1
EXHIBIT 4.14
CIT BUSINESS CREDIT CANADA INC.
as Agent and Lender
and
STERLING PULP CHEMICALS, LTD.
as Borrower
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FINANCING AGREEMENT
JULY 11, 2001
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TABLE OF CONTENTS
Section 1 Definitions and Interpretation...............................1
Section 2 Conditions Precedent........................................23
Section 3 Revolving Loans.............................................29
Section 4 Term Loan...................................................35
Section 5 Letters of Credit...........................................36
Section 6 Acceptances and Drafts......................................39
Section 7 Representations, Warranties and Covenants...................42
Section 8 Interest, Fees and Expenses.................................61
Section 9 Powers......................................................69
Section 10 Events of Default and Remedies..............................70
Section 11 Termination.................................................76
Section 12 Miscellaneous...............................................76
Section 13 Agreement between the Lenders...............................80
Section 14 Agency......................................................84
EXHIBIT
Exhibit A - Form of Term Loan Promissory Note
Exhibit B - Form of Revolving Loan Promissory Note
SCHEDULES
Schedule 1 - Collateral Information
Schedule 2 - Permitted Liens
Schedule 3 - Leases
Schedule 4 - Owned Properties
Schedule 5 - Litigation
Schedule 6 - Permitted Debt
Schedule 7 - Environmental Liabilities
Schedule 8 - Contravention and Consents
Schedule 9 - Material Agreements
Schedule 10 - Bowater Project Assets
Schedule 11 - Australia Project
(i)
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FINANCING AGREEMENT
CIT BUSINESS CREDIT CANADA INC., a Canada corporation, with offices
located in Toronto, Ontario (hereinafter "CIT"), and CIT as agent for the
lenders (the "AGENT"), and any other party which now or hereafter becomes a
lender hereunder pursuant to Section 13 hereof (individually a "LENDER" and
collectively the "LENDERS") are pleased to confirm the terms and conditions
under which the Agent and the Lenders shall make Revolving Loans, the Term Loan
and other financial accommodations to STERLING PULP CHEMICALS, LTD., an Ontario
corporation with a principal place of business at 000 Xxx Xxxx Xxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx X0X 0X0 (herein the "COMPANY").
SECTION 1 DEFINITIONS AND INTERPRETATION
ACCOUNTS shall mean, with respect to a Person, all now existing and
future: (a) accounts (as defined in the PPSA), and any and all other
receivables (whether or not specifically listed on schedules furnished
to the Agent), including, without limitation, all accounts created by,
or arising from, all sales, leases, rentals of goods or renditions of
services to its customers, including but not limited to, those accounts
arising under any trade names or styles, or through any divisions; (b)
any and all instruments, documents of title, chattel paper (all as
defined in the PPSA) (including electronic chattel paper); (c) unpaid
seller's or lessor's rights (including rescission, replevin,
reclamation, repossession and stoppage in transit) relating to the
foregoing or arising therefrom; (d) rights to any goods represented by
any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in
connection with or pursuant hereto; (f) guarantees, supporting
obligations, intangibles and letter of credit rights (all as defined in
the PPSA); (g) insurance policies or rights relating to any of the
foregoing; (h) intangibles pertaining to any and all of the foregoing
(including all rights to payment, including those arising in connection
with bank and non-bank credit cards), and including books and records
and any electronic media and software thereto; (i) notes, deposits or
property of account debtors securing the obligations of any such
account debtors; and (j) cash and non-cash proceeds (as defined in the
PPSA) of any and all of the foregoing:
ADMINISTRATIVE MANAGEMENT FEE shall mean the fee which shall be paid to
the Agent in accordance with Section 8(8) hereof.
AFFILIATE shall have the meaning ascribed thereto in the Canada
Business Corporations Act.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the
Closing Date, and thereafter shall mean the date occurring one (1) year
from
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the three (3) year anniversary date of the Closing Date, and the same
date in every year thereafter.
APPLICABLE DRAWING FEE means, with respect to each Draft drawn by the
Company and purchased by any Person on any Drawing Date, an amount
equal to (i) with respect to Revolving Loans, 3.5% or (ii) with respect
to the Term Loan, 4%, in each case, of the aggregate Face Amount of the
Draft, calculated on the basis of the term to maturity of the Draft and
a year of 365 days.
AUSTRALIA PROJECT shall mean the project more specifically described on
Schedule 11 with respect to the construction and operation of an
Australian sodium chlorate facility to be built in the Hunter Valley,
New South Wales, Australia and owned by Sterling Australia, which shall
be a wholly-owned subsidiary of the Company, its successors and
assigns, together with all rights relating thereto.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and
Transfer Agreement to be entered into between the Agent and an assignee
pursuant to Section 13.
AVAILABILITY shall mean at any time the amount by which: (a) the
Borrowing Base exceeds (b) the outstanding aggregate amount of all
Obligations, including without limitation, all Obligations with respect
to Revolving Loans (excluding the Letters of Credit) but excluding the
Term Loan.
AVAILABILITY RESERVE shall mean the sum of: (a) (i) two (2) months
rental payments or similar charges for any of the Company's leased
premises or other Collateral locations for which the Company has not
delivered to the Agent a landlord's waiver or subordination in form and
substance reasonably satisfactory to the Agent, plus (ii) two (2)
months estimated payments plus any other fees or charges owing by the
Company to any applicable warehousemen or third party processor (as
determined by the Agent in its reasonable business judgement), provided
that any of the foregoing amounts shall be (x) eliminated from time to
time hereafter upon delivery to the Agent of any such acceptable waiver
or subordination, (y) adjusted or eliminated, as the case may be, from
time to time upon the opening or closing of a Collateral location
and/or (z) adjusted from time to time with respect to any change in the
amount of rental, storage or processor payments or similar charges; (b)
any reserve which the Agent may reasonably require from time to time
pursuant to this
Financing Agreement, including without limitation, for
Letters of Credit pursuant to Section 5(2) hereof; and (c) such other
reserves as the Agent deems necessary in its commercially reasonable
judgment as a result of (x) negative forecasts and/or trends in the
Company's business,
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industry, prospects, profits, operations or financial condition or (y)
other issues, circumstances or facts that could otherwise negatively
impact the Company, its business, prospects, profits, operations,
industry, financial condition or assets.
BA EQUIVALENT NOTE has the meaning specified in Section 6(7).
BA INSTRUMENTS means, collectively, Bankers' Acceptances, Drafts and BA
Equivalent Notes, and, in the singular, any one of them.
BA LOAN shall mean either a Revolving Loan or the Term Loan made in
accordance with the procedures set forth in Section 6.
BANKERS' ACCEPTANCE has the meaning specified in Section 6(1).
BANKRUPTCY COURT shall mean the United States Bankruptcy Court,
Southern District of Texas, Houston Division.
BORROWING BASE shall mean the sum of (a) eighty-five percent (85%) of
the Company's aggregate outstanding Eligible Accounts Receivable, plus
(b) the lesser of (i) sixty-five percent (65%) of the aggregate value
of the Company's Eligible Inventory, valued at the lower of cost or
market, on a first in, first out basis, and (ii) the Inventory Loan
Cap, less (c) the sum of (x) any applicable Availability Reserves and
(y) Priority Accounts Payable.
BOWATER shall mean Bowater Pulp and Paper Canada Inc., its successors
and assigns.
BOWATER PROJECT means the lease and related agreements to be entered
into by the Company with Bowater pursuant to which the Company will
lease from Bowater the chlorine dioxide chemical plant located at
Bowater's Thunder Bay, Ontario, pulp mill and the Company will supply
chlorine dioxide to the Bowater Thunder Bay mill.
BUSINESS DAY shall mean any day on which the Agent and CIBC are open
for business in Xxxxxxx, Xxxxxxx.
CANADIAN DOLLARS AND CDN.$ each means lawful money of Canada.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate
expenditures of the Company during such period on account of, property,
plant, equipment or similar fixed assets that, in conformity with GAAP,
are required to be reflected in the balance sheet of the Company.
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CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities
(other than land) acquired or installed for use in the Company's
business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal
or mixed) which, in conformity with GAAP, is accounted for as a capital
lease or a Capital Expenditure in the balance sheet of the Company.
CHANGE OF CONTROL means the occurrence of any of the following events
with respect to the Company: (i) any Person (or any successor to it
continuing from any amalgamation, merger or other reorganization) other
than the Parent becoming the owner, directly or indirectly,
beneficially or of record, of shares representing (x) a majority or
more of the aggregate ordinary voting power represented by the
outstanding share capital of the Company, or (y) a majority or more of
the votes attached to the Company's securities entitled to vote for the
election of the Company's board of directors, as applicable, (ii) any
sale, lease, exchange or other transfer (in one transaction or series
of related transactions) of all or substantially all of the Company's
property and assets, or (iii) the Company's shareholders approve any
plan or proposal for the liquidation or dissolution of the Company.
CHAPTER 11 PROCEEDINGS means the jointly administered cases pursuant to
the provisions of sections 101 et seq. of Chapter 11 of title 11 of the
United States Commercial Code commenced in the United States Bankruptcy
Court, Southern District of Texas, Houston Division, in which Sterling
Chemicals Holdings Inc. and certain of its U.S. subsidiaries are
debtors and debtors-in-possession.
CIBC shall mean the Canadian Imperial Bank of Commerce and its
successors.
CIBC BANK RATE shall mean, at any time, the rate of interest per annum
announced by CIBC from time to time as its prime rate in effect at its
principal office in Toronto, Ontario as the rate of interest for loans
in Canadian dollars (the prime rate is not intended to be the lowest
rate of interest charged by Canadian Imperial Bank of Commerce to its
borrowers).
CIBC BANK RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon
the CIBC Bank Rate.
CIBC BASE RATE shall mean, at any time, the rate of interest per annum
announced by CIBC from time to time as the reference rate of interest
for loans in U.S. Dollars to its Canadian borrowers.
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CIBC BASE RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon
the CIBC Base Rate.
CLOSING DATE shall mean the date that this
Financing Agreement has been
duly executed by the parties hereto and delivered to the Agent, or such
other date as the parties hereto may mutually agree.
COLLATERAL shall mean all present and future Accounts, Equipment,
Inventory, Documents of Title, General Intangibles, Real Estate, stock
of the Company's subsidiaries and Other Collateral of the Company and
its subsidiaries except for (a) all present and future property and
assets of the Company solely dedicated to the Bowater Project, as set
forth in Schedule 10, and (b) all present and future property and
assets of Sterling Australia; provided, however, that any issued stock
of Sterling Australia and any promissory note issued by Sterling
Australia in favour of the Company shall constitute a part of the
Collateral, subject only to a prior Lien in favour of any financier to
the Australia Project, the priority of which, if so requested, the
Agent for itself and on behalf of the Lenders, agrees to acknowledge in
an agreement in form and content satisfactory to the Agent and its
counsel acting reasonably.
COMMITMENT shall mean each Lender's commitment in accordance with this
Financing Agreement to make Revolving Loans (the "REVOLVING CREDIT
COMMITMENT") and the Term Loan funding (the "TERM LOAN COMMITMENT"), in
the amount of their respective pro rata share set forth in schedules
prepared by the Agent or the Assignment and Transfer Agreement executed
by each such Lender.
CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as
applicable, balance sheet for the Company and the subsidiaries of the
Company (other than Sterling Australia) eliminating all inter-company
transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet
plus individual balance sheets for the Company and the subsidiaries of
the Company (other than Sterling Australia), showing all eliminations
of inter-company transactions, including a balance sheet for the
Company exclusively, all prepared in accordance with GAAP.
COPYRIGHTS shall mean (i) all present and hereafter acquired
copyrights, copyright registrations, recordings, applications, designs,
styles, licenses, marks, prints and labels bearing any of the
foregoing, (ii) goodwill, general intangibles, intellectual property
and rights pertaining thereto, and (iii) all cash and non-cash proceeds
thereof.
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CURRENT ASSETS shall mean those assets of the Company which, in
accordance with GAAP, are classified as current.
CURRENT LIABILITIES shall mean those liabilities of the Company which,
in accordance with GAAP, are classified as "CURRENT", provided however,
that, notwithstanding GAAP, the Revolving Loans and the current portion
of Permitted Debt shall be considered "CURRENT LIABILITIES".
DEBT of any Person means (i) all Debt of such Person for borrowed
money, including borrowings of commodities, bankers' acceptances,
letters of credit or letters of guarantee, (ii) all Debt of such Person
for the deferred purchase price of property or services represented by
a note, bond, debenture or other evidence of Debt, (iii) all Debt
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such
property, (iv) all obligations under leases which have been or should
be, in accordance with GAAP, recorded as capital leases in respect of
which such Person is liable as lessee, (v) all reimbursement or other
obligations of such Person, contingent or otherwise, in respect of
letters of credit, letters of guarantee or the borrowing of any
commodity, (vi) the aggregate amount at which any shares in the capital
of the Person which are retractable at the option of the holder may be
retracted provided all conditions precedent for such retraction have
been met, (vii) all obligations of the Person under any interest rate
cap or collar arrangements or similar arrangements, (viii) all current
liabilities of such Person represented by a note, bond, debenture or
other evidence of Debt, and (ix) Debt of the kinds referred to in (i)
through (viii) above which is directly or indirectly guaranteed by such
Person.
DEFAULT shall mean any event specified in Section 10 hereof, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of: (a) two percent (2%) and
(b) the applicable increment over the CIBC Bank Rate plus the CIBC Bank
Rate, the applicable increment over the CIBC Base Rate plus the CIBC
Base Rate, in each case, as set forth in Section 8(1) hereof, the
applicable increment over the LIBOR Rate (as set forth in Section 8(14)
hereof) plus the LIBOR Rate, and the Applicable Drawing Fee in respect
of a BA Loan, which the Agent shall be entitled to charge the Company
on all Obligations due the Agent on behalf of the Lenders by the
Company, as further set forth in Section 10(2) of this
Financing
Agreement.
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DEPOSITORY ACCOUNTS shall mean the collection accounts, which are
subject to the Agent's instructions, as specified in Section 3(4) of
this
Financing Agreement.
DOCUMENTATION FEE shall mean all amounts necessary to reimburse and
compensate the Agent for the use of the Agent's in-house Legal
Department and facilities and external legal counsel in documenting, in
whole or in part, the initial transaction solely on behalf of the
Agent, exclusive of Out-of-Pocket Expenses, and subsequent to the
Closing Date, the Agent's standard fees relating to any and all
modifications, waivers, releases, amendments or additional collateral
with respect to this
Financing Agreement, the Collateral and/or the
Obligations.
DOCUMENTS OF TITLE shall mean, with respect to a Person, all present
and future documents of title (as defined in the PPSA), and any and all
warehouse receipts, bills of lading, shipping documents, chattel paper,
instruments and similar documents, all whether negotiable or not and
all goods and Inventory relating thereto and all cash and non-cash
proceeds of the foregoing.
DRAFT means, at any time, either a depository xxxx within the meaning
of the Depository Bills and Notes Act, or a xxxx of exchange within the
meaning of the Bills of Exchange Act (Canada), drawn by the Company on
the Agent or a Lender and bearing such distinguishing letters and
numbers as the Agent or a Lender may determine, but which at such time
has not been completed as the payee or accepted by the Agent or a
Lender.
DRAWING means (i) the creation and purchase of Bankers' Acceptances by
the Agent or a Lender pursuant to Section 6, or (ii) the purchase of
completed Drafts by the Agent or Lender pursuant to Section 6.
DRAWING DATE means any Business Day fixed for a Drawing pursuant to
Section 6.
DRAWING PRICE means, in respect of Bankers' Acceptances or Drafts to be
purchased by the Agent or a Lender, the difference between (i) the
result (rounded to the nearest whole cent, with one-half of one cent
being rounded up) obtained by dividing the aggregate Face Amount of the
Bankers' Acceptances or Drafts by the sum of one plus the product of
(x) the Reference Discount Rate multiplied by (y) a fraction the
numerator of which is the number of days in the term of maturity of the
Bankers' Acceptances or Drafts and the denominator of which is 365, and
(ii) the aggregate Applicable Drawing Fee.
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EARLY TERMINATION DATE shall mean the date on which the Company
terminates this Financing Agreement or the Revolving Line of Credit
which date is prior to an Anniversary Date.
EARLY TERMINATION FEE shall: (a) mean the fee the Agent on behalf of
the Lenders is entitled to charge the Company in the event the Company
terminates the Line of Credit or this Financing Agreement on a date
prior to an Anniversary Date; and (b) be determined by multiplying the
Line of Credit by (x) one and one quarter percent (1.25%) if the Early
Termination Date occurs on or before one (1) year from the Closing
Date, (y) one half of one percent (0.5%) if the Early Termination Date
occurs after one (1) year from the Closing Date but on or before two
(2) years from the Closing Date; and (z) one quarter of one percent
(0.25%) if the Early Termination Date occurs after two (2) years from
the Closing Date but prior to an Anniversary Date.
EBITDA shall mean, in any period, all earnings of the Company and its
subsidiaries (other than Sterling Australia) for said period before all
interest, tax, depreciation and amortization obligations of the Company
and its subsidiaries (other than Sterling Australia) for said period,
determined in accordance with GAAP on a consistent basis with the
latest consolidated audited financial statements of the Company and its
subsidiaries, (other than Sterling Australia) but excluding the effect
of extraordinary or non-reoccurring gains or losses for such period.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the
Company's Trade Accounts Receivable that are subject to a valid,
exclusive, first priority and fully perfected security interest in
favour of the Agent, on behalf of the Lenders, which conform to the
warranties contained herein and which, at all times, continue to be
acceptable to the Agent in the exercise of its reasonable business
judgment, less, without duplication, the sum of: (a) any returns,
discounts, claims, credits and allowances of any nature (whether
issued, owing, granted, claimed or outstanding), and (b) reserves for
any such Trade Accounts Receivable that arise from or are subject to or
include: (i) sales to the United States of America, any state or other
governmental entity or to any agency, department or division thereof,
except for any such sales as to which the Company has complied with the
Assignment of Claims Act of 1940 or any other applicable statute, rules
or regulation, or to Canada, any province or other governmental entity,
or any agency, department or division thereof, except for any such
sales in relation to which the Company has complied with any applicable
financial administration legislation as is needed to ensure the Agent
holds a valid and perfected security interest in such account
receivable, to the Agent's satisfaction in the exercise of its
reasonable business judgment; (ii) foreign sales (i.e., sales outside
of Canada or the United States), other than sales which otherwise
comply with all of the other criteria for
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eligibility hereunder and are secured by letters of credit (in form and
substance satisfactory to the Agent and assigned to the Agent) issued
or confirmed by, and payable at, banks having a place of business in
the United States of America or Canada, or to the extent covered by
Export Development Corporation insurance in form and content acceptable
to the Agent with proceeds payable to the Agent and the Lenders; (iii)
Accounts that remain unpaid more than thirty (30) days from due date
(except for certain customer accounts agreed to by the Agent in
writing); (iv) contra accounts; (v) sales to Parent, any subsidiary, or
to any company affiliated with the Company or Parent in any way; (vi)
xxxx and hold (deferred shipment) or consignment sales; (vii) sales to
any customer which is: (A) insolvent, (B) the debtor in any bankruptcy,
insolvency, arrangement, restructuring, reorganization, receivership,
liquidation or similar proceedings under any federal or state law, (C)
negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise of its debts, or (D) financially unacceptable
to the Agent or has a credit rating unacceptable to the Agent, acting
reasonably; (viii) all sales to any customer if fifty percent (50%) or
more of the aggregate dollar amount of all outstanding invoices to such
customer are unpaid more than thirty (30) days from due date (except
for certain customer accounts agreed to by the Agent in writing); (ix)
pre-billed receivables and receivables arising from progress billing;
(x) an amount representing, historical returns, discounts, claims,
credits, allowances and applicable terms; (xi) sales not payable in
United States or Canadian currency; and (xii) any other reasons deemed
necessary by the Agent in its reasonable judgment, including without
limitation those which are customary either in the commercial finance
industry or in the lending practices of the Agent and/or the Lenders;
provided that the Agent reserves the right to change the criteria set
forth under (iii) and (viii) above from 30 days from due date to 90
days from the invoice date.
ELIGIBLE INVENTORY shall mean the gross amount of the Company's
Inventory that is subject to a valid, exclusive, first priority and
fully perfected security interest in favour of the Agent, on behalf of
the Lenders, and which conforms to the warranties contained herein and
which, at all times, continues to be acceptable to the Agent in the
exercise of its reasonable business judgment, less, without
duplication, any (a) Inventory which has been delivered to the Company
within 30 days before such time, (b) Inventory in respect of which
payment has not been made or the supplier has not waived or lost its
rights to repossession under the Bankruptcy and Insolvency Act (Canada)
or any similar legislation or law of general application including,
without limitation, in connection with rights of revindication, (c)
work-in-process, (d) supplies (other than raw materials), (e) Inventory
not present in the United States of America or Canada, (f) Inventory
returned or rejected by the Company's
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customers (other than goods that are undamaged and resaleable in the
normal course of business) and goods to be returned to the Company's
suppliers, (f) Inventory in transit to third parties (other than the
Company's agents or warehouses), or in the possession of a
warehouseman, bailee, third party processor, or other third party,
unless such warehouseman, bailee or third party has executed a notice
of security interest agreement (in form and substance reasonably
satisfactory to the Agent) and/or the Agent shall otherwise have a
first priority perfected security interest in such Inventory and (g)
less any reserves required by the Agent in its reasonable discretion,
including without limitation for special order goods, discontinued,
slow-moving and obsolete Inventory, market value declines, xxxx and
hold (deferred shipment), consignment sales, shrinkage and any
applicable customs, freight, duties and Taxes.
ENVIRONMENTAL LAWS shall mean all applicable laws, regulations, orders,
judgments, decisions of and agreements with a governmental entity and
all other statutory requirements relating to public health or the
protection of the environment and all authorizations, permits,
consents, registrations and approvals issued pursuant to such laws,
agreements or statutory requirements.
ENVIRONMENTAL LIABILITIES shall mean all liabilities imposed by, under
or pursuant to Environmental Laws or which relate to the existence of
contaminants on, under or about the Subject Properties.
EQUIPMENT shall mean, with respect to a Person, all present and
hereafter acquired equipment (as defined in the PPSA) including,
without limitation, all machinery, equipment, furnishings and fixtures,
and all additions, substitutions and replacements thereof, wherever
located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds
thereof of whatever sort.
EQUIVALENT U.S.$ AMOUNT shall mean, on any day with respect to any
amount of Canadian Dollars, the amount of U.S. Dollars which would be
required to buy such amount of Canadian Dollars using the rate quoted
by CIBC in accordance with its opening daily rate for that day, and if
that is not a Business Day on the immediately preceding Business Day.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10
of this Financing Agreement.
FACE AMOUNT means in respect of a BA Instrument, the amount payable to
the holder on its maturity.
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FIELD/VERIFICATION FEE means $750 per Person per day plus all travel,
lodging, food and other out of pocket expenses of representatives of
the Agent in connection with monitoring and inspecting the Collateral
and the books and records of the Company from time to time.
FINAL ORDER means an order or judgment of the Bankruptcy Court in form
and substance acceptable to the Agent, the Lenders and their counsel
approving, inter alia, the transactions contemplated by this Financing
Agreement and other the Loan Documents which has not been reversed,
stayed or otherwise rendered ineffective or modified in any manner, and
if such order is the subject of a pending appeal in any respect, such
Bankruptcy Court has made a finding in favour of the Agent and the
Lenders pursuant to 11 U.S.C. Section 363(m) and neither the making
available of the Line of Credit nor the performance by the Company of
any of its obligations under this Financing Agreement or any of the
other Loan Documents or under any other instrument or agreement
referred to herein shall be subject of a presently effective stay
pending appeal.
FISCAL QUARTER shall mean, with respect to the Company, each three (3)
month period ending on December 31, March 31, June 30, and September 30
of each Fiscal Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on
October 1 of each year and ending on the following September 30.
FIXED CHARGES shall mean the sum of (i) Interest Charges, (ii) the
amount of principal repaid to the Agent on the Term Loan for the then
applicable last four Fiscal Quarters, (iii) any dividends or management
fees paid by the Company for the then applicable last four Fiscal
Quarters, (iv) Capital Expenditures actually incurred and (v) all
federal, provincial, state and local cash taxes paid by the Company.
GAAP shall mean generally accepted accounting principles in the United
States of America as in effect from time to time and for the period as
to which such accounting principles are to apply, provided that in the
event the Company modifies its accounting principles and procedures as
applied as of the Closing Date, the Company shall provide to the Agent
and the Lenders such statements of reconciliation as shall be in form
and substance) acceptable to the Agent.
GENERAL INTANGIBLES shall mean, with respect to a Person, all present
and hereafter acquired intangibles (as defined in the PPSA), and shall
include, without limitation, all present and future right, title and
interest in and to: (a) all Trademarks, trade names, corporate names,
business names, logos and
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any other designs or sources of business identities, (b) Patents,
together with any improvements on said Patents, utility models,
industrial models, and designs, (c) Copyrights, (d) trade secrets, (e)
licenses, permits and franchises, (f) all applications with respect to
the foregoing, (g) all right, title and interest in and to any and all
extensions and renewals, (h) goodwill with respect to any of the
foregoing, (i) any other forms of similar intellectual property, (j)
all customer lists, distribution agreements, supply agreements,
blueprints, indemnification rights and tax refunds, together with all
monies and claims for monies now or hereafter due and payable in
connection with any of the foregoing or otherwise, and all cash and
non-cash proceeds thereof, including, without limitation, the proceeds
or royalties of any licensing agreements between the Company and any
licensee of any of the Company's General Intangibles.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance
carrier with respect to any loss, casualty or damage to Collateral.
INTEREST CHARGES means with respect to the Company for the then
applicable four Fiscal Quarter periods, the sum of (i) the aggregate
amount of interest expense (including imputed interest with respect to
capitalized lease obligations) accrued during such period on a
consolidated basis in accordance with GAAP, (ii) the net amount payable
(or less the net amount receivable) by the Company under any interest
rate cap or collar arrangements or similar arrangements during such
period, and (iii) the aggregate of all purchase discounts relating to
the sale of accounts receivable in connection with any asset
securitization program, all as adjusted to reflect the impact of
proceeds received from discontinued operations (including, without
limitation, operations disposed of or closed during such period whether
or not the operations were classified as discontinued).
INTEREST PERIOD shall mean:
(a) with respect to any initial request by the Company for a LIBOR
Loan, a one month, two month or three month period commencing
on the borrowing or conversion date with respect to a LIBOR
Loan and ending one, two or three months thereafter, as
applicable; and
(b) thereafter with respect to any continuation of, or conversion
to, a LIBOR Loan, at the option of the Company, any one month,
two month or three month period commencing on the last day of
the immediately preceding Interest Period applicable to such
LIBOR Loan and ending one, two or three months thereafter, as
applicable;
15
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provided that, the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day
which is not a Working Day, that Interest Period
shall be extended to the next succeeding Working Day,
unless the result of such extension would extend such
payment into another calendar month in which event
such Interest Period shall end on the immediately
preceding Working Day;
(ii) any Interest Period that begins on the last Working
Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar
month, at the end of such Interest Period) shall end
on the last Working Day of a calendar month; and
(iii) for purposes of determining the availability of
Interest Periods, such Interest Periods shall be
deemed available if (x) CIBC quotes an applicable
rate or the Agent determines LIBOR, as provided in
the definition of LIBOR, (y) the LIBOR determined by
CIBC or the Agent will adequately and fairly reflect
the cost of maintaining or funding its loans bearing
interest at LIBOR, for such Interest Period, and (z)
such Interest Period will end on or before the
earlier of Anniversary Date or the last day of the
then current term of this Financing Agreement. If a
requested Interest Period shall be unavailable in
accordance with the foregoing sentence, the Company
shall continue to pay interest on the Obligations at
the applicable per annum rate based upon the CIBC
Bank Rate.
INTERIM ORDER means an interim order of the Bankruptcy Court in form
and substance acceptable to the Agent and its counsel approving, inter
alia, the transactions contemplated by this Financing Agreement and the
other Loan Documents.
INVENTORY shall mean, with respect to a Person, present and hereafter
acquired inventory (as defined in the PPSA) and including, without
limitation, all merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with
all goods and materials used or usable in manufacturing, processing,
packaging or shipping same in all stages of production from raw
materials through work-in-process to finished goods - and all proceeds
thereof of whatever sort.
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INVENTORY LOAN CAP shall mean 50% of the aggregate amount of the
Obligations outstanding under the Revolving Loans after giving effect
to an outstanding request for an advance of the Revolving Loans.
ISSUING BANK shall mean the bank issuing Letters of Credit for the
Company.
LEASED PROPERTIES means, collectively, the real properties forming the
subject matter of the Leases.
LEASES means the leases, subleases, rights to occupy and licences of
real property or buildings and fixtures to which the Company is a party
at the date of this Agreement as listed on Schedule 3.
LETTERS OF CREDIT shall mean all letters of credit issued with the
assistance of the Agent on behalf of the Lenders in accordance with
Section 5 hereof by the Issuing Bank for or on behalf of the Company.
LETTER OF CREDIT GUARANTEE shall mean the guarantee delivered by the
Agent, on behalf of the Lenders, to the Issuing Bank of the Company's
reimbursement obligations under the Issuing Bank's reimbursement
agreement, application for Letter of Credit or other like document.
LETTER OF CREDIT GUARANTEE FEE shall mean the fee the Agent, on behalf
of the Lenders, may charge the Company under Section 8(3) of this
Financing Agreement for: (a) issuing a Letter of Credit Guarantee,
and/or (b) otherwise aiding the Company in obtaining Letters of Credit,
all pursuant to Section 5 hereof.
LETTER OF CREDIT SUB-LINE shall mean the commitment of the Lenders to
assist the Company in obtaining Letters of Credit, pursuant to Section
5 hereof, in an aggregate amount of $5,000,000.
LIBOR shall mean, at any time of determination, and subject to
availability, for each applicable Interest Period, a variable rate of
interest equal to: (a) at the Agent's election (i) the applicable LIBOR
quoted to the Agent by CIBC (or any successor thereof), or (ii) the
rate of interest determined by the Agent at which deposits in U.S.
dollars are offered for the relevant Interest Period based on
information presented on Telerate Systems at Page 3750 as of 11:00 A.M.
(London time) on the day which is two (2) Business Days prior to the
first day of such Interest Period, provided that, if at least two such
offered rates appear on the Telerate System at Page 3750 in respect of
such Interest Period, the arithmetic mean of all such rates (as
determined by the Agent) will be the rate used.
17
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LIBOR LENDING OFFICE with respect to the Agent, shall mean the office
of CIBC, or any successor thereof, maintained at Xxxxxxx, Xxxxxxx.
LIBOR LOAN shall mean any loans made pursuant to this Financing
Agreement which are made or maintained at a rate of interest based upon
LIBOR, provided that (i) no Default or Event of Default has occurred
hereunder, which has not been waived in writing by the Required
Lenders, and (ii) no LIBOR Loan shall be made with an Interest Period
that ends subsequent to an Anniversary Date or any applicable Early
Termination Date.
LIEN means any mortgage, charge, pledge, hypothecation, security
interest, assignment, encumbrance, lien (statutory or otherwise), title
retention agreement or arrangement, restrictive covenant or other
encumbrance of any nature or any other arrangement or condition that in
substance secures payment or performance of an obligation.
LINE OF CREDIT shall mean the aggregate commitment of the Lenders to
(a) make Revolving Loans pursuant to Section 3 of this Financing
Agreement (b) assist the Company in opening Letters of Credit pursuant
to Section 5 of this Financing Agreement and (c) make the Term Loan
pursuant to Section 4 of this Financing Agreement, in the aggregate
amount equal to $45,000,000 or the Equivalent U.S.$ Amount ;provided
that nothing herein shall be deemed to increase any Lender's commitment
hereunder, and which commitment shall be set forth in the applicable
schedules maintained by the Agent or the Assignment and Transfer
Agreements executed by such Lender.
LINE OF CREDIT FEE shall: (a) mean the fee due the Agent at the end of
each month for the Line of Credit, and (b) be determined by multiplying
the difference between (i) the Revolving Line of Credit and (ii) the
sum, for said month, of (x) the average daily balance of Revolving
Loans plus (y) the average daily balance of Letters of Credit
outstanding for said month, by three quarters of one percent (0.75%)
per annum for the number of days in said month.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory
Notes, the debenture, debenture pledge agreement, hypothec, blocked
account agreements and the other closing documents and any other
ancillary loan and security agreements executed from time to time in
connection with this Financing Agreement, all as may be renewed,
amended, extended, increased or supplemented from time to time.
LOAN FACILITY FEE shall mean the fee payable to the Agent and the
Lenders (as applicable) in accordance with, and pursuant to, the
provisions of Section 8(7) of this Financing Agreement.
18
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MANDATORY PREPAYMENT shall: (a) mean the amount by which the Company
must prepay the Term Loan on or before the 90th day after the end of
each Fiscal Year of the Company; and (b) be determined as set forth in
Section 4(5) of this Financing Agreement.
MATERIAL ADVERSE EFFECT means a material adverse effect on the
business, operations, results of operations, prospects, assets,
liabilities or financial condition of the Company.
MATERIAL AGREEMENTS means any agreement, contract or similar instrument
to which the Company is a party or to which any of its property or
assets may be subject for which breach, non-performance, cancellation
or failure to renew could reasonably be expected to have a Material
Adverse Effect, as set forth on Schedule 9.
NET WORTH shall mean, at any date of determination, an amount equal to
(a) Total Assets minus (b) Total Liabilities, and shall be determined
in accordance with GAAP, on a consistent basis with the latest audited
financial statements of the Company.
OBLIGATIONS shall mean all loans, advances and extensions of credit
made or to be made by the Agent and/or the Lenders to the Company or to
others for the Company's account (including, without limitation, all
Revolving Loans, Letter of Credit Guarantees, the aggregate Face Amount
of all outstanding Bankers' Acceptances, completed Drafts and BA
Equivalent Notes which the Agent or a Lender has purchased, and the
Term Loan) and all other amounts owing, including, without limitation,
interest, fees, costs, expenses or otherwise by the Company to the
Agent and the Lenders in connection with, or pursuant to or under this
Financing Agreement and the other Loan Documents.
OPERATING CASH FLOW shall mean EBITDA less the sum of (i) Capital
Expenditures determined in accordance with GAAP consistently applied,
and (ii) cash taxes paid by the Company.
OPERATING LEASES shall mean all leases of property (whether real,
personal or mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired
lockbox, blocked account and any other deposit accounts maintained with
any bank or financial institutions into which the proceeds of
Collateral are or may be deposited; all cash and other monies and
property in the possession or control of the Agent and/or any of the
Lenders; all books, records, ledger cards, disks and related data
processing software at any time evidencing or
19
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containing information relating to any of the Collateral described
herein or otherwise necessary or helpful in the collection thereof or
realization thereon; and all cash and non-cash proceeds of the
foregoing.
OWNED PROPERTIES means, collectively, the land and premises owned by
the Company on the date of this Financing Agreement as listed on
Schedule 4.
OUT-OF-POCKET EXPENSES shall mean, without duplication of any other
fees and expenses provided for herein or in any other Loan Document,
all of the Agent's (and the Lenders upon the occurrence of an Event of
Default which is not waived by the Required Lenders) present and future
reasonable costs and expenses incurred relative to this Financing
Agreement or any other Loan Document, whether incurred heretofore or
hereafter, which expenses shall include, without being limited to: the
cost of retaining external legal counsel, external financial advisers
and the Trustee, record searches, all costs and expenses incurred by
the Agent in opening bank accounts, depositing checks, receiving and
transferring funds, and wire transfer charges, any charges imposed on
the Agent due to returned items and "INSUFFICIENT FUNDS" of deposited
checks and the Agent's standard fees relating thereto, any amounts paid
by, incurred by or charged to, the Agent and/or the Lenders by the
Issuing Bank under a Letter of Credit Guarantee or the Company's
reimbursement agreement, application for Letters of Credit or other
like document which pertain either directly or indirectly to such
Letters of Credit, the filing of financing statements, all expenses,
costs and fees set forth in Section 10(3) of this Financing Agreement,
and title insurance premiums, real estate survey costs, costs of
preparing and recording debentures and hypothecs against the Real
Estate.
OVERADVANCE RATE shall mean a rate equal to one-half of one percent
(1/2%) per annum in excess of the applicable contract rate of interest
determined in accordance with Section 8(1)(a) of this Financing
Agreement.
OVERADVANCES shall mean the amount by which (a) the sum of all
outstanding Revolving Loans, the face amount of BA Loans outstanding
and Letters of Credit and advances made hereunder exceed (b) the
Borrowing Base.
PARENT shall mean Sterling Chemicals, Inc. a Delaware Corporation.
PARENT CREDIT AGREEMENT means the debtor-in-possession credit agreement
dated July 16, 2001 among the Parent, certain of its subsidiaries as
borrowers, The CIT Group/Business Credit, Inc. as agent and lender and
the other lenders, as amended, supplemented, or restated, refinanced or
replaced from time to time;
20
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PATENTS shall mean all of the Company's present and hereafter acquired
patents, patent applications, registrations, any reissues or renewals
thereof, licenses, any inventions and improvements claimed thereunder,
and all general intangible, intellectual property and patent rights
with respect thereto of the Company, and all income, royalties, cash
and non-cash proceeds thereof.
PERMITTED DEBT shall mean: (a) current indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw
materials, supplies, equipment, services, Taxes or labour; (b) Debt
secured by Purchase Money Liens in an aggregate amount not to exceed
$2,000,000 and any Debt arising out of the refinancing, extension,
renewal or refunding of such Debt, provided such Debt is not secured by
additional property or assets and the total amount of such Debt is not
increased; (c) Debt arising under the Letters of Credit in an aggregate
amount not to exceed $5,000,000; (d) Debt under this Financing
Agreement; (e) deferred Taxes and other expenses incurred in the
ordinary course of business; (f) Debt arising in the ordinary course of
business for the sale, purchase or exchange or for future delivery of
foreign currency (whether or not the subject currency is to be
delivered or exchanged), or any currency swap agreements, option
contracts, futures contracts, options on futures contracts, spot or
forward contracts or other agreements to purchase or sell currency or
any other arrangements related to movements in the rates of exchange of
currencies or other similar derivatives transactions in an aggregate
notional amount (as determined by the Agent) not to exceed $20,000,000
(provided the Company shall forthwith provide the Agent with notice
upon the xxxx to market value of the swap position being greater than
negative $10 million in the aggregate with respect to all such
contracts and arrangements); (g) other Debt existing on the date of
execution of this Financing Agreement and listed in the most recent
financial statement delivered to the Agent and the Lenders or otherwise
disclosed to the Agent and the Lenders in Schedule 6 hereto; and (h)
process and performance guarantees to the extent permitted under
Section 7(12)(g).
PERMITTED LIENS shall mean: (a) Liens existing on the date hereof and
which are listed on Schedule 2 and other Liens expressly permitted, or
consented to in writing by the Agent and the Required Lenders; (b)
Purchase Money Liens and any Liens arising out of the refinancing,
extension, renewal or refunding of any indebtedness secured by a
Purchase Money Lien provided such indebtedness is not secured by
additional property or assets and the total amount of such indebtedness
is not increased; (c) statutory Liens of landlords and Liens of
carriers, warehousemen, bailees, mechanics, materialmen and other like
Liens imposed by law, created in the ordinary course of business and
for amounts not yet due (or which are being contested in good faith, by
21
-19-
appropriate proceedings or other appropriate actions which are
sufficient to prevent imminent foreclosure of such Liens) and with
respect to which adequate reserves or other appropriate provisions are
being maintained by the Company in accordance with GAAP; (d) deposits
made (and the Liens thereon) in the ordinary course of business of the
Company (including, without limitation, security deposits for leases,
indemnity bonds, surety bonds and appeal bonds) in connection with
workers' compensation, employment insurance and other types of social
security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money
or purchase money obligations), statutory obligations and other similar
obligations arising as a result of progress payments under government
contracts; (e) easements (including, without limitation, reciprocal
easement agreements and utility agreements), site plans, subdivision
and other municipal agreements, encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate, if
applicable, and which in the aggregate (A) do not materially interfere
with the occupation, use or enjoyment by the Company of its business or
property so encumbered and (B) in the reasonable business judgment of
the Agent do not materially and adversely affect the value of such Real
Estate; (f) Liens granted in favour of the Agent and the Lenders by the
Company; (g) Liens of judgment creditors provided such Liens do not
exceed, in the aggregate, at any time, $1,000,000 (other than Liens
bonded or insured to the reasonable satisfaction of the Agent); and (h)
tax Liens securing obligations of the Company which are not yet due and
payable or which are being diligently contested in good faith by the
Company by appropriate proceedings and for which adequate reserves have
been provided for by the Company in accordance with GAAP.
PERSON means a natural Person, partnership, corporation, joint stock
company, trust, unincorporated association, joint venture or other
entity or governmental entity or court, and pronouns have a similarly
extended meaning.
PPSA shall mean the Personal Property Security Act (Ontario) and the
regulations promulgated thereunder as the same may be amended and in
effect from time to time.
PRIORITY ACCOUNTS PAYABLE means, at any time, the amount past due and
owed by the Company which it has an obligation to remit to a
governmental entity pursuant to any applicable law, rule or regulation
in respect of pension fund obligations, employment insurance, goods and
services taxes, sales taxes and other taxes payable or to be remitted
or withheld, workers' compensation and other like charges and demands,
in respect of which any governmental
22
-20-
entity may claim a security interest or other claim ranking or capable
of ranking in priority to the security held by the Agent and the
Lenders.
PROMISSORY NOTES shall mean the notes, in the form of Exhibits A and B
attached hereto, delivered by the Company to the Agent to evidence the
Term Loan and the Revolving Loans.
PURCHASE MONEY LIENS shall mean Liens on any item of Equipment acquired
after the date of this Financing Agreement provided that (a) each such
Lien shall attach only to the property to be acquired, (b) a
description of the Equipment so acquired is furnished to the Agent, and
(c) Debt incurred in connection with such acquisitions shall not
exceed, in the aggregate, $2,000,000 in any Fiscal Year.
REAL ESTATE shall mean, with respect to a Person, fee and/or leasehold
interests in the real property, including any such real property which
has been, or will be, encumbered, mortgaged, pledged or assigned to the
Agent or its designee except for any such property or assets leased or
otherwise derived by or through Bowater in connection with the Bowater
Project and listed in Schedule 10 and except for any present or future
real property owned or leased by Sterling Australia in connection with
the Australia Project.
REFERENCE DISCOUNT RATE means, in respect of any Bankers' Acceptances
or Drafts to be purchased by the Agent or a Lender pursuant to Section
6, the arithmetic average of the discount rates (calculated on an
annual basis and rounded to the nearest one-hundredth of 1%, with
five-thousandths of 1% being rounded up) quoted by CIBC at 9:30 a.m.
(Toronto time) as the discount rate at which CIBC would purchase, on
the relevant Drawing Date, its own Bankers' Acceptances or Drafts
having an aggregate Face Amount equal to and with a term to maturity
the same as the Bankers' Acceptances or Drafts to be acquired by the
Agent or a Lender on the Drawing Date. If the discount rates cannot be
calculated on any Business Day on which they are required to be
calculated the applicable discount rate shall be the CDOR rate in
effect on such day for bankers' acceptances having a term to maturity
the same as the applicable Bankers' Acceptances.
REQUIRED LENDERS shall mean the Lenders holding aggregate commitments
under this Financing Agreement in an amount of 66 2/3% or more.
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of the
Lenders to make loans and advances pursuant to Section 3 of this
Financing Agreement and issue Letters of Credit Guaranties pursuant to
Section 5
23
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hereof to the Company, in the aggregate amount of up to $25,000,000 or
the Equivalent U.S.$ Amount.
REVOLVING LOAN ACCOUNT shall mean the account on the Agent's books, in
the Company's name, in which the Company will be charged with all
Obligations under this Financing Agreement.
REVOLVING LOANS shall mean the loans and advances made, from time to
time, to or for the account of the Company by the Agent, on behalf of
the Lenders, pursuant to Section 3 of this Financing Agreement.
REVOLVING LOAN PROMISSORY NOTE shall mean the promissory note
substantially in the form of Exhibit B hereto executed by the Company
to evidence the Revolving Loans made by the Agent under Section 3
hereof.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at
the discretion of the Agent, upon the occurrence of an Event of Default
or a continuing decline or increase of the Revolving Loans that the
Agent and the Lenders shall settle amongst themselves so that (a) the
Agent shall not have, as the Agent, any money at risk and (b) on such
Settlement Date the Lenders shall have a pro rata amount of all
outstanding Revolving Loans and Letters of Credit, provided that each
Settlement Date for a Lender shall be a Business Day on which such
Lender and its bank are open for business.
STERLING AUSTRALIA means Sterling Pulp Chemicals (Australia) Pty
Limited, its successors and assigns.
SUBJECT PROPERTIES means collectively, the Owned Properties and the
Leased Properties.
SUBSIDIARY has the meaning ascribed thereto in the Business
Corporations Act (Ontario).
SURPLUS CASH shall mean for any Fiscal Year (a) the sum of (i) EBITDA
and (ii) other non-cash charges of the Company (excluding depreciation
and amortization to the extent already included in EBITDA) less (b) the
sum of (i) all interest obligations paid or due by the Company, (ii)
the amount of principal repaid to the Agent on the Term Loan, (iii)
Capital Expenditures actually incurred, (iv) all federal, provincial,
state and local tax obligations of the Company and (v) any dividends or
management fees permitted by the Agent and the Lenders to be included
in this definition of Surplus Cash.
TAXES shall mean all federal, state, provincial, municipal and other
governmental taxes, levies, charges, claims and assessments which are
or may
24
-22-
be due by the Company with respect to its business, operations,
Collateral or otherwise.
TERM LOAN PROMISSORY NOTE shall mean the promissory note substantially
in the form of Exhibit A hereto executed by the Company to evidence the
Term Loan made by the Agent under Section 4 hereof.
TERM LOAN shall mean the term loan in the principal amount of up to
$20,000,000 made by the Lenders pursuant to, and repayable in
accordance with, the provisions of Section 4 of this Financing
Agreement.
TOTAL ASSETS shall mean total assets determined in accordance with
GAAP, on a basis consistent with the latest audited financial
statements of the Company.
TOTAL LIABILITIES shall mean total liabilities determined in accordance
with GAAP, on a basis consistent with the latest audited financial
statements of the Company.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of the Company's
Accounts which arises from the sale of Inventory or the rendition of
services in the ordinary course of the Company's business.
TRADEMARKS shall mean all present and hereafter acquired trademarks,
trademark registrations, recordings, applications, trade names, trade
styles, service marks, prints and labels (on which any of the foregoing
may appear), licenses, reissues, renewals, and any other intellectual
property and trademark rights pertaining to any of the foregoing,
together with the goodwill associated therewith, and all cash and
non-cash proceeds thereof.
U.S. DOLLARS AND U.S. $ each means lawful money of the United States of
America.
WORKING CAPITAL shall mean Current Assets in excess of Current
Liabilities.
WORKING DAY shall mean any Business Day on which dealings in foreign
currencies and exchanges between banks may be transacted.
(2) Any reference in the Loan Documents to gender includes all genders and
words importing the singular number only include the plural and vice
versa.
(3) The provision of a Table of Contents, the division of this Financing
Agreement into Sections and the insertion of headings are for
convenient reference only and are not to affect the interpretation of
this Financing Agreement.
25
-23-
(4) All references in the Loan Documents to dollars, unless otherwise
specifically indicated, are expressed in Canadian Dollars.
(5) In any Loan Document (i) (y) the words "INCLUDING" and "INCLUDES" mean
"INCLUDING (OR INCLUDES) WITHOUT LIMITATION" and (z) the phrase "THE
AGGREGATE OF", "THE TOTAL OF", "THE SUM OF", or a phrase of similar
meaning means "THE AGGREGATE (OR TOTAL OR SUM), WITHOUT DUPLICATION,
OF", and (ii) in the computation of periods of time from a specified
date to a later specified date, unless otherwise expressly stated, the
word "FROM" means "FROM AND INCLUDING" and the words "TO" and "UNTIL"
each mean "TO BUT EXCLUDING".
(6) All accounting terms not specifically defined in this Financing
Agreement shall be interpreted in accordance with GAAP.
(7) The schedules attached to this Financing Agreement shall, for all
purposes of this Financing Agreement, form an integral part of it.
(8) The provisions of this Financing Agreement prevail in the event of any
conflict or inconsistency between its provisions and the provisions of
any of the other Loan Documents.
SECTION 2 CONDITIONS PRECEDENT
(1) The obligation of the Agent and the Lenders to make the initial loans
hereunder is subject to the satisfaction of, extension of or waiver of
in writing (or as otherwise waived in the closing undertaking of the
Company), on or prior to, the Closing Date, the following conditions
precedent:
(a) LIEN SEARCHES. The Agent shall have received tax, judgment,
real property, title, PPSA and other personal property
searches satisfactory to the Agent for all locations presently
occupied or used by the Company.
(b) INSURANCE. The Company shall have delivered to the Agent
evidence satisfactory to the Agent that insurance policies
listing the Agent as additional insured, loss payee or
mortgagee, as the case may be, are in full force and effect,
all as set forth in Section 7(5) of this Financing Agreement.
(c) SECURITY FILINGS. Any financing or other registration
statements required to be filed in order to create, in favour
of the Agent, on behalf of the Lenders, a first perfected
security interest in the Collateral, subject only to the
Permitted Liens, shall have been properly filed in each office
in each jurisdiction required in order to create in favour of
the Agent for the benefit of the Lenders a perfected lien on
the
26
-24-
Collateral. The Agent shall have received evidence
satisfactory to the Agent that all such filings have been made
and the Agent shall have received evidence that all necessary
filing fees and all taxes or other expenses related to such
filings have been paid in full.
(d) RESOLUTION. The Agent shall have received a copy of the
resolutions of the sole shareholder of the Company authorizing
the execution, delivery and performance of (i) this Financing
Agreement, (ii) the Loan Documents and (iii) all transactions
contemplated thereby, including the repayment of indebtedness
owing to Sterling NRO, Ltd., certified by the Secretary or
Assistant Secretary of the Company as of the date hereof,
together with a certificate of the Secretary or Assistant
Secretary of the Company as to the incumbency and signature of
the officers of the Company executing such Loan Documents and
any certificate or other documents to be delivered by them
pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary.
(e) CORPORATE ORGANIZATION. The Agent shall have received (i) a
copy of the constating documents of the Company certified by
the Secretary or Assistant Secretary thereof, and (ii) a copy
of the By-Laws of the Company certified by the Secretary or
Assistant Secretary thereof, all as amended through the date
hereof.
(f) OFFICER'S CERTIFICATE. The Agent shall have received an
executed Officer's Certificate of the Company, satisfactory in
form and substance to the Agent, certifying that (i) the
representations and warranties contained herein are true and
correct in all material respects on and as of the Closing
Date; (ii) the Company is in compliance with all of the terms
and provisions set forth herein; and (iii) no Default or Event
of Default has occurred.
(g) OPINIONS. Counsel for the Company and the Parent and Sterling
NRO, Ltd. shall have delivered to the Agent on behalf of the
Lenders opinions satisfactory to the Agent.
(h) ABSENCE OF DEFAULT. No Default or Event of Default shall have
occurred and no material adverse change shall have occurred in
the financial condition, business, prospects, profits,
operations or assets of the Company since November 5, 2000.
(i) LEGAL RESTRAINTS/LITIGATION. As of the Closing Date, and
except as set out in Schedule 5 there shall be no: (x)
litigation, investigation or proceeding (judicial or
administrative) pending or, to the best of the
27
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knowledge of the Company, threatened against the Company or
its assets, by any agency, division or department of any
county, city, state, province or federal government arising
out of this Financing Agreement; (y) injunction, writ or
restraining order restraining or prohibiting the financing
arrangements or transactions contemplated under this Financing
Agreement; or (z) suit, action, investigation or proceeding
(judicial or administrative) pending against the Company or
its assets, which, in the opinion of the Agent, if adversely
determined, could have a material adverse effect on the
business, operation, assets, prospects, financial condition or
Collateral of the Company.
(j) CASH BUDGET PROJECTIONS. The Agent shall have received,
reviewed and been satisfied with a twelve (12) month cash
budget projection prepared by the Company on the form provided
by the Agent.
(k) ADDITIONAL DOCUMENTS. The Company shall have executed and
delivered to the Agent all Loan Documents necessary to
consummate the lending arrangement contemplated between the
Company, the Agent and the Lenders, including blocked account
agreements contemplated herein, and a subordination agreement
between the Company, Sterling NRO, Ltd. and the Agent, in each
case, satisfactory to the Agent and its counsel.
(l) COLLATERAL. The Company shall have obtained all discharges,
subordination agreements, waivers and confirmations as may be
required to ensure that all obligations under the Loan
Documents are secured by first priority Liens on the
Collateral with such exceptions as are permitted pursuant to
this Financing Agreement or any of the other Loan Documents,
including Permitted Liens.
(m) DISBURSEMENT AUTHORIZATION. The Company shall have delivered
to the Agent all information necessary for the Agent and the
Lenders to issue wire transfer instructions on behalf of the
Company for the initial and subsequent loans and/or advances
to be made under this Financing Agreement including, but not
limited to, disbursement authorizations in form acceptable to
the Agent.
(n) EXAMINATION & VERIFICATION. The Agent and each of the Lenders
shall have completed, to their respective satisfaction, an
examination and verification of the Collateral and of the
Accounts, Inventory, financial statements, books and records
of the Company which such latter examination shall indicate
that, after giving effect to all Revolving Loans, advances and
extensions of credit to be made at closing, the
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Company shall have an opening additional Availability of at
least $10,000,000, as evidenced by a Borrowing Base
certificate delivered by the Company to the Agent as of the
Closing Date. It is understood that such requirement
contemplates that all debts and obligations are current, and
that all payables are being handled in the normal course of
the Company's business and consistent with its past practice.
(o) DEPOSITORY ACCOUNTS. The Company shall have established a
system of blocked accounts and bank accounts with respect to
the collection of Accounts and the deposit of proceeds of
Collateral as shall be acceptable to the Agent in all
respects. Such accounts shall be subject to three party
agreements (between the Company, the Agent and the depository
bank), which shall be in form and substance satisfactory to
the Agent.
(p) DEBENTURES/HYPOTHECS. The Company shall have executed and
delivered to the Agent such debentures, debenture pledge
agreements and hypothecs as the Agent on behalf of the Lenders
may reasonably require to obtain first priority Liens on the
Real Estate (subject to Permitted Liens), and the Company
shall have obtained and delivered to the Agent all necessary
landlord consents and waivers in connection with such
documents.
(q) MATERIAL AGREEMENTS. The Agent and each of the Lenders shall
have completed, to their respective reasonable satisfaction,
an examination and review of all Material Agreements of the
Company and such other agreements of the Company as the Agent
believes is necessary.
(r) SURVEYS. The Agent shall have received surveys with respect to
the Subject Properties in form and substance and dated a date
satisfactory to the Agent.
(s) APPRAISALS. The Agent shall have received satisfactory
appraisals by Chem Systems on the Company's plant, Equipment
and Real Estate.
(t) ENVIRONMENTAL REPORT. The Agent shall have received final
environmental audit reports on (i) the Company's leasehold and
fee interests on the properties located in North Vancouver,
British Columbia, Grand Prairie, Alberta, Thunder Bay, Ontario
and Buckingham, Quebec as listed in Schedule 4, and (ii) the
Company's waste disposal practices. The reports must (x) be
satisfactory to the Agent and (y) except as set out on
Schedule 7, not disclose or indicate any material liability
(real or potential) stemming from the Company's
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premises, its operations, its waste disposal practices or
waste disposal sites used by Company.
(u) ABSENCE OF MATERIAL CHANGE. The Agent shall be satisfied that
no event, condition or state of affairs exists which has
caused or which may cause a material adverse change in the
business, operations, assets, financial condition, business
prospects, profitability or Collateral of the Company.
(v) CONSENTS. The Company shall have obtained all necessary
consents and approvals from all necessary Persons (including
all landlord waivers and consents, but excluding the consent
referred to in Section 10(1)(n) hereof) authorizing the
Company to execute and deliver the Financing Agreement and the
other Loan Documents and to consummate the transaction
contemplated thereby.
(w) INDEMNITY. The Agent shall have received an indemnity in form
and content satisfactory to the Agent, the Lenders and their
counsel from the Parent and certain of its Affiliates in
respect of the entering into of this Financing Agreement and
the other Loan Documents and the consummation of the
transaction contemplated thereby.
(x) CHAPTER 11 PROCEEDINGS. The Agent and its counsel shall have
received a copy (or such other evidence satisfactory to the
Agent and its counsel) of the Interim Order of the Bankruptcy
Court in the Chapter 11 Proceedings and the Agent and its
counsel shall be satisfied with all aspects of the Chapter 11
Proceedings, including that appropriate orders have been
obtained pursuant to the Chapter 11 Proceedings permitting (a)
the Company to enter into the Financing Agreement and the
other Loan Documents and to grant the security contemplated
thereby, (b) the Company to repay indebtedness owing to
Sterling NRO, Ltd., and (c) Sterling NRO, Ltd. to advance the
proceeds it has received from the Company pursuant to (b) to
Sterling Canada, Inc.
(y) DEPOSIT. The Company shall have provided a good faith deposit
of U.S.$200,000 to cover due diligence costs, fees and
expenses of the Agent, its counsel and other professional
advisers in respect of the preparation of the Loan Documents.
(z) MANAGEMENT AND SERVICES. The Agent shall have (i) received
satisfactory results of background checks on key management;
and (ii) performed a review of essential key services
performed by the Parent
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or any of its subsidiaries for the Company which shall be
satisfactory to the Agent.
(aa) DIP FACILITY. All conditions precedent to the Parent Credit
Agreement (other than the execution and delivery of this
Financing Agreement and other than the making of the advance
from Sterling NRO, Ltd. to Sterling Canada, Inc. referred to
in subclause (x)(c) above) shall have been satisfied or waived
and funding pursuant thereto shall be available to the Parent.
(2) Upon the execution of this Financing Agreement and the initial
disbursement of loans hereunder, all of the above Conditions Precedent
shall have been deemed satisfied except as otherwise set forth
hereinabove or as the Company and the Agent shall otherwise agree in
writing.
(3) Subject to the terms of this Financing Agreement, including, without
limitation, the Agent's rights pursuant to Section 10(2) hereof, the
agreement of the Agent on behalf of the Lenders to make any extension
of credit requested to be made by it to the Company on any date
(including without limitation, the initial extension of credit) is
subject to the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES - Each of the representations
and warranties made by the Company in or pursuant to this
Financing Agreement shall be true and correct in all material
respects on and as of such date as if made on and as of such
date, other than representations and warranties that relate
specifically to an earlier date (which shall be true and
correct in all material aspects on and as of such earlier
date).
(b) NO DEFAULT - No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect
to the extension of credit requested to be made on such date.
(c) BORROWING BASE - Except as may be otherwise agreed to from
time to time by the Agent and the Company in writing, after
giving effect to the extension of credit requested to be made
by the Company on such date, the aggregate outstanding balance
of the Revolving Loans and outstanding Letters of Credit owing
by the Company will not exceed the lesser of (i) the Revolving
Line of Credit or (ii) the Borrowing Base.
(4) Each borrowing by the Company hereunder shall constitute a
representation and warranty by the Company as of the date of such loan
or advance that each of the representations, warranties and covenants
contained in the
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Financing Agreement have been satisfied and are true and correct in all
material aspects on and as of such date other than representations and
warranties that relate specifically to an earlier date (which shall be
true and correct in all material respects as of such earlier date),
except as the Company and the Agent and/or the Required Lenders shall
otherwise agree herein or in a separate writing.
SECTION 3 REVOLVING LOANS
(1) The Agent and the Lenders agree, subject to the terms and conditions of
this Financing Agreement, from time to time (but subject to the Agent's
and the Lenders' right to make "OVERADVANCES"), to make loans and
advances to the Company on a revolving basis (i.e. subject to the
limitations set forth herein, the Company may borrow, repay and
reborrow Revolving Loans). Such requests for loans and advances shall
be in amounts not to exceed the lesser of (a) the Availability or (b)
the Revolving Line of Credit. All requests for loans and advances must
be received by an officer of the Agent no later than (i) 12:00 p.m.,
Toronto time, of the Business Day on which any such CIBC Bank Rate
Loans, CIBC Base Rate Loans and advances are required or, (ii) three
Business Days prior to any requested LIBOR Loan, or (iii) the time
specified in Section 6(5) in respect of any required BA Loan. Should
the Agent for any reason honour requests for Overadvances, any such
Overadvances shall be made in the Agent's reasonable discretion and
subject to any additional terms the Agent and/or the Required Lenders
deem necessary.
(a) Whenever the Company requests the Agent, on behalf of the
Lenders, to make a Revolving Loan pursuant to this Section 3,
it shall give the Agent notice in writing or irrevocable
telephonic notice confirmed promptly in writing, specifying
(A) the amount to be borrowed, and (B) the requested borrowing
date (which shall be a Business Day) and shall be prior to:
the Anniversary Date, and if applicable, any Early Termination
Date, or prior to any effective termination date of this
Financing Agreement, all as further set forth herein), and (C)
specify whether the requested Revolving Loan shall bear
interest at the applicable rates set forth in Section 8
herein. All requests for loans and advances must be received
by an officer of the Agent no later than 12:00 P.M. Toronto
time on any borrowing date. The procedure for Revolving Loans
to be made on a requested borrowing date may be such other
procedure as is mutually satisfactory to the Company, the
Agent and/or the Lenders. The proceeds of the Revolving Loans
shall be used solely (i) to repay existing indebtedness owing
to Sterling NRO, Ltd. in a maximum amount, together with the
proceeds of the Term Loan as provided under Section 4(4), not
to exceed $30,000,000 in
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the aggregate; (ii) for general corporate purposes of the
Company which, for the purposes of this subclause (ii), shall
not include repayment of indebtedness owing to Sterling NRO,
Ltd.; and (iii) as permitted under Section 7(12)(n)(ii)
hereof.
(b) Subject to Section 14(10) hereof, should the Agent, on behalf
of the Lenders, for any reason honour requests for
Overadvances, such Overadvance shall be made in the Agent's
reasonable discretion, subject to any additional terms the
Agent and/or the Required Lenders deem necessary. Requests for
loans and advances shall be made solely by the Company and
shall be directed solely to the Agent.
(c) The Agent shall on any Settlement Date, and upon notice given
by the Agent no later than 2:00 p.m. Toronto time, request
each Lender to make, and each Lender hereby agrees to make, a
Revolving Loan in an amount equal to such Lender's Revolving
Credit Commitment percentage (calculated with respect to the
aggregate Revolving Credit Commitments then outstanding) of
the aggregate amount of the Revolving Loans made by the Agent
from the preceding Settlement Date to the date of such notice,
and to reimburse the Agent for the amount of the Revolving
Loans made by the Agent to the Company. Each Lender's
obligation to make the Revolving Loans pursuant to this
subsection (c) shall be absolute and unconditional and shall
not be affected by any circumstance, including without
limitation (i) any set-off, counterclaim, recoupment, defense
or other right which any such Lender or the Company may have
against the Agent, the Company, any other Lender or any other
Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default or an Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of
the Company; (iv) any breach of this Financing Agreement or
any other Loan Document by the Company or any other Lender; or
(v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. Without
limiting the liability and obligation of each Lender to make
such advances, the Company authorizes the Agent to charge the
Company's Revolving Loan Account with the Agent to the extent
amounts received from the Lenders are not sufficient to repay
in full the amount of any such deficiency.
(d) The Company's Revolving Loan Obligations hereunder shall be
evidenced by the Revolving Loan Promissory Note in the form of
Exhibit B attached hereto.
(2) In furtherance of the continuing assignment and security interest in
the Company's Accounts and Inventory, the Company will provide to the
Agent
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various reports and information as may be requested by the Agent,
including, without limitation: (a) monthly, within ten (10) days of the
last day of each month (i) detailed monthly accounts receivable aging
(including both summary and detail format), (ii) detail monthly
accounts payable aging, (iii) a Borrowing Base certificate as at the
month end, (iv) a reconciliation of accounts receivable aging to the
general ledger and to the financial statements as at the month end, (v)
a calculation of the Trade Accounts Receivable which would not meet the
criteria of an Eligible Account Receivable, (vi) a copy of the
internally generated month end cash receipts and collections journal,
(vii) a listing of the ten largest accounts for the month, (viii) a
Company prepared reconciliation of the cash receipts journal to the
blocked depository account; and (b) weekly, on the second Business Day
of each week for the prior week (i) a weekly Borrowing Base
certificate, (ii) a copy of the internally generated weekly sales
journal and invoice register, (iii) a copy of the internally generated
credit memo journal (or sales journal if included there), (iv) a copy
of the internally generated debit memo journal (or sales journal if
included there), and (v) a copy of the internally generated weekly cash
receipts and collections journal. At the Company's discretion, the
Company may report on a daily basis. The Company will, upon creation of
the Accounts and purchase or acquisition of Inventory, execute and
deliver to the Agent in such form and manner as the Agent may
reasonably require, solely for the Agent's convenience in maintaining
records of Collateral, such confirmatory schedules of Accounts as the
Agent may reasonably request, including, without limitation, weekly
schedules of Accounts and monthly schedules of Inventory, all in form
and substance satisfactory to the Agent, and such other reports
designating, identifying and describing the Accounts and Inventory
including, without limitation, the following reports and information:
(a) monthly, within 10 days of the last day of each month, (i) a
detailed monthly Inventory perpetual listing, (ii) a reconciliation of
the monthly Inventory perpetual listing to the general ledger and to
the financial statements of the Company as at the month end, and (iii)
a calculation of the Inventory which would not meet the criteria of
Eligible Inventory; and (b) weekly, a summary total age of the
Inventory perpetual listing which the Agent may request weekly if the
Agent, in its sole discretion, determines such weekly listing is
necessary, and including such other reports as the Agent may reasonable
request, and provided further that the Agent may request any such
information more frequently, from time to time, upon its reasonable
prior request. In addition, upon the Agent's request, the Company shall
provide the Agent with copies of agreements with, or purchase orders
from, the Company's customers, and copies of invoices to customers,
proof of shipment or delivery, access to its computers, electronic
media and software programs associated therewith (including any
electronic records, contracts and signatures) and such other
documentation and information relating to said
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Accounts and other Collateral as the Agent may reasonably require,
provided that such access does not constitute a violation of the
Personal Information Protection and Electronic Documents Act (Canada)
any similar provincial privacy legislation from time to time. The
Company hereby authorizes the Agent to regard the Company's printed
name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of the Company's authorized
officers or agents.
(3) The Company hereby represents and warrants that: (i) each Trade Account
Receivable is based on an actual and bona fide sale and delivery of
Inventory or rendition of services to its customers, made by the
Company in the ordinary course of its business; (ii) the Inventory
being sold, and the Trade Accounts Receivable created, are the
exclusive property of the Company and are not and shall not be subject
to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Liens; (iii)
the invoices evidencing such Trade Accounts Receivable are in the name
of the Company; and (iv) the customers of the Company have accepted the
Inventory or services, owe and are obligated to pay the full amounts
stated in the invoices according to their terms, without dispute,
offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business and disputes and
other matters arising out of the ordinary course of business with
respect to which the Company has complied with the notification
requirements of Section 3(5). The Company confirms to the Agent that
any and all Taxes or fees relating to its business, its sales, the
Accounts or Inventory relating thereto, are its sole responsibility and
that same will be paid by the Company when due, subject to its right to
appeal such amounts by proper proceedings, if adequate reserves have
been set aside by the Company in accordance with GAAP and that none of
said Taxes or fees represent a lien on or claim against the Accounts.
The Company hereby further represents and warrants that it shall not
acquire any Inventory on a consignment basis, nor comingle its
Inventory with any of its customers or any other Person, including
pursuant to any xxxx and hold sale or otherwise, and that its Inventory
is marketable to its customers in the ordinary course of business of
the Company, except as it may otherwise report in writing to the Agent
pursuant to Section 3(5) hereof from time to time. The Company agrees
to maintain such books and records regarding Accounts and Inventory as
the Agent may reasonably require and agrees that the books and records
of the Company will reflect the Agent's interest in the Accounts and
Inventory. All of the books and records of the Company will be
available to the Agent at normal business hours, on reasonable notice
by the Agent, including any records handled or maintained for the
Company by any other company or entity.
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(4)
(a) Until the Agent has advised the Company to the contrary after
the occurrence of an Event of Default, the Company, at its
expense, will enforce, collect and receive all amounts owing
on the Accounts in the ordinary course of its business and any
proceeds it so receives shall be subject to the terms hereof,
and held on behalf of and in trust for the Agent on behalf of
the Lenders. Such privilege shall terminate at the election of
the Agent, upon the occurrence of an Event of Default, until
such Event of Default is waived in writing by the Required
Lenders or cured to the Agent's and/or the Required Lender's
satisfaction. Any checks, cash, credit card sales and
receipts, notes or other instruments or property received by
the Company with respect to any Collateral, including
Accounts, shall be held by the Company in trust for the Agent,
on behalf of the Lenders, separate from the Company's own
property and funds, and promptly turned over to the Agent with
proper assignments or endorsements by deposit to the
Depository Accounts. The Company shall, at the option of the
Agent, (i) indicate on all of its invoices that funds should
be delivered to and deposited in a Depository Account; and
(ii) direct all of its account debtors to deposit any and all
proceeds of Collateral into the Depository Accounts. The
Company shall (i) irrevocably authorize and direct any banks
which maintain the Company's initial receipt of cash, checks
and other items to promptly wire transfer all available funds
to a Depository Account; and (ii) advise all such banks of the
Agent's security interest in such funds. The Company shall
provide the Agent with prior written notice of any and all
deposit accounts opened or to be opened subsequent to the
Closing Date. All amounts received by the Agent in payment of
Accounts will be credited to the Revolving Loan Account when
the Agent is advised by its bank of its receipt of "COLLECTED
FUNDS" at the Agent's bank account in Toronto, Ontario on the
Business Day of such advise if advised no later than 1:00 p.m.
(Toronto time) or on the next succeeding Business Day if so
advised after 1:00 p.m. (Toronto time). No checks, drafts or
other instrument received by the Agent shall constitute final
payment to the Agent and/or the Lenders unless and until such
instruments have actually been collected.
(b) The Company shall establish and maintain, in its name and at
its expense, deposit accounts with such banks as are
acceptable to the Agent (the "BLOCKED ACCOUNTS") into which
the Company shall promptly cause to be deposited (i) all
proceeds of Collateral received by the Company, including all
amounts payable to the Company from
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credit card issuers and credit card processors, and (ii) all amounts on
deposit in deposit accounts used by the Company at each of its
locations, all as further provided in Section 3(4)(a) above. The banks
at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to the Agent (the
"BLOCKED ACCOUNT AGREEMENTS"), providing that all cash, checks and
items received or deposited in the Blocked Accounts are the property of
the Agent, that the depository bank has no lien upon, or right of set
off against, the Blocked Accounts and any cash, checks, items, wires or
other funds from time to time on deposit therein, except as otherwise
provided in the Blocked Account Agreements, and that automatically, on
a daily basis the depository bank will wire, or otherwise transfer, in
immediately available funds, all funds received or deposited into the
Blocked Accounts to such bank account as the Agent may from time to
time designate for such purpose. The Company hereby confirms and agrees
that all amounts deposited in such Blocked Accounts and any other funds
received and collected by the Agent, whether as proceeds of Inventory
or other Collateral or otherwise, shall be the property of the Agent.
(5) Except with respect to non-material matters arising in the ordinary
course of business and except with respect to matters not forming a
part of the then applicable Borrowing Base, the Company agrees to
notify the Agent (a) of any matters affecting the value, enforceability
or collectability of any Account and of all customer disputes, offsets,
defenses, counterclaims, returns, rejections and all reclaimed or
repossessed merchandise or goods, and of any adverse effect in the
value of its Inventory, in its weekly and monthly collateral reports
(as applicable) provided to the Agent hereunder, in such detail and
format as the Agent may reasonably require from time to time; and (b)
promptly of any such matters which are material, as a whole, to the
Accounts and/or the Inventory. The Company agrees to issue credit
memoranda promptly (with duplicates to the Agent upon request after the
occurrence and during the continuance of an Event of Default) upon
accepting returns or granting allowances. Upon the occurrence and
during the continuance of an Event of Default (which is not waived in
writing by the Required Lenders) and on notice from the Agent, the
Company agrees that all returned, reclaimed or repossessed merchandise
or goods shall be set aside by the Company, marked with the Agent's
name (as secured party) and held by the Company for the Agent's
account.
(6) The Agent shall maintain a Revolving Loan Account on its books in which
the Company will be charged with all loans and advances made by the
Agent to it or for its account, and with any other Obligations,
including any and all
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costs, expenses and reasonable legal fees which the Agent may incur in
connection with the exercise by or for the Agent of any of the rights
or powers herein conferred upon the Agent, or in the prosecution or
defense of any action or proceeding to enforce or protect any rights of
the Agent in connection with this Financing Agreement, the other Loan
Documents or the Collateral assigned hereunder, or any Obligations
owing by the Company. The Company will be credited with all amounts
received by the Agent and/or the Lenders from the Company or from
others for the Company's account, including, as above set forth, all
amounts received by the Agent in payment of Accounts, and such amounts
will be applied to payment of the Obligations as set forth herein. In
no event shall prior recourse to any Accounts or other security granted
to or by the Company be a prerequisite to the Agent's right to demand
payment of any Obligation. Further, it is understood that the Agent
and/or the Lenders shall have no obligation whatsoever to perform in
any respect any of the Company's contracts or obligations relating to
the Accounts.
(7) After the end of each month commencing October 1, 2001, and, with
respect to the period from July 16, 2001 to September 30, 2001, as the
case may be, the Agent shall promptly send the Company a statement
showing the accounting for the charges, loans, advances and other
transactions occurring between the Agent and the Company during that
month or period, as the case may be. The monthly statements shall be
deemed correct and binding upon the Company and shall constitute an
account stated between the Company and the Agent unless the Agent
receives a written statement of the exceptions within sixty (60) days
of the date of the monthly statement.
(8) In the event that any requested advance exceeds Availability or that
(a) the sum of (i) the outstanding balance of Revolving Loans and (ii)
outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing
Base or (y) the Revolving Line of Credit, any such non-consensual
Overadvance shall be due and payable to the Agent on behalf of the
Lenders immediately upon the Agent's demand therefor.
SECTION 4 TERM LOAN
(1) The Company hereby agrees to execute and deliver to the Agent, on
behalf of the Lenders, the Term Loan Promissory Note, to evidence the
Term Loan to be extended by the Agent. The Term Loan shall be provided
by way of either a CIBC Bank Rate Loan or a BA Loan, as requested by
the Company. A request for the Term Loan must be received by an officer
of the Agent no later than 12:00 p.m. Toronto time on the Business Day
on which any such CIBC Bank Rate Loan or is required or no later than
the time specified in Section 6(5) in respect of any required BA Loan.
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(2) The Term Loan shall be evidenced by the Term Loan Promissory Note. The
proceeds of the Term Loan shall only be used solely (i) to repay
existing indebtedness owing to Sterling NRO, Ltd. in a maximum
aggregate amount, together with the proceeds of the Revolving Loan as
provided for under Section 3(1)(a), not to exceed $30,000,000, and (ii)
for general corporate purposes, which for the purposes of this
subclause (ii), shall not include repayment of indebtedness owing to
Sterling NRO, Ltd.
(3) The principal amount of Term Loan shall be repaid to the Agent on
behalf of the Lenders by the Company by: (i) thirty (30) equal monthly
principal installments of $238,095.23 each, followed by (ii) one (1)
installment of $12,857,143.10, on July 11, 2004. The first installment
shall be due and payable on February 1, 2002 and the subsequent
installments shall be due and payable on the first Business Day of each
month thereafter until paid in full.
(4) In the event this Financing Agreement, the Line of Credit or the
Revolving Loan is terminated by either the Agent or the Company for any
reason whatsoever, the Term Loan shall become due and payable on the
effective date of such termination notwithstanding any provision to the
contrary in the Promissory Notes or this Financing Agreement.
(5) In the event the Company has Surplus Cash in any Fiscal Year beginning
on October 1, 2001, the Company must make a Mandatory Prepayment of the
Term Loan by an amount equal to fifty percent (50%) of said Surplus
Cash on or before the 90th day after the end of each Fiscal Year of the
Company before the Anniversary Date.
(6) Each voluntary prepayment (which may be made at any time without
penalty or fee to the Company) shall be applied to the then last
maturing installments of principal of the Term Loan.
(7) The Company hereby authorizes the Agent to charge its Revolving Loan
Account with the amount of all Obligations owing under this Section 4
as such amounts become due. The Company confirms that any charges which
the Agent may so make to its Revolving Loan Account as herein provided
will be made as an accommodation to the Company and solely at the
Agent's discretion. The Agent shall promptly advise the Company with
all particulars when the Agent has charged the Company's Revolving Loan
Account.
SECTION 5 LETTERS OF CREDIT
(1) In order to assist the Company in establishing or opening Letters of
Credit with an Issuing Bank, the Company has requested the Agent, on
behalf of the Lenders, to join in the applications for such Letters of
Credit, and/or
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guarantee payment or performance of such Letters of Credit and any
drafts or acceptances thereunder through the issuance of the Letters of
Credit Guarantee, thereby lending the Agent's credit to the Company and
the Agent has agreed to do so. These arrangements shall be handled by
the Agent subject to the terms and conditions set forth below.
(2) Within the Revolving Line of Credit and Availability, the Agent on
behalf of the Lenders shall assist the Company in obtaining Letter(s)
of Credit in an amount not to exceed the outstanding amount of the
Letter of Credit Sub-Line. The Agent's assistance for amounts in excess
of the limitation set forth herein shall at all times and in all
respects be in the Agent's reasonable discretion. It is understood that
the Issuing Bank, the term, form and purpose of each Letter of Credit
and all documentation in connection therewith, and any amendments,
modifications or extensions thereof, must be mutually acceptable to the
Agent, the Issuing Bank and the Company, provided that Letters of
Credit shall not be used for the purchase of domestic Inventory or to
secure present or future debt of domestic Inventory suppliers. Any and
all outstanding Letters of Credit shall be reserved dollar for dollar
from Availability as an Availability Reserve.
(3) The Agent shall have the right, without prior notice to the Company, to
charge the Company's Revolving Loan Account with the amount of any and
all Debt, liability or obligation of any kind incurred by the Agent
and/or the Lenders under the Letters of Credit Guarantee at the earlier
of (a) payment by the Agent under the Letters of Credit Guarantee; or
(b) the occurrence of an Event of Default which has not been waived in
writing by the Required Lenders. Any amount charged to Company's
Revolving Loan Account shall be deemed a Revolving Loan hereunder and
shall incur interest at the rate provided in Section 8(1) of this
Financing Agreement. The Agent shall promptly advise the Company of all
particulars when such amount has been charged to the Company's
Revolving Loan Account.
(4) The Company unconditionally indemnifies the Agent and the Lenders and
holds the Agent and the Lenders harmless from any and all loss, claim
or liability incurred by the Agent arising from any transactions or
occurrences relating to Letters of Credit established or opened for the
Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any
such loss or claim due to any errors, omissions, negligence, misconduct
or action taken by any Issuing Bank, other than for any such loss,
claim or liability arising out of the gross negligence or willful
misconduct by the Agent and/or the Lenders under the Letters of Credit
Guarantee. This indemnity shall survive termination of this Financing
Agreement. The Company agrees that any charges incurred by the Agent
and/or the Lenders for the Company account by the Issuing Bank shall be
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conclusive absent manifest error and may be charged to the Company's
Revolving Loan Account.
(5) The Agent and the Lenders shall not be responsible for: (a) the
existence, character, quality, quantity, condition, packing, value or
delivery of the goods purporting to be represented by any documents;
(b) any difference or variation in the character, quality, quantity,
condition, packing, value or delivery of the goods from that expressed
in the documents; (c) the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (d) the time, place, manner or order in which
shipment is made; (e) partial or incomplete shipment, or failure or
omission to ship any or all of the goods referred to in the Letters of
Credit or documents; (f) any deviation from instructions; (g) delay,
default, or fraud by the shipper and/or anyone else in connection with
the goods or the shipping thereof; or (h) any breach of contract
between the shipper or vendors and the Company.
(6) The Company agrees that any action taken by the Agent and/or the
Lenders, if taken in good faith, or any action taken by any Issuing
Bank, under or in connection with the Letters of Credit, the Letter of
Credit Guarantees, the drafts or acceptances, or the Collateral, shall
be binding on the Company and shall not result in any liability
whatsoever of the Agent and the Lenders to the Company. In furtherance
thereof, the Agent shall have the full right and authority to: (a)
clear and resolve any questions of non-compliance of documents; (b)
give any instructions as to acceptance or rejection of any documents or
goods; (c) execute any and all steamship or airways guaranties (and
applications therefore), indemnities or delivery orders; (d) grant any
extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and (e) agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; all in the
Agent's sole name. The Issuing Bank shall be entitled to comply with
and honour any and all such documents or instruments executed by or
received solely from the Agent, all without any notice to or any
consent from the Company. Notwithstanding any prior course of conduct
or dealing with respect to the foregoing including amendments and
non-compliance with documents and/or the Company's instructions with
respect thereto, the Agent may exercise its rights hereunder in its
sole and reasonable judgement. In addition, without the Agent's express
consent and endorsement in writing, the Company agrees: (a) not to
execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders; to grant any extensions of the maturity
of, time of payment for, or
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time of presentation of, any drafts, acceptances or documents; or to
agree to any amendments, renewals, extensions, modifications, changes
or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; and (b) after
the occurrence of an Event of Default which is not cured within any
applicable grace period, if any, or waived by the Agent, not to (i)
clear and resolve any questions of non-compliance of documents, or (ii)
give any instructions as to acceptances or rejection of any documents
or goods.
(7) The Company agrees that: (a) any necessary import, export or other
licenses or certificates for the import or handling of the Collateral
will have been, or will when required be, promptly procured; (b) all
foreign and domestic governmental laws and regulations in regard to the
shipment and importation of the Collateral, or the financing thereof
will have been promptly and fully complied with when required; and (c)
any certificates in that regard that the Agent may at any time request
will be promptly furnished when required. In connection herewith, the
Company represents and warrants that all shipments made under any such
Letters of Credit are in accordance with the laws and regulations of
the countries in which the shipments originate and terminate, and are
not prohibited by any such laws and regulations. The Company assumes
all risk, liability and responsibility for, and agrees to pay and
discharge, all present and future local, state, provincial, federal or
foreign Taxes, duties, or levies in connection with the handling,
shipment, importation or otherwise of the Collateral in connection with
the Letters of Credit or the transactions contemplated thereby. Any
embargo, restriction, laws, customs or regulations of any country,
state, city, or other political subdivision, where the Collateral is or
may be located, or wherein payments are to be made, or wherein drafts
may be drawn, negotiated, accepted, or paid, shall be solely the
Company's risk, liability and responsibility.
(8) Upon any payments made to the Issuing Bank under the Letter of Credit
Guarantee, the Agent on behalf of the Lenders shall acquire by
subrogation, any rights, remedies, duties or obligations granted or
undertaken by the Company to the Issuing Bank in any application for
Letters of Credit, any standing agreement relating to Letters of Credit
or otherwise, all of which shall be deemed to have been granted to the
Agent on behalf of the Lenders and apply in all respects to the Agent
and shall be in addition to any rights, remedies, duties or obligations
contained herein.
SECTION 6 ACCEPTANCES AND DRAFTS
(1) The Agent agrees, on the terms and conditions of this Financing
Agreement and from time to time on any Business Day prior to the
Anniversary Date to
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either (i) create acceptances ("BANKERS' ACCEPTANCES") by accepting
Drafts and to purchase such Bankers' Acceptances in accordance with
Section 6(6), or (ii) to purchase completed Drafts (which have not and
will not be accepted by the Agent or any other Lender) in accordance
with Section 6(6).
(2) Each Drawing shall be in a minimum Face Amount of $1,000,000 and in an
integral multiple of $100,000, and shall consist of the creation and
purchase of Bankers' Acceptances or the purchase of Drafts on the same
day, in each case for the Drawing Price, effected or arranged by the
Agent in accordance with Section 6(5) to Section 6(8).
(3) If the Agent determines that the Bankers' Acceptances to be created and
purchased or Drafts to be purchased on any Drawing (upon a conversion
or otherwise) will not be created and purchased rateably by the Lenders
in accordance with Section 6(1) and Section 6(2), then the requested
Face Amount of Bankers' Acceptances and Drafts shall be reduced to such
lesser amount as the Agent determines will permit rateable sharing and
the amount by which the requested Face Amount shall have been so
reduced shall be converted or continued, as the case may be, as a CIBC
Bank Rate Loan as either a Revolving Loan or as the Term Loan, as the
case may be, to be made contemporaneously with the Drawing.
(4) Each Draft presented by the Company shall (i) be in a minimum amount of
$1,000,000 and in an integral multiple of $100,000, (ii) be dated the
date of the Drawing, and (iii) mature and be payable by the Company (in
common with all other Drafts presented in connection with such Drawing)
on a Business Day which occurs approximately 30, 60 or 90 days at the
election of the Company after the Drawing Date and on or prior to the
Anniversary Date and which would not, in the opinion of the Agent,
conflict with the repayment as provided for herein of Revolving Loans
and the Term Loan.
(5) Each Drawing shall be made on notice given by the Company to the Agent
not later than 10:00 a.m. (Toronto time) on two Business Days notice.
Each such notice shall be irrevocable and binding on the Company and
shall specify (i) the Drawing Date, (ii) whether the Drawing is to be
made as a Revolving Loan or the Term Loan, (iii) the aggregate Face
Amount of Drafts to be accepted and purchased (or purchased, as the
case may be), and (iv) the contract maturity date for the Drafts.
(6) Not later than 2:00 p.m. (Toronto time) on an applicable Drawing Date,
each Lender shall complete one or more Drafts in accordance with the
Drawing notice and either (i) accept the Drafts and purchase the
Bankers' Acceptances so created for the Drawing Price, or (ii) purchase
the Drafts for the Drawing Price. In each case, upon receipt of the
Drawing Price and upon fulfilment of
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the applicable conditions precedent set forth in Section 2, the Agent
shall make funds available to the Company in accordance with Section 3
or 4, as the case may be.
(7) The Company shall, at the request of the Agent, issue one or more
non-interest bearing promissory notes (each a "BA EQUIVALENT NOTE")
payable on the date of maturity of the unaccepted Draft referred to
below, in such form as the Agent may specify and in a principal amount
equal to the Face Amount of, and in exchange for, any unaccepted Drafts
which the Agent has purchased or has arranged to have purchased in
accordance with Section 6(6).
(8) Bankers' Acceptances purchased by a Lender may be held by it for its
own account until the contract maturity date or sold by it at any time
prior to that date in any relevant Canadian market in such Person's
sole discretion.
(9) To enable the Lenders to create Bankers' Acceptances or complete Drafts
in the manner specified in this Section 6, the Company shall supply the
Agent with such number of Drafts as it may reasonably request, duly
endorsed and executed on behalf of the Company. The Agent will exercise
such care in the custody and safekeeping of Drafts as it would exercise
in the custody and safekeeping of similar property owned by it and
will, upon request by the Company, promptly advise the Company of the
number and designations, if any, of uncompleted Drafts held by it for
the Company. The signature of any officer of the Company on a Draft may
be mechanically reproduced and BA Instruments bearing facsimile
signature shall be binding upon the Company as if they had been
manually signed. Even if the individuals whose manual or facsimile
signature appears on any BA Instrument no longer hold office at the
date of signature, at the date of its acceptance by the Agent or at any
time after such date, any BA Instrument so signed shall be valid and
binding upon the Company.
(10) Upon the maturity of a BA Instrument, the Company may (i) elect to
issue a replacement BA Instrument by giving a Drawing notice in
accordance with Section 6(1) and Section 6(5), (ii) elect to have all
or a portion of the Face Amount of the BA Instrument converted to an
advance as a CIBC Bank Rate Loan by giving a written notice in
accordance with Section 3(1), or (iii) pay, on or before 10:00 a.m.
(Toronto time) on the maturity date for the BA Instrument, an amount in
Canadian Dollars equal to the Face Amount of the BA Instrument
(notwithstanding that the Lender may be the holder of it at maturity).
Any such payment shall satisfy the Company's obligations under the BA
Instrument to which it relates and the relevant Lender shall then be
solely responsible for the payment of the BA Instrument.
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(11) If the Company fails to pay any BA Instrument when due or issue a
replacement in the Face Amount of such BA Instrument pursuant to
Section 6(10), the unpaid amount due and payable shall be converted to
a CIBC Bank Rate Loan made by the Lenders rateably as a Revolving Loan
and shall bear interest calculated and payable as provided in Section
8. This conversion shall occur as of the due date and without any
necessity for the Company to give a borrowing notice.
(12) If, by reason of circumstances affecting the money market generally,
there is no market for Bankers' Acceptances (i) the right of the
Company to request a Drawing shall be suspended until the circumstances
causing a suspension no longer exist, and (ii) any Drawing notice which
is outstanding shall be deemed to be a borrowing notice for a CIBC Bank
Rate Loan.
SECTION 7 REPRESENTATIONS, WARRANTIES AND COVENANTS
(1) The Company represents and warrants to the Agent and the Lenders,
acknowledging and confirming that the Agent and the Lenders are relying
on such representations and warranties without independent inquiry in
entering into this Financing Agreement that:
(a) The Company is a corporation duly incorporated, organized and
validly existing under the laws of the Province of Ontario.
The Company is qualified, licensed or registered to carry on
business under the laws applicable to it in all jurisdictions
in which such qualification, licensing or registration is
necessary or where the failure to be so qualified would have a
Material Adverse Effect;
(b) The Company has all requisite corporate power and authority to
(i) own, lease and operate its properties and assets and to
carry on its business as now being conducted by it, and (ii)
enter into and perform its obligations under the Loan
Documents to which it is a party;
(c) Except as set forth in Schedule 8, the execution and delivery
by the Company and the performance by it of its respective
obligations under, and compliance with the terms, conditions
and provisions of, the Loan Documents to which it is a party
will not (i) conflict with or result in a breach of any of the
terms or conditions of (t) its constating documents or
by-laws, (u) any applicable law, rule or regulation, (v) any
loan agreement, mortgage, deed of trust, note, security or
pledge agreement, indenture or other contract or contractual
restriction binding on it, or the Parent or Sterling NRO, Ltd.
or affecting any of their respective assets or properties, or
(w) any judgment, injunction, determination or award which is
binding on it, or (ii) result in, require or permit (x) the
imposition of any encumbrance in, on or with respect
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to any of its assets or property (except in favour of the
Agent and the Lenders), (y) the acceleration of the maturity
of any Debt binding on or affecting the Company, or (z) any
third party to terminate or acquire rights under any Material
Agreement;
(d) The execution and delivery of each of the Loan Documents by
the Company and the performance by the Company of its
obligations under the Loan Documents have been duly authorized
by all necessary corporate action including, without
limitation, the obtaining of all necessary shareholder
consents. Except as set forth in Schedule 8, no authorization,
consent, approval, registration, qualification, designation,
declaration or filing with any governmental entity or other
Person, is or was necessary in connection with the execution,
delivery and performance of the Company's obligations under
the Loan Documents except as are in full force and effect,
unamended, at the date of this Financing Agreement;
(e) This Agreement and the other Loan Documents have been duly
executed and delivered by the Company and constitute legal,
valid and binding obligations of the Company enforceable
against it in accordance with their respective terms, subject
only to any limitation under applicable laws relating to (i)
bankruptcy, insolvency, arrangement or creditors' rights
generally, and (ii) the discretion that a court may exercise
in the granting of equitable remedies;
(f) The Company possesses all material authorizations, permits,
consents, registrations and approvals necessary to properly
conduct its business at full operating capacity and all such
authorizations, permits, consents, registrations and approvals
are in good standing and in full force and effect and a
complete list of such authorizations, permits, consents,
registrations and approvals is listed in Schedule 1.
(g) The Company has no Debt other than Permitted Debt and without
limiting the generality of the foregoing the Company has not
guaranteed the obligations of any other Person, including
those of any Affiliate or those of the Parent.
(h) Except for Permitted Liens, the Company has good and
marketable title in fee simple to the Owned Properties and
good and merchantable title to all the tangible and intangible
personal property reflected as assets in its books and records
in each case free and clear of any Liens. The Company owns,
leases or has the lawful right to use all of the assets
necessary for the conduct of its business at full operating
capacity;
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(i) The Company (i) does not own any real property other than the
Owned Properties, (ii) is not bound by any agreement to own or
lease any real property other than the Leases, or (iii) has
not leased any of its Owned Properties;
(j) Each Lease is in good standing and all amounts owing under it
have been paid by the Company;
(k) Except for matters set forth in the environmental report
delivered to the Agent from Xxxxxx Associates Ltd. and dated
July, 2001, each of the Subject Properties have been used and
is in use, and the Company is in material compliance with all
applicable laws, judgments and orders and rulings, guidelines
and decisions having force of law relating to the conduct of
its business and the ownership of its property;
(l) Except as set forth in Schedule 7, none of the Subject
Properties or other property or assets under the charge,
management or control of the Company (i) has ever been used by
any Person as a waste disposal site or a landfill, or (ii) has
ever had any asbestos, asbestos-containing materials, PCBs,
radioactive substances or aboveground or underground storage
systems, active or abandoned, located on, at or under it at
the date of this Financing Agreement; to the best knowledge of
the Company, no properties adjacent to any of the Subject
Properties are contaminated; there are no contaminants located
on, at or under any of the Subject Properties; and the Company
has not transported, removed or disposed of any waste to a
location outside of Canada as at the date of this Financing
Agreement;
(m) The Company is not in violation of its constating documents,
its by-laws or any shareholders' agreement applicable to it;
(n) The Company is not a party to any agreement or instrument or
subject to any restriction (including any restriction set
forth in its constating documents, by-laws or any
shareholders' agreement applicable to it) which has or, to the
best of its knowledge, in the future could reasonably be
expected to have a Material Adverse Effect;
(o) The Company is in compliance with all Material Agreements to
which it is a party and the Company is not, nor to the best of
the Company's knowledge, has any other party to any Material
Agreement defaulted under any of the Material Agreements. No
event has occurred which, with the giving of notice, lapse of
time or both, would constitute a default on the part of the
Company, and, to the knowledge of the
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Company, on the part of the other parties to the Material
Agreements, under, or in respect of, any Material Agreement.
There is no dispute regarding any Material Agreement to which
the Company is a party and, to the knowledge of the Company,
regarding any other Material Agreement. All Material
Agreements of the Company are set forth in Schedule 9;
(p) All books and records of the Company have been fully, properly
and accurately kept and completed and there are no material
inaccuracies or discrepancies of any kind contained or
reflected therein. The Company's books and records and other
data and information are available to the Company in the
ordinary course of its business;
(q) The Company has filed all tax and information returns which
are required to be filed. The Company has paid all taxes,
interest and penalties, if any, which have become due pursuant
to such returns or pursuant to any assessment received by it
other than those in respect of which liability based on such
returns is being contested in good faith and by appropriate
proceedings where adequate reserves have been established in
accordance with GAAP. Adequate provision for payment has been
made for taxes not yet due. There are no tax disputes existing
or pending involving the Company which could reasonably be
expected to have a Material Adverse Effect;
(r) The Company has no subsidiaries other than, upon its creation,
Sterling Australia.
(s) The September 30, 1999 and September 30, 2000 audited
financial statements of the Company, copies of each of which
have been furnished to the Agent, fairly present the
consolidated financial position of the Company at such dates
and the consolidated results of the operations and changes in
financial position of the Company for such period, all in
accordance with GAAP;
(t) Except as set forth in Schedule 5, there are no actions, suits
or proceedings pending, taken or to the Company's knowledge,
threatened, before or by any governmental entity or by or
against any elected or appointed public official or private
Person in Canada or elsewhere, and, to the knowledge of the
Company, no law which affects the Company has been enacted,
promulgated or applied which (i) challenges, or to the
knowledge of the Company, has been proposed which may
challenge, the validity or propriety of the transactions
contemplated under the Loan Documents or the documents,
instruments and agreements executed or delivered in
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connection therewith or related thereto, or (ii) could be
reasonably anticipated to have a Material Adverse Effect;
(u) All (i) forecasts and projections supplied to the Agent were
prepared in good faith, adequately disclosed all relevant
assumptions and are reasonable, and (ii) other written
information supplied to the Agent is true and accurate in all
material respects. There is no fact known to the Borrower
which could reasonably be expected to have a Material Adverse
Effect and which has not been fully disclosed to the Agent. No
event has occurred which could be reasonably anticipated to
have a Material Adverse Effect since the date of last
financial statements delivered to the Agent.
(2) The Company hereby represents, warrants and covenants that as of the
date of this Financing Agreement and after giving effect to the
transactions contemplated hereby and to the repayment of any
indebtedness owing by the Company to Sterling NRO, Ltd. (a) the fair
value of the Total Assets exceeds and will exceed, as the case may be,
the book value of the Total Liabilities; (b) the Company is and will
be, as the case may be, generally able to pay its debts as they become
due and payable; and (c) the Company does not and will not, as the case
may be, have unreasonably small capital to carry on its business as it
is currently conducted absent extraordinary and unforeseen
circumstances. The Company further represents and warrants that (i)
Schedule 1 hereto correctly and completely sets forth the Company's (A)
chief executive office, (B) Collateral locations, (C) trade names, and
(D) all the other information listed on said Schedule; (ii) except for
the Permitted Liens, after filing of financing statements in the
applicable registration offices at the locations set forth in Schedule
1, the security interests granted pursuant to any of the Loan Documents
constitute and shall at all times constitute valid, perfected first
priority liens on the Collateral (iii) except for the Permitted Liens,
the Company is, or will be, at the time additional Collateral is
acquired by it, the absolute owner or lessee, as applicable, of the
Collateral with full right to pledge, sell, consign, transfer and
create a security interest therein, free and clear of any and all
claims or liens in favour of others; (iv) the Company will, at its
expense, forever warrant and, at the Agent's request, defend the same
from any and all claims and demands of any other Person other than a
holder of a Permitted Encumbrance; (v) the Company will not grant,
create or permit to exist, any lien upon, or security interest in, the
Collateral, or any proceeds thereof, in favour of any other Person
other than the holders of the Permitted Liens; and that the Equipment
does not comprise a part of the Inventory of the Company; and (vi) the
Equipment is and will only be used by the Company in its business and
will not be held for sale or lease, or removed
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from its premises, or otherwise disposed of by the Company except as
otherwise permitted in this Financing Agreement.
(3) The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form
and scope as the Agent shall reasonably require. The Company agrees
that the Agent or its agents, and any of the Lenders who may wish to
accompany the Agent at their own cost and expense, may enter upon the
Company's premises at any time upon reasonable notice during normal
business hours, and from time to time in its reasonable business
judgement, for the purpose of inspecting the Collateral and any and all
records pertaining thereto. The Company agrees to afford the Agent
thirty (30) days prior written notice of any change in the location of
any Collateral, other than to locations, that as of the Closing Date,
are known to the Agent and at which the Agent has filed financing
statements and otherwise fully perfected its liens thereon. The Company
is also to advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of
the Collateral or on the security interests granted to the Agent
therein.
(4) The Company agrees to (a) execute and deliver to the Agent, from time
to time, solely for the Agent's convenience in maintaining a record of
the Collateral, such written statements, and schedules as the Agent may
reasonably require, designating, identifying or describing the
Collateral; and (b) provide the Agent, on request, with an appraisal of
the Inventory which appraisal shall be at the Company's expense and
otherwise acceptable to the Agent; provided however, that such
appraisal request shall be limited to one per Fiscal Year provided an
Event of Default has not occurred and is continuing. The Company's
failure, however, to promptly give the Agent such statements, or
schedules shall not affect, diminish, modify or otherwise limit the
Agent's and/or the Lenders' security interests in the Collateral.
(5) The Company agrees to comply with the requirements of all applicable
laws in order to grant to the Agent valid and perfected first security
interests in the Collateral, subject only to the Permitted Liens. The
Agent is hereby authorized by the Company to file (including pursuant
to the applicable terms of the PPSA) from time to time any financing
statements, continuations or amendments covering the Collateral whether
or not the Company's signature appears thereon. The Company hereby
consents to and ratifies any and all execution and/or filing of
financing statements, for such purpose, on or prior to the Closing Date
by the Agent. The Company agrees to do whatever the Agent may
reasonably request, from time to time, by way of: (a) filing notices of
liens, financing statements, amendments, renewals and continuations
thereof; (b) cooperating with the Agent's agents and employees; (c)
keeping Collateral records; (d) transferring proceeds of Collateral to
the
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Agent's possession; and (e) performing such further acts as the Agent
and/or the Lenders may reasonably require in order to effect the
purposes of this Financing Agreement.
(a) The Company agrees to maintain (or cause to be maintained), in
respect of itself and each of its subsidiaries, insurance at
all times with responsible insurance carriers and in such
amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company or
such subsidiaries, as the case may be, operate, such policies
to show the Agent and the Lenders as loss payees under a
mortgage clause in a form approved by the Insurance Bureau of
Canada and the equivalent governing body of the United States
of America, as applicable.
(b) Without limiting the generality of the foregoing, the Company
agrees to maintain insurance (or cause to be maintained) on
its Real Estate, Equipment and Inventory under such policies
of insurance, with such insurance companies, in such
reasonable amounts and covering such insurable risks as are at
all times reasonably satisfactory to the Agent. All policies
covering the Real Estate, Equipment and Inventory are, subject
to the rights of any holders of Permitted Liens holding claims
senior to the Agent, to be made payable to the Agent, on
behalf of the Lenders, in case of loss, under a standard
non-contributory "MORTGAGEE", "LENDER" or "SECURED PARTY"
clause and are to contain such other provisions as the Agent
may require to fully protect the Agent's interest in the Real
Estate, Inventory and Equipment and to any payments to be made
under such policies. All original policies or true copies
thereof are to be delivered to the Agent, premium prepaid,
with the loss payable endorsement in the Agent's favour, and
shall provide for not less than thirty (30) days prior written
notice to the Agent of the exercise of any right of
cancellation. At the Company's request, or if the Company
fails to maintain such insurance, the Agent may arrange for
such insurance, but at the Company's expense and without any
responsibility on the Agent's part for: (i) obtaining the
insurance; (ii) the solvency of the insurance companies; (iii)
the adequacy of the coverage; or (iv) the collection of
claims. Upon the occurrence of an Event of Default which is
not waived in writing by the Required Lenders, the Agent
shall, subject to the rights of any holders of Permitted Liens
holding claims senior to the Agent, have the sole right and at
its option, in the name of the Agent or the Company, to file
claims under any insurance policies, to receive, receipt and
give acquittance for any payments that may be payable
thereunder, and to
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execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement
of any claims under any such insurance policies.
(c)
(i) In the event of any loss or damage by fire or other
casualty, insurance proceeds relating to Inventory
shall first reduce the Company's Revolving Loans,
then the Term Loan. Upon the occurrence of a Default
or Event of Default, such Insurance Proceeds may be
applied to the Obligations in such order as the Agent
may elect;
(ii) In the event any part of any of the Company's Real
Estate or Equipment is damaged by fire or other
casualty and the Insurance Proceeds for such damage
or other casualty is less than or equal to $100,000,
the Agent shall promptly apply such Proceeds to
reduce the Company's outstanding balance in the
Revolving Loan Account. Upon the occurrence of a
Default or Event of Default, such Insurance Proceeds
may be applied to the Obligations in such order as
the Agent may elect;
(iii) Absent the occurrence of an Event of Default, and
provided that (x) the Company has sufficient business
interruption insurance to replace the lost profits of
such Company's facilities, and (y) the Insurance
Proceeds are in excess of $100,000 the Company may
elect (by delivering written notice to the Agent) to
replace, repair or restore such Real Estate or
Equipment to substantially the equivalent condition
prior to such fire or other casualty as set forth
herein; provided, however, that the Company may use
up to $1,000,000 worth of Insurance Proceeds in
respect of the business interruption insurance Policy
Number 509/EN970616 pertaining to a pre-existing
claim under such policy related to the Thunder Bay
property listed in Schedule 4 for Capital
Expenditures, provided such Capital Expenditures are
made in compliance with Section 7(13)(c). If the
Company does not, or cannot, elect to use the
Insurance Proceeds as set forth above, the Agent may,
subject to the rights of any holders of Permitted
Liens holding claims senior to the Agent, apply the
Insurance Proceeds to the payment of the Obligations
in such manner and in such order as the Agent may
reasonably elect; and
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(iv) If the Company elects to use the Insurance Proceeds
for the repair, replacement or restoration of any
Real Estate and/or Equipment, and there is then no
Event of Default, (x) Insurance Proceeds for any loss
less than or equal to $100,000 will be applied to the
repair, replacement or restoration of any Real Estate
and/or Equipment (such amount not to be included in
the calculation of Capital Expenditures under Section
7(13)(c)), (y) Insurance Proceeds for any loss in
excess of $100,000 on Equipment and/or Real Estate
will be applied to the reduction of the Revolving
Loans and (z) the Agent may set up an Availability
Reserve in an amount equal to said Insurance Proceeds
referred to in (y). The Availability Reserve will be
reduced dollar-for-dollar upon receipt of
noncancelable executed purchase orders, delivery
receipts or contracts for the replacement, repair or
restoration of Equipment and/or the Real Estate and
disbursements in connection therewith. Prior to the
commencement of any material restoration, repair or
replacement of Real Estate, the Company shall provide
the Agent with a restoration plan and a total budget
certified by an independent third party experienced
in construction costing. If there are insufficient
Insurance Proceeds to cover the cost of restoration
as so determined, the Company shall be responsible
for the amount of any such insufficiency, prior to
the commencement of restoration and shall demonstrate
evidence of such before the reserve will be reduced.
Completion of restoration shall be evidenced by a
final, unqualified certification of the design
architect employed, if any; an unconditional
Certificate of Occupancy, if applicable; such other
certification as may be required by law; or if none
of the above is applicable, a written good faith
determination of completion by the Company (herein
collectively the "COMPLETION"). Upon Completion, any
remaining reserve as established hereunder will be
automatically released.
(d) In the event the Company fails to provide the Agent with
timely evidence, acceptable to the Agent, of its maintenance
of insurance coverage required pursuant this to Section 7(5)
above, the Agent may purchase, at the Company's expense,
insurance to protect the Agent's interests in the Collateral.
The insurance acquired by the Agent may, but need not, protect
the Company's interest in the Collateral, and therefore such
insurance may not pay claims which the Company may have with
respect to the Collateral or pay any claim which may be made
against the Company in connection with the Collateral. In the
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event the Agent purchases, obtains or acquires insurance
covering all or any portion of the Collateral, the Company
shall be responsible for all of the applicable costs of such
insurance, including premiums, interest (at the applicable
CIBC Bank Rate for Revolving Loans set forth in Section 8(1)
hereof), fees and any other charges with respect thereto,
until the effective date of the cancellation or the expiration
of such insurance. The Agent may charge all of such premiums,
fees, costs, interest and other charges to the Company's
Revolving Loan Account. The Company hereby acknowledges that
the costs of the premiums of any insurance acquired by the
Agent may exceed the costs of insurance which the Company may
be able to purchase on its own. In the event that the Agent
purchases such insurance, the Agent will notify the Company of
said purchase within thirty (30) days of the date of such
purchase. If, within thirty (30) days after the date of such
notice, the Company provides the Agent with proof that the
Company had the insurance coverage required pursuant to 7.5(a)
above (in form and substance satisfactory to the Agent) as of
the date on which the Agent purchased insurance and the
Company continued at all times to have such insurance, then
the Agent agrees to cancel the insurance purchased by the
Agent and credit the Company's Revolving Loan Account with the
amount of all costs, interest and other charges associated
with any insurance purchased by the Agent, including with any
amounts previously charged to the Revolving Loan Account.
(6) The Company agrees to pay, when due, all Taxes, including sales taxes,
assessments, claims and other charges lawfully levied or assessed upon
the Company or the Collateral unless such Taxes are being diligently
contested in good faith by the Company by appropriate proceedings and
adequate reserves are established in accordance with GAAP.
Notwithstanding the foregoing, if any lien shall be filed or claimed
thereunder (a) for Taxes due any governmental authority, or (b) which
in the Agent's opinion might create a valid obligation having priority
over the rights granted to the Agent herein (exclusive of Real Estate),
such lien shall not be deemed to be a Permitted Encumbrance hereunder
and the Company shall immediately pay such tax and remove the lien of
record. If the Company fails to do so promptly, then at the Agent's
election, the Agent may (i) create an Availability Reserve in such
amount as it may deem appropriate in its reasonable business judgement,
or (ii) upon the occurrence of a Default or Event of Default, imminent
risk of seizure, filing of any priority lien, forfeiture, or sale of
the Collateral, pay Taxes on the Company's behalf, and the amount
thereof shall be an Obligation secured hereby and due on demand.
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(7) The Company (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official,
which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the
business or operations of the Company, provided that the Company may
contest any acts, rules, regulations, orders and directions of such
bodies or officials in any reasonable manner which will not, in the
Agent's reasonable opinion, materially and adversely effect the Agent's
and/or the Lenders' rights or priority in the Collateral; (b) agrees to
comply with all environmental statutes, acts, rules, regulations or
orders as presently existing or as adopted or amended in the future,
applicable to the Collateral, the ownership and/or use of its real
property and operation of its business, which the failure to comply
with would have a material and adverse impact on the Collateral, or any
material part thereof, or on the operation of the business of the
Company; and (c) shall not be deemed to have breached any provision of
this Section 7(7) if (i) the failure to comply with the requirements of
this Section 7(7) resulted from good faith error or innocent omission,
(ii) the Company promptly commences and diligently pursues a cure of
such breach, and (iii) such failure is cured within (30) days following
the Company's receipt of notice of such failure, or if such cannot in
good faith be cured within thirty (30) days, then such breach is cured
within a reasonable time frame based upon the extent and nature of the
breach and the necessary remediation, and in conformity with any
applicable consent order, consensual agreement and applicable law.
(8) The Company agrees to safeguard, protect and hold all Inventory for the
Agent's account and make no disposition thereof except in the ordinary
course of its business of the Company, as herein provided. The Company
represents and warrants that Inventory will be sold and shipped by the
Company to its customers only in the ordinary course of the Company's
business, and then only on open account and on terms currently being
extended by the Company to its customers, provided that, absent the
prior written consent of the Agent, the Company shall not sell
Inventory on a consignment basis nor retain any lien or security
interest in any sold Inventory. Upon the sale, exchange, or other
disposition of Inventory, as herein provided, the security interest in
the Inventory provided for herein shall, without break in continuity
and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, Trade
Accounts Receivable, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sale, exchange
or disposition. As to any such sale, exchange or other disposition, the
Agent shall have all of the rights of an unpaid seller, including
stoppage in transit, replevin, rescission and reclamation. The Company
hereby agrees to immediately forward any and all proceeds of
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Collateral to the Depository Account, and to hold any such proceeds
(including any notes and instruments), in trust for the Agent, on
behalf of the Lenders, pending delivery to the Agent. Irrespective of
the Agent's perfection status in any and all of the General
Intangibles, including, without limitations, any Patents, Trademarks,
Copyrights or licenses with respect thereto, the Company hereby
irrevocably grants the Agent a royalty free license to sell, or
otherwise dispose or transfer, in accordance with Section 10(3) of this
Financing Agreement, and the applicable terms hereof, of any of the
Inventory upon the occurrence of an Event of Default which has not been
waived in writing by the Agent.
(9) The Company agrees at its own cost and expense to keep the Equipment in
as good and substantial repair and condition as the same is now or at
the time the lien and security interest granted herein shall attach
thereto, reasonable wear and tear excepted, making any and all repairs
and replacements when and where necessary. The Company also agrees to
safeguard, protect and hold all Equipment in accordance with the terms
hereof and subject to the Agent's security interest. Absent the Agent's
prior written consent, any sale, exchange or other disposition of any
Equipment shall be made by the Company in the ordinary course of
business and as set forth herein. The Company may, in the ordinary
course of its business, sell, exchange or otherwise dispose of
obsolete, surplus, redundant, derelict or non-operational Equipment
provided, however, that: (a) the then value of the Equipment so
disposed of in any Fiscal Year does not exceed $250,000 in the
aggregate; and (b) the proceeds of any such sales or dispositions shall
be held in trust by the Company for the Agent and shall be immediately
delivered to the Agent by deposit to the Depository Account, except
that the Company may retain and use such proceeds to purchase forthwith
replacement Equipment which the Company determines in its reasonable
judgment to have a collateral value at least equal to the Equipment so
disposed of or sold; provided, however, that the aforesaid right shall
automatically cease upon the occurrence of a Default or an Event of
Default which is not waived in writing by the Agent. Upon the sale,
exchange, or other disposition of the Equipment, as herein provided,
the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and
attach to, all proceeds, including any instruments for the payment of
money, Accounts, documents of title, shipping documents, chattel paper
and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, the
Agent and the Lenders shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, rescission and reclamation.
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(10) The Company possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date
and the Company shall maintain its rights in, and the value of, the
foregoing in the ordinary course of its business, including, without
limitation, by making timely payment with respect to any applicable
licensed rights. The Company shall deliver to the Agent, and/or shall
cause the appropriate party to deliver to the Agent, from time to time
such pledge or security agreements with respect to General Intangibles
(now or hereafter acquired) of the Company and its subsidiaries as the
Agent shall require to obtain valid first liens thereon. In furtherance
of the foregoing, the Company shall provide timely notice to the Agent
of any additional Patents, Trademarks, trade names, service marks,
Copyrights, brand names, trade names, logos and other trade
designations acquired or applied for subsequent to the Closing Date and
the Company shall execute such documentation as the Agent may
reasonably require to obtain and perfect its lien thereon. The Company
hereby confirms that it shall deliver, or cause to be delivered to the
Agent, any stock of any subsidiaries (other than the stock of Sterling
Australia if such stock is subject to a prior outstanding Lien in
favour of the financier to the Australia Project) issued subsequent to
the Closing Date together with the certificates evidencing such stock
with duly executed stock powers (undated and in blank), in accordance
with the applicable terms of a pledge agreement to be entered into by
the Company in form and content satisfactory to the Agent, and prior to
such delivery, shall hold any such stock in trust for the Agent. The
Company hereby irrevocably grants to the Agent a royalty-free,
non-exclusive license in the General Intangibles, including trade
names, Trademarks, Copyrights, Patents, licenses, and any other
proprietary and intellectual property rights and any and all right,
title and interest in any of the foregoing, for the sole purpose, upon
the occurrence of an Event of Default, of the right to: (i) advertise
for sale and sell or transfer any Inventory bearing any of the General
Intangibles, and (ii) make, assemble, prepare for sale or complete, or
cause others to do so, any applicable raw materials or Inventory
bearing any of the General Intangibles, including use of the Equipment
and Real Estate for the purpose of completing the manufacture of
unfinished goods, raw materials or work-in-process comprising
Inventory, and apply the proceeds thereof to the Obligations hereunder,
all as further set forth in this Financing Agreement and irrespective
of the Agent's lien and perfection in any General Intangibles.
(11) Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that,
unless the Agent shall have otherwise consented in writing, the Company
will furnish to the Agent: (a) within 90 days after the end of each
Fiscal Year of the Company, an audited Consolidated Balance Sheet,
with a Consolidating Balance Sheet
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attached thereto, as at the close of such year, and consolidated and
consolidating statements of profit and loss, cash flow and
reconciliation of surplus of the Company and all subsidiaries of the
Company and its consolidated subsidiaries for such year, audited by
chartered accountants selected by the Company and satisfactory to the
Agent; (b) within sixty (60) days after the end of each Fiscal Quarter,
a Consolidated Balance Sheet and Consolidating Balance Sheet as at the
end of such period and consolidated and consolidating statements of
profit and loss, cash flow and surplus of the Company and all
subsidiaries of the Company and its consolidated subsidiaries,
certified by an authorized financial or accounting officer of the
Company; (c) within thirty (30) days after the end of each month, a
Consolidated Balance Sheet as at the end of such period and statements
of profit and loss, cash flow and surplus of the Company and all
subsidiaries for such period, certified by an authorized financial or
accounting officer of the Company; (d) within thirty (30) days prior to
the beginning of each Fiscal Year, the Company shall provide to the
Agent, in a monthly format, a consolidated balance sheet, statement of
profit and loss, cash flow and surplus of the Company and its
consolidated subsidiaries, certified by an authorized financial or
accounting officer for the Company for the upcoming Fiscal Year, and
the Fiscal Year End totals provided should also include a consolidating
balance sheet and statement of profit and loss; and (e) from time to
time, such further information regarding the business affairs and
financial condition of the Company and/or any subsidiaries thereof as
the Agent may reasonably request, including without limitation (i) the
accountant's management practice letter and (ii) annual cash flow
projections in form satisfactory to the Agent. Each financial statement
which the Company is required to submit hereunder must be accompanied
by an officer's certificate, signed by executive officer, pursuant to
which any one such officer must certify that: (x) the financial
statement(s) fairly and accurately represent(s) the Company's financial
condition at the end of the particular accounting period, as well as
the Company's operating results during such accounting period, subject
to year-end audit adjustments; and (y) during the particular accounting
period: (A) there has been no Default or Event of Default under this
Financing Agreement, provided, however that if any such officer has
knowledge that any such Default or Event of Default has occurred during
such period, the existence of and a detailed description of same shall
be set forth in such officer's certificate; (B) the Company has not
received any notice of cancellation with respect to its property
insurance policies; (C) the Company has not received any notice that
could result in a material adverse effect on the value of the
Collateral taken as a whole; and (D) the exhibits attached to such
financial statement(s) constitute detailed calculations showing
compliance with all financial covenants contained in this Financing
Agreement. For the purposes of the financial statements to be
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delivered pursuant to this Section 7(11), the Company's subsidiaries
shall not include Sterling Australia.
(12) Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that,
without the prior written consent of the Agent, except as otherwise
herein provided, the Company will not and will cause each of its
subsidiaries (other than Sterling Australia) not to:
(a) Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment,
(whether as a result of a purchase money or title retention
transaction, or other security interest, or otherwise) to
exist on (i) any of the Collateral, or (ii) all present and
future property and assets of the Company solely dedicated to
the Bowater Project as listed on Schedule 10, or (iii) any
other assets, whether now owned or hereafter acquired, except
for the Permitted Liens;
(b) Incur or create any Debt other than the Permitted Debt;
(c) Except for Inventory sold in the ordinary course of business,
sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement or any other Loan Document or as consented
to in writing by the Agent, or (ii) either all or
substantially all of the Company's or such subsidiary's
assets, which do not constitute Collateral;
(d) Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, or existence,
re-incorporate or re-organize or enter into or engage in any
operation or activity materially different from that presently
being conducted by the Company, except that the Company may
change its corporate name or address; provided that: (i) the
Company shall give the Agent thirty (30) days prior written
notice thereof and (ii) the Company shall execute and deliver,
prior to or simultaneously with any such action, any and all
documents and agreements requested by the Agent to confirm the
continuation and preservation of all security interests and
liens granted to the Agent hereunder;
(e) Incorporate or acquire any subsidiaries other than Sterling
Australia;
(f) Permit any asbestos, asbestos-containing materials, PCBs,
radioactive substances or other contaminants which could
reasonably be expected to have a Material Adverse Effect to be
located on, at or under any of
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the Subject Properties. Permit any underground storage vessels
to be located or installed at any of the Subject Properties;
(g) Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any Person, firm, entity or corporation,
except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business, except for (x) any process or performance
guarantees not to exceed $12,000,000 in the aggregate made by
the Company solely in connection with the Australia Project,
provided that such guarantees shall not guarantee payment or
performance of any Debt, and (y) process and performance
guarantees made by the Company in the ordinary course of
business;
(h) Declare or pay any dividend or distributions of any kind on,
or purchase, acquire, redeem or retire, any of the capital
stock or equity interest, of any class whatsoever, whether now
or hereafter outstanding;
(i) Issue shares, or any options, warrants or securities
convertible into shares;
(j) Make any advance or loan to, or any investment in, any firm,
entity, Person or corporation, or purchase or acquire all or
substantially all of the stock or assets of any entity, Person
or corporation, except for, provided no Default or Event of
Default has occurred which is continuing or would result
therefrom and there is Availability of no less than
$10,000,000 after making such equity investments and/or loans,
equity investments in and/or loans to Sterling Australia
solely in respect of the Australia Project in an aggregate
amount not to exceed $7,500,000 for all such loans and/or
equity investments, and provided that (i) any stock acquired
or issued in connection with any such investments shall be
pledged to the Agent and the Lenders, and (ii) any such loans
are evidenced by a promissory note in favour of the Company
which is assigned to the Agent and the Lenders as Collateral,
in each case, on terms and conditions and pursuant to
agreements in form and content satisfactory to the Agent,
subject in each case only to a prior ranking Lien in favour of
the financiers to the Australia Project, the priority of
which, if so requested, the Agent for itself and on behalf of
the Lenders, agrees to acknowledge in an agreement in form and
content satisfactory to the Agent and its counsel, acting
reasonably.
(k) Pay any management, consulting or other similar fees to any
Person, corporation or other entity affiliated with the
Company other than as is
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consistent with past practice and which does not exceed
$3,000,000 in the aggregate in any Fiscal Year; or
(l) Change its Fiscal Year;
(m) Allow any amendments to any Material Agreements to which the
Company is a party;
(n) Make any repayments with respect to indebtedness owing by the
Company to Sterling NRO, Ltd. except (i) as provided under
Section 3(1)(a) and Section 4(2), and (ii) provided (x) no
Default or Event of Default has occurred and is continuing and
(y) there is Availability of at least $5,000,000 after giving
effect to such payment, for $1,175,000 to be paid by the
Company solely to fund Sterling NRO Ltd.'s withholding tax
liabilities payable to the Canada Customs & Revenue Agency on
August 15, 2001; or
(o) Change its historical practices in effect on the date of this
Financing Agreement with respect to the invoicing and
collection of accounts receivable.
(13) Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company shall:
(a) maintain at all times during each Fiscal Year ending below a
Net Worth of not less than the amount set forth below for the
applicable period:
FISCAL YEAR NET WORTH
(i) For the Fiscal Year ending September 30, 2001 $15,000,000
(ii) For the Fiscal Year ending September 30, 2002 $15,000,000
(iii) For the Fiscal Year ending September 30, 2003 $15,000,000
(iv) For the Fiscal Year ending September 30, 2004 $15,000,000
(v) For the Fiscal Year ending September 30, 2005
and for each Fiscal Year thereafter $15,000,000
(b) not enter into or permit any subsidiary (other than Sterling
Australia) to enter into any Operating Lease if after giving
effect thereto the
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aggregate obligations with respect to Operating Leases of the
Company during any Fiscal Year would exceed $5,000,000;
(c) without the prior written consent of the Agent, the Company
will not contract for, purchase, make expenditures for, lease
pursuant to a Capital Lease or otherwise incur obligations
with respect to Capital Expenditures (whether subject to a
security interest or otherwise) during any period below in the
aggregate amount in excess of the amount set forth for such
period:
(A) $4,000,000 for the period from July 16, 2001
to September 30, 2001;
(B) $10,000,000 for the Fiscal Year ending
September 30, 2002;
(C) $10,000,000 for the Fiscal Year ending
September 30, 2003;
(D) $7,000,000 for the Fiscal Year ending
September 30, 2004;
(E) $7,000,000 for the Fiscal Year ending
September 30, 2005;
(F) $7,000,000 for the Fiscal Year ending
September 30, 2006, and for each Fiscal Year
ending thereafter;
provided that any such amounts not spent on Capital
Expenditures during the period in (A) or in any Fiscal Year in
(B) to (F), as the case may be, may be carried forward to the
Fiscal Year referred to in (B) or the next Fiscal Year, as the
case may be;
(d) sustain a net income loss as determined in accordance with
GAAP in any Fiscal Year in excess of $5,000,000;
(e) maintain, at all times, a minimum ratio, calculated as at the
end of each month, of EBITDA for the twelve month period then
ended to Fixed Charges as at the end of such month, of no less
than 1.1:1; or
(f) maintain, at all times, a maximum ratio, calculated as at the
end of each month, of Debt as at the end of such month to
EBITDA for the twelve month period then ended, of no greater
than 2.00:1.
(14) The Company agrees to advise the Agent in writing of: (a) all
expenditures (actual or anticipated) in excess of $1,000,000 from the
budgeted amount
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therefor in any Fiscal Year for (i) environmental clean-up, (ii)
environmental compliance or (iii) environmental testing and the impact
of said expenses on the Company's Working Capital; and (b) any notices
the Company or any subsidiary receives from any local, provincial,
state or federal authority advising the Company of any environmental
liability (real or potential) stemming from the Company's operations,
its premises, its waste disposal practices, or waste disposal sites
used by the Company and to provide the Agent with copies of all such
notices if so required.
(15) The Company hereby agrees to indemnify and hold harmless the Agent and
its officers, directors, employees, attorneys and agents (each an
"INDEMNIFIED PARTY") from, and holds each of them harmless against, any
and all losses, liabilities, obligations, claims, actions, damages,
costs and expenses (including legal fees) and any payments made by the
Agent pursuant to any indemnity provided by the Agent with respect to
or to which any Indemnified Party could be subject insofar as such
losses, liabilities, obligations, claims, actions, damages, costs, fees
or expenses relate to, arise from or are with respect to the Loan
Documents, including without limitation those which may arise from or
relate to: (a) the Depository Account, the Blocked Accounts, the
lockbox and/or any other depository account and/or the agreements
executed in connection therewith; and (b) any and all claims or
expenses asserted against the Agent as a result of any environmental
pollution, hazardous material or environmental clean-up relating to the
Subject Properties; or any claim or expense which results from the
Company's operations (including, but not limited to, the Company's
off-site disposal practices) and use of the Real Estate, which the
Agent may sustain or incur (other than solely as a result of the
physical actions of the Agent on the Company's premises which are
determined to constitute gross negligence or willful misconduct by a
court of competent jurisdiction), all whether through the alleged or
actual negligence of such Person or otherwise, except and to the extent
that the same results solely and directly from the gross negligence or
willful misconduct of such Indemnified Party as finally determined by a
court of competent jurisdiction. The Company hereby agrees that this
indemnity shall survive termination of this Financing Agreement, as
well as payments of Obligations which may be due hereunder. The Agent
may, in its reasonable business judgement, establish such Availability
Reserves with respect to any claim made or threatened against or which
the Agent reasonably believes may be made against the Agent for which
indemnification is available hereunder as it may deem advisable under
the circumstances and, upon any termination hereof, hold such reserves
as cash reserves for any such contingent liabilities.
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(16) Except as permitted by Section 7(12)(j) of this Agreement, without the
prior written consent of the Agent, the Company agrees that it will not
enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with the Parent or
any subsidiary or affiliate of either the Company or Parent, provided
that, except as otherwise set forth in this Financing Agreement, the
Company may enter into sale, service and other transactions in the
ordinary course of its business and pursuant to the reasonable
requirements of the Company, and upon standard terms and conditions and
fair and reasonable terms, no less favorable to the Company than the
Company could obtain in a comparable arms length transaction with an
unrelated third party, provided further that no Default or Event of
Default exists or will occur hereunder prior to and after giving effect
to any such transaction.
SECTION 8 INTEREST, FEES AND EXPENSES
(1)
(a) Interest on the Revolving Loans shall be payable monthly in
arrears on the first day of the next month. Interest on
Revolving Loans which are (i) CIBC Bank Rate Loans shall be in
an amount equal to the CIBC Bank Rate plus two percent (2%)
per annum, and (ii) CIBC Base Rate Loans shall be in an amount
equal to the CIBC Base Rate plus two percent (2%), in each
case, calculated on the average of the net balances owing by
the Company to the Agent in the Revolving Loan Account at the
close of each day during such month. In the event of any
change in said CIBC Bank Rate or CIBC Base Rate, as the case
may be, the rate hereunder for CIBC Bank Rate Loans and CIBC
Base Rate Loans shall change, as of the date of such change,
so as to remain 2% above the CIBC Bank Rate and the CIBC Base
Rate, as the case may be. The rate hereunder for Revolving
Loans shall be calculated based on a 365-day year. The Agent
shall be entitled to charge the Company's Revolving Loan
Account at the rate provided for herein when due until all
Obligations have been paid in full.
(b) Notwithstanding any provision to the contrary contained in
this Section 8, in the event that the sum of (i) the
outstanding Revolving Loans and (ii) the outstanding Letters
of Credit exceed the lesser of either (x) the maximum
aggregate amount available under Section 3 and Section 5 of
this Financing Agreement or (y) the Revolving Line of Credit:
(A) as a result of Revolving Loans advanced by the Agent at
the request of the Company (herein "REQUESTED OVERADVANCES"),
for any one (1) or more days in any month, or (B) for any
other reason whatsoever (herein "OTHER OVERADVANCES") and such
Other
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Overadvances continue for five (5) or more days in any month ,
the average net balance of all Revolving Loans for such month
shall bear interest at the Overadvance Rate.
(c) Upon and after the occurrence of an Event of Default and the
giving of any required notice by the Agent in accordance with
the provisions of Section 10(2) hereof, all Obligations shall
bear interest at the Default Rate of Interest.
(2)
(a) Interest on the Term Loan shall be payable monthly in arrears
on the first day of the next month on the unpaid balance or on
payment in full prior to maturity. Interest on the Term Loans
which are the CIBC Bank Rate Loans shall be in an amount equal
to the CIBC Bank Rate plus two and one half percent (2.5%) per
annum. In the event of any change in said CIBC Bank Rate, the
rate hereunder for said CIBC Bank Rate shall change, as of the
date of such change, so as to remain 2.5% above the CIBC Bank
Rate.
(b) The rate hereunder shall be calculated based on a 365 day
year. The Agent shall be entitled to charge the Revolving Loan
Account at the rate provided for herein when due until all
Obligations have been paid in full.
(3) In consideration of the Letter of Credit Guarantee of the Agent, the
Company shall pay the Agent the Letter of Credit Guarantee Fee which
shall be an amount equal to (a) three and one half percent (3.5%) on
the face amount of each documentary Letter of Credit payable upon
issuance thereof and (b) three and one half percent (3.5%) per annum,
payable monthly, on the face amount of each standby Letter of Credit
less the amount of any and all amounts previously drawn under such
standby Letter of Credit.
(4) Any and all charges, fees, commissions, costs and expenses charged to
the Agent for the Company's account by any Issuing Bank in connection
with, or arising out of, Letters of Credit or out of transactions
relating thereto will be charged to the Revolving Loan Account in full
when charged to, or paid by the Agent, or as may be due upon any
termination of this Financing Agreement hereof, and when made by any
such Issuing Bank shall be conclusive on the Agent.
(5) The Company shall reimburse or pay the Agent, as the case may be, for:
(a) all Out-of-Pocket Expenses, (b) any Documentation Fee and (c) any
Field/Verification Fee.
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(6) Upon the last Business Day of each month, commencing on July 31, 2001,
the Company shall pay to the Agent the Line of Credit Fee. Interest
will be computed at the rate, and in the manner, set forth in Section
8(1) and Section 8(14) of this Financing Agreement.
(7) To induce the Agent to enter into this Financing Agreement and to
extend to the Company the Revolving Loan, Letters of Credit Guaranties
and the Term Loan, the Company shall pay to the Agent a Loan Facility
Fee in the amount of $1,125,500 payable upon execution of this
Financing Agreement.
(8) On the Closing Date and each anniversary of the Closing Date
thereafter, the Company shall pay to the Agent the annual
Administrative Management Fee in the amount of $200,000, which shall be
deemed fully earned when paid.
(9) The Company shall pay the Agent's standard charges and fees for the
Agent's personnel used by the Agent for reviewing the books and records
of the Company and for verifying, testing, protecting, safeguarding,
preserving or disposing of all or any part of the Collateral (which
fees shall be in addition to the Administrative Management Fee and any
Out-of-Pocket Expenses).
(10) The Company hereby authorizes the Agent to charge the Revolving Loan
Account with the amount of all payments due hereunder as such payments
become due. The Company confirms that any charges which the Agent may
so make to the Revolving Loan Account as herein provided will be made
as an accommodation to the Company and solely at the Agent's
discretion.
(11) In the event that the Agent or any Lender or any participant hereunder
(or any financial institution which may from time to time become a
participant or lender hereunder) shall have determined in the exercise
of its reasonable business judgement that, subsequent to the Closing
Date, any change in applicable law, rule, regulation or guideline
regarding capital adequacy, or any change in the interpretation or
administration thereof, or compliance by the Agent or such Lender or
such participant with any new request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Agent's or such Lender's
or such participant's capital as a consequence of its obligations
hereunder to a level below that which the Agent or such Lender or such
participant could have achieved but for such adoption, change or
compliance (taking into consideration the Agent or such Lender's or
such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by the Agent or such Lender or such
participant to be material, then, from time to time, the Company shall
pay no later than five (5) days following demand to the Agent or such
Lender or such participant such additional amount or amounts as will
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compensate the Agent's or such Lender's or such participant's for such
reduction. In determining such amount or amounts, the Agent or such
Lender or such participant may use any reasonable averaging or
attribution methods. The protection of this Section 8(11) shall be
available to the Agent or such Lender or such participant regardless of
any possible contention of invalidity or inapplicability with respect
to the applicable law, regulation or condition. A certificate of the
Agent or such Lender or such participant setting forth such amount or
amounts as shall be necessary to compensate the Agent or such Lender or
such participant with respect to this Section 8 and the calculation
thereof when delivered to the Company shall be conclusive on the
Company absent manifest error. Notwithstanding anything in this
paragraph to the contrary, in the event the Agent or such Lender or
such participant has exercised its rights pursuant to this paragraph,
and subsequent thereto determines that the additional amounts paid by
the Company in whole or in part exceed the amount which the Agent or
such Lender or such participant actually required to be made whole, the
excess, if any, shall be returned to the Company by the Agent or such
Lender or such participant.
(12) In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or
application thereof, or compliance by the Agent or such Lender or such
participant with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or
other authority, shall:
(a) subject the Agent or such Lender or such participant to any
tax of any kind whatsoever with respect to this Financing
Agreement or change the basis of taxation of payments to the
Agent or such Lender or such participant of principal, fees,
interest or any other amount payable hereunder or under any
other documents (except for changes in the rate of tax on the
overall net income of the Agent or such Lender or such
participant by the federal government or the jurisdiction in
which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held
by, or deposits in or for the account of, advances or loans
by, or other credit extended by the Agent or such Lender or
such participant by reason of or in respect to this Financing
Agreement and the Loan Documents; or
(c) impose on the Agent or such Lender or such participant any
other condition with respect to this Financing Agreement or
any other Loan Document, and the result of any of the
foregoing is to increase the cost to the Agent or such Lender
or such participant of making, renewing
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or maintaining its loans hereunder by an amount that the Agent
or such Lender or such participant deems to be material in the
exercise of its reasonable business judgement or to reduce the
amount of any payment (whether of principal, interest or
otherwise) in respect of any of the loans by an amount that
the Agent or such Lender or such participant deems to be
material in the exercise of its reasonable business judgement,
then, in any case the Company shall pay the Agent or such
Lender or such participant, within five (5) days following its
demand, such additional cost or such reduction, as the case
may be. The Agent or such Lender or such participant shall
certify the amount of such additional cost or reduced amount
to the Company and the calculation thereof and such
certification shall be conclusive upon the Company absent
manifest error. Notwithstanding anything in this paragraph to
the contrary, in the event the Agent or such Lender or such
participant has exercised its rights pursuant to this
paragraph, and subsequent thereto determine that the
additional amounts paid by the Company in whole or in part
exceed the amount which the Agent or such Lender or such
participant actually required pursuant hereto, the excess, if
any, shall be returned to the Company by the Agent or such
Lender or such participant.
(13) The Company may request LIBOR Loans on the following terms and
conditions:
(a) The Company may elect, subsequent to the Closing Date and from
time to time thereafter in connection with the Revolving Loans
(i) to request any Revolving Loan made hereunder to be a LIBOR
Loan as of the date of such loan or (ii) to convert CIBC Base
Rate Loans to LIBOR Loans, and may elect from time to time to
convert LIBOR Loans to CIBC Base Rate Loans by giving the
Agent at least three (3) Business Days' prior irrevocable
notice of such election, provided that any such conversion of
LIBOR Loans to CIBC Base Rate Loans shall only be made,
subject to the second following sentence, on the last day of
an Interest Period with respect thereto. Should the Company
elect to convert CIBC Base Rate Loans which are Revolving
Loans to LIBOR Loans, it shall give the Agent at least three
(3) Business Days' prior irrevocable notice of such election.
If the last day of an Interest Period with respect to a loan
that is to be converted is not a Business Day or Working Day,
then such conversion shall be made on the next succeeding
Business Day or Working Day, as the case may be, and during
the period from such last day of an Interest Period to such
succeeding Business Day, as the case may be, such loan shall
bear interest as if it were an CIBC Base Rate Loan. All or any
part of
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outstanding CIBC Base Rate Loans then outstanding with respect
to Revolving Loans may be converted to LIBOR Loans as provided
herein, provided that partial conversions shall be in
multiples of $100,000 and in an aggregate principal amount of
$1,000,000 or more. The aggregate amount of all such LIBOR
Loans shall not exceed $12,500,000 at any one time
outstanding.
(b) Any LIBOR Loans may be continued as such upon the expiration
of an Interest Period, provided the Company so notifies the
Agent, at least three (3) Business Days' prior to the
expiration of said Interest Period, and provided further that
no LIBOR Loan may be continued as such upon the occurrence of
any Default or Event of Default under this Financing
Agreement, but shall be automatically converted to a CIBC Base
Rate Loan on the last day of the Interest Period during which
occurred such Default or Event of Default. Absent such
notification, LIBOR Rate Loans shall convert to CIBC Base Rate
Loans on the last day of the applicable Interest Period. Each
notice of election, conversion or continuation furnished by
the Company pursuant hereto shall specify whether such
election, conversion or continuation is for a one, two, or
three month period. Notwithstanding anything to the contrary
contained herein, the Agent (or any participant, if
applicable) shall not be required to purchase United States
Dollar deposits in the London interbank market or from any
other applicable LIBOR Rate market or source or otherwise
"MATCH FUND" to fund LIBOR Rate Loans, but any and all
provisions hereof relating to LIBOR Rate Loans shall be deemed
to apply as if the Agent (and any participant, if applicable)
had purchased such deposits to fund any LIBOR Rate Loans.
(c) The Company may request a LIBOR Loan which is a Revolving
Loan, convert any CIBC Base Rate Loan to a LIBOR Loan or
continue any LIBOR Loan to a LIBOR Loan provided there is then
no Default or Event of Default in effect.
(14)
(a) The LIBOR Loans shall bear interest for each Interest Period
with respect thereto on the unpaid principal amount thereof at
a rate per annum equal to the LIBOR determined for each
Interest Period in accordance with the terms hereof plus 3.5%.
(b) If all or a portion of the outstanding principal amount of the
Obligations shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such outstanding
amount, to
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the extent it is a LIBOR Loan, shall be converted to a CIBC
Base Rate Loan at the end of the Interest Period therefor.
(c) The Company may not have more than three (3) LIBOR Loans
outstanding at any given time.
(15)
(a) Interest in respect of the LIBOR Loans shall be calculated on
the basis of a 365 day year and shall be payable as of the end
of each month on the first day of the next month.
(b) The Agent shall, at the request of the Company, deliver to the
Company a statement showing the quotations given by CIBC and
the computations used in determining any interest rate
pursuant to Section 8(14) hereof.
(16) As further set forth in Section 8(12) above, in the event that the
Agent (or any financial institution which may become a participant
hereunder) shall have determined in the exercise of its reasonable
business judgement (which determination shall be conclusive and binding
upon the Company) that by reason of circumstances affecting the
interbank LIBOR market, adequate and reasonable means do not exist for
ascertaining LIBOR applicable for any Interest Period with respect to:
(a) a proposed loan that the Company has requested be made as a LIBOR
Loan; (b) a LIBOR Loan that will result from the requested conversion
of a CIBC Base Rate Loan into a LIBOR Loan; or (c) the continuation of
LIBOR Loans beyond the expiration of the then current Interest Period
with respect thereto, the Agent shall forthwith give written notice of
such determination to the Company at least one day prior to, as the
case may be, the requested borrowing date for such LIBOR Loan, the
conversion date of such CIBC Base Rate Loan or the last day of such
Interest Period. If such notice is given (i) any requested LIBOR Loan
shall be made as a CIBC Base Rate Loan, (ii) any CIBC Base Rate Loan
that was to have been converted to a LIBOR Loan shall be continued as a
CIBC Base Rate Loan, and (iii) any outstanding LIBOR Loan shall be
converted, on the last day of then current Interest Period with respect
thereto, to a CIBC Base Rate Loan. In such case, until such notice has
been withdrawn by the Agent, no further LIBOR Loan shall be made nor
shall the Company have the right to convert a CIBC Base Rate Loan to a
LIBOR Loan.
(17) If any payment on a LIBOR Loan becomes due and payable on a day other
than a Business Day or Working Day, the maturity thereof shall be
extended to the next succeeding Business Day or Working Day unless the
result of such extension would be to extend such payment into another
calendar month in
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which event such payment shall be made on the immediately preceding
Business Day or Working Day.
(18) Notwithstanding any other provisions herein, if any law, regulation,
treaty or directive or any change therein or in the interpretation or
application thereof, shall make it unlawful for the Agent to make or
maintain LIBOR Loans as contemplated herein, the then outstanding LIBOR
Loans, if any, shall be converted automatically to CIBC Base Rate Loans
as of the end of such month, or within such earlier period as required
by law. The Company hereby agrees promptly to pay the Agent, upon
demand, any additional amounts necessary to compensate the Agent for
any costs incurred by the Agent in making any conversion in accordance
with this Section 8 including, but not limited to, any interest or fees
payable by the Agent to lenders of funds obtained by the Agent in order
to make or maintain LIBOR Loans hereunder.
(19) The Company agrees to indemnify and to hold the Agent (including any
participant) harmless from any loss or expense which the Agent or such
participant may sustain or incur as a consequence of: (a) Default by
the Company in payment of the principal amount of or interest on any
LIBOR Loans, as and when the same shall be due and payable in
accordance with the terms of this Financing Agreement, including, but
not limited to, any such loss or expense arising from interest or fees
payable by the Agent or such participant to lenders of funds obtained
by either of them in order to maintain the LIBOR Loans hereunder; (b)
default by the Company in making a borrowing or conversion after the
Company has given a notice in accordance with Section 8(13) hereof; (c)
any prepayment of LIBOR Loans on a day which is not the last day of the
Interest Period applicable thereto, including, without limitation,
prepayments arising as a result of the application of the proceeds of
Collateral to the Revolving Loans; and (d) default by the Company in
making any prepayment after the Company had given notice to the Agent
thereof. The determination by the Agent of the amount of any such loss
or expense, when set forth in a written notice to the Company,
containing the Agent's calculations thereof in reasonable detail, shall
be conclusive on the Company in the absence of manifest error.
Calculation of all amounts payable under this paragraph with regard to
LIBOR Loans shall be made as though the Agent had actually funded the
LIBOR Loans through the purchase of deposits in the relevant market and
currency, as the case may be, bearing interest at the rate applicable
to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans
and having a maturity comparable to the relevant interest period;
provided, however, that the Agent may fund each of the LIBOR Loans in
any manner the Agent sees fit and the foregoing assumption shall be
used only for calculation of amounts payable under this
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paragraph. In addition, notwithstanding anything to the contrary
contained herein, the Agent shall apply all proceeds of Collateral and
all other amounts received by it from or on behalf of the Company (i)
initially to the CIBC Base Rate Loans and (ii) subsequently to LIBOR
Loans; provided, however, (x) upon the occurrence of an Event of
Default or (y) in the event the aggregate amount of outstanding LIBOR
Rate Loans exceeds Availability or the applicable maximum levels set
forth therefor, the Agent may apply all such amounts received by it to
the payment of Obligations in such manner and in such order as the
Agent may elect in its reasonable business judgment. In the event that
any such amounts are applied to Revolving Loans which are LIBOR Loans,
such application shall be treated as a prepayment of such loans and the
Agent shall be entitled to indemnification hereunder. This covenant
shall survive termination of this Financing Agreement and payment of
the outstanding Obligations.
(20) Notwithstanding anything to the contrary in this Agreement, in the
event that, by reason of any Regulatory Change (for purposes hereof
"REGULATORY CHANGE" shall mean, with respect to the Agent, any change
after the date of this Financing Agreement in federal, state,
provincial or foreign law or regulations or the adoption or making
after such date of any interpretation, directive or request applying to
a class of banks including the Agent of or under any federal, state,
provincial or foreign law or regulations (whether or not having the
force of law and whether or not failure to comply therewith would be
unlawful)), the Agent either (a) incurs any material additional costs
based on or measured by the excess above a specified level of the
amount of a category of deposits or other liabilities of such bank
which includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Financing Agreement or a
category of extensions of credit or other assets of the Agent which
includes LIBOR Loans, or (b) becomes subject to any material
restrictions on the amount of such a category of liabilities or assets
which it may hold, then, if the Agent so elects by notice to the
Company, the obligation of the Agent to make or continue, or to convert
CIBC Base Rate Loans into LIBOR Loans hereunder shall be suspended
until such Regulatory Change ceases to be in effect.
(21) For purposes of this Financing Agreement and Section 8 hereof, any
reference to the Agent shall include any financial institution which
may become a participant or co-lender subsequent to the Closing Date.
SECTION 9 POWERS
(1) The Company hereby constitutes the Agent, or any Person or agent the
Agent may designate, as its attorney, at the Company's cost and
expense, to exercise
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all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to the Agent have been paid
in full:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of the Agent or the Company, any and all checks,
notes, drafts, and other documents or instruments relating to
the Collateral;
(b) To receive, open and dispose of all mail addressed to the
Company and to notify postal authorities to change the address
for delivery thereof to such address as the Agent may
designate;
(c) To request from customers indebted on Accounts at any time, in
the name of the Agent information concerning the amounts owing
on the Accounts;
(d) To request from customers indebted on Accounts at any time, in
the name of the Company, in the name of a chartered accountant
designated by the Agent or in the name of the Agent's
designee, information concerning the amounts owing on the
Accounts;
(e) To transmit to customers indebted on Accounts notice of the
Agent's interest therein and to notify customers indebted on
Accounts to make payment directly to the Agent for the
Company's account; and
(f) To take or bring, in the name of the Agent or the Company, all
steps, actions, suits or proceedings deemed by the Agent
necessary or desirable to enforce or effect collection of the
Accounts.
(2) Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (c), (e) and (f) above may only be exercised
after the occurrence of an Event of Default and until such time as such
Event of Default is cured or waived in writing by the Agent; provided
that the powers set forth in subsection (b) may only be exercised if
the Agent has commenced to exercise its rights and remedies under its
Collateral.
SECTION 10 EVENTS OF DEFAULT AND REMEDIES
(1) Notwithstanding anything hereinabove to the contrary, the Agent may
terminate this Financing Agreement immediately upon the occurrence of
any of the following Events of Default:
(a) cessation of the business of the Company or the calling of a
meeting of the creditors of the Company for purposes of
compromising the debts and obligations of the Company;
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(b) and of the Company, the Parent or any of the Parent's
subsidiaries fails to pay the principal of, or premium or
interest on, any of its Debt (excluding Debt under this
Financing Agreement) which is outstanding in an aggregate
principal amount exceeding $2,000,000 in the case of the
Company and U.S.$5,000,000 in the case of the Parent or any of
its subsidiaries (or the equivalent amount in any other
currency) when such amount becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand
or otherwise) and such failure continues after the applicable
grace period, if any, specified in the agreement or instrument
relating to the Debt or any other event occurs or condition
exists and continues after the applicable grace period, if
any, specified in any agreement or instrument relating to any
such Debt, if its effect is to accelerate, or permit the
acceleration of the Debt; or any such Debt shall be declared
to be due and payable prior to its stated maturity; provided,
however, that this Event of Default (b) shall not apply with
respect to the Parent and any of its subsidiaries in respect
of any obligations of the Parent or such subsidiaries incurred
prior to the Filing Date (as defined in the Parent Credit
Agreement);
(c) the commencement by the Company or the Parent of any
bankruptcy, insolvency, arrangement, restructuring,
reorganization, receivership, liquidation or similar
proceedings under any federal, state or provincial law; (ii)
the commencement against the Company or the Parent, of any
bankruptcy, insolvency, arrangement, restructuring,
reorganization, receivership, liquidation or similar
proceeding under any federal, state or provincial law by
creditors of the Company or the Parent, provided that such
Default shall not be deemed an Event of Default if such
proceeding is contested within ten (10) days and dismissed and
vacated within thirty (30) days of commencement, except in the
event that any of the actions sought in any such proceeding
shall occur or the Company or the Parent shall take action to
authorize or effect any of the actions in any such proceeding;
or (iii) the commencement (x) by the Company's subsidiaries
(other than Sterling Australia), or any one of them, of any
bankruptcy, insolvency, arrangement, restructuring,
reorganization, receivership, liquidation or similar
proceeding under any applicable state law, or (y) against the
Company's subsidiaries, or any one of them, of any involuntary
bankruptcy, insolvency, arrangement, restructuring,
reorganization, receivership, liquidation or similar
proceeding under applicable law, provided that such Default
shall not be deemed an Event of Default if such proceeding is
contested within ten (10) days and dismissed or vacated within
thirty (30) days of commencement, except in the event
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that any of the actions sought in any such proceeding shall
occur or the Company's subsidiaries, or any one of them, shall
take action to authorize or effect any of the actions in any
such proceeding; provided, however, that this Event of Default
(c) shall only apply to the Parent in respect of matters
arising after entry of an order closing the Chapter 11
Proceedings;
(d) any representation or warranty of the Company, the Parent,
Sterling NRO, Ltd. or any other Person contained herein or in
any other Loan Document shall prove to be incorrect in any
material respect when made or deemed to be made;
(e) breach by the Company, the Parent, Sterling NRO, Ltd. or any
other Person party to a Loan Document of a covenant contained
herein or in any other Loan Document provided that such
Default by the Company, the Parent, Sterling NRO, Ltd. or any
other Person party to a Loan Document, as the case may be, of
any of such covenants (other than those contained in Section
7(12) and Section 7(13)) shall not be deemed to be an Event of
Default unless and until such Default shall remain unremedied
to the Agent's reasonable satisfaction for a period of ten
(10) days from the date of such breach;
(f) without limiting the generality of any other provision of this
Section 10, the breach by the Company or Sterling NRO, Ltd of
the subordination agreement entered into among the Agent,
Sterling NRO, Ltd. and the Company;
(g) failure of the Company to make any required payment of
principal on the Term Loan or on the Revolving Loans when due
and failure of the Company to pay interest, any fee or other
amount owing hereunder or under any Loan Document within three
(3) Business Days of the due date thereof, provided that
nothing contained herein shall prohibit the Agent from
charging such amounts to the Revolving Loan Account on the due
date thereof;
(h) there is a Change of Control;
(i) the Company fails to perform or observe any term, covenant or
agreement contained in any Material Agreement to which it is a
party on its part to be performed or observed where such
failure could reasonably be expected to have a Material
Adverse Effect; or any Material Agreement is terminated or
revoked or permitted to lapse (other than in accordance with
its terms and not as a result of default); or any party to any
Material Agreement delivers a notice of
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termination or revocation (other than in accordance with its
terms and not as a result of default) in respect of the
Material Agreement;
(j) any judgment or order for the payment of money in excess of
$2,000,000 (net of insurance) (or the equivalent amount in any
other currency) is rendered against the Company and either (i)
enforcement proceedings have been commenced by a creditor upon
the judgment or order, or (ii) there is any period of fifteen
consecutive days during which a stay of enforcement of the
judgment or order, by reason of a pending appeal or otherwise,
is not in effect;
(k) the Company incurs any Environmental Liabilities which will
require expenditures, (i) for any one occurrence, in excess of
$2,000,000, or (ii) aggregating in any Fiscal Year on a
consolidated basis, $5,000,000.
(l) there has occurred, in the reasonable opinion of the Agent, an
event or development reasonably likely to have a Material
Adverse Effect;
(m) the audited consolidated financial statements of the Company
are qualified in any material and adverse respect by the
Company's independent auditor;
(n) a landlord consent and agreement in form and content
acceptable to the Agent and its counsel in respect of the
Thunder Bay property listed in Schedule 3 has not been
obtained and delivered to the Agent by August 17, 2001;
(o) an Event of Default (as therein defined) shall occur under the
Parent Credit Agreement;
(p) The Final Order in a form and content satisfactory to the
Agent, and its counsel is not issued within (30) days
following the granting of the Interim Order; or
(q) An order in form and content satisfactory to the Agent, the
Lenders and their counsel approving the assumption of the
"Inter-Sterling" Material Agreements listed in Schedule 9
hereto by the applicable entities is not entered by the
Bankruptcy Court within 45 days of the Filing Date (as defined
in the Parent Credit Agreement).
(2) Upon the occurrence of a Default and/or an Event of Default, the Agent
in its sole discretion may, or upon the written direction of the
Required Lenders the Agent shall, declare that, all loans, advances and
extensions of credit provided for in this Financing Agreement shall be
thereafter in the Agent's or the Required Lenders' sole discretion, and
the obligation of the Agent and/or
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the Lenders to make Revolving Loans, open Letters of Credit and provide
Letters of Credit Guarantees, shall cease unless such Default or Event
of Default is waived in writing by the Required Lenders or cured to the
Agent's or the Required Lenders' satisfaction in the exercise of the
Agent's and the Lenders' reasonable judgement. Upon the occurrence of
an Event of Default, the Agent in its sole discretion may, or upon the
written direction of the Required Lenders the Agent shall, declare
that: (a) all Obligations shall become immediately due and payable; (b)
the Agent may charge the Company the Default Rate of Interest on all
then outstanding or thereafter incurred Obligations in lieu of the
interest provided for in Section 8 of this Financing Agreement,
provided that, with respect to this clause "(B)" the Agent has given
the Company written notice of the Event of Default, provided further
however, that no notice is required if the Event of Default is the
Event listed in Section 10(1)(c); and (c) the Agent may immediately
terminate this Financing Agreement upon notice to the Company;
provided, however, that upon the occurrence of an Event of Default
listed in Section 10(1)(c), this Financing Agreement shall
automatically terminate and all Obligations shall become due and
payable, and all obligations of the Agent or any Lender to make
Revolving Loans or provide or arrange for Letters of Credit or Letter
of Credit Guarantees shall immediately cease, in each case, without any
action, declaration, notice or demand by the Agent. The exercise of any
option is not exclusive of any other option, which may be exercised at
any time by the Agent.
(3) Immediately upon the occurrence of any Event of Default, the Agent may,
to the extent permitted by law: (a) remove from any premises where same
may be located any and all books and records, computers, electronic
media and software programs associated with any Collateral (including
any electronic records, contracts and signatures pertaining thereto),
documents, instruments, files and records, and any receptacles or
cabinets containing same, relating to the Accounts, or the Agent may
use, at the Company's expense, such of the Company's personnel,
supplies or space at the Company's places of business or otherwise, as
may be necessary to properly administer and control the Accounts or the
handling of collections and realizations thereon; (b) bring suit, in
the name of the Company or the Agent, and generally shall have all
other rights respecting said Accounts, including without limitation the
right to: accelerate or extend the time of payment, settle, compromise,
release in whole or in part any amounts owing on any Accounts and issue
credits in the name of the Company or the Agent; (c) to the extent
permitted by law, sell, assign and deliver the Collateral and any
returned, reclaimed or repossessed Inventory, with or without
advertisement, at public or private sale, for cash, on credit or
otherwise, at the Agent's sole option and discretion, and the Agent may
bid or become a purchaser at any
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such sale, free from any right of redemption, which right is hereby
expressly waived by the Company; (d) foreclose the security interests
in the Collateral created herein or by the Loan Documents by any
available judicial procedure, or to take possession of any or all of
the Collateral, including any Inventory, Equipment and/or Other
Collateral without judicial process, and to enter any premises where
any Inventory and Equipment and/or Other Collateral may be located for
the purpose of taking possession of or removing the same; and (e)
exercise any other rights and remedies provided in law, in equity, by
contract or otherwise. The Agent shall have the right, without notice
or advertisement, to sell, lease, or otherwise dispose of all or any
part of the Collateral, whether in its then condition or after further
preparation or processing, in the name of the Company or the Agent, or
in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk,
for cash or for credit, with or without warranties or representations,
and upon such other terms and conditions as the Agent in its sole
discretion may deem advisable, and the Agent shall have the right to
purchase at any such sale. If any Inventory and Equipment shall require
rebuilding, repairing, maintenance or preparation, the Agent shall have
the right, at its option, to do such of the aforesaid as is necessary,
for the purpose of putting the Inventory and Equipment in such saleable
form as the Agent shall deem appropriate and any such costs shall be
deemed an Obligation hereunder. The Company agrees, at the request of
the Agent, to assemble the Inventory and Equipment and to make it
available to the Agent at premises of the Company or elsewhere
reasonably requested by the Agent and to make available to the Agent
the premises and facilities of the Company for the purpose of the
Agent's taking possession of, removing or putting the Inventory and
Equipment in saleable form. If notice of intended disposition of any
Collateral is required by law, it is agreed that fifteen (15) days
notice shall constitute reasonable notification and full compliance
with the law. The net cash proceeds resulting from the Agent's exercise
of any of the foregoing rights, (after deducting all charges, costs and
expenses, including reasonable legal fees) shall be applied by the
Agent to the payment of the Obligations, whether due or to become due,
in such order as the Agent may elect, and the Company shall remain
liable to the Agent for any deficiencies, and the Agent in turn agrees
to remit to the Company or its successors or assigns, any surplus
resulting therefrom. The enumeration of the foregoing rights is not
intended to be exhaustive and the exercise of any right shall not
preclude the exercise of any other rights, all of which shall be
cumulative. The Company hereby indemnifies the Agent and holds the
Agent harmless from any and all costs, expenses, claims, liabilities,
Out-of-Pocket Expenses or otherwise, incurred or imposed on the Agent
by reason of the exercise of any of its rights, remedies and interests
hereunder, including, without limitation, from any sale or transfer of
Collateral, preserving,
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maintaining or securing the Collateral, defending its interests in
Collateral (including pursuant to any claims brought by the Company,
the Company as debtor-in-possession, any secured or unsecured creditors
of the Company, any trustee or receiver in bankruptcy, or otherwise),
and the Company hereby agrees to so indemnify and hold the Agent
harmless, absent the Agent's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction. The foregoing
indemnification shall survive termination of this Financing Agreement
until such time as all Obligations (including the foregoing) have been
finally and indefeasibly paid in full. In furtherance thereof the
Agent, may establish such reserves for Obligations hereunder (including
any contingent Obligations) as it may deem advisable in its reasonable
business judgement. Any applicable debenture(s), debenture pledge
agreement(s), hypothec(s) or assignment(s) issued to the Agent on the
Real Estate shall govern the rights and remedies of the Agent thereto.
SECTION 11 TERMINATION
Except as otherwise permitted herein, the Agent may terminate this
Financing Agreement only as of the initial or any subsequent Anniversary Date
and then only by giving the Company at least sixty (60) days written notice of
termination prior to such Anniversary Date. Notwithstanding the foregoing the
Agent may terminate the Financing Agreement immediately upon the occurrence of
an Event of Default, provided, however, that if the Event of Default is an event
listed in Section 10(1)(c) of this Financing Agreement, this Financing Agreement
shall terminate in accordance with Section 10(2). This Financing Agreement,
unless terminated as herein provided, shall automatically continue from
Anniversary Date to Anniversary Date. The Company may terminate this Financing
Agreement at any time upon sixty (60) days' prior written notice to the Agent,
provided that the Company pays to the Agent immediately on demand an Early
Termination Fee. All Obligations shall become due and payable as of any
termination hereunder or under Section 10 hereof and, pending a final
accounting, the Agent may withhold any balances in the Company's account (unless
supplied with an indemnity satisfactory to the Agent) to cover all of the
Obligations, whether absolute or contingent, including, but not limited to, cash
reserves for any contingent Obligations, including an amount of 110% of the face
amount of any outstanding Letters of Credit with an expiry date on, or within
thirty (30) days of the effective date of termination of this Financing
Agreement. All of the Agent's rights, liens and security interests shall
continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 12 MISCELLANEOUS
(1) The Company hereby waives diligence, notice of intent to accelerate,
notice of acceleration, demand, presentment and protest and any notices
thereof as
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well as notice of nonpayment. No delay or omission of the Agent or the
Company to exercise any right or remedy hereunder, 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. No single or partial exercise by the Agent of any
right or remedy precludes any other or further exercise thereof, or
precludes any other right or remedy.
(2) This Financing Agreement and the Loan Documents (including all
confidentiality agreements previously executed by the Agent and the
Company and by each Lender and the Company) executed and delivered in
connection therewith constitute the entire agreement amongst the
Company, the Agent and the Lenders; supersede any prior agreements; can
be changed only by a writing signed by the Company, the Agent and the
Lenders; and shall bind and benefit the Company, the Agent and the
Lenders and their respective successors and assigns.
(3) In no event shall the Company, upon demand by the Agent for payment of
any Debt relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the
amount permitted by law. Regardless of any provision herein or in any
agreement made in connection herewith, the Agent shall never be
entitled to receive, charge or apply, as interest on any Debt relating
hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If the Agent ever receives, collects
or applies any such excess, it shall be deemed a partial repayment of
principal and treated as such; and if principal is paid in full, any
remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof, the Loan Documents and of any
other agreement made in connection herewith.
(4) If any provision hereof 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 severed provision as may be possible as agreed to between
the parties to reflect the original intent of the parties.
(5) No failure on the part of the Agent to exercise, and no delay in
exercising, any right under any of the Loan Documents shall operate as
a waiver of such right; nor shall any single or partial exercise of any
right under any of the Loan Documents preclude any other or further
exercise of such right or the exercise of any other right.
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(6) Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties shall not merge on and shall
survive the initial loans made and, notwithstanding such initial loans
made or any investigation made by or on behalf of any party, shall
continue in full force and effect. The closing of this transaction
shall not prejudice any right of one party against any other party in
respect of anything done or omitted under this Financing Agreement or
in respect of any right to damages or other remedies.
(7) The Debt of the Company resulting from loans made under this Financing
Agreement shall be evidenced by the records of the Agent which shall
constitute prima facie evidence of such Debt, absent manifest error.
(8) Any notice, direction or other communication to be given under this
Financing Agreement shall, except as otherwise permitted, be in writing
and given by delivering it or sending it by facsimile or other similar
form of recorded communication addressed:
(a) to the Company at:
000 Xxx Xxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) to the Agent at:
000 Xxxxx'x Xxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Any such communication shall be deemed to have been validly and
effectively given if (i) personally delivered, on the date of such
delivery if such date is a Business Day and such delivery was made
prior to 4:00 p.m. (Toronto time), otherwise on the next Business Day,
(ii) transmitted by facsimile or similar means of recorded
communication on the Business Day following the date of transmission.
Any party may change its address for service from time to time by
notice given in accordance with the foregoing and any subsequent notice
shall be sent to the party at its changed address.
(9) This Financing Agreement shall become effective when executed by the
Company and the Agent and after that time shall be binding upon and
enure to the benefit of the Company and the Agent and their respective
successors and permitted assigns.
(10) The Company shall not have the right to assign its rights or
obligations under this Financing Agreement or any interest in this
Financing Agreement without the prior consent of the Agent, which
consent may be arbitrarily withheld.
(11) Each Lender is authorized at any time and from time to time, upon and
during the continuance of an Event of Default, to the fullest extent
permitted by law (including general principles of common-law), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other Debt at any time owing
by it to or for the credit or the account of the Company against any
and all of the obligations of the Company under any of the Loan
Documents, irrespective of whether or not the Lender has made demand
under any of the Loan Documents and although such obligations may be
unmatured or contingent. If an obligation is unascertained, the Lender
may, in good faith, estimate the obligation and exercise its right of
set-off in respect of the estimate, subject to providing the Company
with an accounting when the obligation is finally determined. Each
Lender shall promptly notify the Company after any set-off and
application is made by it, provided that the failure to give notice
shall not affect the validity of the set-off and application. The
rights of the Lenders under this Section 12(11) are in addition to any
other rights and remedies (including all other rights of set-off) which
the Lenders may have.
(12)
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due to the Agent in any currency
(the "ORIGINAL CURRENCY") into another currency (the "OTHER
CURRENCY"), the parties agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be
that at which, in accordance with normal
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banking procedures, the Agent could purchase the Original
Currency with the Other Currency on the Business Day preceding
the day on which final judgment is given or, if permitted by
applicable law, on the day on which the judgment is paid or
satisfied.
(b) The obligations of the Company in respect of any sum due in
the Original Currency from it to the Agent under any of the
Loan Documents shall, notwithstanding any judgment in any
Other Currency, be discharged only to the extent that on the
Business Day following receipt by the Agent of any sum
adjudged to be so due in the Other Currency, the Agent may, in
accordance with normal banking procedures, purchase the
Original Currency with such Other Currency. If the amount of
the Original Currency so purchased is less than the sum
originally due to the Agent in the Original Currency, the
Company agrees, as a separate obligation and notwithstanding
the judgment, to indemnify the Agent, against any loss, and,
if the amount of the Original Currency so purchased exceeds
the sum originally due to the Lender in the Original Currency,
the Agent shall remit such excess to the Company.
(13) This Financing Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Ontario and the
federal laws of Canada applicable therein.
(14) This Financing Agreement may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
SECTION 13 AGREEMENT BETWEEN THE LENDERS
(1)
(a) The Agent, for the account of the Lenders, shall disburse all
loans and advances to the Company and shall handle all
collections of Collateral and repayment of Obligations. It is
understood that for purposes of advances to the Company and
for purposes of this Section 13 the Agent is using the funds
of the Agent.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Company that such Lender
will not make the amount which would constitute its share of
the borrowing on such date available to the Agent, the Agent
may assume that such Lender shall make such amount available
to the Agent on a Settlement Date, and the Agent may, in
reliance upon such assumption, make available to the Company a
corresponding amount. A certificate of the Agent
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submitted to any Lender with respect to any amount owing under
this subsection shall be conclusive, absent manifest error. If
such Lender's share of such borrowing is not in fact made
available to the Agent by such Lender on the Settlement Date,
the Agent shall be entitled to recover such amount with
interest thereon at the rate per annum applicable to Revolving
Loans hereunder, on demand, from the Company without prejudice
to any rights which the Agent may have against such Lender
hereunder. Nothing contained in this subsection shall relieve
any Lender which has failed to make available its ratable
portion of any borrowing hereunder from its obligation to do
so in accordance with the terms hereof. Nothing contained
herein shall be deemed to obligate the Agent to make available
to the Company the full amount of a requested advance when the
Agent has any notice (written or otherwise) that any of the
Lenders will not advance its ratable portion thereof.
(2) On the Settlement Date, the Agent and the Lenders shall each remit to
the other, in immediately available funds, all amounts necessary so as
to ensure that, as of the Settlement Date, the Lenders shall have their
proportionate share of all outstanding Obligations.
(3) The Agent shall forward to each Lender, at the end of each month, a
copy of the account statement rendered by the Agent to the Company.
(4) The Agent shall, after receipt of any interest and fees earned under
this Financing Agreement, promptly remit to the Lenders: (a) their pro
rata portion of all fees, provided, however, that the Lenders (other
than CIT in its role as the Agent) shall (i) not share in the
Administrative Management Fee or Documentation Fees; and (ii) receive
their share of the Loan Facility Fee in accordance with their
respective agreements with the Agent; (b) interest computed at the rate
and as provided for in Section 8 of this Financing Agreement on all
outstanding amounts advanced by the Lenders on each Settlement Date,
prior to adjustment, that are subsequent to the last remittance by the
Agent to the Lenders of the Company's interest; (c) its pro rata
portion of all principal repaid on the Term Loan; and (d) interest on
the Term Loan computed at the rate and as provided for in Section 8 of
this Financing Agreement.
(5)
(a) The Company acknowledge that the Lenders with the prior
written consent of the Agent may sell participation in the
loans and extensions of credit made and to be made to the
Company hereunder. The Company further acknowledge that in
doing so, the Lenders may
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grant to such participants certain rights which would require
the participant's consent to certain waivers, amendments and
other actions with respect to the provisions of this Financing
Agreement, provided that the consent of any such participant
shall not be required except for matters requiring the consent
of all Lenders hereunder as set forth in Section 14(10)
hereof.
(b) The Company authorize each Lender to disclose to any
participant or purchasing lender (each, a "TRANSFEREE") and
any prospective Transferee any and all financial information
in such Lender's possession concerning the Company and their
affiliates which has been delivered to such Lender by or on
behalf of the Company pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Company
in connection with such Lender's credit evaluation of the
Company and their affiliates prior to entering into this
Agreement, provided that such Transferee agrees to hold such
information in confidence in the ordinary course of its
business on the same terms as if such Transferee were an
original party to this Agreement.
(6) The Company hereby agree that each Lender is solely responsible for its
portion of the Line of Credit and that neither the Agent nor any Lender
shall be responsible for, nor assume any obligations for the failure of
any Lender to make available its portion of the Line of Credit.
Further, should any Lender refuse to make available its portion of the
Line of Credit, then the other Lender may, but without obligation to do
so, increase, unilaterally, its portion of the Line of Credit in which
event the Company are so obligated to that other Lender.
(7) In the event that the Agent, the Lenders or any one of them is sued or
threatened with suit by the Company or any one of them, or by any
receiver, trustee, creditor or any committee of creditors on account of
any preference, voidable transfer or lender liability issue, alleged to
have occurred or been received as a result of, or during the
transactions contemplated under this Financing Agreement, then in such
event any money paid in satisfaction or compromise of such suit,
action, claim or demand and any expenses, costs and legal fees paid or
incurred in connection therewith, whether by the Agent, the Lenders or
any one of them, shall be shared proportionately by the Lenders. In
addition, any costs, expenses, fees or disbursements incurred by
outside agencies or attorneys retained by the Agent to effect
collection or enforcement of any rights in the Collateral, including
enforcing, preserving or maintaining rights under this Financing
Agreement shall be shared proportionately between and among the Lenders
to the extent not reimbursed by the Company or from the proceeds of
Collateral. The provisions of this
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paragraph shall not apply to any suits, actions, proceedings or claims
that (x) predate the date of this Financing Agreement or (y) are based
on transactions, actions or omissions that predate the date of this
Financing Agreement.
(8) Each of the Lenders agrees with each other Lender that any money or
assets of the Company held or received by such Lender, no matter how or
when received, shall be applied to the reduction of the Obligations (to
the extent permitted hereunder) after (x) the occurrence of an Event of
Default and (y) the election by the Required Lenders to accelerate the
Obligations. In addition, the Company authorizes after the occurrence
and during the continuance of an Event of Default, the Lenders to,
without notice, set-off and apply against any and all property held by,
or in the possession of such Lender, the Obligations due such Lenders.
(9) Each Lender shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial
institutions all or a portion of its rights and obligations under this
Financing Agreement (including, without limitation, its obligations
under the Line of Credit, Term Loan, the Revolving Loans and its rights
and obligations with respect to Letters of Credit) with the consent of
the Company, such consent not to be unreasonably withheld; provided,
however, that no such consent shall be required after the occurrence
and during the continuance of a Default or Event of Default. Upon
execution of an Assignment and Transfer Agreement, (a) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
assignment, have the rights and obligations of the Agent as the case
may be hereunder and (b) the Agent shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations
under this Financing Agreement. The Company shall, if necessary,
execute any documents reasonably required to effectuate the
assignments. No other Lender may assign its interest in the loans and
advances and extensions of credit hereunder without the prior written
consent of the Agent. In the event that the Agent consents to any such
assignment by any other Lenders (i) the amount being assigned shall in
no event be less than the lesser of (x) $5,000,000 or (y) the entire
interest of such Lender hereunder, (ii) such assignment shall be of a
pro-rata portion of all of such assigning Lender's loans and
commitments hereunder and (iii) the parties to such assignment shall
execute and deliver to the Agent an Assignment and Transfer Agreement.
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SECTION 14 AGENCY
(1) Each Lender hereby irrevocably designates and appoints CIT as the Agent
for the Lenders under this Financing Agreement and any Loan Documents
and irrevocably authorizes CIT as the Agent for such Lender, to take
such action on its behalf under the provisions of this Financing
Agreement and all Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the
terms of this Financing Agreement and all Loan Documents together with
such other powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary elsewhere in this Financing Agreement,
the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any
Lender and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Financing Agreement
and the Loan Documents or otherwise exist against the Agent.
(2) The Agent may execute any of its duties under this Financing Agreement
and all Loan Documents by or through agents or attorneys-in-fact and
shall be entitled to the advice of counsel concerning all matters
pertaining to such duties.
(3) Neither the Agent nor any of its officers, directors, employees,
agents, or attorneys-in-fact shall be (i) liable to any Lender for any
action lawfully taken or omitted to be taken by it or such Person under
or in connection with this Financing Agreement and all Loan Documents
(except for its or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any of the Lenders
for any recitals, statements, representations or warranties made by the
Company or any officer thereof contained in this Financing Agreement
and all Loan Documents or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agent
under or in connection with, this Financing Agreement and all Loan
Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Financing Agreement and all Loan
Documents or for any failure of the Company to perform their
obligations thereunder. The Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of,
this Financing Agreement and all Loan Documents or to inspect the
properties, books or records of the Company.
(4) The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or
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other document or conversation believed by it in good faith to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall be
fully justified in failing or refusing to take any action under this
Financing Agreement and all Loan Documents unless it shall first
receive such advice or concurrence of the Lenders, or the Required
Lenders, as the case may be, as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking
or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Financing Agreement and all Loan Documents in accordance with a request
of the Lenders, or the Required Lenders, as the case may be, and such
request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders.
(5) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the
Agent has received written notice from a Lender or the Company
describing such Default or Event of Default. In the event that the
Agent receives such a notice, the Agent shall use reasonable efforts to
give notice thereof to the Lenders provided that any failure by the
Agent to do so shall not result in any liability of the Agent to the
Lenders or any other Person. The Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably
directed by the Lenders, or Required Lenders, as the case may be;
provided that unless and until the Agent shall have received such
direction, the Agent may in the interim (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to
such Default or Event of Default as it shall deem advisable and in the
best interests of the Lenders. In the event the Agent in its sole
discretion, or at the request of the Required Lenders, continues to
make Revolving Loans and advances under this Financing Agreement upon
the occurrence of a Default or Event of Default, any such Revolving
Loans and advances may be in such amounts (subject to Section 14(10)
hereof) and on such additional terms and conditions as the Agent or the
Required Lenders may deem appropriate.
(6) Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents or attorneys has made any
representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Company
shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without
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reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own appraisal of
and investigation into the business, operations, property, financial
and other condition and creditworthiness of the Company and made its
own decision to enter into this Financing Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking
action under the Financing Agreement and to make such investigation as
it deems necessary to inform itself as to the business, operations,
property, financial and other condition or creditworthiness of the
Company. The Agent, however, shall provide the Lenders with copies of
all financial statements, projections and business plans which come
into the possession of the Agent or any of its officers, employees,
agents or attorneys.
(7)
(a) The Lenders agree to indemnify the Agent in its capacity as
such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so), from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements (including, without limitation, all
Out-of-Pocket Expenses) of any kind whatsoever (including
negligence on the part of the Agent) which may at any time be
imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of this Financing Agreement or
any Loan Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this paragraph shall survive the
payment of the Obligations.
(b) The Agent will use its reasonable business judgement in
handling the collection of the Accounts, enforcement of its
rights hereunder and realization upon the Collateral but shall
not be liable to the Lenders for any action taken or omitted
to be taken in good faith or on the written advice of counsel.
The Lenders expressly release the Agent from any and all
liability and responsibility (express or implied), for any
loss, depreciation of or delay in collecting or failing to
realize on any Collateral, the Obligations or any guarantees
therefor and for any
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mistake, omission or error in judgment in passing upon or
accepting any Collateral or in making (or in failing to make)
examinations or audits or for granting indulgences or
extensions to the Company, any account debtor or any
guarantor, other than resulting from the Agent's gross
negligence or willful misconduct.
(8) The Agent may make loans to, and generally engage in any kind of
business with the Company as though the Agent were not the Agent
hereunder. With respect to its loans made or renewed by it or loan
obligations hereunder as Lender, the Agent shall have the same rights
and powers, duties and liabilities under this Financing Agreement as
any Lender and may exercise the same as though it was not the Agent and
the terms "LENDER" and "LENDERS" shall include the Agent in its
individual capacity.
(9) The Agent may resign as the Agent upon 30 days' notice (a) to the
Lenders and the Company (provided no Default or Event of Default has
occurred and is continuing) and (b) to the Lenders (upon the occurrence
and during the continuance of a Default or Event of Default) and, in
each case, such resignation shall be effective upon the appointment of
a successor Agent. If the Agent shall resign as Agent, then the Lenders
shall appoint a successor Agent for the Lenders which, provided no
Default or Event of Default has occurred and is continuing, must be
consented to by the Company, acting reasonably; provided, however, that
the consent of the Company shall not be required if the successor Agent
is a Lender. Such successor Agent shall succeed to the rights, powers
and duties of the Agent and the term "AGENT" shall mean such successor
agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the
parties to this Financing Agreement. After any retiring Agent's
resignation hereunder as the Agent the provisions of this Section 14
shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent.
(10) Notwithstanding anything contained in this Financing Agreement to the
contrary, the Agent will not, without the prior written consent of all
Lenders: (a) amend the Financing Agreement to (i) increase the Line of
Credit; (ii) reduce the interest rates; (iii) reduce or waive (x) any
fees in which the Lenders share hereunder, or (y) the repayment of any
Obligations due the Lenders; (iv) extend the maturity of the
Obligations; or (v) alter or amend (x) this Section 14(10) or (y) the
definitions of Eligible Accounts Receivable, Eligible Inventory,
Inventory Loan Cap, Collateral or Required Lenders, or (vi) increase
the advance percentages against Eligible Accounts Receivable or
Eligible Inventory or alter or amend the Agent's criteria for
determining compliance with such definitions of Eligible Accounts
Receivable and/or
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Eligible Inventory if the effect thereof is to increase Availability;
(b) except as otherwise required in this Financing Agreement, release
any guarantee or Collateral in excess of $500,000 during any Fiscal
Year, or (c) knowingly make any Revolving Loan or assist in opening any
Letter of Credit hereunder if after giving effect thereto the total of
Revolving Loans and Letters of Credit hereunder for the Company would
exceed one hundred and ten percent (110%) of the maximum amount
available under this Financing Agreement (the portion in excess of 100%
of such maximum available amount shall be referred to herein as the
"AGENT PERMITTED OVERADVANCES"), provided that the Agent shall not be
entitled to continue to knowingly make such Agent Permitted
Overadvances for a period in excess of ninety (90) days without the
Lenders' consent, and provided further that the foregoing limitations
shall not prohibit or restrict advances by the Agent to preserve and
protect Collateral. Subject to the provisions of Section 12(2) and the
provisions of this Section 14(10) of this Financing Agreement, in all
other respects the Agent is authorized by each of the Lenders to take
such actions or fail to take such actions under this Financing
Agreement and the Loan Documents if the Agent, in its reasonable
discretion, deems such to be advisable and in the best interest of the
Lenders. Notwithstanding any provision to the contrary contained in
this Financing Agreement (including the provisions of Section 12(2) and
Section 14(10) hereof) the Agent is authorized to take such actions or
fail to take such actions in connection with (a) the exercise of (i)
any and all rights and remedies under this Financing Agreement
(including but not limited to the exercise of rights and remedies under
Section 10(2) of this Financing Agreement) and (ii) its discretion in
(x) determining compliance with the eligibility requirements of
Eligible Accounts Receivable and/or Eligible Inventory and establishing
reserves against Availability in connection therewith and/or (y) the
making of Agent Permitted Overadvances, and/or (b) the release of
Collateral not to exceed $250,000 in the aggregate during any Fiscal
Year, and/or (c) curing any ambiguity, defect or inconsistency in the
terms of this Financing Agreement; provided that the Agent, in its
reasonable discretion, deems such to be advisable and in the best
interests of the Lenders. In the event the Agent terminates this
Financing Agreement pursuant to the terms hereof, the Agent will cease
making any loans or advances upon the effective date of termination
except for any loans or advances which the Agent may deem, in its sole
discretion, are reasonably required to maintain, protect or realize
upon the Collateral.
(11) In the event any Lender's consent is required pursuant to the
provisions of this Financing Agreement and such Lender does not respond
to any request by the Agent for such consent within 10 days after such
request is made to such Lender, such failure to respond shall be deemed
a refusal to consent. In addition, in the event that any Lender
declines to give its consent to any such
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request, it is hereby mutually agreed that the Agent and/or any other
Lender shall have the right (but not the obligation) to purchase such
Lender's share of the Loans for the full amount thereof together with
accrued interest thereon to the date of such purchase.
(12) Each Lender agrees that notwithstanding the provisions of Section 11 of
this Financing Agreement any Lender may terminate this Financing
Agreement and the Line of Credit only as of the initial or any
subsequent Anniversary Date and then only by giving the Agent 90 days
prior written notice thereof. Within 30 days after receipt of any such
termination notice, the Agent shall, at its option, either (i) give
notice of termination to the Company hereunder or (ii) purchase, or
arrange for the purchase of, the Lender's share of the Obligations
hereunder for the full amount thereof plus accrued interest thereon.
Unless so terminated and subject to Section 11, the Revolving Loans
shall be automatically extended from Anniversary Date to Anniversary
Date. Termination of this Financing Agreement by any of the Lenders as
herein provided shall not affect the Lenders' respective rights and
obligations under this Financing Agreement incurred prior to the
effective date of termination as set forth in the preceding sentence.
(13) If the Agent is required at any time to return to the Company or to a
trustee, receiver, liquidator, custodian or other similar official any
portion of the payments made by the Company to the Agent as result of a
bankruptcy or similar proceeding with respect to the Company, any
guarantor or any other Person or entity or otherwise, then each Lender
shall, on demand of the Agent, forthwith return to the Agent its
ratable share of any such payments made to such Lender by the Agent,
together with its ratable share of interest and/or penalties, if any,
payable by the Lenders; this provision shall survive the termination of
this Financing Agreement.
(14) The Lenders agree to maintain the confidentiality of any non-public
information provided by the Company to them, in the ordinary course of
their business, provided that the foregoing confidentiality provision
shall terminate one (1) year after the termination date of this
Financing Agreement, and provided further that any such Lenders may
disclose such information (i) to any applicable bank regulatory and
auditor Personnel and (ii) upon the advise of their counsel.
(15) For purposes of constituting security on any of the Collateral, present
or future, of the Company located or deemed located in the Province of
Quebec, as security for the due payment of the demand debenture (the
"DEMAND DEBENTURE") dated July 11, 2001 issued by the Company in favour
of the Agent and the Lenders in connection with this Financing
Agreement, the Company, the Lenders and the Agent hereby acknowledge,
accept and ratify
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the appointment by the Agent (in its capacity as the holder of the
Demand Debenture as Agent for the Lenders) of CIBC Mellon Trust Company
(the "TRUSTEE") as the holder of an irrevocable power of attorney for
the purposes of holding any security granted by the Company pursuant to
the laws of the Province of Quebec for all present and future Lenders
as contemplated in Article 2692 of the Civil Code of Quebec. Any party
which hereafter becomes a Lender hereunder pursuant to Section 13
hereof, shall be deemed to accept and ratify the power of attorney
granted to the Trustee. The Trustee has agreed to act in such capacity
for the benefit of all present and future Lenders. The Company, the
Agent and the Lenders agree that the Demand Debenture constitutes a
"title of indebtedness" within the meaning of such term as used in
Article 2692 of the Civil Code of Quebec.
93
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be effective, executed, accepted and delivered by their proper and
duly authorized officers as of the date set forth above.
CIT BUSINESS CREDIT CANADA
INC., AS AGENT AND LENDER
By:
--------------------------
Title:
By:
--------------------------
Title:
STERLING PULP CHEMICALS, LTD.
By:
--------------------------
Title:
By:
--------------------------
Title:
94
EXHIBIT A
TERM LOAN PROMISSORY NOTE
o, [200o]
$o
FOR VALUE RECEIVED, the undersigned, o, a o corporation (the
"COMPANY"), promises to pay to the order of CIT BUSINESS CREDIT CANADA INC. as
agent for the Lenders (herein "THE AGENT") at its office located at o, in lawful
money of Canada/ the United States of America and in immediately available
funds, the principal amount of o ($o.00) as follows: 1) o (o) equal o principal
installments of $o.00 each, followed by 2) one (1) final principal installment
of $o.00, whereof the first such installment shall be due and payable on o,
[200o] and subsequent installments shall be due and payable on the first
Business Day of each o thereafter until this Note is paid in full.
The Company further agrees to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time from the
date hereof on the date and at the rate specified in Section 8 of the Financing
Agreement, of even date herewith between the Company, the Lenders and the Agent
(the "FINANCING AGREEMENT"). Capitalized terms used herein and defined in the
Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Term Loan Promissory Note referred to in the Financing
Agreement, evidence the Term Loan thereunder, and is subject to, and entitled
to, all provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
95
Upon the occurrence of any Event of Default specified in the Financing
Agreement or upon termination of the Financing Agreement, all amounts then
remaining unpaid on this Note may become, or be declared to be, at the sole
election of the Agent, immediately due and payable as provided in the Financing
Agreement.
COMPANY NAME
By:
--------------------------
Name: o
Title: o
By:
--------------------------
Name: o
Title: o
96
EXHIBIT B
REVOLVING CREDIT NOTE
Dated as of o, 200o
$o
FOR VALUE RECEIVED, the undersigned, o (herein the "COMPANY"), a o
corporation with a principal place of business at o, hereby, absolutely and
unconditionally promises to pay to the order of CIT BUSINESS CREDIT CANADA INC.,
a Canada corporation, (hereinafter "CIT") with offices located at o, and CIT as
agent for the Lenders (the "AGENT"), and any other party which now or hereafter
becomes a lender hereunder pursuant to Section 13 of the Financing Agreement (as
herein defined) (individually a "LENDER" and collectively the "LENDERS"), in
lawful money of Canada/ the United States of America and in immediately
available funds, the principal amount of o Dollars ($o), or such other principal
amount advanced pursuant to Section 3 and Section 5 of the Financing Agreement
(as herein defined), such Revolving Loan advances shall be repaid on a daily
basis as a result of the application of the proceeds of collections of the
Accounts and the making of additional Revolving Loans as described in Section 3.
Subject to the terms of the Financing Agreement, the Revolving Loans may be
borrowed, repaid and reborrowed by the Company. A final balloon payment in an
amount equal to the outstanding aggregate balance of principal and interest
remaining unpaid, if any, under this Note as shown on the books and records of
the Agent shall be due and payable on the termination of the Financing
Agreement, as set forth in Section 11 thereof.
The Company further absolutely and unconditionally promises to pay to
the order of the Agent at said office, interest, in like money, on the unpaid
principal amount owing hereunder from time to time from the date hereof on the
dates and at the rates specified in Section 8, of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is one of the Promissory Notes referred to in the Financing
Agreement, dated as of the date hereof, as the same may be amended and restated
and in effect from time to time, among the Company, the Agent, and the Lenders
thereto from time to time (the "FINANCING AGREEMENT"), and is subject to, and
entitled to, all of the terms, provisions and benefits thereof and is subject to
optional and mandatory prepayment, in whole or in part, as provided therein. All
97
capitalized terms used herein shall have the meaning provided therefor in the
Financing Agreement, unless otherwise defined herein.
The date and amount of the advance(s) made hereunder may be recorded on
the grid page or pages which are attached hereto and hereby made part of this
Note or the separate ledgers maintained by the Agent. The aggregate unpaid
principal amount of all advances made pursuant hereto may be set forth in the
balance column on said grid page or such ledgers maintained by the Agent. All
such advances, whether or not so recorded, shall be due as part of this Note.
The Company confirms that any amount received by or paid to the Agent
in connection with the Financing Agreement and/or any balances standing to its
credit on any of its or their accounts on the Agent's books under the Financing
Agreement may in accordance with the terms of the Financing Agreement be applied
in reduction of this Note, but no balance or amounts shall be deemed to effect
payment in whole or in part of this Note unless the Agent shall have actually
charged such account or accounts for the purposes of such reduction or payment
of this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Financing Agreement or upon termination of the Financing
Agreement, all amounts then remaining unpaid on this Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.
STERLING PULP CHEMICALS, LTD.
By:
--------------------------
Name: o
Title: o
By:
--------------------------
Name: o
Title: o
98
SCHEDULE TO GRID
Date Loan Payment Balance
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