Exhibit 10.6
CONFIDENTIAL
February 29th, 1996
EXCELLE BRANDS FOOD CORP. ET AL
0000 XXXXXX XXXXX
XXXXXX XX X0X 0X0
Attention: Xx. Xxxxx Xxxxx, President
Dear Sir:
We are pleased to offer EXCELLE BRANDS FOOD CORP. ET AL, hereafter referred
to as "the borrower", a loan of $100,000.00 authorized February 29th, 1996,
on the following terms and conditions:
PROGRAMME AND FINANCING
This loan is to finance the following programme:
PROGRAMME
Working Capital $250,000.00
___________
$250,000.00
FINANCING
Business Development Bank of Canada $100.000.00
Increase in Line of Credit (TD) 150,000.00
__________
$250,000.00
No change in the programme or financing may be made without first obtaining
the Bank's written consent.
TERMS OF REPAYMENT
Principal will be repaid in 1 instalment of $1,000.00 on August 23rd, 1996,
followed by 60 consecutive monthly installments of $1,650.00 each, on the
23rd day of each month commencing on September 23rd, 1996. Interest on the
outstanding principal will also be also paid on the 23rd day of each month,
commencing the month following the first disbursement of the loan. The
interest rate will be 2.500 % above our daily floating base interest rate
which varies automatically and is regularly announced in our offices. The
current daily floating base rate is 9.000% per annum. The Maturity Date of
the Loan is August 23rd, 2001.
It is possible to change from this floating interest rate plan to any
available fixed interest rate plan by providing 30 days written notice.
Payment of the Bank's standard switching fee then in effect is required.
Further details will be provided upon request.
It is also possible to select a fixed rate plan rather than the floating
without a switching fee if we are notified in writing of this intent to do so
by March 10th, 1996.
If the borrower selects a fixed interest rate plan rather than the floating
rate offered, the base interest rate corresponding to the selected interest
rate plan will be the rate that was in effect at the date of authorization of
this loan, provided we are notified in writing of this intent and the
acceptance of this loan by March 10th, 1996. If the acceptance is later than
this date, the base rate will be the base rate for the corresponding plan in
effect at date of acceptance and a switching fee will be payable which is
currently $250.00.
MANAGEMENT FEE
A monthly management fee of $50.00 shall apply to this loan and be payable on
the 23rd of each month beginning in the month following the initial
disbursement and ending when the loan has been fully repaid.
SECURITY PROCESSING FEE
The borrower agrees to pay the Bank's standard loan amendment and security
processing fees then in effect, which are charged for the administrative
handling of the loan documents by the Bank, such as for amending loan terms
and for the provision of discharges of security
The borrower also agrees to pay or reimburse the Bank all applicable returned
cheque handling fees and charges.
PRE-AUTHORIZED PAYMENT SYSTEM
All payments of principal interest and fees will be made under the
Pre-Authorization Payment System. Please complete the enclosed form and
return it with a sample cheque marked VOID.
SECURITY AND LEGAL DOCUMENTATION
This loan is the joint and several obligation of Excelle Brands Food Corp.
and Intercorp Foods Limited, secured by:
1. Loan Agreement.
2. Personal Property Security Agreement providing a first charge upon all
personal property of the Borrower including inventory, book debts,
equipment, subject only to chartered bank priority on inventory and
accounts receivable to support the line of credit.
3. Guarantee of Xxxxx Xxxxx for $50.000 and Xxxxx Xxxxx for $50,000.
4. Assignment of a $112,223 shareholder loan owed to the directors of
Excelle Brands Food and of the $91,558 shareholder loan owed to the
parent company. Interest may be paid at a
rate not exceeding that of the Bank's subject to the BDC loan
remaining in good standing.
The borrower also agrees to provide documentation satisfactory to the Bank
and its solicitors in order to carry out the intent of this agreement.
INSURANCE
The borrower agrees to provide and arrange for the following:
An assignment of appropriate insurance satisfactory to the Bank, on assets to
be charged to the Bank; recording Business Development Bank of Canada as Loss
Payee subject to the Insurer's Mortgage Interest clause.
You will advise your insurance broker/agent to arrange the necessary
insurance or amend existing policies as noted above. The solicitor
instructed to take security on your loan must have evidence that the required
insurance is in force, prior to disbursement of the loan.
It is not necessary to forward copies of your policies or renewals to the
Bank and your insurance broker/agent should be informed accordingly.
However, the Bank reserves the right to examine your policies or require that
certified copies be sent to the Bank at any time.
The borrower is obliged to inform the Bank immediately of any loss or damage
to any assets that are charged to the Bank.
We enclose an insurance authorization form. Would you please address it to
your agent and countersign and return it to our office in order that we may
forward it to your agent.
UNDERLYING CONDITIONS
1. No share dividend shall be paid without the Bank's prior written consent.
2. No loan shall be extended, no investment made, no guarantees given, and
no security pledged, without the Bank's prior written consent. Such
consent not unreasonably withheld.
3. No intercompany transactions, outside of the normal course of business
shall be made without the Bank's prior written consent. Xxx consent not
unreasonably withheld.
4. The Bank wishes to maintain a close relationship with your business and
has therefore designed a programme that requires your cooperation. As
part of the programme, the Bank will contact you four times a year. For
our mutual benefit, the Bank will require prompt provision of the
specified financial information. The Bank will analyze the data and
arrange for 2 semi-annual visits by our counselor at a convenient date to
everyone concerned and 2 quarterly telephone contacts.
5. There shall be no redemption of shares nor dividends paid on any class of
shares.
6. No loans may be extended to, nor investments made in, nor guarantees
provided for a third party without the Bank's prior written consent.
CONTINGENT CONDITIONS
The following contingent conditions will have to be fulfilled to the Bank's
satisfaction prior to any disbursement:
1. An audited financial statement as of January 31, 1996 which shows, at the
Bank's opinion, no material adverse change in the borrower's financial
position since the in-house financial statements dated January 31, 1996.
2. Satisfactory evidence that a financial institution operating credit of at
least $500,000 has been established in your favour with terms and
conditions acceptable to The Bank.
COMMITMENT FEE
The loan will lapse on August 30th, 1996, if after acceptance, the borrower
cancels it or does not provide the Bank with satisfactory documentation or
does not draw upon it, at least in part, by this date. Under any of these
circumstances the borrower will have to pay a commitment fee of $2,350.00
minus $500.00 already paid as processing fee, which will be retained by the
Bank not as a penalty, but as liquidated damages representing a reasonable
estimate of the Bank's damages in such event including, but not limited to,
costs incurred by the Bank, both before and after acceptance of this loan
offer, to process, investigate and approve the application for financing, to
prepare this offer, to instruct our solicitors and to arrange and reserve
funding for the loan.
STANDBY FEE
The borrower will pay a standby fee of 3% per annum calculated daily on that
portion of the loan which on each day starting April 30th, 1996 is not
disbursed by the Bank or is not canceled by the borrower in writing. The
standby fee will be effective from that date and will become due and payable
on the 23rd day of each month commencing May 23rd, 1996.
PREPAYMENT PRIVILEGE
The loan can be prepaid in whole or in part, at any time and without prior
notice. Furthermore the Interest Rate Differential will not apply if, at the
moment of prepayment, the loan outstanding is on a floating operational rate.
However, an Interest Rate Differential will be applicable if, at the moment
of prepayment, the loan outstanding is on a Fixed Interest Rate Plan. This
Interest Differential charge will only apply if, on the date of prepayment.
the Bank's base rate for the "corresponding" Fixed Interest Rate Plan is
lower than the base rate most recent set for the loan being prepaid.
The Interest Differential Rate is the difference between the two rates. The
"corresponding" Fixed Interest Rate Plan is determined by calculating the
number of years, rounded to the nearest year (minimum of one year) remaining
until the next Interest Adjustment Date (or the Maturity Date of the loan if
earlier) on the existing plan. The Interest Differential Rate is multiplied
by the principal that would have been outstanding at the 23rd of each month
until the next Interest Adjustment Date (or the maturity of the loan if
earlier), then the present value is calculated for each amount and
totaled to become the Interest Differential charge. In the case of a partial
prepayment, the Interest Differential charge will be reduced proportionately.
Partial prepayments are applied regressively on the then last maturing
installments of principal.
LEGAL FEES
Payment of all legal charges relative to the preparation, execution and
registration of the security documents are the responsibility of the borrower
and may be paid directly by the Bank from the proceeds of this loan.
INELIGIBLE ACTIVITIES
It is a condition of this loan that the borrower or any person leasing space
from the borrower is not involved in the following activities: businesses
that are sexually exploitive or that are inconsistent with generally accepted
community standards of conduct or propriety, including those that feature
sexually explicit entertainment, products or services; businesses that are
engaged in or associated with illegal activities; businesses trading with
countries that are proscribed by the Federal Government; businesses that
operate as a separate and sole entity nightclubs, bars, lounges, cabarets,
casinos, discotheques and similar operations. If at any time during the
currency of the loan, the borrower or any person leasing space from the
borrower fails to comply with this paragraph, the loan will, at the sole
discretion of the Bank, become immediately due and payable forthwith. The
Bank's finding that there is an ineligible activity shall be final and
binding between the parties and will not be subject to review.
ENVIRONMENTAL CONDITION
The borrower is operating and will continue to operate the business in
conformity with all environmental legislation and neither the borrower nor
the prior owner of the assets has used them in violation of environmental
laws. All future uses of the facilities will be in compliance with relevant
environmental laws and any clean-up measures will be in full compliance with
all applicable laws at the sole costs of the borrower. Any breach of the
foregoing will constitute an event of default.
FINANCIAL STATEMENTS
The borrower will provide the Bank, within 90 days at the end of its year
end, with Annual Consolidated/Audited financial statements of Excelle Brands
Food Corp. /Intercorp Foods Ltd.
The borrower will also provide the Bank, within 30 days at the end of the
period, with Semiannual Combined by Client financial statements of Excelle
Brands Food Corp./Intercorp Foods Ltd.
By accepting this offer of credit, the borrower authorizes the Bank to
contact his auditors, inform them of the above-mentioned requirements and ask
them, on his behalf, to provide the Bank with the statements as soon as they
are completed.
CANCELLATION DATE
The Bank may cancel the undrawn balance of the loan if the borrower has not
drawn the entire loan within 12 months of its authorization date.
DISBURSEMENT
Once the borrower has satisfied all our security requirements, met our
contingent conditions, if any, and utilized the financing obtained from
sources other than the Bank, if applicable, the Bank may disburse funds as
required against documents evidencing programme expenditures.
Unless otherwise authorized, funds will be disbursed "in Trust" to the
solicitors instructed to prepare security for this loan.
Please note that prompt attention to the completion and signing of the legal
documentation will assist in expediting the disbursement of funds.
The Bank may withhold disbursement or any undrawn balance if in the Bank's
opinion a material adverse change in risk occurs before full disbursement.
ACCEPTANCE
This loan offer will become effective upon receipt by the Bank no later than
March 11th, 1996, of your written acceptance by signing the enclosed forms
which cover our Offer of Credit as well as the automatic payment system and
insurance requirements.
Should further information be required, please contact the undersigned at
954-5008.
Yours sincerely,
/s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
Senior Manager loans
Encl.
(subject to amendments attached)**
I/we accept the terms and conditions of the loan as outlined in the letter of
offer dated February 29, 1996.
This loan is the joint and several obligation of Excelle Brands Food Corp.
and Intercorp Foods Limited.
Signed this 5th day of March, 1996
EXCELLE BRANDS FOOD CORP
By: /s/ Xxxxxx Xxxxx
----------------
By: /s/ Xxxxx Xxxxx
-----------------
GUARANTORS
/s/ Xxxxx Xxxxx
----------------
Xxxxx Xxxxx
/s/ Xxxxx Xxxxx
----------------
Xxxxx Xxxxx
Subject: Amendments to Loan dated February 29, 1996
The amendments we require in accepting the terms and conditions of the loan
are as follows:
1) Security and Legal Documentation:
Point #2 to be changed in the last part to read "subject only to
chartered bank priority on inventory, accounts receivable, book debts,
equipment and insurance to support the line of credit".
2) Underlying conditions:
Point #1 and point 6 to be changed to add second line "Such consent not
unreasonably withheld". Also add to Point #6, loans, investments, etc.
outside the "normal course of business".
3) Underlying conditions:
Point #5 to be taken out all together.
Xxxxx Xxxxx
Xxxxx Xxxxx
March 7, 1996
Excelle Brands Food Corp et al
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Attn: Xx. Xxxxx Xxxxx, President
Dear Sir:
Re: A/C #353552-01-1 Toronto Branch
We are pleased to advise vou of the following amendment to the letter of
offer dated February 29, 1996.
SECURITY
Replace:
Personal Property Security Agreement providing a first
charge upon all pers...
By:
Personal Property Security Agreement providing a first charge upon all
personal property of the Borrower including inventory, book debts, equipment,
subject only to chartered bank priority on inventory and accounts receivable,
book debts, equipment and insurance to support the line of credit.
UNDERLYING CONDITIONS
Replace:
No share dividend shall be paid without the
Bank's prior written consent...
By:
No share dividend shall be paid without the Bank's prior written consent.
Such consent will not be unreasonably withheld.
VARIABLE RETURN
Replace:
No loans may be extended to. nor investments made
in, nor guarantees provid...
By:
No loans may be extended to, nor investments made in. nor guarantees provided
for a third party outside the normal course of business without the Bank's
prior written consent. Such consent will not be unreasonably withheld.
Delete:
There shall be no redemption of shares nor dividends paid on any
class of shares.
EXCELLE BRANDS FOOD CORP ET AL
March 7, 1995
Page 2
All other terms and conditions remain the same.
Yours truly,
/s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
Senior Manager Loans
We hereby acknowledge that we have read and understood the above and consent
to and agree to be bound by the said amendment. (Please sign and return one
copy to the writer.)
Signed this ________ day of March 1996.
Excelle Brands Food Corp. Guarantor
Per:
--------------------------------- ------------------------------
Xxxxx Xxxxx
Intercorp Foods Limited
Per:
--------------------------------- ------------------------------
Xxxxx Xxxxx
(Please affix company seal)
