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CREDIT AGREEMENT
Dated as of April 1st, 1997
BETWEEN
SPORT MASKA INC.
- AND -
THE CHASE MANHATTAN BANK OF CANADA
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Fraser & Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxxxx
Barristers and Solicitors Barristers & Solicitors
X.X. Xxx 000 0000 XxXxxx College
42nd Floor 26th Floor
1 First Canadian Place Montreal, Quebec
Toronto, Ontario H3A 3N9
M5X 1B2
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.................................1
SECTION 1.02. Accounting Terms......................................18
ARTICLE II
THE CREDIT FACILITY
SECTION 2.01. Revolving Credit Commitment...........................18
SECTION 2.02. Revolving Credit Loan.................................19
SECTION 2.03. Notice of Credit......................................19
SECTION 2.04. Promissory Note.......................................19
SECTION 2.05. Interest on Revolving Credit Loans....................20
SECTION 2.06. Fees..................................................20
SECTION 2.07. Bankers' Acceptances..................................21
SECTION 2.08. Termination and Reduction of Revolving Credit
Commitment .........................................23
SECTION 2.09. Interest on Overdue Amounts...........................24
SECTION 2.10. Prepayment of Credits.................................24
SECTION 2.11. Reserve Requirements..................................27
SECTION 2.12. Indemnity.............................................29
SECTION 2.13. Payments and Computations.............................29
SECTION 2.14. Taxes.................................................30
SECTION 2.15. Issuance of Domestic Letters of Credit................32
SECTION 2.16. Payment of Letters of Credit..........................33
SECTION 2.17. Lender's Actions with respect to Lender's Letters of
Guarantee...........................................34
SECTION 2.18. Letter of Guarantee Fees..............................35
ARTICLE III
COLLATERAL SECURITY
SECTION 3.01. Security Documents....................................35
SECTION 3.02. Filing and Recording..................................36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Organization, Legal Existence.........................36
SECTION 4.02. Authorization.........................................37
SECTION 4.03. Governmental Approvals................................37
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SECTION 4.04. Binding Effect........................................38
SECTION 4.05. Material Adverse Change...............................38
SECTION 4.06. Litigation............................................38
SECTION 4.07. Financial Statements..................................38
SECTION 4.08. Taxes.................................................39
SECTION 4.09. Employee Benefit Plans................................40
SECTION 4.10. No Material Misstatements.............................40
SECTION 4.11. Security Interest.....................................40
SECTION 4.12. Use of Proceeds.......................................40
SECTION 4.13. Subsidiaries..........................................41
SECTION 4.14. Title to Properties...................................41
SECTION 4.15. Solvency..............................................42
SECTION 4.16. Permits, etc..........................................42
SECTION 4.17. Compliance with Environmental Laws....................42
SECTION 4.18. No Change in Credit Criteria or Collection Policies...43
SECTION 4.19. Employee Matters......................................43
ARTICLE V
CONDITIONS OF CREDIT EVENTS
SECTION 5.01. All Credit Events.....................................44
SECTION 5.02. First Borrowing.......................................45
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.01. Affirmative Covenants.................................50
ARTICLE VII
NEGATIVE COVENANTS
SECTION 7.01. Negative Covenants....................................50
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default.....................................51
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ARTICLE IX
MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER
COLLATERAL
SECTION 9.01. Collection of Receivables.............................53
SECTION 9.02. Receivables Documentation.............................55
SECTION 9.03. Status of Receivables and Other Collateral............56
SECTION 9.04. Monthly Statement of Account..........................57
SECTION 9.05. Collateral Custodian..................................57
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices..............................................57
SECTION 10.02. Survival of Agreement................................58
SECTION 10.03. Successors and Assigns...............................58
SECTION 10.04. Expenses.............................................60
SECTION 10.05. Applicable Law.......................................61
SECTION 10.06. Right of Setoff......................................61
SECTION 10.07. Payments on Business Days............................61
SECTION 10.08. Waivers..............................................62
SECTION 10.09. Severability.........................................63
SECTION 10.10. Entire Agreement.....................................63
SECTION 10.11. Confidentiality......................................63
SECTION 10.12. Submission to Jurisdiction...........................64
SECTION 10.13. Interest Rate Limitation.............................64
SECTION 10.14. Counterparts.........................................65
SECTION 10.15. Headings.............................................65
EXHIBITS
EXHIBIT A Form of Bankers' Acceptance
EXHIBIT B Form of Chase U.S. Letter of Credit
EXHIBIT C Form of Lender's Letter of Guarantee
EXHIBIT D Form of Promissory Note
SCHEDULES
SCHEDULE 1.01 Summary of Security
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
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SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.08 Taxes
SCHEDULE 4.13 Subsidiaries
SCHEDULE 4.14 Leases
SCHEDULE 4.17 Environmental Law Compliance
SCHEDULE 4.19 Employee Matters
THIS CREDIT AGREEMENT is made as of the 1st day of April, 1997.
B E T W E E N:
SPORT MASKA INC., a corporation continued under the
laws of the Province of New Brunswick
- and -
THE CHASE MANHATTAN BANK OF CANADA, one of the
chartered banks of Canada
WHEREAS The Chase Manhattan Bank of Canada (hereinafter referred to
as the "Lender") has agreed, subject to the terms and conditions hereof, to
provide a revolving operating credit facility in a maximum aggregate principal
amount equal to the Canadian Dollar Equivalent of $35,000,000.00 U.S. in favour
of Sport Maska Inc. (hereinafter referred to as the "Borrower") in order to
assist the Borrower with its general working capital requirements and to
partially finance the payments to be made pursuant to the Plan of
Reorganization;
NOW THEREFORE in consideration of the premises and the agreements
herein set out and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. For purposes hereof, the
following terms shall have the meanings specified below:
"ACCEPTANCE FEE" means, with respect to a Bankers' Acceptance
accepted by the Lender under this Agreement, a fee payable in Canadian Dollars
by the Borrower to the Lender calculated on the face amount of the Bankers'
Acceptance at the rate of 0.25% per annum, on the basis of the number of days in
the Contract Period and a year of 360 days.
"AFFILIATE" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common control
with such person. For the purposes of this definition, the term "control"
(including, with correlative
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meanings, the terms such as "controlled by" and "under common control with"), as
used with respect to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise.
"AGREEMENT" shall mean this Credit Agreement, together with all
Schedules and Exhibits hereto as each may be amended, supplemented, extended or
restated from time to time.
"APPAREL CANADA" shall mean #1 Apparel Canada Inc., a corporation
continued under the laws of the Province of New Brunswick.
"AVAILABILITY" shall mean at any time (i) the lesser at such time of
(x) the Revolving Credit Commitment and (y) the sum of the Borrowing Base plus
the Seasonal Amount, minus (ii) the sum at such time of (x) the unpaid principal
balance of the Revolving Credit Loans together with all reserves (without
duplication of deductions taken in determining Net Amount of Eligible
Receivables) established by the Lender in its reasonable exclusive judgment upon
notice to the Borrower including, without limitation, reserves reflecting the
risk of suppliers to the Borrower or Apparel Canada repossessing shipped goods
from the Borrower or Apparel Canada and (y) the Domestic Letter of Credit Usage
and (z) the aggregate of all outstanding Bankers Acceptances and all outstanding
liability of the Borrower to reimburse the Lender for matured Bankers
Acceptances.
"BANK ACT SECURITY" means security granted by the Borrower to the
Lender (charging its goods, wares and merchandise) pursuant to section 427 of
the Bank Act pursuant to the Lender's standard form documentation therefor.
"BANKERS' ACCEPTANCE" means a xxxx of exchange substantially in the
form of Exhibit "A" (or such other form as may be acceptable to the Lender)
denominated in Canadian Dollars, drawn by the Borrower and accepted by the
Lender.
"BI EVENT" shall have the meaning assigned to such term in Section
2.10(d) hereof.
"BORROWER" shall have the meaning assigned to such term in the
preamble to this Agreement.
"BORROWING BASE" shall have the meaning assigned to such term in
SECTION 2.01(A) hereof.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or
legal holiday in the Province of Ontario, the Province of Quebec or the State of
New
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York, on which banks are open for the transaction of their banking business in
the ordinary course in Toronto, Montreal and New York City.
"CANADIAN DOLLAR EQUIVALENT" shall mean, for any amount at any
time expressed in United States (U.S.) dollars, the amount of Canadian
Dollars that would be sold at the spot rate of exchange of Chase U.S. at such
time in order to purchase such amount of U.S. dollars.
"CANADIAN PENSION PLAN" shall mean any pension plan established by
the Parent, the Borrower or any subsidiary thereof under Canadian federal or
provincial law for the benefit of employees of the Borrower or any subsidiary
thereof.
"CAPITALIZED LEASE OBLIGATION" shall mean an obligation to pay rent
or other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property which obligation is required to be classified
and accounted for as a capital lease on a balance sheet prepared in accordance
with GAAP, and for purposes hereof the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"CASUALTY EVENT" shall have the meaning assigned to such term in
SECTION 2.10(D) hereof.
"CCM" shall mean Gestion CCM (1983) Inc./CCM Holdings (1983) Inc., a
corporation incorporated under the federal laws of Canada.
"CDOR RATE" shall mean on any day the annual rate of interest which
is the rate determined as being the arithmetic average of the quotations of all
institutions listed in respect of the "BA 1 Month" rate for Canadian Dollar
denominated bankers' acceptances displayed and identified as such on the
"Reuters Screen CDOR Page" (as defined in the International Swap Dealer
Association, Inc. definitions, as modified and amended from time to time) as of
10:00 A.M. Toronto, Ontario local time on such day and, if such day is not a
Business Day, then on the immediately preceding Business Day (as adjusted by the
Lender after 10:00 A.M. Toronto, Ontario local time to reflect any error in a
posted rate of interest or in the posted average annual rate of interest). If
such rates are not available on the Reuters Screen CDOR Page on any particular
day, then the CDOR Rate on that day shall be calculated as the arithmetic mean
of the 30 day rates applicable to Canadian Dollar denominated banker's
acceptances quoted by the Lender and two other financial institutions (selected
and agreed upon between the Lender and the Borrower) as of 10:00 A.M. Toronto,
Ontario local time on such day, or if such day is not a Business Day, then on
the immediately preceding Business Day;
"CHANGE OF CONTROL" shall mean (i) Investor Group shall cease to
maintain the number of seats on the Board of Directors of the Parent to which
the Investor Group is entitled pursuant to the Shareholders' Agreement in effect
on the date hereof, or (ii)
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from and after an initial public offering, the Investor Group shall cease to own
stock of the Parent representing at least 20% of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of the Parent.
"CHARGES" shall have the meaning assigned to such term in Section
10.13 hereof.
"CHASE U.S." shall mean The Chase Manhattan Bank, in its capacity
as Agent pursuant to the U.S. Credit Agreement.
"CHASE U.S. LETTER OF CREDIT" shall mean the standby letter of
credit to be issued by Chase U.S. in favour of the Lender as security for the
Obligations to be substantially in the form of Exhibit "B" attached hereto.
"CLOSING DATE" shall mean the closing date under the U.S. Credit
Agreement, but shall in no event be later than April 15, 1997.
"COLLATERAL" shall mean all collateral and security as described
in the Security Documents.
"CONCENTRATION ACCOUNTS" shall mean collectively the Canadian Dollar
account and the U.S. Dollar account each to be opened and maintained in the name
of each of the Borrower and Apparel Canada at the main branch of National Bank
of Canada in Montreal, Quebec located at
controlled by the Lender as contemplated by section 9.01 below.
"CONSOLIDATED" shall mean, in respect of any person, as applied to
any financial or accounting term, such term determined on a consolidated basis
in accordance with GAAP (except as otherwise required herein) for the person and
all consolidated subsidiaries thereof (and without limiting the generality of
the foregoing, and for clarity, the Borrower and Apparel Canada are consolidated
subsidiaries of the Parent).
"CONTAMINANT" shall mean all Hazardous Materials and all those
substances which are regulated by or form the basis of liability under Federal,
provincial, state or local government in Canada or the United States
environmental, health and safety statutes or regulations or any other material
or substance which constitutes a material health, safety or environmental hazard
to any person or property.
"CONTRACT PERIOD" shall mean, with respect to a Bankers' Acceptance,
the term of days of such Bankers' Acceptance, if Bankers' Acceptances are
selected by the Borrower in accordance with Section 2.03, commencing on the
Drawdown Date or Conversion Date, as applicable, of such Bankers' Acceptance and
expiring on a Business
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Day, which term shall be for 30, 60, 90 or 180 days thereafter, in each case
subject to availability.
"CONVERSION DATE" shall mean the date upon which a Prime Rate Loan
is converted to a Bankers' Acceptance or a date upon which a Bankers' Acceptance
is converted to a Prime Rate Loan, all in accordance with the provisions hereof.
"CREDIT" shall mean each Revolving Credit Loan and each Bankers'
Acceptance and each issuance of a Domestic Letter of Credit in respect of which
the Lender could be liable to make a payment under the Lender's Letter of
Guarantee.
"CREDIT EVENT" shall mean each borrowing or obtaining of any form of
Credit by the Borrower hereunder.
"CUSTOMER" shall mean and include the account debtor or obligor with
respect to any Receivable or purchaser with respect to any inventory.
"DEBENTURES" shall mean the debentures dated April 1, 1997 executed
by the Borrower, Apparel Canada and Trademark Canada in favour of the Lender.
"DEFAULT" shall mean any condition, act or event which, with notice
or lapse of time or both, would constitute an Event of Default.
"DISCOUNT PROCEEDS" shall mean, in respect of a Bankers' Acceptance
accepted and purchased by the Lender under this Agreement, an amount (rounded to
the nearest whole cent, and with one-half of one cent being rounded up)
calculated on the applicable Drawdown Date or Conversion Date by multiplying:
(a) the face amount of such Bankers' Acceptance; by
(b) a fraction, the numerator of which is one and the denominator of
which is the sum of one plus the product of:
(i) the applicable Discount Rate (expressed as a decimal); and
(ii) a fraction, the numerator of which is the Contract Period
for such Bankers' Acceptance, and the denominator of which
is three hundred sixty (360) days;
with the price as so determined being rounded up or down to the fifth decimal
place and .000005 rounded up.
"DISCOUNT RATE" applicable to a Bankers' Acceptance being issued on
any Drawdown Date or Conversion Date, and purchased by the Lender, shall mean
the percentage discount rate (expressed in two decimal places) of the Lender at
which it would, in accordance with its normal practices, at or about 10:00 a.m.
(Toronto time) on such Drawdown Date or Conversion Date, be prepared to purchase
Bankers' Acceptances accepted by it and having a comparable issue and maturity
date as the issue and maturity date of such Bankers' Acceptance.
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"DOLLARS" or "CANADIAN DOLLARS" or the symbol "$" shall mean lawful
currency of Canada.
"DOMESTIC LENDING OFFICE" shall mean, with respect to the Lender,
the office of the Lender located at 0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxx, X0X 0X0 or such other office of the Lender as the Lender may from time
to time specify to the Borrower.
"DOMESTIC LETTERS OF CREDIT" shall mean each and every of the
letters of credit (whether documentary or otherwise) issued by an Issuing Bank
for the account of the Borrower as contemplated by section 2.15 of this
Agreement, the aggregate face amount of all such Domestic Letters of Credit not
to exceed $4,000,000.00 Canadian at any time and no more than twenty (20) such
Domestic Letters of Credit may be issued and outstanding at any time and the
aggregate face amount of all Domestic Letters of Credit which are standby
credits shall not, together with all standby letters of credit outstanding under
the U.S. Credit Agreement, exceed at any time in the aggregate Canadian Dollar
Equivalent of $2,000,000 U.S.
"DOMESTIC LETTER OF CREDIT USAGE" shall mean at any time the sum of
(i) the aggregate undrawn amount of all outstanding Domestic Letters of Credit
at such time plus (ii) the unreimbursed drawings at such time under the Lender's
Letter of Guarantee.
"DRAWDOWN DATE" shall mean the date upon which a Revolving Credit
Loan is made.
"ELIGIBLE INVENTORY" shall mean inventory of each of the Borrower
and Apparel Canada comprised solely of raw materials and finished goods (and
specifically excluding work in process) which is, in the reasonable opinion of
the Lender, not obsolete or slow-moving and is and at all times shall continue
to be acceptable to the Lender in all respects; provided, however, that Eligible
Inventory shall in no event include inventory (i) with respect to which the
Lender has not been granted and does not have a valid, first ranking hypothec or
first priority security interest or (ii) which has been returned and not
reclassified as inventory or rejected by a Customer. Standards of eligibility
may be fixed and revised from time to time solely by the Lender in the Lender's
exclusive reasonable judgment. In determining eligibility, the Lender may, but
need not, rely on reports and schedules furnished by the Borrower, but reliance
by the Lender thereon from time to time shall not be deemed to limit the right
of the Lender to revise standards of eligibility at any time as to both present
and future inventory of the Borrower.
"ELIGIBLE RECEIVABLES" shall mean Receivables created by each of the
Borrower and Apparel Canada in the ordinary course of business arising out of
the sale or lease of goods or rendering of services by the Borrower or Apparel
Canada, which
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are and at all times shall continue to be acceptable to the Lender in all
respects. Standards of eligibility may be fixed and revised from time to time
solely by the Lender in the Lender's exclusive reasonable judgment. In general,
without limiting the foregoing, a Receivable shall in no event be deemed to be
an Eligible Receivable unless: (a) all payments due on the Receivable have been
invoiced and the underlying goods shipped or services performed, as the case may
be; (b) the payment due on the Receivable is not more than 60 days past the due
date when shipped on normal terms or not more than 30 days overdue when shipped
under dating programs providing for payment up to 210 days from invoice date;
(c) the payments due on more than 50% of all Receivables from the same Customer
are less than 60 days past the due date when shipped on normal terms or less
than 30 days past due when shipped under the dating programs referred to in (b)
above; (d) the Receivable arose from a completed and bona fide transaction (and
with respect to a sale of goods, a transaction in which title has passed to the
Customer) which requires no further act under any circumstances on the part of
the Borrower or Apparel Canada in order to cause such Receivable to be payable
in full by the Customer; (e) the Receivable is in full conformity with the
representations and warranties made by the Borrower to the Lender with respect
thereto and is free and clear of all security interests and Liens of any nature
whatsoever other than any security interest deemed to be held by the Borrower or
Apparel Canada or any security interest created pursuant to the Security
Documents or permitted by Section 7.01 of the U.S. Credit Agreement; (f) the
Receivable constitutes an "account" "claim" or "chattel paper" within the
meaning of the Personal Property Security Law of the province or other
jurisdiction in which the Receivable is located; (g) the Customer has not
asserted that the Receivable, and neither the Borrower nor Apparel Canada is
aware that the Receivable, (i) arises out of a xxxx and hold, consignment or
progress billing arrangement or (ii) is subject to any setoff, contras, net-out
contract, offset, deduction, dispute, credit, counterclaim or other defense
arising out of the transactions represented by the Receivable or independently
thereof (provided that such Receivable shall only be ineligible to the extent
thereof) and (iii) the Customer has finally accepted the goods from the sale out
of which the Receivable arose and has not objected to its liability thereon or
returned, rejected or repossessed any of such goods, except for goods returned
in the ordinary course of business provided that such Receivable shall only be
ineligible with respect to that portion thereof which has been objected to or
which relates to goods returned, rejected or repossessed; (h) the Receivable
arose in the ordinary course of business of the Borrower or Apparel Canada; (i)
the Customer is not (x) the Canadian or the United States government or the
government of any state, province or political subdivision thereof or therein,
or any agency or department of any thereof or (y) an Affiliate of the Parent,
the Borrower or Apparel Canada or any subsidiary of the Parent; (j) the Customer
is a Canadian or United States person or an obligor located in Canada or the
United States, or an obligor located in another jurisdiction if the applicable
Receivable is covered by a letter of credit or credit insurance in favour of, or
assigned to, the Lender in form and substance satisfactory to the Lender; (k)
the Receivable complies with all material requirements of all applicable
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laws and regulations, whether Federal, provincial or local (including, without
limitation, usury laws and laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy); (l) to the knowledge of the
Borrower or Apparel Canada, as relevant, the Receivable is in full force and
effect and constitutes a legal, valid and binding obligation of the Customer
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and by general equity
principles; (m) the Receivable is denominated in and provides for payment by the
Customer in Canadian dollars or United States dollars; (n) the Receivable has
not been, and is not required to be charged off or written off as uncollectible
in accordance with GAAP or the customary business practices of the Borrower or
Apparel Canada, as applicable; (o) the Lender possesses a valid, perfected,
first ranking hypothec or first priority security interest, as the case may be,
in such Receivable as security for payment of the Obligations; (p) the
Receivable is not with respect to a Customer located in New Jersey, Minnesota,
or any other state or province denying creditors access to its courts in the
absence of a Notice of Business Activities Report or extra-provincial licence or
other similar filing, unless the Borrower or Apparel Canada, as applicable, has
either qualified as a foreign corporation authorized to transact business in
such province or state or has filed a Notice of Business Activities Report or
extra-provincial licence or similar filing with the applicable province or state
agency for the then current year; and (q) the Lender is satisfied with the
credit standing of the Customer in relation to the amount of credit extended.
"ENVIRONMENTAL CLAIM" shall mean any written notice of violation,
claim, deficiency, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or deed or use restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
non-accidental Releases), of, or exposure to, any Contaminant at, in, by or from
any of the properties of the Borrower or its subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of any of the properties of the
Borrower or its subsidiaries or (iii) the violation, or alleged violation by the
Borrower or any of its subsidiaries, of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental authority, agency
or court relating to environmental matters connected with any of the properties
of the Borrower or its subsidiaries, under any applicable Environmental Law.
"ENVIRONMENTAL LAWS" includes, without limitation, the Environmental
Protection Act (Ontario), the Ontario Water Resources Act, the Environment
Quality Act
Page 9
(Quebec), the Canadian Environmental Protection Act, the Fisheries Act, and the
Transportation of Dangerous Goods Act, and the Canada Shipping Act, and their
United States equivalent, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Oil
Pollution Act of 1990 (33 U.S.C. ss. 2701 et. seq.), the Safe Drinking Water Act
(42 U.S.C. ss. 300f, et seq.), the Clear Air Act (42 U.S.C. ss. 7401 et seq.),
the Toxic Substances Control Act, as amended (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), as such
laws have been and hereafter may be amended or supplemented, and any related or
analogous present or future Federal, provincial, state or local, statutes, rules
having the force of law, regulations, ordinances, licenses, permits and
interpretations having the force of law and orders of regulatory and
administrative bodies.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
ARTICLE VIII hereof.
"EXCLUDED TAXES" shall have the meaning assigned to such term in
SECTION 2.14 hereof.
"FEDERAL" shall mean the federal level of government in both Canada
and the United States.
"FINANCIAL OFFICER" shall mean, the chief financial officer,
vice-president, finance or corporate controller of the Borrower.
"FIRST RATE" shall have the meaning assigned to such term in Section
2.05(c) hereof.
"FISCAL YEAR" shall mean the fiscal year of the Parent for
accounting purposes which as of the Closing Date ends on December 31 of each
year.
"GAAP" shall have the meaning assigned to such term in Section 1.02
hereof.
"GRANTOR" shall mean the Borrower and Apparel Canada and Trademark
Canada and any other party that is defined or described as a "Grantor",
"Corporation", "Company", "Mortgagor", "Pledgor" or "Debtor", as such terms are
defined in any of the Security Documents.
"GUARANTEE" shall mean any obligation, contingent or otherwise, of
any person guaranteeing or having the economic effect of guaranteeing or giving
financial
Page 10
assistance in respect of the repayment of any Indebtedness or monetary
obligation of any other person in any manner, whether directly or indirectly,
and shall include, without limitation, any obligation of such person, direct or
indirect, to (i) purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or monetary obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness or monetary obligation, (ii) purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or
obligation of the payment of such Indebtedness or monetary obligation, or (iii)
maintain working capital, equity capital, available cash or other financial
condition of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or monetary obligation; provided, however, that the term Guarantee
shall not include endorsements for collection or collections for deposit, in
either case in the ordinary course of business. The amount of any Guarantee of
any guaranteeing person shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect of
which such Guarantee is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee, unless such primary obligation and the maximum amount
for which such guaranteeing person may be liable are not stated or determinable,
in which case the amount of such Guarantee shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous goods, waste, substance
or material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any friable asbestos, any petroleum (including
crude oil or any fraction), any radioactive substance and any polychlorinated
biphenyls; provided, in the event that any Environmental Law is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided, further,
without limitation, to the extent that the applicable laws of any province,
state or municipality establish a meaning for "hazardous material," "hazardous
substance," "hazardous waste," "solid waste" or "toxic substance" which is
broader than that specified in any Federal Environmental Law, such broader
meaning shall apply in the relevant province, state, or municipality, as the
case may be.
"INDEBTEDNESS" shall mean, with respect to any person, without
duplication (a) all obligations of such person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such person
evidenced by bonds, debentures, notes or other similar instruments or upon which
interest charges are customarily paid (excluding trade accounts payable and
accrued expenses arising in the ordinary course of business in accordance with
customary trade terms), (c) all obligations of such person for the deferred
purchase price of property or services
Page 11
(excluding trade accounts payable and accrued expenses arising in the ordinary
course of business in accordance with customary trade terms), (d) all
obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person and all Capitalized
Lease Obligations, (e) all payment obligations of such person with respect to
interest rate or currency protection agreements, (f) all obligations of such
person under or in respect of bankers' acceptances and/or as an account party
under any letter of credit, (g) all Indebtedness of any third party secured by
property or assets of such person (regardless of whether or not such person is
liable for repayment of such Indebtedness provided, however, that the amount of
Indebtedness of such person shall be the lesser of (i) the fair market value of
such property or assets and (ii) the amount of such Indebtedness), (h) all
Guarantees of such person and (i) the redemption price of all redeemable
preferred stock of such person, but only to the extent that such stock is
redeemable at the option of the holder or requires sinking fund or similar
payments at any time prior to the Revolving Credit Termination Date.
"INDEMNITIES" shall have the meaning assigned to such term in
SECTION 10.04(C) hereof.
"INDENTURE TRUSTEE" shall mean the Trustee appointed pursuant to the
Senior Secured Note Indenture.
"INFORMATION" shall have the meaning assigned to such term in
SECTION 10.11 hereof.
"INTERCREDITOR AGREEMENT" shall mean the intercreditor agreement
dated as of the Closing Date among the Lender, Chase U.S. (on behalf of certain
other parties) and the Indenture Trustee on behalf of the holders of the Senior
Secured Notes with respect to Lien priorities and related matters.
"INTEREST PAYMENT DATE" shall mean with respect to any Bankers'
Acceptance, the last day of the Contract Period applicable thereto and, in the
case of a Prime Rate Loan the last Business Day of each month.
"INVESTOR GROUP" shall mean Wellspring Associates L.L.C. and its
Affiliates.
"ISSUING BANK" shall mean on the Closing Date, Royal Bank of Canada,
one of the chartered banks of Canada and thereafter any other chartered bank of
Canada which the Borrower proposes, from and after the Closing Date, acceptable
to the Lender, to which the Borrower applies for the issuance of one or more
Domestic Letters of Credit (in accordance with Section 2.15 hereof).
Page 12
"LENDER" shall have the meaning assigned to such term in the
preamble to this Agreement.
"LENDER'S LETTERS OF GUARANTEE" shall mean the standby letter or
letters of credit (or letters of guarantee) that the Lender will be issuing from
time to time in favour of an Issuing Bank as security for the Domestic Letters
of Credit issued by such Issuing Bank, such Lender's Letters of Guarantee being
limited to an aggregate maximum of $4,000,000.00 Canadian, to permit partial
draws and to otherwise be in the form of Exhibit "C" hereto.
"LIEN" shall mean, with respect to any asset, (i) any mortgage,
hypothec, lien, pledge, encumbrance, prior claim, charge or security interest in
or on such asset, (ii) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset, (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities or (iv)
any other right of or arrangement with any creditor to have such creditor's
claim satisfied out of such assets, or the proceeds therefrom, prior to the
general creditors of the owner thereof.
"LOAN DOCUMENTS" shall mean this Agreement, each Security Document,
executed and delivered at any time with respect to the Obligations, the
Promissory Note and each other document, instrument or agreement now or
hereafter delivered by a Loan Party and constituting an agreement entered into
with the Lender in connection herewith or therewith.
"LOAN PARTY" shall mean the Borrower and any Grantor.
"MATERIAL ADVERSE EFFECT" shall mean (A) a material adverse effect
on (i) the business, assets, prospects, operations or financial or other
condition of the Loan Parties and the Parent taken as a whole, (ii) the ability
of any Loan Party or the Parent to perform its obligations under the terms
hereof or of any other Loan Document (or with respect to the Parent, the U.S.
Credit Agreement), (iii) the rights of, or remedies available to, the Lender
under any Loan Document, or (iv) the Lender's Lien on any material portion of
the Collateral or the priority of such Lien, or (B) a Material Adverse Effect as
defined under the U.S. Credit Agreement.
"MAXIMUM RATE" shall have the meaning assigned to such term in
Section 10.13 to this Agreement.
"MORTGAGE" shall mean the real property mortgage dated April ___,
1997, and executed by Apparel Canada in favour of the Lender charging property
in Mount Forest, Ontario, as amended, modified or supplemented from time to
time.
Page 13
"NET AMOUNT OF ELIGIBLE INVENTORY" shall mean, at any time, the
aggregate value, computed at the lower of cost (on a FIFO basis) and current
market value, of Eligible Inventory.
"NET AMOUNT OF ELIGIBLE RECEIVABLES" shall mean and include at any
time, without duplication, the gross amount of Eligible Receivables at such time
less (i) sales, excise or similar taxes, (ii) returns, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed, (iii) a dilution reserve established from
time to time in the Lender's reasonable discretion and (iv) appropriate
adjustments for the conversion of Canadian dollars into United States dollars
(for purposes of any consolidated analysis of the Borrowing Base of the Borrower
and the borrowing base of the Parent under the U.S. Credit Agreement) and any
currency reserve established from time to time in the Lender's sole discretion.
"NET CASH PROCEEDS" shall mean (a) the gross cash proceeds received
less (b) the sum of (i) the amount, if any, of all taxes (other than income
taxes) payable plus the good-faith best estimate of the amount of all income
taxes payable (to the extent such amount shall have been set aside), (ii) the
amount, if any, applied to repay any Indebtedness (other than the Revolving
Credit Loans) including, without limitation, any premium, penalty, interest or
other amount in connection with such Indebtedness to the extent such
Indebtedness is required by its terms or by applicable law to be repaid, (iii)
reasonable and customary fees, discounts, commissions and expenses and other
costs paid (other than those paid to any Affiliate of the Parent) in connection
with the applicable transaction, (iv) reserves, if any, in connection with
indemnification or similar obligations, and (v) amounts held in escrow, if any,
in each case to the extent not already deducted in arriving at the amount
referred to in clause (a).
"NON-GUARANTEEING SUBSIDIARIES" shall mean Xxxxxxx and Xxxx
Skates Ltd. and Sport Maska Europe S.A.R.L.
"NON-CANADIAN LENDER" shall have the meaning assigned to such term
in Section 2.14(f) hereof.
"OBLIGATIONS" shall mean all obligations, liabilities and
Indebtedness of the Borrower to the Lender, whether now existing or hereafter
created, direct or indirect, due or not, whether created directly or acquired by
assignment, participation or otherwise and arising in connection with the
transactions contemplated hereby, including without limitation all obligations,
liabilities and Indebtedness of the Borrower with respect to the Security
Documents and other Loan Documents, the principal of and interest on the
Revolving Credit Loans, Banker's Acceptances and the payment or performance of
all other obligations, liabilities, and Indebtedness of the Borrower to the
Lender hereunder, under or in respect of the Lender's Letters of Guarantee or
under any one or more of the other Loan Documents, including without
Page 14
limitation all fees, costs, expenses and indemnity obligations hereunder and
thereunder.
"OTHER TAXES" shall have the meaning assigned to such term in
Section 2.14(b) hereof.
"PARENT" shall mean SLM International, Inc., a corporation
incorporated under the laws of the State of Delaware.
"PERMITS" shall have the meaning assigned to such term in Section
4.16 hereof.
"PERSON" shall mean any natural person, corporation, business trust,
limited liability company, association, company, joint venture, partnership or
government or any agency or political subdivision thereof.
"PERSONAL PROPERTY SECURITY LAW" shall mean the Personal Property
Security Act of Ontario or other comparable statute or statutory provisions in
effect from time to time in any other province of Canada or any state in the
United States which deals with the perfection, registration, protection and
priority of Liens on Collateral.
"PLAN OF REORGANIZATION" shall mean the First Amended Joint Chapter
11 Plan (as modified) dated as of November 12, 1996, the First Modification
thereto dated January 16, 1997 and the Second Modification thereto dated January
22, 1997, as confirmed by order of the United States Bankruptcy Court for the
District of Delaware dated January 23, 1997 and the Third Modification thereto
dated April ___, 1997 as confirmed by order of the United States Bankruptcy
Court for the District of Delaware dated April ___, 1997.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of the
date hereof, between the Grantor(s) referred to therein and Chase U.S. (on its
own behalf and as agent on behalf of certain other parties) in substantially the
form thereof annexed to the U.S. Credit Agreement as an exhibit thereto, as it
may be amended, modified or supplemented from time to time.
"PLEDGED STOCK" shall have the meaning assigned to such term in the
Pledge Agreement and the Quebec Pledge Agreement.
"PRIME RATE" shall mean the annual rate of interest in effect from
time to time equal to the greater of: (i) floating annual rate of interest
established from time to time by the Lender as the reference rate it will use
for purposes of determining rates of interest it will charge on Canadian Dollar
loans to customers in Canada and (ii) the CDOR Rate plus 1% per annum.
Page 15
"PRIME RATE LOAN" shall mean a Canadian Dollar advance by the Lender
to the Borrower hereunder in respect of which interest accrues at an annual rate
of interest equal to the Prime Rate.
"PROMISSORY NOTE" shall mean the promissory note of the Borrower,
executed and delivered as provided in Section 2.04 hereof, in substantially the
form of EXHIBIT "D" annexed hereto, as amended, modified or supplemented from
time to time.
"PROVINCIAL" shall mean the provincial level of government in
Canada.
"QUEBEC PLEDGE AGREEMENT" shall mean the share pledge agreement
dated as of the date hereof, between Trademark Canada and Chase U.S. in
substantially the form annexed to the U.S. Credit Agreement as an exhibit
thereto, as it may be amended, modified or supplemented from time to time.
"REBUILDING" shall have the meaning assigned to such term in Section
2.10(d) hereof.
"RECEIVABLES" shall mean and include all of the Borrower's (and
where the context requires Apparel Canada's) accounts, instruments, documents,
chattel paper and general intangibles related thereto, whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically assigned to the Lender.
"REGISTER" shall have the meaning ascribed thereto in Section
5.02(f).
"RELEASE" shall mean any releasing, spilling, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Law,
and shall include any "Threatened Release," as defined in Environmental Law;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment.
"REMEDIAL WORK" shall mean any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature with respect to any property of the Borrower or any other Loan Party
(whether such property is owned, leased, subleased or used), including, without
limitation, with respect to Contaminants and the Release thereof.
"RESPONSIBLE OFFICER" shall mean, with respect to any person, any
vice president or president, or the Financial Officer of such person.
Page 16
"REVOLVING CREDIT COMMITMENT" shall mean the commitment of the
Lender to make or extend Credit hereunder to the Borrower in an aggregate amount
at any time outstanding not in excess of the Canadian Dollar Equivalent of
$35,000,000.00 U.S., or if applicable, such amount as reduced from time to time
pursuant to this Agreement including, without limitation, Section 2.08 hereof.
"REVOLVING CREDIT COMMITMENT FEE" shall have the meaning set forth
in Section 2.06 hereof.
"REVOLVING CREDIT LOAN" shall mean a revolving credit loan in the
form of a Prime Rate Loan made in Canadian Dollars pursuant to Sections 2.01 and
2.02 hereof and otherwise subject to the provisions hereof.
"REVOLVING CREDIT TERMINATION DATE" shall mean the earlier to occur
of (i) April 3, 2000 (or April 3, 2001, if so extended by the Lender in its sole
discretion upon notice to the Borrower given no later than 60 days prior to
April 3, 2000, provided that if Chase U.S. agrees to extend the term of the U.S.
Credit Agreement with the Parent, this Agreement shall be correspondingly
extended for the same period of time provided that the term of this Agreement
shall always mature and expire on the fifth (5th) Business Day preceding the
maturity and expiration of the term in the U.S. Credit Agreement; provided
further however that the term of this Agreement shall not be extended beyond
April 3, 2000, in any event, unless the Lender has received a corresponding
extension of the expiry date of the Chase U.S. Letter of Credit, in form and
substance satisfactory to the Lender) and (ii) such earlier date on which the
Revolving Credit Commitment shall terminate, expire or be cancelled in
accordance with the terms of this Agreement.
"SEASONAL AMOUNT" shall mean at any time an amount designated by the
Borrower (which may be zero) not to exceed (i) the Canadian Dollar Equivalent of
$5,000,000.00 U.S. during the period commencing five days subsequent to the
Closing Date through October 31, 1997; the Canadian Dollar Equivalent of
$4,000,000.00 U.S. during a seven month period to be mutually agreed upon by the
Lender and the Borrower in Fiscal Year 1998; the Canadian Dollar Equivalent of
$3,000,000.00 U.S. during a seven month period to be mutually agreed upon by the
Lender and the Borrower in Fiscal Year 1999; and if the Revolving Credit
Commitment is extended as provided for herein, an amount determined in the
Lender's sole discretion and agreed to by Chase U.S. (but in no event less than
the Canadian Dollar Equivalent of $2,000,000.00 U.S.) during a seven month
period to be mutually agreed upon by the Lender and the Borrower and consented
to by Chase U.S. in Fiscal Year 2000 less (ii) the "Seasonal Amount" as that
term is defined in, and as designated to Chase U.S. under the U.S. Credit
Agreement.
Page 17
"SECURITY AGREEMENTS" shall mean the Debentures and deeds of
hypothec dated as of April 1, 1997, between the Grantor(s) and the Lender in
form and substance satisfactory to the Lender, as amended, modified or
supplemented from time to time.
"SECURITY AGREEMENTS (INTELLECTUAL PROPERTY)" shall mean the
Security Agreements (Intellectual Property), dated as of April 1, 1997 by
Apparel Canada, Sport Maska, Trademark Canada in favour of the Lender, in form
and substance satisfactory to the Lender, as amended, modified or supplemented
from time to time.
"SECURITY DOCUMENTS" shall mean the Security Agreements, the Pledge
Agreement, the Security Agreement (Intellectual Property), the Mortgage, the
Bank Act Security, the Guarantee of Trademark Canada and the Guarantee of
Apparel Canada and each other agreement described in Schedule 1.01 or hereafter
created providing collateral security for the payment or
performance of any of the Obligations.
"SENIOR SECURED NOTE INDENTURE" shall mean that certain Senior
Secured Note Indenture, dated as of April 1, 1997, among the Parent, as issuer,
the guarantors named therein, as guarantors, and The Bank of New York, as
Trustee.
"SENIOR SECURED NOTES" shall mean the Parent's 14% Senior Secured
Notes due 2004, issued pursuant to the Senior Secured Note Indenture, in the
original principal amount of $29,500,000.00 U.S.
"SHAREHOLDERS' AGREEMENT" shall mean the Stockholders Agreement
dated as of April ___, 1997 among the Parent and the Stockholders signatory
thereto, as the same may be amended, supplemented, extended or restated from
time to time.
"SPECIAL DEPOSIT" shall have the meaning assigned to such term in
Section 2.10(d) hereof.
"STATE" shall mean the state level of government in the United
States.
"ST-XXXXXXXX" shall mean St-Xxxxxxxx Manufacturing Canada
Inc./Manufactures St-Laurent Canada Inc., a corporation incorporated under the
federal laws of Canada.
"SUBSIDIARY" shall mean, with respect to any person, any
corporation, partnership, association or other business entity of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled, directly or indirectly, by
such person and/or one or more subsidiaries of such person but in no event shall
include an Inactive Subsidiary (as that last term is defined in the U.S. Credit
Agreement).
Page 18
"TAXES" shall have the meaning assigned to such term in Section
2.14(a) hereof.
"TRADEMARK CANADA" shall mean SLM Trademark Acquisition Canada
Corporation, a corporation continued under the laws of the Province of New
Brunswick.
"TRANSACTIONS" shall have the meaning assigned to such term in
SECTION 4.02 hereof.
"U.S. CREDIT AGREEMENT" shall mean the credit agreement dated as
of April 1, 1997 among Chase U.S. (on its own behalf and in its capacity as
agent for certain other parties) and SLM International, Inc., Maska U.S.,
Inc. and #1 Apparel, Inc. as the same may be amended, supplemented, extended
or restated from time to time.
SECTION 1.02. Accounting Terms. Unless otherwise expressly provided
herein, each accounting term used herein shall have the meaning given it under
generally accepted accounting principles in effect from time to time in Canada
("GAAP"); provided, however, that for purposes of determining compliance with
the covenants contained in Article VII, all accounting or financial terms herein
shall be interpreted and all accounting determinations shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with that used in the audited financial statements referred to
in Section 4.07.
ARTICLE II
THE CREDIT FACILITY
SECTION 2.01. Revolving Credit Commitment. (a) Subject to the terms
and conditions herein and relying upon the representations and warranties herein
set forth, the Lender agrees to make or extend Credit to the Borrower, at any
time and from time to time from the date hereof to the Revolving Credit
Termination Date, in an aggregate principal amount at any time outstanding not
to exceed the amount of the Revolving Credit Commitment. Notwithstanding the
foregoing, the aggregate principal amount of Credit outstanding at any time
shall not exceed (1) the lesser of (a) the Revolving Credit Commitment (as such
amount may be reduced pursuant to this Agreement including, without limitation,
Section 2.08 hereof) and (b) an amount equal to the sum of (i) eighty percent
(80%) of the Net Amount of Eligible Receivables, plus (ii) the lesser of (A) the
Canadian Dollar Equivalent of $20,000,000.00 U.S. and (B) fifty percent (50%) of
the Net Amount of Eligible Inventory (such sum referred to herein as the
"BORROWING BASE") plus (iii) the Seasonal Amount, if any, minus (2) the sum of
(x) the unpaid principal balance of Revolving Credit Loans together with all
reserves established by the Lender and referred to in the definition of
Availability and (y) the Domestic Letter of Credit Usage at such time and (z)
the aggregate of all outstanding
Page 19
Bankers' Acceptances and all outstanding liability of the Borrower to reimburse
the Lender for matured Bankers' Acceptances. The Borrowing Base will be computed
weekly (or more frequently if requested by the Lender) and a compliance
certificate from a Responsible Officer of the Borrower presenting its
computation will be delivered to the Lender and to Chase U.S. in accordance with
Section 6.05 of the U.S. Credit Agreement.
Subject to the foregoing and within the foregoing limits, the
Borrower may borrow, repay (or, subject to the provisions of Section 2.10
hereof, prepay) and reborrow Revolving Credit Loans, on and after the date
hereof and prior to the Revolving Credit Termination Date, subject to the terms,
provisions and limitations set forth herein, including, without limitation, the
requirement that no Credit shall be made hereunder if the amount thereof exceeds
the Availability outstanding at such time.
SECTION 2.02. Revolving Credit Loans. (a) The Revolving Credit
Loans made by the Lender on any date to the Borrower shall be in a minimum
amount of $100,000.00 and in integral multiples of $100,000.00.
(b) The initial Revolving Credit Loans shall be made by the Lender
against delivery of the Promissory Note, payable to the order of the Lender, as
referred to in Section 2.04 hereof.
(c) Each Revolving Credit Loan shall be by way of a Prime Rate Loan.
Provided that the Borrower has complied with its obligations hereunder, the
Lender may provide such Revolving Credit Loan under this Agreement by causing
its Domestic Lending Office to make or issue such Revolving Credit Loans.
SECTION 2.03. Notice of Credit. The Borrower shall, through a
Responsible Officer of the Borrower, give the Lender (with a copy to Chase U.S.)
irrevocable written, facsimile or telephonic notice (promptly confirmed by
written or facsimile notice) of each requested borrowing not later than 11:00
A.M., Toronto time, (i) one Business Day before a Prime Rate Loan borrowing or
conversion of another form of Credit to a Prime Rate Loan and (ii) three (3)
Business Days before the obtaining of Credit by way of Bankers' Acceptances or
rollover at maturity of Bankers' Acceptances and (iii) three (3) Business Days
before requesting that the Issuing Bank issue a Domestic Letter of Credit. Such
notice shall specify (w) whether the Credit then being requested is to be a
Prime Rate Loan or Bankers' Acceptance or request for consent to a Domestic
Letter of Credit being issued by an Issuing Bank, (x) the date of such borrowing
(which shall be a Business Day) and amount thereof, and (y) if a Bankers'
Acceptance, the Contract Period for such Bankers' Acceptance and (z) if a
Domestic Letter of Credit, the proposed amount and term of the Domestic Letter
of Credit and identity and address of the proposed Issuing Bank.
Page 20
SECTION 2.04. Promissory Note; Repayment of Revolving Credit Loans.
(a) All Prime Rate Loans made by the Lender to the Borrower shall be evidenced
by a single Promissory Note, duly executed by the Borrower, dated the Closing
Date, in substantially the form of EXHIBIT "D" annexed hereto, delivered and
payable to the Lender in a principal amount equal to the Revolving Credit
Commitment on such date. The outstanding balance of each Revolving Credit Loan,
shall mature and be due and payable on the Revolving Credit Termination Date.
(b) The Promissory Note shall bear interest from its date on the
outstanding principal balance thereof, as provided in Section 2.05 hereof.
(c) The Lender shall, and is hereby authorized by the Borrower to,
endorse on the schedule attached to the Promissory Note (or on a continuation of
such schedule attached to the Promissory Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Prime Rate Loan to
the Borrower from the Lender, as well as the date and amount of each payment and
prepayment with respect thereto; provided, however, that the failure of any
person to make such a notation on the Promissory Note shall not affect any
obligations of the Borrower under the Promissory Note. Any such notation shall
be conclusive and binding as to the date and amount of such Prime Rate Loan or
portion thereof, or payment or prepayment of principal or interest thereon,
absent manifest error.
SECTION 2.05. Interest on Revolving Credit Loans. (a) Subject to the
provisions of Section 2.05(b) and Section 2.09 hereof, each Prime Rate Loan
shall bear interest at a rate per annum equal to the Prime Rate calculated
monthly in arrears from the date of each advance.
(b) Interest on each Prime Rate Loan shall be payable in arrears on
each applicable Interest Payment Date and on the Revolving Credit Termination
Date. Interest on each Prime Rate Loan shall be computed based on a 360 day
year. The Lender shall determine the interest rate applicable to each Prime Rate
Loan and shall promptly advise the Borrower of the interest rate so determined.
(c) For purposes of disclosure under the Interest Act (Canada),
where interest is calculated pursuant to this Agreement at a rate based on a 360
day year (the "First Rate") it is hereby agreed that the rate or percentage of
interest expressed as an annual rate for purposes of such Act is equivalent to
such First Rate multiplied by the actual number of days in the applicable
calendar year, divided by 360.
SECTION 2.06. Fees. The Borrower shall pay to the Lender (i) on the
first Business Day of each January, April, July and October commencing July 1,
1997, (ii) on the date of any reduction of the Revolving Credit Commitment
pursuant to this Agreement including, without limitation, Section 2.08 hereof
and (iii) on the Revolving Credit Termination Date, in immediately available
funds, a commitment fee (the
Page 21
"Revolving Credit Commitment Fee") of 1/8 of 1% per annum on the average daily
unused amount of the Revolving Credit Commitment during the preceding quarter
(or shorter period commencing with the Closing Date or ending with the Revolving
Credit Termination Date) ending immediately prior to such date. The Revolving
Credit Commitment Fee due to the Lender under this Section 2.06 shall commence
to accrue on the date hereof and cease to accrue on the earlier of (i) the
Revolving Credit Termination Date and (ii) the termination of the Revolving
Credit Commitment pursuant to this Agreement including, without limitation,
pursuant to Section 2.08 hereof. The Revolving Credit Commitment Fee shall be
calculated on the basis of the actual number of days elapsed in a year of 360
days.
SECTION 2.07. Bankers' Acceptances. (a) The Borrower shall pay
to the Lender the Acceptance Fee on the undiscounted face amount of each
Bankers' Acceptance accepted by the Lender hereunder. Such fee shall be paid
upon acceptance by the Lender of such Bankers' Acceptance.
(b) The Lender shall not accept any xxxx of exchange drawn by the
Borrower to be a Bankers' Acceptance hereunder which:
(i) is drawn on or which matures on a day which is not a
Business Day;
(ii) matures subsequent to the Revolving Credit Termination
Date;
(iii) has a Contract Period exceeding 180 days;
(iv) is denominated in any currency other than Canadian
Dollars;
(v) is less than $100,000 or not in whole integral multiples
thereof;
(vi) is not otherwise in a form satisfactory to the Lender; or
(vii) in respect of which the Borrower has not then paid the
applicable Acceptance Fee.
(c) The Borrower hereby renounces, and shall not claim or request or
require the Lender to claim, any days of grace for the payment of any Bankers'
Acceptances.
(d) Upon acceptance of a Bankers' Acceptance of the Borrower by the
Lender, the Borrower may offer to sell Bankers' Acceptances to the Lender at the
Discount Rate and, if purchased, the Lender shall credit the Discount Proceeds
received to the Borrower's account maintained with the Lender or as the Borrower
may otherwise direct. The Acceptance Fee payable by the Borrower to the Lender
in respect
Page 22
of each Bankers' Acceptance accepted and purchased by the Lender shall be set
off against the Discount Proceeds payable by the Lender under this Section
2.07(d).
(e) The Borrower hereby unconditionally agrees to pay to the Lender
at the Lender's Domestic Lending Office (or as it may otherwise direct) on the
maturity date (whether at stated maturity, by acceleration hereunder or
otherwise) of each Bankers' Acceptance, the aggregate undiscounted face amount
of each then maturing Bankers' Acceptance and in this regard, the Borrower
hereby authorizes the Lender to debit the Concentration Accounts or any account
of the Borrower with the Lender with the amount(s) required to pay the full
undiscounted face amount of such Bankers' Acceptance, notwithstanding the fact
that such Bankers' Acceptance may be held by the Lender in its own right at
maturity. The obligation of the Borrower to reimburse and pay the Lender for
then maturing Bankers' Acceptances may be satisfied (provided no Event of
Default has occurred and is subsisting or no event has occurred which, but for
notice being given or grace periods expiring (or both) would be an Event of
Default and provided that there is sufficient Availability) by the Borrower
requesting, in accordance with and subject to this Agreement either: that a
Revolving Credit Loan equal to the undiscounted face amount of all then maturing
Bankers' Acceptances be made to it; or that new Bankers' Acceptances be issued,
accepted by the Lender and sold at discount in sufficient amounts to repay the
undiscounted face amount of the then maturing Bankers' Acceptances. The Borrower
acknowledges and agrees that any and all Security Documents now or hereafter
held by the Lender for the payment of all or any portion of the Indebtedness and
Obligations shall be held by the Lender as continuing collateral security for,
among other things, repayment of the indebtedness and liability of the Borrower
to the Lender in respect of all Bankers' Acceptances.
(f) To facilitate the acceptance by the Lender of bills of exchange
to be Bankers' Acceptances as contemplated by this Agreement, the Borrower shall
supply the Lender, at the Lender's request, with such number of bills of
exchange as the Lender may request in form acceptable to the Lender, duly
executed by the Borrower. The Lender shall exercise such care in the custody and
safekeeping of such bills of exchange as the Lender gives to similar property
owned by it. Drafts to be accepted as Bankers' Acceptances shall be signed by an
officer or officers of the Borrower who are duly authorized by the Borrower to
execute the Bankers' Acceptances on behalf of the Borrower. The signatures on
behalf of the Borrower may be mechanically reproduced in facsimile, and any such
signatures shall be binding on the Borrower as if such signatures had been
manually inscribed by the persons or other parties duly authorized to sign on
behalf of the Borrower. Notwithstanding that any one or more individuals or
other parties whose manual or facsimile signature appears on any xxxx as a
signatory on behalf of the Borrower, may no longer hold office or be an
authorized signatory at the date of such xxxx or at the date of its acceptance
by the Lender hereunder or at any time thereafter, any Bankers' Acceptance
signed as aforesaid on behalf of the Borrower shall be valid and binding upon
the Borrower and the Lender shall be entitled to rely
Page 23
on the most recent certificates of signing authority delivered to it by the
Borrower, until the Lender receives notice in writing of a change of authorized
signatures (with sample signatures of such authorized signatories).
(g) Subject to the following subparagraph (h), no prepayment of any
Bankers' Acceptance shall be made by the Borrower to the Lender prior to the
maturity date of such Bankers' Acceptance.
(h) Upon the occurrence of an Event of Default, notwithstanding the
date of maturity of any outstanding Bankers' Acceptances, the Borrower shall pay
to the Lender forthwith upon demand by the Lender, an amount equivalent to the
amount or amounts required to pay:
(i) on maturity, the undiscounted face amount of all
outstanding Bankers' Acceptances which the Lender is
required to honour; and
(ii) all unpaid acceptance fees, if any, owed to the Lender
and, except for any amount payable in respect of unpaid acceptance fees, all
such amounts shall be deposited into an interest-bearing cash collateral account
to be held by the Lender as additional security for payment of the undiscounted
face amount of such outstanding Bankers' Acceptances upon maturity and accrued
interest on such cash collateral, at the option of the Lender, may either be
credited to the Borrower or applied against any Indebtedness or Obligations
which continues to be outstanding.
(i) For purposes of certainty, if the Borrower wishes to obtain
Credit in the form of new Banker's Acceptances, to repay maturing Banker's
Acceptances at their respective maturity, it may request the Lender to rollover
such Credits in the form of new Banker's Acceptances, subject to the provisions
of section 2.07(e) above.
SECTION 2.08. Termination and Reduction of Revolving Credit
Commitment. (a) Upon at least three (3) Business Days' prior irrevocable
written, facsimile or telephonic notice (promptly confirmed by written or
facsimile notice) to the Lender, the Borrower may at any time in whole
permanently repay and thereby terminate, or from time to time in part
permanently reduce, the Revolving Credit Commitment provided, however, that the
Revolving Credit Commitment shall not be reduced at any time to an amount less
than the Revolving Credit Loans outstanding under the Revolving Credit
Commitment at such time. Each partial reduction of the Revolving Credit
Commitment shall be in a minimum of $100,000.00 and integral multiples thereon
of $100,000.00.
(b) Simultaneously with any termination or reduction of the
Revolving Credit Commitment pursuant to this Section 2.08, the Borrower shall
pay to the Lender
Page 24
the Revolving Credit Commitment Fee accrued and unpaid through and excluding the
date of such termination or reduction on the amount of the Revolving Credit
Commitment terminated or reduced.
(c) The Revolving Credit Commitment shall be permanently reduced on
each date that a prepayment of principal of the Credit is required pursuant to
Section 2.10(c) hereof by the amount of each such required prepayment. In any
event, the Revolving Credit Commitment of the Lender shall automatically and
permanently terminate on the Revolving Credit Termination Date, and all Credit
still outstanding on such date shall be due and payable in full together with
accrued interest thereon.
SECTION 2.09. Interest on Overdue Amounts; Alternate Rate of
Interest. If the Borrower shall Default in the payment of the principal of or
interest on any Credit or any other amount becoming due hereunder, by
acceleration or otherwise, the Borrower shall on demand from time to time pay
interest, to the extent permitted by law, on all overdue Obligations outstanding
up to the date of actual payment of such defaulted amount (after as well as
before judgment) at a rate per annum equal to two percent (2%) in excess of the
Prime Rate calculated daily on such amount overdue and payable on demand.
SECTION 2.10. Prepayment of Credits. (a) The Borrower shall not have
the right to prepay any Bankers' Acceptance prior to its maturity. Subject to
the terms and conditions contained in this Section 2.10. and elsewhere in this
Agreement, the Borrower shall have the right to prepay any Prime Rate Loan at
any time and from time to time in whole or in part without penalty (except as
otherwise provided for herein) provided however that each such partial
prepayment of a Prime Rate Loan shall be in an integral multiple of $100,000.00.
(b) The Borrower shall make prepayments of the Prime Rate Loans or
other Credits from time to time such that Availability equals or exceeds zero at
all times. On the date of any termination or reduction of the Revolving Credit
Commitment pursuant to Section 2.08 hereof or elsewhere in this Agreement, the
Borrower shall pay or prepay so much of the Credit as shall be necessary in
order that the Availability equals or exceeds zero following such termination or
reduction; provided, however, that the Borrower shall not be required to make
any prepayment of any Bankers' Acceptance pursuant to this Section until the
last day of the Contract Period with respect thereto so long as an amount equal
to such prepayment is deposited by the Borrower in a cash collateral account
with the Lender to be held in such account on terms satisfactory to the Lender
(if not previously applied, such cash collateral shall be applied by the Lender
on the last day of the Contract Period to satisfy the Obligations).
Page 25
(c) Within three (3) days of the receipt of Net Cash Proceeds from
(i) the sale or other disposition of any assets of the Borrower or any of its
subsidiaries (excluding sales permitted by Section 7.05 of the U.S. Credit
Agreement) or of the capital stock of any of the Borrower or CCM (subject to
Section 7.05 of the U.S. Credit Agreement) or (ii) the consummation of the
issuance of any debt securities of the Borrower not permitted by Section 7.03 of
the U.S. Credit Agreement, the Borrower unless otherwise consented to by the
Lender shall make a mandatory prepayment of the Credit in an amount equal to
100% of the Net Cash Proceeds received, which proceeds shall be applied as set
forth in paragraph (e) below. Nothing contained in this paragraph (c) shall be
or be deemed to be a consent to the sale of any assets or stock or the issuance
of any stock or debt securities.
(d) (i) Except as provided in clause (ii) below, promptly and in any
event not more than one Business Day following the receipt by the Lender or the
Borrower or any subsidiary of the Borrower of any (x) net proceeds in excess of
the Canadian Dollar Equivalent of $250,000.00 U.S. (or, if there shall have
occurred and be continuing a Default or Event of Default, of the full amount of
net proceeds) of any casualty insurance required to be maintained pursuant to
Section 6.03 of the U.S. Credit Agreement on account of each separate loss,
damage or injury (each, a "Casualty Event") to any asset of the Borrower or any
subsidiary of the Borrower (including, without limitation, any Collateral), or
(y) net proceeds in excess of the Canadian Dollar Equivalent of $250,000.00 U.S.
(or, if there shall be continuing a Default or Event of Default, of the full
amount of net proceeds) of any business interruption insurance required to be
maintained pursuant to Section 6.03 of the U.S. Credit Agreement on account of
any business interruption event (each, a "BI Event"), the Borrower shall notify
the Lender of such receipt in writing, by fax or by telephone (promptly
confirmed by written or facsimile notice), and not later than one (1) Business
Day following receipt by the Lender or the Borrower or such subsidiary of any
such proceeds, there shall become due and payable a prepayment of the Revolving
Credit Loans in an amount equal to 100% of such proceeds. Prepayments from such
net proceeds shall be applied as set forth in paragraph (e) below.
(ii) In the case of the receipt of net proceeds described in clause
(i) above with respect to a Casualty Event or BI Event, the Borrower may elect,
by written notice delivered to the Lender not later than the day on which a
prepayment would otherwise be required under clause (d)(i) above: (x) in the
case of proceeds received with respect to a BI Event, to use such proceeds in
the ordinary course of the Borrower's business and (y) in the case of proceeds
received with respect to any Casualty Event, to apply all or a portion of such
net proceeds for the purpose of replacing, repairing, restoring or rebuilding
(referred to herein as a "Rebuilding") the relevant asset, and, in any such
event, any required prepayment under clause (i) above shall be reduced dollar
for dollar by the amount of such election and application of proceeds under
clause (x) or clause (y) of this sentence. An election under this clause (ii)
shall not be effective
Page 26
unless: (x) at the time of such election there is no
continuing Default or Event of Default; (y) the Borrower shall have certified to
the Lender that: (i) the net proceeds of the insurance adjustment with respect
to a Casualty Event, together with other funds available to the Borrower shall
be sufficient to complete such Rebuilding in accordance in all material respects
with all applicable laws, regulations and ordinances; and (ii) no Default or
Event of Default has arisen or will arise as a result of such BI Event, Casualty
Event or Rebuilding; and (z) if the amount of net proceeds in question exceeds
the Canadian Dollar Equivalent of $3,000,000.00 U.S., the Borrower shall further
provide to the Lender evidence satisfactory to the Lender that the replacement
tangible property will have a value to the operation of the Borrower's business
comparable to the replaced tangible property and that such replacement tangible
property is subject to the Security Documents.
(iii) In the event of an election under clause (ii) above, pending
application of the net proceeds to business operations with respect to a BI
Event or to Rebuilding with respect to a Casualty Event, the Borrower shall not
later than the time at which prepayment would have been, in the absence of such
election, required under clause (i) above, apply such net proceeds to the
prepayment of the outstanding principal balance, if any, of the Revolving Credit
Loans (not in permanent reduction of the Revolving Credit Commitment), and
deposit (the "Special Deposit") with the Lender, the balance, if any, of such
net proceeds remaining after such application, pursuant to agreements in form,
scope and substance reasonably satisfactory to the Lender. The Special Deposit,
together with all interest on such Special Deposit, shall be available to the
Borrower solely for the applicable Rebuilding or ordinary course business
operations, as the case may be; provided, however, that at such time as a
Default or Event of Default shall occur, the balance of the Special Deposit and
interest thereon may be applied by the Lender to repay the Obligations in such
order as the Lender shall elect. The Lender shall be entitled to require proof,
as a condition to the making of any withdrawal from the Special Deposit, that
the proceeds of such withdrawal are being applied for the purposes permitted
hereunder and, in the case of Rebuilding, that the withdrawal is equivalent to
the value of the improvements being rebuilt.
(e) When making a prepayment, pursuant to paragraph (a) above, the
Borrower shall furnish to the Lender, not later than 11:00 a.m. (Toronto time)
three (3) Business Days prior to the date of such prepayment of Prime Rate
Loans, written, facsimile or telephonic notice (promptly confirmed by written or
facsimile notice) of prepayment which shall specify the prepayment date and the
principal amount of each Revolving Credit Loan (or portion thereof) to be
prepaid, which notice shall be irrevocable and shall commit the Borrower to
prepay such Revolving Credit Loan by the amount stated therein on the date
stated therein. All prepayments shall be accompanied by accrued interest on the
principal amount being prepaid to the date of prepayment. Prepayments made
pursuant to paragraph (c) or (d)(i) above shall be
Page 27
governed by Section 2.09(f) of the U.S. Credit Agreement and, when received,
shall be applied by the Lender on such parts of the Obligations, in such order,
as the Lender determines in its discretion; provided, however, that if at the
time of the making of any prepayment in accordance with paragraphs (c) or (d),
there are outstanding Bankers' Acceptances or Domestic Letters of Credit (or
both), then in the discretion of the Lender, all or a portion of any such
prepayment (not to exceed an amount equal to the aggregate face amount of all
such outstanding Bankers' Acceptances and Domestic Letters of Credit) shall be
deposited by the Borrower in a cash collateral account to be held by the Lender
for application by the Lender to the payment of any drawing made under any such
Bankers' Acceptances on maturity thereof.
(f) Except as otherwise expressly provided in this Section 2.10,
payments with respect to any paragraph of this Section 2.10 are in addition to
payments made or required to be made under any other paragraph of this Section
2.10.
SECTION 2.11. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law), shall: (i) subject the Lender (which shall for the purpose of this Section
2.11 include any lending office of the Lender) to any charge, fee, deduction or
withholding of any kind or to any tax with respect to any amount paid or to be
paid to the Lender with respect to any Credit made by the Lender to the Borrower
or with respect to the obligations of the Lender under Sections 2.15 through
2.18 hereof (other than (x) taxes imposed on the overall net income of the
Lender, (y) franchise or capital taxes imposed on the Lender; and (z) taxes
imposed by reason of any connection between the jurisdiction imposing such tax
and the Lender or its applicable lending office other than a connection arising
solely from this Agreement) (ii) change the basis of taxation of payments to the
Lender of the principal of or interest on any Credit or any other fees or
amounts payable with respect to any Bankers' Acceptance or letters of credit or
otherwise hereunder (other than (x) taxes imposed on the overall net income of
the Lender (y) franchise or capital taxes imposed on the Lender and (z) taxes
imposed by reason of any connection between the jurisdiction imposing such tax
and the Lender or its applicable lending office other than a connection arising
solely from this Agreement); (iii) impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits with
or for the account of, or loans or loan commitments extended by the Lender; or
(iv) impose on the Lender, any other condition affecting this Agreement; and the
result of any of the foregoing shall be to increase the cost to the Lender of
making or maintaining any Credit, or to reduce the amount of any payment
(whether of principal, interest, fee, compensation or otherwise) receivable by
the Lender, then the Borrower shall pay to the Lender upon the Lender's demand,
such additional amount or amounts as will compensate the Lender for such
additional costs or reduction. The Lender
Page 28
agrees to give notice to the Borrower of any such change in law, regulation,
interpretation or administration with reasonable promptness after becoming
actually aware thereof and of the applicability thereof to all or any of the
Transactions. Notwithstanding anything contained herein to the contrary, nothing
in clause (i) or (ii) of this Section 2.11(a) shall be deemed to (x) permit the
Lender to recover any amount thereunder which would not be recoverable under
Section 2.14 hereof or (y) require the Borrower to make any payment of any
amount to the extent that such payment would duplicate any payment made by the
Borrower pursuant to Section 2.14 hereof.
(b) If at any time and from time to time the Lender shall determine
that the adoption after the date of this Agreement of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change after the date
of this Agreement in any applicable law, rule, regulation or guideline regarding
capital adequacy, including without limitation, the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or any
change after the date of this Agreement in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Lender
(or its lending office) with any request or directive regarding capital adequacy
issued or adopted after the date hereof (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or will have the
effect of reducing the rate of return on the Lender's capital or on the capital
of the Lender's holding company, if any, as a consequence of its obligations
hereunder to a level below that which the Lender could have achieved but for
such adoption, change or compliance (taking into consideration the Lender's
policies and the policies of the Lender's holding company with respect to
capital adequacy) by an amount deemed by the Lender to be material, then from
time to time the Borrower shall pay to the Lender upon the Lender's demand
therefor such additional amount or amounts as will compensate the Lender for
such reduction. The Lender agrees to give notice to the Borrower of any adoption
of, change in, or change in interpretation or administration of, any such law,
rule, regulation or guideline with reasonable promptness after becoming actually
aware thereof and of the applicability thereof to all or any one or more
Transactions.
(c) A statement of the Lender setting forth such amount or amounts,
supported by calculations in reasonable detail, as shall be necessary to
compensate the Lender as specified in paragraphs (a) and (b) above shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay the Lender the amount shown as due on any such statement
within ten (10) days after its receipt of the same.
(d) Failure on the part of the Lender to demand compensation for any
increased costs, reduction in amounts received or receivable with respect to any
Credit
Page 29
in the rate of return earned on the Lender's capital, shall not constitute a
waiver of the Lender's rights to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in rate of return in
respect of such Credit or any other Credit. The protection under this Section
2.11 shall be available to the Lender regardless of any possible contention of
the invalidity or inapplicability of any law, regulation or other condition
which shall give rise to any demand by the Lender for compensation.
(e) In claiming any additional amounts payable pursuant to this
Section 2.11 the Lender agrees to use reasonable efforts (consistent with legal
and regulatory restrictions) to designate a different office or branch of the
Lender if the making of such a designation would avoid the need for, or reduce
the amount of, any such additional amounts and would not, in the reasonable
judgment of the Lender, be otherwise disadvantageous to the Lender.
SECTION 2.12. Indemnity. The Borrower shall indemnify the Lender
against any loss or reasonable expense which the Lender may sustain or incur as
a consequence of the following events (regardless of whether such events occur
as a result of the occurrence of an Event of Default or the exercise of any
right or remedy of the Lender under this Agreement or any other agreement, or at
law): (a) any failure of the Borrower to fulfill on the date of any Credit Event
the applicable conditions set forth in Article V hereof applicable to it; (b)
any failure of the Borrower to borrow hereunder after irrevocable notice of
borrowing pursuant to Section 2.03 hereof has been given; (c) any payment,
prepayment or conversion of a Bankers' Acceptance on a date other than the last
day of the relevant Contract Period; (d) any default in payment or prepayment of
the principal amount of any Credit or any part thereof or interest accrued
thereon, or with respect to any letters of credit issued by the Lender for the
account of the Borrower, in each case as and when due and payable (at the due
date thereof, by irrevocable notice of prepayment or otherwise); or (e) any
default in payment of any amount, commission or fee in respect of the issuance
or renewal of the Lender's Letters of Guarantee. Such loss or reasonable expense
shall include, without limitation, an amount as reasonably determined by the
Lender equal to the excess, if any, of (i) the amount of interest which would
have accrued on the principal or other amount so paid, prepaid or converted or
not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow (or, in the case of a failure to borrow by way
of Bankers' Acceptances on the last day of the Contract Period for such Bankers'
Acceptance which would have commenced on the date of such failure to borrow), at
the applicable rate of interest for such Credit provided for herein over (ii)
the amount of interest (as reasonably determined by the Lender) that would be
realized by the Lender in reemploying the funds so paid, prepaid or converted or
not borrowed for such period or Contract Period, as the case may be. The Lender
shall provide to the Borrower a statement, signed by an officer of the Lender,
explaining any loss or expense and setting forth, if applicable, the computation
pursuant to the preceding
Page 30
sentence, and such statement shall be conclusive absent manifest error. The
Borrower shall pay the Lender the amount shown as due on any such statement
within ten (10) days after the receipt of the same. The indemnities contained
herein shall survive the expiration or termination of this Agreement.
SECTION 2.13. Payments and Computations. The Borrower shall make
each payment hereunder and under any instrument delivered hereunder not later
than 12:00 noon (Toronto time) on the day when due in lawful money of Canada (in
freely transferable dollars) to the Lender at its offices at 0 Xxxxx Xxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0, in immediately available funds,
without set-off, compensation or counterclaim. Any amounts received after such
time on any date may, in the discretion of the Lender, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. The Lender may charge, when due and payable, any of the
Borrower's accounts with the Lender or the Concentration Accounts or all or any
combination of them for all interest, principal and Revolving Credit Commitment
Fees or other fees owing to the Lender on or with respect to this Agreement
and/or the other Loan Documents. If at any time there is not sufficient
availability to cover any of the payments referred to in the prior sentence, and
in any event upon the occurrence of any Default, the Borrower shall make any
such payments upon demand.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower for
the account of the Lender hereunder shall be made, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings in any such case imposed by Canada or any political
subdivision thereof, excluding:
(i) in the case of the Lender (or any participant), (A) taxes
imposed or based on its net income, and franchise or
capital taxes imposed on it (including withholding with
respect to taxes imposed or based on its net income or with
respect to franchise or capital taxes), or (B) taxes
payable under laws (including, without limitation, any
treaty, ruling, determination or regulation) in effect on
the date hereof (or in effect on the date a participant
acquires from the Lender a participation in this Agreement)
but not any increase in withholding tax resulting from any
subsequent change in such laws,
(ii) taxes (including withholding taxes) imposed by reason of the
failure of the Lender or any participant, in each case that is
organized outside Canada, to comply with Section 2.14(f)
hereof (or the inaccuracy at any time of the certificates,
documents and other evidence delivered thereunder), and
Page 31
(iii) taxes imposed by reason of any connection between the
jurisdiction imposing such tax and the Lender other than a
connection arising solely from this Agreement and the other
Loan Documents,
(the taxes referred to in the foregoing clauses (i), (ii) and (iii) individually
or collectively being called "Excluded Taxes" and all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Lender,
(x) the sum payable shall be increased by the amount necessary so that after
making all required deductions (including without limitation deductions
applicable to additional sums payable under this Section 2.14) the Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (y) the Borrower shall make such deductions and (z) the
Borrower shall pay the full amount deducted to the relevant tax authority or
other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant
government authority in accordance with applicable Canadian law, whether
federal, provincial or municipal, any present or future stamp or documentary or
similar taxes or any other excise or property taxes, charges or similar levies
which arise from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify the Lender for the full amount of
Taxes or Other Taxes paid directly by the Lender and any liability (including
penalties, interest and expenses other than those resulting solely from a
failure by the Lender to pay any Taxes or Other Taxes which it is required to
pay and for which it received an indemnity payment) arising therefrom or with
respect thereto. This indemnification shall be made within thirty (30) days from
the date the Lender makes written demand therefor. If the Lender shall become
aware that it is entitled to receive a refund in respect of any Taxes or Other
Taxes, it shall promptly notify the Borrower thereof and shall promptly apply
for such refund. If the Lender receives a refund in respect of any Taxes or
Other Taxes for which the Lender has received payment from the Borrower
hereunder, the Lender shall promptly notify the Borrower of such refund and the
Lender shall promptly repay such refund to the Borrower, provided that the
Borrower, upon the request of the Lender, agrees to return such refund (plus any
penalties, interest or other charges) to the Lender in the event the Lender is
required to repay such refund.
(d) Within thirty (30) days after the date of any payment of Taxes
or Other Taxes withheld by the Borrower in respect of any payment to the Lender,
the Borrower will furnish to the Lender, at its address referred to in Section
10.01 hereof,
Page 32
such certificates, receipts and other documents as may be reasonably required to
evidence payment thereof.
(e) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this Section 2.14 shall
survive the payment in full of principal and interest hereunder.
(f) Each participant in this Agreement, the Credits and Security
Documents that is organized (and whose governing jurisdiction is) outside of
Canada (a "Non-Canadian Lender") shall deliver to the Borrower (with a copy to
the Lender) on the date of the participation and from time to time as required
for renewal under applicable law duly completed copies of such certificates,
documents or other evidence, indicating in each case that the participant is
entitled to receive payments under this Agreement without any deduction or
withholding of any Canadian federal and/or provincial income taxes. The Borrower
shall be entitled to rely on such forms in their possession until receipt of any
revised or successor form pursuant to this Section 2.14(f). If a participant
fails to provide a certificate, document or other evidence required pursuant to
this Section 2.14(f), then (i) the Borrower shall be entitled to deduct or
withhold on payments to the Lender as a result of such failure, as required by
law, and (ii) the Borrower shall not be required to make payments of additional
amounts with respect to such withheld Taxes pursuant to clause (x) of Section
2.14(a) to the extent such withholding is required by reason of the failure of
the participant to provide the necessary certificate, document or other
evidence.
(g) The Lender and any participant shall use reasonable efforts to
avoid or minimize any amounts which might otherwise be payable pursuant to this
Section 2.14 (including, without limitation, transferring Credits to an
Affiliate and seeking refunds of any amounts that are reasonably believed not to
have been correctly or legally asserted); provided, however, that such efforts
shall not include the taking of any actions by the Lender or any participant
that would result in any tax, cost or other expense to the Lender or the
participant (other than a tax, cost or other expense for which the Lender or the
participant shall have been reimbursed or indemnified by the Borrower pursuant
to this Agreement or otherwise) or any action which would or might in the
reasonable opinion of the Lender or the participant have an adverse effect upon
its business, operations or financial condition or otherwise be disadvantageous
to the Lender.
SECTION 2.15. Issuance of Domestic Letters of Credit. (a) The
Borrower may apply for and obtain Domestic Letters of Credit issued for its
account by an Issuing Bank subject to the requirements of the applicable
agreement between the Borrower and such Issuing Bank (such agreement to be
satisfactory in form and substance to the Lender) and subject to satisfaction of
the conditions set forth in Article V hereof and such other conditions as the
Lender requires of its customers generally;
Page 33
provided that not more than twenty (20) Domestic Letters of Credit may be
outstanding at any time and provided that the aggregate undrawn amount of all
outstanding Domestic Letters of Credit shall not at any time exceed $4,000,000
Canadian; and provided, further, that the Borrower may not request any proposed
Issuing Bank to issue a Domestic Letter of Credit if after giving effect thereto
(measured by the face amount of such Domestic Letter of Credit and the Domestic
Letter of Credit Usage) Availability would be less than zero. The Borrower shall
not make application to or request any proposed Issuing Bank to issue any
Domestic Letter of Credit until the Borrower shall first have given at least
three Business Days' prior written notice to the Lender and to Chase U.S. (at
its Domestic Lending Office, as that term is defined in the U.S. Credit
Agreement) which written notice shall provide full particulars of the proposed
Domestic Letter of Credit that the Borrower would like to have issued, together
with such other certificates, documents and other papers and information as the
Lender may reasonably request. The Borrower acknowledges that it shall have no
right to request a proposed Issuing Bank to issue a Domestic Letter of Credit
and no proposed Issuing Bank shall be obligated to issue any Domestic Letter of
Credit if such issuance has not first been approved by the Lender and Chase U.S.
The expiration date of any Domestic Letter of Credit shall not be later than 120
days from the date of issuance thereof, and, in any event, no Domestic Letter of
Credit shall have an expiration date later than thirty days prior to the
Revolving Credit Termination Date. The Domestic Letters of Credit shall be
issued with respect of transactions occurring in the ordinary course of business
of the Borrower or any of its subsidiaries.
(b) Subject to the conditions set forth in Article V hereof and to
the Borrower's compliance with the requirements set forth in section 2.15(a),
the Lender shall open and issue a Lender's Letter of Guarantee for the account
of the Borrower in favour of the applicable Issuing Bank. The Lender's Letters
of Guarantee shall expire no later than the Revolving Credit Termination Date
and be in the form of Exhibit "C" annexed hereto.
SECTION 2.16. Payment of Letters of Credit; Reimbursement. Upon the
issuance of any Domestic Letter of Credit, the Borrower shall notify the Lender
of the principal amount, the number, and the expiration date thereof and provide
the Lender with a copy thereof. Each Issuing Bank shall be entitled to make
partial draws from time to time under the Lender's Letter of Guarantee if the
Borrower has not reimbursed such Issuing Bank for payments made on account of
Domestic Letters of Credit. Promptly after it shall have ascertained that any
payment document and any accompanying documents presented under the Lender's
Letter of Guarantee appear on their face to be in substantial conformity with
the terms and conditions thereof, the Lender shall give telephonic (promptly
confirmed in writing) or facsimile notice to the Borrower of the receipt and
amount of such payment documents and the date on which payment thereon will be
made, and the Lender, not later than 3:00 p.m. on such day, shall make the
appropriate payment to the beneficiary of the Lender's Letter of
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Guarantee. If in accordance with the prior sentence the Lender shall have made
such payment under the Lender's Letter of Guarantee, then the Lender may charge
all or any accounts of the Borrower with or under the control of the Lender for
the amount thereof, together with the Lender's customary overdraft fee in the
event the funds available in such accounts shall not be sufficient to reimburse
the Lender for such payment and the Borrower shall not otherwise have discharged
such reimbursement obligation by 11:00 a.m., Toronto time, on the date of such
payment. The Borrower hereby absolutely, unconditionally and irrevocably agrees
to indemnify, reimburse and hold harmless the Lender from all payments made and
costs incurred by the Lender in respect of the Lender's Letters of Guarantee. If
the Lender has not been reimbursed with respect to such drawing as provided
above, the Borrower shall be liable to pay to the Lender, the amount of the
drawing together with interest on such amount at a rate per annum (computed on
the basis of the actual number of days elapsed over a year of 360 days) equal to
the Prime Rate plus two percent (2%) per annum calculated on the daily
outstanding amount payable on demand. The obligations of the Borrower under this
Section 2.16 to reimburse the Lender for all drawings under the Lender's Letters
of Guarantee shall be absolute, unconditional and irrevocable and shall be
satisfied strictly in accordance with its terms, irrespective of:
(a) any lack of validity or enforceability of any Domestic
Letter of Credit or any Lender's Letters of Guarantee;
(b) the existence of any claim, setoff, defense or other right which
the Borrower or any other person may at any time have against the beneficiary
under any Domestic Letter of Credit or under the Lender's Letters of Guarantee
or the Lender or any other person in connection with this Agreement or any other
transaction (other than the defense of payment in accordance with the terms of
this Agreement or a defense based on the gross negligence or willful misconduct
of the Lender);
(c) any draft or other document presented under any Domestic Letter
of Credit or under the Lender's Letters of Guarantee proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(d) payment by the Issuing Bank or the Lender under any Domestic
Letter of Credit or the Lender's Letters of Guarantee (respectively) against
presentation of a draft or other document which does not comply with the terms
thereof; and
(e) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing that might, but for the provisions of this
Section, constitute legal or equitable discharge of the Borrower's obligations
hereunder.
Page 35
It is understood that in making any payment under the Lender's
Letters of Guarantee (x) the Lender's exclusive reliance on the documents
presented to it under such Lender's Letters of Guarantee as to any and all
matters set forth therein, including, without limitation, reliance on the amount
of any draft presented thereunder, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not any document
presented pursuant thereto proves to be insufficient in any respect, if such
document on its face appears to be in order, and whether or not any other
statement or any other document presented pursuant to such Lender's Letters of
Guarantee proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any
immaterial respect of the documents presented under such Lender's Letters of
Guarantee with the terms thereof shall, in each case, not be deemed willful
misconduct or gross negligence of the Lender.
SECTION 2.17. Lender's Actions with respect to Lender's Letters of
Guarantee. Any draws from time to time under the Lender's Letters of Guarantee
may, in the discretion of the Lender or its correspondents, be interpreted by
them (to the extent not inconsistent with such Lender's Letters of Guarantee) in
accordance with the Uniform Customs and Practice for Documentary Credits of the
International Chamber of Commerce, as adopted or amended from time to time, or
any other rules, regulations and customs prevailing at the place where any
letter of credit is available or the drafts are drawn or negotiated. The Lender
and its correspondents may accept and act upon the name, signature, or act of
any party purporting to be the administrator, receiver, trustee in bankruptcy,
or other legal representative of the beneficiary designated in the Lender's
Letters of Guarantee in the place of the name, signature, or act of such party.
SECTION 2.18. Letter of Guarantee Fees. The Borrower agrees to pay to the Lender
a letter of guarantee fee which shall accrue at the rate of 1/4 of 1% per annum
on the average daily amount of all outstanding Lender's Letters of Guarantee
(excluding any portion thereof attributable to unreimbursed drawings) during the
period from the issuance of each Lender's Letter of Guarantee to but excluding
the later of the Revolving Credit Termination Date and the date on which there
ceases to be any outstanding and undrawn Lender's Letters of Guarantee, as well
as the Lender's standard fees with respect to the issuance, amendment, renewal
or extension of the Lender's Letters of Guarantee or processing of drawings
thereunder. Such fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the first Business Day
of the month following each such period, commencing July 1, 1997; provided that
all such fees shall be payable on the date on which the Total Revolving Credit
Commitment terminates and any such fees accruing after the date on which the
Total Revolving Credit Commitment terminates shall be payable on demand. Any
other fees payable to the Lender pursuant to this paragraph shall be payable on
demand. All such fees shall be computed on the basis of
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a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
ARTICLE III
COLLATERAL SECURITY
SECTION 3.01. Security Documents. The Obligations shall be secured
by the Collateral described in each of the Security Documents and are entitled
to the benefits thereof. The Borrower shall duly execute and deliver, or cause
its subsidiaries and each other Grantor to duly execute and deliver, the
Security Documents, all consents of third parties necessary to permit the
effective granting of the Liens created in such agreements, financing statements
pursuant to the applicable Personal Property Security Law and other documents,
all in form and substance satisfactory to the Lender, as may be reasonably
required by the Lender to grant to it a valid, perfected and enforceable first
priority Lien on and security interest in (subject only to the Liens permitted
under Section 7.01 of the U.S. Credit Agreement) the Collateral. Without
limiting the foregoing, with respect to the Security Agreement being executed
and delivered and registered and/or filed in Quebec, the Borrower shall confirm
and cause any other applicable Grantors to confirm an assignment from the Lender
to any other participants or assignees becoming such after the Closing Date at
such time or from time to time as there shall be another lender under this
Agreement besides the Lender and to provide an opinion of counsel as to the
continued effectiveness of the Lien created thereunder in favour of the Lender
for the benefit of itself and all such participants or assignees, all in form
satisfactory to the Lender.
SECTION 3.02. Filing and Recording. The Borrower shall, at its sole
cost and expense, cause all instruments and documents given as evidence of
security pursuant to this Agreement to be duly recorded, registered and/or filed
or otherwise perfected in all places necessary, in the opinion of the Lender,
and take such other actions as the Lender may reasonably request, in order to
perfect and protect the Liens of the Lender in the Collateral. The Borrower, to
the extent permitted by law, hereby authorizes the Lender to file any financing
statement or application for registration in respect of any Lien created
pursuant to the Security Documents which may at any time be required or which,
in the opinion of the Lender, may at any time be desirable although the same may
have been executed only by the Lender or, at the option of the Lender, to sign
such financing statement or application for registration on behalf of the
Borrower and file the same, and the Borrower hereby irrevocably designates the
Lender, its agents, representatives and designees as its agent and
attorney-in-fact for this purpose. In the event that any renewal of
registration, re-registration, re-recording or refiling thereof (or the filing
of any statements of continuation or assignment of any financing statement or
registered right) is required to protect and preserve such Lien, the Borrower
shall, at the Borrower's cost and expense, cause the same to be renewed,
Page 37
re-registered, recorded and/or refiled at the time and in the manner requested
by the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Except as disclosed in Schedule 4.00, the Borrower represents and
warrants to the Lender that both before and after giving effect to the
consummation of the Transactions:
SECTION 4.01. Organization, Legal Existence. Each of the Loan
Parties and the Parent and their respective subsidiaries is a legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has the requisite power and authority to own
its property and assets and to carry on its business as now conducted and as
currently proposed to be conducted and is qualified to do business in every
jurisdiction where the nature of its business so requires (all such
jurisdictions being listed in SCHEDULE 4.01 annexed hereto) except where the
failure to so qualify or be in good standing would not result in a Material
Adverse Effect. Each of the Loan Parties and the Parent has the corporate power
to execute, deliver and perform its obligations under this Agreement and the
other Loan Documents (and with respect to the Parent, the U.S. Credit Agreement)
to which it is a party, and with respect to the Borrower to borrow hereunder and
to execute and deliver the Promissory Note. St-Xxxxxxxx, being a wholly owned
subsidiary of the Borrower on the Closing Date, has no assets (all of its assets
having been transferred to the Borrower) or liabilities (other than those
liabilities set out in Schedule 4.01) (all such liabilities of St-Xxxxxxxx,
including those set out in Schedule 4.01 having been assumed by the Borrower)
and St-Xxxxxxxx is not engaging in any business.
SECTION 4.02. Authorization. The execution, delivery and performance
by the Borrower of this Agreement and each of the other Loan Documents to which
it is a party, the borrowings hereunder by the Borrower from time to time, the
execution and delivery by the Borrower of the Promissory Note, the grant of
Liens on and security interests in the Collateral created by the Security
Documents and the transactions contemplated to occur under or in connection with
the Plan of Reorganization (collectively, the "Transactions") (a) have been duly
authorized by all requisite corporate and, if required, stockholder action on
the part of the applicable Loan Party and (b) will not (i) violate (A) any
provision of law, statute, rule or regulation or the certificate or articles of
incorporation or other applicable constitutive documents or the by-laws of the
Loan Parties, or their respective subsidiaries, as the case may be, (B) any
order of any court, or any rule, regulation or order of any other agency of
government binding upon the Loan Parties, or their respective subsidiaries, or
(C) any provision of any material indenture, agreement or other instrument to
which
Page 38
the Loan Parties, or their respective subsidiaries, or any of their respective
properties or assets are or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under, any material indenture, agreement or other instrument referred to
in (b)(i)(C) above except where any such conflict, violation, breach or Default
referred to in (i) or (ii) (all of which are disclosed in Schedule 4.00) would
not result in a Material Adverse Effect or (iii) result in the creation or
imposition of any Lien of any nature whatsoever (other than in favour of the
Lender or in favour of Chase U.S. or as permitted pursuant to Section 7.01 of
the U.S. Credit Agreement) upon any property or assets of the Loan Parties, or
their respective subsidiaries.
SECTION 4.03. Governmental Approvals. No registration or filing with
consent or approval of, or other action by, any Federal, provincial, state or
other governmental agency, authority or regulatory body is or will be required
in connection with the Transactions, except for (a) such registrations, filings,
consents, approvals or actions the failure of which to obtain or make would not
have a Material Adverse Effect or (b) such as have been made or obtained or (c)
the filings and registrations necessary to perfect the Liens (x) created by the
Security Documents and (y) in favour of the Indenture Trustee as contemplated by
the Senior Secured Note Indenture.
SECTION 4.04. Binding Effect. This Agreement and the other Loan
Documents to which it is a party constitutes, and the Promissory Note when duly
executed and delivered by the Borrower will constitute, a legal, valid and
binding obligation of the applicable Loan Party enforceable against such Loan
Party in accordance with its terms subject (a) to enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally, from time to time
in effect and (b) to general principles of equity.
SECTION 4.05. Material Adverse Change. Except as set forth in
SCHEDULE 4.05 annexed hereto, there has been no material adverse change in the
business, assets, operations or financial condition of the Parent and
subsidiaries, including, without limitation, the Borrower, taken as a whole
since December 31, 1995.
SECTION 4.06. Litigation; Compliance with Laws; etc. (a) Except as
set forth in SCHEDULE 4.06(a) annexed hereto, there are not any actions, suits
or proceedings at law or in equity or by or before any governmental
instrumentality or other agency or regulatory authority now pending or, to the
knowledge of any Responsible Officer of the Borrower, threatened against or
affecting any of the Loan Parties or any of their subsidiaries or the
businesses, assets or rights of any of the Loan Parties or any of their
subsidiaries (i) which involve any of the Transactions or (ii) as to which there
is a reasonable likelihood of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, materially impair the
ability of any of the Loan
Page 39
Parties or any of their subsidiaries to conduct business substantially as now
conducted, or result in a Material Adverse Effect.
(b) Except as set forth in SCHEDULE 4.06(b) annexed hereto, no Loan
Parties or subsidiary thereof is in violation of any law, or in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or governmental agency or instrumentality where such violation or default
would result in a Material Adverse Effect.
SECTION 4.07. Financial Statements. (a) The Borrower has heretofore
furnished to the Lender Consolidated balance sheets and statements of income and
cash flows of the Parent (i) dated as of December 31, 1995 and audited by and
accompanied by the opinion of independent public accountants; and (ii) dated as
of September 30, 1996 and December 31, 1996 for the nine month period and twelve
month periods respectively then ended and prepared by management and (iii) dated
as of January 31, 1997 for the one month period then ended and prepared by
management. The Borrower has also furnished to the Lender draft consolidating
balance sheets and statements of income and cash flows for the Parent, the
Borrower and Affiliates thereof. Such balance sheets and statements of income
and cash flows present fairly in all material respects the Consolidated
financial condition and results of operations of the Parent and its Consolidated
subsidiaries including, without limitation, the Borrower, as of the dates and
for the periods indicated, and such audited balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of the Parent and its
subsidiaries, including, without limitation, the Borrower, as of the dates
thereof.
(b) The Borrower has heretofore furnished to the Lender projected
income statements, balance sheets and cash flows of the Parent on a Consolidated
basis dated November 6, 1996 for a five year period as supplemented on March 3,
1997, together with projected monthly Borrowing Bases for 1997, such projections
disclosing all material assumptions made by the Borrower in formulating such
projections and giving effect to the Transactions. The projections are based
upon estimates and assumptions, all of which were believed by management to be
reasonable in light of the conditions which existed at the time the projections
were made and have been prepared on the basis of the assumptions stated therein.
(c) The Borrower has heretofore furnished to the Lender a
Consolidated and consolidating pro forma balance sheet of the Parent and which
sets forth information before and after giving effect to the Transactions.
(d) The financial statements referred to in this Section 4.07 have
been prepared in accordance with GAAP, except that the unaudited statements do
not contain footnotes and are subject to year-end audit adjustments.
Page 40
SECTION 4.08. Taxes. The Borrower and each of its subsidiaries has
filed or caused to be filed all material Federal, provincial, state, local and
foreign tax returns which are required to be filed by it, on or prior to the
date hereof. The Borrower and each of its subsidiaries have paid or caused to be
paid all taxes shown to be due and payable on such filed returns or on any
assessments received by it, in writing, except as permitted by Section 6.04 of
the U.S. Credit Agreement, except to the extent that the nonpayment of such
taxes would not result in a Material Adverse Effect and except for certain
Federal taxes being paid on a six-year installment basis, with interest,
pursuant to the Plan of Reorganization. As of the Closing Date except as set
forth on SCHEDULE 4.08 annexed hereto, no Federal or provincial income tax
returns of any Loan Parties or any of their subsidiaries have been audited by
Revenue Canada or by any competent provincial taxing authority or the United
States Internal Revenue Service and no Loan Parties or subsidiary thereof have
as of the date hereof requested or been granted any extension of time to file
any Federal, provincial, state, local or foreign tax return. Except as set forth
on SCHEDULE 4.08 annexed hereto, none of the Loan Parties or their subsidiaries
are party to or have any obligation under any tax sharing agreement.
SECTION 4.09. Employee Benefit Plans. All Canadian Pension Plans
comply currently, and have complied in the past, in all material respects, both
as to form and operation, with their terms and the provisions of all applicable
laws, rules and regulations; all necessary governmental approvals have been
obtained which are material to the Borrower with respect to the operation of its
Canadian Pension Plans; no notice of intent to terminate any Canadian Pension
Plan has been filed or given by any party or governmental body; no event has
occurred or condition exists which might constitute grounds for termination of
any Canadian Pension Plan which termination would result in a Material Adverse
Effect with respect to the Borrower or that might result in the incurrence by
the Borrower or any subsidiary of the Borrower of any material liability, fine
or penalty; and no actions, suits or claims are pending or reasonably expected
to be asserted against any Canadian Pension Plan or the assets of any Canadian
Pension Plan.
SECTION 4.10. No Material Misstatements. The information, reports,
financial statements, exhibits or schedules, taken as a whole, furnished by or
on behalf of the Borrower to the Lender in connection with any of the
Transactions or this Agreement, the Security Documents, the Promissory Note or
any other Loan Documents or included therein, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading in any material respect; provided, however, that to the
extent any such information, report, financial statement, exhibit or schedule
was based upon or constitutes a forecast or projection, the Borrower represents
only that it acted in good faith and used reasonable assumptions in the
preparation of such information, report, financial statement, exhibit or
schedule.
Page 41
SECTION 4.11. Security Interest. Upon the due filing of financing
statements under the Personal Property Security Law, the recording of the
Mortgage in the applicable land registry office, the delivery of the Collateral
under the Pledge Agreement and the filing of the Security Agreements
(Intellectual Property) and the Security Agreements in the Canadian Intellectual
Property Office and the filing of a Notice of Intention with the Bank of Canada
in respect of Section 427 Bank Act Security, the registrations and notices
required in respect of the Quebec Security Agreements and the filing of
assignments with the United States Patent and Trademark Office, each of the
Security Documents creates and grants to the Lender, a legal, valid and
perfected first priority (except as permitted pursuant to Section 7.01 of the
U.S. Credit Agreement) Lien in the collateral identified therein to the extent a
Lien can be perfected in such Collateral by the taking of the foregoing actions.
Such collateral or property is not subject to any other Liens whatsoever, except
Liens permitted by Section 7.01 of the U.S. Credit Agreement.
SECTION 4.12. Use of Proceeds. (a) All proceeds of each borrowing
under the Revolving Credit Commitment on the Closing Date, if any, shall be used
to provide for working capital requirements and for general corporate purposes
of the Borrower and to partially finance the payments to be made pursuant to the
Plan of Reorganization. All proceeds of each subsequent borrowing under the
Revolving Credit Commitment after the Closing Date shall be used to provide for
working capital requirements and for general corporate purposes (including
payment of interest on the Senior Secured Notes to the extent not prohibited by
Section 7.15 of the U.S. Credit Agreement) of the Borrower.
SECTION 4.13. Subsidiaries. As of the Closing Date all of the issued
and outstanding shares in the capital stock of the Borrower are owned, legally
and beneficially by the Parent and 50% of the issued and outstanding shares in
the capital stock of CCM is owned legally and beneficially by Trademark Canada
and the Borrower owns, legally and beneficially all of the issued and
outstanding shares in the capital stock of St-Xxxxxxxx, and SCHEDULE 4.13
annexed hereto sets forth each subsidiary of the Borrower and each subsidiary of
the Parent, including, without limitation, the Borrower, Apparel Canada,
Trademark Canada and CCM, its jurisdiction of incorporation, its capitalization
and ownership of its capital stock.
SECTION 4.14. Title to Properties; Possession Under Leases;
Trademarks. (a) The Borrower and each of its subsidiaries has good title to, or
valid leasehold interest in, all of its respective properties and assets shown
on the most recent balance sheet referred to in Section 4.07(a) hereof and all
assets and properties acquired since the date of such balance sheet, except for
such properties as have been disposed of in the ordinary course of business or
as permitted by this Agreement, and except where lack of title or a valid
leasehold interest does not materially interfere with the ability of the
Borrower or any subsidiary thereof to conduct its business as now conducted. All
Page 42
interests of such persons in such assets and properties are free and clear of
all Liens other than those permitted by Section 7.01 of the U.S. Credit
Agreement.
(b) Except as disclosed in SCHEDULE 4.14 hereto, the Borrower and
each of its subsidiaries has complied with all material obligations under all
material leases to which it is a party and under which it is in occupancy, and
all such leases are in full force and effect and the Borrower and each of its
subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Except as disclosed in Schedule 4.06(a), the Borrower and each
of its subsidiaries owns or controls all material trademarks, trademark rights,
trade names, trade name rights, copyrights, patents, patent rights and licenses
which are necessary for the conduct of the business of such Borrower and such
subsidiary. To its knowledge, neither the Borrower nor any subsidiary thereof is
infringing upon or otherwise acting adversely to any of such trademarks,
trademark rights, trade names, trade name rights, copyrights, patent rights or
licenses owned by any other person or persons. There is no claim or action by
any such other person pending, or to the knowledge of any Responsible Officer of
the Borrower or any subsidiary thereof, threatened, against the Borrower or any
subsidiary thereof with respect to any of the rights or property referred to in
this Section 4.14(c).
SECTION 4.15. Solvency. (a) The fair salable value of the assets of
the Parent, the Borrower and the other Consolidated subsidiaries of the Parent,
is not less than the amount that will be required to be paid on or in respect of
the probable liability on the existing debts and other liabilities (including
contingent liabilities) of the Parent and its Consolidated subsidiaries,
including, without limitation, the Borrower, as they become absolute and mature.
(b) The assets of the Parent and its Consolidated subsidiaries
including, without limitation, the Borrower and Apparel Canada, do not
constitute unreasonably small capital for the Parent and its Consolidated
subsidiaries, including, without limitation, the Borrower and Apparel Canada, to
carry out their business as now conducted and as proposed to be conducted.
(c) Neither the Parent nor any subsidiary thereof, including,
without limitation, the Borrower, intends to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be received by the Parent and such subsidiary, and of amounts to be
payable on or in respect of debt of the Parent and such subsidiary).
(d) Neither the Parent nor any subsidiary thereof, including,
without limitation, the Borrower, believes that final judgments against it in
actions for money damages presently pending will be rendered at a time when, or
in an amount such that, it will be unable to satisfy any such judgments promptly
in accordance with their terms
Page 43
(taking into account the maximum reasonable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered).
SECTION 4.16. Permits, etc. The Borrower and each of its
subsidiaries possesses all licenses, permits, approvals and consents, including,
without limitation, all environmental, health and safety licenses, permits,
approvals and consents of all Federal, provincial, state and local governmental
authorities except where failure does not materially interfere with the ability
of such Borrower or subsidiary to conduct its business as currently conducted
(collectively, the "Permits"), each such Permit is and will be in full force and
effect, the Borrower and each subsidiary is in compliance in all material
respects with all such Permits, and no event (including, without limitation, any
violation of any law, rule or regulation) has occurred which allows the
revocation or termination of any such Permit or any restriction thereon.
SECTION 4.17. Compliance with Environmental Laws. Except as
disclosed in SCHEDULE 4.17 hereto: (i) the operations of the Borrower and its
subsidiaries comply with all applicable Environmental Laws except for any
non-compliance which would not have a Material Adverse Effect; (ii) the Borrower
and its subsidiaries and all of their present facilities or operations, as well
as to the knowledge of the Borrower and its subsidiaries, their past facilities
or operations, are not subject to any judicial proceeding or administrative
proceeding or any outstanding written order or agreement with any governmental
authority or private party respecting (a) any Environmental Law, (b) any
Remedial Work, or (c) any Environmental Claims arising from the Release of a
Contaminant into the environment; (iii) to the best of the knowledge of the
Borrower and its subsidiaries, none of their operations is the subject of any
Federal, provincial, state or municipal investigation evaluating whether any
Remedial Work is needed to respond to a Release of any Contaminant into the
environment in each case which would have a Material Adverse Effect; (iv)
neither the Borrower nor any subsidiaries of the Borrower nor any predecessor of
the Borrower or any subsidiary of the Borrower has filed any notice under any
Environmental Law indicating past or present treatment, storage, or disposal of
a Hazardous Material or reporting a spill or Release of a Contaminant into the
environment in each case which would have a Material Adverse Effect; (v) neither
the Borrower nor its subsidiaries has been notified that it has any material
liability in connection with any Release of any Contaminant into the environment
in each case which would have a Material Adverse Effect; (vi) none of the
operations of the Borrower or its subsidiaries involve the generation,
transportation, treatment or disposal of Hazardous Materials in violation of
Environmental Law in each case which would have a Material Adverse Effect; (vii)
neither the Borrower nor its subsidiaries has disposed of any Contaminant by
placing it in or on the ground or waters of any premises owned, leased or used
by any of them and to the knowledge of the Borrower and its subsidiaries neither
has any lessee, prior owner, or other person in each case which would have a
Material Adverse Effect; (viii) no underground storage tanks or surface
impoundments are on any property of the
Page 44
Loan Parties and their subsidiaries in each case, the result of which would have
a Material Adverse Effect; and (ix) to the best of the knowledge of the Borrower
and its subsidiaries, no Lien in favour of any governmental authority for (A)
any liability under any Environmental Law or regulations, or (B) damages arising
from or costs incurred by such governmental authority in response to a Release
of a Contaminant into the environment, has been filed or attached to the
property of the Borrower and its subsidiaries.
SECTION 4.18. No Change in Credit Criteria or Collection Policies.
There has been no material change in credit criteria or collection policies
concerning account receivables of the Borrower since December 31, 1995.
SECTION 4.19. Employee Matters. Except as disclosed in SCHEDULE 4.19
hereto, (a) neither the Borrower and its subsidiaries nor any of such person's
employees are subject to any collective bargaining agreement, (b) to the
knowledge of the Borrower, no petition for certification or union election is
pending with respect to the employees of the Borrower or any of its subsidiaries
and no union or collective bargaining unit has sought such certification or
recognition with respect to the employees of the Borrower or any of its
subsidiaries and (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the knowledge of Borrower threatened between the
Borrower or any of its subsidiaries and their respective employees, other than
employee grievances arising in the ordinary course of business none of which
would have, either individually or in the aggregate, a Material Adverse Effect.
The Borrower is in compliance with all employment laws applicable to the
Borrower except where the failure to so comply would not have a Material Adverse
Effect.
ARTICLE V
CONDITIONS OF CREDIT EVENTS
The obligation of the Lender to make Revolving Credit Loans and
extend other Credits hereunder shall be subject to the following conditions
precedent:
SECTION 5.01. All Credit Events. On each date on which a Credit
Event is to occur:
(a) The Lender and Chase U.S. shall each have received a notice of
borrowing as required by Section 2.03 hereof (with respect to Revolving Credit
Loans and Bankers' Acceptances) or shall have received a notice with respect to
the proposed issuance of Domestic Letters of Credit, as required by section 2.15
hereof.
(b) The representations and warranties set forth in Article IV
hereof and in any documents delivered herewith, including, without limitation,
the Loan
Page 45
Documents, shall be true and correct in all material respects with the same
effect as though made on and as of such date (except insofar as such
representations and warranties relate expressly to an earlier date).
(c) The Borrower shall be in compliance with all the terms and
provisions contained herein on its part to be observed or performed, and at the
time of and immediately after such Credit Event no Default or Event of Default
shall have occurred and be continuing.
(d) The Lender and Chase U.S. shall have received a certificate
signed by the Financial Officer of the Borrower (i) as to the compliance with
(b) and (c) above and (ii) with respect to each Revolving Credit Loan,
demonstrating that after giving effect thereto the Availability is zero or
greater.
(e) The Lender shall have received written confirmation and
consent from Chase U.S. for the proposed loan or other advance of Credit to
be made, such confirmation to be in writing and to be in the form agreed to
between Chase U.S. and the Lender.
SECTION 5.02. First Borrowing. The obligations of the Lender in
respect of the first Credit Event hereunder are subject to the following
additional conditions precedent:
(a) The Lender shall have received the favourable written opinion of
Ontario, Quebec, New York and New Brunswick counsel for the Borrower and each
Guarantor and Grantor, dated the Closing Date, addressed to the Lender and
satisfactory to the Lender.
(b) The Lender shall have received (i) a copy of the certificate or
articles of incorporation or constitutive documents, in each case as amended to
date, of the Borrower and Apparel Canada and Trademark Canada, certified as of a
recent date by the Provincial Registrar, or other appropriate official of the
jurisdiction of its organization and updated (from the government certificate to
the Closing Date) by a Responsible Officer, and a certificate as to the good
standing of each from such official, in each case dated as of a recent date;
(ii) a certificate of the Secretary of the Borrower, dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of such
person's By-laws as in effect on the date of such certificate and at all times
since a date prior to the date of the resolutions described in item (B) below,
(B) that attached thereto is a true and complete copy of resolutions adopted by
such person's sole shareholder or in the case of Trademark Canada its
shareholders pursuant to the applicable unanimous shareholders agreement
authorizing the execution, delivery and performance of this Agreement, the
Security Documents, the Promissory Note, the other Loan Documents and the Credit
Events hereunder, as applicable, and that such resolutions have not been
modified, rescinded or amended and are in full force and
Page 46
effect, (C) as to the incumbency and specimen signature of each of such person's
officers executing this Agreement, the Promissory Note, each Security Document
or any other Loan Document delivered in connection herewith or therewith, as
applicable; (iii) a certificate of another of such person's officers as to
incumbency and signature of its Secretary; and (iv) such other documents as the
Lender may reasonably request.
(c) The Lender shall have received a certificate, dated the Closing
Date and signed by the Financial Officer of the Borrower, confirming compliance
with the conditions precedent set forth in paragraphs (b) and (c) of Section
5.01 hereof and the conditions set forth in this Section 5.02.
(d) The Lender shall have received the Promissory Note duly executed
by the Borrower, payable to its order and otherwise complying with the
provisions of Section 2.04 hereof.
(e) The Lender shall have received, duly executed and delivered the
Security Documents including, without limitation, the Chase U.S. Letter of
Credit, Security Agreements, the Pledge Agreement, the Quebec Pledge Agreement,
the Bank Act Security, the Guarantee of Trademark Canada and the Guarantee of
Apparel Canada, the Security Agreement (Intellectual Property), the Mortgage
together with a title opinion from counsel of the Borrower and an agreement
between National Bank of Canada, the Borrower, Apparel Canada and the Lender
relating to the operation of the Concentration Accounts and a tripartite
agreement between the Lender, the Borrower and Royal Bank of Canada with respect
to the Domestic Letters of Credit in form, scope and amount satisfactory in all
respects to the Lender.
(f) The Lender shall have received certified copies or a certified
print-out from the Ministry of Consumer and Commercial Relations (Ontario) or on
Form UCC-11 of a UCC Reporter Service or certified statements of the
registration of rights issued by the registrar of the register of personal and
movable real rights established pursuant to the Civil Code of Quebec (the
"Register") or certificates satisfactory to the Lender listing all effective
financing statements and/or rights registered in the Register and duplicate
registered copies of the Security Documents which name as debtor the Borrower,
any guarantor of the Obligations or any Grantor or the Parent and which are
filed in all appropriate offices in the provinces, states or other applicable
jurisdictions in which are located the chief executive office and other
operating offices of such person, or any part of the collateral is located
together with copies of such certified statements, financing statements or of
the security agreements to which such filings relate. With respect to any Liens
not permitted pursuant to Section 7.01 of the U.S. Credit Agreement, the Lender
shall have received termination statements or discharges/cancellations in form
and substance satisfactory to it.
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(g) Each document (including, without limitation, each financing
statement under the Personal Property Security Law and the Notice of Intention
under the Bank Act) required by law or reasonably requested by the Lender to be
filed, registered or recorded in order to create in favour of the Lender a first
priority perfected Lien in the Collateral (subject to the Liens permitted by
Section 7.01 of the U.S. Credit Agreement) shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested. The Lender shall have received
certified statements issued by the registrar of the Register, an acknowledgment
copy, or other evidence satisfactory to it, of each such filing, registration or
recordation.
(h) The Lender shall have received the results of a search of tax
and other Liens and judgments and of security searches under the Personal
Property Security Law and Bank Act or a search of comparable filings made with
respect to the Borrower and each Grantor in the jurisdictions in which the
Borrower is doing business and/or in which any Collateral is located, and in
which Personal Property Security Law filings have been made against the
Borrower, each Guarantor and each Grantor pursuant to paragraph (g) above.
(i) the Lender and Chase U.S. shall each have received and
determined to be in form and substance satisfactory to them:
(A) the most recent (dated within seven (7) days of the
Closing Date) schedule and aging of accounts receivable
and inventory designations of the Borrower;
(B) evidence that all conditions precedent to the first
Loan under the U.S. Credit Agreement have been
satisfied or waived;
(C) evidence that there has been entered a final
non-appealable order of confirmation consistent with the
Plan of Reorganization and that unless waived by the
Lender all conditions precedent to the effectiveness of
the Plan of Reorganization have been satisfied;
(D) a copy of a field examination of the Borrower's books
and records;
(E) evidence of the compliance by the Borrower with all
insurance requirements as set out in the U.S. Credit
Agreement;
Page 48
(F) the financial statements described in Section 4.07
hereof, together with a draft of the audited financial
statements for the Fiscal Year ended December 31, 1996;
(G) evidence that the Transactions are in material
compliance with all material applicable laws and
regulations;
(H) evidence of payment of all fees owed to the Lender by
the Borrower under this Agreement or otherwise;
(I) evidence that all requisite third party consents
(including, without limitation, consents with respect to
the Borrower and each of the Grantors and Guarantors) to
the Transactions have been received;
(J) copies of all major Customer, supplier contracts and
employment agreements with respect to the Borrower;
(K) except as set forth in SCHEDULE 4.05 annexed hereto,
evidence that there has been no material adverse change
in the business, assets, operations or financial
condition of the Parent or any subsidiaries, including,
without limitation, the Borrower since December 31,
1995;
(L) evidence of the repayment in full of exiting credit
arrangements and the termination of all commitments to
lend thereunder, and the termination of all Liens
securing such Indebtedness as required under paragraph
(f) above, all as set forth in the Plan of
Reorganization; and
(M) evidence that except as disclosed in the schedule
delivered pursuant to (k)(i) below there are no
actions, suits or proceedings at law or in equity or
by or before any governmental instrumentality or
other agency or regulatory authority now pending or
to the knowledge of the Loan Parties threatened
against or affecting any of the Loan Parties or any
subsidiary thereof or any of their respective
businesses, assets or rights which involve any of the
Transactions.
(j) The Lender shall have had the opportunity, at the Lender's
option, to examine the books of account and other records and files of the
Borrower and its subsidiaries, and to make copies thereof, and to conduct a
pre-closing audit which shall include, without limitation, verification of
Eligible Receivables, payment of payroll
Page 49
taxes and accounts payable and formulation of an opening Borrowing Base, and the
results of such examination and audit shall have been satisfactory to the Lender
in all material respects.
(k) The Lender shall have received and had the opportunity to review
and determine to be in form and substance satisfactory to it:
(i) a schedule of disputed claims relating to the Plan of
Reorganization and an analysis of the expected disposition
thereof;
(ii) copies of all real property lease agreements entered into by
the Borrower, together with appropriate landlord and/or
mortgagee waivers with the Lender; and
(iii) copies of all loan agreements, notes and other documentation
evidencing Indebtedness for borrowed money of the Borrower and
its subsidiaries, which is to remain outstanding pursuant to
the Plan of Reorganization, including the Senior Secured
Notes.
(l) Messrs. Fraser & Xxxxxx, Canadian counsel to the Lender, and
McMaster Xxxxxxx, special Quebec counsel retained by the Lender shall have
received payment in full for all reasonable legal fees charged, and all
reasonable costs and expenses incurred, by such counsel through the Closing Date
in connection with the transactions contemplated under this Agreement, the
Security Documents and the other Loan Documents and instruments in connection
herewith and therewith.
(m) The Lender shall have entered into the Intercreditor Agreement
with Chase U.S. and the Indenture Trustee on behalf of holders of the Senior
Secured Notes in form and substance satisfactory to it.
(n) The corporate structure and capitalization of the Loan Parties
shall be satisfactory to the Lender in all material respects including, without
limitation, that the Investor Group owns at least 38% of the aggregate issued
and outstanding voting stock of the Parent.
(o) All legal matters in connection with the Transactions shall be
satisfactory to the Lender and its counsel in their sole discretion.
(p) The Borrower shall have executed and delivered to the Lender a
disbursement authorization letter with respect to the disbursement of the
proceeds of the Credit Events made on the Closing Date, in form and substance
satisfactory to the Lender.
Page 50
(q) The Borrower and the Lender shall have entered into depository
and cash management arrangements pertaining to the Concentration Accounts and
the Borrower's direction to their Customers to deposit accounts payable directly
into the Concentration Accounts pursuant to documentation satisfactory in form
and substance to the Lender.
(r) The closing shall have occurred under the U.S. Credit
Agreement.
(s) The transfer of all assets and liabilities by St-Xxxxxxxx to the
Borrower and the sale of all the capital stock of St-Xxxxxxxx by the Parent to
the Borrower shall have been completed to the satisfaction of the Lender.
(t) Environmental audits, appraisals on real property subject to the
Debentures and appraisals of personal property all in form and substance
satisfactory to the Lender shall have been completed.
(u) Sport Maska, Apparel Canada and Trademark Canada shall have been
continued under the laws of the Province of New Brunswick and the Lender shall
have received evidence satisfactory to it of such continuance.
(v) The Lender shall have received such other documents as the
Lender or Lender's counsel shall reasonably deem necessary.
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.01. Affirmative Covenants. (a) The Borrower acknowledges
that the Parent has covenanted and agreed in Article VI of the U.S. Credit
Agreement to cause each of its subsidiaries, to perform certain covenants and
the Borrower hereby covenants and agrees with the Lender that, so long as this
Agreement shall remain in effect or the principal of or interest on the
Promissory Note, any amount under any Bankers' Acceptance or any fee, expense or
other Obligation payable hereunder shall be unpaid, it will, and will cause each
of its respective subsidiaries to perform each of the covenants pertaining to it
set out in said Article VI as fully and effectually as if such covenants were
set out herein in their entirety (such covenants as applicable to the Borrower
and its subsidiaries being incorporated by reference herein) and to do all
things as may be necessary to comply with such covenants, save and except that
the Borrower may maintain its operating and cash management accounts with
National Bank of Canada and the Borrower shall direct all of its Customers to
remit all accounts payable and other amounts owing by each such Customer to the
Borrower directly to the Concentration Accounts (the form of such direction to
be in writing and in form and substance satisfactory to the Lender) and provide
the Lender with a copy of each such written direction all as more particularly
set out in Section 9.01 hereof.
Page 51
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower shall on demand by the Lender, pay or prepay to the
Lender outstanding Credits hereunder if, and to the extent that, the Lender
determines the total outstanding Credits hereunder exceed at such time
$35,000,000.00 United States.
ARTICLE VII
NEGATIVE COVENANTS
SECTION 7.01. Negative Covenants. The Borrower acknowledges that the
Parent has covenanted and agreed in Article VII of the U.S. Credit Agreement
that it will cause each of its subsidiaries to not directly or indirectly take
or do certain actions or things and the Borrower hereby covenants and agrees
with the Lender that, so long as this Agreement shall remain in effect or the
principal of or interest on the Promissory Note, any amount under any Bankers'
Acceptance, or any fee, expense or other Obligation payable hereunder shall be
unpaid, it will not and will cause its subsidiaries to not either directly or
indirectly take or do any actions or things that would result in a breach of the
covenants set forth in said Article VII as fully and effectually as if such
covenants were set out herein in their entirety (such covenants as applicable to
the Borrower and its subsidiaries being incorporated by reference herein) .
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. In case of the happening of any of
the following events (herein called "Events of Default"):
(a) default shall be made in the payment of any principal of any Credit
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration thereof or
otherwise or the Lender is not reimbursed in full for any drawings made under
the Lender's Letters of Guarantee;
(b) default shall be made in the payment of any interest on any Revolving
Credit Loans, or any fee or any other amount payable hereunder, or under the
Promissory Note, Bankers' Acceptances, or any other Loan Document or in
connection with any other Credit Event when and as the same shall become due and
payable;
(c) an Event of Default (as defined in the U.S. Credit Agreement)
shall have occurred and be continuing under the U.S. Credit Agreement which
has not been waived in writing by Chase U.S. or the lenders thereunder (with
a copy of such waiver having been received by the Lender);
Page 52
(d) the Borrower or any subsidiary thereof shall (i) voluntarily commence
any proceeding or file any petition seeking relief under the Bankruptcy and
Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or
Title 11 of the United States Code or any other Federal, provincial, state or
foreign bankruptcy, insolvency, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate manner, any
such proceeding or the filing of any such petition, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or similar
official for any Borrower or subsidiary thereof or for a substantial part of its
property or assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (vii) take corporate
action for the purpose of effecting any of the foregoing;
(e) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Borrower or any subsidiary thereof, or of a substantial part
of the property or assets of the Borrower or any subsidiary thereof, under the
Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act
(Canada) or Title 11 of the United States Code or any other Federal, provincial,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for the Borrower or any subsidiary thereof or for a substantial part of the
property of the Borrower or any subsidiary thereof, or (iii) the winding-up or
liquidation of the Borrower or any subsidiary thereof; and such proceeding or
petition shall continue undismissed for thirty (30) days or an order or decree
approving or ordering any of the foregoing shall continue unstayed and in effect
for thirty (30) days,
then, and in any such event (other than an event described in paragraph (c), (d)
or (e) above), and at any time thereafter during the continuance of such event,
the Lender may by written notice (or facsimile notice promptly confirmed in
writing) to the Borrower, take any or all of the following actions at the same
or different times: (i) terminate forthwith all or any portion of the Revolving
Credit Commitment; (ii) declare the Promissory Note and any amounts then
outstanding on account of Bankers' Acceptances to be forthwith due and payable,
and (iii) require that the Borrower remit to the Lender cash collateral in an
amount equal to the aggregate amount of all outstanding Bankers' Acceptances and
the aggregate amount of all outstanding Domestic Letters of Credit on the basis,
and for the purposes set out in section 2.07(h) at such time, such cash
collateral to be held by Lender in a cash collateral account on terms and
conditions satisfactory to the Lender (such cash collateral to the extent not
applied to satisfy Obligations shall be returned to the Borrower after all
Events of Default have been cured or waived) and for this purpose the Borrower
hereby pledges
Page 53
and grants a security interest in all such cash collateral in
favour of the Lender as security for repayment of the Obligations in full, and,
upon the Lender taking any one or more of the steps enumerated in subparagraphs
(i), (ii) and (iii) above, the principal of the Promissory Note, together with
accrued interest and fees thereon and any amounts then owing to the Lender on
account of Bankers' Acceptances and in respect of the Lender's Letters of
Guarantee and all other liabilities and Obligations of the Borrower accrued
hereunder, shall become forthwith due and payable both as to principal and
interest, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in the Promissory Note to the contrary notwithstanding and the Lender
shall be entitled to realize upon and enforce its rights and remedies under the
Security Documents in such order as the Lender wishes and the Lender may apply
any and all proceeds of any realization or enforcement under the Security
Documents against such parts of the Obligations as the Lender sees fit, in its
discretion (it being understood and agreed that when the Lender draws upon the
Chase U.S. Letter of Credit and is paid by Chase U.S. thereunder, Chase U.S.
shall be subrogated to the rights of the Lender in relation to the Borrower and
the Collateral hereunder and under the Security Documents); provided, however,
that with respect to a Default described in paragraph (c), (d) or (e) above, the
Revolving Credit Commitment shall automatically terminate and the principal of
the Promissory Note, together with accrued interest and fees thereon and any
amounts then owing to the Lender on account of outstanding Bankers' Acceptances
and in respect of the Lender's Letters of Guarantee (including, without
limitation, all amounts in respect of then outstanding Bankers' Acceptances and
the Lender's Letters of Guarantee for which the Borrower is contingently liable
to reimburse or indemnify the Lender) and all other liabilities and Obligations
of the Borrower accrued hereunder shall automatically become due and payable,
both as to principal and interest, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein or in the Promissory Note to the contrary
notwithstanding and the Lender shall, in addition to its other rights and
remedies, draw upon the Chase U.S. Letter of Credit (it being understood and
agreed that when the Lender draws upon the Chase U.S. Letter of Credit and is
paid by Chase U.S. thereunder, Chase U.S. shall be subrogated to the rights of
the Lender in relation to the Borrower and the Collateral hereunder and under
the Security Documents).
ARTICLE IX
MANAGEMENT, COLLECTION AND
STATUS OF RECEIVABLES AND OTHER COLLATERAL
SECTION 9.01. Collection of Receivables; Management of Collateral
and Control of Concentration Accounts. (a) The Borrower and Apparel Canada
shall, at their own cost and expense, (i) arrange for remittances on Canadian
Dollar Receivables
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and U.S. Dollar Receivables of the Borrower and Apparel Canada to be made
directly to respectively, the Canadian dollar account and the U.S. dollar
account comprising the Concentration Accounts or in such other manner as the
Lender may direct from time to time, and (ii) promptly deposit, or cause to be
deposited, all payments received by the Borrower and Apparel Canada on account
of such Receivables, whether in the form of cash, cheques, notes, drafts, bills
of exchange, money orders or otherwise, in such Concentration Accounts in
precisely the form received (but with any endorsements of the Borrower or
Apparel Canada necessary for deposit or collection), subject to withdrawal by
the Lender only, as hereinafter provided, and until such payments are deposited,
such payments shall be deemed to be held in trust by the Borrower and Apparel
Canada for and as the Lender's property and shall not be commingled with the
Borrower's or Apparel Canada's other funds. All remittances and payments that
are deposited in accordance with the foregoing will, be remitted daily by
National Bank of Canada to the Lender in Toronto, Ontario as it directs; the
proceeds of which may be held by the Lender as cash collateral and applied by
the Lender to reduce the outstanding balance of the Credits and outstanding
Obligations. The Borrower agrees that the Lender shall have control over all
proceeds in the Concentration Accounts at all times and the Lender is hereby
authorized, in its discretion at all times, to apply and appropriate proceeds in
any one or more of the Concentration Accounts against the outstanding
Obligations at all times. The Borrower hereby (and the Borrower shall cause
Apparel Canada to likewise) pledges to the Lender, and grants to the Lender a
security interest in and hereby hypothecates in the amount of $50,000,000.00
Canadian in favour of the Lender all present and future proceeds in the
Concentration Accounts as security for the Obligations. Neither the Borrower nor
Apparel Canada shall have any right to withdraw any amount from either or both
the Concentration Accounts except with the prior written consent of the Lender.
Upon the occurrence and continuance of an Event of Default, the
Lender may send and/or register a notice of assignment and/or notice of
withdrawal of authorization to collect and/or notice of the Lender's Liens or
security interests to any and all Customers or any third party holding or
otherwise concerned with any of the Collateral, and thereafter the Lender shall
have the sole right to collect the Receivables and/or take possession of the
Collateral and the books and records relating thereto. Neither the Borrower nor
Apparel Canada shall, without the Lender's prior written consent, grant any
extension of the time of payment of any Receivable, compromise or settle any
Receivable for less than the full amount thereof, release, in whole or in part,
any person or property liable for the payment thereof, or allow any credit or
discount whatsoever thereon except, prior to the occurrence and continuance of
an Event of Default, in the ordinary course of its business.
(b) (i) Each of the Borrower and Apparel Canada hereby constitutes
the Lender or the Lender's designee as their attorney-in-fact with power to
endorse their name upon any notes, acceptances, cheques, drafts, money orders or
other evidences of
Page 55
payment or Collateral that may come into its possession; to sign their name on
any invoice or xxxx of lading relating to any Receivables, drafts against
Customers, assignments and verifications of Receivables and notices to
Customers; to send verifications of Receivables; upon the occurrence of an Event
of Default, to notify the Postal Service authorities to change the address for
delivery of mail addressed to the Borrower or Apparel Canada to such address as
the Lender may designate; and to do all other acts and things necessary to carry
out this Agreement. All acts of said attorney or designee are hereby ratified
and approved, and said attorney or designee shall not be liable for any acts of
omission or commission, for any error of judgment or for any mistake of fact or
law, provided that the Lender or its designee shall not be relieved of liability
to the extent it is determined by a final judicial decision that its act, error
or mistake constituted gross negligence or willful misconduct. This power of
attorney being coupled with an interest is irrevocable until all of the
Obligations are paid in full and the Revolving Credit Commitment is terminated.
(ii) The Lender, without notice to or consent of the Borrower
or Apparel Canada, upon the occurrence and during the continuance of an Event of
Default, (A) may xxx upon or otherwise collect, extend the time of payment of,
or compromise or settle for cash, credit or otherwise upon any terms, any of the
Receivables or any securities, instruments or insurance applicable thereto
and/or release the obligor thereon; (B) is authorized and empowered to accept
the return of the goods represented by any of the Receivables; and (C) shall
have the right to receive, endorse, assign and/or deliver in its name or the
name of the Borrower or Apparel Canada any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and the
Borrower and Apparel Canada hereby waive notice of presentment, protest and
non-payment of any instrument so endorsed; and (D) may continue to exercise its
right to appropriate and apply all proceeds then and thereafter in the
Concentration Accounts against the Obligations.
(c) Nothing herein contained shall be construed to constitute the
Borrower or Apparel Canada as agent of the Lender for any purpose whatsoever,
and the Lender shall not be responsible or liable for any shortage, discrepancy,
damage, loss or destruction of any part of the Collateral wherever the same may
be located and regardless of the cause thereof (except to the extent it is
determined by a final judicial decision that the Lender's act or omission
constituted gross negligence or willful misconduct). The Lender shall not, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof
or for any damage resulting therefrom (except to the extent it is determined by
a final judicial decision that the Lender's error, omission or delay constituted
gross negligence or willful misconduct). The Lender does not, by anything herein
or in any assignment or otherwise, assume any of the Borrower's or Apparel
Canada's obligations under any contract or agreement assigned to the Lender, and
the
Page 56
Lender shall not be responsible in any way for the performance by the Borrower
or Apparel Canada of any of the terms and conditions thereof.
(d) If any of the Receivables includes a charge for any tax payable
to any governmental tax authority, the Lender is hereby authorized (but in no
event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the account of the Borrower or Apparel Canada and the
Borrower and Apparel Canada shall reimburse the Lender for any amount paid upon
demand. The Borrower and Apparel Canada shall notify the Lender if any
Receivables include any tax due to any such taxing authority and, in the absence
of such notice, the Lender shall have the right to retain the full proceeds of
such Receivables and shall not be liable for any taxes that may be due from the
Borrower or Apparel Canada by reason of the sale and delivery creating such
Receivables.
SECTION 9.02. Receivables Documentation. The Borrower and Apparel
Canada will, in addition to the monthly Receivables agings delivered pursuant to
this Agreement, at such intervals as the Lender may reasonably require, furnish,
or cause to be furnished, such further schedules and/or information as the
Lender may reasonably require relating to the Receivables of the Borrower and
Apparel Canada, including, without limitation, sales invoices. In addition, the
Borrower and Apparel Canada shall notify the Lender of any material
non-compliance in respect of the representations, warranties and covenants
contained in Section 9.03 hereof. The items to be provided under this Section
9.02 are to be in form reasonably satisfactory to the Lender and are to be
executed and delivered to the Lender from time to time solely for its
convenience in maintaining records of the Collateral; the Borrower's or Apparel
Canada's failure to give any of such items to the Lender shall not affect,
terminate, modify or otherwise limit the Lender's Lien or security interest in
the Collateral.
SECTION 9.03. Status of Receivables and Other Collateral. Each of
the Borrower and Apparel Canada covenants, represents and warrants that: (a) the
Borrower and Apparel Canada shall be the sole owner, free and clear of all Liens
except in favour of the Lender or otherwise permitted hereunder, of and fully
authorized to sell, transfer, pledge, hypothecate and/or grant a security
interest in each and every item of said Collateral owned respectively by it; (b)
it will not seek to qualify, or maintain the qualification of, a Receivable as
an Eligible Receivable unless such Receivable shall be a good and valid account
representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the Customer therein named, for a fixed sum as set forth in
the invoice relating thereto with respect to an absolute sale and delivery upon
the specified terms of goods sold by the Borrower or Apparel Canada, or work,
labour and/or services theretofore rendered by the Borrower or Apparel Canada;
(c) it will not seek to qualify, or maintain the qualification of, a Receivable
as an Eligible Receivable unless such Receivable or portion thereof which it
seeks to so qualify is not subject to any defense (including,
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without limitation, compensation), offset, counterclaim, discount or allowance
(as of the time of its creation) except as may be stated in the invoice relating
thereto or discounts and allowances as may be customary in the Borrower's or
Apparel Canada's business; (d) none of the transactions underlying or giving
rise to any Eligible Receivable shall violate any applicable provincial, state
or Federal laws or regulations in any material respect, and all documents
relating to any Eligible Receivable shall be legally sufficient under such laws
or regulations and shall be legally enforceable in accordance with their terms
(subject as to enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect and to general
principles of equity); (e) it will not seek to qualify, or maintain the
qualification of, a Receivable as an Eligible Receivable unless to the best of
its knowledge (without independent inquiry), each Customer, guarantor or
endorser with respect to such Receivable is solvent and will continue to be
fully able to pay all Eligible Receivables on which it is obligated in full when
due; (f) it will not seek to qualify, or maintain the qualification of, a
Receivable as an Eligible Receivable unless all documents and agreements
relating to such Receivable shall be true and correct and in all respects what
they purport to be; (g) it will not seek to qualify, or maintain the
qualification of, a Receivable as an Eligible Receivable unless to the best of
its knowledge, all signatures and endorsements that appear on all documents and
agreements relating to such Receivable shall be genuine and all signatories and
endorsers with respect thereto shall have full capacity to contract; (h) it
shall maintain books and records pertaining to the Collateral in such detail,
form and scope as are customary for businesses similarly situated; (i) it will
not seek to qualify, or maintain the qualification of, a Receivable as an
Eligible Receivable unless it shall have immediately notified the Lender as to
any accounts arising out of contracts with Canada or the United States or any
political subdivision, department, agency or instrumentality thereof, and shall
have executed any instruments and taken any steps required by the Lender in
order that all monies due or to become due under any such contract shall be
assigned to the Lender; (j) if any amount payable under or in connection with
any Receivable is evidenced by a promissory note or other instrument, such
promissory note or instrument shall be immediately pledged, endorsed, assigned
and delivered to the Lender as additional collateral; (k) neither it nor Apparel
Canada shall re-date any invoice or sale or make sales on extended dating beyond
that customary in the industry; (l) it shall conduct a physical count of its
inventory at such intervals as the Lender may request (but not more often than
one time in any Fiscal Year unless an Event of Default has occurred and is
continuing) and promptly supply the Lender with a copy of such counts
accompanied by a report of the value (based on the lower of cost (on a FIFO
basis) or market value) of such inventory; and (m) neither it nor Apparel Canada
shall be entitled to pledge the Lender's credit on any purchases or for any
purpose whatsoever.
SECTION 9.04. Monthly Statement of Account. The Lender shall render
to the Borrower each month a statement of the Borrower's revolving credit
account,
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which shall constitute an account stated and shall be deemed to be correct and
accepted by and be binding upon the Borrower unless the Lender receives a
written statement of the Borrower's exceptions within thirty (30) days after
such statement was rendered to the Borrower.
SECTION 9.05. Collateral Custodian. Upon the occurrence and during
the continuance of an Event of Default, the Lender may at any time and from time
to time employ and maintain in the premises of the Borrower a custodian selected
by the Lender who shall have full authority to do all acts necessary to protect
the Lender's interests and to report to the Lender thereon. The Borrower hereby
agrees to co-operate, with any such custodian and to do whatever the Lender may
reasonably request to preserve the Collateral. All costs and expenses incurred
by the Lender by reason of the employment of the custodian shall be paid by the
Borrower on demand and then added to the Obligations if not paid.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. Notices, consents and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service or mailed by certified or registered mail or sent by
telecopy addressed,
(a) if to the Borrower, at 7405 Trans Xxxxxx Xxxxxxx, Xxxxx 000, Xx.
Xxxxxxx, Xxxxxx X0X 0X0, Xxxxxx (Telecopy No. 514-331-7061), Attention:
Xxxxxxx X. Xxxxx, Vice-President, Finance, with a copy to Xxxxxxx Xxxxxxxx &
Xxxxxxxx, 1501 XxXxxx College, 26th Floor, Montreal, Quebec H3A 3N9,
Attention: Xxxx Xxxxxxxxx (Telecopy No. 514-841-6499); and
(b) if to the Lender, at The Chase Manhattan Bank of Canada, 0 Xxxxx
Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0, Attention: Xxxxxxxxx
Xxxx (Telecopy No. 416-216-4161), with a copy to Fraser & Xxxxxx, P.O. Box
100, 1 First Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx, X0X 0X0, Attention: Xxxxx X.
Xxxxxx, (Telecopy No. 416-863-4592) and a copy concurrently to Chase U.S.,
633 Third Avenue, 7th Floor, Asset Based Xxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Credit Deputy (Telecopy No. 212-622-5218).
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or sent by overnight courier service or five
(5) days after being sent by registered or certified mail, postage prepaid,
return receipt requested, if by mail, or when receipt is acknowledged if sent by
telecopy, in each case addressed to such party
Page 59
as provided in this Section 10.01 or in accordance with the latest unrevoked
direction from such party.
SECTION 10.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Borrower herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement, any of the Security Documents, or any other Loan Document, shall be
considered to have been relied upon by the Lender and shall survive the making
or advancing by the Lender of any Credit hereunder and the execution and
delivery to the Lender of the Promissory Note and the occurrence of any other
Credit Event and shall continue in full force and effect as long as the
principal of or any accrued interest on the Promissory Note or any other fee or
amount payable under the Promissory Note or this Agreement or any other Loan
Document is outstanding and unpaid and so long as the Revolving Credit
Commitment has not been terminated.
SECTION 10.03. Successors and Assigns; Participations. (a) Whenever
in this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the Borrower or the
Lender, that are contained in this Agreement shall bind and inure to the benefit
of their respective successors and assigns. Without limiting the generality of
the foregoing, the Borrower specifically confirms that the Lender may at any
time and from time to time pledge, hypothecate or otherwise grant a security
interest in any Revolving Credit Loan or the Promissory Note (or any part
thereof) to any chartered bank of Canada. The Borrower may not assign or
transfer any of its rights or obligations hereunder without the written consent
of the Lender.
(b) The Lender, without the consent of the Borrower but subject to
obtaining the consent of Chase U.S., may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Revolving
Credit Commitment and the Credits owing to it and the Lender's Letters of
Guarantee and the Promissory Note held by it); provided, however, that (i) the
Lender's obligations under this Agreement (including, without limitation, its
Revolving Credit Commitment) shall remain unchanged, (ii) the Lender shall
remain solely responsible to the Borrower for the performance of such
obligations, (iii) the banks or other entities buying participations shall be
entitled to the cost protection provisions contained in Sections 2.11, 2.12 and
2.14 hereof (provided such participant shall have complied with the terms
thereof), but only to the extent any of such Sections would be available to the
Lender, and shall not be entitled to receive any greater amount than the Lender
would be entitled to receive in aggregate and (iv) the Borrower shall continue
to deal solely and directly with the Lender in connection with the Lender's
rights and obligations under this Agreement; provided, further, however, that
the Lender shall retain the sole right and
Page 60
responsibility to enforce the obligations of the Borrower relating to the
Obligations, including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement, other than
amendments, modifications or waivers with respect to decreasing any fees payable
hereunder or the amount of principal or the rate of interest payable on any of
the outstanding Credits, or extending the dates fixed for any payment of
principal or interest on the Credits, or the release of all Collateral.
(c) Notwithstanding any other provision herein, the Lender may, in
connection with any participation or proposed participation pursuant to this
Section 10.03, disclose to a participant or proposed participant, any
information, including, without limitation, any information, relating to the
Borrower furnished to the Lender by or on behalf of the Borrower in connection
with this Agreement; provided, however, that prior to any such disclosure, each
such participant or proposed participant shall agree to preserve the
confidentiality of any information relating to the Borrower received from the
Lender to the extent required pursuant to Section 10.11.
(d) In the event that the Borrower amalgamates, merges or otherwise
reorganizes with one or more other corporations, the Borrower agrees that the
corporation resulting therefrom shall continue to be bound by and subject to all
the terms, conditions, covenants and agreements herein contained and the
Borrower and the other parties to such amalgamation, merger or other
reorganization and the corporation resulting therefrom shall execute any and all
documents and assurances required by the Lender in its sole discretion either
before or after such amalgamation, merger or other reorganization so as to
effectively confirm all of the obligations of the Borrower and of the
corporation resulting therefrom to the Lender under this Agreement and all other
Loan Documents or otherwise.
SECTION 10.04. Expenses; Indemnity. (a) The Borrower agrees to pay
all reasonable out-of-pocket expenses incurred by the Lender in connection with
the preparation of this Agreement and the other Loan Documents or with any
amendments, modifications, waivers, extensions, renewals, renegotiations or
"workouts" of the provisions hereof or thereof (whether or not the transactions
hereby contemplated shall be consummated) or incurred by the Lender in
connection with the enforcement or protection of its rights in connection with
this Agreement or any of the other Loan Documents or with the outstanding
Credits made or the Promissory Note or Bankers' Acceptances issued hereunder, or
in connection with any pending or threatened action, proceeding, or
investigation relating to the enforcement or protection of its rights, including
but not limited to the reasonable fees and disbursements of all counsel for the
Lender and ongoing field examination expenses and charges, and, in connection
with such enforcement or protection, the reasonable fees and disbursements of
counsel for the Lender. The Borrower further indemnifies the Lender from and
agrees to hold the Lender harmless against any documentary taxes, assessments or
Page 61
charges made by any governmental authority by reason of the execution and
delivery of this Agreement or the Promissory Note.
(b) The Borrower indemnifies the Lender and its directors, officers,
employees and agents against, and agrees to hold the Lender and each such person
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including, without limitation, withholding or other taxes that may be
imposed by Canada or the United States of America (or both) or any political
subdivision thereof with respect to any payments made pursuant to this Agreement
and reasonable counsel fees and expenses, incurred by or asserted against the
Lender or any such person arising out of, in any way connected with, or as a
result of any claim, litigation, investigation or proceedings, whether or not
the Lender or any such person is a party thereto, relating to (i) the use of any
of the proceeds of the Revolving Credit Loans, (ii) this Agreement, any of the
other Loan Documents, Plan of Reorganization or the other documents contemplated
hereby or thereby, (iii) the performance by the parties hereto and thereto of
their respective obligations hereunder and thereunder (including but not limited
to the making of the Revolving Credit Commitment) and consummation of the
transactions contemplated hereby and thereby or (iv) breach of any
representation or warranty; provided, however, that such indemnity shall not, as
to the Lender or such person, apply to any such losses, claims, damages,
liabilities or related expenses to the extent that they result from the gross
negligence or willful misconduct of the Lender or such person.
(c) The Borrower indemnifies, and agrees to defend and hold harmless
the Lender and its officers, directors, shareholders, agents and employees
(collectively, the "Indemnitees") from and against any loss, cost, damage,
liability, lien, deficiency, fine, penalty or expense (including, without
limitation, reasonable attorneys' fees and reasonable expenses for
investigation, removal, cleanup and remedial costs and modification costs
incurred to permit, continue or resume normal operations of any property or
assets or business of the Borrower or any subsidiary thereof) arising from a
violation of, or failure to comply with any Environmental Law and to remove any
Lien arising therefrom except to the extent caused by the gross negligence or
willful misconduct of any Indemnitee, which any of the Indemnitees may incur or
which may be claimed or recorded against any of the Indemnitees by any person.
(d) The provisions of this Section 10.04 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Revolving Credit Loans, the invalidity or
unenforceability of any term or provision of this Agreement or the Promissory
Note, or any investigation made by or on behalf of the Lender. All amounts due
under this Section 10.04 shall be payable on written demand therefor.
Page 62
SECTION 10.05. Applicable Law. This agreement and the Promissory
Note shall be construed in accordance with and governed by the laws of the
Province of Ontario and the federal laws of Canada applicable therein.
SECTION 10.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Lender shall and is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set-off,
compensate and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and all proceeds in the Concentration
Accounts and other Indebtedness at any time owing by the Lender to or for the
credit or the account of the Borrower or Guarantors against any and all of the
obligations of such Borrower or Guarantor now or hereafter existing under this
Agreement and the Promissory Note held by the Lender, irrespective of whether or
not the Lender shall have made any demand under this Agreement or the Promissory
Note and although such obligations may be unmatured. The Lender agrees to notify
promptly the Borrower after any such setoff and application made by the Lender,
but the failure to give such notice shall not affect the validity of such setoff
and application. The rights of the Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which may be available to the Lender.
SECTION 10.07. Payments on Business Days. (a) Should the principal
of or interest on the Promissory Note or any fee or other amount payable
hereunder become due and payable on other than a Business Day, payment in
respect thereof may be made on the next succeeding Business Day (except as
otherwise specified in the definition of "Contract Period"), and such extension
of time shall in such case be included in computing interest, if any, in
connection with such payment.
(b) All payments by the Borrower hereunder and all Revolving Credit
Loans made by the Lender hereunder shall be made in lawful money of Canada in
immediately available funds at the office of the Lender set forth in Section
10.01 hereof.
SECTION 10.08. Waivers; Amendments. (a) No failure or delay of the
Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Lender hereunder are cumulative
and not exclusive of any rights or remedies which the Lender may otherwise have.
No waiver of any provision of this Agreement or the Promissory Note nor consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be authorized as provided in paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on the Borrower in any
Page 63
case shall entitle it to any other or further notice or demand in similar or
other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Lender and in respect of which the Lender
has received the consent of Chase U.S. (to the extent required under the U.S.
Credit Agreement) except that any waiver or amendment of any of the affirmative
or negative covenants in Article VI or Article VII of the U.S. Credit Agreement
shall automatically be effective to correspondingly, and to the same extent,
modify the performance obligations of the Borrower under Articles VI and VII of
this Agreement, provided however that no such agreement shall (i) decrease the
principal amount of, or extend the Revolving Credit Termination Date (except in
accordance with the terms thereof) or interest on, any outstanding Credit or
reduce the rate of interest on any outstanding Credit or be construed as, or
have the effect of, comprising or reducing the amount of the outstanding
Obligations, (ii) increase the Revolving Credit Commitment of the Lender,
increase any percentage or amount contained in the definition of Borrowing Base
or Seasonal Amount or amend or modify the provisions of this Section, or
decrease any fee or extend the time for payment thereof, (iii) release any
material portion of Collateral (except as may be expressly permitted by the Loan
Documents), in each case without the prior written consent of the Lender and
provided further, however, that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Lender under this Agreement or the
other Loan Documents without the written consent of the Lender. The Lender shall
be bound by any modification, amendment or waiver authorized in accordance with
this Section regardless of whether the Promissory Note shall be marked to make
reference thereto, and any consent by the Lender or holder of the Promissory
Note pursuant to this Section shall bind any person subsequently acquiring an
interest in the Promissory Note from it, whether or not such Promissory Note
shall be so marked.
SECTION 10.09. Severability. In the event any one or more of the
provisions contained in this Agreement or in the Promissory Note or any of the
other Loan Documents should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall not in any way be affected or impaired
thereby.
SECTION 10.10. Entire Agreement. (a) This Agreement, the Promissory
Note and the other Loan Documents constitute the entire contract between the
parties hereto relative to the subject matter hereof. Any previous agreement
among the parties hereto with respect to the transactions hereunder is
superseded by this Agreement, the Promissory Note and the other Loan Documents.
Except as expressly provided herein or in the Promissory Note or the Loan
Documents (other than this Agreement), nothing in this Agreement, the Promissory
Note or in the other Loan Documents, expressed or
Page 64
implied, is intended to confer upon any party, other than the parties hereto,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, the Promissory Note or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby waives any
right it may have to claim or recover in any litigation any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages.
(c) The Borrower hereby certifies that no representative, agent or
attorney of the Lender has represented, expressly or otherwise, that the Lender
would not, in the event of litigation, seek to enforce the foregoing waivers.
SECTION 10.11. Confidentiality. The Lender agrees to keep
confidential (and to cause its officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to the Lender (the "Information"). Notwithstanding the foregoing, the
Lender shall be permitted to disclose Information (i) to such of its officers,
directors, employees, agents and representatives and to any and all Affiliates
of the Lender from time to time as need to know such Information (who will be
informed of the confidential nature thereof) in connection with the transactions
hereunder or the administration of this Agreement or the other Loan Documents;
(ii) to the extent required by applicable laws and regulations or by any
subpoena or similar legal process, or requested by any governmental agency or
authority (in any which case notice will be provided to the Borrower to the
extent not prohibited by law); (iii) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this Agreement, (B)
becomes available to the Lender on a non-confidential basis from a source other
than any Borrower or any of its subsidiaries (and such source was not prohibited
from transmitting the information by reason of being party to a confidentiality
agreement) or (C) was available to the Lender on a non-confidential basis prior
to its disclosure to the Lender by the Borrower or any of its subsidiaries; (iv)
to the extent the Borrower shall have consented to such disclosure in writing;
or (v) in connection with the sale of any Collateral pursuant to the provisions
of any of the other Loan Documents.
SECTION 10.12. Submission to Jurisdiction. (a) Any legal action or
proceeding with respect to this Agreement or the Promissory Note or any other
Loan Document may be brought in the courts of the Province of Ontario, and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts.
(b) The Borrower hereby irrevocably waives, in connection with any
such action or proceeding, any objection, including, without limitation, any
objection to the
Page 65
laying of venue or based on the grounds of forum non conveniens, which it may
now or hereafter have to the bringing of any such action or proceeding in such
jurisdiction.
(c) The Borrower hereby irrevocably consents to the service of
process of the aforementioned courts in any such action or proceeding by the
mailing of a copy thereof by registered or certified mail, postage prepaid, to
the Borrower at its address set forth in Section 10.01 hereof.
(d) Nothing herein shall affect the right of the Lender to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
SECTION 10.13. Interest Rate Limitation. (a) Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Revolving Credit Loan or any other Credits hereunder, together with all
fees, charges and other amounts which are treated as interest thereon under
applicable law (collectively, the "Charges"), shall exceed the maximum lawful
rate (the "Maximum Rate") which may be contracted for, charged, taken, received
or reserved by the Lender in accordance with the Interest Act (Canada) or the
Criminal Code (Canada) or any other applicable law, the rate of interest payable
in respect of such Credits hereunder, together with all Charges payable in
respect thereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and Charges that would have been payable in respect of such Credits
but were not payable as a result of the operation of this Section shall be
cumulated and the interest and Charges payable to the Lender in respect of other
Credits or periods shall be increased (but not above the Maximum Rate therefor)
until such cumulated amount, together with interest thereon, at the Prime Rate
calculated monthly not in arrears, to the date of repayment, shall have been
received by the Lender.
SECTION 10.14. Counterparts; Facsimile Signature. This Agreement may
be executed in counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one contract, and shall become
effective when copies hereof which bear the signatures of each of the parties
hereto shall be delivered to the Lender.
SECTION 10.15. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
Page 66
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed by their respective duly authorized officers as of
the day and year first above written.
SPORT MASKA INC.
Per: /s/ D. XXXXX XXXXXXX C.S.
------------------------------------
Name: D. Xxxxx Xxxxxxx
Title: Secretary
THE CHASE MANHATTAN BANK OF CANADA
Per: /s/ XXXXXXXXX XXXX
------------------------------------
Name: Xxxxxxxxx Xxxx
Title: Vice President
Acknowledged and agreed to for the purposes of Article IX of the above Credit
Agreement.
#1 APPAREL CANADA INC.
Per: /s/ D. XXXXX XXXXXXX
------------------------------------
Name: D. Xxxxx Xxxxxxx
Title: Secretary
EXHIBIT "A"
GRAPHICAL REPRESENTATION OF
C A N C E L L E D C H E C K
N O. 5 1 2 8
[FRONT AND BACK]
EXHIBIT "B"
[LETTERHEAD OF THE CHASE MANHATTAN BANK]
IRREVOCABLE NONTRANSFERABLE LETTER OF CREDIT
--------------------------------------------------------------------------------
April __, 1997
$35,000,000 United States Dollars
Irrevocable Letter of Credit No. __
XXX XXXXX XXXXXXXXX XXXX XX XXXXXX
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, XX
X0X 0X0
Attention: _________________________
Ladies and Gentlemen:
The Chase Manhattan Bank (hereinafter referred to as the "Bank"), being a
party to a credit agreement dated as of April __, 1997 (that credit agreement
together with all amendments or extensions thereto is hereinafter collectively
referred to as the "U.S. CREDIT AGREEMENT") made among SLM International, Inc.,
Maska U.S., Inc. and #1 Apparel, Inc., as borrowers (collectively referred to
below as the "U.S. BORROWERS"), and the Bank as agent for the lenders named
therein hereby establishes and issues in favour of The Chase Manhattan Bank of
Canada (hereinafter referred to as the "BENEFICIARY"), this irrevocable
nontransferable letter of credit No. ______ (hereinafter referred to as the
"LETTER OF CREDIT") for the account of the U.S. Borrowers and Sport Maska Inc.,
(the "CANADIAN BORROWER"), the U.S. Borrowers and the Canadian Borrower being
collectively referred to below as the "L/C APPLICANTS".
This Letter of Credit is being issued by the Bank to the Beneficiary for
the term of the Canadian Credit (as defined below) expiring on the Termination
Date (as defined below) as security for the present and future indebtedness and
liability of the Canadian Borrower (whether absolute or contingent, direct or
indirect) to the Beneficiary pursuant to or in connection with the credit
agreement dated as of April __,1997 (that credit agreement together with all
amendments or extensions thereto is collectively referred to below as the
"CANADIAN CREDIT AGREEMENT") between the Beneficiary as lender and the Canadian
Borrower.
2
The Bank hereby irrevocably authorizes the Beneficiary to draw on the Bank
in Canadian Dollars a maximum aggregate amount not exceeding the Canadian Dollar
Equivalent (as that term is defined below) of not exceeding $35,000,000 United
States Dollars (hereinafter referred to as the "STATED AMOUNT") from and after
the date hereof, to and including the earliest to occur, on or before the close
of business at the Designated Office of the Bank of: (i) 5 (five) Business Days
following the Revolving Credit Termination Date, as that term is defined in the
Canadian Credit Agreement (such 5th day thereafter being hereinafter referred to
as the "STATED EXPIRATION DATE"); and (ii) the date (hereinafter referred to as
the "ACCELERATED EXPIRATION DATE") upon which an Event of Default (as that term
is defined in the Canadian Credit Agreement) has occurred and is continuing
which has not been waived in writing by the Beneficiary as lender thereunder and
in respect of which the Beneficiary has determined to exercise its rights of
enforcement and (iii) April __, 2000 (the earliest to occur of the Stated
Expiration Date and the Accelerated Expiration Date and April __, 2000, being
hereinafter referred to as the "TERMINATION DATE").
For purposes of this Letter of Credit, "DESIGNATED OFFICE" shall mean the
office of the Bank located at 00 Xxxxx Xxxxxx, Xxxx 0000, 00xx xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Standby Letter of Credit Department or such other
address as the Bank may advise the Beneficiary in writing; and "CANADIAN DOLLAR
EQUIVALENT" shall mean, for any amount at any time expressed in United States
dollars, the amount of Canadian Dollars that would be sold at the Bank's spot
rate of exchange at such time in order to purchase such amount of U.S. dollars;
and "Business Day" shall mean any day other than a Saturday, Sunday or legal
holiday in the Province of Ontario, the Province of Quebec or the State of New
York on which banks are open for the transaction of their banking business in
the ordinary course in Toronto, Montreal and New York City.
The Stated Amount is available to the Beneficiary upon presentation of a
certificate (with your selection of text where indicated and blanks
appropriately completed) in the form of Exhibit "A" attached hereto (the
"PAYMENT DOCUMENT") presented to the Bank at the Designated Office in accordance
with the terms of this Letter of Credit. Partial drawings under this Letter of
Credit are not permitted.
In this Letter of Credit and the Payment Document reference to the credit
established pursuant to the Canadian Credit Agreement (hereinafter referred to
as the "CANADIAN CREDIT") is for identification purposes only, and shall not
limit, in any way, or otherwise affect the obligation of the Bank hereunder to
pay, upon presentation of a Payment Document presented in accordance with the
terms of this Letter of Credit, the Stated Amount requested to be paid in the
Payment Document without any duty on the Bank to inquire into any matters
relating to the Canadian Credit.
3
All drawings made pursuant to this Letter of Credit by the Beneficiary may
be made by presentation in person or by telecopier transmission of the Payment
Document at the Designated Office of the Bank (telecopier no. (000) 000-0000)
before the close of business on a day on which the Bank is open for the
transaction of business at such address, without further need of documentation,
including the original of this Letter of Credit, it being understood that the
Payment Document so submitted is to be the sole operative instrument of drawing.
This Letter of Credit shall, if not drawn upon before the close of business
on the Termination Date at the Designated Office of the Bank, automatically
terminate on the Termination Date, and, at such time, upon the request of the
Bank, this Letter of Credit shall be delivered to the Bank for cancellation.
This Letter of Credit is not transferable in whole or in part.
Communications with respect to this Letter of Credit shall be addressed to
the Bank at the Designated Office of the Bank with a copy concurrently being
sent to the Bank at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attention:
Asset Based Region-Credit Deputy; Telecopier No. (000) 000-0000, and shall make
specific reference to the number of this Letter of Credit.
To the extent not inconsistent with the express terms hereof, this Letter
of Credit shall be governed by, and construed in accordance with, the terms of
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 ("ICC 500"). As to matters
not governed by the ICC 500, this Letter of Credit shall be governed by and
construed in accordance with the laws of the State of New York, including
without limitation the Uniform Commercial Code as in effect in the State of New
York.
THE CHASE MANHATTAN BANK
Per:
------------------------------------
Authorized Signing Officer
EXHIBIT "A"
TO
THE CHASE MANHATTAN BANK
LETTER OF CREDIT NO. _____
THE CHASE MANHATTAN BANK
00 Xxxxx Xxxxxx
Xxxx 0000, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx
X.X.X. 00000
Attention: Standby Letter of Credit Department
The undersigned, a duly authorized representative of The Chase Manhattan
Bank of Canada (hereinafter referred to as the "Beneficiary"), hereby CERTIFIES
on behalf of the Beneficiary, and not in my personal capacity, as follows with
respect to that certain irrevocable nontransferable letter of credit No. _____
dated as of April __, 1997 (hereinafter referred to as the "Letter of Credit"),
issued by The Chase Manhattan Bank (hereinafter referred to as the "Bank") in
favour of the Beneficiary:
1. The Beneficiary is the lender pursuant to the Canadian Credit Agreement
(as that term is defined in the Letter of Credit) and is entitled to make this
draw request under the Letter of Credit.
2. [Select the appropriate certification from one of the following
options.]
An Event of Default (as that term is defined in the Canadian Credit
Agreement) has occurred and is continuing which has not been waived in writing
by the Beneficiary as lender thereunder and in respect of which the Beneficiary
has determined to exercise its rights of enforcement.
or
The Revolving Credit Termination Date (as that term is defined in the
Canadian Credit Agreement) has occurred and the Canadian Borrower (as that term
is defined in the Letter of Credit) has not repaid in full its indebtedness and
liability thereunder.
3. All principal and interest in respect of the Canadian Credit outstanding
under the Canadian Credit Agreement is due and payable.
2
4. The amount being drawn hereunder, namely $__________ Canadian, does not
exceed the lesser of the Canadian Dollar Equivalent (as defined in the Letter of
Credit) of $35,000,000 United States Dollars and the amount of indebtedness and
liability owing to the Beneficiary under the Canadian Credit Agreement.
5. Payment by the Bank pursuant to this drawing shall be made to the
Beneficiary c/o The Royal Bank of Canada, Xxxx Xxxxxx, Xxxxxxx, Xxxxxxx,
Correspondence Banking Division, Transit No. 09591 for the account of The Chase
Manhattan Bank of Canada, Account Number 000-000-0, Re: Sport Maska Inc.
IN WITNESS WHEREOF, this Certificate has been executed this ______ day
of _____________, ____.
XXX XXXXX XXXXXXXXX XXXX XX XXXXXX
Per:
----------------------------------
Authorized Signing Officer
EXHIBIT "C"
[CHASE MANHATTAN CANADA LETTERHEAD]
April __, 1997
Irrevocable Letter of Credit No. _____
ROYAL BANK OF CANADA
Banks, Financial Institutions and Trade
10th Floor, South Tower
Royal Bank Plaza
Toronto, Ontario
M5J 2J5
Attention: Xxxxx Xxxxxxxxxx
Dear Sirs/Mesdames:
Pursuant to the request, and for the account, of Sport Maska Inc. we, The
Chase Manhattan Bank of Canada, hereby establish this irrevocable standby letter
of credit in your favour for a total amount not exceeding Four Million Canadian
Dollars ($4,000,000.00) available at our Designated Branch by drawings as
hereinafter provided for prior to 3:00 p.m. on April __, 1998 (that date as
extended from time to time pursuant to the terms of this letter of credit,
referred to as the "Stated Expiration Date").
Drawings under this letter of credit shall be made by presentation to our
Designated Branch between the hours of 10:00 a.m. and 3:00 p.m. (Toronto time)
on a day on which our Designated Branch is open for normal banking business of a
payment document, in the form of Exhibit "A" attached hereto.
Upon presentation of such payment document together with attachments
referred to therein prior to the Stated Expiration Date we will honour your
drafts without regard to the state of account between The Chase Manhattan Bank
of Canada and Sport Maska Inc. up to the total aggregate amount hereinbefore
referred to.
This letter of credit is not transferable.
-2-
There may be more than one drawing under this letter of credit and the
amount remaining to be drawn will be reduced by each amount drawn on the basis
that the aggregate liability under this letter of credit at any time and from
time to time shall not exceed $4,000,000.00 Canadian.
The Stated Expiration Date shall be automatically extended without
amendment for an additional period of one calendar year from the present or any
future Stated Expiration Date unless at least thirty days' prior to any such
Stated Expiration Date, we shall notify you in writing by registered mail, or by
hand delivery, to your address noted above, that we elect not to renew this
letter of credit for any such additional period. In all events this letter of
credit will expire on April __, 2000. Notice will be deemed to have been validly
given to you when actually received by you, if delivered by us to you, or on the
third day following our mailing of such notice to you by registered mail. Upon
receipt by you of such notice, you may draw under this letter of credit by
presentation of a payment document in the form of Exhibit "A". All references in
this letter of credit to the Stated Expiration Date shall be deemed to be
references to the date resulting from the last such extension, if any.
Communications with respect to this letter of credit shall be addressed to
us at The Chase Manhattan Bank of Canada, 000 Xxxx Xxxxxx Xxxx, Xxxxx 0000, X.X.
Xxx 000, 1 First Canadian Place, Toronto, Ontario M5X 1A4, Attention: Standby
Letter of Credit Unit (such address being our "Designated Branch" for purposes
of this standby letter of credit), specifically referring to the number of this
letter of credit.
To the extent not inconsistent with the express terms hereof, this letter
of credit shall be governed by and construed in accordance with the terms of the
Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce Publication No. 500 (the "Uniform Customs").
As to matters not covered by the Uniform Customs, this letter of credit shall be
governed by and construed in accordance with the laws of the Province of Ontario
and the federal laws of Canada applicable therein.
XXX XXXXX XXXXXXXXX XXXX XX XXXXXX
Per:
------------------------------------
Authorized Signature
Per:
-------------------------------------
Authorized Signature
EXHIBIT "A"
TO
THE CHASE MANHATTAN BANK OF CANADA
IRREVOCABLE LETTER OF CREDIT NO. _____
XXX XXXXX XXXXXXXXX XXXX XX XXXXXX
000 Xxxx Xxxxxx Xxxx
Xxxxx 0000, X.X. Xxx 000
1 First Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Standby Letter of Credit Department
The undersigned, a duly authorized representative of Royal Bank of Canada
(hereinafter referred to as the "Beneficiary"), hereby CERTIFIES on behalf of
the Beneficiary, and not in my personal capacity, as follows with respect to
that certain irrevocable nontransferable letter of credit No. _____ dated as of
April __, 1997 (hereinafter referred to as the "Letter of Credit"), issued by
The Chase Manhattan Bank of Canada (hereinafter referred to as the "Bank") in
favour of the Beneficiary:
1. The Beneficiary issued a letter of credit dated _______________ for the
account of Sport Maska Inc. which has been duly drawn upon by the beneficiary
thereunder and Sport Maska Inc. has not indemnified or reimbursed us for the
amount of such drawing thereunder and such default by Sport Maska Inc. in
reimbursing us for our payment under that letter of credit has continued for
[______] days and Sport Maska Inc. is, as of the date hereof, still in such
default and the same is due and owing to us and accordingly the Beneficiary is
entitled to make this draw request under the Letter of Credit.
2. Attached hereto is a copy of the letter of credit referred to in
paragraph 1 above.
3. The amount being drawn hereunder, namely $____________ Cdn. is the
amount justly owing to the Beneficiary by Sport Maska Inc. in respect of the
letter of credit referred to in paragraph 1 above.
[OR ALTERNATIVELY, IN SUBSTITUTION FOR PARAGRAPHS 1, 2 AND 3 ABOVE:
1. The Beneficiary has received a notice from the Bank pursuant to the
Letter of Credit advising that it does not intend to renew or extend the Letter
of Credit and accordingly the Beneficiary hereby requests payment to it of
-2-
$____________ (Cdn.) that amount being the lesser of $4,000,000.00 (Cdn.) and
the face amount of all outstanding letters of credit issued by the Beneficiary
for the account of Sport Maska Inc.
2. The Beneficiary hereby certifies that the amount referred to in
paragraph 1 above is justly and truly due and owing to it by Sport Maska Inc.
3. The Beneficiary hereby agrees to deposit the proceeds of such drawing
hereunder in an interest-bearing trust account to be held as collateral security
for such indebtedness and liability of Sport Maska Inc. to the Beneficiary and
to apply the proceeds or balance therein against the obligations of Sport Maska
Inc., as and when the letters of credit issued by the Beneficiary for the
account of Sport Maska Inc. are duly drawn upon by the beneficiaries thereunder
and to hold the unappropriated balance of such proceeds in trust for the Bank
and remit such net balance to the Bank (with an accounting).]
4. We agree that upon payment by the Bank to us herein, you shall be fully
subrogated to and in all of our rights against Sport Maska Inc. and any relevant
goods, all without prejudice to any other rights the Bank may have against Sport
Maska Inc. and its property, assets and undertaking.
5. Payment by the Bank pursuant to this drawing shall be made to the
Beneficiary c/o The Royal Bank of Canada, Banks, Financial Institutions and
Trade, 10th Floor, South Tower, Royal Xxxx Xxxxx, Xxxxxxx, Xxxxxxx X0X 0X0, Re:
Sport Maska Inc.
IN WITNESS WHEREOF, this Certificate has been executed this ________ day
of ________________, ____.
ROYAL BANK OF CANADA
Per:
---------------------------------------
Authorized Signing Officer
EXHIBIT "D"
REVOLVING CREDIT NOTE
Canadian Dollar Equivalent of
$35,000,000 United States Dollars
April 15, 1997
FOR VALUE RECEIVED, the undersigned SPORT MASKA INC. (the "Borrower"),
hereby promises to pay to the order of THE CHASE MANHATTAN BANK OF CANADA (the
"Lender"), at the office of the Lender, at 0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxx, X0X 0X0 on the Revolving Credit Termination Date as defined in
the Credit Agreement dated as of April 1, 1997, between the Borrower and the
Lender (as the same may be amended, modified or supplemented from time to time
in accordance with its terms is hereinafter referred to as the "Credit
Agreement") or earlier as provided for in the Credit Agreement, the lesser of
the principal sum of the Canadian Dollar Equivalent of $35,000,000 United States
Dollars or the aggregate unpaid principal amount of all Revolving Credit Loans
to the Borrower from the Lender pursuant to the terms of the Credit Agreement,
in lawful money of Canada in immediately available funds, and to pay interest
from the date thereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at a rate or rates per annum and, in
each case, payable on such dates as determined pursuant to the terms of the
Credit Agreement.
The Borrower promises to pay interest, on demand, on any overdue principal
and fees and, to the extent permitted by law, overdue interest from their due
dates at a rate or rates determined as set forth in the Credit Agreement.
The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and prepayments of
the principal hereof and interest hereon and the respective date thereof shall
be endorsed by the holder hereof on the schedule attached hereto and made a part
hereof, or on a continuation thereof which shall be attached hereto and made a
part hereof, or otherwise recorded by such holder in its internal records;
provided, however, that the failure of the holder hereof to make such a notation
or any error in such a notation shall not in any manner affect the obligation of
the Borrower to make payments of principal and interest in accordance with the
terms of this Note and the Credit Agreement.
This Note is the Promissory Note referred to in the Credit Agreement,
which, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Credit Agreement, all upon the
terms and conditions therein specified.
2.
For the purposes of this Note, the phrase "Canadian Dollar Equivalent"
means, for any amount at any time expressed in United States (U.S.) dollars, the
amount of Canadian Dollars that would be sold at the Lender's spot rate of
exchange at such time in order to purchase such amount in U.S. dollars.
This Note shall be construed in accordance with and governed by the laws of
the Province of Ontario and the federal laws of Canada applicable therein, and
shall enure to the benefit of the Lender and its successors and assigns and
shall be binding upon the Borrower and its successors and assigns.
SPORT MASKA INC.
Per: c.s.
-----------------------------------
Name: D. Xxxxx Xxxxxxx
Title: Secretary
LOANS AND PAYMENT
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AMOUNT OF LOAN PAYMENTS UNPAID NAME OF PERSON
DATE PRINCIPAL INTEREST PRINCIPAL MAKING NOTATION
BALANCE OF NOTE
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