EXHIBIT 10.36
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LOAN AGREEMENT
Made as of December 3, 2001
Between
CONGRESS FINANCIAL CORPORATION (CANADA)
as Lender
and
CATALINA LIGHTING CANADA, (1992) INC. /
LUMIERES CATALINA CANADA, (1992) INC.
as Borrower
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McMillan ▇▇▇▇▇
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BARRISTERS & SOLICITORS
TABLE OF CONTENTS
SECTION 1 - INTERPRETATION..................................................................... 1
1.1 Definitions....................................................................... 1
SECTION 2 - CREDIT FACILITIES.................................................................. 11
2.1 Revolving Loans................................................................... 11
2.2 Availability Reserves............................................................. 12
SECTION 3 - INTEREST AND FEES.................................................................. 12
3.1 Interest.......................................................................... 12
3.2 Closing Fee....................................................................... 13
3.3 Facility Fee...................................................................... 13
3.4 Servicing Fee..................................................................... 13
3.5 Unused Line Fee................................................................... 13
3.6 Payments.......................................................................... 14
SECTION 4 - CONDITIONS PRECEDENT............................................................... 14
4.1 Conditions Precedent to Initial Loans............................................. 14
4.2 Conditions Precedent to All Loans................................................. 15
SECTION 5 - INTENTIONALLY DELETED.............................................................. 15
SECTION 6 - COLLECTION AND ADMINISTRATION...................................................... 15
6.1 Borrower's Loan Account........................................................... 15
6.2 Statements........................................................................ 16
6.3 Collection of Accounts............................................................ 16
6.4 Payments.......................................................................... 17
6.5 Authorization to Make Loans....................................................... 18
6.6 Use of Proceeds................................................................... 18
SECTION 7 - COLLATERAL REPORTING AND COVENANTS................................................. 18
7.1 Collateral Reporting.............................................................. 18
7.2 Accounts Covenants................................................................ 19
7.3 Inventory Covenants............................................................... 20
7.4 Equipment Covenants............................................................... 21
7.5 Power of Attorney................................................................. 21
7.6 Right to Cure..................................................................... 22
7.7 Access to Premises................................................................ 22
SECTION 8 - REPRESENTATIONS AND WARRANTIES..................................................... 23
8.1 Corporate Existence, Power and Authority; Subsidiaries............................ 23
8.2 Financial Statements; No Material Adverse Change.................................. 23
8.3 Chief Executive Office; Collateral Locations...................................... 24
8.4 Priority of Liens; Title to Properties............................................ 24
8.5 Tax Returns....................................................................... 24
8.6 Litigation........................................................................ 24
8.7 Compliance with Other Agreements and Applicable Laws.............................. 25
(i)
8.8 Bank Accounts..................................................................... 25
8.9 Accuracy and Completeness of Information.......................................... 25
8.10 Status of Pension Plans........................................................... 25
8.11 Environmental Compliance.......................................................... 26
8.12 Survival of Warranties; Cumulative................................................ 27
SECTION 9 - AFFIRMATIVE AND NEGATIVE COVENANTS................................................. 27
9.1 Maintenance of Existence.......................................................... 27
9.2 New Collateral Locations.......................................................... 27
9.3 Compliance with Laws, Regulations, Etc............................................ 27
9.4 Payment of Taxes and Claims....................................................... 28
9.5 Insurance......................................................................... 29
9.6 Financial Statements and Other Information........................................ 29
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc..................... 31
9.8 Encumbrances...................................................................... 31
9.9 Indebtedness...................................................................... 32
9.10 Loans, Investments, Guarantees, Etc............................................... 32
9.11 Dividends and Redemptions......................................................... 33
9.12 Transactions with Affiliates...................................................... 33
9.13 Adjusted Net Worth................................................................ 34
9.14 Intellectual Property............................................................. 34
9.15 Additional Bank Accounts.......................................................... 34
9.16 Applications under the Companies' Creditors Arrangement Act...................... 34
9.17 Operation of Pension Plans........................................................ 34
9.18 Costs and Expenses................................................................ 35
9.19 Further Assurances................................................................ 35
SECTION 10 - EVENTS OF DEFAULT AND REMEDIES.................................................... 36
10.1 Events of Default................................................................. 36
10.2 Remedies.......................................................................... 38
SECTION 11 - JURY TRIAL WAIVER, OTHER WAIVERS AND CONSENTS, GOVERNING LAW...................... 40
11.1 Governing Law; Choice of Forum, Service of Process; Jury Trial Waiver............. 40
11.2 Waiver of Notices................................................................. 41
11.3 Amendments and Waivers............................................................ 42
11.4 Waiver of Counterclaims........................................................... 42
11.5 Indemnification................................................................... 42
SECTION 12 - TERM OF AGREEMENT; MISCELLANEOUS.................................................. 42
12.1 Term.............................................................................. 42
12.2 Notices........................................................................... 44
12.3 Partial Invalidity................................................................ 44
12.4 Successors........................................................................ 44
12.5 Entire Agreement.................................................................. 45
12.6 Headings.......................................................................... 45
12.7 Judgment Currency................................................................. 45
(ii)
12.8 Execution in Counterparts......................................................... 45
12.9 Facsimile......................................................................... 45
12.10 Choice of Language................................................................ 46
(iii)
LOAN AGREEMENT
This Loan Agreement dated as of December 3, 2001 is entered into by and
between Congress Financial Corporation (Canada), an Ontario corporation
("Lender") and Catalina Lighting Canada, (1992) Inc. / Lumieres Catalina Canada,
(1992) Inc., a Quebec corporation ("Borrower").
W I T N E S S E T H:
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WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Borrower is a wholly-owned subsidiary of Catalina Lighting, Inc.,
a Florida corporation ("Catalina US");
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 - INTERPRETATION
1.1 Definitions
All terms used herein which are defined in the Personal Property Security
Act (Ontario) shall have the meanings given therein unless otherwise defined in
this Agreement. All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". 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 shall
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 11.3 or is cured in a manner satisfactory to Lender if
such Event of Default is capable of being cured as determined by Lender in good
faith. Any accounting term used herein unless otherwise defined in this
Agreement shall have the meanings customarily given to such term in accordance
with GAAP. Canadian Dollars and the sign "$"
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mean lawful money of Canada. "US Dollars" and the sign "US$" mean lawful money
of the United States of America. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
(1) Accounts shall mean all present and future rights of Borrower to payment
for goods sold or leased or for services rendered, whether or not evidenced by
instruments or chattel paper, and whether or not earned by performance.
(2) Adjusted Net Worth shall mean as to the Borrower, at any time, the Canadian
Dollar Amount of the Borrower's net worth determined in accordance with GAAP on
a consolidated basis less the aggregate net book value of goodwill, prepaid
expenses and deferred costs (excluding tax assets) and other intangible assets
as the Lender may determine in good faith of the Borrower and its subsidiaries.
(3) Availability Reserves shall mean, as of any date of determination, such
amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans which would otherwise be available to
Borrower under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Lender in
good faith, do or may affect either (i) the Collateral or any other property
which is security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Lender's 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 estimate of the amount of any Priority
Payables Reserve, (d) to reflect Lender's estimate of rent or other payments due
and unpaid or which Lender reasonably expects will not be paid when due, with
respect to premises occupied by Borrower, (e) to reflect the Lender's estimate
of rebates, sales incentives or other similar amounts payable by or due to the
Borrower's customers or (f) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or will, with notice or
passage of time or both, constitute an Event of Default.
(4) BIA shall mean the Bankruptcy and Insolvency Act (Canada).
(5) Blocked Accounts shall have the meaning set forth in Section 6.3 hereof.
(6) Borrower General Security Agreement shall mean the Borrower General
Security Agreement dated on or about the date hereof given by Borrower in favour
of Lender in respect of the Obligations.
(7) Business Day shall mean a day (other than a Saturday, Sunday or statutory
holiday in Ontario) on which Lender's Toronto office, the Canadian Reference
Bank's main Toronto office and banks in Toronto, Ontario are open for business
in the normal course.
(8) Canadian Dollar Amount shall mean, at any time, (a) as to any amount
denominated in Canadian Dollars, the amount thereof at such time, and (b) as to
any amount denominated in any
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other currency, the equivalent amount in Canadian Dollars as determined by
Lender at such time on the basis of the Spot Rate for the purchase of Canadian
Dollars with such currency.
(9) Canadian Prime Rate shall mean, at any time, the greater of (i) the 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 (ii) the annual rate of interest equal to the
sum of (A) the CDOR Rate at such time and (B) one percent (1%) per annum.
(10) Canadian Prime Rate Loans shall mean any 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.
(11) 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.
(12) CDOR Rate shall mean, on any day, the annual rate of interest which is the
rate based on an average 30 day rate applicable to Canadian Dollar bankers'
acceptances appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swap Dealer Association, Inc, definitions, as modified and amended
from time to time) as of 10:00 a.m. on such day; provided that if such rate does
not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR Rate
on any day shall be the 30 day rate applicable in Canadian Dollar bankers'
acceptances quoted by any major Schedule I chartered bank selected by Lender as
of 10:00 a.m. on such day.
(13) CCAA shall mean the Companies' Creditors Arrangement Act (Canada).
(14) Collateral shall mean, Collateral as such term is defined in the Borrower
General Security Agreement and in the Hypothec.
(15) Comfort Letter shall mean the comfort letter executed by Catalina US in
favour of the Lender.
(16) Eligible Accounts shall mean Accounts created by Borrower which are and
continue to be acceptable to Lender based on the criteria set forth below.
Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery of
goods by Borrower or rendition of services by Borrower in the ordinary
course of its business;
(b) such Accounts do not arise from sales rebates, incentives or other
similar amounts due from suppliers;
(c) such Accounts do not arise as a result of sales to customers for which
direct payment to the Borrower's suppliers is made by such customers;
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(d) such Accounts are not unpaid more than sixty (60) days past the
original due date thereof and not unpaid more than ninety (90) days
after the date of the original invoice for them (one hundred twenty
days (120) in the case of Walmart Inc. and its affiliates) ; provided
that, upon the request of Borrower in writing, the Lender may, in its
sole discretion, approve in writing such longer periods as it deems
appropriate for particular account debtors;
(e) such Accounts comply with the terms and conditions contained in
Section 7.2(3) of this Agreement;
(f) such Accounts do not arise from sales on consignment, guaranteed sale,
sale and return, sale on approval, or other terms under which payment
by the account debtor may be conditional or contingent;
(g) the chief executive office of the account debtor with respect to such
Accounts is located in Canada or the United States, or the Account is
payable in Canadian Dollars or US Dollars and, at Lender's option, if
either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in Canada in the currency in
which the Account is denominated, sufficient to cover such Account, in
form and substance satisfactory to Lender and, if required by Lender,
the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of
the proceeds of such letter of credit to Lender, or (ii) such Account
is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to
such lending formula with respect thereto as Lender may determine);
(h) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices,
if Lender shall have received an agreement in writing from the account
debtor, in form and substance satisfactory to Lender, confirming the
unconditional obligation of the account debtor to take the goods
related thereto and pay such invoice;
(i) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff
against such Accounts (but the portion of the Accounts of such account
debtor in excess of the amount at any time and from time to time owed
by Borrower to such account debtor or claimed owed by such account
debtor may be deemed Eligible Accounts);
(j) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
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(k) such Accounts are subject to the first priority, valid and perfected
security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens
except those permitted in this Agreement;
(l) neither the account debtor nor any officer or employee of the account
debtor with respect to such Accounts is an officer, employee or agent
of or affiliated with Borrower directly or indirectly by virtue of
family membership, ownership, control, management or otherwise, except
with respect to any account debtor that is an affiliate of the
Borrower solely because such affiliate is an affiliate of Sun Capital
Partners, Inc.;
(m) the account debtors with respect to such Accounts are not any foreign
government, the federal government of Canada, any Province, political
subdivision, department, agency or instrumentality thereof unless,
upon Lender's request, the Financial Administration Act (Canada) or
any similar provincial or local law, if applicable, has been complied
with in a manner satisfactory to Lender;
(n) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's
financial condition;
(o) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty percent (20%) of all Accounts (but the
portion of the Accounts not in excess of such percentage shall be
deemed Eligible Accounts) except for Accounts owing by Walmart Inc.
and its affiliates for which the allowable percentage shall be thirty-
five percent (35%); provided that, upon the request of Borrower in
writing, the Lender may, in its sole discretion, approve in writing
such higher percentages as it deems appropriate for particular account
debtors;
(p) such Accounts are not owed by an account debtor who has Accounts
unpaid more than sixty (60) days past the original due date thereof or
has Accounts unpaid more than ninety (90) days after the date of the
original invoice for them which together constitute more than fifty
percent (50%) of the total Accounts of such account debtor;
(q) such Accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account
debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may still be deemed
Eligible Accounts); and
(r) such Accounts are owed by account debtors deemed creditworthy at all
times by Lender, as determined by Lender.
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General criteria for Eligible Accounts may be established and revised from time
to time by Lender. Any Accounts which are not Eligible Accounts shall
nevertheless be part of the Collateral.
(17) Eligible Inventory shall mean Inventory consisting of finished goods held
for resale in the ordinary course of the business of Borrower which are
acceptable to Lender based on the criteria set forth below. Eligible Inventory
shall not include (a) work-in-process; (b) components which are not part of
finished goods; (c) spare parts for equipment; (d) packaging and shipping
materials; (e) supplies used or consumed in Borrower's business; (f) Inventory
at premises which are not owned and controlled by Borrower, except if Lender
shall have received an agreement in writing from the person in possession of
such Inventory and/or the owner or operator of such premises in form and
substance satisfactory to Lender acknowledging Lender's first priority security
interest in the Inventory, waiving security interests, hypothecs and claims by
such person against the Inventory and permitting Lender access to, and the right
to remain on, the premises so as to exercise Lender's rights and remedies and
otherwise deal with the Collateral; (g) Inventory subject to a security
interest, hypothec or lien in favour of any person other than Lender except
those permitted in this Agreement; (h) ▇▇▇▇ and hold goods; (i) unserviceable,
obsolete, slow moving or discontinued Inventory; (j) Inventory which is not
subject to the first priority, valid and perfected security interest, lien or
hypothec of Lender; (k) returned, damaged and/or defective Inventory; (l)
Inventory purchased or sold on consignment; (m) OTW Inventory unless the Lender
has reviewed and is satisfied in its sole discretion with the insurance and
bills of lading of the Borrower with respect to such Inventory and either the
Lender has received possession of original copies of such bills of lading or the
Borrower's customs broker that has contracted to process such Inventory has
entered into an acknowledgement agreement in form satisfactory to the Lender
acknowledging, among other things, the Lender's security interest in such
Inventory and that it will take instructions from the Lender with respect
thereto; and (n) Inventory which is on display or used for promotion purposes
whether on Borrower's premises or its customers' premises or otherwise and such
other Inventory of the Borrower which is commonly referred to as "road show
inventory".
General criteria for Eligible Inventory may be established and revised from time
to time by Lender. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
(18) 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,
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storage, disposal, transport or handling of pollutants, contaminants, chemicals,
or hazardous, toxic or dangerous substances, materials or wastes.
(19) 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.
(20) Excess Availability shall mean the Canadian Dollar Amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, as determined by Lender, and subject to the
sublimits and Availability Reserves from time to time established by Lender
hereunder, and (ii) the Maximum Credit, minus (b) the sum of: (i) the amount of
all then outstanding and unpaid Obligations, plus (ii) the aggregate amount of
all due but unpaid tax obligations and past due trade payables of Borrower as of
such time.
(21) Excluded Taxes has the meaning given to it in Section 9.4.
(22) Event of Default shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.
(23) Financing Agreements shall mean, collectively, this Agreement, the Borrower
General Security Agreement, the Hypothec, the Comfort Letter 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.
(24) GAAP shall mean generally accepted accounting principles in Canada as in
effect from time to time as set forth in the opinions and pronouncements of the
relevant Canadian public and private accounting boards and institutes which are
applicable to the circumstances as of the date of determination consistently
applied, except that, for the purposes of Section 9.13 hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
(25) 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, 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
-8-
(including, without limitation any that are or become classified as hazardous or
toxic under any Environmental Law).
(26) Hypothec shall mean the hypothec on Collateral (as that term is defined
therein) on or about the date hereof given by Borrower in favour of Lender in
respect of the Obligations.
(27) Information Certificate shall mean the Information Certificate of Borrower
constituting Exhibit A hereto containing material information with respect to
Borrower, its business and assets provided by or on behalf of Borrower to Lender
in connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
(28) Interest Rate shall mean, as to Canadian Prime Rate Loans, a rate of one
and one-half percent (1.5%) per annum in excess of the Canadian Prime Rate and,
as to US Prime Rate Loans, a rate of one half of one percent (0.50%) per annum
in excess of the US Prime Rate; provided that, the Interest Rate shall mean the
rate of three and one half percent (3.5%) per annum in excess of the Canadian
Prime Rate as to Canadian Prime Rate Loans and the rate of two and one half
percent (2.5%) per annum in excess of the US Prime Rate as to US Prime Loans, at
Lender's option, without notice, (a) on non-contingent Obligations (i) for the
period on and after the date of termination or non-renewal hereof until such
time as Lender has received full and final payment of all such Obligations and
(ii) 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 and (b) on the Revolving
Loans at any time outstanding 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).
(29) 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.
(30) Loans shall mean the Revolving Loans.
(31) Maximum Credit shall mean the amount of $7,000,000.
(32) Net Amount of Eligible Accounts shall mean the gross Canadian Dollar Amount
of Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect to such Eligible Accounts; provided that the amounts deducted under
clause (a) or (b) shall not duplicate items for which Availability Reserves have
been established by Lender.
(33) Net Orderly Liquidation Value shall mean the value of the Inventory as
determined by independent appraisers acceptable to the Lender determined on an
orderly liquidation basis net of all liquidation expenses as estimated by such
appraiser.
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(34) Obligations shall mean any and all Revolving Loans and all other
obligations, liabilities and indebtedness of every kind, nature and description
owing by Borrower to Lender and/or its affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, 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, and however acquired by Lender.
(35) Obligor shall mean any guarantor, endorser, acceptor, surety or other
person liable on or with respect to the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower and shall be
deemed to include Catalina US.
(36) OTW Inventory means Inventory in transit.
(37) Payment Account shall have the meaning set forth in Section 6.3 hereof.
(38) Pension Plans means each of the pension plans, if any, registered in
accordance with the Income Tax Act (Canada) which Borrower sponsors or
administers or into which Borrower makes contributions.
(39) 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.
(40) PPSA shall mean the Personal Property Security Act (Ontario) and any other
applicable Canadian or provincial personal property security legislation as all
such legislation now exists or may from time to time hereafter be amended,
modified, recodified, supplemented or replaced, together with all rules,
regulations and interpretations thereunder or related thereto. References to
sections of the PPSA shall be construed to also refer to any successor sections.
(41) 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, workers' compensation obligations, vacation pay, government
royalties or pension fund obligations, together with the aggregate value,
determined in accordance with GAAP, of all Eligible Inventory which Lender
considers may be or may become subject to a right of a supplier to recover
possession thereof under any federal or provincial law, where such supplier's
right may have priority over the security interests, liens or charges securing
the Obligations including,
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without limitation, Eligible Inventory subject to a right of a supplier to
repossess goods pursuant to Section 81.1 of the BIA.
(42) Records shall mean all of Borrower's present and future books of account of
every kind or nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
(43) Revolving Loans shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower on a revolving basis (involving advances, repayments
and readvances) as set forth in Section 2.1 hereof.
(44) Spot Rate shall mean, with respect to a currency, the rate quoted by the
Canadian Reference Bank as the spot rate for the purchase by the Canadian
Reference Bank of such currency with another currency at approximately 10:00
a.m. (Toronto time) on the date two (2) Business Days prior to the date as of
which the foreign exchange computation is made.
(45) US GAAP shall mean generally accepted accounting principles in the United
States as in effect from time to time as set forth in the opinions and
pronouncements of the relevant Canadian or American public and private
accounting boards and institutes which are applicable to the circumstances as of
the date of determination consistently applied, except that, for the purposes of
Section 9.13 hereof, GAAP shall be determined on the basis of such principles in
effect on the date hereof and consistent with those used in the preparation of
the audited financial statements delivered to Lender prior to the date hereof.
(46) US Prime Rate shall mean the rate announced by First Union National Bank,
or its successors, from time to time as its prime rate, whether or not such
announced rate is the best rate available at such bank.
(47) US Prime Rate Loans shall mean any Loan or portion thereof denominated in
US Dollars and on which interest is payable based on the US Prime Rate in
accordance with the terms hereof.
(48) Value shall mean the Canadian Dollar Amount, as determined by Lender in
good faith, with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP or (b) market value.
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SECTION 2 - CREDIT FACILITIES
2.1 Revolving Loans
(1) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans by way of Canadian Prime Rate Loans and US Prime
Rate Loans to Borrower from time to time in amounts requested by Borrower up to
the amount equal to:
(a) eighty-five percent (85%) of the Net Amount of Eligible Accounts; plus
----
(b) the lowest of: (A) the sum of fifty-five percent (55%) of the Value of
Eligible Inventory, or (B) eighty-five percent (85%) of the Net
Orderly Liquidation Value or (C) $3,500,000; provided that, the amount
of Loans which may be advanced against OTW Inventory shall not exceed
$500,000;
(c) minus any Availability Reserves.
------
(2) Lender may, in its discretion, from time to time, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines:
(A) the dilution with respect to the Accounts for any period (based on the ratio
of (1) the aggregate amount of reductions in Accounts other than as a result of
payments in cash to (2) the aggregate amount of total sales) exceeds five
percent (5%), or (B) the general creditworthiness of account debtors has
declined or (ii) reduce the lending formula(s) with respect to Eligible
Inventory to the extent that Lender determines that: (A) the number of days of
the turnover of the Inventory for any period has changed in any material respect
or (B) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased whether as a result of the quarterly appraisals delivered under
Section 7.3 or otherwise, or (C) the nature and quality of the Inventory has
deteriorated. In determining whether to reduce the lending formula(s), Lender
may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(3) Except in Lender's discretion, the aggregate Canadian Dollar Amount of the
Loans outstanding at any time shall not exceed the Maximum Credit. In the event
that the outstanding Canadian Dollar Amount of any component of the Loans, or
the aggregate Canadian Dollar Amount of the outstanding Loans, exceed the
amounts available under the lending formulas or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.
(4) Notwithstanding Section 2.1(1), if the Lender has determined in its
discretion acting in good faith that either the creditworthiness of the Borrower
or the Lender's ability to be repaid from the Collateral has deteriorated, the
Lender may suspend the availability of Revolving Loans by way of US Prime Rate
Loans upon providing the Borrower with written notice thereof. If the
availability of US Prime Rate Loans is so suspended, Lender may also require
that the outstanding Revolving Loans made available by way of US Prime Rate
Loans denominated in
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US Dollars be converted to Revolving Loans made available by way of Canadian
Prime Rate Loans denominated in Canadian Dollars.
2.2 Availability Reserves
All Revolving Loans otherwise available to Borrower pursuant to the lending
formulas and subject to the Maximum Credit and other applicable limits hereunder
shall be subject to Lender's continuing right to establish and revise, in good
faith, Availability Reserves.
SECTION 3 - INTEREST AND FEES
3.1 Interest
(1) Borrower shall pay to Lender interest on the outstanding principal amount of
the non-contingent Obligations at the applicable Interest Rate.
(2) Interest shall be payable by Borrower to Lender monthly in arrears not later
than the first day of each calendar month and shall be calculated on the basis
of a three hundred sixty five (365) day year in the case of Canadian Prime Rate
Loans and a three hundred and sixty (360) day year in the case of US Prime Rate
Loans, as applicable and actual days elapsed. 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 Prime Rate 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 Default or termination or
non-renewal hereof shall be payable on demand. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.
(3) For purposes of disclosure under the Interest Act (Canada), where interest
is calculated pursuant hereto at a rate based upon a 365 day year or 360 day
year (the "First Rate"), it is hereby agreed that the rate or percentage of
interest on a yearly basis is equivalent to such First Rate multiplied by the
actual number of days in the year divided by 365 or 360 as applicable.
(4) Notwithstanding the provisions of this Section 3 or any other provision of
this Agreement, in no event shall the aggregate "interest" (as that term is
defined in Section 347 of the Criminal Code (Canada)) exceed the effective
annual rate of interest on the "credit advanced" (as defined therein) lawfully
permitted under Section 347 of the Criminal Code (Canada). The effective annual
rate of interest shall be determined in accordance with generally accepted
actuarial practices and principles over the term of the applicable Loan, and in
the event of a dispute, a certificate of a Fellow of the Canadian Institute of
Actuaries appointed by Lender will be conclusive for the purposes of such
determination.
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(5) 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.
(6) For greater certainty, whenever any amount is payable under this Agreement
or any Financing Agreement by Borrower as interest or as a fee which requires
the calculation of an amount using a percentage per annum, each party to this
Agreement acknowledges and agrees that such amount shall be calculated as of the
date payment is due without application of the "deemed reinvestment principle"
or the "effective yield method". As an example, when interest is calculated and
payable monthly, the rate of interest payable per month is 1/12 of the stated
rate of interest per annum.
3.2 Closing Fee
Borrower shall pay to Lender as a closing fee the amount of $70,000, which
shall be fully earned as of and payable on the date hereof.
3.3 Facility Fee
Borrower shall pay to Lender annually, beginning on the first anniversary
of the date hereof, a facility fee in an amount equal to one percent (1%) of the
Maximum Credit while this Agreement is in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on each anniversary of the date hereof. However, this
facility fee shall not be payable if during the year preceding such anniversary
date, the average principal balance of the Revolving Loans was at least
US$3,000,000 over that period of time.
3.4 Servicing Fee
Borrower shall pay to Lender monthly a servicing fee in an amount equal to
$2,000 in respect of Lender's services for each month (or part thereof) while
this Agreement remains in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be fully earned as of and payable
in advance on the date hereof and on the first day of each month hereafter.
3.5 Unused Line Fee
Borrower shall pay to Lender monthly an unused line fee at a rate equal to
one half of one percent (0.5%) per annum calculated upon the amount by which
$7,000,000 exceeds the Canadian Dollar Amount equal to average daily principal
balance of the outstanding Revolving 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.
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3.6 Payments
Unless otherwise specified by Lender, all interest, fees and other payments
by Borrower hereunder shall be in the currency in which such Obligations are
denominated.
SECTION 4 - CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans
Each of the following is a condition precedent to Lender making the initial
Loans hereunder:
(1) Lender shall have received evidence (including, without limitation, any
subordinations or releases of any other liens or security interests in the
Collateral required by Lender), in form and substance satisfactory to Lender,
that Lender has valid perfected and first priority security interests in and
liens upon the Collateral and any other property which is intended to be
security for the Obligations or the liability of any Obligor in respect thereof,
subject only to the security interests and liens permitted herein or in the
other Financing Agreements;
(2) all requisite corporate action and proceedings in connection with this
Agreement and the other Financing Agreements shall be satisfactory in form and
substance to Lender, and Lender shall have received all information and copies
of all documents, including, 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;
(3) no material adverse change shall have occurred in the assets or business of
Borrower or any Obligor since the date of Lender's latest field examination and
no change or event shall have occurred which would impair the ability of
Borrower or any Obligor to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral;
(4) 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;
(5) Lender shall have received, in form and substance satisfactory to Lender,
all consents, waivers, acknowledgements and other agreements from third persons
which Lender may deem necessary or desirable in order to permit, protect and
perfect its security interests in and liens upon the Collateral or to effectuate
the provisions or purposes of this Agreement and the other Financing Agreements,
including acknowledgements by landlords, 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;
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(6) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as first loss payee and additional
insured;
(7) 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 request;
(8) the other Financing Agreements and all instruments and documents hereunder
and thereunder shall have been duly executed and delivered to Lender, in form
and substance satisfactory to Lender;
(9) accounts payable of the Borrower must be at a level and in a condition
reasonably acceptable to the Lender; and
(10) Lender shall have received a copy of the written consent of SunTrust Bank.
(11) the Excess Availability as determined by Lender shall be at least $600,000
after giving effect to the initial Revolving Loans made or to be made hereunder
and after (i) payment of all fees and expenses required to be paid by Borrower
to Lender hereunder or under any other Financing Agreement, (ii) application of
the proceeds of the initial Revolving Loans and (iii) deduction of past due
payables and other obligations.
4.2 Conditions Precedent to All Loans
Each of the following is an additional condition precedent to Lender making
Loans to Borrower, including the initial Loans and any future Loans:
(1) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the date of the making of each such Loan and after giving effect thereto;
and
(2) no Event of Default and no event or condition which, with notice or passage
of time or both, would constitute an Event of Default, shall exist or have
occurred and be continuing on and as of the date of the making of such Loan 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 Loans and other Obligations and the Collateral, (b)
all payments made by or on
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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.
6.3 Collection of Accounts
(1) Borrower shall establish and maintain, at its expense, blocked accounts or
lockboxes and related blocked accounts (in either case, "Blocked Accounts"), as
Lender may specify, and Lender may establish and maintain bank accounts of
Lender ("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 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 held for the exclusive
benefit of Lender as collateral security for the Obligations, that the
depository bank has no lien upon, or right of setoff against the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to the Payment Accounts or such other
bank account of Lender as Lender may from time to time designate for such
purpose. Borrower agrees that all amounts deposited in such Blocked Accounts or
Payment Accounts or other funds received and collected by Lender, whether on the
Accounts or as proceeds of Inventory or other Collateral or otherwise shall be
the property of Lender.
(2) For purposes of calculating the amount of the Loans available to Borrower,
such payments will be applied (conditional upon final collection) to the
Obligations on the 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. For the purposes of
calculating interest on the Obligations, such payments or other funds received
will be applied (conditional
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upon final collection) to the Obligations one (1) Business Day following the
date of receipt of immediately available funds by Lender in the Payment Account
provided such payments or other funds 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 such
outstanding Obligations, Lender shall transfer such funds to Borrower at such
account as Borrower may direct, provided that Borrower shall, at Lender's
request, deposit such funds to an account maintained at the bank at which the
Payment Accounts are maintained and, prior to such transfer, shall execute and
deliver to Lender a cash collateral agreement in form and substance satisfactory
to Lender providing to Lender a first priority security interest over such
account.
(3) Borrower and all of its affiliates, subsidiaries, shareholders, directors,
employees or agents shall, acting as trustee for Lender, receive, as the
property of Lender, any monies, cheques, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts or the
Payment Accounts, or remit the same or cause the same to be remitted, in kind,
to Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account or Payment Account is established or any
other bank or person involved in the transfer of funds to or from the Blocked
Accounts or the Payment Accounts arising out of Lender's payments to or
indemnification of such bank or person. The obligation of Borrower to reimburse
Lender for such amounts pursuant to this Section 6.3 shall survive the
termination or non-renewal of this Agreement.
6.4 Payments
All Obligations shall be payable to the Payment Accounts as provided in
Section 6.3 such other place as Lender may designate from time to time. Lender
may apply payments received or collected from Borrower or for the account of
Borrower (including the monetary proceeds of collections or of realization upon
any Collateral) to such of the Obligations, whether or not then due, in such
order and manner and using such conversion rates as Lender determines. Payments
and collections received in any currency other than US Dollars or Canadian
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 this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds
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surrendered or returned. This Section 6.4 shall remain effective notwithstanding
any contrary action which may be taken by Lender in reliance upon such payment
or proceeds. This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans
Lender is authorized to make the Loans based upon written instructions
received from anyone purporting to be an officer of Borrower or other authorized
person or, at the discretion of Lender, if such Loans are necessary to satisfy
any Obligations. All requests for Loans hereunder shall specify the date on
which the requested advance is to be made (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 Loans 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 in accordance with the instructions of Borrower
or in accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds
Borrower shall use the initial proceeds of the Loans provided by Lender to
Borrower hereunder only for: (a) payments to each of the persons listed in the
disbursement direction letter furnished by Borrower to Lender on or about the
date hereof; (b) costs, expenses and fees incurred in connection with the
preparation, negotiation, execution and delivery of this Agreement and the other
Financing Agreements. All other Loans made by Lender to Borrower pursuant to
the provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof.
SECTION 7 - COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting
Borrower shall provide Lender with the following documents in a form
satisfactory to Lender: (a) on a regular basis as required by Lender, a schedule
of Accounts, sales made, credits issued and cash received; (b) on a monthly
basis within 15 days after each month or more frequently and within such time
periods as Lender may request, (i) inventory reports by category, (ii) agings of
accounts receivable, and (iii) agings of accounts payable, (c) on a weekly basis
on the first Business Day following each week or more frequently and within such
time periods as Lender may request perpetual inventory reports (c) upon Lender's
request, (i) copies of credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (ii) copies of shipping and delivery
documents, and (iii) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower; 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,
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contractor, shipper or other agent, Borrower hereby irrevocably authorizes such
service, contractor, shipper or agent to deliver such records, reports, and
related documents to Lender and to follow Lender's instructions with respect to
further services at any time that an Event of Default exists or has occurred and
is continuing.
7.2 Accounts Covenants
(1) Borrower shall notify Lender promptly of: (i) any material delay in
Borrower's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors in an amount in excess of $25,000,
or any settlement, adjustment or compromise thereof in excess of $25,000, (ii)
all material adverse information relating to the financial condition of any
account debtor known to Borrower and (iii) any event or circumstance which, to
Borrower's knowledge would cause Lender to consider any then existing Accounts
as no longer constituting Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor without Lender's consent, except in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed in
writing to Lender. So long as no Event of Default exists or has occurred and is
continuing, Borrower shall have the right to 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.
(2) Without limiting the obligation of Borrower to deliver any other
information to Lender, Borrower shall promptly report to Lender any return of
Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $25,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(3) 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 or paid pursuant to Section 6.3(1) 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 (A) as reported to Lender in accordance
with this Agreement or (B) for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender, (iv) there
shall be no setoffs, deductions, contras, defences, counterclaims or disputes
existing or asserted with respect thereto other than in the ordinary
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course of business, (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.
(4) Lender shall have the right at any time or times, in Lender's name or in
the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(5) 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.
(6) Lender may, at any time or times that an Event of Default exists or has
occurred and is continuing, (i) notify any or all account debtors that the
Accounts have been assigned to Lender and that Lender has a security interest or
lien 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 reasonably satisfactory to Lender, keeping correct and
accurate records itemizing and describing the kind, type, age, quality and
quantity of Inventory, Borrower's cost therefor and daily withdrawals therefrom
and additions thereto; (b) Borrower shall conduct a physical count of the
Inventory at least once each year in scope and methodology satisfactory to
Lender, but at any time or times as Lender may request on or after an Event of
Default, and promptly following such physical inventory shall supply Lender with
a report in the form and with such specificity as may be reasonably satisfactory
to Lender concerning such physical count together with a confirmation in form
and substance satisfactory to Lender that appropriate adjustments have been made
to the inventory records of Borrower to reconcile the inventory account to
Borrower's inventory records; (c) Borrower shall not remove any Inventory from
the locations set forth or permitted herein or in the Information Certificate,
without the prior written consent of Lender,
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except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location; (d) upon Lender's request, Borrower shall, at
its expense, no more than once per quarter, but at any time or times as Lender
may request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Inventory in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to rely; (e)
Borrower shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws; (f) as between Borrower and
Lender, Borrower assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the Inventory; (g)
Borrower shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate Borrower to
repurchase such Inventory; (h) Borrower shall keep the Inventory in good and
marketable condition; and (i) Borrower shall not, without prior written notice
to Lender, acquire or accept any Inventory on consignment or approval.
The Lender shall advise the Borrower of the appointment of any appraiser and
shall endeavour to obtain and deliver to the Borrower cost estimates from such
appraiser with respect to the services to be provided by it.
7.4 Equipment Covenants
With respect to the Equipment: (a) upon Lender's request, Borrower shall,
at its expense, at any time or times as Lender may request on or after an Event
of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender; (b) Borrower shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrower shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
thereon and in conformity with all applicable laws; (d) the Equipment is and
shall be used in Borrower's business and not for personal, family, household or
farming use; (e) Borrower shall not remove any Equipment from the locations set
forth or permitted herein or in the Information Certificate, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) as between Borrower and Lender,
Borrower assumes all responsibility and liability arising from the use of the
Equipment.
7.5 Power of Attorney
Borrower hereby 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
or event which with notice or passage of time or both would constitute an Event
of Default exists or has occurred and is continuing (i) demand
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payment on Accounts or other proceeds of Inventory or other Collateral, (ii)
enforce payment of Accounts by legal proceedings or otherwise, (iii) exercise
all of Borrower's rights and remedies to collect any Account or other
Collateral, (iv) sell or assign any Account upon such terms, for such amount and
at such time or times as the Lender deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor, (viii) notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and open and dispose of all mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender's
determination, to fulfil Borrower's obligations under this Agreement and the
other Financing Agreements and (b) at any time to (i) take control in any manner
of any item of payment or proceeds thereof, (ii) have access to any lockbox or
postal box into which Borrower's mail is deposited, (iii) endorse Borrower's
name upon any items of payment or proceeds thereof and deposit the same in the
Lender's account for application to the Obligations, (iv) 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, (v) sign Borrower's name on any verification of Accounts and
notices thereof to account debtors and (vi) execute in Borrower's name and file
any PPSA or other financing statements or amendments thereto. 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. The power of attorney
granted pursuant to this Section 7.5 is a power coupled with an interest and
shall be irrevocable until this Agreement is terminated by a written instrument
executed by a duly authorized officer of the Lender.
7.6 Right to Cure
Lender may, at its option, (a) cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, (b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, determined in good faith, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 Access to Premises
From time to time as requested by Lender, at the cost and expense of
Borrower, (a) Lender or its designee shall have complete access to all of
Borrower's premises during normal
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business hours and after notice to Borrower, or at any time and without notice
to Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrower's books and records, including, without limitation, the Records, and
(b) Borrower shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may request, and (c) use during normal
business hours such of Borrower's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing and if an Event of Default exists
or has occurred and is continuing for the collection of Accounts and realization
of other Collateral.
SECTION 8 - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans 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 this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within Borrower's corporate powers, have been duly authorized
and are not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property is bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change
All financial statements relating to Borrower or Catalina US which have
been or may hereafter be delivered by Borrower to Lender have been prepared in
accordance with GAAP or US GAAP, as applicable (except that financial statements
for periods other than a year end will not contain notes and will be subject to
year end audit adjustments), and fairly present the financial condition and the
results of operation of Borrower or Catalina US, as applicable, 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.
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8.3 Chief Executive Office; Collateral Locations
The chief executive office, principal place of business and domicile
(within the meaning of the Civil Code of Quebec) of Borrower and Borrower's
Records concerning Accounts are located only at the address set forth below and
its only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate, subject to the
right of Borrower to establish new locations in accordance with Section 9.2
below. The Information Certificate correctly identifies any of such locations
which are not owned by Borrower and sets forth the owners and/or operators
thereof and to the best of Borrower's knowledge, the holders of any mortgages on
such locations.
8.4 Priority of Liens; Title to Properties
The security interests and liens granted to Lender under this Agreement and
the other Financing Agreements constitute valid and perfected first priority
liens and security interests in and upon the Collateral subject only to the
liens indicated on Schedule 8.4 hereto (except to the extent that Lender
requires the discharge thereof prior to the advance of the initial Loans
hereunder) 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 (except to the extent that Lender
requires the discharge thereof prior to the advance of the initial Loans
hereunder) or permitted under Section 9.8 hereof.
8.5 Tax Returns
Borrower has filed, or caused to be filed, in a timely manner all tax
returns, reports and declarations which are required to be filed by it (without
requests for extension except as previously disclosed in writing to Lender).
All information in such tax returns, reports and declarations is complete and
accurate in all material respects. Borrower has paid or caused to be paid all
taxes due and payable or claimed due and payable in any assessment received by
it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of 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 of which Borrower has received
notice, or to the best of Borrower's knowledge threatened, against or affecting
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrower's knowledge threatened,
against Borrower or its assets or goodwill or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against Borrower would result in any material adverse change in the assets,
business or prospects of Borrower or
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would impair the ability of Borrower to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws
Borrower is not in default in any material respect under, or in violation
in any material respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound and Borrower is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, federal, provincial or local
governmental authority.
8.8 Bank Accounts
All of the deposit accounts, investment accounts or other accounts in the
name of or used by Borrower maintained at any bank or other financial
institution are set forth on Schedule 8.8 hereto, subject to the right of
Borrower to establish new accounts in accordance with Section 9.15 below.
8.9 Accuracy and Completeness of Information
All information furnished by or on behalf of Borrower in writing to Lender
in connection with this Agreement or any of the other Financing Agreements or
any transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.10 Status of Pension Plans
To the best knowledge of Borrower:
(1) The Pension Plans are duly registered under all applicable provincial
pension benefits legislation.
(2) 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.
(3) 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.
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(4) 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.
(5) 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.
(6) There have been no improper withdrawals, or applications of, the assets of
any of the Pension Plans.
(7) No amount is owing by any of the Pension Plans under the Income Tax Act
(Canada) or any provincial taxation statute.
(8) 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).
(9) 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
(1) 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 and the operations of Borrower
comply in all material respects with all Environmental Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder.
(2) The Borrower has not received notice of any investigation, proceeding,
complaint, order, directive, claim or citation by any governmental authority or
any other person nor, to the best of Borrower's knowledge, is any pending or
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.
(3) 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.
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(4) 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.
8.12 Survival of Warranties; Cumulative
All representations and warranties contained in this Agreement or any of
the other Financing Agreements shall survive the execution and delivery of this
Agreement and shall be deemed to have been made again to Lender on the date of
each additional borrowing 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
Borrower shall at all times preserve, renew and keep in full, force and
effect its corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted. Borrower shall give
Lender thirty (30) days prior written notice of any proposed change in its
corporate name, which notice shall set forth the new name and Borrower shall
deliver to Lender a 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 provided Borrower (a)
gives Lender thirty (30) days prior written notice of the intended opening of
any such new location and (b) executes and delivers, or causes to be executed
and delivered, to Lender such agreements, documents, and instruments as Lender
may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including PPSA and 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.
9.3 Compliance with Laws, Regulations, Etc.
(1) 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
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pursued and which is not reasonably expected to have a material adverse effect
in Borrower or its property, operations, business, prospects or conditions
(financial or otherwise).
(2) 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. 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.
(3) 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 release, spill or discharge,
threatened or actual, of any Hazardous Material 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.
(4) Without limiting the generality of the foregoing, whenever Lender reasonably
determines that there 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.
(5) 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 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 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
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which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books. Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements provided
for herein and Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by Borrower such amount shall be added and deemed part of the
Loans, provided, that, nothing contained herein shall be construed to require
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Borrower to pay any income or capital or franchise taxes ("Excluded Taxes")
attributable to the income or capital of Lender from any amounts charged or paid
hereunder to Lender. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance
Borrower shall, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
satisfactory to Lender as to form, amount and insurer. Borrower shall furnish
certificates, policies or endorsements to Lender as Lender shall reasonably
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. Borrower shall cause Lender to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrower shall obtain non-contributory
lender's loss payable endorsements to all insurance policies in form and
substance satisfactory to Lender. Such lender's loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to Lender as its
interests may appear and further specify that Lender shall be paid regardless of
any act or omission by Borrower or any of its affiliates. At its option, Lender
may apply any insurance proceeds received by Lender at any time, in excess of
$30,000 to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information
(1) 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 the Borrower
and, if Borrower has any subsidiaries, unaudited consolidating
financial statements (including in each case balance sheets,
statements of income and loss,
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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 forty (40) days after the end of each fiscal month (other
than the month ending at the end of a fiscal quarter), monthly
unaudited consolidated financial statements Catalina US
(including in each case balance sheets, statements of income and
loss, statements of cash flow and statements of shareholders'
equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Catalina
US as of the end of and through such fiscal month;
(iii) within forty five (45) days after the end of each fiscal quarter
(other than the fiscal quarter ending September 30 of each
fiscal year), quarterly unaudited consolidated financial
statements Catalina US (including in each case balance sheets,
statements of income and loss, statements of cash flow and
statements of shareholders' equity), all in reasonable detail,
fairly presenting the financial position and the results of the
operations of Catalina US as of the end of and through such
fiscal quarter;
(iv) within one hundred twenty (120) days after the end of each
fiscal year, audited consolidated financial statements for each
of the Borrower and Catalina US and, if Borrower has any
subsidiaries, audited consolidating financial statements of
Borrower and its subsidiaries (including in each case balance
sheets, statements of income and loss, statements of changes in
financial position and statements of shareholders' equity), and
the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the
operations of Borrower and its subsidiaries or Catalina US, as
applicable, as of the end of and for such fiscal year, together
with the unqualified opinion of independent chartered
accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable
to Lender, that such financial statements have been prepared in
accordance with GAAP in the case of the Borrower and US GAAP in
the case of Catalina US, and present fairly the results of
operations and financial condition of Borrower and its
subsidiaries or Catalina US, as applicable, as of the end of and
for the fiscal year then ended.
(2) 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 or which
would result in any material adverse change in Borrower's business, properties,
assets, goodwill or condition, financial or otherwise and (ii) the occurrence of
any Event of Default or event which, with the passage of time or giving of
notice or both, would constitute an Event of Default.
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(3) 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.
(4) Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts, projections and other information respecting the Collateral and the
business of Borrower, as Lender may, from time to time, reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrower to any court or other
government agency or to any participant or assignee or prospective participant
or assignee. Borrower hereby irrevocably authorizes and directs all accountants
or auditors to deliver to Lender, at Borrower's expense, copies of the 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.
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc.
Borrower shall not, directly or indirectly, (a) amalgamate with any other
Person or permit any other Person to amalgamate with it, or (b) sell, assign,
lease, transfer, abandon or otherwise dispose of any shares or indebtedness to
any other Person or any of its assets to any other Person (except for (i) sales
of Inventory in the ordinary course of business and (ii) the disposition of
worn-out or obsolete Equipment or Equipment no longer used in the business of
Borrower so long as (A) if an Event of Default exists or has occurred and is
continuing, any proceeds are paid to Lender and (B) such sales do not involve
Equipment having an aggregate fair market value in excess of the Canadian Dollar
Amount of $35,000 for all such Equipment disposed of in any fiscal year of
Borrower), or (c) form or acquire any subsidiaries, or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances
Borrower shall not create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, except:
(a) liens and security interests of Lender; (b) liens securing the payment of
taxes or amounts due to public utilities either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
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zoning restrictions, 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 value of the
real property which may be subject thereto; (e) purchase money security
interests in Equipment (including capital leases) and purchase money mortgages
on real estate not to exceed the Canadian Dollar Amount of $35,000 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; and
(f) the security interests and liens set forth on Schedule 8.4 hereto (except to
the extent that Lender requires the discharge thereof prior to the advance of
the initial Loans hereunder).
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; and (d) the indebtedness set forth on Schedule 9.9 hereto; provided,
that, (i) Borrower may only make regularly scheduled payments of principal and
interest in respect of such indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such indebtedness as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly, (A)
amend, modify, alter or change the terms of such indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrower shall furnish to Lender all notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc.
Borrower shall not, directly or indirectly, make any loans or advance money
or property to any person, or invest in (by capital contribution, dividend or
otherwise) or purchase or repurchase the 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; and (b) investments in: (i)
short-term direct obligations of the Canadian 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, and (iii) commercial
paper rated A1 or P1; provided, that, as to any of the foregoing, unless waived
in
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writing by Lender, Borrower shall take such actions as are deemed necessary by
Lender to perfect the security interest of Lender in such investments, (c)
advances made to employees in the ordinary course of business on account of
expenses not yet incurred and (d) 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.
9.11 Dividends and Redemptions
Subject to Section 9.12(2), 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.
9.12 Transactions with Affiliates
(1) Subject to paragraph (2) below, 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.
(2) The Borrower shall be permitted to make distributions by way of dividend,
returns of capital, management fees or other payments to Catalina US of not more
than US$500,000 (or such greater amount as the Lender may approve) per year
payable quarterly provided that no such payments may be made at any time if the
Excess Availability is, or would be after the making of such payment, less than
US$250,000.
(3) The Borrower shall not be permitted to make any payment of amounts due to
its affiliates on account of goods or services supplied by such affiliates if,
at any time, the Excess Availability is, or would be after the making of such
payment, less than US$250,000.
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9.13 Adjusted Net Worth
Borrower shall, at all times, maintain Adjusted Net Worth of not less than
$2,000,000 during the 2002 fiscal year and $2,250,000 thereafter.
9.14 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.
9.15 Additional Bank Accounts
Borrower shall not, directly or indirectly, open, establish or maintain
any deposit account, investment account or any other account with any bank or
other financial institution, other than the 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 and (b) as to any
accounts used by Borrower to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender.
9.16 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.
9.17 Operation of Pension Plans
(1) 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.
(2) Borrower shall deliver to Lender an undertaking of the funding agent for
each of the Pension Plans stating that the funding agent will notify Lender
within 7 days of Borrower's failure to make any required contribution to the
applicable Pension Plan.
(3) Borrower shall not accept payment of any amount from any of the Pension
Plans without the prior written consent of Lender.
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(4) 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.
(5) Borrower shall promptly provide Lender with any documentation relating to
any of the Pension Plans as Lender may reasonably 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,
(iii) commencing payment of contributions to a Pension Plan to which Borrower
had not previously been contributing.
9.18 Costs and Expenses
Borrower shall pay to Lender on demand all costs, expenses, filing fees
and taxes (other than Excluded Taxes) paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, together with such advance funds on
account of such costs, expenses, filing fees and taxes as Lender may from time
to time request, including: (a) all costs and expenses of filing or recording
(including PPSA 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) out-of-pocket 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) out-of-pocket costs and
expenses of preserving and protecting the Collateral; (e) out-of-pocket costs
and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Lender, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions
of this Agreement and the other Financing Agreements or defending any claims
made or threatened against Lender arising out of the transactions contemplated
hereby and thereby (including, without limitation, preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of US$750 per person per day for
Lender's examiners in the field and office; and (g) the fees and disbursements
of counsel (including legal assistants) to Lender in connection with any of the
foregoing.
9.19 Further Assurances
At the request of Lender at any time and from time to time, Borrower
shall, at its expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and instruments, and do or
cause to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and liens and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any of the other Financing Agreements. Lender may at any
time and from time to
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time request a certificate from an officer of Borrower representing that all
conditions precedent to the making of Loans contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans 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 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":
(1) Borrower fails to pay when due any of the Obligations;
(2) Borrower fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements;
(3) Catalina US fails to perform any of the terms, covenants, conditions or
provisions contained in the Comfort Letter;
(4) any representation, warranty or statement of fact made by Borrower to Lender
in this Agreement, the other Financing Agreements or any other agreement,
schedule, confirmatory assignment or otherwise shall when made or deemed made be
false or misleading in any material respect;
(5) any Obligor revokes, terminates or fails to perform any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favour of Lender;
(6) any judgment for the payment of money is rendered against Borrower or any
Obligor in excess of the Canadian Dollar Amount of $35,000 in any one case or in
excess of the Canadian Dollar Amount of $35,000 in the aggregate and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor or any of their assets;
(7) any Obligor (being a natural person or a general partner of an Obligor which
is a partnership) dies or Borrower or any Obligor, which is a partnership,
limited liability company, limited partnership, limited liability partnership or
a corporation, dissolves or suspends or discontinues doing business;
(8) Borrower or any Obligor becomes insolvent (under applicable insolvency law),
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;
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(9) 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;
(10) 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:
(a) 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;
(b) be unable, or admit in writing its inability, to pay its debts as they
mature, or commit any other act of bankruptcy;
(c) make a general assignment for the benefit of creditors;
(d) file a voluntary petition or assignment in bankruptcy or a proposal
seeking a reorganization, compromise, moratorium or arrangement with
its creditors;
(e) 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
(f) take any corporate action for the purpose of effecting any of the
foregoing;
(11) any default by Borrower or any Obligor under any agreement, document or
instrument relating to any indebtedness for borrowed money owing to any person
other than Lender, or any capitalized lease obligations, contingent indebtedness
in connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favour of any person other than Lender, in any case in an amount
in excess of the Canadian Dollar Amount of $35,000, which default continues for
more than the applicable cure period, if any, with respect thereto, and which
default results in a right by the other party thereto to accelerate the maturity
of Borrower's obligations thereunder, or any default by Borrower or any Obligor
under any material contract, lease, license or other obligation to any person
other than Lender, which default continues for more than the applicable cure
period, if any, with respect thereto and which default results in a right by the
other party thereto to terminate such agreement;
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(12) any change in the controlling ownership of Borrower;
(13) charging of Borrower or any Obligor under any criminal statute, or
commencement of criminal against Borrower or any Obligor, pursuant to which
statute or proceedings the penalties or remedies sought or available include
forfeiture of any of the property of Borrower or such Obligor in excess of
$35,000;
(14) there shall be a material adverse change in the business or assets of
Borrower or any Obligor after the date hereof;
(15) there shall be an event of default under any of the other Financing
Agreements;
(16) there shall be a breach or failure to comply with the provisions of any
intercreditor agreement or subordination agreement with respect to Borrower or
any Obligor by Borrower or any Obligor; or
(17) 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 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.
10.2 Remedies
(1) At any time an Event of Default exists or has occurred and is continuing,
Lender shall have all rights and remedies provided in this Agreement, the other
Financing Agreements, the PPSA and other applicable law, all of which rights and
remedies may be exercised without notice to or consent by Borrower or any
Obligor, except as such notice or consent is expressly provided for hereunder or
required by applicable law. All rights, remedies and powers granted to Lender
hereunder, under any of the other Financing Agreements, the PPSA or other
applicable law, are cumulative, not exclusive and enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(2) Without limiting the foregoing, at any time an Event of Default exists or
has occurred and is continuing, Lender may, in its discretion and without
limitation, (i) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender (provided, that, upon the occurrence of any Event of
Default described in Sections 10.1(9) and 10.1(10), all Obligations shall
automatically become immediately due and payable), (ii) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral 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
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Collateral at any place and time designated by Lender, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v) remove
any or all of the Collateral from any premises on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other disposition
thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower, (vii) 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, (viii) 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 (ix) 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) Business 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.
(3) Lender may apply the cash proceeds of Collateral actually received by Lender
from any sale, lease, foreclosure or other disposition of the Collateral to
payment of the Obligations, in whole or in part and in such order as Lender may
elect, whether or not then due. Borrower shall remain liable to Lender for the
payment of any deficiency with interest at the highest rate provided for herein
and all costs and expenses of collection or enforcement, including legal costs
and expenses.
(4) Without limiting the foregoing, upon 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, Lender may, at its option, without notice, (i) cease making
Loans or reduce the lending formulas or amounts of Revolving Loans available to
Borrower and/or (ii) terminate any provision of this Agreement providing for any
future Loans to be made by Lender to Borrower.
(5) 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
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received by such Receiver shall be received in trust for and paid to Lender.
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.
(6) Borrower shall pay all 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 this Agreement or any other 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
(1) The validity, interpretation and enforcement of this Agreement and the other
Financing Agreements and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the laws of the Province of Ontario and the federal laws of Canada
applicable therein except to the extent that the law of another jurisdiction is
specified in a Financing Agreement to be the governing law for that Financing
Agreement.
(2) Borrower and Lender irrevocably consent and submit to the non-exclusive
jurisdiction of the Ontario Superior Court of Justice and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).
(3) 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 service so made shall be deemed to be
completed five (5) Business 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.
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(4) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY
OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(5) Lender shall not have any liability to Borrower (whether in tort, contract,
equity or otherwise) for losses suffered by Borrower in connection with, arising
out of, or in any way related to the transactions or relationships contemplated
by this Agreement or any other 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 willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement or any
other Financing Agreement.
(6) 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 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, this Agreement 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 Counterclaims
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 this
Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including, without
limitation, amounts paid in settlement, court costs, and the fees and expenses
of counsel. 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
(1) This Agreement and the other Financing Agreements shall become effective as
of the date set forth on the first page hereof and shall continue in full force
and effect for a term ending on the date three (3) years from the date hereof
(the "Renewal Date"), and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof; provided, that, the Renewal Date shall
automatically be extended to the date four (4) years from the date hereof unless
either party shall
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give the other party notice of non-renewal at least sixty (60) days prior to the
third anniversary of this Agreement. Lender or Borrower (subject to Lender's
right to extend the Renewal Date as provided above) may terminate this Agreement
and the other Financing Agreements effective on the Renewal Date or on the
anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. 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, in connection with any contingent
Obligations, including 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.
(2) No termination of this Agreement or the other Financing Agreements shall
relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until Lender
has received release documentation satisfactory to it and all Obligations have
been fully and finally discharged and paid, and Lender's continuing security
interest in the Collateral and the rights and remedies of Lender hereunder,
under the other Financing Agreements and applicable law, shall remain in effect
until such release and documentation has been received and all such Obligations
have been fully and finally discharged and paid.
(3) If for any reason this Agreement is terminated (whether voluntarily or
involuntarily or as a result of an Event of Default) prior to the end of the
then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
(i) 2% of Maximum Credit From the date hereof to and
including the date one (1) year from
the date hereof
(ii) 1% of Maximum Credit the date one (1) year from the date
hereof to and including the date two
(2) years from the date hereof
(iii) 0.5% of Maximum Credit the date two (2) years from the date
hereof to and including the date
three (3) years
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from the date hereof or at any other
time prior to 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(9) and 10.1(10) 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.
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) Business
Days after mailing.
12.3 Partial Invalidity
If any provision of this Agreement is held to be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.
12.4 Successors
This Agreement, the other Financing Agreements and any other document
referred to herein or therein shall be binding upon and inure to the benefit of
and be enforceable by Lender, Borrower and their respective successors and
assigns, except that Borrower may not assign its rights under this Agreement,
the other Financing Agreements and any other document referred to herein or
therein without the prior written consent of Lender. Lender may, after notice
to Borrower, assign its rights and delegate its obligations under this Agreement
and the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Loans or any other interest herein to
another financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.
However, prior to the occurrence of an Event
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of Default, no assignment may be made to a Person who is not, or is not deemed
to be, a resident of Canada for purposes of the Income Tax Act (Canada).
12.5 Entire Agreement
This Agreement, the other Financing Agreements, any supplements hereto or
thereto, and any instruments or documents delivered or to be delivered in
connection herewith or therewith represent 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 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 Execution in Counterparts
This Agreement may be executed and delivered in any number of
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same agreement.
12.9 Facsimile
This Agreement may be executed and delivered by facsimile transmission and
the parties may rely on all such facsimile signatures as though such facsimile
signatures were original signatures.
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12.10 Choice of Language
The parties hereto confirm that they have requested that this Agreement
and all documents related hereto be drafted in English only. Les parties aux
presentes ont exige que cette convention ainsi que tout document connexe soient
rediges en anglais seulement.
[INTENTIONALLY LEFT BLANK]
The parties have executed this Agreement.
CONGRESS FINANCIAL CORPORATION
(CANADA)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: First Vice President
Address:
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▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
CATALINA LIGHTING CANADA, (1992)
INC. / LUMIERES CATALINA CANADA,
(1992) INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Controller/Authorized Signatory
Chief Executive Office:
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▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇.,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Principal Place of Business:
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▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇.,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Domicile:
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▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇