CONFORMED COPY
LOAN AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (CANADA)
as Lender
- and -
IMAX CORPORATION
as Borrower
Dated: February 6, 2004
TABLE OF CONTENTS
SECTION 1. DEFINITIONS.................................................................................... 1
1.1 "Accounts"........................................................................................... 2
1.2 "Affiliate" or "affiliate"........................................................................... 2
1.3 "Agreed Currency".................................................................................... 2
1.4 "Applicable Prime Rate".............................................................................. 2
1.5 "Appraiser".......................................................................................... 2
1.6 "Assignment of Capital Leases and Operating Leases".................................................. 2
1.7 "Availability Reserves".............................................................................. 2
1.8 "BIA"................................................................................................ 3
1.9 "Blocked Account Agreement".......................................................................... 3
1.10 "Blocked Accounts"................................................................................... 3
1.11 "Borrowing Base Certificate"......................................................................... 3
1.12 "Business Day"....................................................................................... 3
1.13 "Canadian First Rate"................................................................................ 3
1.14 "Canadian Prime Rate"................................................................................ 3
1.15 "Canadian Prime Rate Loans".......................................................................... 3
1.16 "Canadian Reference Bank"............................................................................ 4
1.17 "Capital Leases"..................................................................................... 4
1.18 "Capital Leases Lending Formula"..................................................................... 4
1.19 "Cash Dominion Event"................................................................................ 4
1.20 "CCAA Plan".......................................................................................... 4
1.21 "CDOR Rate".......................................................................................... 4
1.22 "CCAA"............................................................................................... 4
1.23 "Client"............................................................................................. 4
1.24 "Collateral"......................................................................................... 5
1.25 "Commitment Letter".................................................................................. 5
1.26 "Distressed Fair Market Value"....................................................................... 5
1.27 "EBITDA"............................................................................................. 5
1.28 "Eligible Capital Leases"............................................................................ 5
1.29 "Eligible Operating Leases".......................................................................... 6
1.30 "Environmental Laws"................................................................................. 8
1.31 "Equipment".......................................................................................... 8
1.32 "Equivalent Amount".................................................................................. 8
1.33 "Excess Availability"................................................................................ 8
1.34 "Event of Default"................................................................................... 9
1.35 "Excluded Accounts".................................................................................. 9
1.36 "Financing Agreements"............................................................................... 9
1.37 "GAAP"............................................................................................... 9
1.38 "General Security Agreement"......................................................................... 9
1.39 "Hazardous Materials"................................................................................ 9
1.40 "Hilco Appraisal".................................................................................... 10
1.41 "Information Certificate"............................................................................ 10
1.42 "Interest Rate"...................................................................................... 10
1.43 "Inventory".......................................................................................... 11
1.44 "IP Collateral"...................................................................................... 11
1.45 "IP Collateral License Agreement".................................................................... 11
1.46 "IP Grace Period".................................................................................... 11
1.47 "Lending Formulas"................................................................................... 12
1.48 "Letter of Credit Accommodations".................................................................... 12
1.49 "Libor Rate"......................................................................................... 12
1.50 "Libor Rate Interest Date"........................................................................... 12
1.51 "Libor Rate Interest Period"......................................................................... 12
1.52 "Libor Rate Loan".................................................................................... 13
1.53 "Liquidation Expenses"............................................................................... 13
1.54 "Maximum Credit"..................................................................................... 13
1.55 "New Availability Reserves Criteria"................................................................. 13
1.56 "Notice"............................................................................................. 13
1.57 "Obligations"........................................................................................ 13
1.58 "Obligor"............................................................................................ 14
1.59 "Operating Leases"................................................................................... 14
1.60 "Operating Leases Lending Formula"................................................................... 14
1.61 "Other Currency"..................................................................................... 14
1.62 "Payment Account".................................................................................... 14
1.63 "Pension Plans"...................................................................................... 14
1.64 "Permitted Encumbrances"............................................................................. 14
1.65 "Permitted Refinancing".............................................................................. 14
1.66 "Person" or "person"................................................................................. 15
1.67 "PPSA"............................................................................................... 15
1.68 "Priority Payables Reserve".......................................................................... 15
1.69 "Receiver ".......................................................................................... 15
1.70 "Records"............................................................................................ 15
1.71 "Renewal Date"....................................................................................... 15
1.72 "Revolving Loans".................................................................................... 16
1.73 "Senior Note Indebtedness"........................................................................... 16
1.74 "Senior Notes"....................................................................................... 16
1.75 "Spot Rate".......................................................................................... 16
1.76 "Subsidiary"......................................................................................... 16
1.77 "Trailing Cash Collections".......................................................................... 16
1.78 "Trust Indenture".................................................................................... 16
1.79 "UCC"................................................................................................ 17
1.80 "US Dollar Amount"................................................................................... 17
1.81 "US First Rate"...................................................................................... 17
1.82 "US Prime Rate"...................................................................................... 17
1.83 "US Prime Rate Loans"................................................................................ 17
1.84 "USERP".............................................................................................. 17
SECTION 2. CREDIT FACILITIES.............................................................................. 17
2.1 Revolving Loans...................................................................................... 17
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2.2 Letter of Credit Accommodations...................................................................... 18
SECTION 3. INTEREST AND FEES.............................................................................. 20
3.1 Interest............................................................................................. 20
3.2 Libor Rate........................................................................................... 21
3.3 Servicing Fee........................................................................................ 23
3.4 Unused Line Fee...................................................................................... 23
3.5 Commitment Fee....................................................................................... 23
SECTION 4. CONDITIONS PRECEDENT........................................................................... 24
4.1 Conditions Precedent to the Availability of Initial Revolving Loans and Letter of Credit
Accommodations................................................................................................ 24
4.2 Conditions Precedent to the Availability of All Revolving Loans and Letter of Credit Accommodations.. 26
SECTION 5. INTENTIONALLY DELETED.......................................................................... 26
SECTION 6. COLLECTION AND ADMINISTRATION.................................................................. 26
6.1 Borrower's Loan Account.............................................................................. 26
6.2 Statements........................................................................................... 26
6.3 Collection of Accounts............................................................................... 27
6.4 Payments............................................................................................. 28
6.5 Authorization to Make Revolving Loans and Letter of Credit Accommodations............................ 28
6.6 Use of Proceeds...................................................................................... 29
SECTION 7. COLLATERAL REPORTING AND COVENANTS............................................................. 29
7.1 Collateral Reporting................................................................................. 29
7.2 Accounts Covenants................................................................................... 30
7.3 Inventory Covenants.................................................................................. 31
7.4 Equipment Covenants.................................................................................. 31
7.5 Power of Attorney.................................................................................... 34
7.6 Right to Cure........................................................................................ 35
7.7 Access to Premises................................................................................... 35
SECTION 8. REPRESENTATIONS AND WARRANTIES................................................................. 36
8.1 Corporate Existence, Power and Authority; Subsidiaries............................................... 36
8.2 Financial Statements; No Material Adverse Change..................................................... 36
8.3 Chief Executive Office; Collateral Locations......................................................... 36
8.4 Priority of Liens; Title to Properties............................................................... 37
8.5 Tax Returns.......................................................................................... 37
8.6 Litigation........................................................................................... 37
8.7 Compliance with Other Agreements and Applicable Laws................................................. 37
8.8 Bank Accounts........................................................................................ 38
8.9 Accuracy and Completeness of Information............................................................. 38
8.10 Status of Pension Plans.............................................................................. 38
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8.11 Environmental Compliance............................................................................. 39
8.12 Inter-Creditor and Subordination Agreements.......................................................... 40
8.13 Survival of Warranties; Cumulative................................................................... 40
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................................................. 40
9.1 Maintenance of Existence............................................................................. 40
9.2 New Collateral Locations............................................................................. 40
9.3 Compliance with Laws, Regulations, Etc............................................................... 41
9.4 Payment of Taxes and Claims.......................................................................... 42
9.5 Insurance............................................................................................ 42
9.6 Financial Statements and Other Information........................................................... 43
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc........................................ 45
9.8 Encumbrances......................................................................................... 45
9.9 Indebtedness......................................................................................... 46
9.10 Loans, Investments, Guarantees, Etc.................................................................. 47
9.11 Dividends and Redemptions............................................................................ 48
9.12 Transactions with Affiliates......................................................................... 48
9.13 EBITDA............................................................................................... 48
9.14 Excess Availability.................................................................................. 48
9.15 Aggregate Borrowings................................................................................. 49
9.16 Intellectual Property................................................................................ 49
9.17 Additional Bank Accounts............................................................................. 49
9.18 Applications under the Companies' Creditors Arrangement Act.......................................... 49
9.19 Supplemental Executive Retirement Plan............................................................... 49
9.20 Operation of Pension Plans........................................................................... 50
9.21 Costs and Expenses................................................................................... 50
9.22 Further Assurances................................................................................... 51
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................................................. 51
10.1 Events of Default.................................................................................... 51
10.2 Remedies............................................................................................. 54
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW................................... 57
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver................................ 57
11.2 Waiver of Notices.................................................................................... 58
11.3 Amendments and Waivers............................................................................... 59
11.4 Waiver of Counterclaim............................................................................... 59
11.5 Indemnification...................................................................................... 59
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS............................................................... 59
12.1 Term................................................................................................. 59
12.2 Notices.............................................................................................. 61
12.3 Partial Invalidity................................................................................... 61
12.4 Successors........................................................................................... 62
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12.5 Entire Agreement..................................................................................... 62
12.6 Headings............................................................................................. 62
12.7 Judgment Currency.................................................................................... 62
12.8 Counterparts and Facsimile........................................................................... 63
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INDEX TO
EXHIBITS AND SCHEDULES
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Exhibit A Information Certificate
Schedule 1.11 Borrowing Base Certificate together with form of Exhibits thereto
Schedule 1.17 Capital Leases
Schedule 1.35 Excluded Accounts
Schedule 1.59 Operating Leases
Schedule 7.1(c)(ii) Weekly Trailing Cash Collections
Schedule 7.1(c)(iii) Trailing Cash Collections
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 8.9 Restrictions on assignability within Capital Leases and Operating
Leases
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
Schedule 9.13 Historical EBITDA Calculations
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LOAN AGREEMENT
This Loan Agreement dated February 6, 2004 is entered into by and
between Congress Financial Corporation (Canada), an Ontario corporation
("LENDER") and IMAX Corporation, a corporation incorporated pursuant to the laws
of Canada ("BORROWER").
W I T N E S S E T H:
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 PPSA (as hereinafter
defined) 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". References herein to any statute or any provision thereof include
such statute or provision as amended, revised, re-enacted, and/or consolidated
from time to time and any successor statute thereto. An Event of Default (as
hereinafter defined) shall exist or continue or be continuing until such Event
of Default is waived in accordance with Section 11.3 or, without derogating from
the cure rights, if any, provided to Borrower in Section 10 hereof, 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 (as hereinafter defined). Canadian Dollars and the sign
"CDN$" mean lawful money of Canada. "US Dollars" and the sign "$" mean lawful
money of the United States of America. All monetary amounts referred to in this
Agreement are in US Dollars unless otherwise stated. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.1 "ACCOUNTS"
"Accounts" shall mean all present and future rights of Borrower to payment for
goods sold or leased or for services rendered, including, without limitation,
the right of Borrower to payments made pursuant to the Capital Leases and/or
Operating Leases, which are not evidenced by instruments or chattel paper, and
whether or not earned by performance, excluding Excluded Accounts.
1.2 "AFFILIATE" OR "AFFILIATE"
"Affiliate" or "affiliate" shall have the meaning ascribed thereto in the
Business Corporations Act (Canada).
1.3 "AGREED CURRENCY"
"Agreed Currency" shall have the meaning set forth in Section 12.7 hereof.
1.4 "APPLICABLE PRIME RATE"
"Applicable Prime Rate" shall mean the Canadian Prime Rate for Canadian Prime
Rate Loans and the US Prime Rate for US Prime Rate Loans, as applicable.
1.5 "APPRAISER"
"Appraiser" means Hilco Appraisal Services, LLC or such other appraiser mutually
acceptable to Lender and Borrower.
1.6 "ASSIGNMENT OF CAPITAL LEASES AND OPERATING LEASES"
"Assignment of Capital Leases and Operating Leases" shall mean the Assignment of
Capital Leases and Operating Leases between Borrower, as assignor, and Lender,
as assignee, dated as of the date hereof.
1.7 "AVAILABILITY RESERVES"
"Availability Reserves" shall mean, as of any date of determination, such
amounts as Lender may from time to time establish and revise reducing the amount
of Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the Lending Formulas: (a) to reflect events,
conditions, contingencies or risks which, as determined by Lender, do or may
reasonably be expected to affect either: (i) the Collateral or any other
property which is security for the Obligations or its value; (ii) the assets or
business 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 Lender's good faith
estimate of the amount of any Priority Payables Reserve; 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. The amount of any Availability Reserve established by Lender shall
have a
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reasonable relationship to the event, condition or circumstance which is the
basis for such Availability Reserve as determined by Lender in good faith.
1.8 "BIA"
"BIA" shall mean the Bankruptcy and Insolvency Act (Canada), as amended,
supplemented, restated or superseded, in whole or in part, from time to time.
1.9 "BLOCKED ACCOUNT AGREEMENT"
"Blocked Account Agreement" shall mean the blocked account agreement dated on
the date hereof, among Borrower, Lender and the Bank of Montreal.
1.10 "BLOCKED ACCOUNTS"
"Blocked Accounts" shall have the meaning set forth in Section 6.3(a) hereof.
1.11 "BORROWING BASE CERTIFICATE"
"Borrowing Base Certificate" shall mean the borrowing base certificate, together
with the completed exhibits thereto, to be delivered by Borrower pursuant to,
inter alia, Section 7.1, the form of which is attached herewith as Schedule
1.11.
1.12 "BUSINESS DAY"
"Business Day" shall mean a day (other than a Saturday, Sunday or statutory
holiday in Ontario, Illinois or New York) on which Lender's Toronto office, the
Canadian Reference Bank's main Toronto office and banks in Chicago and New York
City are open for business in the normal course.
1.13 "CANADIAN FIRST RATE"
"Canadian First Rate" shall have the meaning set forth in Section 3.1(c) hereof.
1.14 "CANADIAN PRIME RATE"
"Canadian Prime Rate" shall mean, at any time, the greater of: (a) the annual
interest rate from time to time publicly announced by the Canadian Reference
Bank as its prime rate in effect for determining interest rates on Canadian
Dollar denominated commercial loans in Canada; and (b) the annual rate of
interest equal to the sum of: (i) the CDOR Rate at such time; and (ii) one (1%)
percent per annum.
1.15 "CANADIAN PRIME RATE LOANS"
"Canadian Prime Rate Loans" shall mean any Revolving Loans or portion thereof
denominated in Canadian Dollars and on which interest is payable based on the
Canadian Prime Rate in accordance with the terms hereof.
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1.16 "CANADIAN REFERENCE BANK"
"Canadian Reference Bank" shall mean Bank of Montreal, or its successors and
assigns, or such other bank as Lender may from time to time designate.
1.17 "CAPITAL LEASES"
"Capital Leases" shall mean, collectively, all of the leases listed on Schedule
1.17, as may be amended, updated and/or restated from time to time in accordance
with the reporting requirements set out in Section 7.1(a) hereof, each of which
are theatre system leases that transfer substantially all of the benefits and
risks of ownership to Clients and meet the criteria established by the FASB
Statement of Financial Accounting Standards No. 13.
1.18 "CAPITAL LEASES LENDING FORMULA"
"Capital Leases Lending Formula" shall have the meaning set forth in Section
2.1(a) hereof.
1.19 "CASH DOMINION EVENT"
"Cash Dominion Event" shall mean the occurrence and continuance of the earlier
of: (i) an Event of Default; (ii) the Excess Availability falling below
$7,500,000; or (iii) Borrower failing to maintain EBITDA of not less than
$20,000,000 during a single fiscal quarter, as calculated pursuant to Section
9.13 hereof.
1.20 "CCAA PLAN"
"CCAA Plan" shall have the meaning set forth in Section 9.18 hereof.
1.21 "CDOR RATE"
"CDOR Rate" shall mean, on any day, the annual rate of interest which is the
rate based on an average thirty (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. (Eastern Standard Time) 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 thirty (30) day rate
applicable in Canadian Dollar bankers' acceptances quoted by any major Schedule
I chartered bank selected by Lender as of 10:00 a.m. on such day.
1.22 "CCAA"
"CCAA" shall mean the Companies' Creditors Arrangement Act (Canada), as amended,
supplemented, restated or superseded, in whole or in part, from time to time.
1.23 "CLIENT"
"Client" shall mean any Person, other than Borrower, who is now or hereafter a
party to a Capital Lease and/or an Operating Lease, as applicable, and "Clients"
means all such Persons.
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1.24 "COLLATERAL"
"Collateral" shall mean Collateral as such term is defined in the General
Security Agreement.
1.25 "COMMITMENT LETTER"
"Commitment Letter" shall mean the commitment letter made in respect of the
financing arrangements contemplated herein dated November 10, 2003, between
Lender and Borrower, as may be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.26 "DISTRESSED FAIR MARKET VALUE"
"Distressed Fair Market Value" shall mean an estimated amount, determined as of
the effective date of the applicable appraisal report, expressed in terms of
currency in US Dollars, that may be reasonably realized upon a liquidation by
Lender of the Capital Leases and/or the Operating Leases, as applicable, which
as of the Closing Date will be the distressed fair market value attributed to
the Capital Leases and the Operating Leases in the Hilco Appraisal and at any
future date will be the estimated amount similarly calculated as of the date of
calculation attributed to the Capital Leases and the Operating Leases by the
Appraiser.
1.27 "EBITDA"
"EBITDA" shall mean, for any period with respect to Borrower, the consolidated
net income of Borrower for such period calculated in accordance with GAAP,
adjusted so that: (i) gains and losses from extraordinary events are eliminated;
and (ii) all income tax expense, deferred taxes, depreciation and amortization
expense, non-cash uses of funds and interest deducted are added back to net
income.
1.28 "ELIGIBLE CAPITAL LEASES"
"Eligible Capital Leases" shall mean those leases, from time to time, which are
and continue to be acceptable to Lender based on the general criteria set forth
below which Lender, in good faith, may revise from time to time. In general, a
Capital Lease shall be an Eligible Capital Lease if:
(a) it is with a Client deemed creditworthy at all times by
Lender, as determined by Lender in good faith;
(b) it is with a Client that has not asserted a bona fide
counterclaim, defence or dispute (other than as to a de minimus amount) under
the applicable Capital Lease and if so, the value of such Capital Lease shall be
reduced by the amount of such counterclaim, defense or dispute;
(c) it is with a Client that does not have, and does not engage in
transactions which may give rise to, any right of set-off against the Capital
Lease; provided that the existence of any such right of set-off shall not by
itself cause such Capital Lease to cease to continue to be an Eligible Capital
Lease but its appraised value, for purposes of Section 2.1 hereof, will be
reduced by Lender by an amount determined by Lender in good faith;
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(d) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of the Capital Lease or
materially reduce the amount payable or delay payment thereunder, including
without limitation, any event of default or event which would, with notice or
the passage of time, constitute an event of default under the Capital Lease;
(e) it is subject to the first priority, valid and perfected
security interest of Lender and is not subject to any prior ranking liens or
other liens except Permitted Encumbrances;
(f) it is with a Client which is not itself, nor any officer or
employee thereof, an officer, employee or agent of or affiliated with Borrower,
directly or indirectly, by virtue of family membership, ownership, control,
management or otherwise;
(g) it is with a Client that is a foreign government, the federal
government of Canada, any Province, political subdivision, department, agency or
instrumentality thereof;
(h) there are no proceedings or actions which are threatened or
pending against the Client which could reasonably be expected to result in any
material adverse change in such Client's financial condition;
(i) unless otherwise permitted by Lender, and with the exception
of Capital Leases for which the Client is Famous Players Inc., it is not with a
Client which, together with its affiliates, constitutes more than ten (10%)
percent of all otherwise Eligible Capital Leases and in the case of Famous
Players Inc. constitutes more than twenty-five (25%) percent of all otherwise
Eligible Capital Leases (but the portion of the Capital Leases not in excess of
such applicable percentage continue to be Eligible Capital Leases);
(j) Borrower and/or any Obligor is the lessor under the applicable
Capital Lease;
(k) Borrower and/or any Obligor, as applicable, has not
transferred title to the equipment leased to the Client pursuant to the
applicable Capital Lease; and
(l) notwithstanding that there are any restrictions on
assignability in respect of such Capital Lease.
Any Capital Lease, which is not considered to be an Eligible Capital Lease in
accordance with the foregoing requirements, is nevertheless considered to form
part of the Collateral.
1.29 "ELIGIBLE OPERATING LEASES"
"Eligible Operating Leases" shall mean those leases, from time to time, which
are and continue to be acceptable to Lender based on the general criteria set
forth below which Lender, in good faith, may revise from time to time. In
general, an Operating Lease shall be Eligible Operating Lease if:
(a) it is with a Client deemed creditworthy at all times by
Lender, as determined by Lender in good faith;
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(b) it is with a Client that has not asserted a bona fide
counterclaim, defence or dispute (other than as to a de minimus amount) under
the applicable Operating Lease and if so, the value of such Operating Lease
shall be reduced by the amount of such counterclaim, defense or dispute;
(c) it is with a Client that does not have, and does not engage in
transactions which may give rise to, any right of set-off against the Operating
Lease; provided that the existence of any such right of set-off shall not by
itself cause such Operating Lease to cease to continue to be an Eligible
Operating Lease but its appraised value, for purposes of Section 2.1 hereof,
will be reduced by Lender by an amount determined by Lender in good faith;
(d) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of the Operating Lease or
materially reduce the amount payable or delay payment thereunder, including
without limitation, any event of default or event which would, with notice or
the passage of time, constitute an event of default under the Operating Lease;
(e) it is subject to the first priority, valid and perfected
security interest of Lender and is not subject to any prior ranking liens or
other liens except Permitted Encumbrances;
(f) it is with a Client which is not itself, nor any officer or
employee thereof, an officer, employee or agent of or affiliated with Borrower,
directly or indirectly, by virtue of family membership, ownership, control,
management or otherwise;
(g) it is with a Client that is a foreign government, the federal
government of Canada, any Province, political subdivision, department, agency or
instrumentality thereof;
(h) there are no proceedings or actions which are threatened or
pending against the Client which could reasonably be expected to result in any
material adverse change in such Client's financial condition;
(i) unless otherwise permitted by Lender, and with the exception
of Operating Leases for which the Client is Regal Entertainment Group, it is not
with a Client which, together with its affiliates, constitutes more than ten
(10%) percent of all otherwise Eligible Operating Leases and in the case of
Regal Entertainment Group constitutes more than twenty-five (25%) percent of all
otherwise Eligible Operating Leases (but the portion of the Operating Leases not
in excess of such applicable percentage continue to be Eligible Operating
Leases);
(j) Borrower and/or any Obligor is the lessor under the applicable
Capital Lease;
(k) Borrower and/or any Obligor, as applicable, has not
transferred title to the equipment leased to the Client pursuant to the
applicable Operating Lease; and
(l) notwithstanding that there are any restrictions on
assignability in respect of such Capital Lease.
Any Operating Lease, which is not considered to be an Eligible Operating Lease
in accordance with the foregoing requirements, is nevertheless considered to
form part of the Collateral.
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1.30 "ENVIRONMENTAL LAWS"
"Environmental Laws" shall mean with respect to any Person all federal (United
States of America and Canada), state, provincial, district, local, municipal and
foreign laws, statutes, rules, regulations, ordinances, orders, directives,
permits, licenses and consent decrees relating to health, safety, hazardous,
dangerous or toxic substances, waste or material, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to such Person
and/or its business and facilities (whether or not owned by it), including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes.
1.31 "EQUIPMENT"
"Equipment" shall mean all of Borrower's now owned and hereafter acquired
equipment, machinery, computers and computer hardware and software (whether
owned or 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.
1.32 "EQUIVALENT AMOUNT"
"Equivalent Amount" in one currency on any day means the amount of that currency
into which a specified amount of another currency can be converted at the Spot
Rate (or if such rate is not available, such other rate as the Lender may
determine.
1.33 "EXCESS AVAILABILITY"
"Excess Availability" shall mean the US Dollar Amount, calculated at any time
and as determined by Lender, equal to:
(a) the lesser of, subject to the sub-limit in respect of Letter
of Credit Accommodations:
(i) the amount of the Revolving Loans and Letter of
Credit Accommodations available to Borrower as of
such time based on the Lending Formulas, as
determined by Lender less the Availability Reserves
from time to time established by Lender;
(ii) the Maximum Credit; or
(iii) the amount of the Trailing Cash Collections for the
preceding applicable six (6) month period, less
(b) the sum of:
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(i) the amount of all then outstanding and unpaid
Obligations; and
(ii) the aggregate amount of: (A) all due but unpaid tax
obligations; and (B) past due trade payables which
remain unpaid for more than ninety (90) days past the
original invoice for same, of Borrower as of such
time.
1.34 "EVENT OF DEFAULT"
"Event of Default" shall have the meaning set forth in Section 10.1 hereof.
1.35 "EXCLUDED ACCOUNTS"
"Excluded Accounts" means all present and future rights, revenues and bank
accounts of Borrower or its Subsidiaries in respect of, and which are used to
make or receive payments in relation to: (i) third party film productions; (ii)
third party joint ventures; (iii) revenues of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Productions 70 MM
Inc.; and (iv) owned and operated theatres, each of which is excluded from the
Trailing Cash Collections. As of the date hereof, the Excluded Accounts are as
set out in Schedule 1.35 hereto.
1.36 "FINANCING AGREEMENTS"
"Financing Agreements" shall mean, collectively, this Agreement, the General
Security Agreement, the Assignment of Capital Leases and Operating Leases, the
Blocked Account Agreement, the IP Collateral License 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.
1.37 "GAAP"
"GAAP" shall mean generally accepted accounting principles in the United States
of America as in effect from time to time as set forth in the opinions and
pronouncements of the relevant U.S. public and private accounting boards and
institutes which are applicable to the circumstances as of the date of
determination consistently applied.
1.38 "GENERAL SECURITY AGREEMENT"
"General Security Agreement" shall mean the general security agreement dated on
or about the date hereof given by Borrower in favour of Lender as security for
payment and performance of the Obligations.
1.39 "HAZARDOUS MATERIALS"
"Hazardous Materials" shall mean any hazardous, toxic or dangerous substances,
materials and wastes, including, without limitation, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any
other kind and/or type of pollutants or contaminants (including, without
limitation,
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materials which include hazardous constituents), sewage, sludge, industrial
slag, solvents and/or any other similar substances, materials, or wastes and
including any other substances, materials or wastes that are or become regulated
under any Environmental Law (including, without limitation any that are or
become classified as hazardous or toxic under any Environmental Law).
1.40 "HILCO APPRAISAL"
"Hilco Appraisal" shall mean the appraisal conducted by Hilco dated October 3,
2003.
1.41 "INFORMATION CERTIFICATE"
"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 the Financing Agreements and the financing
arrangements provided for herein.
1.42 "INTEREST RATE"
"Interest Rate" shall mean, as to Revolving Loans advanced:
(a) commencing as of the date hereof and ending on the last day of
the fifth (5th) calendar month following the date hereof (the
"INITIAL PERIOD"), a rate of one half of one (0.50%) percent
per annum in excess of the Applicable Prime Rate or a rate of
two and one quarter (2.25%) percent per annum in excess of the
Libor Rate, as applicable;
(b) commencing on the day after the expiry of the Initial Period:
(i) a rate of one quarter of one (0.25%) percent per
annum in excess of the Applicable Prime Rate or a
rate of two (2%) percent per annum in excess of the
Libor Rate, as applicable, will apply if the average
Excess Availability, as determined by Lender, during
the Initial Period is equal to or greater than
$15,000,000;
(ii) a rate of one half of one (0.50%) percent per annum
in excess of the Applicable Prime Rate or a rate of
two and one quarter (2.25%) percent per annum in
excess of the Libor Rate, as applicable, will apply
if the average Excess Availability, as determined by
Lender, during the Initial Period is less than
$15,000,000 but equal to or greater than $5,000,000;
or
(iii) a rate of three quarters of one (0.75%) percent per
annum in excess of the Applicable Prime Rate or a
rate of two and one half (2.5%) percent per annum in
excess of the Libor Rate, as applicable, will apply
if the average Excess Availability, as determined by
Lender, during the Initial Period is less than
$5,000,000;
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provided that, in all of the foregoing instances and at all times, the
calculation of the Interest Rate pursuant to section 1.38(b) above
shall assume a minimum aggregate Revolving Loan usage of $2,500,000; or
(c) notwithstanding the rates described in subparagraphs (a) and
(b) above, without notice and at Lender's option, the rate of
three (3%) percent per annum in excess of the Applicable Prime
Rate and the rate of three (3%) percent per annum in excess of
the Libor Rate, as applicable, shall apply in respect of the
Obligations described below upon the occurrence and
continuance of the events described below:
(i) on non-contingent Obligations other than the
Revolving Loans: (A) for the period on and after the
date of maturity or termination hereof until such
time as Lender has received full and final payment of
all such Obligations; and (B) for the period from and
after the date of the occurrence of an Event of
Default so long as such Event of Default is
continuing as determined by Lender (notwithstanding
entry of any judgment against Borrower); or
(ii) on the amount of Revolving Loans at any time
outstanding that is in excess of the amounts
available to Borrower under Section 2 hereof (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).
1.43 "INVENTORY"
"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.
1.44 "IP COLLATERAL"
"IP Collateral" shall mean all of the Intellectual Property as such term is
defined in the General Security Agreement.
1.45 "IP COLLATERAL LICENSE AGREEMENT"
"IP Collateral License Agreement" shall mean, the license agreement granting
Lender and its successors, transferees and assignees, a non-exclusive, royalty
free perpetual license to the IP Collateral dated on the date hereof, but
effective only upon the occurrence and continuance of an IP Grace Period,
between Lender and Borrower.
1.46 "IP GRACE PERIOD"
"IP Grace Period" shall mean, the period commencing the date upon which Lender
exercises its remedies pursuant to Sections 10.2(a) and/or Section 10.2(b)
hereof and ending one hundred and twenty (120) days thereafter.
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1.47 "LENDING FORMULAS"
"Lending Formulas" shall mean, collectively, the Operating Leases Lending
Formula and the Capital Leases Lending Formula.
1.48 "LETTER OF CREDIT ACCOMMODATIONS"
"Letter of Credit Accommodations" shall mean the letters of credit, merchandise
purchase or other guarantees denominated in Canadian Dollars or US Dollars 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 or
any Obligor of its obligations to such issuer.
1.49 "LIBOR RATE"
"Libor Rate" means, with respect to any Libor Rate Interest Period applicable to
a Libor Rate Loan, the per annum rate of interest determined by Lender, based on
a three hundred sixty (360) day year, rounded upwards, if necessary, to the
nearest whole multiple of one sixteenth of one percent (.0625%), at which
Wachovia Bank, National Association, or its successors, is offered deposits of
U.S. dollars in the London interbank market, in amounts comparable to the
principal amount of such Libor Rate Loan to be outstanding during such Libor
Rate Interest Period for a period equal to the number of days in the applicable
Libor Rate Interest Period, at or about 9:00 a.m. (New York time) on the second
(2nd) Business Day (the "LIBOR RATE DETERMINATION DATE") prior to the first day
of such Libor Rate Interest Period.
1.50 "LIBOR RATE INTEREST DATE"
"Libor Rate Interest Date" means the date falling on the last day of each Libor
Rate Interest Period selected by Borrower pursuant to Section 3.2(d).
1.51 "LIBOR RATE INTEREST PERIOD"
"Libor Rate Interest Period" means, with respect to each Libor Rate Loan, the
initial period (subject to availability) of one (1) month, two (2) months or
three (3) months (as selected by Borrower and notified to Lender pursuant to
Section 3.2(d)) commencing on and including the date of the drawdown notice,
conversion date or rollover date as set out in Sections 3.2(a), (b) and (c), as
the case may be, applicable to such Libor Rate Loan and ending on and including
the last day of such initial period, and thereafter, each successive period
(subject to availability) of one (1) month, two (2) months or three (3) months
(as selected by Borrower and notified to Lender pursuant to Section 3.2(d))
commencing on and including the last day of the prior Libor Rate Interest
Period, provided however, that;
(a) if a Libor Rate Interest Period for a one month period
commences on the last Business Day of a calendar month (or on
any day for which there is no numerically corresponding day in
the appropriate subsequent calendar month) it shall end on the
last Business Day of the appropriate subsequent calendar
month;
(b) if a Libor Rate Interest Period would end on a day that is not
a Business Day, such Libor Rate Interest Period shall be
extended to the next Business Day; and
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(c) no Libor Rate Interest Period may be selected which would
extend beyond the maturity date or other known date upon which
this Agreement shall be terminated.
1.52 "LIBOR RATE LOAN"
"Libor Rate Loan" shall mean any Revolving Loans or portion thereof denominated
in US Dollars on which interest is payable based on the Libor Rate in accordance
with the terms hereof.
1.53 "LIQUIDATION EXPENSES"
"Liquidation Expenses" shall mean all costs, fees, expenses and all other
charges including, without limitation, operating fees, administration fees,
trustee's fees, receiver fees and court mandated costs directly incurred by
Lender in connection with the disposition of the Collateral.
1.54 "MAXIMUM CREDIT"
"Maximum Credit" shall mean the amount of $20,000,000 or the Equivalent Amount
in Canadian Dollars.
1.55 INTENTIONALLY DELETED
1.56 "NOTICE"
"Notice" shall have the meaning set forth in Section 12.1(d) hereof.
1.57 "OBLIGATIONS"
"Obligations" shall mean any and all Revolving Loans, 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, indemnifications for Letter of Credit Accommodations or
otherwise, fees, costs and expenses, however evidenced, whether as principal or
otherwise, arising under the Financing Agreements, as amended, supplemented,
restated or superseded, in whole or in part, from time to time and/or applicable
laws, 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 proceeding with respect to Borrower or any Obligor under the
BIA, the CCAA, or any similar statute in any jurisdiction (including the payment
of interest and other amounts which would accrue and become due but for the
commencement of such proceeding, whether or not such amounts are allowed or
allowable in whole or in part in such proceeding), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured.
1.58 "OBLIGOR"
"Obligor" shall mean, other than Borrower, 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, including,
without limitation, IMAX U.S.A. Inc., a corporation
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incorporated pursuant to the laws of Delaware, 1329507 Ontario Inc., a
corporation incorporated pursuant to the laws of Ontario and IMAX II U.S.A.
Inc., a corporation incorporated pursuant to the laws of Delaware.
1.59 "OPERATING LEASES"
"Operating Leases" shall mean, collectively, all of the leases listed on
Schedule 1.59, as may be amended, updated and/or restated from time to time in
accordance with the reporting requirements set out in Section 7.1(a) hereof,
each of which are theatre system leases that do not transfer substantially all
of the benefits and risks of ownership to Clients.
1.60 "OPERATING LEASES LENDING FORMULA"
"Operating Leases Lending Formula" shall have the meaning set forth in Section
2.1(a) hereof.
1.61 "OTHER CURRENCY"
"Other Currency" shall have the meaning set forth in Section 12.7 hereof.
1.62 "PAYMENT ACCOUNT"
"Payment Account" shall have the meaning set forth in Section 6.3(a) hereof.
1.63 "PENSION PLANS"
"Pension Plans" shall mean each of the pension plans, if any, that are
registered in accordance with the Income Tax Act (Canada) which Borrower
sponsors or administers or into which Borrower makes contributions.
1.64 "PERMITTED ENCUMBRANCES"
"Permitted Encumbrances" shall have the meaning set forth in Section 9.8 hereof.
1.65 "PERMITTED REFINANCING"
"Permitted Refinancing" means a refinancing of the Senior Note Indebtedness
(including any amendment or replacement of the Trust Indenture and the Senior
Notes in respect thereof) that complies with the following conditions and that
in the determination of Lender, acting reasonably, could not be expected to
adversely impact Borrower's ability to fulfil the Obligations: (i) the principal
amount refinanced must be no greater than the principal amount of Senior Notes
presently issued under the Trust Indenture together with any applicable premium
and costs incurred in connection with such refinancing, due and payable
thereunder resulting from prepayment of the Senior Notes, (ii) the maturity date
must not be earlier than the current maturity of the Senior Notes; (iii) the
interest rate to be paid in respect of such refinancing would not be greater
than the current interest paid on the Senior Notes; and (iv) the amortization of
the principal amount refinanced must not be at a rate more accelerated than
under the Senior Notes.
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1.66 "PERSON" OR "PERSON"
"Person" or "person" shall mean any individual, sole proprietorship,
partnership, limited partnership, corporation, limited liability company,
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.
1.67 "PPSA"
"PPSA" shall mean the Personal Property Security Act (Ontario), as amended,
supplemented, restated or superseded, in whole or in part, from time to time,
provided that, if the attachment, perfection or priority of Lender's security in
respect of any Collateral is governed by the laws of any jurisdiction other than
Ontario, PPSA shall mean those other laws for the purposes hereof relating to
attachment, perfection or priority.
1.68 "PRIORITY PAYABLES RESERVE"
"Priority Payables Reserve" shall mean, at any time, the full amount of the
liabilities at such time which have a trust imposed to provide for payment or
security interest, lien or charge ranking or capable of ranking senior to or
pari passu with security interests, liens or charges securing the Obligations on
any of the Collateral under federal, provincial, state, county, municipal, or
local law including, but not limited, to claims for unremitted and accelerated
rents, taxes, wages, vacation pay, workers' compensation obligations, government
royalties or pension fund obligations excluding, the obligations of Borrower
pursuant to the USERP.
1.69 "RECEIVER "
"Receiver" shall have the meaning set forth in Section 10.2(f) hereof.
1.70 "RECORDS"
"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, including, without limitation, the Clients, 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).
1.71 "RENEWAL DATE"
"Renewal Date" shall have the meaning set forth in Section 12.1 hereof.
1.72 "REVOLVING LOANS"
"Revolving Loans" shall mean Canadian Prime Rate Loans, US Prime Rate Loans
and/or Libor Rate Loans as the case may be, now or hereafter made by Lender to
or for the benefit of
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Borrower on a revolving basis (involving advances, repayments and re-advances)
as set forth in Section 2.1 hereof.
1.73 "SENIOR NOTE INDEBTEDNESS"
"Senior Note Indebtedness" shall mean, the indebtedness for borrowed money owing
by Borrower to the holders of senior notes issued by Borrower pursuant to the
Trust Indenture.
1.74 "SENIOR NOTES"
"Senior Notes" shall collectively mean the Borrower's US$160,000,000 aggregate
principal amount of 9 5/8% senior notes due December 1, 2010 issued pursuant to
the Trust Indenture.
1.75 "SPOT RATE"
"Spot Rate" shall mean, with respect to a currency, the rate quoted by Wachovia
National Bank Association as the spot rate for the purchase by Wachovia National
Bank Association of such currency with another currency at approximately 10:00
a.m. (EST) on the date two (2) Business Days prior to the date as of which the
foreign exchange computation is made.
1.76 "SUBSIDIARY"
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person and one or more Subsidiaries of such Person.
1.77 "TRAILING CASH COLLECTIONS"
"Trailing Cash Collections" shall mean the aggregate amount of cash collections
made by Borrower in the preceding twenty-six (26) week period, measured as at
the last day of the applicable week.
1.78 "TRUST INDENTURE"
"Trust Indenture" shall mean the trust indenture between Borrower and U.S. Bank
National Association dated December 4, 2003, and, to the extent expressly
permitted hereunder, means such trust indenture as may be further amended,
supplemented and restated from time to time.
1.79 "UCC"
"UCC" shall mean the Uniform Commercial Code, as amended, supplemented, restated
or superseded, in whole or in part, from time to time.
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1.80 "US DOLLAR AMOUNT"
"US Dollar Amount" shall mean, at any time, (a) as to any amount denominated in
US Dollars, the amount thereof at such time, and (b) as to any amount
denominated in any other currency, the equivalent amount in US Dollars as
determined by Lender at such time on the basis of the Spot Rate for the purchase
of US Dollars with such currency.
1.81 "US FIRST RATE"
"US First Rate" shall have the meaning set forth in Section 3.1(c) hereof.
1.82 "US PRIME RATE"
"US Prime Rate" shall mean the rate announced by Wachovia National Bank
Association, or its successors, from time to time as its prime rate in effect
for US Dollar denominated commercial loans, whether or not such announced rate
is the best rate available at such bank.
1.83 "US PRIME RATE LOANS"
"US Prime Rate Loans" shall mean any Revolving Loan or portions thereof
denominated in US Dollars and on which interest is payable based on the US Prime
Rate in accordance with the terms hereof.
1.84 "USERP"
"USERP" shall mean the unregistered supplemental executive retirement plan dated
July 12, 2000, made by Borrower in favour of its co-chief executive officers
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
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, net of any
Availability Reserves, of:
(i) eighty-five (85%) percent of the appraised value of
Eligible Operating Leases, net of estimated
Liquidation Expenses, with appraisals conducted on a
Distressed Fair Market Value basis at the expense of
Borrower by the Appraiser (the "OPERATING LEASES
LENDING FORMULA"), plus
(ii) the lesser of:
(A) thirty-four (34%) percent of the aggregate
net book value of Eligible Capital Leases;
or
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(B) eighty-five (85%) of the appraised value of
such Eligible Capital Leases expressed as a
percentage of cost value, net of estimated
Liquidation Expenses, with appraisals
conducted on a Distressed Fair Market Value
basis at the expense of Borrower by the
Appraiser (the "CAPITAL LEASES LENDING
FORMULA").
(b) Lender may, in its discretion, from time to time reduce or
otherwise revise the Lending Formulas to the extent that Lender, in good faith,
determines that: (i) the general creditworthiness of the Clients has declined;
or (ii) the liquidation value of the Eligible Capital Leases, or any category
thereof, has decreased; or (iii) the nature and quality of the Eligible
Operating Leases and/or the Eligible Capital Leases has deteriorated. In
determining whether to reduce or otherwise revise the Lending Formulas, Lender
may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Operating Leases or Eligible Capital Leases
or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Revolving Loans and the Letter of Credit Accommodations outstanding at any time
shall not exceed the lesser of:
(i) the Maximum Credit;
(ii) the amount available under the Lending Formulas; and
(iii) the Trailing Cash Collections.
In the event that the outstanding amount of the Revolving Loans, or the
aggregate amount of the outstanding Revolving Loans and Letter of Credit
Accommodations, exceed the amounts available under the Lending Formulas, the
sub-limit for Letter of Credit Accommodations set forth in Section 2.2(d), the
Maximum Credit or the Trailing Cash Collections, 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.
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 in Canadian Dollars
or US Dollars containing terms and conditions reasonably 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 any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to one and one half
(1.5%) 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, except that
Borrower shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to
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three (3%) percent per annum on such daily outstanding balance for: (i) the
period from and after the date of maturity or termination hereof until Lender
has received full and final payment of all Revolving Loans, and cash collateral
has been posted in the full amount of any then outstanding Letter of Credit
Accommodations (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. 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 maturity or termination of this Agreement.
(c) Letter of Credit Accommodations are not available unless, on
the date of the proposed issuance thereof, the Revolving Loans available to
Borrower (subject to Section 2.1(c)) are equal to, or greater than one hundred
(100%) percent of the face amount of the Letter of Credit Accommodation together
with all other commitments and obligations made or incurred by Lender with
respect thereto, including, without limitation, bank fees.
(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, including, without limitation,
bank fees, shall not at any time exceed $10,000,000. At any time an Event of
Default exists or has occurred and is continuing, upon Lender's request,
Borrower will either furnish cash collateral to secure the reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish cash collateral 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, but not limited to, 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. 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, other than acts, waivers,
errors, delays or omissions caused by the gross negligence or wilful misconduct
of Lender, with respect to or relating to any Letter of Credit Accommodation.
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 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
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guarantee or indemnification in writing with respect to such Letter of Credit
Accommodation. Except as a result of Lender's own gross negligence or wilful
misconduct, Borrower shall be bound by any interpretation made 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. At any time an Event of Default exists or has occurred
and is continuing, Lender, in its own name or in Borrower's name, shall have the
sole and exclusive right and authority to, and Borrower shall not: (i) approve
or resolve any questions of non-compliance of documents, (ii) give any
instructions as to acceptance or rejection of any documents or goods, or (iii)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders. At all times other than when an Event of Default exists or
has occurred and is continuing, Borrower shall be permitted, with the prior
written consent of Lender to: (i) grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents, and (ii) to 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.
(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 favour 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. 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 favour of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Lender to Borrower.
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 applicable Interest
Rate. Subject to Section 3.2(d) hereof, Borrower may borrow, repay and reborrow
funds under the Revolving Loans by way of Canadian Prime Rate Loans, US Prime
Rate Loans and Libor Rate Loans.
(b) For Canadian Prime Rate Loans and US Prime Rate Loans,
interest shall be payable by Borrower to Lender monthly in arrears not later
than the first Business 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
in the case of Canadian Prime Rate Loans and a three hundred and sixty (360) day
year and actual days elapsed in the case of US Prime Rate Loans, as applicable.
The interest rate shall increase or decrease by an amount equal to each increase
or decrease in the Canadian Prime Rate or US Prime Rate, as applicable,
effective on the first day of the month after any change in such rates is
announced. The increase or decrease shall be based on the Canadian Prime Rate or
US Prime Rate, as applicable, 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
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Default or maturity or termination 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: (i) a three
hundred sixty five (365) day year (the "CANADIAN FIRST RATE"), it is hereby
agreed that the rate or percentage of interest on a yearly basis is equivalent
to such Canadian First Rate multiplied by the actual number of days in the year
divided by 365; or (ii) a three hundred and sixty (360) day year (the "US FIRST
RATE"), it is hereby agreed that the rate or percentage of interest on a yearly
basis is equivalent to such US First Rate multiplied by the actual number of
days in the year divided by 360.
(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
Revolving 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) A certificate of an authorized signing officer of Lender as to
each amount and/or each rate of interest payable hereunder from time to time
shall be conclusive evidence of such amount and of such rate, absent manifest
error.
(f) For greater certainty, whenever any amount is payable under
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 LIBOR RATE
(a) Libor Rate Loans must have a term of one (1) month, two (2)
months or three (3) months, after Borrower delivering to Lender a drawdown
notice no later than 11:00 a.m. (Toronto time) three (3) Business Days prior to
the requested drawdown date, provided however, Borrower may repay a Libor Rate
Loan only on the last day of the applicable Libor Rate Interest Period subject
to the occurrence of an Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(b) Subject to Section 3.2(d), at any time prior to the
termination, maturity or the occurrence of an Event of Default or event which,
with the passage of time or giving of notice or both, would constitute an Event
of Default, Borrower may, upon delivering to Lender a
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conversion notice no later than 11:00 a.m. (Toronto time) three (3) Business
Days prior to the requested conversion date, convert any Canadian Prime Rate
Loan, US Prime Rate Loan or Letter of Credit Accommodation into a Libor Rate
Loan or vice versa, as the case may be, provided that:
(i) a Libor Rate Loan may be converted only on the last
day of the Libor Rate Interest Period applicable to
that Libor Rate Loan; and
(ii) on the conversion date there exists no Event of
Default or event which, with the passage of time or
giving of notice or both, would constitute an Event
of Default.
If on the expiry of a Libor Rate Interest Period an Event of Default or event
which, with the passage of time or giving of notice or both, would constitute an
Event of Default, shall have occurred and be continuing, the relevant Libor Rate
Loan shall be automatically converted into a US Prime Rate Loan.
(c) Borrower may, during the term of this Agreement, rollover all
or any portion of a Libor Rate Loan for an additional Libor Rate Interest Period
subsequent to the initial or any subsequent Libor Rate Interest Period, upon
delivering to Lender a rollover notice no later than 11:00 a.m. (Toronto time)
three (3) Business Days prior to the last day of the Libor Rate Interest Period,
any such rollover to have a term of not less than one (1) month and not more
than three (3) months. Immediately prior to the commencement of any subsequent
Libor Rate Interest Period, should an Event of Default or event which, with the
passage of time or giving of notice or both, would constitute an Event of
Default, have occurred and be continuing, Borrower shall be deemed to have
converted the Libor Rate Loan to a US Prime Rate Loan on the last day of the
Libor Rate Interest Period applicable thereto, unless Lender, in its sole
discretion, otherwise permits. In the event a rollover notice in respect of an
existing Libor Rate Loan is not given pursuant to this Section 3.2(c) or a
conversion notice in respect of such existing Libor Rate Loan is not given
pursuant to Section 3.2(b), any such Libor Rate Loan shall be converted to a US
Prime Rate Loan on the last day of the Libor Rate Interest Period applicable to
such existing Libor Rate Loan. The rollover of a Libor Rate Loan to another
Libor Rate Loan shall not constitute a repayment or prepayment hereunder.
(d) If Borrower elects to borrow by way of a Libor Rate Loan or
continue a Libor Rate Loan or elects to convert a Revolving Loan (other than a
Libor Rate Loan) into a Libor Rate Loan pursuant to Section 3.2(b) or elects to
rollover a Libor Rate Loan pursuant to Section 3.2(c), Borrower shall select, in
the drawdown notice, conversion notice or rollover notice (as the case may be)
delivered in connection therewith, the Libor Rate Interest Period applicable to
such Libor Rate Loan. Borrower shall thereafter select and notify Lender of each
new Libor Rate Interest Period applicable to such Libor Rate Loan in accordance
with the foregoing notice requirements. If Borrower fails to deliver to Lender a
drawdown notice, conversion notice or a rollover notice in respect of a Libor
Rate Loan at least three (3) Business Days prior to the expiry of the Libor Rate
Interest Period applicable to such Libor Rate Loan, such Libor Rate Loan shall,
on the last day of the Libor Rate Interest Period applicable thereto, be deemed
to have been converted into a US Prime Rate Loan, pursuant to Section 3.2(b).
(e) Borrower agrees that:
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(i) the difference between the amount of a Revolving Loan
requested by Borrower by way of Libor Rate Loan and
the actual proceeds of the Libor Rate Loan;
(ii) the difference between the actual proceeds of a Libor
Rate Loan and the amount required to pay a Libor Rate
Loan at the end of the Libor Rate Interest Period, if
a Libor Rate Loan is being rolled over; and
(iii) the difference between the actual proceeds of a Libor
Rate Loan and the amount required to repay any
Revolving Loan which is being converted to a Libor
Rate Loan,
shall be funded by Borrower from its own resources, by 11:00 a.m. (Toronto time)
on the day of the Revolving Loan or may be advanced as a US Prime Rate Loan if
Borrower is otherwise entitled to same.
3.3 SERVICING FEE
Borrower shall pay to Lender monthly a servicing fee in an
amount equal to $3,000 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 non-contingent Obligations (other than Letter of Credit
Accommodations) 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.
3.4 UNUSED LINE FEE
Borrower shall pay to Lender monthly an unused line fee equal
at a rate equal to one quarter of one percent (0.25%) per annum calculated upon
the amount by which the then applicable Maximum Credit exceeds the average daily
principal balance of the outstanding Revolving Loans, Letter of Credit
Accommodations and Libor Rate Loans during the immediately preceding month (or
part thereof) while this Agreement is in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be payable on the first
day of each month in arrears. For further clarity, no Obligations will be
outstanding once this Agreement has been terminated and all Obligations have
been fully and indefeasibly satisfied and cash collateral has been posted in the
full amount then outstanding of any Letter of Credit Accommodations, if any.
3.5 COMMITMENT FEE
Borrower has paid to Lender a commitment fee in the amount of
$150,000, which was fully earned by Lender and paid by Borrower on the date of
the execution of the Commitment Letter.
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SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE AVAILABILITY OF INITIAL REVOLVING
LOANS AND LETTER OF CREDIT ACCOMMODATIONS
Each of the following is a condition precedent to Lender
making available the initial Revolving Loans and making available the initial
Letter of Credit Accommodations hereunder:
(a) Lender shall have received evidence (including, without
limitation, any Financing Agreements, inter-creditor arrangements,
subordinations or releases of any other liens or security interests in the
Collateral required by Lender), in form and substance reasonably satisfactory to
Lender, that Lender, subject to Permitted Encumbrances, 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 Permitted Encumbrances;
(b) all requisite corporate action and proceedings in connection
with the Financing Agreements shall be satisfactory in form and substance to
Lender, and Lender shall have received all information and copies of all
documents, including, without limitation, 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 event or circumstance shall have occurred which has had or
could be reasonably expected to have a material adverse change in the assets or
business 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 under any of the 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 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) 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 the Financing Agreements, including,
without limitation: (i) acknowledgements by lessors, mortgagees and warehousemen
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; and
(ii) full subordination agreements of any indebtedness for borrowed money owing
by Borrower, including, without limitation, the subordination of shareholder and
inter-company loans;
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(f) Lender shall have received evidence of insurance and loss
payee endorsements required under the Financing Agreements, in form and
substance satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as first loss payee, as its interests may appear, or
an additional insured, as applicable;
(g) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrower and the Obligors with
respect to the Financing Agreements and such other matters as Lender may
reasonably request;
(h) the Financing Agreements and all instruments and documents
thereunder shall have been duly executed and delivered to Lender, in form and
substance reasonably satisfactory to Lender;
(i) Lender shall have received, in form and substance satisfactory
to Lender, an assignment of the keyman life insurance obtained for ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and an assignment of the cash surrender value
thereof, upon terms satisfactory to Lender;
(j) the Excess Availability as determined by Lender shall be at
least $2,500,000 after giving effect to the initial Revolving Loans made or to
be made hereunder on the Closing Date;
(k) Borrower shall have delivered to Lender, in form and substance
reasonably satisfactory to Lender, a legal opinion from Shearman & Sterling LLP,
opining that the execution, delivery and performance of the facility
contemplated herein by Borrower will not result in a breach of the provisions
of, or a default under, the Trust Indenture;
(l) Borrower shall have obtained and delivered to Lender, in form
and substance reasonably satisfactory to Lender, any consents which are required
in order to permit Borrower to enter into the Financing Agreements, including,
without limitation, consents required pursuant to the Senior Note Indebtedness
and any shareholders' agreement existing among the shareholders of Borrower;
(m) Lender and its counsel, acting reasonably, must be satisfied
with the form and content of Borrower's material agreements, including, without
limitation, financial guarantees, indemnification agreements, licensing
agreements, customer and supplier agreements and lawsuits and without limiting
the foregoing, Lender and its counsel, acting reasonably, must also be satisfied
with the form and content of all of the Operating Leases and Capital Leases of
Borrower and must be reasonably satisfied that the benefits received by Borrower
under each of the Operating Leases and Capital Leases are assignable to Lender
and any future assignees without the consent of any of the Clients;
(n) Lender shall have received, in form and substance satisfactory
to Lender, projections for the fiscal years ending December 31, 2003 and 2004 of
Borrower, prepared on a monthly basis, which shall include balance sheets,
income statements and cash flows, including, detail on a monthly basis
reflecting capital expenditures, repayment to long term debt, acquisitions and
financing required therefor; and
(o) Lender shall have received, in form and substance satisfactory
to Lender, a completed and executed Borrowing Base Certificate dated as of the
date hereof.
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4.2 CONDITIONS PRECEDENT TO THE AVAILABILITY OF ALL REVOLVING
LOANS AND LETTER OF CREDIT ACCOMMODATIONS
Each of the following is an additional condition precedent to
Lender making available the Revolving Loans and/or making available Letter of
Credit Accommodations to Borrower, including the initial Revolving Loans and
Letter of Credit Accommodations and any future Revolving Loans and Letter of
Credit Accommodations:
(a) all representations and warranties contained in the 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 Revolving 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 Revolving Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.
SECTION 5. INTENTIONALLY DELETED
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 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 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.
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6.3 COLLECTION OF ACCOUNTS
(a) Borrower shall establish and maintain, at its expense, blocked
accounts (the "BLOCKED ACCOUNTS"), as Lender may specify, and Lender may
establish and maintain bank accounts of Lender in Canada ("PAYMENT ACCOUNTS") 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, with the exception of payments received in
connection with Excluded Accounts, in the identical form in which such payments
are made, whether by cash, cheque or other manner. The banks at which the
Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are subject to the first priority security interest of
Lender, that the depository bank has no lien upon, or right to set-off against
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that upon receipt of Lender's notice that a
Cash Dominion Event has occurred and is continuing, the depository bank will,
without further inquiry, 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 shall be subject to the first priority
security interest of Lender and that all payments made, in accordance with this
Section, to such 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 to the extent of any outstanding
Obligations.
(b) Such payments made to the Payment Account (conditional upon
final collection which may be subject to fees, expenses and charges resulting
from things such as the dishonour of cheques), will be applied, for all
purposes, including for purposes of calculating the amount of the Revolving
Loans available to Borrower and of calculating interest on the Obligations, to
the Obligations on the same Business Day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
account on such day, and if not, then on the next Business Day. If Lender
receives funds in a Payment Account at any time at which no Obligations are
outstanding or in excess of then outstanding Obligations, Lender shall hold such
funds in trust for Borrower and shall, by no later than the Business Day
following receipt by Lender of: (i) immediately available funds in the Payment
Account, provided such payments and notice thereof are received in accordance
with Lender's usual and customary practices as in effect from time to time; and
(ii) a direction from Borrower to advance such funds, advance such excess funds
to the Blocked Account. Lender shall no later than the Business Day following
the day on which there ceases to be a Cash Dominion Event, deliver to the bank
at which the Blocked Account is maintained an executed "Unblocked Notice" in the
form attached to the Blocked Account Agreement.
(c) Borrower and all of its affiliates, Subsidiaries,
shareholders, directors, employees or agents shall receive, subject to the first
priority security interest of Lender, any monies, cheques, notes, drafts or any
other payment relating to and/or proceeds of Accounts or other
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Collateral, with the exception of Excluded Accounts, 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 remit the
same or cause the same to be remitted, in kind, to Lender. Borrower agrees to
reimburse Lender on demand for any amounts owed or paid by Lender 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 required 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 in Canada as Lender may designate
from time to time. Lender may, after the occurrence and continuance of an Event
of Default, 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 Obligations, whether or not then
due, in such order and manner as Lender determines. Payments and collections
received in any currency other than Canadian Dollars or US Dollars will be
accepted and/or applied at the sole discretion of Lender. At Lender's option,
all principal, interest, fees, costs, expenses and other charges provided for in
the 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
set-off, counterclaim, defence, 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. Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. The indemnification in the second preceding
sentence shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 AUTHORIZATION TO MAKE REVOLVING LOANS AND LETTER OF CREDIT
ACCOMMODATIONS
Lender is authorized to make the Revolving Loans and provide
the Letter of Credit Accommodations based upon written instructions received
from the persons authorized by Borrower as notified in writing by Borrower to
Lender from time to time or, at the discretion of Lender, if such Revolving
Loans are necessary to satisfy any Obligations. All requests for Revolving 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. Toronto time on any day shall be deemed to
have been made as of the opening of business on the immediately following
Business Day. All Revolving Loans and Letter of Credit
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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 Revolving Loans
provided by Lender to Borrower hereunder for costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of the
Financing Agreements and any remaining proceeds and 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
(a) Borrower shall provide Lender with the following documents in
a form satisfactory to Lender: (a) on a monthly basis within twenty (20) days
after each month end or more frequently as Lender may request: (i) agings of
accounts payable; and (ii) copies of bank statements and trial balances; (b)
within twenty (20) days after each month end or more frequently as Lender may
request, a duly completed and executed Borrowing Base Certificate together with
any information which Lender reasonably requests in connection therewith which
Borrowing Base Certificate shall, in no event, be deemed to limit, impair or
otherwise affect the rights of Lender contained in this Agreement and in the
event of any conflict or inconsistency between the calculations made in the
Borrowing Base Certificate and those made by Lender, those made by Lender shall
be binding and conclusive on Borrower absent manifest error; (c) on a weekly
basis, on the Monday of each week, and if such Monday does not fall on a
Business Day then on the next Business Day: (i) details of cash receipts, (ii) a
schedule, in the form attached herewith as Schedule 7.1(c)(ii) of the aggregate
amount of cash collections made by Borrower in the preceding week together with
evidence, in form and substance satisfactory to Lender, of the deposit of such
collections into the Blocked Accounts, and (iii) a schedule, in the form
attached herewith as Schedule 7.1(c)(iii) of the Trailing Cash Collections; and
(d) 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 or
maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes, at any time that an Event of Default
exists or has occurred and is continuing, 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.
(b) Borrower shall, at its expense: (i) once in any twelve (12)
month period, but at any time or times as Lender may request on or after an
Event of Default that is continuing, deliver or cause to be delivered to Lender
written appraisals as to all of the Collateral; and (ii) twice in any twelve
(12) month period, but at any time or times as Lender may request on or after an
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Event of Default that is continuing, deliver or cause to be delivered to Lender
written desktop appraisals as to all of the Collateral, in accordance with the
form, scope and methodology utilized in the Hilco Appraisal by the Appraiser,
addressed to Lender or upon which Lender is expressly permitted to rely.
7.2 ACCOUNTS COVENANTS
(a) Borrower shall promptly upon becoming aware thereof, notify
Lender 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,
defences or counterclaims by any Account debtor, or any material disputes with
Account debtors, or any material settlement, adjustment or compromise thereof;
and (ii) all material adverse information relating to the financial condition of
any Account debtor. 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
good commercial practice. 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) 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; (ii) no payments shall be made thereon except payments
immediately deposited into the Blocked Accounts 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 permitted
in this Agreement and except for credits, discounts, allowances or extensions
made or given in the ordinary course of Borrower's business in accordance with
good commercial practice; (iv) there shall be no set-offs, deductions, contras,
defences, counterclaims or material disputes existing or asserted with respect
thereto except as reported to Lender in accordance with the terms of this
Agreement; and (v) none of the transactions giving rise thereto will violate any
applicable federal or provincial laws or regulations, all 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.
(c) At any time that an Event of Default exists or has occurred
and is continuing, Lender shall have the right, acting in good faith, 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.
(d) 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.
(e) 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
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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 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 satisfactory to Lender, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of
Inventory, Borrower's cost therefor and monthly 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 that is continuing, and promptly following such
physical inventory shall supply Lender with a report in the form and with such
specificity as may be satisfactory to Lender concerning such physical count; (c)
Borrower shall not, other than as permitted herein, including, without
limitation, pursuant to Section 9.7(b), remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Lender,
except for sales and movement 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) 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; (e) Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory; (f) 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; (g) Borrower shall keep the Inventory in good and
marketable condition; and (h) 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) Borrower shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (b) 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; (c) the Equipment is and shall be
used in Borrower's business and not for personal, family or household use; (d)
Borrower shall not, other than as permitted herein, including, without
limitation, pursuant to Section 9.7(b),
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remove any Equipment from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales (as permitted in section
9.7(b) hereof) and movement of Equipment in the ordinary course of Borrower's
business and except to move Equipment directly from one location set forth or
permitted herein to another such location; (e) 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 (f) Borrower assumes all
responsibility and liability arising from the use of the Equipment.
7.5 IP COLLATERAL COVENANTS
With respect to the IP Collateral:
(a) Borrower shall notify Lender forthwith in writing:
(i) of the failure of any licensee, if any, to pay or
perform any material obligations due to the Borrower
in respect of the License Agreements (as such term is
defined in the General Security Agreement);
(ii) of any reason any patent, patent application, patent
registration, trademark, trademark application,
trademark registration, copyright, copyright
application, copyright registration, industrial
design application or industrial design registration
forming part of the material IP Collateral or any
other application, registration or proceeding
relating to any of the material IP Collateral may
become barred, abandoned, refused, rejected,
forfeited, withdrawn, expired, lapsed, cancelled,
expunged, opposed or dedicated or of any adverse
determination or development (including, without
limitation, the institution of any proceeding in any
Intellectual Property Office or any court or
tribunal) regarding the Borrower's ownership of or
rights in any of the material IP Collateral, its
right to register or otherwise protect the same, or
to keep and maintain the exclusive rights in same, or
the validity of same; or
(iii) of any action, proceeding, or allegation that the IP
Collateral infringes upon, misappropriates, violates,
or otherwise interferes with the rights of any
Person.
(b) Borrower shall do everything commercially necessary or
desirable to preserve and maintain the IP Collateral. Particularly, and without
limiting the foregoing, unless the Borrower receives the prior written consent
of Lender to the contrary, the Borrower shall do each of the following:
(i) perform all obligations pursuant to the License
Agreements;
(ii) commence and prosecute such suits, proceedings or
other actions for infringement, passing off, unfair
competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the
IP Collateral;
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(iii) enforce its rights under any agreements (including
without limitation the License Agreements) which
enhance the value of and/or protect the IP
Collateral;
(iv) make all necessary filings and recordings in the
Intellectual Property Offices and elsewhere necessary
to protect its interest in the Collateral, including
protection of any new IP Collateral arising in the
Collateral, including, without limitation making,
maintaining and pursuing (including, without
limitation, proceedings before Intellectual Property
Offices) each application and registration with
respect thereto; and
(v) promptly notify Lender in writing when it commences
any steps referred to in subsections 7.5(b)(ii) and
7.5(b)(iii) hereof and provide Lender with such
information with respect thereto as Lender may
request.
(c) Borrower shall not other than in the ordinary course of its
business prior to an Event of Default that is continuing, without the prior
written consent of Lender, amend, enter into or renew any agreement, oral or
written, or any indenture, instrument or undertaking relating to the IP
Collateral, including, without limitation, the License Agreements or any other
license agreements and/or sub-license agreements, provided however that the
Borrower may at any time prior to an Event of Default terminate, amend, enter
into or renew any agreement, oral or written, or any indenture, instrument,
undertaking or license (other than exclusive licenses) relating to the IP
Collateral, in the ordinary course of its business.
(d) The Borrower shall at the Borrower's sole cost and expense
perform all acts and execute all documents, including, without limitation,
grants of security interests or assignments other than in respect of Trade-Marks
in forms suitable for filing with the Intellectual Property Offices in Canada
and the United States, as may be requested by Lender at any time and from time
to time to evidence, perfect, maintain, record and enforce Lender's interest in
the IP Collateral, or otherwise in furtherance of the provisions of this
Agreement.
(e) The Borrower shall:
(i) unless Lender consents in writing otherwise, not do
any act or omit to do any act, other than in the
ordinary course of its business, whereby any of the
IP Collateral, may lapse, become abandoned or
dedicated to the public, enter the public domain,
lose its quality of confidence, become indistinct, or
become unenforceable;
(ii) unless Lender consents in writing otherwise, or
unless the failure to so act would not reasonably be
expected to have a material adverse effect on the
business of Borrower, with respect to any Trade-▇▇▇▇
forming part of the Collateral:
(A) continue the use of any such Trade-marks in
order to maintain all of the Trade-marks in
full force free from any claim of
abandonment;
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(B) maintain as in the past the character and
quality of the wares and services offered in
association with such Trade-marks, and use
its reasonable best efforts to require its
licensees to maintain as in the past the
character and quality of the wares and
services offered in association with such
Trade-marks; and
(C) require that all use by any Person of any
such Trade-marks shall be pursuant to a
license that provides the Borrower with the
requisite control and other provisions to
maintain the distinctiveness of such
Trade-marks.
7.6 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 the Capital Leases, the
Operating Leases 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 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, (ix) do all acts and things which are
necessary, in Lender's determination, to fulfil Borrower's obligations under the
Financing Agreements, (x) have access to any lockbox or postal box into which
Borrower's mail is deposited, (xi) endorse Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral, and
(xii) sign Borrower's name on any verification of Accounts and notices thereof
to account debtors, (b) at any time an Event of Default and/or a Cash Dominion
Event exists or has occurred and is continuing to: (i) endorse Borrower's name
upon any items of payment or proceeds thereof and deposit the same in the
Lender's account for application to the Obligations; and (ii) take control in
any manner of any item of payment or proceeds thereof (to the extent that the
Blocked Account instructions are not otherwise respected); and (c) at any time,
to execute in Borrower's name and file any PPSA, UCC or other financing
statements or amendments thereto in respect of the security interests granted to
Lender pursuant to any of the Financing Agreements if Borrower has not done so
within two (2) days from Lender's request. Borrower hereby releases Lender and
its 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.
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7.7 RIGHT TO CURE
Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, 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 good faith 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.
7.8 ACCESS TO PREMISES
(a) From time to time as requested by Lender, at the cost and
expense of Borrower: (i) Lender or its designee shall have complete access to
all of Borrower's premises during normal business hours and after reasonable
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, without limitation, the Records; and (ii) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (iii) 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.
(b) Provided that an Event of Default has not occurred and is
continuing, Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information made available
by Borrower to Lender pursuant to Section 7.8(a), and all copies thereof,
provided that, nothing in this Section 7.8(b) shall limit the disclosure of any
such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order; (ii) to bank examiners and other regulators, auditors
and/or accountants; (iii) in connection with any litigation to which Lender is a
party; (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant), as applicable, shall have first agreed in writing to treat such
information as confidential in accordance with this Section 7.8(b); and (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee). In no event shall this Section 7.8(b), or any other provision of this
Agreement or any applicable law be deemed to: (i) apply to or restrict
disclosure of information that has been or is made public by Borrower or any
third party without breach by Lender of this Section 7.8(b) or otherwise become
generally available to the public other than as a result of a disclosure in
violation hereof; (ii) apply to or restrict disclosure of information that was
or becomes available to Lender on a non-confidential basis
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from a person other than Borrower; (iii) require Lender to return any materials
furnished by Borrower to Lender; or (iv) prevent Lender from responding to
routine informational requests in accordance with applicable industry standards
relating to the exchange of credit information.
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
Revolving Loans and providing Letter of Credit Accommodations by Lender to
Borrower:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES
Borrower is a corporation duly incorporated, validly existing
and duly organized under the laws of its jurisdiction of incorporation and is
duly qualified or registered as a foreign or extra-provincial corporation in all
provinces, 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 operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of the Financing Agreements
and the transactions contemplated 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. The
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 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 and to
move Inventory and Equipment as permitted in Sections 7.3 and 7.4 respectively.
The Information Certificate correctly identifies any of such locations which are
not
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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 the
Financing Agreements constitute, subject to Permitted Encumbrances, 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, hypothecs, 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
(with extensions) all tax returns, reports and declarations which are required
to be filed by it (except those in respect of taxes the calculation or payment
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and except for those returns for those
jurisdictions in which failure to do so would not have a material adverse effect
on the financial condition of Borrower). 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 all
accrued and unpaid federal, provincial, municipal, 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 in each of the foregoing cases, can reasonably be expected
to result in any material adverse change in the assets or business of Borrower
or would impair the ability of Borrower to perform its obligations under any of
the 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 material terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound, including, without
limitation, the Capital Leases and the Operating Leases and Borrower is in
compliance
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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 9.17 below.
8.9 ACCURACY AND COMPLETENESS OF INFORMATION
All information furnished by or on behalf of Borrower in
writing to Lender in connection with any of the Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate 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, in
addition, the Information Certificate attaches the form(s) of the agreements
used for all the Capital Leases and Operating Leases, together with a breakdown
of which agreements constitute Capital Leases and which agreements constitute
Operating Leases, together with any and all exceptions thereto, have been
delivered to Lender for review. The Borrower represents and warrants that none
of the Capital Leases or Operating Leases include contractual provisions
restricting the assignability thereof, to Lender or to an assignee of the Lender
upon exercise of the Financing Agreements, with the exception of those
restrictive provisions set out on Schedule 8.9 hereof. No event or circumstance
has occurred which has had or could reasonably be expected to have a material
adverse affect on the business or assets of Borrower, which has not been fully
and accurately disclosed to Lender in writing.
8.10 STATUS OF PENSION PLANS
To the best knowledge of Borrower:
(a) The Pension Plans are duly registered under all applicable
provincial pension benefits legislation.
(b) All obligations of Borrower (including fiduciary, funding,
investment and administration obligations) required to be performed in
connection with the Pension Plans or the funding agreements therefor have been
performed in a timely fashion. There are no outstanding disputes concerning the
assets held pursuant to any such funding agreement.
(c) All contributions or premiums required to be made by Borrower
to the Pension Plans have been made in a timely fashion in accordance with the
terms of the Pension Plans and applicable laws and regulations.
(d) All employee contributions to the Pension Plans required to be
made by way of authorized payroll deduction have been properly withheld by
Borrower and fully paid into the Pension Plans in a timely fashion.
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(e) All reports and disclosures relating to the Pension Plans
required by any applicable laws or regulations have been filed or distributed in
a timely fashion.
(f) There have been no improper withdrawals, or applications of,
the assets of any of the Pension Plans.
(g) No amount is owing by any of the Pension Plans under the
Income Tax Act (Canada) or any provincial taxation statute.
(h) The Pension Plans are fully funded both on an ongoing basis
and on a solvency basis (using actuarial assumptions and methods which are
consistent with the valuations last filed with the applicable governmental
authorities and which are consistent with generally accepted actuarial
principles).
(i) Borrower, after diligent enquiry, has neither any knowledge,
nor any grounds for believing, that any of the Pension Plans is the subject of
an investigation, any other proceeding, an action or a claim. There exists no
state of facts which after notice or lapse of time or both could reasonably be
expected to give rise to any such proceeding, action or claim.
8.11 ENVIRONMENTAL COMPLIANCE
(a) Borrower has not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder which may be
expected to have a material adverse effect on Borrower and the operations of
Borrower comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) There is no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or any other
person nor is any pending or to the best of Borrower's knowledge threatened,
with respect to any non-compliance with or violation of the requirements of any
Environmental Law by Borrower or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials.
(c) Borrower has no material liability (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect.
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(e) Borrower does not maintain and is not required by applicable
law or otherwise to establish and maintain a system to assure and monitor its
continued compliance with all Environmental Laws in all of its operations. In
the event Borrower establishes such a system it shall include annual reviews of
such compliance by employees or agents of Borrower who are familiar with the
requirements of the Environmental Laws and copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrower to Lender
all at Borrower's expense.
8.12 INTER-CREDITOR AND SUBORDINATION AGREEMENTS
There are no intercreditor agreements and/or subordination
agreements to which Borrower and/or any Obligor is a party.
8.13 SURVIVAL OF WARRANTIES; CUMULATIVE
All representations and warranties contained in any of the
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. 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.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE
Except to the extent otherwise permitted herein, 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
fifteen (15) 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 certified copy of the Articles of Amendment of Borrower providing for
the name change immediately following its filing.
9.2 NEW COLLATERAL LOCATIONS
Borrower may open any new location within Canada or the United
States of America 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 necessary or desirable
to protect its interests in the Collateral at such location, including PPSA, UCC
and other financing statements and such other evidence as Lender may require of
the perfection of Lender's first priority security interests and liens where
required by Lender.
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9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, Provincial or
local governmental authority, including, without limitation, all statutes,
rules, regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including, without limitation, all of
the Environmental Laws except for any matter that Borrower is contesting in good
faith by appropriate proceedings diligently pursued and which is not reasonably
expected to have a material adverse effect on Borrower or its property,
operations, business, prospects or conditions (financial or otherwise).
(b) Borrower shall take prompt and appropriate action to respond
to any non-compliance with any of the Environmental Laws and shall regularly
report to Lender on such response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of: (i) the occurrence of any event involving the actual
release, spill or discharge of any Hazardous Material that would be in violation
of Environmental Laws; or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by Borrower, or (B) the release,
spill or discharge, threatened or actual, of any Hazardous Material, or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials, or (D) any other
environmental, health or safety matter, which affects any Borrower or its
business, operations or assets or any properties at which Borrower transported,
stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, if is
non-compliance, or any condition which requires any action by or on behalf of
Borrower in order to avoid any material non-compliance, with any Environmental
Law, Borrower shall, at Lender's request and Borrower's expense: (i) cause an
independent environmental engineer acceptable to Lender to conduct such tests of
the site where Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non- compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof; and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or Borrower's response thereto or the estimated costs thereof,
shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including reasonable legal fees and expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrower and the preparation and implementation of any closure,
remedial or other required plans. All
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representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
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 Revolving Loans, provided, that, nothing contained herein
shall be construed to require Borrower to pay any income, capital, financial
institution 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
(a) Borrower shall, at all times, maintain with financially sound
and reputable insurers insurance 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, acting in good faith, 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 of Default exists or has occurred and is
continuing, adjusting, settling, amending and cancelling such insurance.
(b) Borrower shall cause Lender to be named as a loss payee and/or
an additional insured, as applicable (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
(other than third party liability policies) in form and substance satisfactory
to Lender. Such lender's loss payable endorsements shall specify that at any
time an Event of Default exists or has occurred and is continuing, the proceeds
of such insurance shall all be payable to Lender as its interests may appear and
at all other times in accordance with this Section 9.5(c).
(c) Subject to Section 9.5(b)(ii) hereof, the proceeds of
insurance:
(i) which are equal to or less than $2,000,000 per
occurrence shall be payable to Borrower;
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(ii) which are greater than $2,000,000 and less than
$10,000,000 per occurrence, shall be payable to
Borrower and Borrower shall provide Lender with
evidence, satisfactory to Lender in its discretion,
that such Collateral can be repaired and/or replaced
within one hundred and eighty (180) days from the
date Borrower receives such proceeds. Borrower shall
forthwith apply such proceeds to the costs of
repairing and/or replacing the Collateral within such
one hundred and eighty (180) day period otherwise
Borrower shall remit all such proceeds directly into
the Payment Account and dealt with in accordance with
Section 6.3 hereof; or
(iii) which are greater than $10,000,000 per occurrence,
shall be payable directly to Lender and in the event
that such Collateral can be repaired and/or replaced
within one hundred and eighty (180) days from the
date Lender receives such proceeds, Borrower shall
provide evidence, within five (5) days from the date
Lender receives such proceeds, to Lender that such
Collateral can be repaired and/or replaced within
such one hundred and eighty (180) days and if such
evidence is satisfactory Lender, in its discretion,
Lender shall release such insurance proceeds to
Borrower. Borrower shall forthwith apply such
proceeds to the costs of repairing and/or replacing
the Collateral within such one hundred and eighty
(180) days, in the event Borrower does not provide
Lender with the evidence required within five (5)
days from the date Lender receives such proceeds,
Lender shall forthwith remit such proceeds to the
Payment Account to be dealt with in accordance with
Section 6.3 hereof.
(d) notwithstanding anything to the contrary contained in Section
9.5(c) hereof, insurance proceeds received in respect of:
(i) Collateral comprised of real property shall be
payable directly into the Payment Account and dealt
with in accordance with Section 6.3 hereof;
(ii) proceeds of the keyman insurance policies, or cash
surrender value thereof, assigned to Lender pursuant
to Section 4.1(i) hereof, shall be payable to Payment
Account and dealt with in accordance with Section 6.3
hereof; and
(iii) proceeds of business interruption insurance assigned
to Lender, shall be payable to the Payment Account
and dealt with in accordance with Section 6.3 hereof.
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 thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements (including in each case balance
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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; (ii) within one hundred and twenty
(120) days after the end of each fiscal year, audited consolidated financial
statements of Borrower and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of changes in financial
position and statements of shareholders' equity), and the accompanying notes
thereto, including any consolidating worksheets prepared on a quarterly basis in
connection therewith, 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 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; (iii) by
January 15 of each year, projections for such fiscal year; and (iv) as Lender
may from time to time reasonably request, and provided that Borrower prepares
such information in the ordinary course of business, budgets, forecasts,
business plans, cash flows and other information respecting the Collateral and
the business of Borrower.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations and 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.
(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 shareholders generally and copies of all reports and registration
statements which Borrower files with any provincial securities commission or
securities exchange.
(d) 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, if legally required to do so, or to any
participant or assignee or prospective participant or assignee. Borrower hereby
irrevocably authorizes and directs, at any time an Event of Default exists or
has occurred and is continuing, all accountants or auditors to deliver to
Lender, at Borrower's expense, copies of the financial statements of Borrower
and any 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. 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.
(e) Borrower shall within ten (10) days after the end of each
month provide a certificate of a senior officer of Borrower, in form and content
satisfactory to Lender, certifying that Borrower has paid in full: (i) all rent
and other amounts due and payable with respect to any premises, with the
exception of theatres owned and operated by Borrower, leased by Borrower
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or any Obligor during such month; and (ii) all payments and other amounts due
and payable with respect to any Pension Plan during such month.
(f) Borrower shall within thirty (30) days after the end of each
month provide a compliance certificate, in form and content satisfactory to
Lender, with respect to EBITDA of Borrower, guarantees entered into by Borrower
and such other matters relating to Borrower as Lender may from time to time
request.
9.7 SALE OF ASSETS, CONSOLIDATION, AMALGAMATION, DISSOLUTION, ETC.
(a) Borrower shall not, directly or indirectly, without the prior
written consent of Lender which is not to be unreasonably withheld or unless
otherwise permitted herein: (i) amalgamate with any other Person or permit any
other Person to amalgamate with it, or (ii) sell, assign, lease, transfer,
abandon or otherwise dispose of any Collateral to any other Person, or (iii)
form or acquire any Subsidiaries, or (d) wind up, liquidate or dissolve or (iv)
agree to do any of the foregoing.
(b) Notwithstanding Section 9.7(a) hereof and provided that an
Event of Default does not then exist, Borrower shall be permitted to: (i) sell
Inventory in the ordinary course of business; (ii) sell Equipment at fair market
value in the ordinary course of business; (iii) dispose of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower; (iv) except
as permitted in this Section 9.7(b), sell assets at fair market value provided
that such assets are not real property or IP Collateral; (v) sell assets which
include intellectual property as an incidental component of such asset, provided
such sale does not materially diminish or impair the IP Collateral to be
retained by Borrower hereunder; (vi) amalgamate with an Affiliate or permit an
Affiliate to amalgamate with it provided that prior to the completion of such
amalgamation Lender shall be entitled to obtain and perfect a security interest
from such Affiliate and/or amalgamated entity, in form and substance
substantially similar to that obtained from the Obligors existing as at the date
hereof, or that obtained from Borrower, if applicable; (vii) form or acquire any
Subsidiaries provided that Lender shall be provided with thirty (30) days prior
written notice of same and further provided that Lender shall be entitled to
obtain and perfect a security interest from such Subsidiary, in form and
substance substantially similar to that obtained from the Obligors existing as
at the date hereof; and (viii) form or acquire any single purpose Subsidiaries
for the purpose of entering into the joint ventures and the third party
productions permitted pursuant to Section 9.10 hereof.
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
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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, rights-of-way, easements,
licenses, covenants and other restrictions affecting the use of real property
which do 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 appraised value of the real property which may
be subject thereto and the liens permitted in the Charge to be registered in
favour of Lender in respect of the property municipally known as ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate not to
exceed $50,000 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; (f) the security interests, mortgages, pledges, liens, charges or other
encumbrances set forth on Schedule 8.4 hereto; (g) liens securing performance of
bids, contracts, statutory obligations, surety, performance and appeal bonds and
other like obligations incurred in the ordinary course of business, (h) pledges
or deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
legislation; and (i) liens securing indebtedness of a person acquired by or
amalgamated with the Borrower or liens securing indebtedness incurred in
connection with an acquisition, provided in all such cases that such acquisition
or amalgamation, as the case may be, is not prohibited hereunder and provided
further that such liens were in existence prior to the date of such acquisition,
and were not incurred in anticipation thereof and do not extend to assets other
than those acquired. (all of the foregoing being sometimes collectively referred
to herein as "PERMITTED ENCUMBRANCES").
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 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 the indebtedness, existing as of the date hereof, in respect of
letters of credit obligations with the Bank of Montreal and the Toronto-Dominion
Bank; (e) the Senior Note Indebtedness; (f) the indebtedness incurred pursuant
to a Permitted Refinancing; (g) regularly scheduled payments of interest and
scheduled payment of principal on maturity each in respect of the Senior Note
Indebtedness and each in accordance with the terms of the Trust Indenture; (h)
upon an issue of additional equity, redeem up to 35% of the aggregate principal
amount of Securities (as such term is defined in the Trust Indenture) in
accordance with the terms set out in Section 1101 of the Trust Indenture; and
(i) enter into private placement transactions in respect of the Senior Notes
pursuant to Section 3(a)(9) of the Securities Act of 1933. For greater certainty
and without limiting the foregoing Borrower shall not, directly or
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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 except that Borrower may amend, modify, alter or change the terms of the
Senior Note Indebtedness only with the prior written consent of Lender, in its
discretion, or (b) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose except that Borrower may redeem, retire, defease, purchase or otherwise
acquire the Senior Note Indebtedness (including, necessary amendments to the
Senior Notes and Trust Indenture in respect thereof) only with the prior written
consent of Lender, in its discretion. 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, ETC.
Borrower shall not, directly or indirectly, without the prior
written consent of Lender which is not to be unreasonably withheld, 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 shares 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, except: (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 Canadian Government and
the U.S. Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of Borrower or to bearer and
delivered to Lender, (iii) commercial paper rated A1 or P1; and (iv) term
deposits with the Bank of Montreal and the Toronto-Dominion Bank existing as of
the date hereof; (c) financial guarantees in an amount less than $7,000,000; (d)
in respect of the Senior Note Indebtedness in the manner provided in Section 9.9
hereof; (e) the redemption of the Senior Note Indebtedness by Borrower in
exchange for equity in value equal to or less than the Senior Note Indebtedness,
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; (f) the 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; (h) purchase or repurchase any and all shares, interest, participations
or other equivalents in Borrower's capital stock or other equity interests at
any time outstanding, and any and all rights, warrants or options exchangeable
for or convertible into such capital stock or other interests (excluding any
debt security that is exchangeable for or convertible into such capital stock);
(h) enter into joint ventures, acting as a prudent investor, with strategic
partners for the purpose of advancing Borrower's business provided that
Borrower's investment in such joint ventures, whether direct or indirect, shall
not, at any time and in the aggregate, exceed
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$10,000,000 and shall not result in a derogation of the value of the Collateral
or Lender's, subject to Permitted Encumbrances, first priority security interest
therein; (i) entering into Section 3(a)(9) of the Securities Act of 1933 private
placements transactions which are solely made in respect of the Senior Notes;
(j) make loans or advance money to Affiliates in the ordinary course of
Borrower's business; (k) with the proceeds of such issuance of shares in the
capital of Borrower, provided such proceeds are used in the ordinary course of
business and shall not, for further clarity, be subject to any other
restrictions on use contained herein; and (l) make payments to employees in
connection with the repurchase of phantom stock in the ordinary course of
business.
9.11 DIVIDENDS AND REDEMPTIONS
Subject to Section 9.10 hereof, Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares 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 (or set aside or otherwise deposit or invest any sums for
such purpose) for any consideration other than common shares 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
with the exception of redemptions of any securities, shares and/or options of
Borrower which are held by employees and/or insiders thereof.
9.12 TRANSACTIONS WITH AFFILIATES
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 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 to officers, employees and directors for
services rendered to Borrower in the ordinary course of business.
9.13 EBITDA
Borrower shall, at all times, maintain EBITDA, calculated
quarterly by Lender on a trailing four quarter basis, of not less than
$20,000,000. The EBITDA calculation for the first four quarters occurring
subsequent to the date hereof will be based on the historical results set forth
on Schedule 9.13 attached hereto until such time as there are a full four
quarters of post-closing results. The failure to comply with this Section 9.13
for a single fiscal quarter shall result in a Cash Dominion Event and the
failure to comply with this Section 9.13 for two or more successive fiscal
quarters shall result in an Event of Default under Section 10.1(a)(iv).
9.14 EXCESS AVAILABILITY
Borrower shall maintain a minimum Excess Availability of
$2,500,000 at all times.
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9.15 AGGREGATE BORROWINGS
At all times prior to the occurrence of an Event of Default or
an event which with notice or passage of time or both would constitute an Event
of Default and subject to Excess Availability, Borrower shall maintain a minimum
average daily principal balance of outstanding Revolving Loans of $2,500,000 and
if, and only if, Borrower does not maintain such average daily principal
balance, the applicable Interest Rate will not be charged on the difference
between the outstanding Revolving Loans and $2,500,000 however, the unused line
fee described in Section 3.4 hereof will be applied to the difference. If Lender
applies funds to reduce Obligations which results in the minimum average daily
principal balance of outstanding Revolving Loans being less than $2,500,000
following a Cash Dominion Event or application of insurance proceeds an Event of
Default will not occur provided that Borrower increases the minimum average
daily principal balance of outstanding Revolving Loans to $2,500,000 within
three (3) days.
9.16 INTELLECTUAL PROPERTY
In the event Borrower obtains or applies for any material
intellectual property rights or obtains any material licenses with respect
thereto, Borrower shall immediately notify Lender thereof and shall provide to
Lender copies of all written materials including, but not limited to,
applications and licenses with respect to such intellectual property rights. At
Lender's request, Borrower shall promptly execute and deliver to Lender an
intellectual property security agreement granting to Lender a perfected security
interest in such intellectual property rights in form and substance satisfactory
to Lender.
9.17 ADDITIONAL BANK ACCOUNTS
Borrower shall not, without the prior consent of Lender,
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 Blocked Accounts and the accounts set forth in
Schedule 8.8 hereto, except: (a) as to any new or additional Blocked 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; (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; and (c) as to any new Excluded
Accounts.
9.18 APPLICATIONS UNDER THE COMPANIES' CREDITORS ARRANGEMENT ACT
Borrower acknowledges that its business and financial
relationships with Lender are unique from its relationship with any other of its
creditors. Borrower agrees that it shall not file any plan of arrangement under
the CCAA ("CCAA PLAN") which provides for, or would permit directly or
indirectly, Lender to be classified with any other creditor of Borrower for
purposes of such CCAA Plan or otherwise.
9.19 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Borrower shall not, directly or indirectly, in respect of the
USERP: (i) pay or declare any payments thereunder other than those required to
be paid and due pursuant to the
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terms thereof; (ii) commence payment of contributions which Borrower had not
previously been contributing; (iii) amend, modify, alter or otherwise change the
terms thereof except for the purpose of reducing the pension benefit to the
applicable Borrower executive; or (iv) register the USERP or otherwise establish
a new similar registered plan.
9.20 OPERATION OF PENSION PLANS
(a) Borrower shall administer the Pension Plans in accordance with
the requirements of the applicable pension plan texts, funding agreements, the
Income Tax Act (Canada) and applicable provincial pension benefits legislation.
(b) Borrower shall deliver to Lender, upon Lender's request, an
undertaking of the funding agent for each of the Pension Plans stating that the
funding agent will notify Lender within thirty (30) days of Borrower's failure
to make any required contribution to the applicable Pension Plan.
(c) Borrower shall not accept payment of any amount from any of
the Pension Plans without the prior written consent of Lender other than
payments for forfeitures in connection with terminated employees to be set-off
against future contribution obligations.
(d) Without the prior written consent of Lender, Borrower shall
not terminate, or cause to be terminated, any of the Pension Plans, if such plan
would have a solvency deficiency on termination.
(e) Borrower shall promptly provide Lender with any documentation
relating to any of the Pension Plans as Lender may request. Borrower shall
notify Lender within 30 days of: (i) a material increase in the liabilities of
any of the Pension Plans; (ii) the establishment of a new registered pension
plan; and (iii) commencing payment of contributions to a Pension Plan to which
Borrower had not previously been contributing.
9.21 COSTS AND EXPENSES
Borrower shall pay to Lender on demand all reasonable 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, the 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 and UCC financing statement and other similar filing
and recording fees and taxes, documentary taxes, intangibles taxes and mortgage
recording taxes and fees, if applicable); (b) all insurance premiums, appraisal
fees and search fees; (c) reasonable costs and expenses of remitting loan
proceeds, collecting cheques and other items of payment, and establishing and
maintaining the Blocked Accounts, if any, and the Payment Accounts, together
with Lender's customary charges and fees with respect thereto; (d) 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) reasonable 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
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upon the Collateral, and otherwise enforcing the provisions of the Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including, without
limitation, preparations for and consultations concerning any such matters); (g)
all reasonable 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
$750 per person per day for Lender'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.
9.22 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 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 any of
the 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 Revolving 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 Revolving 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, UCC or other financing statements or notices
signed only by Lender or Lender's representative.
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:
(i) pay when due any principal due and payable hereunder
or subject to 10.1(a)(ii) hereof, fails to perform
any of the covenants contained in Section 9.14 of
this Agreement or fails to perform any of the
covenants contained in Section 9.18 of this
Agreement;
(ii) perform any of the covenants contained in Section
9.14 of this Agreement, where such failure to perform
is caused solely by the exercise of discretion on the
part of Lender pursuant to Section 2.1(b) hereof and
where such failure to perform is not remedied to the
satisfaction of Lender, in its sole discretion,
within three (3) days of the date on which such term
covenant, condition or provision was to be performed;
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(iii) fails to perform any of the covenants contained in
Section 6.3 of this Agreement, where such failure to
perform is not remedied to the satisfaction of
Lender, in its sole discretion, within one (1) day of
the original date on which such term, covenant,
condition or provision was to be performed;
(iv) pay when due any Obligations (other than principal)
or fails to perform any of the covenants contained in
Sections 6.6, 7.1, 7.2, 9.1, 9.2, 9.3, 9.5, 9.7, 9.8,
9.9, 9.10, 9.12, 9.13, 9.15 or 9.19 of this
Agreement, where such failure to pay or perform, as
applicable, is not remedied to the satisfaction of
Lender, in its sole discretion, within three (3) days
of the original date on which such term, covenant,
condition or provision was to be performed; or
(v) fails to perform any other terms, covenants,
conditions or provisions, or if any representations
and warranties hereunder proves to be false or
inaccurate when made, contained in this Agreement or
any of the other Financing Agreements, where such
failure to perform or to revise such representation
or warranty is not remedied to the satisfaction of
the Lender, in its sole discretion, within fifteen
(15) days from notice by Lender;
(vi) except as contemplated in Section 9.13 hereunder,
fails to maintain EBITDA of not less than
$20,000,000, for two or more successive fiscal
quarters, as calculated pursuant to Section 9.13
hereof;
(b) any Obligor:
(i) revokes or terminates any of the terms, covenants,
conditions or provisions of any Financing Agreement;
(ii) fails to pay principal required pursuant to the
terms, covenants, conditions or provisions of any
Financing Agreement;
(iii) fails to pay Obligations (other than principal)
required pursuant to the terms covenants, conditions
or provisions of any Financing Agreement where such
failure to pay is not remedied to the satisfaction of
Lender, in its sole discretion, within three (3) days
of the original date on which such payment was to be
made; or
(iv) fails to perform any other terms covenants,
conditions or provisions of any Financing Agreement,
where such failure to perform is not remedied to the
satisfaction of Lender, in its sole discretion,
within fifteen (15) days from notice by Lender;
(c) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $50,000 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
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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;
(d) Borrower dissolves, suspends or discontinues doing business,
any Obligor (which is a partnership, limited liability company, limited
partnership, limited liability partnership or a corporation) or any general
partner of an Obligor that is a general partnership dissolves, suspends or
discontinues doing business or any Obligor (who is a natural person) dies;
(e) Borrower or any Obligor becomes insolvent, makes an assignment
for the benefit of creditors, proposes to make, makes or sends notice of a bulk
sale or calls a meeting of its creditors or principal creditors;
(f) a petition, case or proceeding under the bankruptcy laws of
Canada 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 any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(g) a petition, case or proceeding under the bankruptcy laws of
Canada 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 or any Obligor for all or any part of its property
including, without limitation, if Borrower or any Obligor 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;
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(h) 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, contingent indebtedness in connection with any
guarantee, letter of credit, indemnity or similar type of instrument in favour
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, 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;
(i) any acquisition of control or change in the controlling
ownership of Borrower, if any, which may reasonably be expected to have a
material adverse effect on Borrower's financial condition;
(j) there shall be a change in the business or assets of Borrower
or any Obligor after the date hereof which is reasonably expected to have a
material adverse effect on Borrower or any Obligor;
(k) a requirement from the Minister of National Revenue for
payment pursuant to Section 224 or any successor section of the Income Tax Act
(Canada) or Section 317, or any successor section or any other Person in respect
of Borrower of the Excise Tax Act (Canada) or any comparable provision of
similar legislation shall have been received by Lender or any other Person in
respect of Borrower or otherwise issued in respect of Borrower; or
(l) the occurrence and continuance of an Event of Default (as such
term is defined in the Trust Indenture) which default has not been cured within
the applicable grace period provided in respect thereof or has not been waived
by the party so entitled to waive same.
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 the Financing
Agreements, the PPSA, UCC 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,
under any of the Financing Agreements, the PPSA, UCC 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 any of
the 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 and subject to Section 10.2(c)
hereof, 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 outstanding Obligations and demand immediate payment thereof
to Lender (provided, that, upon the occurrence of any Event of
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Default described in Sections 10.1(f) and 10.1(g), all outstanding 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 and carry on the business of Borrower; (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, set-off 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; (vii) without
limiting clause (vi), grant a general, special or other license in respect of
any aspect of the Collateral on an exclusive or non-exclusive basis to any
person throughout the world or any part of it and on such terms and on such
conditions as Lender may consider appropriate; (viii) enforce against any
licensee or other person all rights and remedies of the Borrower with respect to
all or any part of the Collateral, and take or refrain from taking any action
that the Borrower might take with respect to any of those rights and remedies,
and for this purpose Lender shall have the exclusive right to enforce or refrain
from enforcing those rights and remedies, and may in the name of the Borrower
and at its expense retain and instruct counsel and initiate any court or other
proceeding that Lender considers necessary or expedient; (ix) take any step
necessary to preserve, maintain or insure the whole or any part of the
Collateral or to realize upon any of it put it in vendable condition, and any
amount paid as a result of any taking any such steps shall be a cost the payment
of which is secured by this Agreement; (x) borrow money and use the Collateral
directly or indirectly in carrying on Borrower's business or as security for
loans or advances for any such purposes; (xi) require Borrower to immediately
begin using commercially reasonable efforts to obtain all consents and to
provide all notices to any Client, as applicable, which may be required to
permit Lender to assign the Eligible Capital Leases and Eligible Operating
Leases; (xii) grant extensions of time and other indulgences, take and give up
security, accept compositions, grant releases and discharges, and otherwise deal
with Borrower, debtors of Borrower, sureties and others as Lender may see fit
without prejudice to the liability of Borrower or Lender's right to hold and
realize the security interest created under any Financing Agreement; and/or
(xiii) 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, five (5) 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 be deemed 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.
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(c) Notwithstanding anything to the contrary contained in this
Section 10.2:
(i) (A) for the duration of the IP Grace Period,
Lender shall not be permitted to enforce its
security interest against the IP Collateral,
or to exercise its rights under Section
10.2(b)(vii) hereof except as permitted
pursuant to the IP Collateral License
Agreement;
(ii) (B) for the duration of the IP Grace Period,
Borrower shall be permitted to use the IMAX
name to carry on business;
(iii) (C) upon the commencement of the IP Grace
Period, Lender shall have, pursuant to the
IP Collateral License Agreement in favour of
Lender, a royalty-free, freely assignable
perpetual license to use the IP Collateral
required to enable Lender to perform the
obligations of the Borrower under the
Capital Leases and the Operating Leases; and
(iv) (D) upon the commencement of the IP Grace
Period, Lender may sell, transfer, assign
and/or otherwise dispose of the Collateral,
other than the IP Collateral, to any
transferee or assignee,
(v) subsequent to the expiry of the IP Grace
Period, provided that an Event of Default is
then continuing, Lender may sell, transfer,
assign and/or otherwise dispose of any of
the IP Collateral up to a maximum amount
equal to the outstanding Obligations
together with all costs, charges and
expenses incurred by Lender as a result of
enforcing against the IP Collateral.
(d) 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 enforcement including, without
limitation, legal costs and expenses.
(e) Without limiting the foregoing, upon the occurrence of an
Event of Default that is continuing, Lender may, at its option, without notice,
(i) cease making Revolving Loans or arranging 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 Revolving Loans or Letter of Credit
Accommodations to be made by Lender to Borrower
(f) Lender may appoint, remove and reappoint any person or
persons, including an employee or agent of Lender to be a receiver (the
"RECEIVER") which term shall include a receiver and manager of, or agent for,
all or any part of the Collateral. Any such Receiver shall, as far as concerns
responsibility for his acts, be deemed to be the agent of Borrower and not of
Lender, and Lender shall not in any way be responsible for any misconduct,
negligence or non-feasance of such Receiver, his employees or agents. Except as
otherwise directed by Lender, all money received by such Receiver shall be
received in trust for and paid to Lender.
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Such Receiver shall have all of the powers and rights of Lender described in
this Section 10.2. Lender may, either directly or through its agents or
nominees, exercise any or all powers and rights of a Receiver.
(g) Where Lender realizes upon any of the Collateral, and in
particular upon any of the IP Collateral, Borrower shall provide without charge
its know-how and expertise relating to the use and application of the
Collateral, and in particular shall instruct Lender, and any purchaser of the
Collateral designated by Lender, concerning any IP Collateral including without
limitation, any confidential information or trade secrets of Borrower. For
greater certainty, the parties agree that unless such confidential information
or trade secrets form part of the Collateral being realized upon, such
confidential information or trade secrets shall be provided for use only subject
to any agreement regarding the confidentiality thereof or for the protection
thereof as may be reasonably requested by the Borrower.
(h) Borrower shall pay all reasonable costs, charges and expenses
incurred by Lender or any Receiver or any nominee or agent of Lender, whether
directly or for services rendered (including, without limitation, solicitor's
costs on a solicitor and his own client basis, auditor's costs, other legal
expenses and Receiver remuneration) in enforcing any Financing Agreement and in
enforcing or collecting Obligations and all such expenses together with any
money owing as a result of any borrowing permitted hereby shall be a charge on
the proceeds of realization and shall be secured hereby.
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 the 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
laws of the Province of Ontario and the federal laws of Canada applicable
therein.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of Justice (Ontario) and waive
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under any of the Financing Agreements or in any way
connected with or related or incidental to the dealings of the parties hereto in
respect of any of the 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) To the extent permitted by law, Borrower hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by registered mail (return receipt requested)
directed to its address set forth on the signature pages hereof and
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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 ANY OF
THE FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF ANY OF THE
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 any Financing 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 wilful
misconduct.
(f) Borrower hereby expressly waives all rights of notice and
hearing of any kind prior to the exercise of rights by Lender from and after the
occurrence of an Event of Default that is continuing to repossess the Collateral
with judicial process or to replevy, attach or levy upon the Collateral or other
security for the Obligations. Borrower waives the posting of any bond otherwise
required of Lender in connection with any judicial process or proceeding to
obtain possession of, replevy, attach or levy upon the Collateral or other
security for the Obligations, to enforce any judgment or other court order
entered in favour of Lender, or to enforce by specific performance, temporary
restraining order, preliminary or permanent injunction or any other Financing
Agreement.
11.2 WAIVER OF NOTICES
Borrower hereby expressly waives demand, presentment, protest
and notice of protest and notice of dishonour 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, 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.
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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.
11.4 WAIVER OF COUNTERCLAIM
Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any nature (other than compulsory
counterclaims) 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, 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
any 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, without limitation, amounts paid in
settlement, court costs, and the fees and expenses of counsel. Such
indemnification shall not apply to losses, claims, damages, liabilities, costs
or expenses resulting from the gross negligence or wilful misconduct of Lender
and/or its employees, officers, directors and authorized agents as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
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.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM
(a) The Financing Agreements shall become effective as of the date
set forth on the first page hereof and shall continue in full force and effect
for a term ending on the earlier of: (i) the date which is 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, each of Lender
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and Borrower may, provided mutually agreed, extend the original Renewal Date to
the date three hundred sixty-five (365) days from the Renewal Date by giving the
other party, as applicable, notice at least sixty (60) days prior to the Renewal
Date and in the event such option to extend the original Renewal Date to the
date three hundred sixty-five (365) days from the original Renewal Date is
exercised by Lender or Borrower, Borrower shall pay to Lender, upon the date
such option is exercised, a fully earned additional commitment fee in the amount
of $50,000.00. Lender or Borrower may terminate the 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, all Financing Agreements must be terminated simultaneously. 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 to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including legal fees and expenses, 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 Canadian Dollars 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, Toronto time.
(b) No termination of any of the Financing Agreements shall
relieve or discharge Borrower of its respective duties, obligations and
covenants under the 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, under the Financing
Agreements and applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid.
(c) If this Agreement is terminated by Borrower prior to the end
of the then current term or renewal term of this Agreement or by Lender pursuant
to its right to terminate pursuant to Section 10.2, 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
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(i) 1.5% of Maximum Credit - From the date hereof to and including the first
anniversary of the date hereof.
(ii) 1.0% of Maximum Credit - After the first anniversary of the date hereof to and
including the second anniversary of the date hereof.
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(iii) 0.5% of Maximum Credit - After the second anniversary of the date hereof to and
including the third anniversary of the date hereof and
if the term of this Agreement is extended for an
additional year, then to and including the end of the
then current term.
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(f) and 10.1(g) hereof, 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 any applicable reorganization or insolvency legislation. The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations.
(d) Notwithstanding anything else herein, if at any time during
the term of this Agreement, the amount that would otherwise have been available
to be borrowed hereunder by Borrower has been reduced as a result of the
exercise of any discretion by Lender by an amount that, when aggregated, exceeds
$4,000,000, then Borrower may terminate this Agreement, without penalty and
without any early termination fee (including under this Section 12.1), provided
that each of the following conditions is satisfied: (i) Borrower shall have
notified Lender of its intention to terminate this Agreement within ninety (90)
days of notice to Lender that the aforementioned $4,000,000 threshold has been
reached (the "NOTICE"); (ii) all of the Obligations shall be fully and
indefeasibly satisfied within sixty (60) days after delivery of the Notice to
Lender, and (iii) Lender shall not have previously sent any written notice to
Borrower of its intention to terminate this Agreement in accordance with the
terms hereof. Notwithstanding the foregoing sentence, a reduction in
availability as a result of due but unpaid tax obligations, past due trade
payables and/or the establishment of a Priority Payables Reserve shall not be
considered in the calculation of the aforementioned $4,000,000 threshold. The
failure of Borrower to exercise its rights under the foregoing provision at any
time does not preclude its right to exercise such rights at a future time.
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 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 registered 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
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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
The 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 the 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 the Financing Agreements at any time: (a) assign,
or sell participations in, all or any part of the Revolving Loans, the Letter of
Credit Accommodations or any other interest herein to another financial
institution that is not a non-resident in Canada, other than a direct competitor
of Borrower; and (b) after an Event of Default exists or has occurred and is
continuing, assign, or sell participations in, all or any part of the Revolving
Loans, the Letter of Credit Accommodations or any other interest herein to
another financial institution or other Person, which in each circumstance, 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
The 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.
12.6 HEADINGS
The division of this Agreement into Sections and the insertion
of headings and a table of contents are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement.
12.7 JUDGMENT CURRENCY
To the extent permitted by applicable law, the obligations of
Borrower in respect of any amount due under this Agreement shall,
notwithstanding any payment in any other currency (the "OTHER CURRENCY")
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in the currency in which it is due (the "AGREED CURRENCY") that
Lender may, in accordance with normal banking procedures, purchase with the sum
paid in the Other Currency (after any premium and costs of exchange) on the
Business Day immediately after the day on which Lender receives the payment. If
the amount in the Agreed Currency that may be so purchased for any reason falls
short of the amount originally due, Borrower shall pay
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all additional amounts, in the Agreed Currency, as may be necessary to
compensate for the shortfall. Any obligation of Borrower not discharged by that
payment shall, to the extent permitted by applicable law, be due as a separate
and independent obligation and, until discharged as provided in this Section,
continue in full force and effect.
12.8 COUNTERPARTS AND FACSIMILE
This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original, and
such counterparts together shall constitute one and the same agreement. The
delivery of a facsimile copy of an executed counterpart of this Agreement shall
be deemed to be valid execution and delivery of this Agreement, but the party
delivering a facsimile copy shall deliver to the other party an original copy of
this Agreement as soon as possible after delivering the facsimile copy.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL IMAX CORPORATION
CORPORATION (CANADA)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: VP, Loan Officer Title: Executive Vice President, Business
and Legal Affairs
By: /s/ G. ▇▇▇▇ ▇▇▇▇
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Title: Sr. Vice President, Legal Affairs
Address: Address of Chief Executive Office:
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