Exhibit 10.10
AMENDED AND RESTATED ACCOUNTS RECEIVABLE MANAGEMENT, LOAN & SECURITY AGREEMENT
BY AND BETWEEN: GMAC COMMERCIAL FINANCE CORPORATION -
CANADA/SOCIETE FINANCIERE COMMERCIALE
GMAC - CANADA;
("LENDER")
AND: XXXXX XXXXX & SONS INC.
("BORROWER")
AND: EACH AND EVERY ONE OF THE CREDIT PARTIES
WHEREAS Lender and Borrower are party to an Accounts Receivable Management, Loan
and Security Agreement dated October 15, 1996, as amended by letter agreements
dated July 23, 1998, June 8, 1999, September 23, 1999, May 2, 2000, January 30,
2001, May 29, 2001, November 16, 2001 and November 17, 2003 (the "FORMER
AGREEMENT");
WHEREAS the parties hereto have agreed to amend and restate the terms and
conditions of the Former Agreement pursuant to the terms hereof;
WHEREFORE the parties hereto have agreed as follows:
1. DEFINITIONS AND INTERPRETATION
1.1. Whenever utilized herein:
1.1.1. "ACCEPTED LETTERS OF CREDIT" means any Letters of Credit:
(a) In respect of which there have been any drawing(s), up to the
aggregate amount of such drawing(s); and,
(b) Which are letters of credit unrelated to the purchase of
Inventory, standby letters of credit or letters of guarantee;
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1.1.2. "ACCOUNT(S)" means all present and future accounts, accounts
receivable, claims, contract rights and all other forms of obligations
owing or to become owing to Borrower or any Credit Party arising out of
the sale of Inventory by Borrower or any Credit Party or the retention of
services (to the extent permitted by Lender, from time to time) of
Borrower or any Credit Party, irrespective of whether earned by
performance, any and all credit insurance, guarantees and security
therefore;
1.1.3. "ACCOUNT DEBTOR(S)" means any Person(s) who is or who may become
obligated under, with respect to, or on account of an Account;
1.1.4. "ADDITIONAL COLLATERAL" means the additional collateral, if any,
stipulated and valued in the Contract Data Sheet;
1.1.5. "ADVANCE(S)" means each and every advance of funds made by Lender
to Borrower or to any other Person for, on behalf of or for the benefit of
Borrower including, without limitation, any advances made or credits given
by Lender to any bank account or other account now or hereafter maintained
by Borrower, any payments made by Lender of any Fees or Expenses, any
payments made by Lender of any amounts in respect of any Letters of Credit
and any payments made by Lender of the Other Indebtedness;
1.1.6. "ADVERSE CHARGE" means any Lien or Encumbrance, other than the
Permitted Charges, against or affecting any property of Borrower or any
Credit Party, whether ranking prior to, equal with or after the Security;
1.1.7. "ARRANGEMENT FEE" means the amount designated as such in the
Contract Data Sheet, the full amount of which shall be deemed to have been
fully earned by Lender upon execution of the present Credit Agreement;
1.1.8. "AUDIT(S)" means the examination and appraisal of the books,
records and Collateral of Borrower or any Credit Party by Lender's staff
auditors or third party professionals and/or evaluators designated by
Lender, which shall be conducted at such greater intervals as Lender may
determine in its discretion;
1.1.9. "AUTHORIZED OVERADVANCE" means Outstandings, at any given time,
under any Overadvance Availability;
1.1.10. "AUTHORIZED OVERADVANCE RATE" has the meaning set forth in the
Contract Data Sheet for Dollars and US Dollars respectively;
1.1.11. "BANK" means the Toronto-Dominion Bank or, in its absence, such
other bank operating in Canada which Lender may, in its discretion,
designate;
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1.1.12. "BANKERS' ACCEPTANCE(S)" means any bills of exchange payable at a
future time, which are drawn by Borrower on any bank designated by Lender
and are accepted by such bank;
1.1.13. "BANKERS' ACCEPTANCE COSTS" means all fees, charges and other
amounts payable by Borrower and/or Lender to any bank for such bank's
acceptance and processing of Bankers' Acceptances;
1.1.14. "BANKERS' ACCEPTANCE FEE(S)" means, in addition to all Bankers'
Acceptance Costs, an amount equal to the annual rate set forth in the
Contract Data Sheet of the face amount of each particular Bankers'
Acceptance for the term of each particular Bankers' Acceptance, provided,
however, if a Default occurs, such annual rate shall be automatically
increased by two percentage points (2%) effective as of the occurrence of
such Default and continuing for so long as such Default is outstanding;
1.1.15. "BORROWER" means the Person defined as such at the outset of this
Agreement. If Borrower consists of more than one Person then, all
references herein to "Borrower" shall be interpreted in accordance with
the provisions of Clause 14 hereof;
1.1.16. "BORROWING BASE" means:
(a) the aggregate of:
(i) the percentage of Eligible Accounts set forth in the
Contract Data Sheet;
(ii) the lesser of (a) the aggregate of (i) the percentage of
NOLV of eligible Finished Goods Inventory set forth in the
Contract Data Sheet and (ii) the percentage of NOLV of
Eligible Raw Materials Inventory set forth in the Contract
Data Sheet and (b) the Eligible Inventory Availability Limit;
and
(iii) during the months of February through June (inclusive)
only, the Collateral Stretch Facility,
LESS
(b) The aggregate of:
(i) the face amount of all Accepted Letters of Credit;
(ii) the amount of all Letter of Credit Reserves;
(iii) the amount of all Reserves;
(iv) the amount of all Priority Claims;
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(v) the amount of any Surplus Reserve; and,
(vi) such portion, if any, of the Non-Revolving Loan as set
forth in the Contract Data Sheet.
1.1.17. "BORROWING BASE SURPLUS" means, at any given time, the difference
between (I) the Borrowing Base, and (II) all Outstandings under the
Revolving Loan;
1.1.18. "BUSINESS DAY(S)" means any day that is not a Saturday, Sunday or
other day on which Lender or Banks are authorized or required to close in
the City of Montreal;
1.1.19. "CAPITAL EXPENDITURES" means any and all expenditures made by
Borrower (or, if applicable, any Credit Parties) for or in connection with
the acquisition of capital property (including, without limitation,
leasehold rights, leasehold improvements and trade fixtures);
1.1.20. "COLLATERAL" means all present and future movable and personal
property of Borrower and the Credit Parties, corporeal and incorporeal,
tangible and intangible, of any nature or form whatsoever, wherever
situated, and includes, without limitation, the Accounts, the Inventory,
any Additional Collateral as well as any immovable properties now or
hereafter forming the object of the Security;
1.1.21. "COLLATERAL STRETCH FACILITY" means the amount determined in
accordance with the formula set forth in the Contract Data Sheet;
1.1.22. "COLLECTION(S)" means all cash, cheques, funds electronically
transferred and all other hard copy or electronic payment instruments
(including collection of insurance proceeds, cash sale proceeds, rental
proceeds and tax refunds);
1.1.23. "COMPLIANCE CERTIFICATE" means the "Compliance Certificate" in
form and substance as set forth in Annex 1 hereto or in such other form
and substance as shall, from time to time, be determined by Lender and
communicated to Borrower. Each Compliance Certificate to be delivered to
Lender hereunder shall be certified as correct and accurate by Borrower's
Chief Financial Officer;
1.1.24. "CONTRACT DATA SHEET" means the "Contract Data Sheet" annexed
hereto as well as any and all future amendments, supplements and/or
addendums thereto and/or renewals, replacements and/or restatements
thereof. The Contract Data Sheet shall be deemed, for all purposes, to
form part of the Credit Agreement;
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1.1.25. "CONTRACT YEAR" means consecutive periods of 12 consecutive months
immediately following the Effective Date;
1.1.26. "CREDIT AGREEMENT" means the present Amended and Restated Accounts
Receivable Management, Loan and Security Agreement as well as any and all
future amendments, supplements and/or addendums hereto and/or renewals,
replacements and/or restatements hereof;
1.1.27. "CREDIT DOCUMENTS" means the Credit Agreement, the Security, any
agreements or documents pertaining to any matter under or arising from the
Credit Agreement or the Security and any other agreements or documents
entered into, now or in the future, in connection with any of the
foregoing or in connection with any matter pertaining to the Credit
Facilities;
1.1.28. "CREDIT FACILITIES" means all credit facilities made available to
Borrower hereunder including the Revolving Loan and any Non-Revolving Loan
hereunder;
1.1.29. "CREDIT PARTY(IES)" means any Person(s), if any, designated as
such in the Contract Data Sheet and who is(are) party to the Credit
Agreement;
1.1.30. "DEBT" means all indebtedness, of any nature or source whatsoever,
at any given time owing by Borrower (or, if applicable, any Credit
Parties), whether due or not, matured or not. Debt includes all
Outstandings under the Credit Facilities;
1.1.31. "DEBT TO EQUITY RATIO" means the ratio of Debt to Tangible Net
Worth;
1.1.32. "DEFAULT" has the meaning set forth in Clause 13.1 hereof;
1.1.33. "DISPUTE" means any cause asserted for non-payment of an Account
including, without limitation, any dispute, claim, complaint, offset,
defense, contra-account or counter-claim, real or asserted, lawful or
unlawful, whether arising from or relating to any sale or any other
transaction or occurrence and includes, for greater certainty, any reason
for non-payment of an Account at its maturity other than solely as a
result of the financial inability of the Account Debtor;
1.1.34. "DOLLAR(S)" or "$" means Canadian dollars and "US DOLLAR(S)" or
"US$" means United States of America dollars;
1.1.35. "EARLY TERMINATION FEE" means a payment due by Borrower to Lender
in the amount of $750,000.00 in the event of (I) Borrower's terminating
this Agreement prior to the expiry of the Minimum Term pursuant to Clauses
14.1.2 hereof, or (II) Lender's terminating this Agreement prior to
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the expiry of the Minimum Term upon occurrence of an event of Default
pursuant to Clause 14.1.3 hereof;
1.1.36. "EBIT" means Borrower's earnings during any particular fiscal
period before:
(a) payment or provision for payment of interest; and,
(b) payment or provision for payment of income taxes,
all computed in accordance with GAAP;
1.1.37. "EBITDA" means Borrower's earnings during any particular fiscal
period before:
(a) payment or provision for payment of interest;
(b) payment or provisions for payment of income taxes;
(c) depreciation;
(d) amortization; and
(e) any other non-recurring income and expense items,
all computed in accordance with GAAP;
1.1.38. "EFFECTIVE DATE" means the date stipulated as such in the Contract
Data Sheet;
1.1.39. "ELIGIBLE ACCOUNTS" means the aggregate of the Net Face Amount of
all Accounts created by Borrower or any Credit Party in the ordinary
course of business which Lender, in its sole discretion, determines to be
acceptable for purposes of advances hereunder. Without limiting Lender's
discretion, the following shall not be Eligible Accounts:
(a) Accounts which are outstanding for a period exceeding 90 days
immediately following the earlier of (i) delivery of the relevant
Inventory or performance of the relevant services or (II) the date
of the relevant invoice;
(b) Accounts in respect of which Lender (if specifically requested
by Lender) has not been provided with both (I) the Account Debtor's
purchase order therefor and (II) proof of delivery of the
merchandise and/or services forming the object thereof, both in form
and substance satisfactory to Lender;
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(c) any portion of any Accounts (to the extent not already deducted
in arriving at the Net Face Amount thereof) which may reduce the
amount of such Accounts and/or may be deducted therefrom by the
relevant Account Debtor including, without limitation, all
discounts, rebates, allowances, credits or any other deductions
applicable thereto;
(d) Accounts owed by an Account Debtor which is a Related Person;
(e) Accounts with respect to which goods are placed on a
consignment, guaranteed sale, "xxxx and hold", sale or return, sale
on approval, or other terms by reason of which the payment by the
Account Debtor may be conditional;
(f) Accounts, the collection of which Lender, in its reasonable
credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(g) Accounts with respect to which goods have not been shipped and
billed to the Account Debtor, the services have not been performed
and accepted by the Account Debtor or does otherwise not represent a
final sale;
(h) Accounts that represent progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by
Borrower of the subject contract for goods or services; and,
(i) Accounts which are the object of any Dispute, to the extent of
such Dispute (if such extent is clearly ascertainable);
1.1.40. "ELIGIBLE ACCOUNTS AVAILABILITY" means Borrower's borrowing
availability under the Revolving Loan based on the Borrowing Base, after
deducting and not taking into account any value attributed to Eligible
Inventory;
1.1.41. "ELIGIBLE FINISHED GOODS INVENTORY" means Eligible Inventory
consisting of finished goods, wares and other finished merchandise;
1.1.42. "ELIGIBLE INVENTORY" means Inventory which is either (i) landed,
duty paid, located in Canada or the United States and in possession of
Borrower or any Credit Party, or (ii) is to be imported by Borrower or any
Credit Party and has been shipped under outstanding Letters of Credit,
both consisting of first quality finished goods owned by Borrower or any
Credit Party and held for sale in the ordinary course of Borrower's or any
Credit Party's business which are in good condition and readily saleable
at prices not less than cost, all of which Lender, in its sole discretion,
determines to be acceptable for purposes of advances hereunder. Without
limiting Lender's discretion, the following shall not be Eligible
Inventory:
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(a) Inventory held on consignment or not otherwise owned by Borrower
or any Credit Party with good, valid and marketable title thereto;
(b) is of a type no longer sold by Borrower or any Credit Party;
(c) Inventory which is encumbered in favour of any Person whatsoever
other than in favour of Lender under the Security;
(d) Inventory which is damaged or consists of goods returned or
rejected by an Account Debtor;
(e) Inventory which is in the process of being converted from raw
material into finished goods, commonly known as "work in progress";
and,
(f) Inventory which is, in Lender's reasonable determination,
obsolete or slow moving, unmarketable, a restrictive custom item, a
component not forming part of finished goods, spare parts, packing,
shipping and storage materials, supplies used or consumed in
Borrower's or any Credit Party's business, "xxxx and hold" goods,
defective goods or "seconds";
(g) The portion of the value of Inventory attributable to overhead
allocation in excess of the lesser of (i) the amount excepted by
Lender from time to time as determined by Borrower's auditors in
accordance with GAAP and (ii) the sum of $3,237,000.00;
1.1.43. "ELIGIBLE INVENTORY AVAILABILITY LIMIT" has the meaning set forth
in the Contract Data Sheet;
1.1.44. "ELIGIBLE RAW MATERIAL INVENTORY" means Eligible Inventory
Consisting of Raw Materials;
1.1.45. "ENCUMBRANCE(S)" means any lien, prior claim, legal hypothec,
charge, statutory lien, encumbrance, seizure, form of distress,
attachment, levy or any other right in favour of any Person other than
Lender;
1.1.46. "EXPENSES" means all costs and expenses incurred and/or to be
incurred by and/or on behalf of Lender in the preparation, execution,
registration/publication and/or implementation of the Credit Documents, in
administering the Credit Facilities and the Credit Documents and in
collecting the Obligations and enforcing the Credit Documents including,
without limitation:
(a) costs and expenses (including taxes and insurance premiums)
required to be paid by Borrower or any Credit Party under any of the
Credit Documents that are paid or incurred by Lender;
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(b) fees or charges paid or incurred by Lender in connection with
Lender's transactions with Borrower or any Credit Party hereunder,
including fees or charges for photocopying, notarialization,
couriers and messengers, telecommunication, public record searches
and environmental audits;
(c) costs and expenses incurred by Lender in the disbursement of
funds to Borrower (by wire transfer or otherwise);
(d) charges paid or incurred by Lender resulting from the dishonour
of cheques or other payment instruments;
(e) costs and expenses paid or incurred by Lender to correct any
Default or enforce any provision of the Credit Documents or in
gaining possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale or advertising to sell the
Collateral or any portion thereof;
(f) costs and expenses of all Audits (at the greater of $750.00 per
day or the then prevailing rate for Lender's internal auditors or at
the actual rate charged by any third party professionals and/or
evaluators plus, in either case, all disbursements and out-of-pocket
expenses associated therewith). Notwithstanding the foregoing, the
costs and expenses of all Audits (other than the costs and expenses
of appraisals of Collateral) shall, in any given calendar year, not
exceed $60,000.00;
(g) costs and expenses of third party claims or any other suit paid
or incurred by Lender in enforcing or defending the Credit Documents
or in connection with the transactions contemplated by the Credit
Documents or any relationship between Lender and Borrower or any
Credit Party;
(h) costs and expenses of converting any foreign currency to Dollars
(or vice-versa);
(i) all collection, bank, postage, photocopy, telephone, telecopy,
courier, credit report charges and other disbursements related to
anything herein contained or contained in the Security; and,
(j) Lender's reasonable attorney's fees and expenses incurred in
advising, structuring, drafting, administering, amending,
terminating, enforcing, defending or concerning the Credit Documents
or the Credit Facilities.
1.1.47. "FEES" means all fees and other amounts of any nature or form
whatsoever payable pursuant to the provisions of any of the Credit
Documents by Borrower or any of the Credit Parties and shall include,
without limitation,
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the Arrangement Fee, the Monitoring Fee, the Standby Fee and the
Overadvance Fee;
1.1.48. "FISCAL QUARTER(S)" means each consecutive quarter of a Fiscal
Year;
1.1.49. "FISCAL YEAR" means the period (which shall be no less than 50
weeks and no more than 54 weeks) designated as Borrower's or any Credit
Party's fiscal year;
1.1.50. "FIXED CHARGE COVERAGE RATIO" means the ratio of:
(a) the sum of (i) EBITDA, and (ii) all amounts paid or payable
under leasing agreements or leases made for financing purposes, less
Capital Expenditures (except to the extent that such Capital
Expenditures are directly and specifically financed by Persons other
than Lender); to
(b) the sum of (i) all interest paid or payable, (ii) all amounts
paid or payable under leasing agreements or leases made for
financing purposes, (iii) all capital repayments of any portion of
Funded Debt (other than the Revolving Loans), (iv) all income taxes
or taxes on capital paid, and (v) all dividends, share redemptions,
share retractions or other corporate distributions declared, made
and/or paid;
1.1.51. "FORMER AGREEMENT" shall have the meaning ascribed thereto in the
preamble hereof;
1.1.52. "FUNDED DEBT" means, without duplication, the sum of:
(a) all obligations for the borrowing or raising of money including,
without limitation, all Outstandings under the Credit Facilities;
(b) all obligations under leasing agreements or leases made for
financing purposes which are required to appear on a balance sheet
prepared in accordance with GAAP;
(c) all obligations to pay the deferred purchase price of property
or services, except trade accounts payable;
(d) all guarantees (being any obligation, contingent or not,
directly or indirectly guaranteeing any liability or indebtedness of
any Person or protecting any creditor of any Person from a loss in
respect of such liability or indebtedness) in respect of financial
obligations and all reimbursement obligations arising from letters
of credit, letters of guarantee or similar instruments; and
(e) all obligations relative to off-balance sheet financing,
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other than any indebtedness which now or hereafter is postponed,
subordinated and hypothecated in favour of Lender;
1.1.53. "FUNDED DEBT TO EBITDA RATIO" means the ratio of Funded Debt to
EBITDA;
1.1.54. "GAAP" means generally accepted Canadian accounting principles
applied on a basis at all times consistent with prior periods with all
Inventory accounting being reflected on a first in/first out basis;
1.1.55. "GUARANTOR(S)" means those Persons, as designated in the Contract
Data Sheet, who:
(a) have guaranteed or shall guarantee, in whole or in part; and/or,
(b) have pledged/hypothecated or shall pledge/hypothecate property
in favour of the Lender as continuing and collateral security for,
all present and future indebtedness and obligations of Borrower
towards Lender (including, without limitation, all of the
Obligations and all other indebtedness and obligations of Borrower
under the Credit Documents);
1.1.56. "INTEREST" means all interest payable by Borrower to Lender
pursuant to Clause 6.1 hereof and as set forth in the Contract Data Sheet;
1.1.57. "INVENTORY" means all present and future inventory, goods, wares,
merchandise and stock-in-trade owned by Borrower or any Credit Party,
including goods held for sale or lease or to be furnished under a contract
of service and present and future Raw Materials, work in process, finished
goods and packing, shipping and storage materials, wherever situated;
1.1.58. "LENDER" means GMAC COMMERCIAL FINANCE CORPORATION -
CANADA/SOCIETE FINANCIERE COMMERCIALE GMAC - CANADA, its successors or
assigns;
1.1.59. "LETTER(S) OF CREDIT" means any and all letters of credit and/or
letters of guarantee which Lender causes to be issued for the account of
Borrower;
1.1.60. "LETTER OF CREDIT FEE(S)" means a fee equal to the rate(s) set
forth in the Contract Data Sheet of the face amount of each Letter of
Credit, calculated on the basis of the number of calendar months (or
portions thereof) for which each Letter of Credit is outstanding (with
part of any calendar month being counted as a full calendar month);
1.1.61. "LETTER OF CREDIT LIMIT" has the meaning set forth in the Contract
Data Sheet;
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1.1.62. "LETTER OF CREDIT RESERVES" means the percentage of the face
amount of all Unaccepted Letters of Credit set forth in the Contract Data
Sheet;
1.1.63. "LIEN(S)" means any hypothec, security interest, trust, deemed
trust, ownership retention device (under conditional sales, finance
leases, capital leases or otherwise) and any other rights in any property
forming part of the Collateral;
1.1.64. "LOAN ACCOUNT(S)" means the account or accounts now or hereafter
established and maintained by Lender on its books in Borrower's name for
the purpose of recording Outstandings under the various Credit Facilities;
1.1.65. "MATERIAL ADVERSE CHANGE" means the occurrence of anything or any
event or the failure of occurrence of anything or event which, in Lender's
reasonable opinion, materially and adversely affects:
(a) Borrower or any Credit Party;
(b) the businesses or financial condition or any other matter of or
pertaining to Borrower or any Credit Party;
(c) the ability of Borrower or any Credit Party to pay the
Obligations or to otherwise fulfill their respective obligations
under the Credit Documents;
(d) the value of the Collateral or the ability of Lender to access
the Collateral and/or realize thereon; and/or,
(e) the level of risk on the part of Lender under the Credit
Facilities;
1.1.66. "MAXIMUM AMOUNT" has the meaning set forth in the Contract Data
Sheet;
1.1.67. "MINIMUM TERM" shall have the meaning set forth in the Contract
Data Sheet;
1.1.68. "MONITORING FEE" means the monthly amount designated as such in
the Contract Data Sheet, the full amount of each monthly amount of which
shall be deemed to have been fully earned by Lender on the first day of
each respective month;
1.1.69. "NET FACE AMOUNT" means the gross amount of any Account less all
discounts (which shall be determined by Lender, in its discretion, where
optional terms are given), returns, allowances, credits and/or reductions
at any time applicable, taken or allowed and shall, under no circumstances
whatsoever, exceed the amount actually owing by the Account Debtor;
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1.1.70. "NOLV" means the net recovery value (after all expenses and third
party fees and charges have been deducted) of all Eligible Inventory or
any other portion of the Collateral, on an orderly liquidation basis (ie.
supervised sale by or under the auspices of a bankruptcy trustee, a
proposal trustee, an interim receiver, a receiver, a monitor, a liquidator
or a similar person under a protective or other insolvency filing) as
determined, at such intervals as Lender may determine, by such third party
evaluator(s) as Lender may designate;
1.1.71. "NON-REVOLVING LOAN(S)" has the meaning set forth in Clause 5.1
hereof;
1.1.72. "NON-REVOLVING LOAN RATE" has the meaning set forth in the
Contract Data Sheet;
1.1.73. "NOTICE" means written notice by Lender to Borrower or any Credit
Party or by Borrower or any Credit Party to Lender, delivered by personal
delivery, courier, bailiff or facsimile transmission and addressed:
(a) if intended for Borrower or any Credit Party, at the address(es)
set forth in the Contract Data Sheet; or,
(b) if intended for Lender, at:
GMAC COMMERCIAL FINANCE CORPORATION - CANADA/
SOCIETE FINANCIERE COMMERCIALE GMAC - CANADA
000 Xxxx Xxxxxxxx Xxxx. Xxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx Xxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: President
until Notice by one to the other of any change of address(es);
1.1.74. "OBLIGATIONS" means the aggregate at any given time of all present
and future amounts, of any nature or source whatsoever, owing to Lender by
Borrower including:
(a) all amounts under the Credit Agreement (including, without
limitation, all Outstandings under the Credit Facilities, the face
amount of all outstanding Letters of Credit as well as all Interest,
Fees and Expenses);
(b) all amounts under any other Credit Documents;
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(c) all amounts under any other contract, agreement, arrangement,
occurrence, non-occurrence or operation of law, of any nature
whatsoever, whereby Lender becomes a creditor of Borrower; and,
(d) the full amount, from time to time, of the Other Indebtedness;
1.1.75. "OTHER INDEBTEDNESS" means any indebtedness or liabilities of
Borrower or any Credit Party towards third parties where such third
parties are financed or factored by Lender or GMAC Commercial Finance LLC
or where Lender or GMAC Commercial Finance LLC has assumed the risk of
credit loss in favour of such third parties or where Lender or GMAC
Commercial Credit LLC is or may become otherwise liable, including,
contingently, to such third parties for any debts of Borrower or any
Credit Party;
1.1.76. "OUTSTANDINGS" means the full amount of all Advances and the face
amount of any Bankers' Acceptances owing and outstanding under all of the
Credit Facilities or the relevant Credit Facility (as the case may be),
any US Dollar amount of which, for the purpose of calculating
Outstandings, may (at Lender's discretion) be converted to Canadian
dollars at the then prevailing selling rate of US Dollar to Canadian
Dollar exchange of the Bank;
1.1.77. "OVERADVANCE AVAILABILITY" means the Overadvance Availability, if
any, set forth in the Contract Data Sheet by which Outstandings under the
Revolving Loan may exceed the Borrowing Base and/or the Maximum Amount (as
the case may be as set forth in the Contract Data Sheet) by the amounts
set forth in the Contract Data Sheet during the period(s) set forth in the
Contract Data Sheet;
1.1.78. "OVERADVANCE FEE" means the amount of $10,000.00 per calendar
month (or any portion thereof) for each calendar month (or any portion
thereof) during which an Unauthorized Overadvance exists during any 3
consecutive Business Days or any 5 non-consecutive Business Days, the full
amount of which shall be deemed to have been fully earned by Lender on the
last day of each respective month;
1.1.79. "PERMITTED CHARGES" means:
(a) the Security;
(b) any Liens affecting property acquired by Borrower, any Credit
Party or any Guarantor as specific security for the financing or
acquisition of such specific property and affecting no other
property of Borrower or any Credit Party whatsoever;
(c) inchoate or statutory Liens or Encumbrances for taxes,
assessments or government charges which have not been assessed or
claimed and are not delinquent or, if assessed and claimed, are
being contested in good
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faith by appropriate proceedings and provided that, in such case,
either the effect of such proceedings is to stay any enforcement or
Lender has been provided with security in form and substance
satisfactory to it in an amount to satisfy such Lien or Encumbrance;
(d) minor title defects or irregularities not in the aggregate
materially and adversely affecting the use of the property of
Borrower or any Credit Party to which they relate;
(e) Liens which are the object of an Intercreditor Agreement or a
Priority Agreement between Lender and the holder of such Liens, in
form and substance satisfactory to Lender;
(f) Liens or Encumbrances which are being diligently contested by
Borrower or any Credit Party in good faith, in respect of which
Lender has been furnished with security to cover the consequences of
such Encumbrances, in form, substance and amount satisfactory to
Lender; and,
(g) any Liens or Encumbrances exhaustively enumerated in the
Contract Data Sheet as well as any other Liens or Encumbrances which
may, in the future, be expressly permitted by Lender in writing at
its discretion.
1.1.80. "PERSON(S)" means and includes all natural persons, corporations,
limited liability companies, unlimited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts or any other entities and includes all municipalities,
governments and agencies thereof;
1.1.81. "PRIME RATE" means (i) for Advances in Dollars, the variable per
annum rate of interest as, from time to time, set and/or announced and
varied by the Bank as its "prime rate", "prime lending rate" or similar
rate for loans in Dollars in Canada and (ii) for Advances in US Dollars,
the variable rate of interest as, from time to time, set and/or announced
and varied by the Bank as its "base rate", "base lending rate","prime
rate", "prime lending rate" or similar rate for loans in US Dollars in
Canada;
1.1.82. "PRIORITY CLAIM(S)" means any claim(s) against Borrower or any
Credit Party which, by effect of law, entitles the beneficiary(ies)
thereof to be paid in priority to payment of the Obligations, whether
resulting from any Lien or Encumbrance or any other mechanism or right
benefiting the holder(s) of such claim(s). In calculating any such
claim(s), any credits or amounts receivable by Borrower or any Credit
Party from any governmental or quasi-governmental authorities shall be
valued as nil;
1.1.83. "RAW MATERIALS" means completely unfinished precious and
semi-precious metals, loose diamonds and gemstones, but specifically
excluding
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components, accessories, work in progress, supplies, parts, watch faces
and any and all other raw materials and jewellery parts or components of
any kind or nature;
1.1.84. "RELATED PERSON(S)" means any Person(s) who is a "related person"
to Borrower or any Credit Party, any shareholder of Borrower or of any
Credit Party, any officer of Borrower or any Credit Party or any director
of Borrower or any Credit Party, all as set forth and defined in Section 4
of the Bankruptcy and Insolvency Act, Canada (or any successor
legislation) and additionally and without limiting the generality of the
foregoing, "Related Person(s)" includes any Person in which Borrower or
any Credit Party, any shareholder of Borrower or any Credit Party, any
officer of Borrower or any Credit Party or any director of Borrower or any
Credit Party have any direct or indirect equity interest (other than by
way of a passive investment in shares traded on a recognized stock
exchange representing less than a 1% equity interest);
1.1.85. "RESERVES" means any and all reserves (other than those
specifically stipulated herein) now or hereafter created by Lender against
and/or in reduction of its herein stipulated advance rates against
Eligible Accounts and/or Eligible Inventory (which Lender shall be
entitled to create, vary or apply, from time to time, in its discretion)
including, without limitation, any and all amounts established by Lender,
in its discretion from time to time, as Lender's risk in respect of any
foreign exchange facilities utilized by Borrower and/or in respect of the
fluctuation of currency exchange rates in respect of any Credit
Facilities;
1.1.86. "REVOLVING LOAN(S)" has the meaning set forth in Clause 3.1
hereof;
1.1.87. "REVOLVING LOAN RATE" has the meaning set forth in the Contract
Data Sheet for Dollars and US Dollars, respectively;
1.1.88. "ROLLING BASIS" means, at any given time, the then 4 most recently
completed Fiscal Quarters or the then 12 most recently completed
accounting months (as the case may be) reflecting Borrower's financial
results for such period;
1.1.89. "SECURITY" means all Liens, presently or in the future, held by or
on behalf of Lender over the Collateral or any other present and future
property of Borrower, any Credit Party or any other Person as well as any
and all Guarantees presently or in the future held by and/or on behalf of
Lender from any Credit Party or any other Person for the Obligations.
Security includes, without limitation, all of the Liens and Guarantees
enumerated in the Contract Data Sheet;
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1.1.90. "SENIOR DEBT" means any Debt which, as a result of any Lien,
Encumbrance, agreement, event or law, is to be paid in priority to other
portions of Debt in the event of the liquidation of property of Borrower
or any applicable Credit Party;
1.1.91. "SETTLEMENT DATE" means three (3) Business Days after the day on
which each applicable Collection is actually received by Lender;
1.1.92. "SPECIAL COVENANTS" means the special covenants, if any, set forth
in the Contract Data Sheet;
1.1.93. "STANDBY FEE" means a monthly amount equal to the percentage
designated in the Contract Data Sheet of the difference between:
(a) the Maximum Amount and any Overadvance Availability (which
permits the Revolving Loan to exceed the Maximum Amount) applicable
during any given calendar month; and,
(b) the average Outstandings under the Revolving Loan (including the
face amount of all outstanding Letters of Credit) during the same
calendar month, the full amount of each monthly amount of which
shall be deemed to have been fully earned by Lender on the last day
of each respective month;
1.1.94. "SURPLUS REQUIREMENTS" means the requirements, if any, set forth
in the Contract Data Sheet;
1.1.95. "SURPLUS RESERVE" means the amount, if any, set forth in the
Contract Data Sheet;
1.1.96. "TANGIBLE NET WORTH" means the sum of Borrower's capital, surplus
and debts specifically subordinated, postponed and hypothecated to Lender
less:
(a) any amounts receivable from any Related Person;
(b) research and development costs;
(c) goodwill;
(d) patents, trademarks, trade names, license rights and other
intellectual rights; and,
(e) any and all other intangible property other than Accounts;
1.1.97. "UNACCEPTED LETTERS OF CREDIT" means all Letters of Credit other
than Accepted Letters of Credit;
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1.1.98. "UNAUTHORIZED OVERADVANCE" means Outstandings under the Revolving
Loans, at any given time, which exceed:
(a) the Borrowing Base and/or the Maximum Amount (as the case may
be); and,
(b) any Overadvance Availability to the extent applicable; and,
1.1.99. "WORKING CAPITAL RATIO" means the ratio of Borrower's current
assets to current liabilities in accordance with GAAP.
1.2. The words or any references to "herein", "hereunder", "hereinafter" or
similar references shall be deemed to be references of the Credit Agreement as
well as to all future amendments, renewals and replacements.
1.3. All references to "days" (unless specifically to Business Days) shall
constitute references to any days whatsoever (including, without limitation,
Business Days). If any delay herein expires on a day which is not a Business
Day, then such delay shall be deemed to expire on the next following Business
Day.
1.4. Whenever utilized herein, the singular shall include the plural and
vice-versa and all genders shall be interchangeable in accordance with the
context hereof.
1.5. The Clause headings herein contained are for ease of reference only, do not
form part hereof and shall not, in any manner be used in the interpretation of
the contents hereof.
1.6. The interpretation, validity and enforcement of the Credit Documents shall
be subject to and governed by the laws of the Province of Quebec and the laws of
Canada applicable therein. Notwithstanding the foregoing, the interpretation,
validity and enforcement of the Security shall be subject to and governed by the
relevant province in which the particular portion of the Security has been
registered/published/recorded as well as the laws of Canada applicable therein.
2. NO NOVATION
2.1. Borrower and each and every one of the Credit Parties hereby agree,
covenant and warrant that:
2.1.1. each of them remains obliged toward Lender for any and all
covenants, representations, warranties, obligations and undertakings of
any kind or nature which are presently existing and outstanding as at the
date hereof, whether arising under the Former Agreement or otherwise
(except in the event of a conflict with the terms and provisions of the
present Agreement, in which event the terms of the present Agreement will
prevail);
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2.1.2. nothing in the present Agreement shall be deemed to constitute
novation of any "OBLIGATIONS" (as such term is defined under the Former
Agreement);
2.1.3. nothing in the present Agreement shall be deemed to constitute an
extinction, diminution, novation or alteration of any such covenants,
representations, warranties, obligations, undertakings or "OBLIGATIONS";
and
2.1.4. all "SECURITY" (as such term is defined in the Former Agreement),
security interests, postponements, subordinations, pledges and guarantees
previously granted in favour of Lender by Borrower or any of the Credit
Parties or by any third party whomsoever shall remain in full force and
effect and shall constitute continuing security in order to secure all
"OBLIGATIONS" under the Former Agreement, as well as any and all
Obligations arising herein.
3. REVOLVING LOAN
3.1. Subject to the terms and conditions of the Credit Documents, Lender may, in
its discretion, make loans and re-make loans to Borrower on a revolving basis in
Dollars and/or US Dollars (collectively the "REVOLVING LOAN(S)") by:
3.1.1. making Advances;
3.1.2. issuing or causing the issuance of Letters of Credit; and/or,
3.1.3. if specifically permitted in the Contract Data Sheet, accepting or
causing the acceptance of Bankers' Acceptances.
3.2. All Outstandings under the Revolving Loan shall not, at any time, exceed
the lesser of:
3.2.1. the Maximum Amount plus any applicable Overadvance Availability (to
the extent only that it permits the Revolving Loan to exceed the Maximum
Amount); or,
3.2.2. the Borrowing Base plus any applicable Overadvance Availability (to
the extent only that it permits the Revolving Loan to exceed the Borrowing
Base),
3.3. Additionally, Lender may, in its discretion, make loans and re-make loans
to Borrower on a revolving basis in Dollars and/or US Dollars (in any of the
manners set forth in Clause 2.1 hereof):
3.3.1. in excess of the amounts and limitations set forth in Clause 3.2
hereof;
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3.3.2. in order to pay the whole or any portion of the Other Indebtedness;
3.3.3. in order to pay, in whole or in part, any and all Fees, Expenses
and/or any other amount(s) for any other purpose with which Lender, in its
discretion, deems advisable in order to protect Lender's rights under the
Credit Documents,
all of which loans shall be deemed to constitute part of the Revolving
Loan. Payment of any Fees or Expenses in such manner shall not relieve
Borrower of its obligations hereunder to pay such Fees and Expenses or
from any Default which may result from the non-payment thereof by
Borrower. Until the above loans have been made to Borrower in order to pay
any of the Other Indebtedness, Fees, Expenses and/or other amounts, such
Other Indebtedness, Fees, Expenses and other amounts shall not be
considered as Outstandings under the Revolving Loan.
3.4. All Outstandings under the Revolving Loan and the face amount of all
outstanding Letters of Credit shall, at all times, be and remain repayable in
full by Borrower to Lender upon the earlier of:
3.4.1. Lender's demand therefor; or,
3.4.2. occurrence of Default,
whether or not the Credit Agreement has been terminated.
3.5. Notwithstanding Clause 3.4 hereof, the full amount of any Unauthorized
Overadvance shall, immediately upon its existence, be repaid by Borrower to
Lender without any necessity of demand therefor or any other formality.
4. LETTERS OF CREDIT
4.1. With respect to all Letters of Credit which Lender may issue or cause to be
issued for and on behalf of Borrower as part of the Revolving Loan:
4.1.1. the face amount of all outstanding Letters of Credit shall not, at
any given time, exceed the Letter of Credit Limit;
4.1.2. the face amount of all outstanding Letters of Credit shall, at any
given time, be deemed to constitute part of the Revolving Loan and,
additionally, if and when Lender is obliged to advance funds under a
Letter of Credit, Borrower shall immediately reimburse such amount to
Lender, in the absence of which, the amount so advanced by Lender under a
Letter of Credit shall automatically be deemed to be an Advance under the
Revolving Loan;
4.1.3. Borrower shall indemnify and hold Lender harmless for and against
any loss, cost, expense, or liability arising out of or in connection with
any Letters of Credit. Borrower agrees to be bound by the issuing bank's
Page 21
regulations and interpretations of any Letters of Credit. Lender shall not
be liable for any error, negligence or mistake (whether of omission or
commission) in following Borrower's instructions or those contained in the
Letters of Credit or any modifications, amendments or supplements thereto;
4.1.4. Borrower hereby authorizes and directs any bank issuing Letters of
Credit to deliver to Lender all instruments, documents and other writings
and property received by the issuing bank pursuant to such Letters of
Credit and to accept and rely on Lender's instructions and agreements with
respect to all matters arising in connection with such Letters of Credit
and the related applications;
4.1.5. any and all charges, commissions, fees and costs incurred by Lender
relating to Letters of Credit shall be considered as Expenses hereunder
and shall immediately be reimbursed by Borrower to Lender; and,
4.1.6. immediately upon issuance of any Letters of Credit, Borrower shall
pay to Lender:
(a) a service charge of $100.00 for each Letter of Credit issued;
(b) the applicable Letter of Credit Fee;
(c) all normal bank and correspondents' charges payable by Lender in
respect of any Letters of Credit; and
(d) any and all standard transaction fees which are charged by
Lender from time to time, including but without limitation, fees in
connection with modifications, extensions, renewals and
cancellations of Letters of Credit.
5. NON-REVOLVING LOANS
5.1. Subject to the terms and conditions of the Credit Documents, Lender may, in
its discretion, lend the non-revolving loan(s), if any, set forth in the
Contract Data Sheet to Borrower in Dollars and/or US Dollars (collectively the
"NON-REVOLVING LOAN(S)") by:
5.1.1. making one or more Advances thereof; and/or,
5.1.2. if specifically permitted in the Contract Data Sheet, accepting or
causing the acceptance of Bankers' Acceptances, as non-revolving (ie.
permanently reducing) loan(s).
5.2. The Outstandings under all Non-Revolving Loans shall:
5.2.1. until demand for payment therefor or occurrence of Default, be
repaid by Borrower to Lender by way of the minimum periodic capital
repayments thereof set forth in the Contract Data Sheet; and,
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5.2.2. notwithstanding the foregoing, be repayable in full by Borrower to
Lender upon the earlier of:
(a) Lender's demand therefor; or,
(b) the occurrence of Default,
whether or not the Credit Agreement has been terminated.
6. CONDITIONS PRECEDENT FOR UTILIZATION OF CREDIT FACILITIES
6.1. Lender shall not make any further Advance under the Credit Facilities or
cause issuance of any Letters of Credit or acceptance of any Bankers'
Acceptances unless and until, each of the following conditions precedent have
been fulfilled, to the complete satisfaction of Lender and its legal counsel,
namely:
6.1.1. proper execution and registration/publication of the Security;
6.1.2. proper execution of all agreements and documents pertaining to the
administration of the Accounts;
6.1.3. Lender's receipt of opinions from legal counsel to Borrower and the
Credit Parties in form and substance satisfactory to Lender and its legal
counsel;
6.1.4. Lender's receipt of all certificates, searches and other documents
deemed by Lender to be necessary, all in form and substance satisfactory
to Lender and its legal counsel;
6.1.5. Lender's receipt of evidence that all insurance required on the
part of Borrower and the Credit Parties hereunder exists and is in full
force and effect;
6.1.6. all representations and warranties of Borrower and the Credit
Parties hereunder being true, accurate and unbreached in all respects;
6.1.7. Borrower shall be in complete conformity with all of the covenants
and obligations incumbent upon Borrower hereunder including, without
limitation, any Surplus Requirements;
6.1.8. the non-existence of Default;
6.1.9. the non-existence of any Material Adverse Change; and,
6.1.10. such other matters, items or documents as Lender or its legal
counsel may reasonably request.
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6.2. After the initial Advance or issuance of the initial Letter of Credit or
acceptance of the initial Bankers' Acceptance, no further Advances shall be
made, no further Letters of Credit shall be issued and no further acceptances of
Bankers' Acceptances shall be made unless and until each of the following
conditions precedent shall have been fulfilled to Lender's satisfaction, namely:
6.2.1. all representations and warranties of Borrower and the Credit
Parties hereunder shall be true, accurate and unbreached in all respects;
6.2.2. Borrower shall be in complete conformity with all of the covenants
and obligations incumbent upon Borrower hereunder including, without
limitation, any Surplus Requirements;
6.2.3. the non-existence of Default; and,
6.2.4. the non-existence of any Material Adverse Change.
6.3. All of the conditions precedent set forth in Clauses 6.1 and 6.2 hereof
shall exist and inure solely to Lender's benefit and may, accordingly, be waived
solely by Lender (and no other Person) in Lender's discretion.
7. INTEREST, FEES AND EXPENSES
7.1. All Outstandings under the Credit Facilities consisting of Advances shall
bear interest and any overdue interest shall in turn bear interest at the
hereafter described rates, calculated and payable as hereinafter set forth (the
"INTEREST").
7.2. All Interest shall be payable by Borrower to Lender in arrears on the last
Business Day of each month, calculated on the average daily Outstandings
resulting from Advances under the Revolving Loan and the Non-Revolving Loan (as
the case may be) at the rates hereafter set forth, commencing with the first
payment of Interest by Borrower to Lender on the last Business Day of the month
during which the initial Advance occurs hereunder. Interest on overdue Interest
will be calculated on the same basis but will be compounded monthly and payable
upon demand. All Interest shall be payable both before as well as after any
demand for payment, any Default or any judgment.
7.3. The rates of Interest on all Outstandings consisting of Advances under:
7.3.1. the Revolving Loan (other than any Authorized Overadvance) shall
be:
(a) for Dollars, a rate equal to the Revolving Loan Rate for
Dollars; and,
(b) for US Dollars, a rate equal to the Revolving Loan Rate for US
Dollars;
7.3.2. any Authorized Overadvance shall be:
Page 24
(a) for Dollars, a rate equal to the Authorized Overadvance Rate for
Dollars: and,
(b) for US Dollars, a rate equal to the Authorized Overadvance Rate
for US Dollars; and
7.3.3. any Non-Revolving Loan(s) shall be:
(a) for Dollars, a rate equal to the Non-Revolving Loan Rate for
Dollars: and,
(b) for US Dollars, a rate equal to the Non-Revolving Loan Rate for
US Dollars,
based upon the weighted average of Prime Rate during each month for
which the foregoing rates of Interest are calculated.
7.4. In the event that, from time to time hereunder, Lender makes loans or
re-makes loans to Borrower under the Revolving Loan and/or the Non-Revolving
Loan by Lender's accepting or arranging for the acceptance of Bankers'
Acceptances, then:
7.4.1. any such Bankers' Acceptances so accepted shall be in multiples of
CDN$100,000.00 or US$100,000.00 (as the case may be) and shall be for
terms equal to multiples of 30 days and not to exceed 180 days;
7.4.2. upon acceptance of any Bankers' Acceptance, the face value of each
such accepted Bankers' Acceptance shall be deemed, for all purposes to
constitute Outstandings under the Revolving Loan or the Non-Revolving Loan
(as the case may be), repayable by Borrower to Lender in accordance with
the provisions of the present Credit Agreement;
7.4.3. upon acceptance of any Bankers' Acceptances, Borrower shall
immediately pay to Lender all Bankers' Acceptance Costs applicable
thereto; and,
7.4.4. in addition to all Bankers' Acceptance Costs, upon acceptance of
any Bankers' Acceptances, Borrower shall immediately pay to Lender the
Bankers' Acceptance Fee applicable thereto;
7.5. All rates of Interest and Bankers' Acceptance Fees under the Revolving
Loan, any Authorized Overadvance and any Non-Revolving Loan(s) hereunder shall
be computed on the basis of a 360 day period. The applicable Revolving Loan
Rate, Authorized Overadvance Rate, Non-Revolving Loan Rate, and/or Bankers'
Acceptance Fees, shall constitute rates on a per annum (ie. yearly) basis
equivalent to such rates divided by 360 and multiplied by the number of days in
any given year (being .01389 times greater than such rates in any ordinary year
and .0667 times greater than such rates in any leap year).
Page 25
7.6. In the event of occurrence of Default, each of the Revolving Loan Rate, the
Authorized Overadvance Rate, the Non-Revolving Loan Rate and the Bankers'
Acceptance Fees shall be automatically increased by two percentage points (2%)
effective as of the occurrence of such Default and continuing for so long as
such Default is outstanding. In the event of existence of any Unauthorized
Overadvance, Borrower shall immediately pay to Lender (and Lender shall be
entitled to charge to Borrower's account as part of the Revolving Loans) the
Overadvance Fee. Such Overadvance Fee shall be in addition to and not constitute
part of the Interest payable hereunder.
7.7. In addition to, and not constituting part of, the Interest, Borrower shall
pay to Lender:
7.7.1. the Arrangement Fee, which shall be paid in full by Borrower to
Lender immediately upon the making of the first Advance hereunder;
7.7.2. the Monitoring Fee, which shall be paid, on a monthly basis on the
last day of each calendar month, by Borrower to Lender during each
calendar month (with a part of any calendar month being counted as a full
calendar month) commencing at the end of the first calendar month
immediately following the Effective Date and thereafter, until both the
Obligations shall have been fully paid and discharged and Borrower is no
longer entitled to avail itself of the Credit Facilities;
7.7.3. the Standby Fee, which shall be paid on a monthly basis on the last
day of each calendar month, by Borrower to Lender during each calendar
month (with a part of any calendar month being counted as a full calendar
month) commencing at the end of the first calendar month immediately
following the Effective Date and thereafter until both the Obligations
shall have been fully paid and discharged and Borrower is no longer
entitled to avail itself of the Credit Facilities;
7.7.4. the Overadvance Fee for and during each calendar month during which
the Overadvance Fee is applicable (with a part of any calendar month being
counted as a full calendar month); and,
7.7.5. all other Fees hereunder as and when due hereunder; and,
7.7.6. all Expenses as and when due hereunder.
7.8. None of the Fees or Expenses shall, under any circumstances, be deemed to
constitute part of the Interest. All Fees and Expenses, on the one hand, and all
Interest, on the other hand, shall operate and be paid by Borrower to Lender
independently of one another;
Page 26
8. ADMINISTRATION OF ACCOUNTS, LOAN ACCOUNTS AND COLLECTION
8.1. Borrower shall, from time to time as directed by Lender, execute and
deliver all such documents and do all such things as may be, in Lender's
opinion, necessary or advisable in order for Lender to obtain and maintain
possession and control of and dominion over all Accounts and all Collections.
Lender shall be entitled, from time to time, to decrease, increase or otherwise
alter the mechanisms whereby Lender possesses, controls and maintains dominion
over the Accounts and the Collections.
8.2. The receipt of any Collections by Lender shall be applied on the Settlement
Date to reduce the Outstandings under the Revolving Loan only to the extent that
such Collection is honoured for payment. Should any Collection not be honoured
for payment, then Borrower shall be deemed not to have made such payment on the
Settlement Date and all Interest will be re-calculated accordingly;
8.3. The Loan Account will be charged with all Advances, Interest, Fees and
Expenses and any other payment obligation of Borrower hereunder. In accordance
with Clause 8.2 hereof, the Loan Account will be credited with all payments
received by Lender from Borrower or for Borrower's account, including all
Collections.
9. STATEMENTS OF ACCOUNT
9.1. To the extent only that Lender possesses, controls and maintains dominion
over the Collections, Lender shall provide Borrower with periodic reports
summarizing Collections. Lender shall not be liable to Borrower or any Credit
Party by reason of any delays in providing reports or inadvertent errors or
omissions unless caused by Lender's willful misconduct or gross negligence.
Borrower and each of the Credit Parties acknowledge that Lender may use the
services of any other organizations in connection with the processing of
Collections and data pertaining to Borrower and the Credit Parties and, in such
case, Lender shall not be liable to Borrower by reason of acts or omissions of
such organizations unless caused by the willful misconduct or gross negligence
of Lender;
9.2. Each month, Lender will deliver to Borrower statements of the Loan Account.
Borrower and each of the Credit Parties shall verify the correctness of such
statements and send Notice to Lender of any errors, irregularities or omissions
within 30 days of the date of such statements. Such statements will, unless
corrected as a result of the aforesaid Notice, be finally and conclusively
binding upon Borrower and each of the Credit Parties and will constitute proof
of the status of the amounts and accounts reflected therein.
10. SECURITY AND POWER OF ATTORNEY
10.1. Borrower and each Credit Party shall grant the Security and shall execute
all documents, do all things and perform all acts which may be necessary or
required, in Lender's sole discretion, in order to maintain, perfect or renew
the Security. All Security
Page 27
shall be held by Lender as continuing and collateral security for all of the
Obligations and any other debts, liabilities and/or obligations stipulated in
the Security.
10.2. At any time, Lender may notify Account Debtors or any other debtors of any
other accounts receivable of Borrower or any Credit Party that Lender has a
hypothec and security interest therein pursuant to the Security and Lender may
directly collect same. All amounts so collected shall be deemed to constitute
Collections and shall be dealt with in accordance with the provisions of the
present Agreement.
10.3. Borrower and each Credit Party hereby irrevocably names and appoints
Lender (as well as any of Lender's representatives) as Borrower's and each
Credit Party's mandatary, agent and power of attorney to sign, execute and/or
deliver, in the names of Borrower or any Credit Party, for each of the following
purposes:
10.3.1. if Borrower or any Credit Party refuses to, or fails timely to
sign, execute and deliver any of the documents required under the present
Agreement, in order to sign, execute and deliver any such documents in the
name of Borrower or any such Credit Party;
10.3.2. at any time after and during continuation of Default, in order to
sign, execute and deliver, in Borrower's or any Credit Party's name, any
invoice or xxxx of lading relating to an Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts
and notifications to Account Debtors;
10.3.3. in order to endorse and/or negotiate, in Borrower's or any Credit
Party's name, any Collection item;
10.3.4. at any time after and during continuation of Default, in order to
notify the post office authorities to change the address for delivery of
Borrower's or any Credit Party's mail to an address designated by Lender,
in order to receive and open all mail addressed to Borrower and the Credit
Parties and in order to retain all mail relating to the Security and
forward all other mail to Borrower and the relevant Credit Parties; and,
10.3.5. at any time after and during continuation of Default, in order to
settle and adjust Disputes and claims relating to the Accounts directly
with Account Debtors, for such amounts and upon such terms that Lender
determines to be reasonable and Lender may cause to be executed and
delivered any documents and/or releases that Lender determines to be
necessary for such purposes.
10.4. The appointment of Lender as mandatary, agent and power of attorney
hereunder shall be irrevocable until both the Obligations shall have been fully
paid and discharged and Borrower is no longer entitled to avail itself of the
Credit Facilities.
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10.5. Lender shall be entitled, from time to time as permitted herein, to
conduct Audits at Borrower's sole cost and expense, which cost and expense shall
form part of the Expenses payable by Borrower to Lender hereunder. Borrower and
any Credit Party shall fully co-operate with persons conducting Audits and grant
such person(s) full access to Borrower's and any Credit Party's books, records
and Collateral for the purpose of such Audits.
11. BORROWER'S REPRESENTATIONS AND WARRANTIES
11.1. Borrower represents and warrants to and in favour of Lender, as continuing
representations and warranties, that, for so long as both the Obligations shall
not have been fully paid and discharged and Borrower is entitled to avail itself
of any of the Credit Facilities:
11.1.1. Borrower and each Credit Party is and shall remain a corporation,
duly incorporated, organized, validly subsisting and in good standing
under the laws of the jurisdiction of its incorporation and of all
jurisdictions in which it carries on business with full power and
authority to own its present and future properties and to carry on its
business;
11.1.2. Borrower and each Credit Party has and shall have the full power
and has taken all of the necessary actions in order to fully authorize
each of their executions of the Credit Documents, to borrow hereunder, to
grant the Security and to execute and deliver and perform the Credit
Documents and the obligations herein and therein contained;
11.1.3. each of the Credit Documents have been duly and properly executed
and delivered by duly authorized representatives of Borrower and each
Credit Party and are and shall be and remain legal, valid and binding
obligations on the part of Borrower and each Credit Party, all enforceable
in accordance with the terms, conditions and contents of each
respectively;
11.1.4. Borrower and each Credit Party is and shall remain in compliance
with all laws (including, without limitation, laws relating to
environmental matters) and in substantial compliance with all municipal
by-laws or any other applicable laws, where non-compliance individually or
in the aggregate with which would have a Material Adverse Change;
11.1.5. Borrower and each Credit Party is and shall remain the sole and
absolute owner (other than third party ownership under the Permitted
Charges), with good, marketable and legal title, of all of the property
currently and in the future held and/or acquired by each or utilized by
each in conjunction with the operation of its businesses (including,
without limitation, the Accounts and the Inventory) and that all of the
foregoing is and shall remain free and clear of all Adverse Charges;
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11.1.6. there is and shall be no action, suit or proceeding pending
against nor, to the knowledge of Borrower or any Credit Party, any action,
suit or proceeding threatened or in any manner relating adversely to any
of the properties of Borrower or any Credit Party in any court or before
any arbitrator of any kind or before any governmental body, other than
actions, suits or proceedings of the character normally incidental to the
kind of business to be operated by Borrower and any Credit Party which, if
adversely determined, would not individually or in the aggregate have a
Material Adverse Change;
11.1.7. all tax returns required in any applicable jurisdiction (including
all Canadian federal, provincial and other tax returns) of each of
Borrower and each Credit Party required by law to be filed have been and
shall be duly filed and all taxes, assessments and other governmental
charges or levies in any applicable jurisdiction (including all Canadian
federal, provincial and other taxes, assessments and other governmental
charges or levies) upon Borrower's and each Credit Party's properties,
income, profits and assets, which are and shall be due and payable, have
been and shall be paid, except that any such payment of which Borrower or
any Credit Party is contesting in good faith by appropriate proceedings
and for which appropriate reserves have been provided on the books of
Borrower or such Credit Party in respect of which no Adverse Charge
exists;
11.1.8. all financial and business information and documentation
(including, without limitation, all financial statements, business plans,
projections, etc.) previously furnished by and/or on behalf of any of
Borrower or any Credit Party to Lender are true and accurate in all
material respects; and,
11.1.9. all financial and business information and documentation
(including, without limitation, all borrowing certificates and borrowing
certificates as well as all financial statements, listings of Accounts,
Inventory, payables and other listings, operating budgets, certificates
and other reports and documents, etc. furnished or required to be
furnished hereunder) hereafter furnished to Lender by and/or on behalf of
Borrower or any Credit Party shall be true and accurate in all material
respects.
11.2. All representations and warranties made hereunder shall be deemed to be
made and shall be true and correct, as of the date of execution hereof, and,
unless otherwise stated, at all times for so long as both the Obligations shall
not have been fully paid and discharged and Borrower is entitled to avail itself
of any of the Credit Facilities.
11.3. All representations and warranties made hereunder shall survive and shall
not be deemed, in any manner whatsoever, to have been waived by execution and
delivery of the Credit Agreement, any investigation by or on behalf of Lender or
any extensions of credit under the Credit Facilities.
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12. BORROWER'S COVENANTS
12.1. For so long as both the Obligations shall not have been fully paid and
discharged and Borrower is entitled to avail itself of the Credit Facilities,
Borrower covenants and agrees with and in favour of Lender that:
12.1.1. Borrower and each Credit Party shall maintain and cause to be
maintained in good repair, working order and condition, all properties
useful in each of their businesses and, from time to time, make or cause
to be made all needed and appropriate repairs, renewals, replacements,
additions, betterments and improvements thereto;
12.1.2. Borrower shall pay all Interest to Lender on the respective due
dates therefor hereunder;
12.1.3. Borrower shall pay all periodic capital repayments of the
Non-Revolving Loan, if any, set forth in the Contract Data Sheet on the
respective due dates therefor thereunder;
12.1.4. Borrower shall pay all Fees to Lender on the respective due dates
therefor hereunder;
12.1.5. Borrower shall pay all Expenses to Lender on their respective due
dates therefor thereunder;
12.1.6. Borrower shall pay all other amounts owing or which become owing
to Lender under any of the Credit Documents on the due dates therefor
hereunder and thereunder;
12.1.7. Borrower shall maintain and respect each of the financial
covenants, if any, set forth in the Contract Data Sheet;
12.1.8. Borrower shall respect each and every one of the Surplus
Requirements;
12.1.9. Borrower shall respect and comply with each of the Special
Covenants;
12.1.10. Borrower and each Credit Party shall comply with all of the
terms, conditions and obligations set forth in the Credit Documents;
12.1.11. Borrower shall furnish each of the written financial and other
reports and other documents to Lender as set forth in the Contract Data
Sheet and within the delays set forth in the Contract Data Sheet;
12.1.12. Borrower and each Credit Party shall maintain the following
insurance coverage on the following basis:
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(a) Borrower and each Credit Party shall insure and keep insured for
their full insurable value all of their present and future
corporeal/tangible property (including, without limitation, the
Inventory) by means of one or more policies of insurance, in form
and substance approved by Lender with one or more insurers approved
by Lender;
(b) all such insurance policies shall contain a hypothecary/mortgage
clause or provision benefiting Lender, in form and substance
approved by Lender;
(c) all such insurance policies shall provide that all indemnities
and other amounts payable thereunder shall be payable to Lender;
(d) at least 5 days prior to the expiry or cancellation of any such
insurance policies, evidence of renewals or replacements thereof
shall be delivered to Lender;
(e) should Borrower or any Credit Party fail to insure and keep
insured its property or renew or replace such insurance policies,
Lender may insure and keep insured such property and/or renew or
replace such insurance policies. In such event, Borrower shall pay
to Lender, upon Lender's simple demand therefor, all sums so
expended by Lender in effecting any of the foregoing;
12.1.13. Borrower and each of the Credit Parties shall ensure that all
Accounts arise and will arise from bona fide, final and absolute sales and
delivery of merchandise or services without any special arrangements such
as consignment, "xxxx and hold", guaranteed sale arrangements or other
similar conditions;
12.1.14. Borrower and each of the Credit Parties shall ensure that all
Accounts arise and will arise from sales with respect to which there is
reasonable belief that the Account Debtor will receive and accept the
Inventory and/or services as invoiced without Dispute;
12.1.15. Borrower and each of the Credit Parties will, at all times, duly
and punctually pay and discharge all wages, salary and other remuneration
of all persons employed by each of them;
12.1.16. Borrower and each of the Credit Parties will keep proper books of
account in accordance with GAAP and will permit Lender's representatives
free and reasonable access to each of their premises, computers (including
all hardware and software) and financial and computer and/or other data,
records and reports relating to Borrower, each of the Credit Parties and
their properties; and,
Page 32
12.1.17. if Borrower or any Credit Party becomes aware or Borrower or any
Credit Party receives any notification to the effect that:
(a) any of their corporeal property violates any applicable
environmental law, by-law, rule and/or regulation and/or creates any
environmental hazard whatsoever;
(b) any act, enterprise or activity carried on from or at any
location of Borrower or any Credit Party is conducted in a manner
which violates any applicable environmental law, by-law, rule and/or
regulation and/or creates any environmental hazard whatsoever;
(c) any contaminant, pollutant, toxic substance and/or dangerous
material has been emitted by or from any locations or property of
Borrower or any Credit Party;
(d) the whole or any part of any properties of Borrower or any
Credit Party has been used as a waste disposal site or for storage
or production of any hazardous materials (including, without
limitation, asbestos and/or PCB's); or,
(e) any underground storage reservoir is located under any locations
of Borrower or any Credit Party,
Borrower shall immediately give Notice to Lender as to the details
thereof and, immediately upon such occurrence, properly and
diligently commence and complete all operations or other matters
necessary in order to completely remedy and rectify any of the
foregoing occurrences.
12.2. For so long as both the Obligations shall not have been fully paid and
discharged and Borrower is entitled to avail itself of any of the Credit
Facilities, Borrower covenants and agrees with and in favour of Lender that:
12.2.1. Borrower and each Credit Party shall not declare, pay or effect
any dividends, share redemptions, share retractions, share repurchases or
any other forms of corporate distributions to shareholders, without the
express prior written consent of Lender and then under such conditions as
Lender may impose unless and until the shares in the capital stock of the
Borrower or any Credit Party (or a successor thereof) are listed and
trading on a recognized North American stock exchange, in which event the
Borrower or any such Credit Party may declare, pay or effect any
dividends, share redemptions, share retractions, share repurchases or any
other forms of corporate distributions to shareholders so long as same
does not render the Borrower or Credit Party in question insolvent or
otherwise impair such entity to meet its obligations as they become due;
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12.2.2. Borrower and each Credit Party shall not repay, in whole or in
part, any indebtedness whatsoever which has been or may hereafter be
postponed, subordinated and/or hypothecated in favour of Lender;
12.2.3. Borrower and each Credit Party shall not merge, amalgamate or
otherwise consolidate or combine with any other entities whatsoever,
unless Lender has granted its prior written consent, which consent shall
not be unreasonably withheld;
12.2.4. Borrower and each Credit Party shall not sell or otherwise dispose
of any significant portion of their respective property out of the
ordinary course of business without the express prior written consent of
Lender and then on such terms and conditions as Lender may, in its
discretion, impose;
12.2.5. Borrower and each Credit Party shall not, directly or indirectly,
purchase or otherwise acquire any significant property out of the ordinary
course of business without the express prior written consent of Lender and
then on such terms and conditions as Lender may, in its discretion,
impose;
12.2.6. Borrower and each Credit Party shall not allow any Adverse Charge
to exist against any of their respective properties;
12.2.7. neither Borrower nor any of the Credit Parties will:
(a) change the location of its registered or head office from that
which existed as of the date of execution of the Credit Agreement;
(b) establish business operations in any locations other than those
in which it conducted business operations on the date of execution
of the Credit Agreement; or,
(c) establish any location where any of their properties are located
other than those which existed as of the date of execution of the
Credit Agreement,
unless, prior thereto, (i) Lender shall have received Notice as to
the details thereof, and (ii) any properties situated in such
alternate or additional location(s) forms the object of the Security
or all documents are executed in favour of Lender and properly
published, registered or recorded in order to perfect a first
ranking Lien thereon in Lender's favour; and,
12.2.8. neither Borrower nor any of the Credit Parties will create any
Funded Debt beyond and in addition to any Funded Debt existing as of the
Effective Date without the express prior written consent of Lender and
then in accordance with such terms and conditions as Lender may, in its
discretion, determine.
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12.3. Should Borrower or any Credit Party fail to pay when due any amounts
hereunder (other than repayment of Outstandings under the Credit Facilities,
Interest, Fees and Expenses) or fail to perform any of their obligations
hereunder, Lender may do so, after Notice thereof to Borrower. In such event,
Borrower shall pay to Lender, upon Lender's simple demand therefor, all amounts
so paid by Lender together with Interest thereon. Any such payments made by
Lender shall not negate or remedy any Default which may have existed as a result
of any of the foregoing.
13. DEFAULT
13.1. For so long as both the Obligations shall not have been paid and
discharged and Borrower is entitled to avail itself of any of the Credit
Facilities, the occurrence of any of the following events, automatically and
without necessity of any notification or formality whatsoever (other than as
hereafter expressly stipulated or strictly required under law), shall constitute
are defined as "DEFAULT" hereunder, namely:
13.1.1. the failure by Borrower to pay, as and when due hereunder, any or
all of the Outstandings, the face amount of all outstanding Letters of
Credit or any other Obligations under any of the Credit Facilities where
same remains unremedied following the expiry of five (5) days immediately
following Notice thereof by Lender to Borrower;
13.1.2. should Borrower fail to fully repay all Outstandings under all of
the Credit Facilities, the face amount of all outstanding Letters of
Credit or all other Obligations to Lender upon Lender's simple demand
therefore where same remains unremedied following the expiry of five (5)
days immediately following Notice thereof by Lender to Borrower;
13.1.3. the failure by Borrower to pay, as and when due hereunder, any
Interest where same remains unremedied following the expiry of five (5)
days immediately following Notice thereof by Lender to Borrower;
13.1.4. the failure by Borrower to pay, as and when due hereunder, all
periodic capital repayments, if any, of the Non-Revolving Loan set forth
in the Contract Data Sheet as and when due thereunder where same remains
unremedied following the expiry of five (5) days immediately following
Notice thereof by Lender to Borrower;
13.1.5. the failure by Borrower to pay, as and when due hereunder, any
Fees or Expenses, remaining completely unremedied for a period of seven
(7) consecutive days immediately following Notice thereof by Lender to
Borrower;
13.1.6. the failure by Borrower to fully repay any other amounts which may
become owing by Borrower to Lender under any of the Credit Documents
(other than Outstandings, the face amount of all outstanding Letters of
Credit, Interest, Fees, Expenses or periodic capital repayments of
Page 35
the Non-Revolving Loan) and same remaining unpaid for a period of 14 days
immediately following Notice thereof by Lender to Borrower;
13.1.7. the existence of any Unauthorized Overadvance;
13.1.8. the material untruth or material breach, for any reason
whatsoever, of any of the representations and warranties of Borrower
hereunder, which is not completely remedied within 14 days immediately
following Notice thereof by Lender to Borrower;
13.1.9. the failure, for any reason, by Borrower in the performance or
fulfillment of any of its covenants, undertakings, agreements and/or
obligations under the Credit Agreement (other than those covered by any of
Clauses 13.1.1 through 13.1.8 hereof) remaining completely unremedied for
a period of 14 consecutive days immediately following Notice thereof by
Lender to Borrower;
13.1.10. the failure, for any reason whatsoever, by Borrower in the
performance or fulfillment of any of its covenants, undertakings,
agreements and/or obligations under any of the Credit Documents other than
the Credit Agreement, under any other credit or loan (other than the
Credit Facilities) or any other agreement, contract, undertaking or
document with or in favour of Lender to which Borrower is party, which is
not completely remedied within 14 consecutive days immediately following
Notice thereof by Lender to Borrower;
13.1.11. should Borrower or any Credit Party become insolvent, become
bankrupt, become the object of any Petition for Receiving Order under the
provisions of the Bankruptcy and Insolvency Act, Canada which is not
dismissed or withdrawn within 60 days after its first having been lodged;
13.1.12. should Borrower or any Credit Party file a Notice of Intention to
file a proposal or a proposal under the provisions of the Bankruptcy and
Insolvency Act, Canada;
13.1.13. should Borrower or any Credit Party become the object of any
voluntary or involuntary proceedings under the provisions of the
Winding-Up Act, Canada (or similar legislation in any of the provinces);
13.1.14. should Borrower or any Credit Party seek or attempt to seek
protection from its creditors under the provisions of the Companies
Creditors Arrangements Act, Canada;
13.1.15. should a receiver, liquidator, sequestrator or similar person
take possession or become entitled to take possession of the whole or any
substantial portion of the property of Borrower or any Credit Party;
Page 36
13.1.16. should any creditor (other than Lender) give any notice of
intention to enforce or enforcement of any security interest over any
property of Borrower or any Credit Party except for any notice of
intention to enforce or enforcement of any security interests over
property which is, in Lender's sole opinion, of a minor nature and then
provided that Borrower has furnished to Lender Security, in form and
substance satisfactory to Lender, for any consequences of such enforcement
of such security interests over such property;
13.1.17. should there exist any Adverse Charge;
13.1.18. should Borrower or any Credit Party cease or threaten to cease
carrying on business;
13.1.19. should there occur any transaction or operation of law whereby
the effective ultimate control of Borrower or any Credit Party changes;
13.1.20. should Borrower or any Credit Party sell, transfer or dispose of
or purport to sell, transfer or dispose of all or a significant portion of
its assets; or,
13.1.21. the occurrence of any Material Adverse Change.
13.2. In the event of Default, without any necessity of notification or
formality whatsoever (other than those strictly required under law), the
following shall immediately and automatically occur:
13.2.1. notwithstanding their discretionary nature, any availment by
Borrower of any of the Credit Facilities shall immediately cease and
terminate although Lender shall remain entitled, in its sole discretion,
to continue to make the Credit Facilities available to Borrower (which
shall form part of the Obligations) upon and subject to such terms and
conditions as Lender may, in its discretion, stipulate;
13.2.2. all Obligations (including, without limitation, all Outstandings
under all of the Credit Facilities and the face amount of all outstanding
Letters of Credit) shall immediately become fully due and owing by
Borrower to Lender, bearing Interest accruing up to and after any judgment
rendered in favour of Lender and until full payment of the Obligations;
13.2.3. Lender shall be entitled (but not obliged) to enforce and/or
realize upon the Security; and/or
13.2.4. Lender shall be entitled (but not obliged) to exercise all other
rights, remedies and recourses as may then be available to Lender under
law or otherwise (including, without limitation, all rights, remedies and
recourses against Borrower and any Credit Party and/or their respective
properties).
Page 37
13.3. Lender may grant extensions of time or other indulgence, take up and give
securities, accept compensations, grant releases and discharges and otherwise
deal with Borrower and Credit Party as Lender sees fit, without prejudice to the
liability of Borrower and the Credit Parties towards Lender or to Lender's
rights in respect hereof and/or the Security. Any waiver, delay or forbearance
by Lender in the enforcement or prosecution of its rights under any of the
Credit Documents shall not, in any respect, constitute any waiver, delay or
forbearance or agreement by Lender to grant any other waiver, delay or
forbearance in respect of any future matter or occurrences and shall not render
Lender liable or responsible, in any manner whatsoever, towards Borrower or any
Credit Party for any loss or purported loss which Borrower or any Credit Party
may sustain as a result thereof.
13.4. The failure by Lender to insist upon the strict performance of any
provisions hereof or under any of the other Credit Documents or to assert any
right hereunder or under any other of the Credit Documents shall not be deemed
to be or constitute a waiver or forbearance or an agreement to grant a waiver or
forbearance of any rights, recourses or remedies of Lender hereunder or under
any of the other Credit Documents.
13.5. All other rights, remedies and recourses accruing and/or available to
Lender hereunder or under any of the other Credit Documents and/or under law
(including, without limitation, those enumerated in Clause 13.2 hereof) shall be
cumulative and not alternative.
13.6. In the event of Default, Lender may charge on its own behalf and pay
others reasonable sums for services rendered (expressly including legal,
accounting and other professional advice and services) in connection with
enforcement and/or realization of the Security, collecting, selling,
transferring, delivering and obtaining payment of the Obligations and/or the
Security and/or any other matter pertaining to and/or resulting from such
Default, all of which Lender, under reserve of its other rights and recourses,
shall be entitled to deduct from the proceeds of realization and/or Collections.
14. DURATION OF CREDIT AGREEMENT AND TERMINATION
14.1. The Credit Agreement shall come into force as and from the Effective Date
and shall thereafter remain in force and effect until terminated as follows:
14.1.1. either Lender or Borrower may terminate the Credit Agreement by
Notice of termination (by Lender to Borrower or vice versa) no less than
60 days prior to and effective as of the end of any Contract Year from and
including the third Contract Year, provided however that no Notice of
termination given by either Lender or Borrower pursuant to Clause 14.1.1
hereof will be effective until expiry of the Minimum Term;
14.1.2. either Lender or Borrower may terminate the Credit Agreement by no
less than 60 days prior Notice of termination (by Lender to Borrower or
vice versa) at any time whatsoever. In the event of Borrower's terminating
the Credit Agreement pursuant to the provisions of the present Clause
14.1.2
Page 38
hereof, effective before the expiry of the Minimum Term, Borrower shall
immediately pay to Lender the applicable Early Termination Fee. Such
applicable Early Termination Fee shall be deemed to form part of the
Obligations and shall expressly be deemed not to constitute a penalty.
Notwithstanding the foregoing, the Early Termination Fee shall not be
payable by Borrower to Lender in the event that Borrower terminates the
Credit Agreement pursuant to the foregoing in the event of the occurrence
of both of the following circumstances:
(i) Borrower has furnished to Lender evidence satisfactory to Lender
(acting reasonably) that a minimum of $20,000,000.00 (excluding any
existing loans outstanding with Related Persons and subscriptions
for capital stock in Borrower made prior to the date hereof and
nettable investment, banker, underwriter, brokerage or other fees
and costs associated therewith) has been invested in and delivered
to you as completely fresh unrelated or third party funds (and not
re-financing of existing debt or replacement of existing equity) by
way of either (A) new loans to you fully subordinated in favour of
Lender (or in favour of any Lender referred to in item (ii) below)
and subject to all requirements imposed by us with respect to any
prior indebtedness incurred by Borrower, except for payment of
market rate interest and convertibility features, and/or (B) newly
issued share capital in your capital stock; and
(ii) Borrower having furnished to Lender complete details of any
bona fide, legitimate, unrelated offer to replace Lender's financing
pursuant to the present Agreement and Lender having failed to agree
within fourteen (14) days from Lender's receipt of such details, to
furnish the therein specified financing on the same terms and
conditions contained in such bona fide legitimate third party
financing offer.
14.1.3. Lender may terminate the Credit Agreement at any time whatsoever
without Notice or any other notification to Borrower at any time upon or
after occurrence of Default. In the event of termination of the Credit
Agreement pursuant to the provisions of the present Clause 14.1.3 hereof,
Borrower shall immediately pay to Lender the applicable Early Termination
Fee, which shall be deemed to form part of the Obligations and shall
expressly be deemed not to constitute a penalty.
14.2. Borrower expressly acknowledges that the nature, calculation and amount of
the Early Termination Fee as well as the Minimum Term have been agreed to by
Lender and Borrower as part of the overall agreement as to the Credit Facilities
to be made available by Lender to Borrower hereunder and the pricing of such
Credit Facilities (which pricing includes the rate(s) of Interest as well as the
nature and amounts of Fees and Expenses hereunder). Borrower furthermore
acknowledges that the nature, calculation and amount
Page 39
of the Early Termination Fee and the Minimum Term are an integral part of and
partial consideration for Lender's making the Credit Facilities Available to
Borrower and the pricing thereof and that, in such context, the nature,
calculation and amount of the Early Termination Fee and the Minimum Term are
fair and reasonable in all respects.
14.3. Upon termination of the Credit Agreement:
14.3.1. except as herein otherwise expressly provided, all rights and
obligations arising out of transactions having their inception prior to
such termination will not be affected by such termination; and,
14.3.2. Borrower will fulfill and pay all of the Obligations, without the
necessity of demand, and will obtain and furnish Lender with a written
release and discharge from any and all guarantees, undertakings and/or
obligations (including, without limitation, those under the Letters of
Credit) of Lender which may have then been contracted, undertaken or exist
in favour of any such third parties as well as any and all guarantees,
undertakings and obligations of Lender otherwise relating to the Borrower.
Failing occurrence of all of the foregoing, the Credit Agreement, at
Lender's option, will continue in full force and effect until such
payment, satisfaction, release and discharge are received by Lender and
Lender shall be entitled (without any Notice, other notification or
formality whatsoever), to immediately enforce and realize upon the
Security.
15. MULTIPLE PERSONS CONSTITUTING BORROWER
15.1. In the event that Borrower constitutes more than one Person then, for all
purposes hereof:
15.1.1. all Persons constituting Borrower shall be and remain solidarily
liable and obliged towards Lender for the payment and fulfillment of all
indebtedness and obligations hereunder and under all of the other Credit
Documents including, without limitation, the Obligations;
15.1.2. all Persons constituting Borrower shall be considered as one
single person for the purposes of calculating all matters hereunder in
respect of Borrower;
15.1.3. all references to "Borrower" hereunder shall, whenever the context
requires, be deemed to constitute references to each and every one of the
Persons constituting Borrower;
15.1.4. all extensions of the Credit Facilities by Lender to Borrower
hereunder (whether by Advances, causing issuance of Letters of Credit,
causing acceptances of Bankers' Acceptances or otherwise) shall be deemed,
for all purposes whatsoever, to be extensions of such Credit Facilities to
and
Page 40
for the account of all of the Persons constituting Borrower hereunder
solidarily;
15.1.5. notwithstanding the provisions of Clause 15.1.4 or anything else
herein contained, Lender shall be entitled, in its discretion from time to
time, to keep separate Loan Accounts for each Person constituting Borrower
as to extensions of credit under the Credit Facilities hereunder (whether
by Advances, causing issuance of Letters of Credit, causing acceptances of
Bankers' Acceptances or otherwise). Notwithstanding the keeping of such
separate Loan Accounts, Lender may deal with such Persons constituting
Borrower and with all of their Loan Accounts as if such Person and Loan
Accounts were one sole Loan Account and, without limiting the generality
of the foregoing, Lender shall be and remain fully authorized to apply any
debits and/or credits to any or all of such Loan Accounts and to transfer
debits and credits between such Loan Accounts and/or any of the Persons
constituting Borrower as Lender, in its sole discretion, may deem
appropriate.
16. FORMAL DATE
16.1. This Credit Agreement may be referred to as bearing formal date July 1,
2004, notwithstanding the date of actual signature hereof or the Effective Date
hereof.
17. MISCELLANEOUS
17.1. Any provisions of any of the Credit Documents which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability, without invalidating
the remaining provisions of the Credit Documents in that jurisdiction or
affecting the validity or enforcement of such provision in any other
jurisdiction;
17.2. Subject to the provisions of Section 2 hereof, the Credit Agreement
expressly supersedes, for all purposes, any previous existing commitments and/or
arrangements between Lender and Borrower.
17.3. Every provision of the Credit Agreement is and will be independent of the
other and, in the event that any part of the Credit Agreement is declared
invalid, illegal or unenforceable, the remaining provisions will not be affected
by such declaration and will remain valid, binding and enforceable.
17.4. In the event of any express inconsistency between any of the terms,
conditions or contents of the Credit Agreement and any of the terms, conditions
and contents of the Security then (in the absence of any express written
agreement to the contrary by all of the parties hereto under subsequent date
hereof), the terms, conditions and contents of the Credit Agreement shall
prevail.
Page 41
17.5. These presents may be executed in one or more counterparts, each of which
shall be deemed to be an original, all of which shall constitute one and the
same Credit Agreement.
17.6. There intervened herein each of the Guarantors, which Guarantors, by their
present intervention, hereby:
17.6.1. acknowledge having taken due cognizance of all of the terms,
conditions and contents of all of the Credit Documents; and,
17.6.2. declare their complete satisfaction with all of the terms,
conditions and contents of all of the Credit Documents and consent thereto
for all purposes.
17.7. The parties hereto and the intervenants herein hereto acknowledge that
they have requested and are satisfied that the foregoing, as well as all
notices, actions and legal proceedings be drawn up in the English language./Les
parties et les intervenants a cette convention reconnaissent qu'elles ont exige
que ce qui precede ainsi que tous avis, actions et procedures legales soient
rediges et executes en anglais et s'en declarent satisfaites.
IN WITNESS WHEREOF, the parties hereto and the intervenants herein have executed
the Credit Agreement on November 19, 2004
LENDER: GMAC COMMERCIAL FINANCE CORPORATION -
CANADA/SOCIETE FINANCIERE COMMERCIALE
GMAC - CANADA
Per:
/s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx
Senior Vice-President
BORROWER: XXXXX XXXXX & SONS INC.
Per:
/s/ Xxxxxx X. Xxxxxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
Page 42
CREDIT PARTY: XXXXX XXXXX & SONS U.S., INC.
Per:
/s/ Xxxxxx X. Xxxxxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
GUARANTOR: XXXXX XXXXX & SONS U.S., INC.
Per:
/s/ Xxxxxx X. Xxxxxxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
XXXXX XXXXX & SONS HOLDINGS INC./XXXXX
XXXXX ET FILS, SOCIETE DE PORTEFEUILLE
INC.
Per:
/s/ Xxxxx Xxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxx
Chief Executive Officer
CONTRACT DATA SHEET
This is the Contract Data Sheet to and forming part of the Amended and Restated
Accounts Receivable Management, Loan & Security Agreement between GMAC
Commercial Finance Corporation - Canada, as Lender, and Xxxxx Xxxxx & Sons Inc.,
as Borrower, bearing formal date July 1, 2004.
1. CREDIT FACILITIES
1.1. REVOLVING LOAN:
1.1.1. Maximum Amount: $60,000,000.00
1.1.2. Eligible Accounts: 80 %
1.1.3. NOLV of Eligible Finished Goods Inventory: 85 %
1.1.4. NOLV of Eligible Raw Materials Inventory: 100 %
1.1.5. Eligible Inventory Availability Limit: N/A
1.1.6. Collateral Stretch Facility: the lesser of:
(a) 7% of the NOLV of Eligible Finished Goods Inventory; and
(b) $5,000,000.00
1.1.7. Value of Additional Collateral: Not Applicable
1.1.8. Overadvance Availablity: Not Applicable
1.2. NON-REVOLVING LOAN(S):
1.2.1. Loan corresponding to Loan number 7015-81 in the principal amount
of $4,993,021.00, first disbursed on July 1, 1999 maturing on January 1,
2005, repayable in equal consecutive monthly installments of $83,333.33
and bearing interest at the annual rate equal to the Prime Rate plus
0.375% per annum;
1.2.2. Loan corresponding to Loan number 7015-82 in the principal amount
of $400,000.00, first disbursed on October 16, 2000 maturing on October 1,
2005, repayable in equal consecutive monthly installments of $6,666.66 and
bearing interest at the annual rate equal to the Prime Rate plus 2.50% per
annum;
1.2.3. Loan corresponding to Loan number 7015-83 in the principal amount
of $2,567,353.14, first disbursed on April 18, 2001 maturing on January 1,
2006, repayable in equal consecutive monthly installments of $50,000.00
and bearing interest at the annual rate equal to the Prime Rate plus 2.50%
per annum;
Page 44
1.2.4. Loan corresponding to Loan number 7015-84 in the principal amount
of $2,901,730.75, first disbursed on May 14, 2001 maturing on September 1,
2006, repayable in equal consecutive monthly installments of $50,000.00
and bearing interest at the annual rate equal to the Prime Rate plus
0.625% per annum;
2. INTEREST
2.1. REVOLVING LOAN RATE:
2.1.1. On all Outstandings resulting from Advances under the Revolving
Loan in Dollars, Prime Rate plus 0.5% per annum; and,
2.1.2. On all Outstandings resulting from Advances under the Revolving
Loan in US Dollars, Prime Rate plus 0.5%;
2.2. AUTHORIZED OVERADVANCE RATE: Not Applicable
2.3. NON-REVOLVING LOAN RATE:
2.3.1. Loan 7015-81: annual rate equal to the Prime Rate plus 0.375%;
2.3.2. Loan 7015-82: annual rate equal to the Prime Rate plus 2.50%
2.3.3. Loan 7015-83: annual rate equal to the Prime Rate plus 2.50%
2.3.4. Loan 7015-84: annual rate equal to the Prime Rate plus 0.625%
3. BANKERS' ACCEPTANCES
3.1. [ ] Permitted
[X] Not Permitted
3.2. BANKERS' ACCEPTANCE FEES: Not Applicable
4. LETTERS OF CREDIT
4.1. LETTER OF CREDIT LIMIT: N/A
4.2. LETTER OF CREDIT RESERVES: 50% of the face amount of all Unaccepted
Letters of Credit
Page 45
4.3. LETTER OF CREDIT FEE: 0.25% per month, calculated on the average
daily balance of outstanding Letters of Credit for each month
5. FEES
5.1. ARRANGEMENT FEE: $60,000.00
5.2. MONITORING FEE: $7,500.00 per month plus an additional amount
of $5,000.00 per month during the months of February through June,
inclusive
5.3. STANDBY FEE: 0.25 % per annum
6. CREDIT PARTIES Xxxxx Xxxxx & Sons U.S., Inc.
7. GUARANTOR Xxxxx Xxxxx & Sons U.S., Inc.
Xxxxx Xxxxx & Sons Holding Inc. (formerly
Borgosesia Acquisitions Corp.)
8. TERM
8.1. EFFECTIVE DATE: July 1, 2004
8.2. MINIMUM TERM: 3 consecutive Contract Years
9. ADDRESS FOR BORROWER AND ANY CREDIT PARTIES:
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
10. PERMITTED CHARGES:
- Rights in favour of vendors having sold goods to the Borrower by way
of consignment or conditional sale;
Page 46
- Rights in favour of lessors of equipment and/or machinery which have
been leased by lease or capital lease to the Borrower;
- Movable hypothec in the amount of $5,400,000 registered in favour of
La Financiere du Quebec on April 24, 2003 under number 00-0000000-0000,
on strict condition that La Financiere du Quebec cede priority of all
such hypothecary rights in favour of the Lender on terms and conditions
satisfactory to the Lender;
- Movable hypothec in the amount of $1,500,000 registered in favour of
National Bank Trust Inc. on August 21, 2002 under number
00-0000000-0000, on strict condition that National Bank Trust Inc. cede
priority of all such hypothecary rights in favour of the Lender on
terms and conditions satisfactory to the Lender;
11. SURPLUS REQUIREMENTS: N/A
12. SURPLUS RESERVE: N/A
13. FINANCIAL COVENANTS:
Borrower shall maintain the following financial covenants, each to be calculated
on a non-consolidated basis:
13.1. The aggregate of all Capital Expenditures during any Fiscal Year shall be
limited to:
(a) $2,500,000.00 in the Fiscal Year ending March 31, 2005;
(b) $5,000,000.00 in the Fiscal Year ending March 31, 2006; and
(c) $5,000,000.00 in the Fiscal Year ending March 31, 2007.
13.2. Borrower shall have and maintain the following EBITDA, tested quarterly on
a Rolling Basis:
(a) No less than $4,000,000.00 as at September 30, 2004 and as at
December 31, 2004;
(b) No less than $6,500,000.00 as at March 31, 2005 until the
Fiscal Quarter ending September 30, 2005; and
Page 47
(c) No less than $9,500,000.00 as at the Fiscal Quarter ending
December 31, 2005 and for each Fiscal Quarter throughout the
balance of the Minimum Term.
14. SPECIAL COVENANTS:
N/A
15. REPORTING:
Borrower shall provide the following financial information to Lender:
15.1. Annual audited consolidated and unconsolidated financial statements of
Borrower (and if multiple Persons, each Person constituting the Borrower)
containing a profit and loss statement, balance sheet and other reports
normally forming part of financial statements, prepared in accordance with
GAAP by an independent chartered accounting firm satisfactory to Lender,
within 120 days of each Fiscal Year end;
15.2. On a quarterly basis, Compliance Certificates signed by the chief
financial officer, attesting to financial covenant requirements;
15.3. On a monthly basis, as at the end of each accounting month, to be
delivered no later than 30 days following each accounting month end:
15.3.1. financial statements prepared by management and signed by the
chief financial officer of Borrower;
15.3.2. a report of the chief financial officer, signed by the chief
financial officer of Borrower;
15.3.3. a detailed aged listing of Accounts in form and substance
satisfactory to Lender within 15 days of each month end; and
15.3.4. a detailed aged listing of accounts payable, to be delivered to
Lender within 15 days of each month end;
15.4. On a weekly basis, detailed Inventory Declaration in form and substance
satisfactory to Lender within 3 days of each weekly period;
15.5. A month by month projected operating budget and cashflow for borrower in a
form and substance satisfactory to Lender, at such intervals Lender may
from time to time request; and
15.6. Such other additional information and documents as Lender may, from time
to time and at such intervals, request from Borrower.
Page 48
16. SECURITY:
16.1. The hypothecation (in such amount as may be designated by Lender from time
to time) and security interests in favour of Lender of all of Borrower's
and each Credit Party's present and future movable and personal property,
whether corporeal or incorporeal, tangible or intangible, of any nature
whatsoever, wherever situated, properly perfected in all jurisdictions
where any such property is or may hereafter be situated, creating a
first-ranking hypothec and security interest in Lender's favour thereon
except for the Permitted Charges;
16.2. An unlimited Guarantee executed by Xxxxx Xxxxx & Sons U.S., Inc. in favour
of the lender, with respect to any and all obligations due from time to
time by Borrower to Lender supported by a general security agreement in
favour of Lender charging all of such guarantor's present and future
personal property, tangible and intangible, wherever situated, properly
perfected in all jurisdictions where any such property is or may hereafter
be situated, creating a first-ranking hypothec and security interest in
Lender's favour thereon except for the Permitted Charges.
LENDER: GMAC COMMERCIAL FINANCE CORPORATION
- CANADA/SOCIETE FINANCIERE
COMMERCIALE GMAC - CANADA
Per:
/s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx, Senior Vice-President
BORROWER: XXXXX XXXXX & SONS INC.
Per:
/s/ Xxxxxx X. Xxxxxxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
CREDIT PARTY: XXXXX XXXXX & SONS U.S., INC.
Per:
/s/ Xxxxxx X. Xxxxxxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
Page 49
GUARANTOR: XXXXX XXXXX & SONS U.S., INC.
Per:
/s/ Xxxxxx X. Xxxxxxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
XXXXX XXXXX & SONS HOLDINGS INC.
/XXXXX XXXXX ET FILS,
SOCIETE DE PORTEFEUILLE INC.
Per:
/s/ Xxxxx Xxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
Chief Executive Officer
