Exhibit 10.6
08/8/97-7
LOAN AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (CANADA)
AS LENDER
AND
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ CANADA INC.
AS BORROWER
DATED: AUGUST 8 , 1997
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 "Accounts". . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 "Adjusted Net Worth". . . . . . . . . . . . . . . . . . . . .3
1.3 "Availability Reserves" . . . . . . . . . . . . . . . . . . .3
1.4 "BIA" . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5 "Blocked Accounts". . . . . . . . . . . . . . . . . . . . . .3
1.6 "CCAA". . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.7 "Canadian Dollar Amount". . . . . . . . . . . . . . . . . . .3
1.8 "CDOR Rate" . . . . . . . . . . . . . . . . . . . . . . . . .4
1.9 "Collateral". . . . . . . . . . . . . . . . . . . . . . . . .4
1.10 "Currency Exchange Convention". . . . . . . . . . . . . . . .4
1.11 "Eligible Accounts" . . . . . . . . . . . . . . . . . . . . .4
1.12 "Eligible Inventory". . . . . . . . . . . . . . . . . . . . .6
1.13 "Equipment" . . . . . . . . . . . . . . . . . . . . . . . . .6
1.14 "Event of Default". . . . . . . . . . . . . . . . . . . . . .7
1.15 "Financing Agreements". . . . . . . . . . . . . . . . . . . .7
1.16 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.17 "Information Certificate" . . . . . . . . . . . . . . . . . .7
1.18 "Inventory" . . . . . . . . . . . . . . . . . . . . . . . . .7
1.19 "Letter of Credit Accommodations" . . . . . . . . . . . . . .7
1.20 "Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.21 "Maximum Credit". . . . . . . . . . . . . . . . . . . . . . .7
1.22 "Net Amount of Eligible Accounts" . . . . . . . . . . . . . .7
1.23 "Obligations" . . . . . . . . . . . . . . . . . . . . . . . .8
1.24 "Obligor" . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.25 "Payment Account" . . . . . . . . . . . . . . . . . . . . . .8
1.26 "Person" or "person". . . . . . . . . . . . . . . . . . . . .8
1.27 "Records" . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.28 "Reference Rate". . . . . . . . . . . . . . . . . . . . . . .8
1.29 "Revolving Loans" . . . . . . . . . . . . . . . . . . . . . .8
1.30 "Value" . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . .9
2.1 Revolving Loans.. . . . . . . . . . . . . . . . . . . . . . .9
2.2 Letter of Credit Accommodations.. . . . . . . . . . . . . . .10
2.3 Availability Reserves.. . . . . . . . . . . . . . . . . . . .12
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . .12
3.1 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Closing Fee.. . . . . . . . . . . . . . . . . . . . . . . . .13
3.3 Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . .14
3.4 Servicing Fee.. . . . . . . . . . . . . . . . . . . . . . . .14
3.5 Unused Line Fee.. . . . . . . . . . . . . . . . . . . . . . .14
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SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . .14
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. . . . . . . . . . . . . . . . . . . . . . . .14
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 5. GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . .16
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . .16
6.1 Borrower's Loan Account.. . . . . . . . . . . . . . . . . . .16
6.2 Statements. . . . . . . . . . . . . . . . . . . . . . . . . .16
6.3 Collection of Accounts. . . . . . . . . . . . . . . . . . . .17
6.4 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.5 Authorization to Make Loans.. . . . . . . . . . . . . . . . .19
SECTION 7. COLLATERAL REPORTING AND COVENANTS. . . . . . . . . . . . . .19
7.1 Collateral Reporting. . . . . . . . . . . . . . . . . . . . .19
7.2 Accounts Covenants. . . . . . . . . . . . . . . . . . . . . .20
7.3 Inventory Covenants.. . . . . . . . . . . . . . . . . . . . .21
7.4 Equipment Covenants.. . . . . . . . . . . . . . . . . . . . .22
7.5 Power of Attorney.. . . . . . . . . . . . . . . . . . . . . .22
7.6 Right to Cure.. . . . . . . . . . . . . . . . . . . . . . . .23
7.7 Access to Premises. . . . . . . . . . . . . . . . . . . . . .23
SECTION 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . .23
8.1 Corporate Existence, Power and Authority. . . . . . . . . . .23
8.2 Financial Statements. . . . . . . . . . . . . . . . . . . . .24
8.3 Chief Executive Office. . . . . . . . . . . . . . . . . . . .24
8.4 Priority of Liens . . . . . . . . . . . . . . . . . . . . . .24
8.5 Tax Returns.. . . . . . . . . . . . . . . . . . . . . . . . .24
8.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .25
8.7 Compliance with Other Agreements and Applicable Laws. . . . .25
8.8 Bank Accounts.. . . . . . . . . . . . . . . . . . . . . . . .25
8.9 Accuracy and Completeness of Information. . . . . . . . . . .25
8.10 Survival of Warranties. . . . . . . . . . . . . . . . . . . .25
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . . . . . . . . . .26
9.1 Maintenance of Existence. . . . . . . . . . . . . . . . . . .26
9.2 New Collateral Locations. . . . . . . . . . . . . . . . . . .26
9.3 Compliance with Laws, Regulations, Etc. . . . . . . . . . . .26
9.4 Payment of Taxes and Claims.. . . . . . . . . . . . . . . . .26
9.5 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . .26
9.6 Financial Statements and Other Information. . . . . . . . . .27
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.. . .28
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9.8 Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . .28
9.9 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . .29
9.10 Loans, Investments, Guarantees, Distributions, Etc. . . . . .29
9.11 Dividends and Redemptions.. . . . . . . . . . . . . . . . . .30
9.12 Transactions with Affiliates. . . . . . . . . . . . . . . . .30
9.13 Additional Bank Accounts. . . . . . . . . . . . . . . . . . .30
9.14 Adjusted Net Worth. . . . . . . . . . . . . . . . . . . . . .31
9.15 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . .31
9.16 Further Assurances. . . . . . . . . . . . . . . . . . . . . .31
SECTION 10. EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . .32
10.1 Events of Default.. . . . . . . . . . . . . . . . . . . . . .32
10.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.3 Rental Reservation. . . . . . . . . . . . . . . . . . . . . .35
SECTION 11. JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . . . . .35
11.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . .35
11.2 Waiver of Notices.. . . . . . . . . . . . . . . . . . . . . .36
11.3 Amendments and Waivers. . . . . . . . . . . . . . . . . . . .37
11.4 Waiver of Counterclaims.. . . . . . . . . . . . . . . . . . .37
11.5 Indemnification.. . . . . . . . . . . . . . . . . . . . . . .37
SECTION 12. TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . .38
12.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
12.2 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . .40
12.3 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . .40
12.4 Successors. . . . . . . . . . . . . . . . . . . . . . . . . .40
12.5 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .40
INDEX TO
EXHIBITS AND SCHEDULES
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Exhibit A Information Certificate
Schedule 1.12 Retail Sales Locations
Schedule 4.1(e) List of Certain Lessors and Warehousemen
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
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LOAN AGREEMENT
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This Loan Agreement dated August 8, 1997 is entered into by and between
Congress Financial Corporation (Canada), an Ontario corporation ("Lender") and
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Canada Inc., an Ontario corporation ("Borrower").
W I T N E S S E T H:
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WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in the Personal Property Security
Act (Ontario) shall have the meanings given therein unless otherwise defined in
this Agreement. All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. "Cdn $" and the sign "$" mean lawful money of Canada,
and "US $" and "US Dollars" mean lawful money of the United States. For purposes
of this Agreement, the following terms shall have the respective meanings given
to them below:
1.1 "Accounts"; shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
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1.2 "Adjusted Net Worth"; shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities properly
included on a balance sheet, of such Person and its subsidiaries (including tax
and other proper accruals) PLUS (b) indebtedness of such Person and its
subsidiaries which is subordinated in right of payment to the full and final
payment of all of the Obligations (i) on the terms and conditions set forth in
the lien subordination and intercreditor agreement between the Lender, the
Borrower and Biderman Industries Corp., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc., and Bank of
America National Trust and Savings Association (the "Intercreditor Agreement");
or (ii) on any other terms and conditions acceptable to the Lender.
1.3 "Availability Reserves"; shall mean, as of any date of
determination, such reasonable amounts as Lender may from time to time establish
and revise in good faith, acting reasonably, providing written notice to the
Borrower of the revision on a timely basis thereafter, reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender, in good faith, would be reasonably likely to materially affect either
(i) the Collateral or any other property which is security for the Obligations
or its value, (ii) the assets, business or prospects of Borrower or any Obligor
or (iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.
1.4 " BIA "; shall mean the Bankruptcy and Insolvency Act (Canada).
1.5 "Blocked Accounts"; shall have the meaning set forth in Section 6.3
hereof.
1.6 "CCAA"; shall mean the Companies' Creditors Arrangement Act
(Canada).
1.7 "Canadian Dollar Amount"; shall mean, in respect of any amount, the
sum of:
(a) such portion, if any, of such amount denominated in Canadian
Dollars; and
(b) to the extent that a portion of such amount is denominated in US
Dollars, the amount in Canadian Dollars calculated by Lender using the Currency
Exchange Convention in effect on the day of determination.
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1.8 "CDOR Rate"; shall mean, on any day, the annual rate of interest
which is the rate based on an average 30 day rate applicable to Canadian Dollar
bankers' acceptances appearing on the "Reuters Screen CDOR Page" (as defined in
the International Swap Dealer Association, Inc., definitions, as modified and
amended from time to time) as of 10:00 a.m. on such day; provided that if such
rate does not appear on the Reuters Screen CDOR Page as contemplated, then the
CDOR Rate on any day shall be the 30 day rate applicable in Canadian Dollar
bankers' acceptances quoted by any major Schedule I chartered bank selected by
Lender, selecting in good faith, as of 10:00 a.m. on such day.
1.9 "Collateral"; shall have the meaning set forth in the General
Security Agreement (as defined in Section 5.1 hereof).
1.10 "Currency Exchange Convention"; shall mean a procedure used by
Lender to value in Canadian Dollars the obligations or assets of Borrower or its
affiliates that are originally measured in US Dollars by using the spot price
for US Dollars provided to Lender by Bank of Montreal for the preceding business
day. In the event the Bank of Montreal no longer provides appropriate spot
prices for US Dollars to Lender, Lender shall obtain a US Dollar spot price from
another major Schedule I Canadian chartered bank selected in good faith by
Lender.
1.11 "Eligible Accounts"; shall mean Accounts created by Borrower which
are and continue to meet the criteria set forth below. In general, Accounts
shall be Eligible Accounts if:
(a) such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than the earlier of 120
days after the date of the original invoice and 60 days after the original due
date for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in Canada or the United States, or, at
Lender's option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in Canada and in Cdn. or U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Lender and, if
required by Lender, the original of such letter of credit has been delivered to
Lender or Lender's agent and the issuer thereof notified of the assignment of
the proceeds of such letter of credit to Lender, or (ii) such Account is subject
to credit insurance payable to Lender issued by an insurer and on terms and in
an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in
all respects to
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Lender on the criteria in this section (subject to such lending formula with
respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and
hold invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff ( including
specifically any arising from providing letter of credit or other support for
the Borrower) against such Accounts (but the portion of the Accounts of such
account debtor in excess of the amount at any time and from time to time owed by
Borrower to such account debtor or claimed owed by such account debtor may be
deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not
any foreign government, the federal government of Canada or the United States,
any province, political subdivision, department, agency or instrumentality
thereof, unless, if the account debtor is the federal government of Canada or of
the United States, or any province, political subdivision, department, agency or
instrumentality thereof, upon Lender's request, any applicable federal,
provincial or local law has been complied with in a manner satisfactory to
Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which would be
reasonable likely to result in any material adverse change in any such account
debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates
do not constitute more than twenty-five (25%) percent of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage may
be deemed Eligible Accounts), except with respect to Walmart Stores, Inc. with
regard to which all Accounts not in excess of thirty percent (30%) of all
otherwise Eligible Accounts will be deemed Eligible Accounts.
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(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than the earlier of 120 days after the date of the original
invoice and 60 days after the original due date for them which constitute more
than fifty (50%) percent of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed any credit limit with respect to such
account debtors as reasonably determined by Lender from time to time in good
faith, (but the portion of the Accounts not in excess of such credit limit may
be deemed Eligible Accounts);
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as reasonably determined by Lender in good
faith.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender acting reasonably and in good faith. Any Accounts which are
not Eligible Accounts shall nevertheless be part of the Collateral.
1.12 "Eligible Inventory"; shall mean Inventory consisting of uncut
fabric raw materials and finished goods held for resale in the ordinary course
of the business of Borrower, which are acceptable to Lender based on the
criteria set forth below . In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral, or
as to those retail sales locations listed in schedule 1.12 the Borrower has
provided evidence monthly, on the due date for rent for each such retail
location, that the rent is fully up to date, including any net or additional
rent and the landlord has no claims for past due payments of any nature relating
to such retail location, and except Inventory in transit in relation to which
the Lender has received satisfactory assurance of perfected security by delivery
of bills of lading or similar documents, as reasonably acceptable to the Lender;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (i) unserviceable,
obsolete or slow moving Inventory; (j) Inventory which is not subject to the
first priority, valid and perfected security interest of Lender; (k) returned,
damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment; or (m) raw materials savefor uncut fabric. General criteria for
Eligible Inventory may be established and revised from time to time by Lender
acting reasonably and in good faith. Any Inventory which is not Eligible
Inventory shall nevertheless be part of the Collateral.
1.13 "Equipment"; shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or
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licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and
property now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
1.14 "Event of Default"; shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.15 "Financing Agreements"; shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.16 "GAAP"; shall mean generally accepted accounting principles in
Canada as in effect from time to time as set forth in the Handbook of the
Canadian Institute of Chartered Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which are applicable
to the circumstances as of the date of determination consistently applied,
except that, for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.17 "Information Certificate"; shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.18 "Inventory"; shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.19 "Letter of Credit Accommodations"; shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower, in writing, of its obligations to such
issuer.
1.20 "Loans"; shall mean the Revolving Loans and the Letter of Credit
Accommodations .
1.21 "Maximum Credit"; shall mean the amount of $15,000,000.
1.22 "Net Amount of Eligible Accounts"; shall mean the gross amount of
Eligible Accounts less (a) unpaid sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
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1.23 "Obligations"; shall mean any and all Revolving Loans and Letter of
Credit Accommodations, and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by Borrower to Lender, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, arising under
this Agreement or the Financing Agreements, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of this Agreement or after the commencement of any case with respect to Borrower
under the BIA, CCAA, or any similar statute (including the payment of interest
and other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in
part in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.
1.24 "Obligor"; shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.25 "Payment Account"; shall have the meaning set forth in Section 6.3
hereof.
1.26 "Person" or "person"; shall mean any individual, sole
proprietorship, partnership, corporation, limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.27 "Records"; shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.28 "Reference Rate"; shall mean, at any time, the greater of (i) the
rate from time to time publicly announced by Bank of Montreal as its prime rate
in effect for determining interest rates on Canadian Dollar denominated
commercial loans in Canada, or (ii) the annual rate of interest equal to the sum
of (A) the CDOR Rate at such time and (B) one (1%) percent per annum.
1.29 "Revolving Loans"; shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.30 "Value"; shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
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SECTION 2. CREDIT FACILITIES
2.1 REVOLVING LOANS.;
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of Eligible
Accounts; PLUS
(ii) the lesser of: (A)the sum of fifty-five(55%) percent of the
Value of Eligible Inventory consisting of finished goods, to a
maximum of $10,000,000, plus fifty-five (55%) percent of the Value
of Eligible Inventory consisting of uncut fabric raw materials to a
maximum of $2,000,000 and (B) the amount of $10,000,000 ; LESS
(iii) any Availability Reserves.
(b) Lender may, in its reasonable discretion, from time to time,
upon not less than five (5) days prior notice to Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts
for any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined from historical
levels or (ii) reduce the lending formula(s) with respect to Eligible Inventory
to the extent that Lender determines that: (A) the number of days of the
turnover of the Inventory for any period has changed in any material respect or
(B) the liquidation value of the Eligible Inventory, or any category thereof,
has materially decreased, or (C) the nature and quality of the Inventory has
deteriorated. In determining whether to reduce the lending formula(s), Lender
may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the amount of the Maximum Credit specified for Revolving Loans and Letter
of Credit Accommodations. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(d) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
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(d) For purposes only of applying the sublimit on Revolving
Loans based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may
treat the then undrawn amounts of outstanding Letter of Credit Accommodations
for the purpose of purchasing Eligible Inventory as Revolving Loans to the
extent Lender is in effect basing the issuance of the Letter of Credit
Accommodations on the Value of the Eligible Inventory being purchased with such
Letter of Credit Accommodations.
2.2 LETTER OF CREDIT ACCOMMODATIONS.;
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to the customary and reasonable charges, fees or
expenses charged for opening, negotiation and similar fees and charges by the
bank or issuer in connection with the issuance of letters of credit under the
Letter of Credit Accommodations, Borrower shall pay to Lender a letter of credit
fee at a rate equal to one and one-quarter (1 1/4%) percent per annum on the
daily outstanding balance of the Letter of Credit Accommodations for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, which shall be the only charge or fee
payable to Congress, except that Borrower shall pay to Lender such letter of
credit fee, at Lender's option, without prior notice, but with notice promptly
thereafter, at a rate equal to three and one-quarter (3 1/4%) percent per annum
on such daily outstanding balance for: (i) the period from and after the date
of termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender, acting in good faith, but not after the Borrower posted
cash collateral or letters of credit acceptable to the Lender for the
obligations under the Letter of Credit Accommodations. Such letter of credit
fee shall be calculated on the basis of a three hundred sixty-five (365) day
year and actual days elapsed and the obligation of Borrower to pay such fee
shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the Value of
such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which
Lender estimates, acting in good faith, must be paid in connection with such
Inventory upon arrival and for delivery to one of Borrower's locations for
Eligible Inventory within Canada and (ii) if the proposed Letter of Credit
Accommodation is for any other purpose, an amount equal to one
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hundred (100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, an Availability Reserve shall
be established in the applicable amount set forth in Section 2.2(c)(i) or
Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$8,000,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
or letters of credit acceptable to Lender to secure the reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish cash collateral or letters of credit acceptable to the Lender to
Lender for the Letter of Credit Accommodations, and in either case, the
Revolving Loans otherwise available to Borrower shall not be reduced as provided
in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation, but excluding those resulting from the gross negligence or
willful misconduct of the Lender, or any issuer or correspondent selected by the
Lender. Borrower assumes all risks with respect to the acts or omissions of the
drawer under or beneficiary of any Letter of Credit Accommodation and for such
purposes the drawer or beneficiary shall be deemed Borrower's agent. Borrower
assumes all risks for, and agrees to pay, all foreign, Federal, provincial and
local taxes, duties and levies relating to any goods subject to any Letter of
Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrower hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation, but excluding those resulting from gross negligence or
willful misconduct of the Lender, or any issuer or corrsepondent selected by the
Lender. The provisions of this Section 2.2(e) shall survive the payment of
Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability, absent gross negligence or willful
misconduct, of any kind with respect to any Letter of Credit Accommodation
provided by an issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or indemnification in
writing with respect to such Letter of Credit Accommodation. Borrower shall be
bound by any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrower shall not
without the prior consent of the Lender at any time an Event of Default exists
or has occurred and is continuing: (A) approve or resolve any questions of
non-compliance of documents, (B) give any
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instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders. The Borrower may not at any time, to the extent the
following would adversely affect any right, obligation or liability of the
Lender, and in any event may not without notice to the Lender, or at any time
after an Event of Default exists or has occurred and is continuing: (A) grant
any extensions of the maturity of, time of payment for, or time of presentation
of, any drafts, acceptances, or documents, or (B) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letter of Credit Accommodations,
or documents, drafts or acceptances thereunder or any letters of credit included
in the Collateral. Lender may take such actions either in its own name or in
Borrower's name, and shall provide notice to the Borrower on a timely basis.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Provided that the
following shall apply solely to Letter of Credit Accommodations issued following
written application by the Borrower, and solely in relation to the standard
requirements of the bank or issuer in issuing the Letter of Credit
Accommodation, and subject to the limitation on fees set forth in Section 2.2(b)
hereof, any duties or obligations undertaken by Lender to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or any
other agreement by Lender in favor of any issuer or correspondent relating to
any Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrower to Lender and to apply in all respects to Borrower, provided that such
duties, obligations and agreements are not materially inconsistent with the
terms of this Agreement, unless the Borrower has given its prior written consent
to such material inconsistency, and the Lender shall provide copies of the
letters of credit and related documents, on a timely basis.
2.3 AVAILABILITY RESERVES.; All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves, in accordance with this
Agreement.
SECTION 3. INTEREST AND FEES
3.1 INTEREST.;
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of one and one
quarter (1 1/4%) percent per annum in excess of the Reference Rate, except that,
at Lender's option, without prior notice, but with notice promptly thereafter,
Borrower shall pay to Lender interest at the rate of three and one quarter (3
1/4%) percent per annum in excess of the Reference Rate: (i) on the
non-contingent Obligations for (A) the period from and after the date of
termination or non-renewal hereof until such time as Lender has received full
and final payment of all such Obligations (notwithstanding entry of any judgment
against Borrower), and (B) the period from and after the date of the
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occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, acting in good faith and (ii) on the
Revolving Loans at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default).
(b) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty five (365) day year and actual
days elapsed. The interest rate shall increase or decrease by an amount equal
to each increase or decrease in the Reference Rate effective on the first day of
the month after any change in such Reference Rate is announced. The increase or
decrease shall be based on the Reference Rate in effect on the last day of the
month in which any such change occurs. All interest accruing hereunder on and
after an Event of Default or termination or non-renewal hereof shall be payable
on demand. In no event shall charges constituting interest payable by Borrower
to Lender exceed the maximum amount or the rate permitted under any applicable
law or regulation, and if any part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
(c) For purposes of disclosure under the INTEREST ACT (Canada),
where interest is calculated pursuant hereto at a rate based upon a 365 day year
(the "First Rate"), it is hereby agreed that the rate or percentage of interest
on a yearly basis is equivalent to such First Rate multiplied by the actual
number of days in the year divided by 365.
(d) Notwithstanding the provisions of this Section 3 or any
other provision of this Agreement, in no event shall the aggregate "interest"
(as that term is defined in Section 347 of the CRIMINAL CODE (Canada)) exceed
the effective annual rate of interest on the "credit advanced" (as defined
therein) lawfully permitted under Section 347 of the CRIMINAL CODE (Canada).
The effective annual rate of interest shall be determined in accordance with
generally accepted actuarial practices and principles over the term of the
applicable Loan, and in the event of a dispute, a certificate of a Fellow of the
Canadian Institute of Actuaries appointed by Lender will be conclusive for the
purposes of such determination.
(e) For greater certainty, whenever any amount is payable under
this Agreement or any Financing Agreement by Borrower as interest or as a fee
which requires the calculation of an amount using a percentage per annum, each
party to this Agreement acknowledges and agrees that such amount shall be
calculated as of the date payment is due without application of the "deemed
reinvestment principle" or the "effective yield method". As an example, when
interest is calculated and payable monthly, the rate of interest payable per
month is 1/12 of the stated rate of interest per annum.
3.2 CLOSING FEE.; Borrower shall pay to Lender as a closing fee the
amount of one (1%) percent of the Maximum Credit, which shall be fully earned as
of and payable on the date hereof.
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3.3 FACILITY FEE.; Borrower shall pay to Lender annually a facility fee
in an amount of $15,000 per annum while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
fully earned as of and payable in advance on each anniversary of the date
hereof.
3.4 SERVICING FEE.; Borrower shall pay to Lender, monthly, in advance,
a servicing fee in an amount equal to $1,000 in respect of Lender's services for
each month (or part thereof) while this Agreement remains in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
fully earned as of and payable in advance on the date hereof and on the first
day of each month hereafter.
3.5 UNUSED LINE FEE.; Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one quarter of one (1/4%) percent per annum
calculated upon the amount by which $12,000,000 exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof), during
such periods as the Revolving Loans and Letter of Credit Accommodations remain
available to the Borrower, which fee shall be payable on the first day of each
month in arrears.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS.; Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of
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Revolving Loans available to Borrower, the results of which shall be
satisfactory to Lender, not more than three (3) business days prior to the date
hereof;
(e) Subject to the Borrower's compliance with the reporting
requirements imposed upon it with respect to retail sales locations pursuant to
Section 1.12 hereof, Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including acknowledgements by the lessors, and
warehousemen identified on Schedule 4.1(e) hereto of Lender's security interests
in the Collateral, waivers by such persons of any security interests, liens or
other claims by such persons to the Collateral and agreements permitting Lender
access to, and the right to remain on, the premises to exercise its rights and
remedies and otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may request;
(h) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender; and
(i) the Excess Availability as determined by Lender in
accordance with this Agreement, as of the date hereof, shall be not less than
$1,500,000 after giving effect to the initial Loans made or to be made and
Letter of Credit Accommodations issued or to be issued in connection with the
initial transactions hereunder and any distribution to any direct or indirect
parent or grandparent company, or any related company, which distributions shall
be limited to repayment of the inter-corporate obligations as reported to the
Lender prior to the date hereof.
"Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the amount of the
Revolving Loans available to Borrower, as determined by Lender, in accordance
with this Agreement, and subject to the sublimits and Availability Reserves from
time to time established by Lender hereunder and (ii) the Maximum Credit, MINUS
(b) the sum of: (i) the amount of all then outstanding and unpaid Obligations,
plus (ii) the aggregate amount of all trade payables of Borrower which are more
than sixty (60) days past due as of such time plus (iii) the amount of cheques
issued by Borrower to pay trade payables, but not yet sent and the book
overdraft of Borrower.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS.; Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter
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of Credit Accommodations to Borrower, including the initial Loans and Letter of
Credit Accommodations and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1; To secure payment and performance of all Obligations, Borrower has
granted to the Lender security under a general security agreement between the
Borrower and the Lender dated even date herewith (the "General Security
Agreement"), which shall remain in full force and effect, duly perfected during
the period that any Obligation shall remain owing by the Borrower to the Lender.
5.2; As additional security, Borrower has granted to Lender a debenture
over the lands municipally known as ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the
"Debenture"). The Lender confirms that notwithstanding the nominal rate of
interest set forth in the Debenture in the amount of 25%, the applicable rate of
interest is the rate set forth in this Agreement and payment of interest at such
applicable rate for any period shall satisfy in full any requirement to pay
interest under the Debenture for the same period.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 BORROWER'S LOAN ACCOUNT.; Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Revolving Loans,
Letter of Credit Accommodations and other Obligations and the Collateral, (b)
all payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Lender's customary practices as in effect from time to time.
6.2 STATEMENTS. ; Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice
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from Borrower of any specific exceptions of Borrower thereto within thirty (30)
days after the date such statement has been mailed by Lender. Until such time
as Lender shall have rendered to Borrower a written statement as provided above,
the balance in Borrower's loan account(s) shall be presumptive evidence of the
amounts due and owing to Lender by Borrower.
6.3 COLLECTION OF ACCOUNTS. ;
(a) Borrower shall either establish and maintain, at its expense, an
arrangement for the deposit of all revenue and other receipts of any
nature and kind to a control account of the Lender, with such
arrangements for the operation of such account as shall be required
by the Lender ("Payment Accounts"), or, if required by the Lender,
shall, upon five (5) days notice, establish such blocked accounts
or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify. In either case, the Lender may
establish and maintain bank accounts of Lender in each case with
such banks as are acceptable to Lender, into which Borrower shall,
in accordance with Lender's instructions, promptly deposit and
direct its account debtors that remit payments by electronic funds
transfers to directly remit, all payments on Accounts and all
payments constituting proceeds of Inventory or other Collateral in
the identical form in which such payments are made, whether by cash,
cheque or other manner. The banks at which any Blocked Accounts are
established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items once received or
deposited in the Blocked Accounts are to be promptly applied to the
Obligations and therefore are the property of Lender, that the
depository bank has no lien upon, or right to setoff against the
Blocked Accounts, the items received for deposit therein, or the
funds from time to time on deposit therein and that the depository
bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to the Payment Accounts or such other bank account
of Lender as Lender may from time to time designate for such
purpose. Borrower agrees that all payments made to such Blocked
Accounts or Payment Accounts or other funds received and collected
by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon
final collection) to the Obligations on the business day of receipt
of immediately available funds by Lender in the applicable Payment
Account, provided the same is received for same day credit and
otherwise on the next following business day. For purposes of
calculating the amount of the Revolving Loans available to Borrower
such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender in the
applicable Payment Account, if such payments are received within
sufficient time (in accordance with Lender's usual and customary
practices as in effect from time to time) to credit Borrower's loan
account on such day, and if not, then on the next business day.
Provided that no Event of Default has occurred and is continuing, if
Lender receives funds in a
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Payment Account at any time at which no non-contingent Obligations
are outstanding or in excess of such outstanding Obligations, Lender
shall transfer such funds to Borrower at such account as Borrower
may direct, provided that Borrower shall, at Lender's request,
deposit such funds to an account maintained at the bank at which the
Payment Accounts are maintained and shall execute and deliver to
Lender a cash collateral agreement in form and substance
satisfactory to Lender providing to Lender a first priority security
interest over such account.
(c) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, cheques, notes,
drafts or any other payment relating to and/or proceeds of Accounts
or other Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause
the same to be deposited in the Blocked Accounts or the Payment
Accounts, as applicable, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be
commingled with Borrower's own funds. Borrower agrees to reimburse
Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account or Payment Account is established or any other bank
or person involved in the transfer of funds to or from the Blocked
Accounts or the Payment Accounts arising out of Lender's payments to
or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this
Agreement.
6.4 PAYMENTS.; All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Provided that no Event of Default has occurred and is continuing,
Lender may apply payments received or collected from Borrower or for the account
of Borrower (including the monetary proceeds of collections or of realization
upon any Collateral) to such of the non-contingent Obligations, in such order
and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
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To the extent Lender receives any payments or collections from or on
account of Borrower in US Dollars, Lender shall convert the amount of any such
payments received or collected (including, without limitation, the monetary
proceeds of collections or of realization upon any collateral) in US Dollars to
Canadian Dollars using the Currency Exchange Convention and such payments shall
constitute satisfaction of the Obligations only to the extent of the amounts so
converted.
6.5 AUTHORIZATION TO MAKE LOANS.; Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from those persons purporting to be the persons
designated, in writing, to the Lender for such purpose or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations. All requests
for Loans or Letter of Credit Accommodations hereunder shall specify the date on
which the requested advance is to be made or Letter of Credit Accommodations
established (which day shall be a business day) and the amount of the requested
Loan. Requests received after 11:00 a.m. eastern standard time on any day
shall be deemed to have been made as of the opening of business on the
immediately following business day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
6.6 USE OF PROCEEDS.; Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction furnished by Borrower to
Lender on or about the date hereof and as otherwise permitted in Section 9.10
hereof and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements. All other Revolving Loans made or Letter of Credit Accommodations
provided by Lender to Borrower pursuant to the provisions hereof shall be used
by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms hereof.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 COLLATERAL REPORTING.; Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis within 20 days after each month end, or more
frequently and within such time periods as Lender may request, (i) perpetual
inventory reports, (ii) inventory reports by category and (iii) agings of
accounts payable, (c) upon Lender's request, (i) copies of customer statements
and credit memos, remittance advices and reports, and copies of deposit slips
and bank statements, (ii) copies of shipping and delivery documents, and (iii)
copies of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrower; (d) agings of accounts receivable on a monthly
basis within 20 days after each month end, or more frequently and within such
time periods as Lender may request; and (e) such other reports as to the
Collateral as Lender shall request from time to time. If any of Borrower's
records or reports of the Collateral are prepared
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or maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.;
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information in
Borrower's possession relating to the financial condition of any account debtor
and (iii) any event or circumstance which, to Borrower's knowledge would cause
Lender to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred and
is continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $100,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, in all material respects, (ii) no payments shall be made
thereon except payments promptly delivered to Lender pursuant to the terms of
this Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor except as
reported to Lender in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
Borrower's business in accordance with practices and policies previously
disclosed to Lender, (iv) there shall be no setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Lender in accordance with the terms of this Agreement, (v)
none of the transactions giving rise thereto will violate any applicable
provincial or Federal laws or regulations, all
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documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable, save for gross negligence or willful
misconduct, for its failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3 INVENTORY COVENANTS.; With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, but acting
reasonably and promptly following such physical inventory shall supply Lender
with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Lender's request, acting reasonably, Borrower shall, at its expense, no
more than once in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Inventory in form,
scope and methodology acceptable to Lender and by an
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appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) Borrower shall produce, use, store and maintain
the Inventory with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws ;
(f) Borrower assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (g) Borrower
shall not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate Borrower to repurchase such
Inventory; (h) Borrower shal keep the Inventory in good and marketable condition
; and (i) Borrower shall not, without prior written notice to Lender, acquire or
accept any Inventory on consignment or approval.
7.4 EQUIPMENT COVENANTS.; With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as Lender
may request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrower shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrower shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrower's business and not for personal,
family, household or farming use; (e) Borrower shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Borrower or to move Equipment directly from one location set forth
or permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Borrower in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment to be or become a part of or
affixed to real property; and (g) Borrower assumes all responsibility and
liability arising from the use of the Equipment.
7.5 POWER OF ATTORNEY.; Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) demand payment on Accounts or other proceeds of Inventory or other
Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise,
(iii) exercise all of Borrower's rights and remedies to collect any Account or
other Collateral, (iv) sell or assign any Account upon such reasonable terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (ix) do all acts and things which are necessary,
in Lender's determination, acting reasonably, to fulfill Borrower's obligations
under this Agreement and the other Financing Agreements and (b) at any time to
(i) take control in any manner of any item of payment or proceeds thereof, (ii)
have access to any lockbox or postal box into which Borrower's mail is
deposited, (iii) endorse Borrower's name upon any items of payment or proceeds
thereof and deposit the same in the Payment Account for application to the
Obligations, (iv) endorse Borrower's name upon any
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chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other Collateral,
(v) sign Borrower's name on any verification of Accounts and notices thereof to
account debtors and (vi) execute in Borrower's name and file any PPSA financing
statements or amendments thereto. Borrower hereby releases Lender and ts
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 RIGHT TO CURE.; Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's reasonable judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 ACCESS TO PREMISES.; From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) Lender may use during normal business hours such of Borrower's
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES.; Borrower
is a corporation duly organized and in good standing under the laws of its
province of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on Borrower's financial
condition, results of
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operation or business or the rights of Lender in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder are all
within Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of Borrower's certificate of incorporation,
by-laws, or other organizational documentation, or any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower or its property
are bound. This Agreement and the other Financing Agreements constitute legal,
valid and binding obligations of Borrower enforceable in accordance with their
respective terms. Borrower does not have any subsidiaries except as set forth
on the Information Certificate.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE.; All financial
statements, save for drafts thereof, relating to Borrower which have been or may
hereafter be delivered by Borrower to Lender have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operation of Borrower as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrower to
Lender prior to the date of this Agreement, there has been no material adverse
change in the assets, liabilities, properties and condition, financial or
otherwise, of Borrower, since the date of the most recent audited financial
statements furnished by Borrower to Lender prior to the date of this Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS.; The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES.; The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 TAX RETURNS.; Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of
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all accrued and unpaid Federal, provincial, county, local, foreign and other
taxes whether or not yet due and payable and whether or not disputed.
8.6 LITIGATION.; Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.; Borrower is
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any material agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, provincial or local governmental authority.
8.8 BANK ACCOUNTS.; All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.9 ACCURACY AND COMPLETENESS OF INFORMATION.; All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate, as the same may be up-dated or supplemented, from time to time, is
true and correct in all material respects on the date as of which such
information is dated or certified and does not omit any material fact necessary
in order to make such information not misleading. No event or circumstance has
occurred which has had or could reasonably be expected to have a material
adverse affect on the business, assets or prospects of Borrower, which has not
been fully and accurately disclosed to Lender in writing.
8.10 SURVIVAL OF WARRANTIES; CUMULATIVE.; All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender, but subject to any information disclosed to the Lender in
any schedule hereto. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE.; Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the appropriate authority of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 NEW COLLATERAL LOCATIONS.; Borrower may open any new location
within Canada and the continental United States provided Borrower (a) gives
Lender thirty (30) days prior written notice of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including PPSA and UCC financing statements.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC. ; Borrower shall, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, Provincial or local
governmental authority applicable to it.
9.4 PAYMENT OF TAXES AND CLAIMS.; Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, PROVIDED,
THAT, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 INSURANCE.; Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance, on tangible property, with respect to
the Collateral against loss or damage and all other insurance of the kinds and
in the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event
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of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations; provided, however, if (a) no Event of Default has occurred and is
continuing at the time of Lender' receipt of any such insurance proceeds and (b)
Lender elects to apply such insurance proceeds towards the reduction of the
Obligations, Lender will apply such proceeds towards non-contingent Obligations
only.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.;
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Lender: (i) within fifteen (20) days after the end of each fiscal month,
monthly unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month, subject to normal
year end adjustments and (ii) within one hundred and twenty (120) days after the
end of each fiscal year, audited consolidated financial statements and, if
Borrower has any subsidiaries, audited consolidating financial statements of
Borrower and its subsidiaries (including in each case balance sheets, statements
of income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrower
and its subsidiaries as of the end of and for such fiscal year, together with
the unqualified opinion of independent chartered accountants, which accountants
shall be an independent accounting firm selected by Borrower and reasonably
acceptable to Lender, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrower and its subsidiaries as of the end of and for the fiscal
year then ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any material loss, damage, investigation, action, suit,
proceeding or claim relating to the Collateral or any other property which is
security for the Obligations which would result in any material adverse change
in Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
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(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with any applicable Securities Commission, any
securities exchange or equivalent.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the final financial statements of Borrower and any
final reports or management letters prepared by such accountants or auditors on
behalf of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower, upon written request to the auditor copied
to the Borrower. Any documents, schedules, invoices or other papers delivered
to Lender may be destroyed or otherwise disposed of by Lender one (1) year after
the same are delivered to Lender, except as otherwise designated by Borrower to
Lender in writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC.; Except as
may be expressly permitted pursuant to Section 9.8 hereof, Borrower shall not,
directly or indirectly, (a) merge into or with or consolidate with any other
Person or permit any other Person to merge into or with or consolidate with it,
or (b) sell, assign, lease, transfer, abandon or otherwise dispose of a material
amount of any stock or indebtedness to any other Person, or its assets to any
other Person (except for (i) sales of Inventory in the ordinary course of
business and (ii) the disposition of worn-out or obsolete Equipment or Equipment
no longer used in the business of Borrower so long as (A) if an Event of Default
exists or has occurred and is continuing, any proceeds are paid to Lender and
(B) such sales do not involve Equipment having an aggregate fair market value in
excess of $100,000 for all such Equipment disposed of in any fiscal year of
Borrower), or (c) form or acquire any subsidiaries, or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
9.8 ENCUMBRANCES.; Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, EXCEPT: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do
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not interfere in any material respect with the use of such real property or
ordinary conduct of the business of Borrower as presently conducted thereon or
materially impair the value of the real property which may be subject thereto;
(e) purchase money security interests in Equipment (including capital leases)
and purchase money mortgages on real estate not to exceed $500,000 in the
aggregate at any time outstanding so long as such security interests and
mortgages do not apply to any property of Borrower other than the Equipment or
real estate so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case may be but
provided that the Borrower may complete a sale and leaseback arrangement for the
building located in Kitchener, Ontario on reasonable commercial terms, with
prior written notice to the Lender; and (f) the security interests and liens set
forth on Schedule8.4 hereto.
9.9 INDEBTEDNESS.; Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, EXCEPT: (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to Borrower,
and with respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the extent not
incurred or secured by liens (including capital leases) in violation of any
other provision of this Agreement; (d) the indebtedness set forth on Schedule
9.9 hereto; and (e) indebtedness subordinated to the payments to and the
security held by the Lender (i) on the terms and conditions set forth in the
Intercreditor Agreement; or (ii) on any other terms and conditions satisfactory
to the Lender; PROVIDED, THAT, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof as to the terms of payment, interest charge, terms of default or
other material term, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 LOANS, INVESTMENTS, GUARANTEES, DISTRIBUTIONS, ETC.; Except as may
be permitted in Section 9.12 hereof, Borrower shall not, directly or indirectly,
make any loans or advance money or property to any person, or invest in (by
capital contribution, dividend or otherwise) or purchase or repurchase the stock
or indebtedness or all or a substantial part of the assets or property of any
person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or dividends
of any Person or agree to do any of the foregoing, and specifically shall not
authorize, undertake or pay any corporate distribution, which term is to be read
in its broadest meaning, to its parent, grandparent or any other related party
except, at the time of first advance of the Revolving Loan the Borrower may make
a distribution to its parent, grandparent or any other related person in the
amount permitted by the Lender, and after closing in an amount such that the
aggregate of any payment
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at closing and any thereafter does not exceed $4,000,000 US$ and the payment
would not reduce the Excess Availability, immediately on payment, and on the
basis of projections for the next 6 months, below $500,000, EXCEPT THE BORROWER
MAY PAY OR ISSUE THE FOLLOWING: (a) the endorsement of instruments for
collection or deposit in the ordinary course of business; (b) investments in:
(i) short-term direct obligations of the United States Government, or the
Government of Canada or any province thereof (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; PROVIDED, THAT, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender to
perfect the security interest of Lender in such investments and (c) the
investments, loans, advances and guarantees set forth on Schedule 9.10 hereto;
PROVIDED, THAT, as to such loans, advances and guarantees, (i) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
loans, advances or guarantees or other indebtedness subject to such guarantees
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.11 DIVIDENDS AND REDEMPTIONS.; Save as permitted under Section 9.10,
Borrower shall not, directly or indirectly, declare or pay any dividends on
account of any shares of class of capital stock of Borrower now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of capital stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing.
9.12 TRANSACTIONS WITH AFFILIATES.; Except as may be permitted pursuant
to Section 9.10 hereof, Borrower shall not, directly or indirectly, (a)
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, any officer, director, agent or other person affiliated with
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to the Borrower than Borrower would obtain in a comparable arm's
length transaction with an unaffiliated person or (b) make any payments of
management, consulting or other fees for management or similar services, or of
any indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Borrower except reasonable compensation for services
rendered to Borrower in the ordinary course of business, and subject to
commercially reasonable terms, as if on an arm's length basis.
9.13 ADDITIONAL BANK ACCOUNTS.; Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Payments Accounts, Blocked Accounts and the accounts set forth in Schedule
8.8 hereto, except: (a) as to any new or additional Blocked
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Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Lender and subject to
such conditions thereto as Lender may establish and (b) as to any accounts used
by Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender.
9.14 ADJUSTED NET WORTH.; Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $10,000,000.
9.15 COSTS AND EXPENSES.; Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including PPSA or UCC financing statement
filing taxes and fees, documentary taxes, intangibles taxes and mortgage
recording taxes and fees, if applicable); (b) all insurance premiums, appraisal
fees and search fees; (c) costs and expenses of remitting loan proceeds,
collecting cheques and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (d) subject to Section 2.2(b) hereof, charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (g) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $650 Cdn funds per person per
day forLender's examiners in the field and office; and (h) the reasonable fees
and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.16 FURTHER ASSURANCES.; At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more PPSA financing statements
signed only by Lender.
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SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT.; The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or
fails to perform any of the terms, covenants, conditions or provisions, but
subject to the Lender providing notice of failure to perform and the Borrower
failing to rectify within 5 days of the notice, contained in this Agreement or
any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or other writing delivered
pursuant hereto shall when made or deemed made be false or misleading in any
material respect;
(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any final judgment for the payment of money is rendered
against Borrower or any Obligor, to the extent it is not covered by prompt
payment of insurance proceeds, in excess of $25,000 in any one case or in excess
of $100,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of
an Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor makes an assignment for the benefit
of creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors;
(g) a petition, case or proceeding under the BIA or CCAA
("Bankruptcy Legislation") or similar laws, of any foreign jurisdiction now or
hereafter in effect or under any insolvency, arrangement, reorganization,
moratorium, receivership, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction now or hereafter in effect (whether at law or in
equity) is filed or commenced , against Borrower or all or any part of its
properties and such petition or application is not dismissed within sixty (60)
days after the date of its filing or Borrower shall file any answer admitting or
not contesting such petition or application or
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indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) a petition, case or proceeding under Bankruptcy Legislation,
or similar laws, of any foreign jurisdiction now or hereafter in effect or under
any insolvency, arrangement, reorganization, moratorium, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed or
commenced by Borrower for all or any part of its property including, without
limitation, if Borrower shall:
(i) apply for or consent to the appointment of a receiver,
trustee or liquidator of it or of all or a substantial part
of its property and assets;
(ii) be unable, or admit in writing its inability, to pay its
debts as they mature, or commit any other act of bankruptcy;
(iii) make a general assignment for the benefit of creditors;
(iv) file a voluntary petition or assignment in bankruptcy or a
proposal seeking a reorganization, compromise, moratorium or
arrangement with its creditors;
(v) take advantage of any insolvency or other similar law
pertaining to arrangements, moratoriums, compromises or
reorganizations, or admit the material allegations of a
petition or application filed in respect of it in any
bankruptcy, reorganization or insolvency proceeding; or
(vi) take any corporate action for the purpose of effecting any
of the foregoing;
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $100,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any material contract, lease, license or other obligation
to any person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any change in the controlling ownership of Borrower save as
provided by the plan of re-organization under the bankruptcy proceedings of any
direct or indirect parent or grandparent corporation in the United States;
(k) the indictment of Borrower or any Obligor under any criminal
statute, or commencement of criminal proceedings against Borrower or any
Obligor, pursuant to which
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statute or proceedings the penalties or remedies sought or available include
forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default, with the passage of any
grace or cure period under any of the other Financing Agreements.
10.2 REMEDIES.;
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the PPSA and other applicable law,
all of which rights and remedies may be exercised without notice to or consent
by Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing Agreements,
the PPSA or other applicable law, are cumulative, not exclusive and enforceable,
in Lender's discretion, alternatively, successively, or concurrently on any one
or more occasions, and shall include, without limitation, the right to apply to
a court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (PROVIDED, THAT, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law,
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fifteen (15) days prior notice by Lender to Borrower designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall bedeemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) without limiting the foregoing, upon the occurrence and
during the continuation of an Event of Default, Lender may apply the cash
proceeds of Collateral actually received by Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of the
Obligations, in whole or in part and in such order as Lender may elect, whether
or not then due. Borrower shall remain liable to Lender for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including reasonable attorneys' fees
and legal expenses.
(d) Without limiting the foregoing, upon the occurrence and
during the continuation of an Event of Default, Lender may, at its option,
without notice, (i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving Loans and
Letter of Credit Accommodations available to Borrower and/or (ii) terminate any
provision of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
10.3 RENTAL RESERVATION.;
In the event the Borrower has not provided the Lender with evidence,
within five (5) days of the due date for rent at any location in any month, that
the rent at any such location is fully up to date, including any net or
additional rent, and that the landlord has no claims for past due payments of
any nature relating to such location, the Lender shall be entitled, in addition
to any other remedies it may have, to add the amount of the rent due or past due
at such location(s) to its Availability Reserves, until such time as the
Borrower provides the Lender with evidence of the payment of all outstanding
amounts owing to the landlord(s).
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.;
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Province of Ontario
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the courts of the Province of Ontario and waive
any objection based on venue or
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FORUM NON CONVENIENS with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the Canadian mails,
or, at Lender's option, by service upon Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
Borrower shall appear in answer to such process, failing which Borrower shall be
deemed in default and judgment may be entered by Lender against Borrower for the
amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER
OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct.
11.2 WAIVER OF NOTICES.; Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations,
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the Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give shall
entitle Borrower to any other or further notice or demand in the same, similar
or other circumstances.
11.3 AMENDMENTS AND WAIVERS.; Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise. If the Lender exercises its rights,
options or judgment to amend terms, including the rate of interest chargeable or
the Availability Reserve, as provided by this Agreement, then the Lender shall
provide timely written notice of the change to the Borrower, and such change
shall be in effect from and after the exercise of the discretion, option or
judgment.
11.4 WAIVER OF COUNTERCLAIMS.; Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims or those raised in defence of a claim under this
Agreement) in any action or proceeding with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating hereto
or thereto.
11.5 INDEMNIFICATION.; Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel (collectively, the "Indemnified
Persons"), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel, but excluding any arising from the gross
negligence or willful misconduct of the Lender. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion which it is permitted to pay under applicable law to Lender
in satisfaction of indemnified matters under this Section. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement. If any action, proceeding or investigation is
commenced for which an Indemnified Person intends to demand indemnification
pursuant to this Section 11.5 or otherwise pursuant to this Agreement, such
Indemnified Person will notify the Borrower with reasonable promptness;
provided, however, that any failure by an Indemnified Person to notify the
Borrower will not relieve the Borrower from its indemnification obligations
hereunder, except and only to the extent that such failure has materially
prejudiced the defense of such action, proceeding or investigation. The Lender
shall have final authority to determine all matters in
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connection with any such action, proceeding or investigation; provided, however,
that the Borower shall have the right, at its own expense, to appoint single
counsel to advise the Lender in any contest of any such action, proceeding or
investigation. Notwithstanding the foregoing, the Borrower may, upon the giving
of written notice to the Lender within fifteen (15) days following its receipt
of any such notice of a claim of indemnity from any Indemnified Person, elect to
defend, at its own expense, any such action, proceeding or investigation, but
only if (a) the Borrower acknowledges, in writing to the Lender, its obligation
to fully indemnify the Lender, to the reasonable satisfaction of the Lender,
with respect to such action, proceeding or investigation, (b) the Borrower
demonstrates its ability to defend, and to pay the amount of any settlement or
judgment obtained in connection with, any such action, proceeding or
investigation and (c) the Borrower, in the reasonable judgment of the Lender,
diligently pursues the defence of any such action, proceeding or investigation,
in good faith, through appropriate proceedings and, in such event, the Borrower
shall be entitled to negotiate concerning settlement with any party asserting
any action, proceeding or investigation as to which an Indemnified Person shall
have provided notice of an intent to demand indemnification. In the event that
the Borrower (a) recommends a settlement of any such action, proceeding or
investigation that does not provide for any injunctive or other nonmonetary
relief affecting any Indemnified Person, (b) acknowledges its willingness to
fully fund such settlement and (c) demonstrates its ability to fully fund such
settlement, then, provided such settlement fully discharges the Indemnified
Person from all of the claims asserted in such action, proceeding or
investigation without the need for the Indemnified Person to admit wrongdoing,
the Indemnified Person shall accept such settlement. The Borrower shall not
consent to entry of any judgment against any Indemnified Person that does not
satisfy the requirements of the preceding setence without the prior written
consent of such Indemnified Person, which consent shall not be unreasonably
withheld.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM.;
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect, unless terminated as provided in Section 12.1
(c), for a term ending on the date three (3) years from the date hereof (the
"Renewal Date"), and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof; PROVIDED, THAT, Lender may, at its option, extend
the Renewal Date to the date four (4) years from the date hereof by giving
Borrower notice at least sixty (60) days prior to the third anniversary of this
Agreement. Lender (subject to Lender's right to extend the Renewal Date as
provided above) may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in any
year by giving to the other party at least sixty (60) days prior written notice;
PROVIDED, THAT, this Agreement and all other Financing Agreements must be
terminated simultaneously. Notwithstanding the foregoing, Borrower, subject to
its payment of the applicable early termination fee described in Section 12.1(c)
hereof and payment of all Obligations, release of any Letters of Credit and
contingent obligations, or the posting of cash collateral or a letter of credit
acceptable to the Lender to Lender in such amounts as Lender determines are
reasonably necessary to secure Lender as set forth below, and the availability
of Loans in favour of the
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contingent obligations, and the availability of Loans in favour of the Lender,
on terms acceptable to the Lender, if any, may terminate this Agreement at any
time prior to the Renewal Date or at any time thereafter upon at least sixty
(60) days prior written notice to Lender. Upon the effective date of
termination or non-renewal of the Financing Agreements, Borrower shall pay to
Lender, in full, all outstanding and unpaid Obligations and shall furnish cash
collateral or a letter of credit acceptable to the Lender to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and cheques or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, eastern
standard time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
--------------------------------------------------------------------------------
AMOUNT PERIOD
--------------------------------------------------------------------------------
(i) 3% of Maximum Credit From the date hereof to and including
the first anniversary
--------------------------------------------------------------------------------
(ii) 2% of Maximum Credit From the first anniversary to and
including the second anniversary
__________________________
--------------------------------------------------------------------------------
(iii) 1% of Maximum Credit From the second anniversary to and
including the day immediately preceding
the third anniversary
__________________________
--------------------------------------------------------------------------------
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof,
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even if Lender does not exercise its right to terminate this Agreement, but
elects, at its option, to provide financing to Borrower or permit the use of
cash collateral under the Bankruptcy Laws. The early termination fee provided
for in this Section 12.1 shall be deemed included in the Obligations.
12.2 NOTICES.; All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 PARTIAL INVALIDITY.; If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 SUCCESSORS.; This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 ENTIRE AGREEMENT.; This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
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LENDER BORROWER
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CONGRESS FINANCIAL ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ CANADA INC.
CORPORATION (CANADA)
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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By : ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice-President Title: Treasurer
ADDRESS: CHIEF EXECUTIVE OFFICE:
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