Contract
Exhibit
99.3
RMI/HI
SUPPORT AGREEMENT
THIS
AGREEMENT is dated as of March 10, 2003.
BETWEEN:
RAVELSTON
MANAGEMENT INC., a corporation incorporated under the
laws
of
Ontario
("RMI")
-
and
-
XXXXXXXXX
INC., a corporation incorporated under the laws of Canada
("HI")
RECITALS:
A.
HI
and
RMI have entered into an indenture dated as of March 10, 2003 (the "Indenture")
with Wachovia Trust Company, National Association, as trustee (the "Trustee"),
which provides for the issue by HI of senior secured notes (the
"Notes").
B.
The
Ravelston Corporation Limited ("Ravelston") is the holder, directly or
indirectly, of 78.2% of the issued and outstanding retractable common shares
of
HI. RMI is a wholly-owned direct subsidiary of
Ravelston. RMI has entered into a guarantee of the Notes (the
"Guarantee").
C. RMI
wishes to provide support to HI in connection with the Notes.RMI
wishes to provide support to HI in connection with the Notes.
NOW
THEREFORE, in consideration of the mutual promises herein contained and other
good and valuable consideration, the parties hereto agree as
follows:
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1.
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Definitions. For
the purposes of this Agreement:
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"Agreement"
means this agreement as it may be amended, supplemented, restated or replaced
from time to time; the expressions "hereof", "herein", "hereto", "hereunder",
"hereby" and similar expressions refer to this Agreement as a whole and not
to
any particular article, section, schedule or other portion hereof.
"Capital
Stock" has the meaning assigned to such term in the
Indenture.
"Dividend
Offset Amount" means the excess of any Net Dividend Amount received by
HI and NBI in the relevant fiscal year over U.S.$4,650,000.
"Floor
Amount" means U.S.$14,000,000 in each fiscal year, less (i) the
aggregate amount of management fees paid in cash by HII and its subsidiaries
directly to HI or to its Wholly-Owned Restricted Subsidiaries in such fiscal
year, and (ii) any Dividend Offset Amount in such fiscal year. With
respect to any period that is less than a fiscal
year,
the
Floor Amount shall be calculated pro rata by reference to the number of days
in
such period, computed on the basis of a 360-day year of twelve 30-day
months.
"GAAP"
means generally accepted accounting principles in Canada, consistently applied,
which are in effect on the date of the Indenture.
"HII"
means Xxxxxxxxx International Inc.
"NBI"
means 504468 N.B. Inc.
"Negative
Net Cash Flow" means, for any period, the amount by which:
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(a)
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Net
Income (Loss) plus, without duplication, (i) the amount of all
non-cash items reducing Net Income (Loss), (ii) all amounts deducted
in
the calculation of Net Income (Loss) on account of depreciation
and
amortization, and (iii) all taxes provided for in the calculation
of Net
Income (Loss), less, without duplication, (iv) any non-cash items
increasing Net Income (Loss), (v) all taxes paid in cash during
such
period, (vi) all capital expenditures made in cash during such
period, and
(vii) all dividends (excluding dividends on HI's retractable common
shares) made during such period; all calculated in accordance with
GAAP as
of the last day of any period, is less
than
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(b)
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zero.
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"Net
Dividend Amount" means the net cash dividend amount received by HI and
NBI in the relevant fiscal year on the Class A common shares and Class B
common
shares of HII held by them (including, without limitation, any such shares
pledged as security for the Notes), after deducting (i) any withholding taxes
or
income taxes paid or payable in cash by HI or NBI in respect of such dividends,
and (ii) any dividends received by HI or NBI on such number of shares of
HII
hold by HI or NBI that corresponds to the number of Class A common shares
of HII
into which the Series II preferred shares of HI are exchangeable.
"Net
Income (Loss)" of the Company means, for any period, the unconsolidated
net income (or loss (and treating a loss as a negative number)) of the Company
for such period, adjusted by excluding, without duplication, to the extent
included in calculating such net income (or loss), (i) all extraordinary
gains
and losses, (ii) the net income (or loss) of any Person acquired during the
specified period attributable to any period prior to the date of such
acquisition, (iii) any gain or loss realized upon the termination of any
employee pension benefit plan, (iv) aggregate gains and losses (less all
fees
and expenses relating thereto) in respect of dispositions of assets other
than
in the ordinary course of business (provided that any sale of Capital Stock
of
HII for cash would be considered a disposition in the ordinary course of
business), (v) any gain from the collection of proceeds of life insurance
policies, and (vi) any gain or loss arising from the acquisition of any
securities of the Company, or the extinguishment, under GAAP, of any
Indebtedness of the Company.
"Qualified
Capital Stock" has the meaning assigned to such term in the
Indenture.
"RCL
Repayment Amount" means, for any period, any permanent repayment in
cash of the principal amount of debt owing by Ravelston under the promissory
note made by Ravelston as borrower in favour of HI as lender dated March
10,
2003 received by HI during such period.
"Subordinated
Debt" means unsecured debt expressly subordinated in right of payment
to the Notes.
"Wholly-Owned
Restricted Subsidiaries" has the meaning attributed to such term in the
Indenture.
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2.
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Annual
Support Amount. Each fiscal year, RMI will contribute to HI
an amount (the "Annual Support Amount") equal to (i) the greater
of (A)
Negative Net Cash Flow for that fiscal year and (B) the Floor Amount,
less
(ii) any RCL Repayment Amount made during that fiscal year. The
Annual Support Amount shall be contributed by RMI to HI as either
(i)
subscription for Qualified Capital Stock, (ii) contributions to
capital in
respect of Capital Stock of HI already issued and without the issuance
of
additional Capital Stock of HI to RMI, or (iii) Subordinated Debt,
as
determined by RMI and HI.
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3.
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Payment
of Annual Support Amount. The Annual Support Amount shall
be paid by RMI to HI as follows:
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(a)
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for
the first three quarters of each fiscal year, an amount equal to
(i) the
Negative Net Cash Flow for the preceding quarter, less (ii) any
RCL
Repayment Amount for that preceding quarter, shall be paid by RMI
to HI
within 45 days of the end of each such quarter;
and
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(b)
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for
the last quarter of each fiscal year, an amount equal
to
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(i)
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the
greater of (A) the Negative Net Cash Flow for the fiscal year and
(B) the
Floor Amount,
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(ii)
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less
any RCL Repayment Amount made during the fiscal
year,
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(iii)
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less
the aggregate amount paid during the fiscal year pursuant to section
3(a)
hereof,
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shall
be
paid by RMI to HI (or, if negative, paid by HI to RMI, if permitted by the
Indenture) no later than 90 days after the end of such fiscal year.
For
greater certainty, partial payments of the Annual Support Amount may be made
by
RMI from time to time before the dates specified in this
section. Such partial payments shall be credited towards the amounts
due in this section. With respect to any period that is less than a
fiscal quarter or a fiscal year, the Annual Support Amount to be paid by
RMI to
HI for such period shall be calculated pro rata by reference to the number
of
days in such period, computed on the basis of a 360-day year of twelve 30-day
months.
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4.
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Reports
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(a)
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HI
shall:
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(i)
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for
each of the first three quarters of each fiscal year, calculate
the Net
Income (Loss), the Negative Net Cash Flow and the amount to be
paid by RMI
pursuant to section 3(a) hereof for the preceding fiscal quarter
and,
within 45 days after the end of such quarter, deliver to RMI and
the
Trustee (A) a report for such quarter setting out these amounts,
and (B) a
review on such report by HI's independent auditors;
and
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(ii)
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for
the last quarter of each fiscal year, calculate the Net Income
(Loss), the
Negative Net Cash Flow and the amount to be paid by RMI pursuant
to
section 3(b) hereof for the preceding fiscal year and, within 90
days
after the end of such quarter, deliver to RMI and the Trustee (A)
a report
for such fiscal year setting out these amounts, and (B) an audit
of such
reports by HI's independent
auditors,
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(each
such report, a "Delivered Report"). The amounts set out in each
Delivered Report will be deemed to be the settled amounts for purposes of
the
payments required hereby until such time as determined otherwise pursuant
to
section 4(c) or (d). Any payments or adjustments to payments
previously made required by a resolution under section 4(c) or an award or
determination of an Auditor under section 4(d) will be made forthwith after
the
resolution, award or determination (as applicable).
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(b)
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For
each Delivered Report, if RMI notifies HI that it agrees with the
Delivered Report within 10 days after receiving it or fails to
deliver
notice to HI of its disagreement with the Delivered Report within
that
10-day period, the Delivered Report will be conclusive and binding
on HI
and RMI will be deemed to have agreed to it, in the first case,
on the
date HI receives the notice and, in the second case, on that 10th
day.
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(c)
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If
RMI notifies HI of RMI's disagreement with a Delivered Report within
the
10-day period provided for in section 4(b), then HI and RMI will
attempt,
in good faith, to resolve their differences with respect to it
within 20
days after delivery of the Delivered Report to RMI. Any
disagreement over a Delivered Report not resolved by HI and RMI
within
that 20-day period will be resolved as set out in section
4(d). HI shall provide the Trustee with a copy of any notice of
disagreement received from RMI.
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(d)
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Any
dispute relating to a Delivered Report not resolved within 20 days
after
delivery of the Delivered Report to RMI will be determined by arbitration
under the Arbitration Act, 1991 (Ontario) (the
"Arbitration Act") by a partner of a major accounting
firm in Ontario (the "Auditor") who is independent of HI
and RMI and agreed to by HI and RMI or appointed by a judge of
the
Superior Court of Justice of Ontario, on application of HI or RMI,
on
notice to the other. The application of section 7(2) of the
Arbitration Act is expressly excluded. Subject to section 44 of
the Arbitration Act, any award or determination of the Auditor
will be
final and binding on the parties and there will be no appeal on
any
ground. Any hearing in the course of the determination will be
held in Toronto, Ontario in the English language. All matters
relating to the arbitration will be kept confidential to the full
extent
permitted by law. Despite section 28(1) of the Arbitration Act,
the Auditor will not, without the written consent of HI and RMI,
retain
any expert. The Auditor shall have power to award costs of the
arbitration (including fees of the Auditor) to the losing party
on a
substantial indemnity basis.
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5.
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Termination. This
Agreement shall terminate upon repayment in full of the Notes and
termination or release of the
Guarantee.
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6.
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Waiver. RMI
hereby waives any failure or delay on the part of another party
in
asserting or enforcing any rights or in making any claims or demands
hereunder.
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7.
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Modification,
Amendment and Termination. This Agreement may be modified,
amended or terminated only by the written agreement of all parties
hereto.
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8.
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Third
Party Beneficiary. The parties hereto agree and acknowledge
that the Trustee is a third party beneficiary of this Agreement
(except
for the second sentence of section 2 hereof) and is entering into
the
Indenture in reliance, among other things, upon this
Agreement. The Trustee shall be entitled to enforce against any
party hereto any term or provision of this Agreement (except the
second
sentence of section 2 hereof).
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9.
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Successor. The
Agreement herein set forth shall be binding upon, and enure to
the benefit
of RMI and HI and their respective successors and permitted
assigns.
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10.
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Assignment. The
benefits of this Agreement may not be assigned without the express
written
consent of RMI and HI, other than a pledge of this Agreement by
HI in
favour of the Trustee as security for HI's obligations under the
Indenture. In the event that (i) an Event of Default (as
defined in the Indenture) has occurred and is continuing, and (ii)
the
Trustee has given prior written notice to RMI and HI, RMI shall
pay all
amounts payable by RMI to HI hereunder directly to the Trustee
for the
benefit of the holders of the Notes for such time as such Event
of Default
shall continue.
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11.
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GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
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DATED
as
of the date first set out above.
| RAVELSTON MANAGEMENT INC. | |||
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By:
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/s/Xxxxx X. Xxxxxxxx | |
| Name:Xxxxx X. Xxxxxxxx | |||
| Title: | |||
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XXXXXXXXX
INC.
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By:
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/s/ Xxxxx X. Xxxxxxxx | ||
| Name :Xxxxx X. Xxxxxxxx | |||
| Title | |||
