LOAN AGREEMENT FOR
SECURED BRIDGE LOAN
March 9, 2005
AMONG
XXXXXXX BAKING MIX PRODUCTS LTD.
(as "Borrower")
- and -
XXXXXXX FOOD GROUP INC.
("Parent")
- and -
CAITHNESS FINANCIAL SERVICES LIMITED
(as "Lender")
- and -
XX XXXXXX
(as "Xxxxxx")
TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION...............................................2
1.1 Definitions.................................................2
1.2 Headings...................................................10
1.3 Number.....................................................10
1.4 Accounting Principles......................................10
1.5 Accounting Practices.......................................10
1.6 Determinations by Obligors.................................10
1.7 Permitted Encumbrances.....................................11
1.8 Currency...................................................11
1.9 Conflicts..................................................11
1.10 Non-Business Days..........................................11
1.11 Statutory References.......................................11
1.12 Schedules..................................................12
ARTICLE 2 - THE LOAN....................................................12
2.1 Loan.......................................................12
2.2 Purpose of the Loan........................................12
2.3 Right of First Refusal.....................................12
ARTICLE 3 - CONDITIONS PRECEDENT........................................13
3.1 Conditions Precedent to the First Loan.....................13
3.2 Waiver.....................................................16
ARTICLE 4 - PAYMENTS OF INTEREST AND BONUS..............................16
4.1 Interest...................................................16
4.2 General Interest Rules.....................................16
4.3 Bonus......................................................17
ARTICLE 5 - PAYMENTS OF PRINCIPAL, INTEREST AND FEES....................17
5.1 Repayment of Principal.....................................17
5.2 Mandatory Prepayment of Principal..........................17
5.3 Voluntary Repayment of Principal...........................18
5.4 Manner of Payment of Principal, Interest and Fees..........18
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES..............................18
6.1 Representations and Warranties.............................18
6.1.1 Existence and Qualification........................18
6.1.2 Power and Authority................................18
6.1.3 Execution, Delivery, Performance and
Enforceability of Documents........................19
6.1.4 Loan Documents Comply with Applicable Law,
Organizational Documents and Contractual
Obligations .......................................19
6.1.5 Consent Respecting Loan Documents..................19
6.1.6 Enforceable Obligations............................19
6.1.7 Taxes..............................................20
6.1.8 Judgments, Etc.....................................20
6.1.9 Absence of Litigation..............................20
6.1.10 Debt and Non Arm's Length Transactions.............20
6.1.11 Ownership..........................................20
6.1.12 Insurance..........................................21
6.1.13 Compliance with Law................................21
6.1.14 No Event of Default or Pending Event of Default....22
6.1.15 Relevant Jurisdictions.............................22
6.1.16 Material Contracts and Material Licences...........22
6.1.17 Fiscal Year........................................23
(i)
6.1.18 Financial Information..............................23
6.1.19 No Material Adverse Effect.........................23
6.1.20 Insolvency.........................................23
6.1.21 Full Disclosure....................................23
6.2 Survival and Repetition of Representations and Warranties..24
ARTICLE 7 - COVENANTS...................................................24
7.1 Positive Covenants.........................................24
7.1.1 Timely Payment.....................................24
7.1.2 Conduct of Business, Maintenance of Existence,
Compliance with Law................................24
7.1.3 Access to Information..............................24
7.1.4 Obligations and Taxes..............................25
7.1.5 Use of the Loan....................................25
7.1.6 Insurance..........................................25
7.1.7 Notice of Event of Default or Pending Event
of Default.........................................25
7.1.8 Notice of Material Adverse Effect..................25
7.1.9 Notice of Litigation...............................26
7.1.10 Other Notices......................................26
7.1.11 Security...........................................26
7.1.12 Maintenance of Property............................27
7.1.13 Landlord Consents and Non-Disturbance Agreements...27
7.1.14 Material Contracts.................................27
7.1.15 Expenses...........................................27
7.1.16 Revision or Update of Schedules....................27
7.2 Reporting Requirements.....................................28
7.2.1 Financial Information..............................28
7.2.2 Information to be Presented to Directors...........28
7.2.3 Other Information..................................28
7.3 Negative Covenants.........................................29
7.3.1 Restrictions on Business Activities................29
7.3.2 Operation of Business..............................29
7.3.3 Disposition of Property............................29
7.3.4 Capital Expenditures...............................29
7.3.5 No Debt............................................29
7.3.6 No Encumbrances....................................29
7.3.7 No Distributions...................................29
7.3.8 No Repayment of Other Debt.........................29
7.3.9 No Consolidation, Amalgamation, etc................30
7.3.10 No Change of Name..................................30
7.3.11 No Continuance.....................................30
7.3.12 No Share Issuance..................................30
7.3.13 Ownership of Subsidiaries..........................30
7.3.14 Amendments to Organizational Documents.............30
7.3.15 Amendments to other Material Contracts and
Material Licences..................................30
7.3.16 Location of Assets in Other Jurisdictions..........30
7.3.17 Xxxxxx Restriction.................................31
ARTICLE 8 - SECURITY....................................................31
8.1 Form of Security...........................................31
8.2 Insurance Assignment.......................................32
8.3 After Acquired Property and Further Assurances.............32
8.4 Registration...............................................32
8.5 Release of Security........................................33
ARTICLE 9 - DEFAULT.....................................................33
9.1 Events of Default..........................................33
9.2 Acceleration and Termination of Rights.....................35
(ii)
9.3 Remedies Cumulative........................................36
9.4 Saving.....................................................36
9.5 Perform Obligations........................................36
9.6 Set-Off or Compensation....................................36
9.7 Application of Payments....................................37
ARTICLE 10 - COSTS, EXPENSES AND INDEMNIFICATION........................37
10.1 Costs and Expenses.........................................37
10.2 Indemnification by the Borrower............................38
10.3 Specific Third Party Claim Indemnification.................38
ARTICLE 11 - TAXES, CHANGE OF CIRCUMSTANCES.............................39
11.1 Change in Law..............................................39
11.2 Illegality.................................................40
11.3 Taxes......................................................41
ARTICLE 12 - SUCCESSORS AND ASSIGNS AND ADDITIONAL LENDERS..............41
12.1 Successors and Assigns.....................................41
12.2 Assignments................................................42
ARTICLE 13 - GENERAL....................................................42
13.1 Exchange and Confidentiality of Information................42
13.2 Notices....................................................43
13.3 Governing Law..............................................44
13.4 Consent to Jurisdiction....................................44
13.5 Severability...............................................45
13.6 Entire Agreement...........................................45
13.7 Further Assurances.........................................45
13.8 Waiver of Jury Trial.......................................45
13.9 Non-Merger.................................................46
13.10 Time of the Essence........................................46
13.11 Counterparts...............................................46
13.12 Amendments and Waivers.....................................46
ADDENDA
Schedule 1.1.1 (a)
Schedule 1.1.1 (b)
Schedule 1.1.1 (c)
Schedule 1.1.49
Schedule 2.1
Schedule 2.2
Schedule 6.1.9
Schedule 6.1.11
Schedule 6.1.12
Schedule 6.1.15
Schedule 6.1.16
(iii)
LOAN AGREEMENT
THIS AGREEMENT is made as of 9th day of March, 0000,
X X X X X X X:
XXXXXXX BAKING MIX PRODUCTS LTD., a corporation incorporated under the laws of
the state of Michigan (hereinafter referred to as the
(hereinafter referred to as the "Borrower")
- and -
XXXXXXX FOOD GROUP INC., a corporation incorporated under the
laws of the state of Delaware (hereinafter referred to as the "Parent")
- and -
CAITHNESS FINANCIAL SERVICES LTD., a corporation incorporated under
the laws of the Province of Ontario (hereinafter referred to as the "Lender")
- and -
XX XXXXXX of the Province of Ontario, as a guarantor ("Xxxxxx")
RECITALS:
A. The Borrower is in the business of manufacturing and selling baking mixes at
wholesale.
B. The Borrower will use the proceeds of this Loan to acquire from Monroe Bank &
Trust ("Monroe") substantially all of the business assets (excluding real
property) ("Acquired Assets") formerly-owned by Xxxxxx Corporation (Monroe
having acquired title to said assets by virtue of a voluntary surrender by
Xxxxxx Corporation of said assets to Monroe and a sale by Monroe pursuant to the
provisions Article 9 of the Uniform Commercial Code as adopted in Michigan),
pursuant to the terms of an asset purchase agreement dated as of December 24,
2004 (the "Asset Purchase Agreement").
C. The Borrower is a wholly-owned subsidiary of the Parent.
D. The Parent and Xxxxxx, the Parent's principal, are willing to unconditionally
guaranty the obligations of the Borrower under this Loan Agreement and the Loan
Documents.
NOW THEREFORE, in consideration of the covenants and agreements contained
in this Agreement, the Parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 Definitions
In this Agreement unless something in the subject matter or context is
inconsistent therewith:
1.1.1 "Acquired Assets" means the property to be acquired by the Borrower
pursuant to the Asset Purchase Agreement, the closing of which is to
occur contemporaneously with the completion of the transactions
hereunder on the Closing Date including, without limitation, the
following property:
(a) The Equipment listed in Schedule 1.1.1(a) attached hereto;
(b) The Inventory listed in Schedule 1.1.1(b) attached hereto; and
(c) The Accounts Receivable listed in Schedule 1.1.1(c) attached
hereto.
1.1.2 "Additional Compensation" has the meaning ascribed to that term in
Section 11.1(a)(iii);
1.1.3 "Affiliate" has the meaning ascribed to that term in the Business
Corporations Act (Ontario) and for greater certainty includes a
directly or indirectly held Subsidiary of any of the Obligors;
1.1.4 "Agreement" means this agreement, including its attached schedules, and
all amendments made to it in accordance with its provisions as amended,
revised, replaced, supplemented or restated from time to time;
1.1.5 "Applicable Law" means, in respect of a Person, property, transaction,
event or other matter, as applicable, all present or future Law
relating or applicable to that Person, property, transaction, event or
other matter, including any interpretation of Law by any Governmental
Authority;
1.1.6 "Applicable Order" means any applicable domestic or foreign order,
judgment, award or decree of any Governmental Authority;
1.1.7 Intentionally Deleted;
1.1.8 "Arm's Length" has the meaning specified in the definition of
"Non-Arm's Length";
1.1.9 "Asset Purchase Agreement" means the asset purchase agreement dated the
24th day of December, 2004 between the Borrower and MB Monroe
Properties Inc. as purchasers and Monroe as vendor;
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1.1.10 "Borrower" has the meaning ascribed thereto in the first paragraph of
this Agreement;
1.1.11 "Borrower's Counsel" means the firm of Xxxxxxxxx Prozanski LLP or such
other firm of legal counsel as the Borrower may from time to time
designate;
1.1.12 "Business" means the business as now carried on by the Obligors, namely
the business of manufacturing and selling baking mixes and other food
product mixes at wholesale and/or at retail and all business or
activities related or ancillary thereto, and including the business
acquired as a result of the completion of the purchase of the Acquired
Assets;
1.1.13 "Business Day" means any day other than Saturday, Sunday and holidays;
1.1.14 "Canadian Dollars", and "CDN$" mean the lawful money of Canada;
1.1.15 "Change of Control" means the failure of the Parent to own, directly or
indirectly, legally and beneficially, 100% of the outstanding voting
stock of the Borrower or any direct Subsidiary acquired or incorporated
by the Borrower after the Closing Date (as may be permitted under this
Agreement) free and clear of all Encumbrances (other than the
Encumbrances created by the Security) or shall otherwise fail to
Control the Borrower.
1.1.16 "Closing Date" means the 9th day of March, 2005; or such other date as
agreed to by the parties
1.1.17 "Control" (including with correlative meanings the terms "controlled
by" and "under common control with") in respect of a corporation has
the meaning given thereto in the Business Corporations Act (Ontario)
and in respect of any other Person means the power to direct or cause
the direction of the management and policies of any Person, whether
through the ownership of shares or voting interests or by contract or
otherwise;
1.1.18 "Disposition" means any sale, assignment, transfer, conveyance, lease,
license or other disposition of any nature or kind whatsoever of any
Property or of any right, title or interest in or to any Property, and
the verb "Dispose" shall have a correlative meaning;
1.1.19 "Distribution" means, with respect to any Person, any payment, directly
or indirectly, by that Person:
(a) of any dividends on any shares of its capital,
(b) on account of, or for the purpose of setting apart any property for
a sinking or other analogous fund for, the purchase, redemption,
retirement or other acquisition of any shares of its capital or any
warrants, options or rights to acquire any such shares;
3
(c) in respect of any shares of its capital;
(d) of any principal of or interest or premium on, or of any amount in
respect of, a sinking or analogous fund or defeasance fund for
Subordinated Debt or other indebtedness or liability of such Person
ranking, at law or by contract, in right of payment subordinate to any
liability of such Person under the Loan Documents or otherwise; or
(e) of any management, consulting or similar fee or any bonus payment
or comparable payment, or by way of gift or other gratuity, to any
Affiliate of such Person or to any director or officer of such Person
or Affiliate of such Person, or to any Person not dealing at Arm's
Length with such first Person or Affiliate, director or officer;
1.1.20 "Encumbrance" means, in respect of any Person, any mortgage, debenture,
pledge, hypothec, lien, charge, assignment by way of security,
hypothecation or security interest granted or permitted by that Person
or arising by operation of law, in respect of any of that Person's
Property, or any consignment of Property by that Person as consignee or
lessee or any other security agreement, trust or arrangement having the
effect of security for the payment of any debt, liability or
obligation, and "Encumbrances", "Encumbrancer", "Encumber" and
"Encumbered" shall have corresponding meanings;
1.1.21 "Equity" means, in respect of any Person at any time, the aggregate
amount of
(a) the stated capital of all of the outstanding shares or other
ownership interest of that Person;
(b) that Person's accumulated retained earnings;
(c) the amount, without duplication, of any contributed surplus all as
set forth in the financial statements for that Person as at the end of
its most recently completed fiscal quarter; and
(d) the amount of any loans from shareholders of that Person which have
been fully subordinated and postponed to the Obligations on terms and
conditions satisfactory to the Lender;
1.1.22 "Event of Default" has the meaning ascribed to that term in
Section 9.1;
1.1.23 "Financial Assistance" means, without duplication and with respect to
any Person, all loans granted by that Person and guarantees incurred by
that Person for the purpose of, or having the effect of, providing
financial assistance to another Person or Persons, including, without
limitation, letters of guarantee, letters of credit, legally binding
comfort letters or indemnities issued in connection with them,
endorsements of bills of exchange (other than for collection or deposit
in the ordinary course of business), obligations to purchase assets
regardless of the delivery or non-delivery of those assets and
obligations to make advances or otherwise provide financial assistance
to any other entity, and for greater certainty shall include any
guarantee of any third party lease obligations;
4
1.1.24 "Fiscal Year" means the fiscal year of the Borrower ending on December
31 in each calendar year;
1.1.25 "GAAP" means those accounting principles which are recognized as being
generally accepted and which are in effect from time to time, as
published in the Handbook of the Canadian Institute of Chartered
Accountants;
1.1.26 "Governmental Authority" means the government of any nation, province,
territory, municipality, state or other political subdivision of any
nation, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
or the application, enforcement, or interpretation of Law, including
any central bank, and any corporation or other entity owned or
controlled (through stock or capital ownership or otherwise) by any of
the foregoing;
1.1.27 "Guarantors" means collectively, the Parent and Xxxxxx, and "Guarantor"
shall mean any one of them;
1.1.28 "Information" has the meaning ascribed to that term in Section 13.1(b);
1.1.29 "ITA" means the Income Tax Act (Canada);
1.1.30 "Law" means all laws, (including the common law), by-laws, ordinances,
rules, statutes, regulations, treaties, orders, rules, judgments and
decrees, and all official directives, rules, guidelines, notices,
approvals, orders, policies and other requirements of any Governmental
Authority whether or not they have force of law;
1.1.31 "Leases" has the meaning ascribed thereto in Section 6.1.11;
1.1.32 "Lender" has the meaning ascribed thereto in the first paragraph of
this Agreement;
1.1.33 "Lender's Counsel" means the firm of Xxxxxxxx Xxxxxxx & Xxxx LLP or any
other firm of legal counsel that the Lender may from time to time
designate;
5
1.1.34 "Loan Amount" means the sum of US $880,000;
1.1.35 "Loan Documents" means this Agreement, the Security and all other
documents, certificates and instruments executed or delivered or to be
executed or delivered by an Obligor to the Lender pursuant hereto or
thereto, as the same may be modified, amended, extended, restated or
supplemented from time to time and "Loan Document" shall mean any one
of the Loan Documents;
1.1.36 "Material Adverse Effect" means:
(a) a material adverse effect on the business , operations, properties,
assets, condition (financial or otherwise) or prospects of any Obligor;
(b) an adverse effect on the legality, validity or enforceability of
any of the Loan Documents which could reasonably be considered material
having regard to the Loan Documents considered as a whole, including
the validity, enforceability, perfection or priority of any Encumbrance
created or intended to be created under any of the Security which could
reasonably be considered material having regard to the Security
considered as a whole;
(c) an adverse effect on the right, entitlement or ability of any
Obligor to pay or perform any of its Obligations under any of the Loan
Documents which could reasonably be considered material having regard
to the Obligors as a whole; or
(d) an adverse effect on the right, entitlement or ability of the
Lender to enforce any of the Obligations of any Obligor which could
reasonably be considered material having regard to the Obligors, or any
one of them, or to exercise or enforce any of its rights, entitlements,
benefits or remedies under any of the Loan Documents;
1.1.37 "Material Contract" means any agreement, arrangement or understanding,
whether written or oral, which:
(a) materially affects the business, operations, assets or prospects,
financial or otherwise, of the Borrower, including without limitation,
the Business; or
(b) is from time to time designated by the Lender in its sole
discretion, acting reasonably, as a Material Contract, provided notice
of such designation is delivered to the Borrower by the Lender (and,
for greater certainty, the contracts listed in Schedule 6.1.16 are
deemed to be so designated);
6
1.1.38 "Material Licence" means any licence, franchise, permit or approval
issued by any Governmental Authority to the Borrower, and which is at
any time on or after the date of this Agreement,
(a) necessary or material to the business and operations of the
Borrower, including without limitation, the Business or the breach,
default or revocation of which would result in a Material Adverse
Effect, or
(b) is from time to time designated by the Lender in its sole
discretion, acting reasonably, as a Material Licence, provided notice
of such designation is delivered to the Borrower by the Lender (and,
for greater certainty, the licences listed in Schedule 6.1.16 are
deemed to be so designated);
1.1.39 "Maturity Date" means March 1, 2006;
1.1.40 "Net Proceeds" means, with respect to any Disposition, the aggregate
fair market value of proceeds of that Disposition (whether such
proceeds are in the form of cash or other Property or part cash and
part other Property) net of reasonable, bona fide direct transaction
costs and expenses incurred in connection with that Disposition;
1.1.41 "Non-Arm's Length" and similar phrases have the meaning attributed
thereto for the purposes of the ITA; and "Arm's Length" shall have the
opposite meaning;
1.1.42 "Obligations" means, with respect to an Obligor, all of that Obligor's
present and future indebtedness, liabilities and obligations of any and
every kind, nature or description whatsoever (whether direct or
indirect, joint or several or joint and several, absolute or
contingent, matured or unmatured, in any currency and whether as
principal debtor, guarantor, surety or otherwise, including without
limitation any interest that accrues thereon or would accrue thereon
but for the commencement of any case, proceeding or other action,
whether voluntary or involuntary, relating to the bankruptcy,
insolvency or reorganization whether or not allowed or allowable as a
claim in any such case, proceeding or other action) to the Lender
under, in connection with, relating to or with respect to each of the
Loan Documents, and any unpaid balance thereof;
1.1.43 "Obligors" means, collectively, the Borrower and the Guarantors and
their respective successors and assigns and "Obligor" means any one of
them;
1.1.44 "Organizational Documents" means, with respect to any Person, that
Person's articles or other charter documents, by-laws, unanimous
shareholder agreement, partnership agreement, joint venture agreement,
operating agreement or trust agreement, as applicable, and any and all
other similar agreements, documents and instruments relative to that
Person;
7
1.1.45 "Parent" has the meaning ascribed thereto in the first paragraph of
this Agreement;
1.1.46 "Parties" means the Borrower, the Lender, the Parent, and any other
Person that may become a party to this Agreement;
1.1.47 "Pending Event of Default" means an event which, but for the
requirement for the giving of notice, lapse of time, or both, or but
for the satisfaction of any other condition subsequent to that event,
would constitute an "Event of Default";
1.1.48 "Permitted Distributions" means:
(a) routine employee salaries, bonuses, and benefits, all paid in the
normal course of business;
(b) redemption, out of the earned funds of the Borrower, of up to One
Thousand (1,000) shares of Class A Preferred Stock of Borrower
originally issued to and held by Monroe at a redemption price of One
Hundred ($100) Dollars per share on December 31, 2005.
1.1.49 "Permitted Encumbrances" means, with respect to any Person:
(a) the Security;
(b) the Encumbrances described in Schedule 1.1.49 to this Agreement;
and
(c) any other Encumbrances as agreed to in writing by the Lender;
1.1.50 "Person" is to be broadly interpreted and includes an individual, a
corporation, a limited liability company, an unlimited liability
company, a partnership, a trust, an incorporated organization, a joint
venture, the government of a country or any political subdivision of a
country, or an agency or department of any such government, any other
Governmental Authority and the executors, administrators or other legal
representatives of an individual in such capacity;
1.1.51 "Property" means, with respect to any Person, all or any portion of
that Person's undertaking, property and assets, both real and personal,
including, for greater certainty, any share in the capital of a
corporation or ownership interest in any other Person;
1.1.52 "Relevant Jurisdiction" means, from time to time, with respect to any
Person that is granting Security under this Agreement, any province or
territory of Canada, any state of the United States or any other
country or political subdivision thereof, in which that Person has its
chief executive office or chief place of business or has Property and,
for greater certainty, includes the provinces and states set out in
Schedule 6.1.15;
8
1.1.53 Intentionally Omitted.
1.1.54 "Requirements of Law" means, in respect of any Person, the
Organizational Documents of such Person and any Applicable Law, in each
case applicable to or binding upon such Person or any of its business
or Property or to which such Person or any of its business or Property
is subject;
1.1.55 "Security" means all security held from time to time by or on behalf of
the Lender, securing or intended to secure directly or indirectly
repayment of the Obligations and includes all security described in
Article 8;
1.1.56 "Senior Officer" means, in respect of any Person, the chairperson, the
chief executive officer, the chief operating officer, the chief
financial officer, the president, or any vice-president of such Person
or any person holding a similar office;
1.1.57 "Subordinated Debt" means indebtedness owing by any Obligor to any
Person, which indebtedness (including the payment of principal and
interest) and any security granted in respect of that indebtedness is
fully and absolutely postponed and subordinated to the full, final and
indefeasible repayment of the Obligations pursuant to a written
agreement in form and substance satisfactory to the Lender in its sole
discretion, acting reasonably;
1.1.58 "Subsidiary" means, with respect to a corporation, a subsidiary as
defined in the Business Corporations Act (Ontario) or the Michigan
Business Corporations Act, MCLA 450.1101, et. seq. as in effect on the
date hereof, and any partnership, joint venture or other organization
which is Controlled by the corporation or any Subsidiary of the
corporation;
1.1.59 "Tax" or "Taxes" means all taxes, charges, fees, levies, imposts and
other assessments of any kind or nature whatsoever, including without
limitation all income, sales, use, goods and services, value added,
capital, capital gains, alternative, net worth, transfer, profits,
withholding, payroll, employer health, excise, franchise, real property
and personal property taxes, and any other taxes, customs duties, fees,
assessments, royalties, duties, deductions, compulsory loans or similar
charges in the nature of a tax, including Canada Pension Plan and
provincial pension plan contributions, employment insurance payments
and workers compensation premiums, together with any instalments, and
any interest, fines and penalties, imposed by any Governmental
Authority, whether disputed or not; and
9
1.1.60 "United States Dollars", and "US$" mean the lawful money of the United
States of America.
1.2 Headings
The division of this Agreement into Articles and Sections and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The term "this Agreement",
refers to this Agreement in its entirety and not to any particular Article,
Section or other portion of this Agreement and includes any agreement
supplemental to this Agreement. Unless otherwise indicated, references in this
Agreement to Articles and Sections are to Articles and Sections of this
Agreement.
1.3 Number
Words importing the singular number only shall include the plural and vice
versa, words importing the masculine gender shall include the feminine and
neuter genders and vice versa.
1.4 Accounting Principles
Where the character or amount of any asset or liability, or item of revenue
or expense, is required to be determined, or any consolidation or other
accounting computation is required to be made for the purpose of this Agreement
or any Loan Document, that determination or calculation shall, to the extent
applicable and except as otherwise specified in this Agreement or as otherwise
agreed in writing by the Parties, be made in accordance with GAAP.
1.5 Accounting Practices
All calculations for the purpose of determining compliance with the
financial ratios and financial covenants contained in this Agreement shall be
made on a basis consistent with GAAP in existence as at the date of this
Agreement. In the event of a change in GAAP, the Borrower and the Lender shall
negotiate in good faith to revise (if appropriate) those ratios and covenants to
reflect GAAP as then in effect, in which case all subsequent calculations made
for the purpose of determining compliance with those ratios and covenants shall
be made on a basis consistent with GAAP in existence as at the date of those
revisions.
1.6 Determinations by Obligors
All provisions contained herein or under any other Loan Document requiring
any Obligor to make a determination or assessment of any event or circumstance
or other matter to the best of its knowledge shall be deemed to require such
Obligor to make all due inquiries and investigations as may be necessary or
prudent in the circumstances before making any such determination or assessment.
10
1.7 Permitted Encumbrances
The inclusion of reference to Permitted Encumbrances in any Loan Document
is not intended to subordinate, and shall not subordinate, any Encumbrance
created by any of the Security to any Permitted Encumbrance.
1.8 Currency
Unless otherwise specified in this Agreement, all references to dollar
amounts (without further description) shall mean United States Dollars and all
payments shall be made in United States Dollars.
1.9 Conflicts
In the event of a conflict or inconsistency between the application of any
of the provisions of this Agreement and the application of any of the provisions
of any of the other Loan Documents, the provisions giving the Lender greater
rights or remedies shall govern (to the maximum extent permitted by Applicable
Law), it being understood that the purpose of this Agreement and any other Loan
Document is to add to, and not detract from, the rights granted to the Lender
under the Loan Documents.
1.10 Non-Business Days
Unless otherwise expressly provided in this Agreement, whenever any payment
is stated to be due on a day other than a Business Day, the payment will be made
on the immediately preceding Business Day. In the case of interest or fees
payable pursuant to the terms of this Agreement, the extension or contraction of
time will be considered in determining the amount of interest and fees. Unless
otherwise expressly provided in this Agreement, whenever any action to be taken
is stated or scheduled to be required to be taken on, or (except with respect to
the calculation of interest or fees) any period of time is stated or scheduled
to commence or terminate on, a day other than a Business Day, the action will be
taken or the period of time will commence or terminate, as the case may be, on
the immediately preceding Business Day.
1.11 Statutory References
Any reference in this Agreement to any Law, or to any section of or any
definition in any Law, shall be deemed to be a reference to such Law or section
or definition as amended, supplemented, substituted, replaced or re-enacted from
time to time.
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1.12 Schedules
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule 1.1.1(a) - Equipment
Schedule 1.1.1(b) - Inventory
Schedule 1.1.1(c) - Accounts Receivable
Schedule 1.1.49 - Permitted Encumbrances
Schedule 2.1 - Senior Secured Promissory Note
Schedule 2.2 - Asset Purchase Agreement
Schedule 6.1.9 - Absence of Litigation
Schedule 6.1.11 - Description of Real Property
Schedule 6.1.12 - Insurance Policies
Schedule 6.1.15 - Relevant Jurisdictions
Schedule 6.1.16 - Material Contracts and Material Licenses
ARTICLE 2 - THE LOAN
2.1 Loan
Subject to the terms and conditions, and during the term of this Agreement,
the Lender agrees to lend to the Borrower and the Borrower agrees to borrow from
the Lender the principal sum of EIGHT HUNDRED EIGHTY THOUSAND AND NO/100THS
UNITED STATES DOLLARS (US$ 880,000) (the "Loan"). The Lender shall advance the
Loan Amount to the Borrower on the Closing Date. The loan shall be evidenced by
a promissory note (the "Note") substantially in the form attached hereto as
Schedule 2.1.
2.2 Purpose of the Loan
Except for the payment of the bonus contemplated by Section 4.3 (a), the
Borrower shall use the Loan Amount solely to pay the purchase price of Purchased
Assets acquired from Monroe pursuant to the Asset Purchase Agreement (a copy of
which is attached hereto as Schedule "2.2"). The Borrower shall not use the Loan
Amount for any other purpose.
2.3 Right of First Refusal
The Lender shall have the right of first refusal to provide to the Borrower
any subsequent financing of any kind, including without limitation debt, lease
facility, convertible debt, rights or equity until the Loan is fully repaid. The
Borrower shall provide Lender with fifteen (15) days prior written notice of any
proposed subsequent funding during which time Lender may match the terms and
conditions thereof or this right of first refusal shall terminate.
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ARTICLE 3 - CONDITIONS PRECEDENT
3.1 Conditions Precedent to the First Loan
The obligations of the Lender under this Agreement (including without
limitation, the obligation to make the first Loan hereunder) are subject to, and
conditional upon, all of the following conditions precedent being satisfied as
at the Closing Date:
(a) receipt by the Lender of a copy of the following documents (together
with this Agreement and such other documents as may be required by the
Lender hereunder from time to time, collectively referred to as the
"Loan Documents"), each duly executed and delivered, and in form and
substance satisfactory to the Lender in the Lender's sole discretion:
(i) this Loan Agreement;
(ii) the Note (attached hereto as Schedule 2.1);
(iii) Assignment of Lease or Leasehold Deed of Trust, at the Lender's
discretion, covering the tenant's interest in the Leased Premises for
security purposes;
(iv) Attornment and Non-Disturbance Agreement made by the landlord of
the Leased Premises in favor of the Lender; and
(v) Subordination and Postponement Agreement among the Lender, the
Borrower and Monroe;
(b) receipt by the Lender of certified true copies of the Organizational
Documents of each Obligor, the resolutions authorizing the execution,
delivery and performance of each Obligor's respective obligations under
the Loan Documents and the transactions contemplated in this Agreement,
as well as certificates of the incumbency of the officers of the
Obligors, and any other documents to be provided under the terms and
conditions of this Agreement;
(c) receipt by the Lender of certificates of status or good standing, as
applicable, for all Relevant Jurisdictions of each Obligor;
(d) compliance by each Obligor in all material respects with all Material
Contracts and Material Licenses to the satisfaction of the Lender in
its sole discretion, acting reasonably, and a receipt by the Lender of
copies of all Material Contracts and Material Licences of each of the
Obligors;
(e) completion by the Lender of its due diligence with respect to the
Obligors, the Acquired Assets and the Business, including but not
limited to a review of all Material Contracts and Material Licenses,
the results of which shall be satisfactory to the Lender in its sole
discretion, acting reasonably;
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(f) receipt by the Lender of copies, if any, of all required shareholder,
regulatory, governmental, and other approvals, necessary or desirable
in connection with the execution and delivery of the Loan Documents and
the consummation of the transactions contemplated by the Loan
Documents;
(g) receipt by the Lender of copies of all documentation to be delivered
under the terms of the Asset Purchase Agreement including the xxxx of
sale by Monroe on the closing of the purchase of the Acquired Assets,
certified by a Senior Officer of the Borrower to be true and correct in
full force and effect;
(h) all representations and warranties of the Borrower or any Guarantor set
forth in any Loan Document shall be true and correct in all material
respects on the Closing Date;
(i) completion by the Borrower, to the satisfaction of the Lender in its
sole discretion, acting reasonably, of the purchase of the Acquired
Assets free and clear of all Encumbrances and all other rights or
claims of any other Person, except for Permitted Encumbrances, and the
transactions otherwise contemplated in, and substantially in accordance
with the terms and conditions (without any waiver or variation thereof)
of, the Asset Purchase Agreement, including, without limitation an
opinion of the Borrower's counsel with respect to the Acquired Assets
addressed to the Lender;
(j) delivery to the Lender of any releases, discharges, subordinations and
postponements (in registerable form where appropriate) of all
Encumbrances affecting the collateral encumbered by the Security which
are not Permitted Encumbrances;
(k) delivery to the Lender of subordination or non sheltering agreements in
form satisfactory to the Lender in its sole discretion, acting
reasonably, obtained from all secured Parties under Permitted
Encumbrances designated by the Lender;
(l) the non-existence of any continuing Event of Default or Pending Event
of Default on the Closing Date, including any Event of Default or
Pending Event of Default that would result from making the Loan;
(m) the non-existence of any Material Adverse Effect;
(n) delivery to the Lender of duly executed copies of the Security, and the
due registration, filing and recording of the Security in all
applicable offices or places of registration in all Relevant
Jurisdictions;
(o) delivery to the Lender of a currently-dated letters of opinion of the
Borrower's Counsel that encompasses all Obligors, in form and substance
satisfactory to the Lender and the Lender's Counsel in their sole
discretion;
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(p) receipt by the Lender of copies of certificates of insurance of the
Obligors evidencing general comprehensive liability and property
insurance meeting the requirements set forth in the Loan Documents, all
in accordance with Section 7.1.6;
(q) receipt by the Lender from the Borrower of a statement of sources and
uses of funds covering all payments reasonably expected to be made by
the Borrower in connection with the purchase of the Acquired Assets and
otherwise on the Closing date of the first Loan, including an estimate
of all fees, expenses and other closing costs; and
(r) payment in full on or before the Closing Date to the Lender of the
aggregate amount of the Lender's actual and estimated legal fees and
other out-of-pocket fees and expenses (including any goods and services
tax, provincial sales tax or any commodity taxes thereon) in connection
with its due diligence review, preparation of the Indicative Term
Sheet, Loan Documents and all related documentation;
(s) delivery to the Lender of executed copies of all other Loan Documents
not specifically referenced in this Section 3.1, including written
acknowledgements and consents to assignment to the Lender signed by all
counterparties to the Material Contracts;
(t) the Approved Budget shall have been finalized and approved by the
Lender, and a copy delivered to the Lender at Closing;
(u) prior to the advance of the Loan, the Lender shall have reviewed each
lease and memorandum of lease over the Leased Premises, and shall have
determined in its sole discretion that each is in form and substance
satisfactory to the Lender in all respects. The Leases shall be in full
force and effect and no party shall be in breach of or in default
thereunder, nor shall an event have occurred which with the passage of
time or the giving of notice or both would constitute an event of
default thereunder;
(v) Monroe shall have executed and delivered a final Asset Purchase
Agreement, xxxx of sale and/or such other documents as in the Lender's
reasonable judgment are necessary and appropriate for the acquisition
by the Borrower of the Acquired Assets, and the sole contingency to
closing of the sale of the Acquired Assets shall be the advance of the
Loan;
(w) delivery to the Lender of evidence that the Loan Amount will be used
solely for the purpose provided for in Section 2 hereof;
(x) the Borrower has delivered a cheque in the amount of CDN $15,000
payable to the Borrower's Counsel; and
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(y) receipt by the Lender of such additional evidence, documents or
undertakings as the Lender shall reasonably request to establish the
consummation of the transactions contemplated by this Agreement, and to
satisfy the Lender in its sole discretion, acting reasonably, that all
proceedings in connection with this Agreement are being taken in
compliance with the conditions set out in this Agreement;
provided that all documents delivered pursuant to this Section 3.1 shall be
in full force and effect and in form and substance satisfactory to the
Lender in its sole discretion, acting reasonably.
3.2 Waiver
The conditions set forth in Sections 3.1 are inserted for the sole benefit
of the Lender and may be waived by the Lender, in whole or in part (with or
without terms or conditions) in respect of the Loan.
ARTICLE 4 - PAYMENTS OF INTEREST AND BONUS
4.1 Interest
The Borrower shall pay interest on the amount of outstanding principal
under this Loan Agreement from time to time at a rate of 12% per annum (net of
any withholding or other similar taxes). Interest shall be payable monthly in
arrears on the last Business Day of each month (net of any withholding or other
similar taxes). Notwithstanding the foregoing, if an Event of Default shall have
occurred and be continuing, interest shall accrue at a rate of 15% per annum on
the amount of outstanding principal and any other amount payable under this Loan
Agreement.
4.2 General Interest Rules.
(a) All interest payments to be made under this Agreement shall be paid
without allowance or deduction, both before and after maturity and
before and after judgment, if any, until payment. Interest shall accrue
on overdue interest, if any, compounded monthly.
(b) Unless otherwise stated, wherever in this Agreement reference is made
to a rate of interest or rate of fees "per annum" or a similar
expression is used, such interest or fees will be calculated on the
basis of a calendar year of 365 days or 366 days, as the case may be,
and using the nominal rate method of calculation, and will not be
calculated using the effective rate method of calculation or on any
other basis that gives effect to the principle of deemed re-investment
of interest.
(c) In calculating interest or fees payable under this Agreement for any
period, unless otherwise specifically stated, the first day of a period
shall be included and the last day of a period shall be excluded.
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4.3 Bonus
The Borrower shall pay to the Lender the following non-refundable bonus
payments (net of any withholding or other similar taxes):
(a) US $80,000 on the Closing Date; (to be paid out of the Loan Amount);
(b) 2% of the principal amount outstanding at 12:01 AM on December 1, 2005;
(c) 2% of the principal amount outstanding at 12:01 AM on January 1, 2006;
and
(d) 5% of the principal amount outstanding at 12:01 AM on February 1, 2006.
The Borrower hereby irrevocably authorizes and directs the Lender to
withhold from the advance of the Loan Amount the sum of US $80,000.00 (net of
any withholding or other similar taxes) in satisfaction of its bonus payment
obligation under Section 2.4 (a).
ARTICLE 5 - PAYMENTS OF PRINCIPAL, INTEREST AND FEES
5.1 Repayment of Principal
Unless the Borrower is required to repay the Loan Amount at an earlier date
pursuant to this Loan Agreement, the Borrower shall repay to the Lender the
outstanding principal amount of the Loan together with all accrued interest,
fees and other amounts then unpaid by it in full on the Maturity Date.
5.2 Mandatory Prepayment of Principal
(a) The Borrower shall pay to the Lender:
(i) 75% of any proceeds from the sale, assignment, licence, transfer or
disposition of any asset (including insurance proceeds) whether
tangible or intangible (except for Excluded Proceeds); and
(ii) 100% of any proceeds from the issuance or sale of any equity or
debt of the Borrower or its subsidiary or any other financing activity
of the Borrower or its subsidiary.
(b) "Excluded Proceeds" means proceeds from dispositions in the ordinary
course of the Borrower's business of inventory or other assets that are
customarily sold by the Borrower on an-on-going basis as part of the
normal operation of its business. 5.3 Voluntary Repayment of Principal
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5.3 Voluntary Repayment of Principal
The Borrower may prepay the outstanding Loan Amount at any time without
bonus or penalty upon fifteen (15) days' prior written notice to the Lender.
5.4 Manner of Payment of Principal, Interest and Fees
All payments of principal, interest, bonus or any other amount payable by
the Borrower under any Loan Document shall be made to the Lender at the Lender's
address set out in Section 13.2 of this Agreement or such other location the
Lender may specify in writing.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties
The Obligors jointly and severally make the following representations and
warranties to the Lender, and acknowledge and confirm that the Lender is relying
upon such representations and warranties (for greater certainty, and for
purposes of the representations and warranties made by the Obligors on the
Closing Date for purposes of satisfying the conditions precedent to obtain the
Loan, the Obligors also make the following representations and warranties with
respect to the Acquired Assets, as if the purchase contemplated by the Asset
Purchase Agreement had been fully completed immediately before the time these
representations and warranties are made):
6.1.1 Existence and Qualification
Each of the Borrower and the Parent:
(a) has been duly incorporated, amalgamated, merged or continued, as the
case may be, and is validly subsisting under the laws of its
jurisdiction of formation, amalgamation, merger or continuance, as the
case may be; and
(b) is duly qualified and has all required Material Licenses to carry on
its business in each jurisdiction in which the nature of its business
requires qualification.
6.1.2 Power and Authority
(a) Each Obligor has the power and authority to enter into, and to exercise
its rights and perform its obligations under, the Loan Documents to
which it is a party and all other instruments and agreements delivered
by it pursuant to any of the Loan Documents.
(b) The Borrower has the power and authority to have implemented and
completed the purchase of the Acquired Assets and to enter into, and to
exercise its rights and perform its obligations under, all instruments
and agreements delivered by it in connection with that purchase.
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(c) The Borrower has the power and authority to own its Property and carry
on its business as currently conducted and as currently proposed to be
conducted by it (including in the case of the Borrower, the Business).
6.1.3 Execution, Delivery, Performance and Enforceability of Documents
The execution, delivery and performance of each of the Loan Documents to
which each Obligor is a party, and every other instrument or agreement delivered
by an Obligor pursuant to any Loan Document, or in connection with the purchase,
have been duly authorized. Each of such documents has been duly executed and
delivered.
6.1.4 Loan Documents Comply with Applicable Law, Organizational Documents and
Contractual Obligations
None of the execution or delivery of, the consummation of the transactions
contemplated in, or compliance with the terms, conditions and provisions of any
of, the Loan Documents or any of the agreements or documents delivered in
connection therewith or in connection with the purchase of the Acquired Assets,
by the Borrower, conflicts with or will conflict with, or results or will result
in any breach of, or constitutes a default under or contravention of, any
Requirement of Law or any Material Contract or Material License, or results or
will result in the creation or imposition of any Encumbrance upon any of its
Property.
6.1.5 Consent Respecting Loan Documents
Each Obligor has obtained, made, or taken all consents, approvals,
authorizations, declarations, registrations, filings, notices and other actions
whatsoever required (except for registrations or filings which may be required
in respect of the Security) in connection with the execution and delivery by it
of each of the Loan Documents to which it is a party, and the consummation of
the transactions contemplated in the Loan Documents, the completion and
implementation of the purchase, and the execution and delivery by it of each of
the instruments and agreements delivered by it in connection with the purchase,
and the consummation of the transactions contemplated in such instruments and
agreements.
6.1.6 Enforceable Obligations
This Agreement and the other Loan Documents have been duly executed and
delivered and constitute legal, valid and binding obligations of each Obligor
(with regard to each agreement or instrument to which it is a party) enforceable
in accordance with their respective terms, except as may be limited by
bankruptcy, reorganization, moratorium or insolvency laws or similar laws
affecting creditors' rights generally and by general equitable principles.
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6.1.7 Taxes
Each Obligor has filed, or caused to be filed, all income tax returns and
other material returns in respect of Taxes required to be filed, has either
paid, or made adequate provision for the payment of, all Taxes which are due and
payable, or has accrued such amounts in its financial statements for the payment
of such Taxes, except for charges, fees or dues which are not material in
amount, and which are not delinquent or if delinquent are being contested in
good faith and through appropriate proceedings, and there is no material action,
suit, proceeding, investigation, audit or claim now pending, or to the best of
the knowledge of either the Borrower or Parent threatened by any Governmental
Authority regarding any Taxes, nor has any of the Obligors agreed to waive or
extend any statute of limitations with respect to the payment or collection of
Taxes. There is no material tax liability that will arise to an Obligor as a
result of the completion of the purchase of the Acquired Assets.
6.1.8 Judgments, Etc.
No Obligor is subject to any judgment, order, writ, injunction, decree or
award, or to any restriction, rule or regulation (other than customary or
ordinary course restrictions, rules and regulations consistent or similar with
those imposed on other Persons engaged in similar businesses) which has not been
stayed, or of which enforcement has not been suspended, which restrains,
prohibits or delays the purchase of the Acquired Assets.
6.1.9 Absence of Litigation
There are no actions, suits or proceedings pending or, to the best of each
Obligor's knowledge and belief, after due inquiry and all reasonable
investigation, threatened against or affecting any Obligor or the Property of
any Obligor except for those actions set out in Schedule 6.1.9.
6.1.10 Debt and Non Arm's Length Transactions
Neither Xxxxxxx Food Group, Inc. nor the Borrower has any debt except as
set out in Schedule 6.1.10.
6.1.11 Ownership
(a) The Borrower has good and marketable title to all of its material
Property, in each case subject to no Encumbrances other than Permitted
Encumbrances.
(b) The Borrower will purchase the Acquired Assets from Monroe pursuant to
the Asset Purchase Agreement and upon completion of that purchase
transaction Purchaser will have good and marketable title to the
Acquired Assets free and clear of any Encumbrances other than Permitted
Encumbrances.
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(c) The Borrower enjoys peaceful and undisturbed possession of all its
occupied real property and there is no pending or, to the knowledge of
the Borrower, threatened condemnation or expropriation proceeding
relating to any such real property. The leases with respect to the
Borrower's leased property, together with any leases of real property
entered into by any the Borrower after the Closing Date, are referred
to collectively as the "Leases". All of the real property and the
structures thereon and other tangible assets owned, leased or used by
any the Borrower in the conduct of its business (including without
limitation the Business) are
(i) insured to the extent, and in a manner customary, in the industry
in which the Borrower is engaged;
(ii) structurally sound with no known material defects;
(iii) in good operating condition and repair, subject to ordinary wear
and tear and casualty;
(iv) not in need of maintenance or repair except for ordinary, routine
maintenance and repair the cost of which would not be material or as a
result of casualty;
(v) sufficient for the operation of the business of the Borrower as
presently conducted thereon; and
(vi) in conformity with all Applicable Law and other requirements
(including applicable zoning, environmental, motor vehicle safety,
occupational safety and health laws and regulations) relating thereto,
except where the failure to comply or conform with any of the foregoing
could not reasonably be expected to have a Material Adverse Effect.
6.1.12 Insurance
The Borrower maintains insurance which is in full force and effect and
which complies with all of the requirements of this Agreement. The details of
all existing insurance policies maintained by the Borrower as of the date of
this Agreement are outlined as to carrier, policy number, expiration date, type
and amount in Schedule 6.1.12.
6.1.13 Compliance with Law
None of the Obligors has violated or failed to comply with any Applicable
Law, or any Applicable Order of any self regulatory organization, or any
judgment, decree or order of any court, applicable to its business (including
the Business) except where the aggregate of all such violations or failures to
comply could not reasonably be expected to have a Material Adverse Effect. The
conduct of the business of each of the Obligors is in conformity with all
securities, commodities, energy, public utility, zoning, building code, health,
21
occupational health and safety and environmental requirements and all other
foreign, federal, state, provincial and local governmental and regulatory
requirements and requirements of any self regulatory organizations, except where
such non-conformities could not reasonably be expected to have a Material
Adverse Effect. None of the Obligors has received any notice to the effect that,
or otherwise been advised that, it is not in compliance with any Applicable Law,
and none of the Obligors knows of any currently existing circumstances that are
likely to result in the violation of any Applicable Law, which non-compliance or
violation could reasonably be expected to have a Material Adverse Effect.
6.1.14 No Event of Default or Pending Event of Default
No Event of Default or Pending Event of Default has occurred and no event
has occurred that (with the giving of notice, the lapse of time or both) would
constitute an Event of Default or Pending Event of Default. No Obligor is in
default under any agreement, guarantee, indenture or instrument to which it is a
party or by which it is bound, the breach of which could reasonably be expected
to cause a Material Adverse Effect or affect its ability to perform any of its
obligations under any Loan Document to which it is a party.
6.1.15 Relevant Jurisdictions
(a) The Relevant Jurisdictions for each Obligor are set out in
Schedule 6.1.15.
(b) The Obligors' chief executive offices are at the locations set out in
Schedule 6.1.15, and the books and records of the Obligors and all
chattel paper and all records of accounts are located at the chief
executive offices of the Obligors or as otherwise noted in
Schedule 6.1.15.
(c) All other locations where the Obligors keep, store or maintain any
Property are set out in Schedule 6.1.15.
6.1.16 Material Contracts and Material Licences
(a) Schedule 6.1.16, (as amended from time to time with the consent of the
Lender), accurately sets out all Material Contracts and Material
Licences.
(b) No event has occurred and is continuing which would constitute a breach
of, or a default under, any Material Contract or Material Licence.
(c) Each Material Contract, to which an Obligor is a party is binding upon
that Obligor and, to its knowledge, is a binding agreement of each
other Person who is a party to the Material Contract.
(d) Each of the Obligors has obtained all necessary consents, including
consents of landlords, to the granting of a security interest in each
Material Contract and Material Licence.
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6.1.17 Fiscal Year
The Fiscal Year end of the Borrower is December 31.
The Fiscal Year end of Xxxxxxx Food Group Inc. is December 31.
6.1.18 Financial Information
All financial statements which have been furnished to the Lender, in
connection with this Agreement or the purchase of the Acquired Assets are
complete in all material respects and such financial statements fairly present
the financial position of the Obligors, as applicable as of the dates referred
to therein and have been prepared in accordance with GAAP. All other financial
information (including, without limitation, budgets and projections) provided to
the Lender is complete in all material respects and based on reasonable
assumptions and expectations.
6.1.19 No Material Adverse Effect
Since the date of the most recent financial statements of either the
Borrower or the Parent which have been furnished to the Lender in connection
with this Agreement, there has been no development or event relating to or
affecting the Borrower or the Parent, the Acquired Assets or the Business which
has had or could reasonably be expected to have a Material Adverse Effect.
6.1.20 Insolvency
No Obligor nor any of their predecessors where applicable
(a) has committed any act of bankruptcy,
(b) is insolvent, or has proposed, or given notice of its intention to
propose, a compromise or arrangement to its creditors generally,
(c) has any petition for a receiving order in bankruptcy filed against it,
made a voluntary assignment in bankruptcy, taken any proceeding with
respect to any compromise or arrangement, taken any proceeding to have
itself declared bankrupt or wound-up, taken any proceeding to have a
receiver appointed of any part of its assets, has had any encumbrancer
take possession of any of its Property, or
(d) has had an execution or distress become enforceable or become levied on
any of its Property.
6.1.21 Full Disclosure
All information furnished by or on behalf of the Obligors to the Lender for
purposes of, or in connection with, this Agreement or any Loan Documents, or any
other transaction contemplated by this Agreement, including any information
furnished in the future, is or will be true and accurate in all material
23
respects on the date as of which such information is dated or certified, and not
incomplete by omitting to state any material fact necessary to make such
information not misleading at such time in light of then-current circumstances.
There is no fact now known to any of the Obligors which has had, or could
reasonably be expected to have, a Material Adverse Effect.
6.2 Survival and Repetition of Representations and Warranties
The representations and warranties set out in Section 6.1 will be deemed to
be repeated by the Obligors as of the Closing Date.
ARTICLE 7 - COVENANTS
7.1 Positive Covenants
So long as this Agreement is in effect, and until the Obligations have been
paid in full, and except as otherwise permitted by the prior written consent of
the Lender, each of the Borrower and Parent makes and shall maintain, or cause
the other Obligors to maintain, as applicable, the following covenants:
7.1.1 Timely Payment
The Borrower shall make due and timely payment of the Obligations required
to be paid by it under this Agreement or any other Loan Document.
7.1.2 Conduct of Business, Maintenance of Existence, Compliance with Law
The Borrower shall engage in business of the same general type as the
Business now conducted by it; carry on and conduct its business and operations
in a proper, efficient and businesslike manner, in accordance with good business
practice; preserve, renew and keep in full force and effect its existence; and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business and comply with all
Material Contracts, Material Licenses and Requirements of Law.
7.1.3 Access to Information
Each Obligor shall promptly provide the Lender with all information
requested by the Lender from time to time concerning its financial condition and
Property, and during normal business hours and from time to time upon reasonable
notice, permit representatives of the Lender to inspect any of its Property and
to examine and take extracts from its financial books, accounts and records
including but not limited to accounts and records stored in computer data banks
and computer software systems, and to discuss its financial condition with its
Senior Officers and (in the presence of such of its representatives as it may
designate) its auditors.
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7.1.4 Obligations and Taxes
Each Obligor shall pay or discharge, or cause to be paid or discharged,
before they become delinquent:
(a) all Taxes imposed upon it or upon its income or profits or in respect
of its business, including the Business, or Property and file all tax
returns in respect thereof;
(b) all lawful claims for labour, materials and supplies;
(c) all required payments under any of its debt; and
(d) all other obligations;
provided, however that no Obligor shall be required to pay or discharge or to
cause to be paid or discharged, any such amount so long as its validity or
quantum is contested in good faith by appropriate proceedings, and a reserve has
been established in its books and records in accordance with GAAP in an amount
satisfactory to the Lender in its sole discretion, acting reasonably.
7.1.5 Use of the Loan
The Borrower shall use the proceeds of the Loan as contemplated by
Section 2.2.
7.1.6 Insurance
The Borrower will keep in force upon all of its properties and operations
policies of insurance carried with responsible companies covering all such risks
in the minimum amount of $2,000,000, with other terms and conditions that are
customary in the industry and are otherwise satisfactory to Lender, or as
otherwise required in the Loan Documents. The Borrower will on request furnish
to the Lender certificates of insurance or duplicate policies evidencing such
coverage.
7.1.7 Notice of Event of Default or Pending Event of Default
The Borrower shall promptly notify the Lender of any Event of Default or
Pending Event of Default.
7.1.8 Notice of Material Adverse Effect
The Borrower shall promptly notify the Lender of any Material Adverse
Effect that would apply to it, or any other Obligor, or any event or
circumstance that is likely to give rise to a Material Adverse Effect.
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7.1.9 Notice of Litigation
The Borrower shall promptly notify the Lender of the occurrence or
threatened occurrence of any litigation, dispute, arbitration, proceeding or
other circumstance the result of which, if determined adversely, would be a
judgment or award against it or the other Obligors that would result in a
Material Adverse Effect to it or the other Obligors, and from time to time
provide the Lender with all information requested by the Lender concerning any
such proceeding.
7.1.10 Other Notices
The Borrower shall promptly give notice to the Lender of:
(a) any notice of expropriation, or material action or proceeding affecting
the business of an Obligor, including the Business;
(b) any violation of any Applicable Law which results or could result in a
Material Adverse Effect;
(c) any entering into, termination of or amendment of or default under a
Material Contract;
(d) any Encumbrance registered against any property or assets of an
Obligor, other than a Permitted Encumbrance;
(e) any material change or proposed material change in the business of an
Obligor from that of the Business;
(f) any material change in, or amendment to, any Material Contract.
7.1.11 Security
With respect to the Security, each Obligor shall:
(a) provide and cause each of its Subsidiaries to provide, as applicable,
to the Lender the Security required from time to time pursuant to
Article 8 in accordance with the provisions of that Article,
accompanied by supporting resolutions, certificates and opinions in
form and substance satisfactory to the Lender and the Lender's Counsel
in their sole discretion, acting reasonably; and
(b) do, execute and deliver all such things, documents, security,
agreements and assurances as may from time to time be requested by the
Lender to ensure that the Lender holds at all times valid, enforceable,
perfected first priority Encumbrances (subject only to Permitted
Encumbrances) from the Obligors meeting the requirements of Article 8.
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7.1.12 Maintenance of Property
Each Obligor shall keep all Property useful and necessary in its business
in good working order and condition, normal wear and tear excepted and do and
cause to be done all things necessary to preserve and keep in full force all
intellectual property and registrations thereof necessary to carry on its
business.
7.1.13 Landlord Consents and Non-Disturbance Agreements
Except in respect of such premises as the Lender shall agree in writing,
each Obligor shall:
(a) obtain a consent agreement from each landlord of premises that are
leased by such landlord at any time and from time to time to any
Obligor, in form and content satisfactory to the Lender in its sole
discretion, acting reasonably;
(b) obtain a non-disturbance agreement from each mortgagee of any such
leased premises and an acknowledgement by each such mortgagee of any
applicable landlord's consent in respect of such premises; and
(c) file a Memorandum of Lease relating to leased premises and any
memorandum of Landlord's consent and Non-Disturbance Agreement against
title to the applicable real or leasehold property with the Monroe
County Register of Deeds.
7.1.14 Material Contracts
Except in respect of such Material Contracts as the Lender shall agree in
writing, each Obligor shall obtain the consent of each Person (other than the
other Obligor) which is party to a Material Contract to the assignment of any
applicable Obligor's interest therein to the Lender pursuant to the Security,
such form to be satisfactory in content to the Lender in its sole discretion,
acting reasonably.
7.1.15 Expenses
The Borrower shall pay promptly all reasonable fees and disbursements
(including Taxes) incurred or paid by the Lender in connection with the
preparation, negotiation, execution, delivery, maintenance, amendment and
enforcement (including any workouts in connection with or in lieu of any
enforcement) of the Loan Documents, and in connection with the consummation of
the transactions contemplated by the Loan Documents, and including, without
limitation, all court costs and all reasonable fees and disbursements of
lawyers, auditors, consultants and accountants.
7.1.16 Revision or Update of Schedules
The Borrower shall, if any of the information or disclosures provided in
any of the Schedules attached to this Agreement becomes outdated or incorrect in
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any material respect, deliver to the Lender any revisions or updates to such
Schedule(s) as may be necessary or appropriate to update or correct the outdated
Schedule(s), which revisions shall be effective from the date accepted in
writing by the Lender, such acceptance not to be unreasonably withheld;
provided, that no revisions or updates to any Schedule(s) shall be deemed to
have cured any breach of warranty or misrepresentation occurring prior to the
delivery of that revision or update by reason of the inaccuracy or
incompleteness of the relevant Schedule(s) at the time that warranty or
representation previously was made or deemed to have been made.
7.2 Reporting Requirements
So long as this Agreement is in effect, and until the Obligations have been
paid in full, and except as otherwise permitted by the prior written consent of
the Lender, the Borrower and the Parent shall perform, or shall cause the other
Obligors to perform, as applicable, the following covenants:
7.2.1 Financial Information
The Borrower will deliver to Lender (a) as soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower, the
balance sheet of the Borrower as of the end of such fiscal year and the related
statements of income and retained earnings and statement of changes in financial
position of the Borrower for such year, accompanied by the audit report thereon
by independent certified public accountants satisfactory to Lender; and (b) as
soon as available and in any event within 30 days after the end of each month,
the unaudited balance sheet and statement of income and retained earnings of the
Borrower as of the end of such month (including the fiscal year to the end of
such month), accompanied by a certificate of the chief financial officer of the
Borrower that such unaudited balance sheet and statement of income and retained
earnings have been prepared in accordance with generally accepted accounting
principles consistently applied and present fairly the financial position and
the results of operations of the Borrower as of the end of and for such month;
and (c) all other statements, reports and other information as Lender may
request concerning the financial condition and business affairs of the Borrower.
7.2.2 Information to be Presented to Directors
The Borrower shall deliver to the Lender unedited copies of all materials,
reports and other information to be furnished or presented to the Board of
Directors of the Borrower or its management at all meetings of the Board of
Directors or management of the Borrower at least five business days prior to any
such meeting.
7.2.3 Other Information
The Borrower and the Parent shall promptly provide the Lender with such
other information as it may reasonably request respecting the Obligors,
(including, without limitation, an aged list of accounts receivable and accounts
payable for each Obligor).
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7.3 Negative Covenants
So long as this Agreement is in effect, and until the Obligations have been
paid in full, and except as otherwise permitted by the prior written consent of
the Lender, the Borrower and the Parent shall maintain the following covenants:
7.3.1 Restrictions on Business Activities
The Borrower shall not carry on any business other than the Business.
7.3.2 Operation of Business
The Borrower shall not operate its business in a manner that would
reasonably be expected to result in a Material Adverse Effect.
7.3.3 Disposition of Property
The Borrower shall not dispose of, or permit any of its Subsidiaries to
dispose of, Property in any Fiscal Year except for dispositions in the ordinary
course of business of any inventory or other assets that are customarily sold by
the Borrower on an on-going basis as part of the normal operation of its
business.
7.3.4 Capital Expenditures
Other than expenditures for fixed or capital assets in excess of
Twenty-Five Thousand ($25,000) Dollars per fiscal year, the Borrower shall not
make any expenditure for a fixed or capital asset without the prior written
consent of Lender.
7.3.5 No Debt
The Borrower shall not create, incur, assume or permit any debt to remain
outstanding, other than the current operating line in place with the Bank of
Montreal.
7.3.6 No Encumbrances
The Borrower shall not create, incur, assume or permit to exist any
Encumbrance upon any of its Property, except Permitted Encumbrances.
7.3.7 No Distributions
The Borrower shall not make any Distribution except Permitted
Distributions.
7.3.8 No Repayment of Other Debt
Borrower shall not make any repayment of principal indebtedness owing to
Borrower's shareholder(s). Repayment of the principal of all such indebtedness
is subordinated to the repayment in full of the Loan, as set forth more fully in
the Subordination Agreement.
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7.3.9 No Consolidation, Amalgamation, etc.
The Borrower shall not consolidate, amalgamate or merge with any other
Person, enter into any corporate reorganization or other transaction intended to
effect or otherwise permit a change in its existing corporate or capital
structure, liquidate, wind-up or dissolve itself, or permit any liquidation,
winding-up or dissolution.
7.3.10 No Change of Name
No Obligor shall change its name without providing the Lender with thirty
(30) days prior written notice thereof. Borrower may operate under the Assumed
Name Xxxxxx Milling Co. by filing a Certificate of Assumed Name with the
Michigan Corporation, Securities, and Land Development Bureau and providing
written notice to Lender within ten (10) days after the Certificate of Assumed
Name is filed.
7.3.11 No Continuance
No Obligor shall continue into any other jurisdiction.
7.3.12 No Share Issuance
The Borrower shall not issue any securities without the prior written
consent of the Lender.
7.3.13 Ownership of Subsidiaries
The Borrower shall not sell, transfer or otherwise dispose of, any of its
shares of the capital stock of a Subsidiary or permit any of its Subsidiaries to
issue securities, or sell or otherwise dispose of, any shares of capital stock
of any its other Subsidiaries.
7.3.14 Amendments to Organizational Documents
The Borrower shall not amend any of its Organizational Documents in a
manner that would be prejudicial to the interests of the Lender under the Loan
Documents.
7.3.15 Amendments to other Material Contracts and Material Licences
The Borrower shall not amend, vary or alter in any material way, consent to
any assignment or transfer of, or waive or surrender any of its rights or
entitlements which could be considered material under, any Material Contracts or
Material Licences.
7.3.16 Location of Assets in Other Jurisdictions
No Obligor shall, except in the case of Property being delivered to a
customer in the ordinary course of business as part of the performance of its
obligations, or the provision of its services, under a contract entered into
with that customer, (1) move any Property from a jurisdiction in which the
Encumbrance of the Security over such Property is perfected to a jurisdiction
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where that Encumbrance is not perfected or where, after a temporary period
allowing for registration in such other jurisdiction, that Encumbrance could
become unperfected, or (2) suffer or permit in any other manner any of its
Property to not be subject to that Encumbrance or to be or become located in a
jurisdiction in which that Encumbrance is not perfected, unless:
(a) the Obligor has first given thirty (30) days prior written notice
thereof to the Lender; and
(b) the applicable Obligor has first executed and delivered to the Lender
all Security and all financing or registration statements deemed
necessary or admissible by, and in form and substance satisfactory to
the Lender or the Lender's Counsel in its sole discretion, acting
reasonably, to ensure that the Security at all times constitutes a
perfected first priority Encumbrance (subject only to Permitted
Encumbrances) over such Property in such jurisdiction, together with
any supporting certificates, resolutions, opinions and other documents
as the Lender or the Lender's Counsel may deem necessary or desirable
in its sole discretion, acting reasonably, in connection with such
security and registrations.
7.3.17 Xxxxxx Restriction
Xxxxxx shall not transfer or sell any personal property aggregating in
value over $100,000 until the Loan is repaid in full.
ARTICLE 8 - SECURITY
8.1 Form of Security
(a) As general and continuing security for the due payment and performance
of the Obligations of the Obligors to the Lender under the Loan
Documents, the following Security shall be granted to the Lender:
(i) a general security agreement from the Borrower in favour of the
Lender, constituting a first-priority Encumbrance (subject only to
Permitted Encumbrances) on all of the present and future Property of
the Borrower (including without limitation, the Acquired Assets);
(ii) an unconditional unlimited guarantee and a postponement of claim
from Monaco, guaranteeing the due payment and performance to the Lender
of all present and future obligations of the Borrower under the Loan
Documents (the "XXXXXXX FOOD GROUP INC. Guaranty");
(iii) a general security agreement from Xxxxxxx Food Group, Inc. in
favour of the Lender, as security for its Obligations, constituting a
first-priority Encumbrance (subject only to Permitted Encumbrances) on
all of the present and future Property of Xxxxxxx Food Group, Inc.
including without limitation the shares of the Borrower and all other
subsidiaries of Xxxxxxx Food Group Inc. ;
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(iv) an unconditional unlimited guarantee and a postponement of claim
from Xxxxxx, guaranteeing the due payment and performance to the Lender
of all present and future obligations of the Borrower under the Loan
Documents (the "Xxxxxx Guaranty"); and
(v) such further security agreements, deeds or other instruments of
conveyance, assignment, transfer, mortgage, pledge or charge as the
Lender may reasonably request to effectively secure the undertaking,
property and assets of the Obligors (including without limitation the
Acquired Assets) in the manner contemplated by the security referred to
in (i) through (iv) above.
(b) The Borrower acknowledges and agrees that it shall continue to be
liable for the obligations of the Loan, despite any action or inaction
by the Lender in selling or disposing of the Security or any part
thereof. The Lender may grant extensions or other indulgences, take and
give up the Security or any part thereof, accept compositions, grant
releases and discharges, and otherwise deal with Borrower and with
other parties, guarantors, indemnitors or securities as the Lender may
see fit, without prejudice to the rights of the Lender in respect of
the Security.
8.2 Insurance Assignment
Each Obligor, or the appropriate Obligor if blanket insurance polices are
held, will cause the Lender to be shown as a loss payee, as its interest may
appear, with respect to all insurance on the Property of each Obligor.
8.3 After Acquired Property and Further Assurances
The Borrower and the Parent shall from time to time execute and deliver,
and shall cause each of the other Obligors from time to time execute and
deliver, all such further deeds or other instruments of conveyance, assignment,
transfer, mortgage, pledge or charge in connection with all assets acquired by
any Obligor and intended to be subject to the Security, including any insurance
on those assets as may be requested by the Lender from time to time.
8.4 Registration
The Borrower shall, at its expense, cause to be registered, filed or
recorded the Security in all offices in each Relevant Jurisdiction where such
registration, filing or recording is necessary or of advantage to the creation,
perfection and preserving of the Security applicable to it and/or any other
Obligor. The Borrower shall renew such registrations, filings and recordings
from time to time as and when required to keep them in full force and effect and
shall, from time to time as reasonably required, provide to the Lender an
opinion of the Borrower's Counsel that all such registrations, filings and
recordings have been made and perfect the security interests created by the
Security.
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8.5 Release of Security
At such time as the Borrower has satisfied all of its respective
indebtedness, liabilities and obligations in relation to the Agreement in full
and shall have terminated the same, the Lender shall, at the expense and request
of the Borrower, without any representations, warranties or recourse of any kind
whatsoever, enter into such agreements and other instruments as may be necessary
to release, reassign, reconvey and discharge the Security; provided that any
asset which is disposed of by the Borrower or any other Obligor in accordance
with the terms of this Agreement shall be released from the Security by the
Lender following a written request by, and at the expense of, the Borrower.
ARTICLE 9 - DEFAULT
9.1 Events of Default
The occurrence of any one or more of the following events (each an "Event
of Default") shall constitute a default under this Agreement:
(a) the failure of an Obligor to pay any amount of principal of the Loan,
or to pay interest, fees or other Obligations when due and payable;
(b) the occurrence of a Material Adverse Effect;
(c) the failure of an Obligor to observe or perform any covenant or
obligation applicable to it under this Agreement or any Loan Document
(other than a covenant or condition whose breach or default in
performance is specifically dealt with elsewhere in this Section 9.1),
if that Obligor fails to remedy such default within the earlier of
twenty (20) days from the date:
(i) it becomes aware of the default; and
(ii) the Lender delivers written notice of the default to the Borrower;
(d) any representation or warranty made by any Obligor in this Agreement,
any other Loan Document or in any certificate or other document at any
time delivered hereunder to the Lender was incorrect or misleading in
any material respect; or
(e) the cessation or threatened cessation by an Obligor of its business
generally or the admission by an Obligor of its inability to, or, its
actual failure to, pay its debts generally;
33
(f) the denial by any Obligor of its obligations under any Loan Document,
or the claim by any Obligor that any of the Loan Documents is invalid
or has been withdrawn in whole or in part;
(g) the enactment of any legislation or the entering or obtaining of any
decree or order of a court, statutory board or commission which renders
any of the Loan Documents or any material provision of any of them
unenforceable, unlawful or otherwise changed, if any Obligor does not,
within ten (10) days of receipt of notice of the Loan Document or
material provision becoming unenforceable, unlawful or otherwise
changed, replace the Loan Document with a new agreement that is in form
and substance satisfactory to the Lender in its sole discretion, acting
reasonably, or amend the Loan Document to the satisfaction of the
Lender in its sole discretion, acting reasonably;
(h) the entering into or obtaining of a decree or order of a court of
competent jurisdiction adjudging an Obligor a bankrupt or insolvent, or
approving as properly filed a petition seeking the winding-up of an
Obligor under the Companies' Creditors Arrangement Act (Canada), the
Bankruptcy and Insolvency Act (Canada), the United States Bankruptcy
Code or the Winding Up and Restructuring Act (Canada) or any other
bankruptcy, insolvency or analogous laws or issuing sequestration or
process of execution against any substantial part of the assets of an
Obligor or ordering the winding up or liquidation of its affairs;
(i) the insolvency of an Obligor, or the making by an Obligor of an
assignment in bankruptcy, or any other assignment for the benefit of
creditors, or any proposal under the Bankruptcy and Insolvency Act
(Canada) or any comparable law, or the seeking of relief under the
Companies' Creditors Arrangement Act (Canada), the United States
Bankruptcy Code, the Winding Up and Restructuring Act (Canada) or any
other bankruptcy, insolvency or analogous law, the Obligor is adjudged
bankrupt, files a petition or proposal to take advantage of any act of
insolvency, consents to or acquiesces in the appointment of a trustee,
receiver, receiver and manager, interim receiver, custodian,
sequestrator or other Person with similar powers of itself or of all or
any substantial portion of its assets, or files a petition or otherwise
commences any proceeding seeking any reorganization, arrangement,
composition or readjustment under any applicable bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting
creditor' rights or consents to, or acquiesces in, the filing of such
a petition;
(j) the filing or instituting of any proceeding or against an Obligor
seeking to have an order for relief entered against that Obligor as
debtor or to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment or
composition under any law relating to bankruptcy, insolvency,
reorganization or relief or debtors (including, without
34
limitation, the Bankruptcy and Insolvency Act (Canada), the Companies
Creditors Arrangement Act (Canada), the United States Bankruptcy Code
and the Winding-Up and Restructuring Act (Canada), or seeking
appointment of a receiver, trustee, custodian or other similar official
for such Obligor or for any substantial part of its properties or
assets unless the same is being contested actively and diligently in
good faith by appropriate and timely proceedings and is dismissed,
vacated or permanently stayed within thirty (30) days of institution;
(k) the taking of possession by an Encumbrancer, by appointment of a
receiver, receiver and manager, or otherwise, of any material portion
of the Property of any Obligor;
(l) the loss by any of the Security of its status as a valid and perfected
first priority security interest subject only to Permitted
Encumbrances, if the Obligors have failed to remedy this default within
the earlier of ten (10) days from the date:
(i) an Obligor becomes aware, using reasonable due diligence of such
default; and
(ii) the Lender delivers written notice of the default to the Borrower;
(m) the occurrence of an event of default under any Material Contract or
Material Licence of an Obligor (other than an event of default
specifically dealt with in this section), if that event of default is
not remedied within thirty (30) days after an Obligor becomes aware of
it;
(n) the occurrence of a Change of Control; or
(o) the inclusion in any report of an Obligor's auditors of any
qualification which is unacceptable to the Lender in its sole
discretion, acting reasonably.
9.2 Acceleration and Termination of Rights
If any Event of Default occurs, all Obligations shall, at the option of the
Lender, become immediately due and payable with interest, at the rate or rates
determined as provided in this Agreement, to the date of their actual payment,
all without notice, presentment, protest, demand, notice of dishonour or any
other demand or notice whatsoever, all of which are hereby expressly waived by
each Obligor In that event the Security shall become immediately enforceable and
the Lender may, in its sole discretion, exercise any right or recourse and/or
proceed by any action, suit, remedy or proceeding against any Obligor authorized
or permitted by law for the recovery of all the Obligations of the Obligors to
the Lender, and proceed to exercise any and all rights hereunder and under the
Security, and no such remedy for the enforcement of the rights of the Lender
shall be exclusive of, or dependent on, any other remedy, but any one or more of
such remedies may from time to time be exercised independently or in
combination.
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9.3 Remedies Cumulative
For greater certainty, it is expressly understood and agreed that the
rights and remedies of the Lender under this Agreement or under any other Loan
Document are cumulative and are in addition to, and not in substitution for, any
rights or remedies provided by Law or by equity; and any single or partial
exercise by the Lender of any right or remedy for a default or breach of any
term, covenant, condition or agreement contained in this Agreement or other Loan
Document shall not be deemed to be a waiver of or to alter, affect or prejudice
any other right or remedy or other rights or remedies to which the Lender may be
lawfully entitled for such default or breach.
9.4 Saving
The Lender shall have no obligation to the Obligors or any other Person to
realize any collateral or enforce the Security or any part thereof or to allow
any of the collateral to be sold, dealt with or otherwise disposed of. The
Lender shall not be responsible or liable to the Obligors or any other Person
for any loss or damage upon the realization or enforcement of, the failure to
realize or enforce the collateral or any part thereof or the failure to allow
any of the collateral to be sold, dealt with or otherwise disposed of or for any
act or omission on their respective parts or on the part of any director,
officer, agent, servant or adviser in connection with any of the foregoing,
except that the Lender may be responsible or liable for any loss or damage
arising from the wilful misconduct or gross negligence of the Lender.
9.5 Perform Obligations
If an Event of Default has occurred and is continuing, and if any Obligor
has failed to perform any of its covenants or agreements in the Loan Documents,
the Lender may, but shall be under no obligation to, perform any such covenants
or agreements in any manner deemed fit by the Lender without thereby waiving any
rights to enforce the Loan Documents. The reasonable expenses (including any
legal costs) incurred by the Lender in respect of the foregoing shall be an
Obligation and shall be secured by the Security.
9.6 Set-Off or Compensation
In addition to, and not in limitation of, any rights now or hereafter
granted under Applicable Law, if repayment is accelerated pursuant to
Section 9.2, the Lender may, at any time without notice to any Obligor or any
other Person, the right to receive any notice being expressly waived by each
Obligor, set-off and compensate and apply any and all deposits, general or
special, time or demand, provisional or final, matured or unmatured, and any
other indebtedness at any time owing by the Lender to or for the credit of or
the account of an Obligor, against and on account of the Obligations,
notwithstanding that any of them are contingent or unmatured.
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9.7 Application of Payments
Notwithstanding any other provisions of this Agreement, after the
occurrence and during the continuance of an Event of Default, all payments made
by an Obligor under this Agreement or from the proceeds of realization of any
Security, or otherwise collected or received by the Lender on account of amounts
outstanding with respect to any of the Obligations, shall be paid over or
delivered to make the following payments (as the same become due at maturity, by
acceleration or otherwise):
(a) first, to payment of any fees owed to the Lender hereunder or under any
other Loan Document;
(b) second, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable legal fees) of the
Lender in connection with enforcing the rights of the Lender under the
Loan Documents;
(c) third, to the payment of all Obligations consisting of default
interest;
(d) fourth, to the payment of all Obligations consisting of interest
payable to the Lender hereunder;
(e) fifth, to the payment of the outstanding principal amount of the Loan;
and
(f) sixth, to all other Obligations.
ARTICLE 10 - COSTS, EXPENSES AND INDEMNIFICATION
10.1 Costs and Expenses
The Borrower shall pay promptly upon receipt of written notice from the
Lender all reasonable costs and expenses in connection with the preparation,
execution and delivery of this Agreement, the other Loan Documents and the other
instruments, certificates and documents to be delivered under this Agreement or
the other Loan Documents, whether or not a closing has occurred or the Loan has
been made under this Agreement, including, without limitation, the reasonable
fees and out-of-pocket expenses of the Lender's Counsel with respect thereto and
with respect to advising the Lender as to its rights and responsibilities under
this Agreement and the other Loan Documents to be delivered under this
Agreement. The Borrower further agrees to pay all reasonable costs and expenses
in connection with the preparation or review of waivers, consents and amendments
requested by the Borrower, questions of interpretation of this Agreement, and in
connection with the establishment of the validity and enforceability of this
Agreement and the preservation or enforcement of rights of the Lender under this
Agreement, and other documents to be delivered under this Agreement, including,
without limitation, all reasonable costs and expenses sustained by the Lender as
a result of any failure by any of the Obligors to perform or observe any of
their respective obligations under this Agreement, together with interest at the
rate of 15% per annum from and after the 10th Business Day of having been given
notice from the Lender, if payment is not made by that time. Such costs and
expenses shall be payable whether or not a Loan is made under this Agreement.
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10.2 Indemnification by the Borrower
(a) In addition to any liability of an Obligor to the Lender under any
other provision of this Agreement, the Obligors jointly and severally
covenant to indemnify the Lender and hold the Lender harmless against
any reasonable loss or expense incurred by the Lender as a result of:
(i) any Obligor's failure to fulfil any of its Obligations;
(ii) any Obligor's failure to pay any other amount, including, without
limitation, any interest or fee, when due under this Agreement or any
other Loan Document; or
(iii) any Obligor s failure to give any notice required to be given by
it to the Lender under this Agreement
(b) A certificate of the Lender as to the amount of any such loss or
expense shall be prima facie evidence as to the amount thereof, in the
absence of manifest error. The agreements in this Section 10.2 shall
survive the termination of this Agreement and repayment of the
Obligations.
10.3 Specific Third Party Claim Indemnification
In addition to any liability of an Obligor under any other provision of
this Agreement, the Obligors jointly and severally covenant to indemnify and
hold harmless the Lender and its directors, officers, employees and
representatives (collectively the "Indemnified Parties" and individually an
"Indemnified Party") from and against any and all actions, proceedings, claims,
assessments in respect of required withholding losses, damages, liabilities,
expenses and obligations of any kind that may be incurred by, or asserted
against, any of them by any third party, including any Governmental Authority,
as a result of, or in connection with, the entering into of this Agreement or
the other Loan Documents or the transactions therein contemplated, other than
any claim arising from the gross negligence or wilful misconduct of an
Indemnified Party. Whenever any such claim arises, an Indemnified Party (if not
the Lender) shall promptly notify the Lender, and the Lender shall in turn
promptly notify the Borrower, of the claim and, when known, the facts
constituting the basis for the claim, and if known, the amount or an estimate of
the amount of the claim. The failure of an Indemnified Party to promptly give
notice of a claim shall not adversely affect the Indemnified Party's rights to
indemnity, except to the extent such failure adversely affects the right of the
38
Borrower to assert any reasonable defence to the claim. An Indemnified Party
shall not settle or compromise any claim by a third party for which it is
entitled to indemnification under this Section 10.3 without the prior written
consent of the Borrower (which consent shall not be unreasonably withheld). The
Borrower, at its sole cost and expense, may, upon written notice to the
applicable Indemnified Parties, assume the defence of any such claim or any
legal proceeding resulting therefrom, with counsel satisfactory to the
applicable Indemnified Parties in their sole discretion, acting reasonably, but
shall not settle or compromise any such claim or any legal proceeding resulting
therefrom without the prior written consent of the applicable Indemnified
Parties (which consent shall not be unreasonably withheld). The applicable
Indemnified Parties shall be entitled to participate in (but not control) the
defence of any action, with their own counsel and at their own expense. If the
Borrower does not assume the defence of any claim or litigation resulting
therefrom, the applicable Indemnified Parties may defend against that claim or
litigation using one set of counsel for those Indemnified Parties, in the manner
as it deems appropriate and at the expense of the Borrower, including, but not
limited to, settling the claim or litigation, after giving notice of the
proposed settlement to, and receiving the consent of, the Borrower (which
consent shall not be unreasonably withheld). In that case the Borrower shall be
entitled to participate in (but not control) the defence of the action, with its
own counsel and at its own expense. The defense and indemnity obligations
contained throughout this Agreement shall survive the termination of this
Agreement and repayment of the Obligations.
ARTICLE 11 - TAXES, CHANGE OF CIRCUMSTANCES
11.1 Change in Law
(a) In the event of any change after the date of this Agreement in any
Applicable Law or in the interpretation or application thereof by any
court or by any Governmental Authority which now or hereafter:
(i) subjects the Lender to any Tax or changes the basis of taxation, or
increases any existing Tax, on payments of principal, interest, fees or
other amounts payable by any Obligor to the Lender under any Loan
Document (except for Taxes on the overall net income of the Lender);
(ii) imposes, modifies or deems applicable any reserve, special deposit
or similar requirements against assets held by, or deposits in or for
the account of or loans by or any other acquisition of funds by, an
office of the Lender; or
(iii) imposes on the Lender or requires there to be maintained by the
Lender any capital adequacy or additional capital requirements in
respect of any Loans hereunder or any other condition with respect to
any Loan Document
with the result of an increase in the cost to, or a reduction in the
amount of principal, interest or other amount received or receivable
by, or the effective return of, the Lender under this Agreement in
respect of making, maintaining or funding the Loan, the Lender shall
determine that amount of money which shall compensate the Lender for
such increase in cost or reduction in income (in this Agreement
referred to as "Additional Compensation").
39
(b) Upon the Lender having determined that it is entitled to Additional
Compensation the Lender shall promptly notify the Borrower. The Lender
shall provide to the Borrower a photocopy of the relevant Applicable
Law, and a certificate of a duly authorized officer of the Lender
setting forth the Additional Compensation and the basis of calculation
therefore, which shall be conclusive evidence of such Additional
Compensation in the absence of manifest error. The Borrower shall pay
or shall cause the applicable Obligor to pay to the Lender within ten
(10) Banking Days of the giving of such notice the Lender's Additional
Compensation calculated to the date of such notification. The Lender
shall be entitled to be paid such Additional Compensation from time to
time to the extent that the provisions of this Section 11.1 are then
applicable, notwithstanding that the Lender has previously been paid
Additional Compensation. The Lender shall endeavour to limit the
incidence of any Additional Compensation, including seeking recovery
for the account of the applicable Obligor, by appealing any assessment
at the expense of the applicable Obligor upon the request of the
Borrower and will not seek Additional Compensation from the applicable
Obligor except to the extent it seeks Additional Compensation from
other Obligors, if any, similarly affected.
11.2 Illegality
If, after the date of this Agreement, the adoption of or change to any
Applicable Law, or any change in the interpretation or application thereof by
any court or by any Governmental Authority, now or hereafter makes it unlawful
or impossible for the Lender to make, fund or maintain the Loan or to give
effect to its obligations in respect of such a Loan, the Lender may, by written
notice to the Borrower, declare its obligations under this Agreement to be
terminated, whereupon the same shall forthwith terminate, and the Borrower shall
prepay within the time required by such Law (or at the end of such longer period
as the Lender at its discretion has agreed) the principal of such Loan together
with accrued interest, any Additional Compensation that may be applicable to the
date of such payment and all costs, losses and expenses incurred by the Lender
by reason of the liquidation or re-employment of deposits or other funds or for
any other reason whatsoever resulting from the repayment of such Loan or any
part thereof . If any such change shall only affect a portion of the Lender's
obligations under this Agreement which is, in the opinion of the Lender and the
Lender's Counsel in their sole discretion, acting reasonably, severable from the
remainder of this Agreement, so that the remainder of this Agreement may be
continued in full force and effect without otherwise affecting any of the
obligations of the Lender or the Obligors under this Agreement, the Lender shall
only declare its obligations under that portion so terminated.
40
11.3 Taxes
All payments to be made to the Lender pursuant to the Loan Documents shall
be made free and clear of, and without reduction for or on account of, any
present or future Taxes; provided, however, if any Taxes are required by
Applicable Law or the interpretation or application thereof by any court or
Government Authority to be withheld from any interest or other amount payable to
the Lender under any Loan Document, the amount so payable to the Lender shall be
increased to the extent necessary to yield to the Lender, on a net basis after
payment of all Taxes (including all Taxes imposed on any additional amounts
payable under this subsection), interest or any such other amount payable under
such Loan Document at the rate or in the amount specified in such Loan Document.
Each Obligor shall be fully liable and responsible for and shall, promptly
following receipt of a request from the Lender, pay to the Lender on its behalf
or on behalf of the other Obligors, any and all Taxes in the nature of sales,
use, and goods and services Taxes payable under the laws of Canada or any
Province of Canada, or payable under the laws of any other country or
jurisdiction with respect to any and all goods and services made available under
the Loan Documents to any Obligor by the Lender. Whenever any Taxes are payable
by an Obligor, as promptly as possible thereafter that Obligor shall send or
cause to be sent to the Lender, a certified copy of an original official receipt
showing payment of such Taxes. If an Obligor fails to pay any Taxes when due or
if an Obligor fails to remit to the Lender the required documentary evidence of
such payment, the Borrower, the Parent and Xxxxxx shall indemnify and save
harmless the Lender from any Taxes or other liabilities that may become payable
by the Lender or to which the Lender may be subjected as a result of any such
failure. A certificate of the Lender as to the amount of any such Taxes and
containing reasonable details of the calculation of such Taxes shall be, absent
manifest error, prima facie evidence of the amount of such Taxes.
ARTICLE 12 - SUCCESSORS AND ASSIGNS AND ADDITIONAL LENDERS
12.1 Successors and Assigns
(a) The Loan Documents shall be binding upon and enure to the benefit of
the Lender, the Obligors and their successors and assigns, except that
no Obligor shall assign any rights or obligations with respect to this
Agreement or any of the other Loan Documents.
(b) The rights and obligations of the Lender under this Agreement are
assignable and the Lender shall be entitled to assign its rights and
obligations hereunder, all in accordance with the provisions of this
Section 12.1, Section 12.2 and the other terms of this Agreement. The
Borrower and the Parent hereby consent to the disclosure of any
Information to any potential assignee or participant provided that the
potential assignee or participant agrees in writing to keep the
Information confidential.
41
12.2 Assignments
(a) No Guarantor or Borrower may assign its rights or obligations under
this Agreement. The Lender may assign or transfer its rights and
obligations under this Agreement to any Affiliate of the Lender without
any obligation to obtain any consent of the Borrower or the other
Obligors. The Lender may assign its rights or obligations under this
Agreement to any other Person with the written consent of the Borrower,
such consent not to be unreasonably withheld or delayed.
(b) Following the occurrence of an Event of Default or a Pending Event of
Default that is continuing, the prior written consent of the Borrower
to the assignment by the Lender of any of its rights and obligations
under this Agreement shall not be required.
ARTICLE 13 - GENERAL
13.1 Exchange and Confidentiality of Information
(a) The Borrower and the Parent agree that the Lender may provide any
assignee or participant pursuant to Article 12 with any information
concerning the financial condition of the Obligors.
(b) Subject to Section 13.1(a), the Lender acknowledges the confidential
nature of the financial, operational and other information and data
provided and to be provided to it by the Obligors, or any one of them
pursuant to this Agreement (the "Information") and agree to use all
reasonable efforts to prevent its disclosure provided, however, that:
(i) it may disclose all or any part of the Information if, in its
opinion, such disclosure is required in connection with any actual or
threatened judicial, administrative or governmental proceeding; and
(ii) it shall incur no liability in respect of any disclosure of
Information to any, or pursuant to the requirements of any, judicial
authority, law enforcement agency or taxation authority.
(c) No Guarantor or the Borrower will disclose any aspect of the Loan
including the name of the Lender in any press release or other public
disclosure, except as required by law or applicable stock exchange
rules or policies, or as may be approved by the Lender in writing,
previously obtained.
(d) Each Guarantor and the Borrower consents to the collection, use and
disclosure by Lender and its agents of any and all personal and/or
proprietary information regarding the Guarantor or the Borrower as may
be reasonably necessary to fully exercise the Lender's rights and
remedies contained in any Loan Document.
42
(e) The Borrower and the Parent agree that the Lender may provide any
assignee or participant pursuant to Article 12 with any information
concerning the financial condition of the Borrower and the Parent.
13.2 Notices
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered in person,
transmitted by facsimile or similar means of recorded electronic
communication or sent by registered mail, charges prepaid, addressed as
follows:
(i) if to the Lender:
Caithness Financial Services Limited
000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX
Xxxxxx X0X 0X0
Attention: President
Fax No.: (000) 000-0000
(ii) if to the Borrower:
Xxxxxxx Baking Mix Products Ltd.
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx, X0X 0X0
Attention: President
Fax No.: (000) 000-0000
(iii) if to the Parent: - (Please provide)
Xxxxxxx Food Group Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx, X0X 0X0
Attention: President
Fax No.: (000) 000-0000
43
(iv) if to Xxxxxx:
Xx Xxxxxx
c/o Xxxxxxx Food Group Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx, X0X 0X0
Fax No.: (000) 000-0000
(b) Any such notice or other communication shall be deemed to have been
given and received on the day on which it was delivered or transmitted
(or, if such day is not a Banking Day, on the next following Banking
Day) or, if mailed, on the third Banking Day following the date of
mailing; provided, however, that if at the time of mailing or within
three Banking Days thereafter there is or occurs a labour dispute or
other event that might reasonably be expected to disrupt the delivery
of documents by mail, any notice or other communication hereunder shall
be delivered or transmitted by means of recorded electronic
communication as aforesaid.
(c) Any Party may at any time change its address for service from time to
time by giving notice to the other Parties in accordance with this
Section 13.1(c).
13.3 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Michigan and the laws of the United States applicable
therein, without prejudice to or limitation of any other rights or remedies
available under the laws of any jurisdiction where Property or assets of any of
the Obligors may be found.
13.4 Consent to Jurisdiction
(a) The parties hereto irrevocably submit to the non-exclusive jurisdiction
of the courts of the State of Michigan and hereby irrevocably agree
that all claims in respect of such action or proceeding may be heard
and determined in such court. The Obligors hereby irrevocably waive, to
the fullest extent it may effectively do so, the defence of an
inconvenient forum to the maintenance of such action or proceeding.
(b) The parties hereto hereby irrevocably consent to the service of any and
all process in such action or proceeding by the delivery of such
process to either Obligor at the Borrower's address provided in
accordance with Section 13.1(c).
44
13.5 Severability
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
13.6 Entire Agreement
This Agreement, including all its attached Schedules, along with the Loan
Documents, constitutes the entire agreement between the Parties with respect to
the subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral. There are no conditions,
covenants, agreements, representations, warranties or other provisions, express
or implied, collateral, statutory or otherwise, relating to the subject matter
hereof expect as herein provided. No reliance is placed by any Party hereto on
any warranty, representation, opinion, advice or assertion of fact made by any
Party hereto or its directors, officers, employees or agents, to any other Party
hereto or its directors, officers, employees or agents except to the extent that
the same has been reduced to writing and included in this Agreement.
13.7 Further Assurances
Each of the Obligors and the Lender shall promptly cure any default by it
in the execution and delivery of this Agreement, the Loan Documents or any other
agreements provided for in this Agreement to which it is a party. The Borrower,
at its own expense, shall or shall cause the other Obligors, as applicable, to
promptly execute and deliver to the Lender, upon request by the Lender, all
further documents, agreements, opinions, certificates and instruments in
compliance with, or accomplishment of the covenants and agreements of the
Obligors under this Agreement or the other Loan Documents, or more fully to
state the obligations of such Obligor as set forth in this Agreement or other
Loan Documents or to make any recording, file any notice or obtain any consent,
all as may be reasonably necessary or appropriate in connection with this
Agreement or the other Loan Document from time to time.
13.8 Waiver of Jury Trial
THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR OF THE OBLIGORS. THE
PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EVERY OTHER PROVISION OF EACH OTHER CREDIT
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT AND EACH OTHER CREDIT
DOCUMENT.
45
13.9 Non-Merger
The representations, warranties and covenants contained in this Agreement,
including any schedule hereto, and in any other Loan Document to be executed and
delivered pursuant to this Agreement or pursuant to such other Loan Documents
shall not merge on closing or at the time of the Loan hereunder and
notwithstanding such closing or the Loan, and notwithstanding any investigations
made by or on behalf of the Lender, shall, subject to Section 6.2 hereto,
continue in full force and effect.
13.10 Time of the Essence
Time shall be of the essence of this Agreement.
13.11 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which taken together shall be
deemed to constitute one and the same instrument, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one such
counterpart.
13.12 Amendments and Waivers
No amendment, modification of any provision of this Agreement or any other
Loan Document, or consent by the Lender to any departure from any provision of
this Agreement or other Loan Document, is in any way effective unless it is in
writing and signed by the Lender, the Borrower, Xxxxxx and the Parent. Any
waiver by the Lender of the strict observance, performance or compliance with
any term, covenant, condition or other matter contained in this Agreement or any
other Loan Document and any indulgence granted, by the Lender shall be effective
only if in writing and in the specific instance and for the purpose for which it
was given and shall be deemed not to be a waiver of any rights and remedies of
the Lender under this Agreement or any other Loan Document or instrument
executed pursuant to this Agreement as a result of any other default or breach
under this Agreement or any other Loan Document.
46
IN WITNESS WHEREOF the Parties hereto have executed this Agreement.
XXXXXXX BAKING MIX PRODUCTS LTD.,
a Michigan corporation
Per:
-----------------------------------------
Title President
Per:
-----------------------------------------
Title
XXXXXXX FOOD GROUP INC.
Per:
-----------------------------------------
Title
Per:
-----------------------------------------
Title
CAITHNESS FINANCIAL SERVICES LIMITED
Per:
-----------------------------------------
Title
Per:
-----------------------------------------
Title
--------------
Signature
-------------------------------------
XX XXXXXX, in his individual capacity
Print Name
Address:
47
SCHEDULE 1.1.1(a)
EQUIPMENT
(Please see attached)
SCHEDULE 1.1.1(b)
INVENTORY
(Please see attached)
SCHEDULE 1.1.1(c)
ACCOUNTS RECEIVABLE
(Please see attached)
SCHEDULE 1.1.49
PERMITTED ENCUMBRANCES
NONE.
SCHEDULE 6.1.9
LITIGATION
NONE.
SCHEDULE 2.1
SENIOR SECURED PROMISSORY NOTE
(Please see attached)
SCHEDULE 2.2
ASSET PURCHASE AGREEMENT
(Please see attached)
SCHEDULE 6.1.11
DESCRIPTION OF REAL PROPERTY
(Please see attached)
SCHEDULE 6.1.12
INSURANCE POLICIES
(Please see attached Certificate of Insurance)
SCHEDULE6.1.15
RELEVANT JURISDICTIONS
Borrower
1. State of Michigan
2. State of Delaware
SCHEDULE 6.1.16
MATERIAL CONTRACTS AND LICENSES
NONE.
