion of this Agreement and includes any agreement
supplemental to this Agreement. Unless otherwise indicated, references in this
Agreement to Articles and Sections are to Articles and Sections of this
Agreement.
1.2 Currency
Unless otherwise specified in this Agreement, all references to dollar amounts
(without further description) shall mean Canadian Dollars and all payments shall
be made in Canadian Dollars.
1.3 Conflicts
In the event of a conflict or inconsistency between the application of any of
the provisions of this Agreement and the application of any of the provisions of
any of the other Loan Documents, the provisions giving the Lender greater rights
or remedies shall govern (to the maximum extent permitted by Applicable Law), it
5.
being understood that the purpose of this Agreement and any other Loan Document
is to add to, and not detract from, the rights granted to the Lender under the
Loan Documents.
2. Use of Proceeds
The proceeds of the Loan shall be used by the Borrower solely for the following
purposes: (i) in respect of the First Advance to repay the Quest Debt and for
general corporate working capital purposes; and (ii) in respect of the Second
Advance for general corporate working capital purposes.
3. Loan Advances
The Lender shall advance the Loan to the Borrower by way of wire transfer that
shall be paid by the Lender to the Borrower, or in a manner as the Borrower may
otherwise direct. The Loan shall be evidenced by a promissory note (the
"Promissory Note") issued in favour of the Lender in the original principal
amount in respect of the applicable advance, substantially in the form of
Schedule "A" attached hereto, dated as of the date of the applicable advance,
executed by the Borrower. The Loan shall be payable in accordance with the terms
of the Promissory Note, this Agreement and any applicable Loan Agreement.
4. Term and Mandatory Repayment
(a) Except as otherwise provided herein, any outstanding balance of the
Loan, including all principal, accrued interest, fees, bonuses and
other costs or charges payable hereunder (collectively the
"Outstanding Balance"), will be immediately due and payable by the
Borrower to the Lender on the earlier of: (i) one (1) year from the
date hereof; and (ii) the occurrence of an Event of Default, as
defined in Section 16 hereto.
(b) If after the advance of the Loan and prior to repayment in full of the
Outstanding Balance, the Borrower (i) sells or otherwise disposes of
any assets or (ii) closes one or more equity or debt financing
(excluding the Management Private Placement) each of which financing
raises gross proceeds in excess of $1,000,000, the Borrower will pay
or cause to be paid to the Lender all proceeds from such sale,
disposition or financing, net of reasonable selling or financing
costs, as the case may be, up to the full amount of the Outstanding
Balance, to be applied on account of the Loan.
5. Rate of Interest
Interest will accrue on the Outstanding Balance from the date of advance of the
Loan both before and after maturity, default and judgment, at a fixed rate of
interest of Twelve Percent (12%) per annum, calculated and compounded monthly
(effective annual rate of 12.68%) and shall be payable on the last Business Day
of every month after the advance of the Loan, as well as after maturity, default
and judgment.
6. Bonus Shares
As additional consideration for the advance of the Loan, the Borrower will pay
to the Lender a non-refundable bonus in the form of 600,000 Common Shares in the
capital of the Borrower (the "First Advance Bonus Shares") in respect of the
First Advance and a non-refundable bonus in the form of 220,000 Common Shares in
the capital of the Borrower (the "Second Advance Bonus Shares") in respect of
the Second Advance (the First Advance Bonus Shares and the Second Advance Bonus
Shares shall be referred to herein collectively, as the "Bonus Shares"). Subject
to Exchange approval, all of the First Advance Bonus Shares will be issued and
6.
delivered to the Lender concurrently with the First Advance of the Loan,
registered in the name of the Lender or as the Lender may otherwise direct and
all of the Second Advance Bonus Shares will be issued and delivered to the
Lender concurrently with the Second Advance of the Loan, registered in the name
of the Lender or as the Lender may otherwise direct. The Bonus Shares will be
subject to a four (4) month hold period from the date of issue under applicable
securities laws and the rules and policies of the Exchange and all certificates
representing such shares shall bear a legend to that effect, in accordance with
Multilateral Instrument 45-102.
7. Prepayment
Prepayment in whole or in part of the Loan may be made by the Borrower without
penalty at any time following the date of the advance of the Loan.
8. Fees and Lender's Expenses
The following non-refundable fees and expenses shall be payable by the Borrower
to the Lender:
(a) Structuring Fee: A structuring fee equal to two percent (2%) of the
First Advance and two percent (2%) of the Second Advance shall be due
and payable by the Borrower to the Lender concurrently with closing of
the First Advance and the Second Advance, respectively.
(b) Lender's Legal Fees: The Borrower will pay for the Lender's legal fees
and other costs, charges and expenses (including due diligence
expenses) of and incidental to the preparation, execution and
completion of this Agreement and the Security as may be required by
the Lender to complete the transactions contemplated herein and has
paid to the Lender a retainer in the amount of $16,500 and irrevocably
authorizes and directs the Lender to hold back from each advance of
the Loan such amounts as may be necessary to cover the Lender's legal
fees and other costs, charges and expenses payable hereunder. Any
amounts in excess of the retainer and any amounts held back from the
advances of the Loan will be payable by the Borrower within 30 days of
presentment of an invoice. If not paid within that time, such amount
will be added to and form part of the principal amount of the Loan and
shall accrue interest from such date as if it had been advanced by the
Lender to the Borrower hereunder.
9. Security
As security for the Loan the Borrower will:
(a) execute and deliver to the Lender a Promissory Note in respect of each
advance of the Loan;
(b) execute and deliver to the lender a general security agreement under
which the Borrower will grant to and in favour of the Lender a first
security interest over all of its present and after-acquired personal
property, subject only to Permitted Encumbrances;
(c) execute and deliver to the Lender an assignment of all trademarks and
other intellectual property of the Borrower;
(d) cause each of the Material Subsidiaries to execute and deliver to the
Lender a guarantee under which it will guarantee all indebtedness of
the Borrower to the Lender hereunder;
7.
(e) cause each of the Material Subsidiaries to execute and deliver to the
Lender a general security agreement under which it will grant to and
in favour of the Lender a first security interest over all of its
present and after-acquired personal property, subject only to
Permitted Encumbrances;
(f) cause the holders of the Subordinated Convertible Debentures to
execute and deliver to the Lender a subordination and postponement
agreement under which each holder of the Subordinated Convertible
Debentures will agree to subordinate and postpone in favour of the
Lender their security and all amounts payable to them under the
Subordinated Convertible Debentures;
(g) cause the principals of the Management Credit Facility to execute and
deliver to the Lender a subordination and postponement agreement under
which they will agree to subordinate and postpone in favour of the
Lender their security and all amounts payable to them under the
Management Credit Facility;
(h) execute, register and deliver to the Lender a title-insured first
mortgage over the Formosa Property and cause the Lender to be named as
first "loss payee" on all property insurance policies held by the
Borrower in respect of the Formosa Property;
(i) cause Blue Mountain to execute, register and deliver to the Lender a
title-insured second mortgage over the Collingwood Property (subject
only to the Collingwood Property Mortgage) and cause the Lender to be
named as first "loss payee" on all property insurance policies held by
the Borrower in respect thereto;
(j) cause Xxxxxxx X. Xxxxx to execute and deliver to the Lender a limited
personal guarantee under which he will guarantee the indebtedness of
the Borrower to the Lender under the Second Advance;
(k) cause Criterion to execute and deliver to the Lender a limited
guarantee under which it will guarantee the indebtedness of the
Borrower to the Lender under the Second Advance; and
(l) cause Criterion to execute and deliver to the Lender under the Second
Advance a general security agreement under which it will grant to and
in favour of the Lender a first security interest over all of its
present and after-acquired personal property.
all in form and on terms satisfactory to the Lender and its counsel acting
reasonably (collectively, the "Security").
10. Conditions Precedent to the First Advance
The Lender shall not be obligated to advance the First Advance unless and until
the following conditions have been fulfilled to the Lender's sole satisfaction:
(a) any security interest held by Quest granted by the Borrower (or any
Material Subsidiary or Affiliate of the Borrower) to such party in
respect of the Quest Debt shall either: (i) have been fully discharged
and such discharges shall be registered on all applicable personal
property and real property registers; or (ii) the Borrower shall have
received an irrevocable authority (which shall include all required
executed but unregistered discharges) from Quest in respect of
effecting such discharges concurrently with the Borrower's repayment
in full of the Quest Debt, and Quest shall execute a release and
termination agreement, in form and on terms satisfactory to the
8.
Lender, releasing the Borrower (and any Material Subsidiary or
Affiliate of the Borrower, as applicable) from any and all liability
associated with the Quest Debt and terminating all loan documents in
connection therewith;
(b) all security interests and other charges over the property and assets
of the Borrower and other parties referred to herein, other than
Permitted Encumbrances, shall have been (i) discharged or (ii) fully
subordinated and postponed in favour of the Lender's Security;
(c) the representations and warranties of the Borrower contained in
Section 12 will be true and correct in all material respects and the
Borrower will have complied with all covenants and agreements set
forth herein required to be complied with by it prior to the advance
of the Loan by the Lender;
(d) no Event of Default shall have occurred and be continuing or shall
occur as a result of the transactions contemplated by this Agreement;
(e) the Borrower will have:
(i) executed and delivered or caused to be executed and delivered, as
the case may be, all Security and other documents and instruments
referred to in Subsections 9(a) to 9(h) inclusive, including
title and other insurance policies, and will have completed all
registrations and other filings that may be prudent or necessary
to perfect the Lender's security therein;
(ii) received all necessary approvals of the Exchange to the
completion of the transactions contemplated herein, including the
issuance of the Bonus Shares;
(iii)obtained a special resolution pursuant to the Convertible
Debenture Trust Indenture to permit the subordination of the
Subordinated Convertible Debentures;
(iv) delivered a certified copy of its directors' resolutions
authorizing the borrowing of the Loan and the execution and
delivery of this Agreement and all agreements, documents and
instruments referred to herein, together with an officer's
certificate, certifying certain factual matters, in form and on
terms satisfactory to the Lender; and
(v) caused to be executed and delivered legal opinions of Borrower's
counsel, in form and on terms satisfactory to the lender and its
legal counsel both acting reasonably;
(f) the Lender will have:
(i) completed and, in its sole and absolute discretion, be satisfied
with its due diligence review of the Borrower, the other parties
referred to herein and their respective assets, properties and
undertakings; and
(ii)received the approval of its board of directors and will in its
sole and absolute discretion, be satisfied as to the
creditworthiness of the Borrower and the other parties referred
to herein and the adequacy of the Security.
9.
11. Conditions Precedent to the Second Advance
The Lender shall not be obligated to advance the Second Advance unless and until
the following conditions have been fulfilled to the Lender's sole satisfaction:
(a) the Borrower will have confirmed and the Lender will be satisfied that
an Event of Default has not occurred and will not occur as a result of
the payment by the Lender of the Second Advance;
(b) the Borrower shall deliver a certificate certifying that all of the
Borrower's representations and warranties contained in Section 12 will
be true, complete, accurate and correct in all material respects and
that the Borrower will have complied with all covenants and agreements
set forth herein required to be complied with by it prior to the
advance of the Loan by the Lender;
(c) all security interests and other charges over the property and assets
of the Borrower and the other parties referred to herein, other than
Permitted Encumbrances, shall have been (i) discharged or (ii) fully
subordinated and postponed in favour of the Lender's Security;
(d) the Borrower will have either:
(i)
A. executed and delivered or caused to be executed and delivered, as
the case may be, all Security and other documents and instruments
referred to in Subsections 9(a) to 9(i) inclusive, including
title and other insurance policies, and will have complete all
registrations and other filings that may be prudent or necessary
to perfect the Lender's security therein;
B. produced, to the satisfaction of the Lender, a third party
valuation report (which report shall be prepared at the expense
of the Borrower) on the water source located on the Collingwood
Property in which a minimum value of $1,500,000 is concluded; and
C. caused to be executed and delivered legal opinions of Borrower's
counsel, in form and terms satisfactory to the Lender and its
counsel both acting reasonably; or
(ii)
A. executed and delivered or caused to be executed and delivered, as
the case may be, all Security and other documents and instruments
referred to in Subsections 9(a) to 9(l) inclusive, including
title and other insurance policies, and will have complete all
registrations and other filings that may be prudent or necessary
to perfect the Lender's security therein; and
B. caused to be executed and delivered legal opinions of Borrower's
counsel, in form and terms satisfactory to the Lender and its
counsel both acting reasonably; and
10.
(e) the Lender will:
(i) have completed and, in its sole and absolute discretion, be
satisfied with its due diligence review of the Borrower, the
other parties referred to herein and their respective assets,
properties and undertakings; and
(ii) in its sole discretion, be satisfied as to the creditworthiness
of the Borrower and the other parties referred to herein and the
adequacy of the Security.
12. Representations and Warranties
The Borrower makes the following representations and warranties to the Lender,
and acknowledges and confirms that the Lender is relying upon such
representations and warranties:
(a) the Borrower is a company incorporated and amalgamated under the
Company Act (British Columbia) and is now governed by the Business
Corporations Act (British Columbia) and has not discontinued or been
dissolved under such act and is in good standing with respect to the
filing of annual reports with the Registrar of Companies office;
(b) CCB(US) is a company incorporated under the laws of the State of
Washington and has not discontinued or been dissolved and is in good
standing with respect to the filing of annual reports therein;
(c) Blue Mountain is a company incorporated under the Business
Corporations Act (Ontario) is in good standing and has not been
discontinued or dissolved;
(d) the Material Subsidiaries are the only material subsidiaries of the
Corporation;
(e) each of the Borrower and the Material Subsidiaries has the power and
authority to (i) carry on its businesses as now being conducted and is
licensed or registered or otherwise qualified in all jurisdictions
where in the nature of its assets or the business transacted makes
such licensing, registration or qualification necessary, (ii) acquire,
own, hold, lease and mortgage or grant security in its assets
including real property and personal property and (iii) enter into and
perform its obligations under this Agreement and all other documents
or instruments delivered hereunder or thereunder;
(f) this Agreement, the Loan Documents and all ancillary instruments or
documents issued, executed and delivered hereunder or thereunder by
the Borrower or any Material Subsidiary have been duly authorized by
all necessary action of the Borrower and each Material Subsidiary, as
applicable, and each constitutes or will constitute a legal, valid and
binding obligation of the Borrower and each Material Subsidiary, as
applicable, enforceable against it in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights and remedies of
creditors and to the general principles of equity;
(g) none of the Borrower or any of the Material Subsidiaries is in breach
of or in default under any obligation in respect of borrowed money;
(h) the execution and delivery by the Borrower of this Agreement and each
of the Loan Documents and the performance by it of its obligations
hereunder or thereunder in compliance with such provisions do not and
will not: (i) conflict with or result in a breach of any of the terms,
11.
conditions or provisions of: (A) its constating or organizational
documents, by-laws or shareholders' agreement, if any; (B) any Law
applicable to it or its property and assets; (C) any contractual
provision, including, without limitation any material contract,
binding on or affecting them or any of their respective property and
assets, the breach of which could reasonably be expected to have a
material adverse effect upon the business, assets, condition financial
or otherwise of them, respectively; or (D) any writ, judgment,
injunction, termination or award which is binding on any of them or
any of their respective property and assets; or (ii) result in or
permit: (A) the imposition of any Lien on any of their respective
property and assets, other than in favour of the Lender; or (B) the
acceleration of the maturity of any indebtedness of the Borrower or
any Material Subsidiary;
(i) the execution, delivery of this Agreement and each of the Loan
Documents by the Borrower and the performance by it of its respective
obligations hereunder or thereunder do not require any consent,
approval, order, authorization, licence, exemption or designation of
or by any Governmental Authority except for Exchange approval referred
to in Subsection 10(e)(ii) , filings in connection with the perfection
of the security interest created by the Security and a special
resolution of the holders of the Convertible Debentures under the
Convertible Debenture Trust Indenture;
(j) the Borrower is the legal and beneficial owner of and holds good and
marketable title in fee simple to the Formosa Property, free and clear
of any encumbrances save and except the Permitted Encumbrances;
(k) Blue Mountain is the legal and beneficial owner and holds good and
marketable title in fee simple to the Collingwood Property, free and
clear of any encumbrances save and except the Permitted Encumbrances;
(l) subject only to Permitted Encumbrances, the Security creates a valid
first registered charge, mortgage, lien and security interest over the
property and assets of the Borrower and the Material Subsidiaries
which have been granted on their respective properties and assets in
accordance with the terms thereof;
(m) there are no outstanding work orders, deficiency notices, remedial or
removal orders or other similar compliance orders from any
Governmental Authority relating to any leased premises or the
operations of the Borrower's or Material Subsidiary's respective
businesses and the Borrower and the Material Subsidiaries will not
permit any work orders, deficiency notices, remedial or removal orders
or other similar compliance orders in the future;
(n) the Financial Statements provided by the Borrower have been prepared
in accordance with GAAP and present fairly in all material respects,
the financial position of the Borrower, on a consolidated basis, as at
such date, including, without limitation, all contingent liabilities;
(o) as at the date of this Agreement, except as disclosed in the Financial
Statements or Schedule "C" hereto, no holder of outstanding shares in
the capital of the Borrower will be entitled to any pre-emptive or any
similar rights to subscribe for any of the shares in the capital of
the Borrower or other securities of the Borrower, and no rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for any shares in the capital of the Borrower are
outstanding;
12.
(p) subject to the Permitted Encumbrances, the Borrower owns its business,
operations and assets, and holds good title thereto, free and clear of
all liens, claims or encumbrances whatsoever;
(q) the Borrower and the Material Subsidiaries own or license all
intellectual property necessary for the conduct of their business as
now conducted, without any conflict known to the Borrower with the
rights of others, and in each case, free from any security interest,
except for Permitted Encumbrances;
(r) to the best of the Borrower's knowledge as at the date of this
Agreement, there are no strikes or other labour disputes against the
Borrower or any of its Material Subsidiaries that are pending or
threatened. All payments due from the Borrower or any of its Material
Subsidiaries on account of workers compensation, social security,
pension plan, employment insurance, employee health plans, social
security and insurance of every kind and employee income tax
deductions and vacation pay have been paid. None of the Borrower or
any of its Material Subsidiaries have any obligations under any
collective-bargaining agreement nor, to the best of their knowledge,
is there any organizing activity involving the Borrower or any of its
Material Subsidiaries by any labour union or group of employees;
(s) all factual information previously or contemporaneously furnished to
the Lender by or on behalf of the Borrower for purposes of or in
connection with this Agreement or any transaction contemplated hereby,
is true and accurate in every material respect and such information is
not incomplete by the omission of any material fact necessary to make
such information not misleading;
(t) each of the Borrower and its Material Subsidiaries is solvent and is
generally able to pay its debts as they come due and will be able to
do so after giving effect to the transactions contemplated in this
Agreement;
(u) other than Permitted Encumbrances and as disclosed in the Financial
Statements or otherwise disclosed to the Lender in writing, none of
the Borrower or any of its Material Subsidiaries has guaranteed the
obligations of any person;
(v) to the best of the Borrower's knowledge, the Borrower is in compliance
in all material respects with the provisions and requirements of all
applicable securities laws, regulations, rules and requirements of any
jurisdiction having authority in relation to the Borrower;
(w) the Borrower is a reporting issuer under the Securities Acts of
British Columbia and Ontario and to the best of the Borrower's
knowledge, is in compliance with its material obligations under those
acts and under the rules, regulations and policies of the Exchange,
and will use reasonable commercial efforts to maintain such status,
without default, from the date hereof until repayment in full of the
Loan to the Lender;
(x) the disclosure contained in the Borrower's annual report on Form 20-F
for the year ending December 31, 2003 prepared in compliance with the
United States Securities Exchange Act of 1934, as amended, fully and
accurately discloses the business, assets and undertaking of the
Borrower and its subsidiaries as at that date and no material changes
have occurred in respect of the information described therein, except
as publicly disclosed by the Borrower;
(y) to the best of the Borrower's knowledge, the Borrower is in
compliance, in all material respects, with its continuous disclosure
obligations under applicable Canadian and United Stated securities
13.
laws and, without limiting the generality of the foregoing, there has
been no material adverse change (actual, contemplated or threatened)
in the property, assets or business of the Borrower since the date of
release of the Financial Statements, other than as publicly disclosed
in writing by the Borrower prior to the date of this Agreement;
(z) except as disclosed in the Financial Statements there is no action or
proceeding outstanding, pending or, to the knowledge of the Borrower
or any Material Subsidiary, threatened against the Borrower or any
Material Subsidiary before any court, administrative agency, tribunal,
arbitrator or Governmental Agency out of the ordinary course of
business which might have a material adverse effect on the properties,
business, prospects or condition of the Borrower or any Material
Subsidiary, or question the validity of this Agreement or any Loan
Document to which the Borrower or any Material Subsidiary is a party
and there are no outstanding judgments, writs of execution, work
orders, injunctions or directives against the Borrower, any Material
Subsidiary or any of their properties or assets;
(aa) the Borrower and the Material Subsidiaries have not withheld from or
failed to disclose to the Lender any information relating to the
financial condition, property, assets, insurance, contractual
relationships, labour relations, Laws, permits, systems, records,
business or prospects of the Borrower or any Material Subsidiary which
could reasonably be expected to be material to the Lender;
13. Environmental Representations, Warranties and Covenants
(a) Representations and Warranties: The Borrower and each Material
Subsidiary represents and warrants that:
(i) the Borrower and each Material Subsidiary operates and will
continue to operate in conformity with all Environmental Laws and
Permits and will ensure its staff is trained as required for such
purposes;
(ii) the businesses of the Borrower and the Material Subsidiaries do
not require it to maintain an environmental emergency response
plan;
(iii)neither the Borrower nor any Material Subsidiary stores,
generates, uses, treats, manufactures, handles or disposes of any
Hazardous Materials on any of its properties other than in
compliance with all Environmental Laws and Permits thereunder, or
has disposed of any Hazardous Materials in a manner contrary to
Environmental Law or any Permit;
(iv) the Borrower and each Material Subsidiary possesses and will
maintain all necessary environmental Permits and other approvals
required by any Governmental Authority as may be necessary for
the conduct of its business;
(v) its assets are and will remain free of environmental damage or
contamination; and
(vi) the Borrower and each Material Subsidiary has no knowledge of,
and has not received any notice of, any pending or threatened
claim, complaint, proceeding, prosecution, investigation or
otherwise against or affecting any of the Borrower or any
Material Subsidiary, or any of its properties, assets or
operations relating to Environmental Laws.
14.
(b) Covenants: The Borrower and each Material Subsidiary covenant and
agree with the Lender that until all amounts owing by the Borrower to
the Lender under this Agreement (including without limitation, all
principal, interest, fees and expenses) have been indefeasibly paid in
full, they will:
(i) advise the Lender immediately upon becoming aware of any
environmental problem relating to the Borrower's or any Material
Subsidiary's business, properties or assets;
(ii) provide the Lender with copies of all communications with
environmental officials, Governmental Authorities and all
environmental studies or assessments prepared for any of the
Borrower or any Material Subsidiary; and
(iii)not install on or under any of their properties, storage tanks
for petroleum products or Hazardous Materials, without the
Lender's prior written consent and only upon full compliance with
all Environmental Laws and the standards and requirements of the
Governmental Authorities having jurisdiction over the Borrower's
or any Material Subsidiary's activities or assets.
14. Positive Covenants of the Borrower
The Borrower covenants and agrees with the Lender that until the full
Outstanding Amount has been indefeasibly paid in full, and except as otherwise
permitted by the prior written consent of the Lender:
(a) the Borrower shall duly and punctually pay to the Lender all amounts
payable by the Borrower hereunder, and in the manner provided herein,
without set-off, abatement or deduction of any kind whatsoever and
shall indemnify and save harmless the Lender from such claims in
respect of any such amounts;
(b) the Borrower shall at all times maintain its corporate existence and
the corporate existence of all the Material Subsidiaries;
(c) the Borrower shall forthwith upon becoming aware of the occurrence of
an Event of Default, provide to the Lender notice of such Event of
Default, whether continuing or otherwise;
(c) the Borrower and each Material Subsidiary shall keep its property,
assets and undertakings free and clear of all Liens (other than
Permitted Encumbrances);
(d) the Borrower and each Material Subsidiary will observe and perform, in
a timely fashion all obligations, covenants, agreements and
undertakings on each of its part required to be observed or performed
under the terms of this Agreement and the Loan Documents;
(e) the Borrower shall, with thirty (30) days of the First Advance,
satisfy the requirement in respect of Security set forth in Section
9(i) hereto;
(f) the Borrower shall pay, on a timely basis and within the prescribed
period of time, all governmental remittances to any Government
Authority as required by Law;
(g) the Borrower shall carry on and conduct its business in a proper and
prudent manner so as not to materially affect its ability to perform
its obligations under this Agreement;
15.
(h) the Borrower and each Material Subsidiary shall at all times renew or
cause to be preserved and renewed all material rights, powers,
permits, consents, privileges, franchises, licences, goodwill and
intellectual property owned by it and necessary for the conduct of its
business and shall at all times comply with all Laws applicable to it;
(i) the Borrower shall promptly provide the Lender with all information
requested by the Lender from time to time concerning its financial
condition and property and shall permit representatives of the Lender
to inspect any of its property and to examine and take extracts from
its financial books, accounts and records including but not limited to
accounts and records stored in computer data banks and computer
software systems, and to discuss its financial condition with its
senior officers and (in the presence of such of it representatives as
it may designate) its auditors;
(j) upon the written request of the Lender, the Borrower shall deliver to
the Lender a certificate executed on its behalf by a senior officer of
the Borrower: (i) stating that no Event of Default has occurred and is
continuing under this Agreement or any Loan Document; or (ii) if any
Event of Default has occurred under this Agreement, or any Loan
Document, specifying the nature and status of all such Events of
Default;
(k) the Borrower shall promptly give written notice to the Lender of: (i)
the commencement of any claim, litigation, proceeding or investigation
against the Borrower or any Material Subsidiaries or any of their
assets which, in the event that a decision is rendered which is
adverse to it, may have an adverse effect on the ability of the
Borrower to repay the Loan or have a material adverse effect on the
business of the Borrower; (ii) or any damage to or destruction of any
of the assets or property of the Borrower or any Material Subsidiaries
which might give rise to a material insurance claim; and (iii) the
occurrence of any Event of Default under this Agreement, the Loan
Documents or any material contract of the Borrower;
(l) the Borrower shall maintain all risks comprehensive insurance coverage
with reputable insurers satisfactory to the Lender in its sole
discretion, and to provide the Lender with evidence of such insurance
satisfactory to it, in amounts and against risks normally insured by
owners of similar businesses (which insurance, at a minimum, shall
cover against risk of loss or damage to property of the Borrower and
each Material Subsidiaries up to its full replacement value, and
including public liability and damage to property of third parties and
business interruption insurance) and the Borrower shall provide
written notice to the Lender within twenty-four (24) hours of any
change to the insurance coverage of the Borrower or any Material
Subsidiary or any change by the Borrower and or any Material
Subsidiary of any of their insurers. The Lender shall be indicated in
all insurance policies, as applicable, as a loss payee and additional
insured, as applicable, and all policies shall contain such clauses as
the Lender requires in its sole discretion, acting reasonably, for the
Lender's protection. In the event of any loss or damage by fire or
other casualty, the insurance proceeds shall be applied, (subject to
any first priority arrangement agreed to by the Lender) at the
Lender's option, which will not be unreasonably withheld, to reduce
the Loan or to replace, restore or repair the damaged or lost asset(s)
to substantially its equivalent condition prior to such fire or
casualty;
(m) at the request of the Lender, the Borrower and each Material
Subsidiary shall forthwith and from time to time execute all security
agreements and documents, which, in the opinion, of the Lender, may be
necessary or advisable to provide the Lender with the rights, powers,
privileges, security, priority position and interests conferred or
intended to be conferred upon it by this Agreement and the Loan
16.
Documents. All such additional documents executed shall be deemed to
form part of the Loan Documents;
(n) the Borrower shall keep proper books of record and account in which
full and correct entry shall be made of all financial transactions,
assets and business of the Borrower in accordance with GAAP;
(o) the Borrower and each Material Subsidiary shall maintain and preserve
all of their respective property and assets in good repair, working
order and condition (reasonable wear and tear excepted) and, from time
to time, make all needed and proper repairs, renewals, replacements,
additions and improvements thereto, so that the business carried on by
the Borrower may be properly and advantageously conducted at all times
in accordance with prudent business practices;
(p) the Borrower shall pay and discharge promptly when due, all taxes,
assessments and other governmental charges or levies imposed upon it
or upon its properties or assets or upon any part thereof, as well as
all claims of any kind (including claims for labour, materials and
supplies) which, if unpaid, would by law become a lien, charge, trust
or other claims upon any such properties or assets, provided however
that the Borrower shall not be required to pay any such tax,
assessment, charge or levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Borrower shall have set aside on
its books the reserve to the extent required by GAAP in an amount
which is reasonably adequate with respect thereto;
(q) the Borrower shall provide to the Lender with prior written notice of
any proposed financing made by or to the Borrower, but excluding the
Management Private Placement;
(r) the Borrower shall forthwith provide to the Lender copies of all
financial statements, both audited and unaudited, as they become
available from time to time; and
(s) the Borrower shall perform and do all such acts and things as are
necessary to perfect and maintain the priority of the security
provided to the Lender pursuant to this Agreement.
15. Negative Covenants
The Borrower covenants and agrees with the Lender that until the full
Outstanding Amount has been indefeasibly paid in full, the Borrower shall not,
without the prior written consent of the Lender:
(a) declare, pay or set aside for payment any dividend unless the
distribution of such dividends has received prior written approval of
the Lender;
(b) enter into a transaction (whether by way of a reorganization,
consolidation, financing, amalgamation, merger, transfer, liquidation,
sale, purchase, assumption of liabilities or obligations, lease or
otherwise), whereby all or a material portion of the undertaking,
property or assets of the Borrower or any of the Material Subsidiaries
would become the property of any other Person or enter into any
transaction whereby the business of any other Person would be
acquired;
(c) other than Permitted Encumbrances, make, give, create or permit or
attempt to make, give or create any mortgage, charge, lien or
encumbrance on the assets of the Borrower or any Material
Subsidiaries;
17.
(d) make any sale of or dispose of any substantial or material part of its
business, assets or undertaking, or shares or assets of any subsidiary
outside of the ordinary course of business;
(e) save and except for purchase money security interests, chattel
mortgages and equipment leases entered into in the ordinary course of
business, borrow or cause any subsidiary to borrow money from any
person other that the Lender without first obtaining and delivering to
the Lender a duly signed assignment and postponement of claim by such
person in favour of the Lender, in form and terms satisfactory to the
Lender;
(f) make loans to any non-arm's length parties or pay out to any
shareholders loans or other indebtedness to non-arm's length parties
other than payment of interest in accordance with the terms of the
Convertible Debentures;
(g) make any repayments of principal under the Management Credit Facility;
(h) from and after the date of this Agreement, whether in respect of the
existing operating line of credit or otherwise, allow the aggregate of
such amounts, together with all other indebtedness of the Borrower and
CCB(US) to CAPCO, to exceed US$1,000,000;
(i) guarantee the obligations of any other person, directly or indirectly;
or
(j) make any capital expenditure in excess of $100,000 which is (i) not in
the ordinary course of business and (ii) attributable to the core
business of the Borrower. In the event the Borrower desires to make
capital expenditures not in the accordance with the foregoing, the
Borrower shall first receive prior written consent of the Lender,
which consent shall not be unreasonably withheld, provided (i) the
Borrower is in full compliance with its obligations under this
Agreement and the Loan Documents, and (ii) the capital expenditure is
made in the ordinary course of business.
16. Events of Default
The occurrence of any of the following shall constitute an "Event of Default"
under this Agreement:
(a) the non-payment when due (whether at stated maturity, upon
acceleration, upon required prepayment or otherwise) of any amounts
owing to the Lender under this Agreement or any other Loan Document
and such non-payment continues for five (5) Business Days;
(b) during the term of the Loan any breach (other than by reason of
non-payment pursuant to Subsection 16(a) hereto) by the Borrower or
any Material Subsidiary, as applicable, of any of their respective
undertakings, covenants, conditions or other obligations set forth in
this Agreement or any of the Loan Documents, which breach is not cured
within five (5) Business Days of the Borrower or the Material
Subsidiary, as applicable, becoming aware of such breach;
(c) if any of the Borrower's representations, warranties or other
statements made or given in this Agreement or any other document
delivered hereunder or in connection with the Loan were at the time
given false or misleading in any material respect;
(d) if the Borrower, either directly or indirectly through any Material
Subsidiary, ceases or threatens to cease to carry on business;
18.
(e) if any order is made or issued by a competent regulatory authority
prohibiting the trading in shares of the Borrower or if the Borrower's
Common Shares are suspended or de-listed from trading, such that the
Borrower's Common Shares cannot be traded through the facilities of
either the Exchange or the TSX Venture Exchange;
(f) if the Borrower or any of its subsidiaries petitions or applies to any
tribunal for the appointment of a trustee, receiver or liquidator or
commences any proceedings under any bankruptcy, insolvency, proposal,
readjustment of debt or liquidation or law of any jurisdiction,
whether now or hereafter in effect;
(g) if any petition or application for appointment of a trustee, receiver
or liquidator is filed, or any proceedings under any bankruptcy,
insolvency, proposal, readjustment of debt, or liquidation law are
commenced, against the Borrower or any of its subsidiaries which is
not opposed in good faith, or an order, judgment or decree is entered
appointing any such trustee, receiver, or liquidator, or approving the
petition in any such proceeding;
(h) if the Borrower or any Material Subsidiary defaults in any obligation
in respect of any material contract or of any indebtedness (or
security granted pursuant thereto), where as a result of such default,
the maturity of such indebtedness is or may be accelerated, or under
any agreement with an equipment financier where as a result of such
default, such equipment financier commences any enforcement action in
respect of its collateral;
(i) if a judgment or order for payment of monies is rendered against the
Borrower or any Material Subsidiary and such judgment or order for
payment of monies is not immediately paid or stayed after it has been
rendered;
(j) the Lender in good faith believes and has commercially reasonable
grounds to believe that the prospect of payment or performance of any
of the Borrower's or Material Subsidiary's obligations is impaired, or
that the property provided as security hereunder in favour of the
Lender is in danger of loss, damage, misuse, seizure or confiscation;
or
(k) if at any time after execution and delivery of this Agreement, any of
the Loan Documents ceases to be in full force and effect or if any of
the Loan Documents is declared by a court or tribunal of competent
jurisdiction to be null and void or the validity, enforceability or
priority thereof is contested by the Borrower or any of the Material
Subsidiaries.
17. Effect of Event of Default
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may: (i) declare that any obligation of the Lender hereunder is
immediately terminated; (ii) declare that the Outstanding Balance is due and
payable whereupon all indebtedness and liability of the Borrower in respect
thereof, together with all other monies and amounts payable hereunder, shall be
immediately due and payable; (iii) retain any amounts which the Borrower may be
entitled to receive as an adjustment of additional interest as a genuine
pre-estimate of liquidated damages; (iv) exercise any right or recourse and
proceed by any action, suit, remedy or proceeding against the Borrower or any
Material Subsidiary authorized or permitted by law or in equity for the recovery
of all indebtedness and liabilities of the Borrower to the Lender hereunder; and
(v) proceed to exercise any and all rights hereunder or under the Loan
Documents. Notwithstanding any other provisions of this Agreement, upon the
occurrence of an Event of Default, the Lender may, at its discretion, send, in
addition to any notice of such default hereunder, a notice of intention to
enforce security pursuant to Section 244 of the Bankruptcy and Insolvency Act
(Canada), or any successor provision, if any, such that the time period under
19.
such notice shall run concurrently with any other notices under the terms of
this Agreement.
No right, power or remedy conferred upon or reserved to the Lender by this
Agreement or any of the other Loan Documents is intended to be exclusive of any
other right, power or remedy, but each and every such right, power and remedy
shall be cumulative and concurrent and shall be in addition to any other right,
power and remedy given hereunder, under any of the other Loan Documents or now
or hereafter existing at law, in equity or by statute. No delay or omission by
the Lender to exercise any right, power or remedy accruing upon the occurrence
of an Event of Default shall exhaust or impair any such right, power or remedy
or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein, and every right, power and remedy given by this Agreement
and the other Loan Documents to the Lender may be exercised from time to time
and as often as may be deemed expedient by the Lender.
Any or all proceeds resulting from the exercise of any or all of the foregoing
remedies shall be applied as set forth in any applicable Loan Document providing
the remedy or remedies exercised; if none is specified, or if the remedy is
provided by this Agreement, then as follows: (i) to the costs and expenses,
including without limitation reasonable legal fees and disbursements incurred by
the Lender in connection with the exercise of its remedies; (ii) to the expenses
of curing the default that has occurred, in the event that the Lender elects, in
its sole discretion, to cure the default that has occurred; (iii) to the payment
of amounts owing by the Borrower under the Loan Documents, including but not
limited to the payment of the principal of and interest on the Outstanding
Balance, in such order of priority as the Lender shall determine in its sole
discretion; and (iv) the remainder, if any, to the Borrower or to any other
person lawfully hereunto entitled.
18. Power of Attorney
The Borrower hereby grants to the Lender and its officers, employees and agents
from time to time, with full power of substitution, its power of attorney, upon
an Event of Default, to do all such acts, matters and things that the Lender may
deem necessary to give effect to this Agreement. This power of attorney is
coupled with an interest and is irrevocable until all obligations of the
Borrower have been indefeasibly paid and satisfied in full.
19. Indemnity
The Borrower and each Material Subsidiary agrees to indemnify and hold the
Lender and its officers, directors, employees, agents and advisors (each, an
"Indemnified Person") harmless from and against any and all suits, actions,
demands, obligations, proceedings, claims, damages, losses, liabilities, costs
and expenses of any kind or nature whatsoever (including any and all reasonable
professional fees and disbursements incurred by the Lender in connection with
the preparation, negotiation and enforcement of this Agreement and any other
Loan Document) which may be instituted, asserted against or incurred by any
Indemnified Person as a result of or arising out of, a loan having been
extended, suspended or terminated under this Agreement, any breach of the
representations, warranties or covenants of the Borrower or any of the Material
Subsidiaries hereunder, any breach or violation of any Laws, the transactions
contemplated hereunder or under any other Loan Documents, any investigation,
litigation or proceeding in connection herewith or any other Loan Document, and
the enforcement, performance, administration, action or inaction by any of the
Indemnified Persons of or under this Agreement or any of the other Loan
Documents, including, without limitation, relating to the operation of the
Borrower's business and any environmental liability (collectively, the
"Indemnified Liabilities"), except to the extent to that any such Indemnified
Liabilities are finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person's gross negligence or wilful
misconduct. No Indemnified Person shall be responsible or liable to any other
20.
party to this Agreement or any other Loan Document, any heir, executor,
administrator, other legal personal representative, successor, assignee or third
party beneficiary of such Person or any other Person asserting claims
derivatively through such party, for indirect, punitive, exemplary or
consequential damages which may be alleged or incurred as a result of or arising
out of any of the above, including, without limitation, credit having been
extended, suspended or terminated under this Agreement or any other Loan
Document, or any of the transactions contemplated under this Agreement or any
other Loan Document. This indemnity is severable and distinct from the remainder
of this Agreement and shall survive any termination of this Agreement for any
reasons whatsoever.
20. Performance of Covenants
If the Borrower or any Material Subsidiary fails to perform any of the covenants
or fulfill any of the conditions contained in this Agreement, the Lender may, in
its discretion, perform any of the covenants or fulfill any condition capable of
being performed by it and, if any such covenant or condition requires the
payment or expenditure of money, it may make such payments or expenditures with
its own funds, but shall be under no obligation to do so; and all sums so
expended or advanced by the Lender shall be immediately due and payable to it by
the Borrower, shall until paid be deemed to be added and form part of the Loan
and shall bear interest payable monthly at the same rate of interest as set
forth herein until paid, and shall be secured by the Loan Documents, but no such
performance or payment shall be deemed to relieve the Borrower from any
occurrence of an Event of Default.
21. Assignment
The Borrower shall not assign or transfer any of its rights and obligations
under this Agreement or the Loan Documents without the prior written consent of
the Lender, which consent may be unreasonably withheld. In the event of any such
assignment, the Borrower and the Material Subsidiaries shall not be relieved of
their rights and obligations under this Agreement and the Loan Documents without
the express written consent of the Lender. This Agreement is saleable,
assignable and transferable by the Lender, and any successor or assign thereof,
in whole or in part, free from any right of set-off or counterclaim or equity,
without any requirement for the consent of the Borrower.
22. Assignment to Pay
Upon receipt of written notice and direction from the Lender, the Borrower
covenants and agrees, net of all applicable withholding taxes, to make all
payments of interest, principal and structuring fees due under this Agreement to
the Lender and any assignee, pro rata in accordance with their respective
proportionate interests in the Loan as set out in such written notice and
direction, absent which all such payments may be made to the Lender.
23. Waiver of Breach
No failure, delay or omission of the Lender in exercising any right or remedy in
respect of non-compliance with any provision of this Agreement or any Loan
Document, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any
such Event of Default. Any waiver by the Lender under this Agreement or any Loan
Document must be in writing and shall be effective only in the specific instance
and for the purpose which it is given and shall not constitute a waiver of any
other rights and remedies of the Lender with respect to any other or future
non-compliance. No single or partial exercise by the Lender of any right or
remedy precludes any other or further exercise thereof, or precludes any other
right of remedy.
21.
24. Interest and Loan Charges Not to Exceed Maximum allowed by Law
In no event shall the aggregate "interest" as that term is defined in Section
347 of the Criminal Code (Canada) received by or payable to the Lender in
connection with the transactions contemplated in this Agreement or the Loan
Documents exceed the effective annual rate of interest on the "credit advanced"
(as defined therein) lawfully permitted under that section. The effective annual
rate of interest shall be determined in accordance with generally accepted
actuarial practices and principles over the term that the principal amount of
the Loan is outstanding and in the event of a dispute, a certificate of a Fellow
of the Canadian Institute of Actuaries is appointed by the Lender will be
conclusive for the purposes of such determination. The parties do not intend
that the aggregate interest payable in connection with the transactions
contemplated hereby will exceed such lawfully permitted rate or amount.
Notwithstanding anything to the contrary herein contained, if the aggregate
interest payable hereunder exceeds such lawfully permitted rate or amount, the
rate and the amount of interest on the principal hereof shall be the maximum
rate and amount permitted by law. If the aggregate interest paid or payable to
the Lender in connection with the transaction contemplated in the Loan Documents
would, if paid to the Lender in the manner contemplated hereby and thereby,
exceed the lawfully permitted rate or amount, then the Lender shall be entitled
to defer the timing of receipt or vary the manner of payment of any interests or
amount paid or payable to the Lender in connection with the transactions
contemplated hereunder or thereunder, or to otherwise vary the terms pursuant to
which or another manner in which interest or any portion thereof or any other
amount shall be paid to the Lender so that such payment will not be in violation
of applicable law (provided that such variation does not adversely affect the
Borrower).
25. Further Assurances
The Borrower and each Material Subsidiary shall execute and deliver to the
Lender such additional documents and shall provide such additional information
as the Lender may reasonably require to carry out the terms of this Agreement
and to be informed of the status and affairs of the Borrower and each Material
Subsidiary.
26. Governing Law
Except where required by British Columbia law as it relates to certain corporate
and securities laws requirements, the validity, interpretation and enforcement
of this Agreement and the Loan Documents shall be governed by and construed in
accordance with, the laws of the Province of Ontario and of Canada applicable
therein. The Borrower and the Lender submit to the jurisdiction of the Courts of
the Province of Ontario and agree to be bound by any suit, action or proceeding
commenced in such Courts and by any order or judgment resulting from such suit,
action or proceeding, but the foregoing will in no way limit the right of the
Lender to commence suites, actions, or proceedings based on this Agreement or
the other Loan Documents in any jurisdiction it deems appropriate.
28. Enurement
This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
29. Amendment
No provision of this Agreement any of the Loan Documents may be changed,
replaced, supplemented, modified or amended other than by an agreement in
writing signed by all of the parties hereto or thereto.
22.
30. Severability
If any provision of this Agreement or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the several provision as may be possible.
31. Survival and Non-Merger
All representations, warranties, covenants and agreements made in this Agreement
or otherwise in writing in connection with this Agreement by the Borrower shall
remain binding notwithstanding the advance of the Loan. The covenant of the
Borrower to pay interest at the rate provided herein shall not merge in any
judgment in respect of any obligation of the Borrower under this Agreement and
any judgment shall bear interest at the same rate.
32. Time of Essence
Time shall be of the essence of this Agreement.
33. Notices
Except as otherwise expressly provided herein, any notice, report or other
communication which may be or is required to be given or made pursuant to this
Agreement shall be in writing and shall be deemed to have been validly served,
if given or hand delivered or sent by facsimile, or other electronic
communication, or three (3) days after deposit in the mail with Canada Post,
with proper first class postage prepaid and addressed to the party to be
notified or to such other address as any party hereto may designate for itself
by like notice, as follows:
(a) if to the Borrower or any of the Material Subsidiaries, at:
Clearly Canadian Beverage Corporation
0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Mr. Xxxxx Xxxxxx
Facsimile: (000) 000-0000
(b) if to the Lender, at:
Global (GMPC) Holdings Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
P.O. Box 2426
Toronto, Ontario
M4P 1E4
Attention: Xx. Xxxxx Xxxxx
Facsimile: (000) 000-0000
23.
34. Counterparts
This Agreement may be executed in any number of counterparts, including by
facsimile transmissions, each of which shall be deemed to be an original,
including those sent by facsimile transmissions, and which together shall
constitute one and the same agreement.
[The remainder of this page has been intentionally left blank.]
24.
IN WITNESS WHEREOF the parties hereto have hereunto duly executed this
Agreement as of the day and year first above written.
CLEARLY CANADIAN BEVERAGE CORPORATION
"signed"
-----------------------------------------------
Name:
Title:
GLOBAL (GMPC) HOLDINGS INC.
"signed"
-----------------------------------------------
Name:
Title:
25.
SCHEDULE "A"
------------
PROMISSORY NOTE
---------------
Principal Amount: $[ ]
For value received, CLEARLY CANADIAN BEVERAGE CORPORATION (the "Borrower")
hereby promises to pay to GLOBAL (GMPC) HOLDINGS INC. (the "Lender") the
principal sum of [ ] CANADIAN DOLLARS (Cdn.$[ ]) (the "Principal Amount") on the
earlier of: (i) [ ], 2005; and (ii) the occurrence of an Event of Default,
together with interest accruing on the outstanding principal amount from the
date hereof at a rate of TWELVE PERCENT (12%) per annum, compounded monthly
(effective rate of 12.68% per annum), before and after each of maturity, default
and judgment, payable monthly on the last Business Day of every month. All
payments under this promissory note will be made by certified cheque, bank draft
or wire transfer (pursuant to wire transfer instructions provided by the Lender
from time to time) and delivered to the Lender at Xxxxx 0000, 0000 Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxx X0X 0X0. All payments made by the Borrower will be applied to
principal, interest, bonus and any other costs or charges owed to the Lender, as
the Lender may determine, in its absolute discretion.
If after the advance of the Loan and prior to repayment in full of the
Outstanding Balance, the Borrower (i) sells or otherwise disposes of any assets
or (ii) closes one or more equity or debt financing (excluding the Management
Private Placement) each of which financing raises gross proceeds in excess of
$1,000,000, the Borrower will pay or cause to be paid to the Lender all proceeds
from such sale, disposition or financing, net of reasonable selling or financing
costs, as the case may be, up to the full amount of the Outstanding Balance, to
be applied on account of the Loan.
The undersigned is entitled to prepay this promissory note, in whole or in part,
without notice or penalty. The undersigned waives demand and presentment for
payment, notice of non-payment, protest, notice of protest and notice of
dishonour. This promissory note will be governed by and construed in accordance
with the laws of the Province of Ontario and the federal laws of Canada
applicable therein. In this promissory note, "Business Day" means a day which is
not a Saturday, Sunday or a statutory holiday in the Province of Ontario.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to such terms in the loan agreement dated November [],
2004 between the Borrower and the Lender.
Dated: November [ ], 2004.
CLEARLY CANADIAN BEVERAGE CORPORATION
Per:
-------------------------------------------
Authorized Signatory
SCHEDULE "B"
------------
PROPERTIES
----------
1. Formosa Property
In the Village of Formosa, in the Township of Culross, in the County of Xxxxx
and being composed of:
FIRSTLY: Lot Number 17 in the said Village of Formosa, according to Registered
Plan Number 282.
SECONDLY: Lot Number 18, in the said Village of Formosa, according to Registered
Plan Number 282, SAVE AND EXCEPT from said Lot number 18 the Southerly 197 feet
of said Lot Number 18, more particularly described as follows:
COMMENCING at the South-east angle of said Lot number 18;
THENCE Northerly along the Easterly limit of said Lot, a distance of 197 feet;
THENCE Westerly parallel to the Southern limit of said Lot, a distance of 466.62
feet more or less to the Westerly limit of said Lot;
THENCE Southerly along the Westerly limit of said Lot, a distance of 197 feet;
THENCE Easterly along the Southerly limit of said Lot, a distance of 466.62 feet
to the place of beginning.
As previously described in instrument number 239756.
2. Collingwood Property
Part of the West Half of Lot 9, concession 14, in the Township of Osprey, in the
County of Grey and being more particularly described as follows:
COMMENCING at the Northeasterly angle of the West Half of said Lot 9;
HENCE Westerly and along the Northerly limit of the said Lot the distance of 350
feet;
HENCE Southerly and parallel to the Easterly limit of the said Lot the distance
of 500 feet;
HENCE Easterly and parallel to the Northerly limit of the said Lot to the
distance of 350 feet to the dividing line between the West and East Halves of
the said Lot;
HENCE Northerly and along the said dividing line the distance of 500 feet to the
place of beginning.
The aforesaid lands being the same lands at those described in Instrument No.
139825.
SCHEDULE "C"
------------
PRE-EMPTIVE RIGHTS, CONVERTIBLE SECURITIES, ETC.
------------------------------------------------
-------------------------------------------------------------------------------------------------------------
PRIVATE PLACEMENT WARRANTS: Exercise Price
Nov.24/00 - 5 year warrants issued re private placement
(expiring Nov. 24, 2005) $1.10 Cdn 565,000
Dec. 2/02 - 2 year warrants issued re debenture offering
(expiring Dec. 2/04) $0.80 Cdn 837,500
Mar. 4/04 - 2 year warrants issued to Dundee Securities $0.34 Cdn 250,000
-------
(expiring Mar. 4/06) 1,652,500
TOTAL PRIVATE PLACEMENT WARRANTS:
------------------------------------------------------------------------------------------------------------
STOCK OPTIONS: Exercise Price
Employee/Director (expiring: April 4, 2006) $0.65 Cdn 25,169
Employee/Director (expiring: Oct. 29, 2006) $0.65 Cdn 76,234
Employee/Director (expiring: Nov. 4, 2006) $0.65 Cdn 2,488
Employee (expiring Mar. 27, 2007) $0.65 Cdn 588
Employee/Director (expiring Jan. 5, 2008) $0.65 Cdn 134,118
Director (expiring: Sept. 3, 2008) $0.65 Cdn 5,882
Employee/Officer (expiring Dec. 23, 2009) $0.65 Cdn 94,857
Director (expiring Nov. 15, 2010) $1.05 Cdn 25,000
Employee/Director (expiring Feb. 21, 2011) $1.15 Cdn 255,000
Employee (expiring August 23, 2011) $1.35 Cdn 25,000
Director/Officer (expiring May 15, 2012) $1.25 Cdn 370,000
Employee (expiring Sept. 23, 2012) $1.00 Cdn 40,000
Director/Officer (expiring Feb. 11, 2013) $0.70 Cdn 230,000
Employee/Director/Officer (expiring April 29, 2013) $0.65 Cdn 265,000
Consultant (expiring April 29, 2008) $0.65 Cdn 35,000
Employee (expiring September 8, 2013) $0.65 Cdn 10,000
Consultant (expiring April 15, 2006) $0.40 Cdn 100,000
-------
TOTAL STOCK OPTIONS: 1,694,336
------------------------------------------------------------------------------------------------------------
CONVERTIBLE DEBENTURES
Dec.02/02 - 1 year (plus 3 year extension) convertible debenture $0.80 Cdn 837,500
(expiring Dec. 2, 2006)
------------------------------------------------------------------------------------------------------------
