Exhibit 99.2
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CREDIT AGREEMENT
Dated as of May 13, 2002
between
CABLETEL COMMUNICATIONS CORP.
as Borrower
and
LASALLE BUSINESS CREDIT, A DIVISION OF
ABN AMRO BANK N.V., CANADA BRANCH
as Lender
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TABLE OF CONTENTS
1. DEFINITIONS..............................................................1
(a) General Definitions...................................................1
(b) Accounting Terms and Definitions.....................................13
2. LOANS AND LETTERS OF CREDIT.............................................13
(a) Revolving Loans......................................................13
(b) Margin and Other Requirements: Revolving Loans......................14
(c) Foreign Exchange Contracts...........................................15
(d) Loan Accounts........................................................15
(e) Letters of Credit....................................................15
3. INTEREST, FEES AND CHARGES..............................................16
(a) Rates of Interest....................................................16
(b) Computation of Interest and Fees.....................................16
(c) Maximum Interest.....................................................17
(d) Commitment Fee.......................................................17
(e) Unused Line Fee......................................................17
(f) Examination and Appraisal Fees.......................................17
(g) Capital Adequacy Charge..............................................17
(h) Letter of Credit Fees................................................18
4. LOAN ADMINISTRATION.....................................................18
(a) Loan Requests........................................................18
(b) Letter of Credit Requests............................................19
(c) Disbursement.........................................................19
5. SECURITY................................................................19
6. COLLECTIONS.............................................................20
(a) Blocked Accounts and Lock Boxes......................................20
(b) Rights of LaSalle....................................................21
(c) Application of Collections...........................................22
(d) Dealings by LaSalle..................................................22
(e) Receipts by Borrower.................................................22
7. SCHEDULES AND REPORTS...................................................23
(a) Activity Reports.....................................................23
(b) Borrowing Base Certificate...........................................23
(c) Inventory Reports....................................................23
(d) Financial Reports....................................................24
(e) Authorized Officer...................................................24
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8. TERMINATION.............................................................24
(a) Survival of Security Interests, Liens, etc. .........................24
(b) Prepayment...........................................................25
9. REPRESENTATIONS AND WARRANTIES..........................................25
10. COVENANTS...............................................................31
11. CONDITIONS PRECEDENT....................................................39
(a) Closing Deliveries...................................................39
(b) Post Closing Deliveries..............................................41
12. DEFAULT.................................................................42
13. REMEDIES UPON AN EVENT OF DEFAULT.......................................44
14. INDEMNIFICATION.........................................................45
(a) General Indemnity....................................................45
(b) Environmental Indemnity..............................................46
15. MISCELLANEOUS...........................................................47
(a) Notices..............................................................47
(b) Choice of Governing Law and Construction.............................47
(c) Forum Selection and Service of Process...............................47
(d) Modification and Benefit of Agreement................................48
(e) Headings of Subdivisions.............................................48
(f) Power of Attorney....................................................48
(g) Waiver of Jury Trial, Other Waivers, Confidentiality.................48
(h) Timing of Payments...................................................49
(i) Canadian Currency....................................................49
(j) Judgment Currency....................................................49
(k) Severability.........................................................49
(l) Conflicts............................................................49
(m) Counterparts.........................................................50
(n) Proposal Letter Superseded...........................................51
SCHEDULES AND EXHIBITS
Schedule A Authorized Officers
Schedule B Business and Collateral Locations
Schedule C Permitted Liens
Schedule 9(c) Borrower Furniture, Fixtures and Equipment
Schedule 9(h) Actions and Proceedings
Schedule 9(p) Indebtedness
Schedule 9(r) Affiliates, Joint Ventures and Partnerships
Schedule 9(v) Intellectual Property
Schedule 9(x) Environmental Matters
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Schedule 11(a)(iii) Closing Documents List
Exhibit 2(d)(ii) Form of Revolving Promissory Note
Exhibit 4(a) Form of Notice of Borrowing
Exhibit 7(a) Form of Collateral Loan Report
Exhibit 7(b) Form of Borrowing Base Certificate
Exhibit 7(b)(ii) Form of Statutory Payables Report
Exhibit 7(d) Form of Financial Reporting Certificate
Exhibit 11(a)(ix) Form of Closing Certificate
CREDIT AGREEMENT dated as of May 13, 2002, between CABLETEL
COMMUNICATIONS CORP., a corporation duly amalgamated under the laws of the
Province of Ontario (the "BORROWER") and LASALLE BUSINESS CREDIT, a division of
ABN AMRO BANK N.V., CANADA BRANCH, a Canadian branch of a Netherlands bank (such
bank herein referred to as "LASALLE"), with its head office at Maritime Life
Tower, 15th Floor, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇), ▇▇▇ ▇▇▇.
RECITALS
WHEREAS, the Borrower desires that LaSalle extend certain loans,
advances and other financial accommodations to the Borrower in order to
refinance existing indebtedness and to provide for working capital and the
parties wish to provide for the terms and conditions upon which such loans,
advances and other financial accommodations shall be made;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the Borrower,
the parties hereto agree as follows:
1. DEFINITIONS
(a) General Definitions.
The following terms have the following meanings when used herein:
"ACCOUNT", "CHATTEL PAPER", "DOCUMENT OF TITLE", "EQUIPMENT",
"INTANGIBLE", "GOODS", "INSTRUMENT", and "INVENTORY" shall have the respective
meanings assigned to such terms without initial capitals, as of the date of this
Agreement, in the Ontario Personal Property Security Act ("PPSA").
"ACCOUNT DEBTOR" shall mean in respect of any Account the debtor
obligated to make payment thereof.
"ACQUISITION" shall mean the acquisition of certain Stirling Connector
inventory and all of the NRG distribution rights in connection with Stirling
Connector products on the terms and conditions as set out in the NRG Agreement.
"ADJUSTED NET WORTH" shall mean in respect of the Borrower,
shareholders' equity (including retained earnings but excluding any appraisal
increments) less the book value of all intangible assets (including, without
limitation, deferred tax debits, leasehold improvements, goodwill and
transaction costs), prepaid expenses, and amounts owing from affiliates and
other related Persons of the Borrower (including officers and employees), all as
determined by LaSalle on a consistent basis, plus the amount of any debt
subordinated to LaSalle on terms and conditions acceptable to LaSalle in its
sole judgment.
"AGGREGATE COMMITMENT" shall mean Fifteen Million Canadian Dollars
(Cdn. $15,000,000).
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"AGREEMENT" shall mean this Credit Agreement as it may be amended,
supplemented, extended or restated from time to time.
"AUTHORIZED OFFICER" shall mean in respect of the Borrower each person
whose name appears on SCHEDULE A hereto.
"BASE AMOUNT" shall have the meaning ascribed thereto in SUBSECTION
10(o)(i) hereof.
"BDC EQUIPMENT" shall mean the Equipment of the Borrower that is
subject to a valid security agreement in favour of Business Development Bank of
Canada and identified as such in SCHEDULE 9(c) hereto.
"BLOCKED ACCOUNT" shall have the meaning ascribed thereto in SUBSECTION
6(a) hereof.
"BORROWING" shall mean a borrowing or advance of credit hereunder
consisting of any loans made to the Borrower on the same day by LaSalle.
"BORROWING BASE" shall mean at any time the lesser of the amounts then
calculated as specified in SUBSECTIONS 2(b)(i) and (ii) hereof.
"BORROWING BASE CERTIFICATE" shall have the meaning ascribed thereto in
SUBSECTION 7(b) hereof and shall be in substantially the form of EXHIBIT 7(b)
hereto.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
such other day as banks in Toronto, Ontario are authorized or required to be
closed for business.
"CANADIAN DOLLARS" or "CDN. $" shall mean the lawful currency of
Canada.
"CANADIAN DOLLAR EQUIVALENT AMOUNT" shall mean, on any given date, the
amount of Canadian Dollars which could be purchased with the relevant amount of
a currency at the then applicable Spot Rate at 11:00 a.m. Toronto time on such
date (and if such date is not a Business Day, on the preceding Business Day) for
the purchase of Canadian Dollars with such currency.
"CAPITAL ADEQUACY CHARGE" shall have the meaning ascribed thereto in
SUBSECTION 3(g).
"CAPITAL ADEQUACY DEMAND" shall have the meaning ascribed thereto in
SUBSECTION 3(g).
"CAPITAL EXPENDITURES" shall mean, with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including expenditures for capitalized lease obligations) by the Borrower
during such period that are required by GAAP to be included in or reflected by
the property, plant or equipment or similar fixed asset accounts (or in
intangible accounts subject to amortization) in the balance sheet of the
Borrower.
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"CLOSING CERTIFICATE" shall have the meaning ascribed thereto in
SUBSECTION 11(a)(ix) and shall be in substantially the form of EXHIBIT 11(a)(ix)
hereto.
"CLOSING DATE" shall mean the date upon which the initial Revolving
Loan is made.
"COLLATERAL" shall mean all of the undertaking, property and assets,
present and future, real and personal, of the Borrower, including that
specifically described in SECTION 5 hereof and all other undertaking, property
and assets of any other Loan Party or any other Person now or hereafter pledged
to LaSalle to secure, either directly or indirectly, repayment of any of the
Liabilities.
"COMMSCOPE" shall mean CommScope, Inc of North Carolina, a North
Carolina Corporation.
"CONTAMINANT" shall mean all Hazardous Materials and all those
substances which are regulated by or form the basis of liability under
Environmental Laws or any other material or substance which constitutes a
material health, safety or environmental hazard to any person or property.
"DEFAULT" shall mean any event, condition or default which with the
giving of notice, the lapse of time or both would be an Event of Default.
"DILUTION" shall mean, with respect to any Person for any period, the
percentage obtained by dividing: (a) the sum of non-cash credits against
Accounts of such Person for such period, plus pending or probable, but not yet
applied, non-cash credits against Accounts of such Person for such period as
determined by LaSalle, by (b) gross invoiced sales of such Person for such
period.
"EBITDA" shall mean, with respect to any period, net income after taxes
for such period (excluding any after-tax gains or losses on the sale of assets
other than Inventory and excluding other after-tax extraordinary gains or
losses) plus interest expense, income tax expense, depreciation and amortization
for such period, plus or minus any other non-cash charges or gains which have
been subtracted or added in calculating net income after taxes for such period.
"ELIGIBLE ACCOUNT" shall mean an Account owing to the Borrower or the
Guarantor which is acceptable to LaSalle in its sole discretion for lending
purposes. LaSalle shall, in general, consider an Account to be an Eligible
Account if it meets, and so long as it continues to meet, all of the following
requirements:
(i) it is genuine and in all respects is what it purports to be;
(ii) it is owned by the Borrower or the Guarantor and the Borrower
or the Guarantor has the right to subject it (and has
subjected it) to a security interest in favour of LaSalle;
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(iii) it arises from (A) the performance of services by the Borrower
or the Guarantor and such services have been fully performed
and acknowledged and accepted by the Account Debtor
thereunder; or (B) the sale of Goods by the Borrower or the
Guarantor, and such Goods have been completed in accordance
with the Account Debtor's specifications (if any) and
delivered to and accepted by the Account Debtor, such Account
Debtor has not refused to accept and has not returned or
offered to return any of the Goods, or has not refused to
accept any of the services, which are the subject of such
Account, and the Borrower or the Guarantor has possession of,
or has delivered to LaSalle at LaSalle's request, shipping and
delivery receipts evidencing delivery of such Goods; for
greater certainty, Accounts arising from debit memos,
pre-▇▇▇▇▇▇▇▇ or progress ▇▇▇▇▇▇▇▇ shall not be Eligible
Accounts;
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within a maximum of sixty (60)
days after the stated invoice date thereof (one hundred fifty
(150) days in the case of each invoice rendered to ▇▇▇▇▇
Communications Inc. and does not remain unpaid more than
thirty (30) days past the stated due date thereof; provided,
however, that if more than twenty-five percent (25%) of the
aggregate dollar amount of invoices owing by a particular
Account Debtor to the Borrower and the Guarantor remain unpaid
for more than the applicable period set out above in this
SUBPARAGRAPH (iv), then all Accounts owing to the Borrower or
the Guarantor by that Account Debtor shall be deemed
ineligible;
(v) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than
Permitted Liens;
(vi) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not
subject to setoff, counterclaim, rebate accrual or other
contra, deduction, credit, allowance or adjustment, or to any
claim by such Account Debtor denying liability thereunder in
whole or in part whether by reason of prepayment, previous
credit or otherwise (but the portion of the Accounts of such
Account Debtor in excess of any amount owed (or claimed by
such Account Debtor to be owed) by the Borrower or the
Guarantor to such Account Debtor may be deemed Eligible
Accounts);
(vii) it does not arise out of a contract or order which fails in
any material respect to comply with the requirements of
applicable law;
(viii) the Account Debtor thereunder is not a director, officer,
employee or agent of the Borrower or the Guarantor, or a
subsidiary, parent or affiliate corporation of the Borrower or
the Guarantor;
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(ix) it is not an Account with respect to which the Account Debtor
is (A) the U.S. government or any department, agency or
instrumentality thereof, unless the Borrower or the Guarantor
assigns its right to payment of such Account to LaSalle
pursuant to, and in full compliance with, the Assignment of
Claims Act of 1940, as amended, (B) Her Majesty the Queen in
Right of Canada or any department, agency or instrumentality
thereof, unless the Borrower or the Guarantor grants to
LaSalle by way of absolute assignment and as security, its
right to payment of such Account pursuant to and in full
compliance with, and all other steps deemed necessary by
LaSalle have been taken under, the Financial Administration
Act (R.S.C. 1985, c. F-11), as amended, or (C) a Crown
corporation, any other government or other governmental body
if such Account cannot be the object of a valid first ranking
security interest in favour of LaSalle without special
formalities or requirements, unless such formalities or
requirements have been performed to the full satisfaction of
LaSalle;
(x) it is not an Account with respect to which the Account Debtor
is located in a state of the U.S., a province of Canada or in
any other country which requires the Borrower or the
Guarantor, as a precondition to commencing or maintaining an
action in its courts, either to (A) receive a certificate of
authority to do business and be in good standing therein, (B)
file a notice of business activities report or similar report
with its taxing authority, or (C) otherwise comply with any
other requirement of such state, province or country, unless
(x) the Borrower or the Guarantor has taken the appropriate
actions described in clauses (A), (B) or (C), (y) the failure
to take one of the actions described in either clause (A), (B)
or (C) may be cured retroactively by the Borrower or the
Guarantor at its election, or (z) the Borrower or the
Guarantor has proven, to LaSalle's satisfaction, that it is
exempt from any such requirements under any such state's,
province's or country's laws;
(xi) it is an Account which arises out of a sale made in the
ordinary course of the Borrower's or the Guarantor's business;
(xii) the Account Debtor is a resident or citizen of, and is located
or has its chief executive office located within (A), a state
or province of the U.S. or Canada in which, or in accordance
with the laws of which, the security interest of LaSalle is
properly registered and the Account is payable in the lawful
money of either the U.S. or Canada, or (B) any other country,
provided the payment of such Account is secured by a letter of
credit or insurance supplied by an institution, and which is
in form and substance and otherwise, satisfactory to LaSalle
in its sole discretion;
(xiii) it is not an Account with respect to which the Account
Debtor's obligation to pay is conditional upon the Account
Debtor's approval of the Goods or services or is otherwise
subject to any repurchase obligation or return
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right, as with sales made on a ▇▇▇▇-and-hold, guaranteed sale,
sale on approval, sale or return or consignment basis;
(xiv) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement or any
Security Agreement is untrue or (B) which violates any of the
covenants of the Borrower or the Guarantor contained in this
Agreement or any Security Agreement;
(xv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to the Borrower or the Guarantor,
exceeds (A) in the case of ▇▇▇▇▇▇ Cable Inc., ▇▇▇▇
Communications Inc., Cogeco Cable Inc., Videotron Ltee/Le
Group Videotron Ltee and Persona Inc., twenty percent (20%);
(B) in the case of ▇▇▇▇▇ Communications Inc., forty percent
(40%) if such Account is added during May, 2002, forty-five
percent (45%) if such Account is added during June, 2002,
forty percent (40%) if such Account is added between July and
October, 2002 and thirty percent (30%) if such Account is
added thereafter; and (C) in the case of any other Account
Debtor, ten percent (10%), of the aggregate of the Borrower's
and the Guarantor's Accounts, provided that Accounts excluded
from Eligible Accounts solely by reason of this SUBPARAGRAPH
(xv) shall be Eligible Accounts to the extent of such limit;
and
(xvi) it is not an Account with respect to which the prospect of
payment or performance by the Account Debtor is or will be
impaired, as determined by LaSalle in its sole discretion.
"ELIGIBLE INVENTORY" shall mean Inventory of the Borrower or the
Guarantor which is acceptable to LaSalle in its sole discretion. Without
limiting LaSalle's discretion, LaSalle shall, in general, consider Inventory to
be Eligible Inventory if it meets, and so long as it continues to meet, all of
the following requirements:
(i) it is finished goods inventory owned by the Borrower or the
Guarantor and the Borrower or the Guarantor has the right to
subject it to a security interest in favour of LaSalle;
(ii) it is located on the premises listed on SCHEDULE B hereto or
such other premises from time to time accepted in writing by
LaSalle;
(iii) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than
Permitted Liens, has not given rise to an Account and is
subject to a valid first ranking security interest in favour
of LaSalle which is properly perfected in the province where
such Inventory is located;
(iv) it is not raw materials, work in process, stores, parts,
samples, kits/tools, display, demonstration or slow moving
Inventory, and is held for sale or furnishing under contracts
of service; it is (except as LaSalle may
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otherwise consent in writing) unspoiled and free from
deficiencies which would, in LaSalle's sole determination,
affect its market value;
(v) it is not in transit (except as consented to in writing by
LaSalle), or stored with a bailee, consignee, warehouseman,
processor or similar party or located on any leased premises
unless LaSalle has given its prior written approval and the
Borrower or the Guarantor has caused any such bailee,
consignee, warehouseman, processor, similar party or lessor to
issue and deliver to LaSalle, in form and substance acceptable
to LaSalle in its absolute discretion, such financing
statements, warehouse receipts, waivers and other documents as
LaSalle shall require;
(vi) LaSalle has determined that it is not unacceptable due to
obsolescence, age, appraiser comment or qualification, type,
category, quantity, expiry or other factors; for greater
certainty any packaging materials and any used or old,
returned, damaged or defective or spoiled Inventory, Inventory
unfit for intended usage or not readily saleable, and
Inventory held or placed on consignment shall not be
acceptable as Eligible Inventory; and
(vii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement or
any Security Agreement are untrue or (B) which violates any of
the covenants of the Borrower or the Guarantor contained in
this Agreement or any Security Agreement.
"ENVIRONMENTAL CLAIMS" shall mean any written notice of violation,
claim, deficiency, demand, abatement or other order or prosecution by any
governmental authority or any person for personal injury (including sickness,
disease or death), tangible or intangible property damage, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties, convictions or deed or use restrictions,
resulting from or based upon (i) the existence, or the continuation of the
existence, of a Release (including, without limitation, sudden or non-sudden,
accidental or nonaccidental Releases), of, or exposure to, any Contaminant at,
in, by or from any of the properties of the Borrower or any Loan Party, (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of any of the properties of the
Borrower or any Loan Party or (iii) the violation, or alleged violation by
Borrower or any Loan Party, of any statutes, ordinances, orders, rules,
regulations, permits or licenses of or from any Governmental Authority, agency
or court relating to environmental matters connected with any of the properties
of the Borrower or any Loan Party, under any applicable Environmental Laws.
"ENVIRONMENTAL LAWS" includes, without limitation, the Environmental
Protection Act (Ontario), the Canadian Environmental Protection Act, the
Canadian Transportation of Dangerous Goods Act, the Ontario Water Resources Act,
the Dangerous Goods Transportation Act (Ontario), the Occupational Health and
Safety Act (Ontario), the Fisheries Act (Canada) and the Gasoline Handling Code
and Gasoline Handling Act (Ontario) and regulations thereunder, and laws and
regulations respecting pesticides, fisheries regulation and water resource
management, as all of the aforesaid laws and regulations have been and hereafter
may be amended or supplemented, and any related or analogous present or future
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federal, provincial, state or local, statutes, rules having the force of law,
regulations, ordinances, licenses, permits and interpretations having the force
of law, orders of regulatory and administrative bodies and guidelines, in any
jurisdiction.
"EVENT OF DEFAULT" shall have the meaning ascribed thereto in SECTION
12 hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of determination by
LaSalle, the excess, if any, of (i) the Borrowing Base over (ii) the aggregate
of the outstanding Revolving Loans as of the close of business on such date. For
purposes of calculating Excess Availability and the amount of the Borrowing Base
relating thereto, LaSalle may, in the exercise of its sole discretion, and
without prejudice to its ability to establish other reserves as set out in this
Agreement, establish a reserve in an aggregate amount based on the Borrower's
and the Guarantor's outstanding debt which is not current (in accordance with
its terms of payment as verified by LaSalle) or which is past due as of such
date of determination, to the extent thereof, and a reserve in an aggregate
amount based on outstanding cheques issued by the Borrower and the Guarantor, to
the extent thereof.
"FINANCIAL REPORTING CERTIFICATE" shall mean a certificate in
substantially the form of EXHIBIT 7(D) hereto.
"FISCAL QUARTER END" shall mean December 31, March 31, June 30 or
September 30 in each year.
"GAAP" shall mean at any time generally accepted accounting principles
and policies as in effect at such time in Canada.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state, province or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"GUARANTOR" shall mean Stirling Connectors U.S.A., Inc., a Delaware
corporation.
"HAZARDOUS MATERIALS" shall mean any pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous goods, waste, substance or
material, defined or regulated as such in (or for purposes of) any Environmental
Laws and any other toxic, reactive, or flammable chemicals, including (without
limitation) any friable asbestos, any petroleum (including crude oil or any
fraction), any radioactive substance and any polychlorinated biphenyls; provided
that in the event that any Environmental Law is amended so as to broaden the
meaning of any term defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment; and provided further that, without
limitation, to the extent that the applicable laws of any province establish a
meaning for "waste", "hazardous material," "hazardous substance," "hazardous
waste," "solid waste" or "toxic substance" which is broader than that specified
in any federal Environmental Laws, such broader meaning shall apply in the
relevant province.
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"HEDGING RESERVES" shall mean at any time a reserve (which is
currently calculated as a percentage, which percentage is currently 10%) in
respect of the nominal amount of all foreign exchange contracts (including
without limitation hedging, futures and option agreements) then outstanding
between the Borrower and LaSalle, as determined by LaSalle in its sole
discretion. LaSalle reserves the right to change the reserve percentage or the
hedging reserve methodology (including a ▇▇▇▇ to market calculation method or
basis) at its sole discretion from time to time.
"INDEMNIFIED PARTY" shall have the meaning ascribed thereto in
SECTION 14 hereof.
"LEASEHOLD PROPERTY" shall mean the property municipally known
as ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
"LETTER OF CREDIT REQUEST" shall have the meaning ascribed
thereto in SUBSECTION 4(b) hereof.
"LETTERS OF CREDIT" shall mean documentary or standby letters
of credit issued for the Borrower's account in accordance with the terms of
SUBSECTION 2(e) hereof.
"L/C LIABILITIES" shall mean at any time the face amount of
letters of credit (if any) issued for the Borrower's account by LaSalle to the
extent not drawn down and if drawn down, not fully reimbursed to LaSalle.
"LIABILITIES" shall mean any and all present and future
obligations, liabilities and indebtedness of the Borrower to LaSalle or to any
parent, affiliate or subsidiary of LaSalle of any and every kind and nature,
howsoever created, arising or evidenced and howsoever owned, held or acquired,
whether now or hereafter existing, whether now due or to become due, whether
primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law.
"LOAN" or "LOANS" shall mean any and all Revolving Loans made
by LaSalle pursuant to SECTION 2 hereof and all other loans, advances and
financial accommodations made by LaSalle to or on behalf of the Borrower
hereunder.
"LOAN PARTY" shall mean each Person who is or shall become
primarily or secondarily liable for any of the Liabilities, including without
limitation the Guarantor.
"LOCK BOX" shall have the meaning ascribed thereto in
SUBSECTION 6(a) hereof.
"MATERIAL ADVERSE EFFECT" shall mean with respect to any
Person, and with respect to any event, act, condition or occurrence of whatever
nature (including, without limitation, a labour union strike or lockout and any
adverse determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a material
adverse effect upon, any of the
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business, property, assets, operations, condition (financial or otherwise) or
prospects of such Person.
"MATURITY DATE" shall mean May 13, 2005.
"NOTE" shall mean the Revolving Note.
"NOTICE OF BORROWING" shall have the meaning ascribed thereto
in SUBSECTION 4(a).
"NRG" shall mean N-R-G Control Company, a Mississippi
corporation.
"NRG AGREEMENT" shall mean the Terms of Proposed Settlement
dated April 8, 2002 among the Borrower, the Guarantor, NRG and ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, in form and substance reasonably satisfactory to LaSalle.
"PERMITTED INTER-COMPANY DEBT" means (i) indebtedness owing by
the Guarantor to the Borrower of not more than US$2,130,000 which is in
existence on the date of this Agreement, and (ii) indebtedness owing by Stirling
Israel Ltd. to the Borrower of not more than Cdn.$615,000 which is in existence
on the date of this Agreement.
"ORDERLY LIQUIDATION VALUE" means the net (after liquidation
expenses) value of unencumbered (except to LaSalle) Eligible Inventory based on
definitions and assumptions acceptable to LaSalle in its sole discretion and
confirmed in an appraisal report by an accredited appraiser satisfactory to
LaSalle in its sole discretion.
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents including, without limitation, guarantees, mortgages, hypothecs, trust
deeds, pledges, powers of attorney, consents, assignments, contracts, notices,
security agreements, leases, financing statements and all other writings
heretofore, now or from time to time hereafter executed by or on behalf of the
Borrower or any other Person (including any Loan Party) and delivered to LaSalle
or to any parent, affiliate or subsidiary of LaSalle in connection with the
Liabilities or the transactions contemplated hereby.
"PERMITTED LIENS" shall mean (i) statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder, (ii) liens or security interests in favour of
LaSalle, (iii) liens to secure Permitted Inter-Company Debt, (iv) zoning
restrictions and easements, rights of way, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on the ability of the owner or user
thereof to use such real property for its intended purpose in connection with
its business, (v) liens and prior claims securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, (vi) liens securing a purchase money obligation or
liens incurred or deposits made in the ordinary course of business in connection
with capitalized leases for purchase of, and in each case applying only to,
Equipment permitted as Capital Expenditures under SUBSECTION 10(o)(iii), the
documents relating to such liens to be in form and substance acceptable to
LaSalle, (vii) deposits to secure performance of bids, trade contracts, leases
and
11
statutory obligations (to the extent not excepted elsewhere herein); (viii)
liens set forth on SCHEDULE C or specifically permitted by LaSalle in its sole
discretion and in writing from time to time; (ix) any lien arising out of the
refinancing, extension, renewal or refunding of any indebtedness secured by a
lien permitted by any of the foregoing SECTIONS (i) THROUGH (viii) inclusive;
provided, that (A) such indebtedness is not secured by any additional assets,
and (B) the amount of such indebtedness is not increased, (x) pledges or
deposits in connection with worker's compensation, unemployment insurance and
other social security legislation, (xi) rights of setoff, banker's lien and
other similar rights arising solely by operation of law, and (xii) liens
subordinated to the liens and security interests described in (ii) above by
agreements satisfactory in form and substance to LaSalle in its absolute
discretion.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or local government (whether
federal, provincial, county, city, municipal or otherwise), including, without
limitation, any instrumentality, division, agency, body or department thereof.
"PRIME RATE" shall mean the floating annual rate of interest
established from time to time by ABN AMRO Bank N.V., Canada Branch as the
reference rate for determining interest rates on commercial loans made in Canada
in the lawful currency of Canada and designated as its prime rate; provided that
under no circumstances shall the Prime Rate be less than the market bid rate
determined by LaSalle as the average of bid rates for 30 day Canadian dollar
bankers' acceptances that appear on the Reuters Screen CDOR Page at 10:00 a.m.
(Toronto time) on the applicable day plus one and one half percent (1.5%) per
annum. The Prime Rate is not intended to be the lowest or most favourable rate
of LaSalle in effect at any time. It shall vary from time to time as determined
by ABN AMRO Bank N.V., Canada Branch.
"PRIME RATE LOAN" shall mean a Loan in the lawful currency of
Canada that bears interest based on the Prime Rate. "PRIME RATE REVOLVING LOAN"
shall mean a Revolving Loan that is a Prime Rate Loan.
"RELEASE" shall mean any releasing, spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Laws,
and shall include any threatened Release, as defined in Environmental Laws;
provided that in the event that any Environmental Law is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment.
"REVOLVING CREDIT COMMITMENT" shall mean Fifteen Million
Canadian Dollars (Cdn. $15,000,000), or such lower amount as may from time to
time be applicable after taking into account any reductions to the Revolving
Credit Commitment as set out in SUBSECTION 8(b).
"REVOLVING LOANS" shall have the meaning ascribed thereto in
SUBSECTION 2(a) hereof.
"REVOLVING NOTE" shall mean the revolving promissory note
executed by the Borrower in favour of LaSalle pursuant to SUBSECTION 2(d)(ii) in
substantially the form of EXHIBIT 2(d)(ii) hereto.
12
"SECURITY" shall have the meaning ascribed thereto in SECTION
5 hereof.
"SECURITY AGREEMENT" shall mean any security agreement
executed by the Borrower or any other Loan Party from time to time regarding the
pledge and grant of mortgages, charges, assignments, hypothecs, pledges and
security interests to LaSalle of Collateral.
"SPOT RATE" shall mean in respect of a currency, the rate
determined by LaSalle by reference to applicable currency markets to be the spot
rate for the purchase by LaSalle of such currency with another currency through
its main Toronto branch at approximately 11:00 a.m. (Toronto time) on the date
as of which the foreign exchange computation is made; provided that if at the
time of any such determination, no such spot rate can be reasonably quoted,
LaSalle may use any method as it deems applicable to determine such rate
hereunder, and such determination shall be conclusive absent manifest error.
"STATUTORY PAYABLES REPORT" shall have the meaning ascribed
thereto in SUBSECTION 7(b)(ii).
"SUBORDINATED DEBT" shall mean all indebtedness of the
Borrower to CommScope, and all successors and assigns, pursuant to the
Subordinated Unsecured Note, as amended, extended, restated or otherwise
modified from time to time, but only with the prior written consent of LaSalle.
"SUBORDINATED UNSECURED NOTE" shall mean the subordinated
unsecured note dated the date hereof made by the Borrower in favour of CommScope
in the principal amount of Two Million Two Hundred Thousand U.S. Dollars
(U.S.$2,200,000).
"TYPE" shall mean, with respect to any Loan, whether such Loan
is a Prime Rate Loan or a U.S. Base Rate Loan.
"UNITED STATES" or "U.S." shall mean the United States of
America.
"UNITED STATES DOLLARS" or "U.S. DOLLARS" shall mean the
lawful currency of the United States.
"U.S. BASE RATE" shall mean the floating annual rate of
interest established from time to time by ABN AMRO Bank N.V., Canada Branch as
the reference rate for determining interest rates on commercial loans made in
Canada in U.S. Dollars and designated as its U.S. Base Rate. The U.S. Base Rate
is not intended to be the lowest or most favourable rate of LaSalle in effect at
any time. It shall vary from time to time as determined by ABN AMRO Bank N.V.,
Canada Branch.
"U.S. BASE RATE LOAN" shall mean a Revolving Loan in U.S.
Dollars that bears interest based on the U.S. Base Rate.
13
(b) Accounting Terms and Definitions.
Unless otherwise defined or specified herein, all defined
terms in SUBSECTION 1(a) as used in this Agreement shall have the meanings set
out in such subsection, and all accounting terms used in this Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all material
respects with the financial statements delivered by the Borrower to LaSalle on
or before the Closing Date. All accounting determinations for purposes of
determining compliance with the financial covenants contained in SUBSECTION
10(o) shall be made in accordance with GAAP as in effect on the Closing Date and
applied on a basis consistent in all material respects with the audited
financial statements delivered to LaSalle by the Borrower on or before the
Closing Date. The financial statements required to be delivered hereunder from
and after the Closing Date, and all financial records, shall be maintained in
accordance with GAAP. If GAAP shall change from the basis used in preparing the
audited financial statements delivered to LaSalle by the Borrower on or before
the Closing Date, the certificates required to be delivered pursuant to
SUBSECTION 7(d) demonstrating compliance with the covenants contained herein
shall include, upon the request of LaSalle, calculations setting forth the
adjustments necessary to demonstrate how the Borrower is in compliance with the
financial covenants based upon GAAP as in effect on the Closing Date. References
herein to sections and subsections hereof shall include such sections and
subsections as amended or modified.
2. LOANS AND LETTERS OF CREDIT
Subject to the terms and conditions of this Agreement and the
Other Agreements, absent the existence of a Default:
(a) Revolving Loans.
LaSalle shall make such revolving loans and advances requested
as part of the revolving facilities hereunder (the "REVOLVING LOANS") in
whatever Type, to or for the account of the Borrower as the Borrower shall from
time to time request, in accordance with the terms hereof. Subject to the
provisions hereof requiring earlier repayment, all Revolving Loans shall be
repaid in full upon the earlier to occur of (i) the Maturity Date; (ii) the date
this Agreement is terminated by the Borrower pursuant to SUBSECTION 8(b); and
(iii) their acceleration pursuant to SECTION 13 of this Agreement. If at any
time the outstanding aggregate principal balance of the Revolving Loans made to
the Borrower exceeds any limit expressed herein (whether or not such excess
results from any change in exchange rates between U.S. Dollars and Canadian
Dollars), the Borrower shall immediately, and without the necessity of a demand
by LaSalle, pay to LaSalle (or cause to be paid to LaSalle) such amount as may
be necessary to eliminate such excess, and LaSalle shall apply any such payment
to it against the outstanding principal balance of the Revolving Loans as it may
determine in its sole discretion. In particular, if at any time the sum of the
L/C Liabilities and the outstanding principal balance of the Loans, expressed as
the Canadian Dollar Equivalent Amount thereof, exceeds the Aggregate Commitment
or the amount of Revolving Loans, expressed as the Canadian Dollar Equivalent
Amount thereof, exceeds the amount of the Borrowing Base, the Borrower shall
immediately pay to LaSalle such amount as may be necessary to eliminate such
excess, and LaSalle shall apply such payment in such order as LaSalle shall
determine in its sole discretion. The Borrower hereby authorizes LaSalle to
14
charge any of the Borrower's accounts to make any payments, whether of
principal, interest or otherwise, required by this Agreement.
(b) Margin and Other Requirements: Revolving Loans.
LaSalle shall make Revolving Loans to the Borrower in U.S.
Dollars by way of U.S. Base Rate Loans and/or in Canadian Dollars by way of
Prime Rate Loans. The Canadian Dollar Equivalent Amount of all such Revolving
Loans outstanding at any time shall not exceed the lesser of the following:
(i) the sum of the following amounts at such time
expressed as the Canadian Dollar Equivalent Amount
thereof:
A. an amount in LaSalle's discretion up to
eighty-five percent (85%) of the face amount
(not including any interest component) of
Eligible Accounts; plus
B. an amount in LaSalle's discretion up to the
lesser of (y) fifty percent (50%) of the value
of Eligible Inventory, calculated on the basis
of the lower of cost on purchase from an
independent third party not related to the
Borrower or any other Loan Party (determined on
a basis consistent with the basis used as at
the date of the most recent financial
statements heretofore delivered to LaSalle by
the Borrower and not, for greater certainty,
including any profit component when purchased
from a related party) or market value on a
first-in, first-out basis; and (z) eighty
percent (80%) of the Orderly Liquidation Value
of Eligible Inventory (as reflected in the
semi-annual inventory appraisal); provided that
the amount as calculated under this SUBSECTION
2(b)(i)B at any time shall not exceed Five
Million Canadian Dollars (Cdn. $5,000,000) in
the aggregate; minus
C. an amount not less than one hundred percent
(100%), less a percentage equal to the
percentage in SUBSECTION 2(b)(i)(B)(y) to the
extent that percentage applies, and the
equivalent to that percentage to the extent
SUBSECTION 2(b)(i)(B)(z) applies, of
outstanding documentary L/C Liabilities
relating to the purchase of Eligible Inventory;
minus
D. such reserve amount(s) as LaSalle elects to
establish from time to time in the exercise of
its sole discretion including, without
limitation, reserves in respect of Dilution
where such Dilution equals or exceeds five
percent (5%) at any time, reserves in respect
of rebate accruals, and reserves for potential
preferential creditor items (including, without
limitation, if needed in LaSalle's sole
discretion, amounts in respect of suppliers'
repossession rights pursuant to the Bankruptcy
and Insolvency Act (Canada) or similar
15
suppliers' rights in Quebec pursuant to the
Quebec Civil Code, and amounts in respect of
payments that may become owing to landlords and
warehousemen that have not entered into an
agreement with LaSalle satisfactory to
LaSalle); minus
E. the amount of Hedging Reserves; and minus
F. the L/C Liabilities (other than in respect of
documentary Letters of Credit for which
provision is made in SUBSECTION 2(b)(i)C)
hereof; and
(ii) the Revolving Credit Commitment minus the aggregate
of all then outstanding L/C Liabilities.
(c) Foreign Exchange Contracts.
All foreign exchange contracts (including hedging and futures
contracts as well as option agreements) are available to the Borrower only in
LaSalle's absolute discretion, and shall not, in any case, be for a term longer
than twelve (12) months and the aggregate nominal value of all such foreign
exchange contracts shall not at any time exceed Two Million Canadian Dollars
(Cdn. $2,000,000).
(d) Loan Accounts.
(i) The accounts or records maintained by LaSalle shall
be conclusive evidence, absent manifest error, of the
amount of the Loans made by LaSalle to the Borrower,
and the interest and payments thereon. Any failure so
to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of
the Borrower hereunder to pay any amount owing with
respect to the Loans.
(ii) The Borrower shall execute and deliver to LaSalle a
Note in respect of Revolving Loans.
(e) Letters of Credit.
Subject to the terms and conditions of this Agreement and the
Other Agreements, LaSalle shall, absent the existence of a Default, from time to
time issue or cause the issuance of, upon the Borrower's request, Letters of
Credit in Canadian Dollars; provided, that the aggregate amount of all
outstanding L/C Liabilities shall at no time exceed the lesser of:
(i) One Million Canadian Dollars (Cdn. $1,000,000); and
(ii) the Revolving Credit Commitment, less the Canadian
Dollar Equivalent Amount of all then outstanding
Revolving Loans,
and provided, further that such Letters of Credit shall be in form and substance
acceptable to LaSalle in its sole discretion, and shall not have an expiry date
more than 365 days from the date
16
of issuance or beyond the term of this Agreement. Documentary Letters of Credit
shall be available only for the purchase of Eligible Inventory. The Borrower's
reimbursement obligation in respect of the Letters of Credit shall automatically
reduce, in accordance with SUBSECTION 2(b), the amount which the Borrower may
borrow based upon the Revolving Credit Commitment. Any unreimbursed payment made
by LaSalle to any Person on account of any Letter of Credit shall constitute a
Revolving Loan hereunder, in the case of any unreimbursed payments in U.S.
Dollars as a U.S. Base Rate Loan, and in the case of any unreimbursed payments
in Canadian Dollars as a Prime Rate Loan.
3. INTEREST, FEES AND CHARGES
(a) Rates of Interest.
Interest accrued on all Loans shall be due and be paid by the
Borrower on the earliest of: (i) the last day of each month (for such month),
computed through the immediately preceding day; (ii) the date of acceleration
following the occurrence of an Event of Default in consequence of which LaSalle
elects to accelerate their maturity and payment; or (iii) termination of this
Agreement pursuant to SECTION 8 hereof. Interest shall accrue on the principal
amount of the Revolving Loans made to the Borrower outstanding at the end of
each day at a fluctuating rate per annum equal to one and one-half percent
(1.5%) above both the Prime Rate and U.S. Base Rate in the case of Prime Rate
Loans and U.S. Base Rate Loans respectively. The rate of interest payable on
Prime Rate or U.S. Base Rate Loans shall increase or decrease by an amount equal
to any increase or decrease in the Prime Rate or U.S. Base Rate, effective as of
the opening of business on the day that any such change in the Prime Rate or
U.S. Base Rate occurs. Upon and following the occurrence of an Event of Default,
and during the continuation thereof, the principal amount of all Loans shall
bear interest payable on demand at a rate per annum equal to the rate of
interest then in effect under this SUBSECTION 3(a) plus two percent (2%) per
annum.
(b) Computation of Interest and Fees.
Interest hereunder shall be determined daily, and calculated
monthly not in advance, both before and after default and judgment. In the case
of U.S. Base Rate Loans, interest shall be computed on the actual number of days
elapsed over a year consisting of three hundred and sixty (360) days. In the
case of Prime Rate Loans, interest shall be computed on the actual number of
days elapsed over a year consisting of three hundred and sixty-five (365) days.
For the purpose of the Interest Act (Canada) only, the yearly rate of interest
to which any rate for a period less than a year is equivalent is such rate,
divided by the number of days in such period, and multiplied by the actual
number of days in the year. Notwithstanding any other provision hereof, all
determinations and calculations of interest rates and amounts hereunder by
LaSalle shall be conclusive absent (in the case of any calculation of an amount
based on a particular rate) manifest mathematical error in calculating such
amount. For the purpose of computing interest hereunder, all items of payment
received by LaSalle shall be deemed applied by LaSalle on account of the related
Loan (subject to final payment of such items) upon receipt by LaSalle of good
funds in LaSalle's account located in Toronto, Ontario.
17
(c) Maximum Interest.
It is the intent of the parties that the rate of interest and
the other charges under this Agreement shall be lawful; therefore, if for any
reason the interest or other charges payable under this Agreement are found by a
court of competent jurisdiction, in a final determination, to exceed the limit
which LaSalle may lawfully charge, then the obligation to pay interest and other
charges shall automatically be reduced to such limit and, if any amount in
excess of such limit shall have been paid, then such amount shall be refunded to
the payor thereof.
(d) Commitment Fee.
The Borrower shall pay to LaSalle a non-refundable commitment
fee of One Hundred Fifty Thousand Canadian Dollars (Cdn. $150,000), Fifty
Thousand Canadian Dollars (Cdn. $50,000) of which has been received by LaSalle,
and the remainder of which is due on the Closing Date.
(e) Unused Line Fee.
The Borrower shall pay to LaSalle at the end of each month, in
arrears, an unused line fee equal to one-quarter of one percent (.25%) per annum
on the daily average amount by which the Revolving Credit Commitment exceeds the
sum of the outstanding principal balance of the Revolving Loans and the L/C
Liabilities, all as defined in this Agreement and all expressed as the Canadian
Dollar Equivalent Amount. The unused line fee shall accrue from the Closing Date
until the last day of the term of this Agreement as set out in SUBSECTION 8(a)
hereof.
(f) Examination and Appraisal Fees.
In addition to the costs and expenses described in SUBSECTION
10(p) hereof, the Borrower shall pay to LaSalle an examination fee equal to
Eight Hundred Fifty Canadian Dollars (Cdn. $850) per person per day for any
audit, inspection or other activity described in the first sentence of
SUBSECTION 10(c) hereof and conducted or undertaken before or after the date of
this Agreement, plus all out-of-pocket expenses incurred by LaSalle including,
without limitation, travel expenses, payable as incurred.
(g) Capital Adequacy Charge.
If LaSalle shall have determined that the adoption of any law,
rule or regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by LaSalle with any request
or directive regarding capital adequacy (whether or not having the force of law)
from any central bank or governmental authority enacted after the Closing Date,
does or shall have the effect of reducing the rate of return on LaSalle's
capital as a consequence of its obligations hereunder to a level below that
which LaSalle could have achieved but for such adoption, change or compliance
(taking into consideration LaSalle's policies with respect to capital adequacy)
by a material amount, then from time to time, after submission by LaSalle to the
Borrower of a written demand therefor (the "CAPITAL ADEQUACY DEMAND") together
with the certificate described below, the Borrower shall pay to LaSalle such
additional amount or amounts (the "CAPITAL ADEQUACY CHARGE") as will compensate
LaSalle for such reduction in respect of its Loans hereunder. A certificate of
LaSalle claiming entitlement to
18
payment as set forth above shall be conclusive in the absence of manifest error.
Such certificate shall set forth the nature of the occurrence giving rise to
such reduction, the amount of the Capital Adequacy Charge to be paid to LaSalle,
and the method by which such amount was determined. In determining such amount,
LaSalle may use any averaging and attribution method, applied on a
non-discriminatory basis.
(h) Letter of Credit Fees.
The Borrower shall pay to LaSalle a standby Letter of Credit
fee equal to three percent (3.0%) per annum on the face amount of each standby
Letter of Credit issued for the account of the Borrower, which fee shall be
payable upon and as a condition of issuance thereof and shall be based on its
term to maturity; provided, however that such fees in respect of standby Letters
of Credit shall not be less than One Hundred and Fifty Canadian Dollars (Cdn.
$150) per item. The Borrower shall pay to LaSalle a documentary Letter of Credit
fee equal to one percent (1.0%) per annum on the face amount of each documentary
Letter of Credit issued for the account of the Borrower, which fee shall be
payable upon and as a condition of the issuance thereof and shall be based on
its term to maturity; provided, however that such fees in respect of each
documentary Letter of Credit shall not be less than One Hundred and Fifty
Canadian Dollars (Cdn. $150). The Borrower shall also pay to LaSalle its
standard costs and expenses with respect to standby and documentary Letters of
Credit and shall also pay, on demand, the normal and customary administrative
charges for issuance, amendments, negotiation, renewal or extension of any
documentary Letters of Credit imposed by any correspondent bank issuing such
documentary Letters of Credit.
4. LOAN ADMINISTRATION
(a) Loan Requests.
A request for a Loan shall be made or shall be deemed to be
made, each in the following manner: (i) the Borrower shall give LaSalle same day
notice, no later than 12:00 noon (Toronto time) on such day, of its intention to
borrow a Prime Rate Loan or U.S. Base Rate Loan, which notice shall be
substantially in the form of EXHIBIT 4(a) hereto (each a "NOTICE OF BORROWING"),
provided, however, that no such request may be made at a time when there exists
a Default or an Event of Default; and (ii) the coming due of any amount required
to be paid under this Agreement or any Note, whether on account of interest or
for any other liability, shall be deemed irrevocably to be a request for a Prime
Rate Loan or U.S. Base Rate Loan as applicable on the due date thereof in the
amount required to pay such interest or other liability. As an accommodation to
the Borrower, LaSalle may permit telephone requests for Loans and electronic
transmittal of instructions, authorizations, agreements or reports to LaSalle.
Unless the Borrower specifically directs LaSalle in writing not to accept or act
upon telephonic or electronic communications, LaSalle shall have no liability to
the Borrower for any loss or damage suffered as a result of LaSalle's honouring
of any requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to it telephonically or electronically and
purporting to have been sent to LaSalle by the Borrower and LaSalle shall have
no duty to verify the origin of any such communication or the authority of the
Person sending it. Each Notice of Borrowing shall be irrevocable by and binding
on the Borrower. The
19
Borrower, at its option, may choose Prime Rate Loans or U.S. Base Rate Loans for
Revolving Loans.
(b) Letter of Credit Requests.
Each Letter of Credit shall be issued upon the irrevocable
written request of the Borrower (each a "LETTER OF CREDIT REQUEST") at least
three (3) Business Days prior to the proposed date of issuance. Each Letter of
Credit Request shall be sent by facsimile, confirmed immediately in writing, in
the form of a Letter of Credit application satisfactory to LaSalle in its
absolute discretion, and shall specify in form and detail satisfactory to
LaSalle: (i) the proposed date of issuance of the Letter of Credit (which shall
be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the
expiry date of the Letter of Credit ; (iv) the name and address of the
beneficiary thereof. Each Letter of Credit Request shall be accompanied by an
application and indemnity in form and substance satisfactory to LaSalle in its
absolute discretion.
(c) Disbursement.
The Borrower hereby irrevocably authorizes LaSalle to disburse
the proceeds of each Loan requested by the Borrower, or deemed to be requested
by the Borrower and to be disbursed or paid by LaSalle, as follows: (i) the
proceeds of each Loan requested under SUBSECTION 4(a)(i) and to be disbursed or
paid by LaSalle, shall be disbursed by LaSalle in Canadian Dollars or U.S.
Dollars as applicable in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
the Borrower, and in the case of each subsequent borrowing, by wire transfer or
otherwise to such bank account as may be agreed upon by the Borrower and LaSalle
from time to time; and (ii) the proceeds of each Revolving Loan deemed requested
under SUBSECTION 4(a)(ii) shall be disbursed by LaSalle by way of direct payment
of the relevant interest or other liability.
5. SECURITY
Security. As security for the payment of all Liabilities and
for the payment or other satisfaction of all other indebtedness and liabilities
of the Borrower, the Borrower agrees to deliver or cause to be delivered to
LaSalle each of the following (collectively, the "SECURITY"):
(a) Debenture and Hypothec each in the principal amount of
$20,000,000 in favour of LaSalle by the Borrower charging all present and future
property, assets and undertaking of the Borrower;
(b) Charge/Mortgage of Land (or equivalent in provinces other than
Ontario) in the principal amount of $20,000,000 in favour of LaSalle by the
Borrower (with debenture attached) and registered on title to the Leasehold
Property in respect of the charge of the Borrower's leasehold interest therein.
(c) Delivery Agreement in favour of LaSalle by the Borrower in
respect of its Debenture;
20
(d) Security under Section 427 of the Bank Act from the Borrower
in favour of and in the forms provided by LaSalle including, without limitation,
a notice of intention, an agreement to give security, an application for credit
and promise to give security, etc. and a grant of security under section 427;
(e) Guarantee by the Guarantor in favour of LaSalle in respect of
all Liabilities;
(f) General Security Agreement charging all present and future
property, assets and undertaking of the Guarantor;
(g) Assignments of Insurance Monies which may become payable in
respect of the property of each of the Borrower and the Guarantor (as
acknowledged by the insurer) in favour of LaSalle, subject to any assignment of
insurance monies in favour of the Business Development Bank of Canada ("BDC") in
relation to the BDC Equipment, to the extent of any amounts secured by the BDC
Equipment;
(h) Pledge Agreement by the Borrower in favour of LaSalle pledging
all of its holdings in the capital of the Guarantor;
(i) Stock Transfer Powers by the Borrower in favour of LaSalle in
respect of the pledge agreement;
(j) Share Certificates representing 100% interest in the Guarantor
delivered by the Borrower to LaSalle; and
(k) such other security and supporting documents, certificates or
instruments in respect of the Borrower and the Guarantor (including third party
postponement and subordinations, landlord and mortgagee waivers) as may be
required by LaSalle from time to time.
6. COLLECTIONS
(a) Blocked Accounts and Lock Boxes.
Until a notice is received by the Borrower as provided
hereinafter, each of the Borrower and the Guarantor shall collect and enforce
all of its Accounts. In furtherance thereof, each of the Borrower and the
Guarantor shall direct all electronic payments on Accounts to be made directly
to LaSalle at the location specified by LaSalle, and shall establish U.S. Dollar
and/or Canadian Dollar accounts (each a "BLOCKED ACCOUNT") in LaSalle's name
with a financial institution acceptable to LaSalle, into which they will
immediately deposit all other payments received by them (including all payments
made for Inventory or services sold or rendered), in the identical form in which
such payments were made, whether by cash or cheque. At and following such time
as LaSalle, in its sole discretion, so notifies the Borrower, each of the
Borrower and the Guarantor shall direct all of its Account Debtors to make all
payments on the Accounts directly to a post office box (each a "LOCK BOX") with
a financial institution acceptable to, and in the name and under exclusive
control of, LaSalle. All payments received in the Lock Box shall be deposited in
the appropriate Blocked Account. If the Borrower, any affiliate or subsidiary
21
corporation of the Borrower, or any shareholder, officer, director, employee or
agent of the Borrower or any affiliate or subsidiary corporation, or any other
Person acting for or in concert with the Borrower shall receive any monies,
cheques, notes, drafts or other payments relating to or as proceeds of Accounts
or other Collateral, the Borrower and each such Person shall receive all such
items in trust for, and as the sole and exclusive property of, LaSalle and,
immediately upon receipt thereof, shall remit the same (or cause the same to be
remitted) in kind to the appropriate Blocked Account. Each financial institution
with which a Lock Box and Blocked Account are established shall acknowledge and
agree, in a manner satisfactory to LaSalle, that the amounts on deposit in such
Lock Box and Blocked Account are the sole and exclusive property of LaSalle,
that such financial institution has no right to set off against such Lock Box or
Blocked Account or against any other account maintained by such financial
institution into which the contents of such Blocked Account are transferred, and
that such financial institution shall wire, or otherwise transfer in immediately
available funds in a manner satisfactory to LaSalle, funds deposited in the
Blocked Account on a daily basis as such funds are collected. Each of the
Borrower and the Guarantor agrees that all payments made to each Blocked Account
or otherwise received by LaSalle, whether in respect of the Accounts of the
Borrower or as proceeds of other Collateral or otherwise, will be applied on
account of the Liabilities in accordance with the terms of this Agreement. The
Borrower agrees to pay all fees, costs and expenses which the Borrower incurs in
connection with opening and maintaining a Lock Box and Blocked Accounts. All of
such fees, costs and expenses which remain unpaid by the Borrower pursuant to
any Lock Box or Blocked Account agreement, to the extent same shall have been
paid by LaSalle hereunder, shall constitute Revolving Loans hereunder, shall be
payable to LaSalle by the Borrower upon demand, and, until paid, shall bear
interest at the highest rate then applicable to the Revolving Loans hereunder.
All cheques, drafts, instruments and other items of payment or proceeds of
Collateral delivered to LaSalle in kind shall be endorsed by the Borrower or the
Guarantor (as applicable) to LaSalle, and, if that endorsement of any such item
shall not be made for any reason, LaSalle is hereby irrevocably authorized to
endorse the same on their behalf. For the purpose of this paragraph, each of the
Borrower and the Guarantor irrevocably hereby makes, constitutes and appoints
LaSalle (and all Persons designated by LaSalle for that purpose) as its true and
lawful attorney and agent-in-fact (i) to endorse its name upon said items of
payment and/or proceeds of Collateral and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account or
goods pertaining thereto; (ii) to take control in any manner of any item of
payment or proceeds thereof; (iii) to have access to any lock box or postal box
into which any of the Borrower's or the Guarantor's mail is deposited; and (iv)
open and process all mail addressed to the Borrower or the Guarantor and
deposited therein; provided, however, that LaSalle shall not exercise any such
powers described in SUBPARAGRAPHS (i), (ii) (except for routine Lock Box
payments/proceeds or through any Blocked Account), (iii) AND (iv) unless and
until an Event of Default has occurred.
(b) Rights of LaSalle.
LaSalle may, at any time after the occurrence of an Event of
Default, and from time to time thereafter, whether before or after notification
to any Account Debtor and whether before or after the maturity of any of the
Liabilities, (i) enforce collection of any of the Borrower's or the Guarantor's
Accounts or contract rights by suit or otherwise; (ii) exercise all of the
Borrower's and the Guarantor's rights and remedies with respect to proceedings
brought to
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collect any Accounts; (iii) surrender, release or exchange all or any
part of any Accounts of the Borrower or the Guarantor, or compromise or extend
or renew for any period (whether or not longer than the original period) any
indebtedness thereunder; (iv) sell or assign any Account of the Borrower or the
Guarantor upon such terms, for such amount and at such time or times as LaSalle
deems advisable; (v) prepare, file and sign the Borrower's or the Guarantor's
name on any proof of claim in bankruptcy or other similar document against any
Account Debtor indebted on an Account of the Borrower or the Guarantor; and (vi)
do all other acts and things which are necessary, in LaSalle's sole discretion,
to fulfill the Borrower's and the Guarantor's obligations under this Agreement
and to allow LaSalle to collect the Accounts. In addition to any other provision
hereof, LaSalle may at any time on or after the occurrence of an Event of
Default, at the Borrower's expense, notify any parties obligated on any of the
Accounts of the Borrower or the Guarantor to make payment directly to LaSalle of
any amounts due or to become due thereunder.
(c) Application of Collections.
LaSalle shall, upon receipt by LaSalle at its office in
Toronto, Ontario of cash or other immediately available funds from collections
of items of payment and proceeds of any Collateral, apply the whole or any part
of such collections or proceeds against the Liabilities in such order as LaSalle
shall determine in its sole discretion.
(d) Dealings by LaSalle.
In its sole credit judgment, without waiving or releasing any
obligation, liability or duty under this Agreement or the Other Agreements or
any Event of Default, at any time or times hereafter, LaSalle may (but shall not
be obligated to) pay, acquire or accept an assignment of any security interest,
lien, encumbrance or claim asserted by any Person in, upon or against the
Collateral. All sums paid by LaSalle in respect thereof and all costs, fees and
expenses (including, without limitation, legal fees and disbursements (on a
solicitor-client basis) for both inside and outside counsel, all court costs and
all other charges relating thereto) incurred by LaSalle shall constitute
Revolving Loans, payable by the Borrower to LaSalle on demand and, until paid,
shall bear interest at the highest rate then applicable to Revolving Loans
hereunder.
(e) Receipts by Borrower.
Immediately upon the Borrower's or the Guarantor's receipt of
any portion of the Collateral consisting of an agreement, Instrument, Document
of Title or Chattel Paper, the Borrower shall deliver or cause to be delivered
the original thereof to LaSalle together with an appropriate endorsement or
other specific evidence of assignment thereof to LaSalle (in form and substance
acceptable to LaSalle). If an endorsement or assignment of any such items shall
not be made for any reason, LaSalle is hereby irrevocably authorized, as the
Borrower's and the Guarantor's attorney and agent-in-fact, to endorse or assign
the same on the Borrower's or the Guarantor's behalf, as applicable.
23
7. SCHEDULES AND REPORTS
(a) Activity Reports.
The Borrower shall deliver to LaSalle prior to any Borrowing, and in
any event not less frequently than weekly (subject to more frequent reporting at
the discretion of LaSalle) by telefacsimile at an address and number advised by
LaSalle from time to time, a report, substantially in the form of EXHIBIT 7(a)
hereto, of the Borrower's invoice activity and details of credit memos and
credit notes issued by the Borrower, and a schedule showing cash receipts, all
for the previous week or lesser period.
(b) Borrowing Base Certificate.
Within twenty (20) days after the close of each calendar month, and at
such other times as may be requested by LaSalle from time to time hereafter, the
Borrower shall deliver to LaSalle a certificate for such month, which shall
include calculations of the Borrowing Base (excluding reserves but including
calculations of Eligible Accounts and Eligible Inventory) (a "BORROWING BASE
CERTIFICATE"), and shall also deliver to LaSalle (and electronically to
Collateral Services Inc. in the case of accounts payable and Accounts trial
balances) (i) an aged trial balance of the Borrower's and the Guarantor's
accounts payable as of the end of such month, together with a listing of any
cheques prepared but not sent in respect of any accounts payable (ii) a report
substantially in the form of EXHIBIT 7(b)(ii) hereto in respect of all statutory
payables coming due during such month from the Borrower and the Guarantor,
identifying all such payables by type and amount and indicating date of payment
of each, such payables to include unemployment insurance, Canada Pension Plan
and income tax employee withholdings, goods and services and retail sales taxes,
and all other payables in respect of which any statutory lien or trust arises (a
"STATUTORY PAYABLES REPORT"), and (iii) a trial balance and declaration
certificate identifying by age each Account of the Borrower and the Guarantor, a
reconciliation thereof to the above Borrowing Base calculations, and copies of
the invoices when requested by LaSalle (with evidence of shipment attached)
pertaining to each such Account, for the month (or other applicable period)
immediately preceding. At such times as may be requested by LaSalle from time to
time hereafter, the Borrower shall deliver or cause to be delivered to LaSalle;
(x) copies of all account statements received in respect of its chequing and any
other accounts held with any financial institution; (y) such additional
schedules, certificates, reports and information with respect to the Collateral
as LaSalle may from time to time require and (z) a collateral assignment of any
or all items of Collateral. LaSalle, through its officers, employees or agents,
shall have the right, at any time and from time to time in LaSalle's name, in
the name of a nominee of LaSalle or in the Borrower's or the Guarantor's name,
to verify the validity, amount or any other matter relating to any of their
Accounts, by mail, telephone, telegraph or otherwise. The Borrower shall
reimburse LaSalle, on demand, for all costs, fees and expenses incurred by
LaSalle in this regard.
(c) Inventory Reports.
Without limiting the generality of the foregoing, the Borrower shall
deliver to LaSalle, at least once a month within twenty (20) days after the
close of each month (or more frequently when requested by LaSalle), a report
with respect to the Borrower's and the
24
Guarantor's Inventory (including a warehouse month end stock status report if
applicable), including a reconciliation thereof to the above Borrowing Base
calculations, a reconciliation of any perpetual inventory report to the general
ledger, a calculation of slow moving and obsolete Inventory values and an
inventory declaration in form and substance satisfactory to LaSalle in its
absolute discretion. The Borrower shall immediately notify LaSalle of any event
causing loss or depreciation in value of the aforesaid Inventory.
(d) Financial Reports.
The Borrower agrees to deliver to LaSalle the following financial
information, all of which shall be prepared in accordance with GAAP consistently
applied: (i) no later than thirty (30) days after the end of each calendar
month, copies of internally prepared financial statements of the Borrower and
the Guarantor (individually and on a consolidating and consolidated basis) on a
monthly and year-to-date basis with a comparison to the prior year and budget
including, without limitation, balance sheets and statements of income, retained
earnings and cash flow certified by the chief financial officer of the Borrower
and accompanied by a Financial Reporting Certificate, (ii) no later than sixty
(60) days before the end of the Borrower's fiscal year, a detailed budget and
statement of cash flow projections for it and the Guarantor during the following
fiscal year, in such detail as LaSalle may require, and (iii) no later than one
hundred twenty (120) days after the end of the Borrower's fiscal year, annual
audited financial statements (of the Borrower on a consolidated basis) certified
by independent chartered accountants satisfactory to LaSalle and unaudited
financial statements of the Guarantor, together with such accountants' report
thereon to management if such is made. LaSalle confirms that the accounting firm
of Kraft, Berger, Grill, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and March LLP is acceptable for the
purposes of this subsection.
(e) Authorized Officer.
Unless otherwise provided for herein, all schedules, certificates,
reports and assignments and other items delivered by the Borrower to LaSalle
hereunder shall be executed by an Authorized Officer and shall be in such form
and contain such information as LaSalle shall request. The Borrower shall
deliver or cause to be delivered from time to time such other schedules and
reports pertaining to the Collateral, and all such other financial information,
as LaSalle may request.
8. TERMINATION
(a) Survival of Security Interests, Liens, etc.
This Agreement shall be in effect from the date hereof until the
earlier of: (i) the Maturity Date; (ii) the date this Agreement is terminated by
the Borrower pursuant to SUBSECTION 8(b); and (iii) in the event the due date of
the Liabilities is accelerated pursuant to SECTION 13 hereof, the date
thereafter that the Liabilities are paid in full, provided, however, that the
security interests and liens created under this Agreement and the Other
Agreements shall survive such termination until the date upon which full and
final payment and satisfaction in full of the Liabilities shall have occurred.
At such time as the Borrower has repaid all of the Liabilities and this
Agreement has terminated, (x) the Borrower shall deliver or cause to be
delivered to LaSalle
25
a release, in form and substances satisfactory to LaSalle, of all obligations
and liabilities of LaSalle and its officers, directors, employees, agents,
parents, subsidiaries and affiliates to the Borrower and the Guarantor, and if
the Borrower is obtaining new financing from another lender, the Borrower shall,
in accordance with LaSalle's direction, either furnish such security to LaSalle,
or deliver such lender's indemnification of LaSalle, in form and substance and
with priority satisfactory to LaSalle, as LaSalle determines shall be necessary
to secure or indemnify LaSalle, as the case may be, in respect of cheques which
LaSalle has credited to the Borrower's account held at LaSalle, but which
subsequently are dishonoured for any reason and (y) upon the Borrower's request
and upon receipt of the release and indemnification described in SUBPARAGRAPH
(x) above, LaSalle shall deliver to the Borrower a release in form and substance
satisfactory to LaSalle.
(b) Prepayment.
The Borrower may terminate this Agreement or reduce the amount of the
Revolving Credit Commitment before the end of the term hereof, by paying to
LaSalle, as a prepayment fee, in addition to the payment of all other
Liabilities owing by the Borrower (in the case of any such termination), an
amount equal to: (i) three percent (3%) of the amount of the Aggregate
Commitment, or of the amount of the applicable reduction in the Revolving Credit
Commitment, if this Agreement is terminated or such reduction is made (as
applicable) during the first year of the term of this Agreement; (ii) one and
one-half percent (1.5%) of the amount of the Aggregate Commitment, or of the
amount of the applicable reduction in the Revolving Credit Commitment, if this
Agreement is terminated or such reduction is made (as applicable) during the
second year of the term of this Agreement; or (iii) one-half percent (.5%) of
the amount of the Aggregate Commitment, or of the amount of the applicable
reduction in the Revolving Credit Commitment, if this Agreement is terminated or
such reduction is made (as applicable) during the third year of the term of this
Agreement. Such termination or reduction described above may only take place
annually on the anniversary date of this Agreement and upon 30 days prior
written notice. In any event, subject to the provisions of SUBSECTION 8(a), this
Agreement shall terminate immediately if the Revolving Credit Commitment is
reduced to less than Ten Million Canadian Dollars (Cdn. $10,000,000). The
Borrower and LaSalle acknowledge and agree that, as a direct and proximate
result of the termination of this Agreement under the aforesaid circumstances,
or prepayment otherwise, or reduction as aforesaid, LaSalle will suffer a loss
in an amount which is difficult to calculate and determine with certainty and,
therefore, as a result of the Borrower's and LaSalle's reasonable endeavour to
ascertain and agree in advance to the amount necessary to compensate LaSalle for
said loss, the Borrower has agreed to pay the aforesaid prepayment and other
fees set out herein.
9. REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations, warranties and
covenants to LaSalle:
(a) the financial statements delivered or to be delivered by the Borrower
to LaSalle at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect the financial condition of the Borrower and each
other Loan Party for which such statements are delivered, and since the date of
such financial statements delivered to LaSalle most recently prior
26
to the date of this Agreement, no event or condition has occurred which has had,
or is reasonably likely to have, a Material Adverse Effect with respect to the
Borrower or any other Loan Party;
(b) the office where each of the Borrower and the Guarantor keeps its
books, records and accounts (or copies thereof) concerning the Collateral, the
Borrower's and the Guarantor's principal place of business and all other places
of business, locations of Collateral and post office boxes of the Borrower and
the Guarantor are as set forth in SCHEDULE B hereto; the Borrower shall promptly
(but in no event less than ten (10) days prior thereto) advise LaSalle in
writing of the proposed opening of any new place of business, the closing of any
existing place of business, any change in the location of the Borrower's and the
Guarantor's books, records and accounts (or copies thereof) or the opening or
closing of any post office box of the Borrower or the Guarantor;
(c) SCHEDULE 9(c) contains a complete list of all Equipment of the Borrower
and the Guarantor having a purchase price exceeding $10,000 as at the date of
this Agreement; the Collateral, including without limitation such Equipment is,
and shall be kept, or, in the case of vehicles, based, only at the addresses set
forth on SCHEDULE B, and at other locations of which LaSalle has been advised by
the Borrower in writing;
(d) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral or any property or
asset of a Loan Party other than any security agreement, financing statement or
analogous instrument evidencing Permitted Liens;
(e) each Account or item of Inventory which the Borrower and the Guarantor
shall, expressly or by implication, request LaSalle to classify as an Eligible
Account or as Eligible Inventory, respectively, shall, as of the time when such
request is made, conform in all respects to the requirements of such
classification as set forth in the respective definitions of Eligible Account
and Eligible Inventory and as otherwise established by LaSalle, and communicated
to Borrower, from time to time, and the Borrower shall promptly notify LaSalle
in writing if any such Eligible Account or Eligible Inventory shall subsequently
become ineligible; no Accounts owing from any party related to or affiliated
with the Borrower, the Guarantor or any of their respective direct or indirect
shareholders, directors, officers or employees is or shall be due and payable
more than thirty (30) days after the stated invoice date thereof;
(f) the Borrower is and shall at all times be the lawful owner of all
Collateral now purportedly owned or hereafter purportedly acquired by the
Borrower, and the Guarantor has good and marketable title to its property
charged as security for its guarantee in favour of LaSalle and is and shall at
all times be the lawful owner of all of its property and assets now purportedly
owned or hereafter purportedly acquired by it, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens; without limiting the generality of the foregoing, the Acquisition has
been completed, all consents, filings and notices required by law to be
obtained, made or given in respect thereof have been obtained, made or given and
each of the Borrower and the Guarantor has good and marketable title (subject
only to Permitted Liens) to the property and assets acquired by it pursuant to
the NRG Agreement, a true and complete copy of which has been delivered to
LaSalle by the Borrower;
27
(g) the Borrower and each other Loan Party has the right and power and is
duly authorized and empowered to enter into, execute and deliver this Agreement
and the Other Agreements to which it is a party and perform its obligations
hereunder and thereunder as applicable; their execution, delivery and
performance of this Agreement and the Other Agreements does not and shall not
conflict with the provisions of any statute, regulation, ordinance or rule of
law, or any agreement, contract or other document which may now or hereafter be
binding on any of them, and their execution, delivery and performance of this
Agreement and the Other Agreements as applicable shall not result in the
imposition of any lien or other encumbrance upon any of their property under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument by which any of them or any of their property may be
bound or affected;
(h) except as otherwise disclosed on SCHEDULE 9(h), there are no actions or
proceedings which are pending or, to the best of the Borrower's knowledge,
threatened against the Borrower or any other Loan Party and the Borrower shall,
and shall cause each other Loan Party to, promptly upon becoming aware of any
such pending or threatened action or proceeding, give written notice thereof to
LaSalle;
(i) the Borrower and each of the other Loan Parties has obtained all
licenses, authorizations, approvals and permits required or desirable in their
respective businesses, and the Borrower is and shall remain in compliance in all
material respects with all applicable federal, provincial, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, statutes, orders, regulations, rules and ordinances relating to
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters), the failure to comply with which would have a Material
Adverse Effect with respect to the Borrower, and there are no conditions with
respect to such licenses, authorizations, approvals and permits that materially
affect or restrict the transferability of such licenses, authorizations,
approvals and permits;
(j) all written information now, heretofore or hereafter furnished by the
Borrower or any other Loan Party to LaSalle is and shall be true and correct as
of the date with respect to which such information was or is furnished (except
for financial projections, which have been and shall be prepared in good faith
based upon reasonable assumptions);
(k) except as otherwise permitted hereby, the Borrower is not conducting,
permitting or suffering to be conducted, nor shall it conduct, permit or suffer
to be conducted, any activities pursuant to or in connection with which any of
the Collateral is now, or will (while any Liabilities remain outstanding) be
owned by any affiliate corporation, with the exception of the Guarantor;
(l) the Borrower was formed by amalgamation under the Business Corporations
Act (Ontario) on January 1, 1998. The Borrower shall notify LaSalle in writing
within ten (10) days of the change of its name or that of any other Loan Party
or the use of any tradenames or division names not previously disclosed to
LaSalle in writing. The Guarantor is a corporation duly incorporated and
subsisting under the laws of Delaware;
28
(m) with respect to Equipment: (i) subject to Permitted Liens, each of the
Borrower and the Guarantor respectively has good and indefeasible and
merchantable title to and ownership of its Equipment; (ii) each of the Borrower
and the Guarantor respectively shall keep and maintain Equipment in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be preserved and maintained, ordinary wear and tear excepted; (iii)
neither of the Borrower or the Guarantor has permitted, and they shall not
permit, any such items to become a fixture to real estate or an accession to
other personal property; (iv) from time to time the Borrower and the Guarantor
may sell obsolete, unused or worn out Equipment, so long as the proceeds of
disposition in respect of the Equipment not subject to any Permitted Liens
having priority over LaSalle's security shall be paid to LaSalle to be applied
to such Loans then outstanding as LaSalle shall determine at its discretion; (v)
the Borrower, immediately on demand by LaSalle, shall deliver to LaSalle any and
all evidence of ownership of, including, without limitation, certificates of
title and applications of title to, any of the aforesaid Equipment;
(n) this Agreement and the Other Agreements to which the Borrower or
another Loan Party is a party are the legal, valid and binding obligations of
the Borrower or such Loan Party as applicable and are enforceable against the
Borrower or such Loan Party as applicable in accordance with their respective
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally;
(o) the Borrower and each other Loan Party is solvent, is able to pay its
debts as they become due and has capital sufficient to carry on its business,
now owns property having a value both at fair valuation and at present fair
saleable value greater than the amount required to pay its debts, and will not
be rendered insolvent by the execution and delivery of this Agreement or any of
the Other Agreements or by completion of the transactions contemplated hereunder
or thereunder;
(p) the Borrower is not now obligated, whether directly or indirectly, for
any loans (including shareholder loans) or other indebtedness or liability
(contingent or otherwise) other than (i) the Liabilities; (ii) indebtedness and
liabilities disclosed to LaSalle on SCHEDULE 9(p); (iii) unsecured indebtedness
to trade creditors arising in the ordinary course of the Borrower's business and
(iv) unsecured indebtedness arising from the endorsement of drafts and other
instruments for collection, in the ordinary course of the Borrower's business.
The Borrower is not in arrears in payment of any amount to any supplier of
Inventory or any governmental body or agency including, without limitation,
amounts owing or to be remitted with respect to employee withholdings for income
tax or Canada Pension Plan, goods and services tax or provincial sales taxes.
(q) the Borrower does not own any margin securities, and none of the
proceeds of the Revolving Loans hereunder shall be used for the purpose of
purchasing or carrying any margin securities or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase any margin
securities;
29
(r) except as otherwise disclosed on SCHEDULE 9(r), the Borrower has no
subsidiary corporation or affiliate corporation or divisions, nor is the
Borrower engaged in any joint venture or partnership with any other Person;
(s) each of the Borrower and each other Loan Party that is a corporation is
duly organized and in good standing in its country, province or state of
organization, has and shall at all times have in place a duly constituted board
of directors or single director overseeing its affairs, is not and shall not be
at any time subject to a unanimous shareholder agreement or declaration
affecting the powers of such director or directors, and is duly qualified and in
good standing in all provinces or states where the nature and extent of the
business transacted by it or the ownership of its assets makes such
qualification necessary, except for such other provinces or states in which the
failure to so qualify would not have a Material Adverse Effect with respect to
any of them;
(t) except as disclosed in writing and acceptable to LaSalle, none of the
Borrower or any other Loan Party is in default under any material contract,
lease or commitment to which it is a party or by which it is bound, nor does the
Borrower know of any dispute regarding any contract, lease or commitment which
is material to the continued financial success and well-being of any of them;
(u) there are no controversies pending or threatened between the Borrower
or any other Loan Party and any of its employees or any union representing any
employees, other than employee grievances arising in the ordinary course of
business which are not, in the aggregate, likely to have a Material Adverse
Effect with respect to the Borrower or such Loan Party. The Borrower and each of
the other Loan Parties is in compliance in all material respects with all state,
federal and provincial laws respecting employment and employment terms,
conditions and practices (including without limitation, in respect of the
Guarantor, the Employee Retirement Income Security Act of 1974), except where
the failure to so comply would not have a Material Adverse Effect with respect
to the Borrower or such Loan Party;
(v) the Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it, details of all of which are described on
SCHEDULE 9(v);
(w) the Borrower is the registered and beneficial owner of all of the
issued and outstanding shares in the capital of the Guarantor, being 10 common
shares;
(x) except as disclosed in SCHEDULE 9(x) hereto: (i) the operations and
properties of the Borrower and each Loan Party comply with all applicable
Environmental Laws except for any non-compliance which would not have a Material
Adverse Effect with respect to any of them; (ii) the Borrower and Loan Party and
all of their present facilities or operations and properties, as well as to the
knowledge of the Borrower and each Loan Party their past facilities or
operations and properties, are not subject to any judicial proceeding or
administrative proceeding or any outstanding written order or agreement with any
Governmental Authority or private party respecting (a) any Environmental Law or;
(b) any Environmental Claim arising from the Release of a Contaminant into the
environment; (ii) to the best of the knowledge of the
30
Borrower and each Loan Party, none of their operations or properties is subject
to any federal, provincial or state investigation evaluating whether any
remedial work is needed to respond to a Release of any Contaminant into the
environment in each case which would have a Material Adverse Effect with respect
to any of them; (iv) none of the Borrower or any Loan Party nor any predecessor
of any of the Borrower or any Loan Party has, to the best of the knowledge of
the Borrower and each Loan Party, carried on on the past or present facilities
or operations or properties of the Borrower or any of the Loan Parties, any past
or present treatment, storage, or disposal of a Hazardous Material, nor have the
Borrower or any Loan Party or any prior owner or operator on any of the
properties of the Borrower or any Loan Party reported a spill or Release of a
Contaminant into the environment in each case which would have a Material
Adverse Effect with respect to any of them; (v) none of the Borrower or any Loan
Party has been notified that it has any liability in connection with any Release
of any Contaminant into the environment in each case which would have a Material
Adverse Effect with respect to any of them; (vi) none of the operations or
properties, past or present, of the Borrower or any Loan party involve the
generation, transportation, treatment or disposal of Hazardous Materials in
violation of Environmental Laws in each case which would have a Material Adverse
Effect with respect to any of them; (vii) none of the Borrower or any Loan Party
have disposed of any Contaminant by placing it in or on the ground or waters of
any premises owned, leased or used by any of them and to the knowledge of the
Borrower or any Loan Party neither has any lessee, prior owner, prior operator
or occupant or other person in each case which would have a Material Adverse
Effect with respect to the Borrower or any Loan Party; (viii) no underground
storage tanks or surface impoundments are on any properties of the Borrower or
any Loan Party; and (ix) to the best of the knowledge of the Borrower and any
Loan Party, no lien in favour of any Governmental Authority for (A) any
liability under any Environmental Laws, or (B) damages arising from or costs
incurred by such Governmental Authority in response to a Release of a
Contaminant into the environment, has been filed or attached to the property of
the Borrower or any Loan Party;
(y) all employee pension benefit plans are registered under, and in
compliance with, all requirements of law, all payments, reports, returns and
filings required to be made thereunder have been made and there is no obligation
on the part of the Borrower or the Guarantor under any such plan that is in
arrears. All such plans have been administered in accordance with their terms
and the provisions of applicable law. There are no unfunded liabilities under
any such plans and, without limiting the generality of the foregoing, there is
no going concern unfunded actuarial liability, past service unfunded actuarial
liability or solvency deficiency.
The Borrower represents, warrants and covenants to LaSalle that all
representations, warranties and covenants of the Borrower and of any other Loan
Party contained in this Agreement or any of the Other Agreements (whether
appearing in SECTIONS 9 OR 10 hereof or elsewhere) shall be true at the time of
the Borrower's execution of this Agreement, shall survive the execution,
delivery and acceptance hereof and thereof by the parties hereto and thereto and
the closing of the transactions described herein or related hereto, shall remain
true until the repayment in full of all of the Liabilities and termination of
this Agreement, and shall be remade by the Borrower and each such Loan Party at
the time each Revolving Loan is made pursuant to this Agreement.
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10. COVENANTS
Until payment or satisfaction in full of all Liabilities and
termination of this Agreement, unless the Borrower obtains LaSalle's prior
written consent waiving or modifying any of the Borrower's covenants hereunder
in any specific instance, the Borrower agrees as follows:
(a) the Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of the Borrower's and the Guarantor's
business activities, in accordance with sound accounting practices and GAAP
consistently applied, and shall keep such books, records and accounts, and any
copies thereof, only at the addresses indicated for such purpose on SCHEDULE B;
(b) the Borrower shall promptly advise LaSalle in writing of any Material
Adverse Effect in respect of the Borrower or any other Loan Party or the
occurrence of any Default or Event of Default (including without limitation, any
default in respect of any of the Subordinated Debt);
(c) LaSalle, or any Persons designated by it, shall have the right, at any
time (including, without limitation, through audits scheduled within forty-five
(45) days after the Closing Date and thereafter quarterly and more frequently
during the continuance of a Default or Event of Default) to call at the
Borrower's and the Guarantor's places of business or at any warehouse or storage
facility where property or assets of the Borrower or the Guarantor are located
at any times, and, without hindrance or delay, to inspect the Collateral and to
inspect, check and make extracts from the Borrower's and the Guarantor's books,
records, journals, orders, receipts and any correspondence and other data
relating to their business, the Collateral or any transactions between the
parties hereto, and shall have the right to make such verification concerning
their business as LaSalle may consider reasonable under the circumstances.
LaSalle shall also have the right to have Persons designated by it conduct such
appraisals of Collateral as it shall require from time to time, including
without limitation net orderly liquidation value appraisals of Inventory not
less than semi-annually. The Borrower shall furnish to LaSalle such information
relevant to LaSalle's rights under this Agreement (including without limitation
information on sales, receivables, collections, accounts payable and inventory
aging) as LaSalle shall at any time and from time to time request. The Borrower
authorizes LaSalle to discuss the affairs, finances and business of the Borrower
and the Guarantor with any officers or directors of the Borrower or any
affiliate corporation and with those employees of the Borrower and the Guarantor
with whom LaSalle has determined it to be necessary or desirable to converse,
and to discuss the financial condition of the Borrower and the Guarantor with
their independent public accountants. Any such discussions shall be without
liability to LaSalle or to such accountants. The Borrower shall pay to or
reimburse LaSalle for all reasonable fees, costs, and out-of-pocket expenses
incurred by LaSalle in the exercise of its rights hereunder (in addition to the
fees payable by the Borrower pursuant to SUBSECTION 3(f) hereof in connection
with LaSalle's examination of Borrower's books and records and Collateral),
including without limitation reimbursing LaSalle on the last day of each month,
in arrears, for the amount of a monitoring fee charged by Collateral Services
Inc. ("COLLATERAL SERVICES"), which fee is currently U.S.$65 per month and is
subject to future fluctuations as directed by Collateral Services, and all of
such
32
costs, fees and expenses shall constitute Revolving Loans hereunder, shall be
payable on demand and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder;
(d) (i) the Borrower shall keep or cause to be kept the Collateral
properly housed and shall keep or cause to be kept the
Collateral insured against such risks and in such amounts as
LaSalle may reasonably require and in any event, for an amount
not less than the full replacement value and under policies in
such form as shall be satisfactory to LaSalle. Originals or
certified copies of such policies of insurance have been, or on
the Closing Date, shall be, delivered to LaSalle together with
evidence of payment of all premiums therefor, and shall contain,
inter alia, an endorsement, in form and substance acceptable to
LaSalle, showing loss under such insurance policies payable to
LaSalle. Such endorsement, the other terms of the said policies,
or an independent instrument furnished to LaSalle, shall provide
that the insurance company shall give LaSalle at least thirty
(30) days written notice before any such policy of insurance is
materially altered or cancelled and shall include a standard
mortgage clause providing, inter alia, that no act or omission,
whether wilful or negligent, or default of the Borrower or any
other Person shall affect the right of LaSalle to recover under
such policy of insurance in case of loss or damage. The Borrower
and the Guarantor hereby direct all insurers under such policies
of insurance to pay all proceeds payable thereunder directly to
LaSalle. Each of the Borrower and the Guarantor irrevocably,
makes, constitutes and appoints LaSalle (and all officers,
employees or agents designated by LaSalle) as its true and
lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance,
endorsing its name on any cheque, draft, instrument or other
item of payment for the proceeds of such policies of insurance
and making all determinations and decisions with respect to such
policies of insurance; provided, however, that LaSalle shall
exercise such rights only upon and following the occurrence of
an Event of Default;
(ii) the Borrower shall maintain, at its expense, for itself and
the Guarantor, such public liability and third party property
damage insurance and business interruption insurance as is
customary for Persons engaged in businesses similar to that of
the Borrower with such companies and in such amounts, with such
deductibles and under policies in such form as shall be
satisfactory to LaSalle, acting reasonably, and originals or
certified copies of such policies have been, or on the Closing
Date, shall be, delivered to LaSalle together with evidence of
payment of all premiums therefor; each such policy shall contain
an endorsement showing LaSalle as additional insured thereunder
and providing that the insurance company shall give LaSalle at
least thirty (30) days written notice before any such policy
shall be materially altered or cancelled;
33
(iii) if the Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating
thereto, then LaSalle, without waiving or releasing any
obligation or default by the Borrower hereunder, may (but
shall be under no obligation to) obtain and maintain such
policies of insurance and pay such premiums and take such
other actions with respect thereto as LaSalle deems advisable.
All sums disbursed by LaSalle in connection with any such
actions, including, without limitation, court costs, expenses,
other charges relating thereto and legal fees and
disbursements (on a solicitor-client basis), shall constitute
Revolving Loans hereunder and, until paid, shall bear interest
at the highest rate then applicable to Revolving Loans
hereunder;
(e) the Borrower and the Guarantor shall not use the Collateral, or any part
thereof, in any unlawful business or for any unlawful purpose or use or maintain
any of the Collateral in any manner that does or could result in material damage
to the environment or a violation of any applicable Environmental Laws, or that
does or could result in an Environmental Claim; the Borrower and the Guarantor
shall keep the Collateral in good condition, repair and order, ordinary wear and
tear excepted; the Borrower and the Guarantor shall not permit the Collateral,
or any part thereof, to be levied upon under execution, attachment, writs of
enforcement, distraint or other legal process; the Borrower and the Guarantor
shall not sell, lease, grant a security interest in or otherwise encumber or
dispose of any of the Collateral except as expressly permitted by this Agreement
and the Borrower and the Guarantor shall not permit any liens or security
interests to attach to the Collateral that could rank either in priority to, or
pari passu to the Security, save and except for Permitted Liens; and the
Borrower and the Guarantor shall not secrete or abandon any of the Collateral,
or remove or permit removal of any of the Collateral from any of the locations
where Collateral is permitted to be held or used herein, except for the removal
of Inventory sold in the ordinary course of business as permitted herein;
(f) all monies and other property obtained by the Borrower from LaSalle pursuant
to this Agreement will be used solely to pay out existing indebtedness to HSBC
Bank Canada and certain suppliers and for ongoing operational requirements of
the Borrower;
(g) the Borrower and the Guarantor shall, at the request of LaSalle, indicate on
its records concerning the Collateral a notation, in form satisfactory to
LaSalle, of the security interest of LaSalle, and shall not maintain duplicates
or copies of such records at any address other than its principal place of
business set forth in this Agreement; provided, however, that the Borrower and
the Guarantor, in the ordinary course of its business, may furnish copies of
such records to its accountants, attorneys and other agents or advisors as it
may determine to be necessary or desirable, in the exercise of its commercially
reasonable judgment;
(h) the Borrower and the Guarantor shall file all required tax returns and pay
all of its taxes when due, including, without limitation, taxes imposed by
federal, provincial or municipal agencies, and shall cause any liens for taxes
to be promptly released; provided, that the Borrower and the Guarantor shall
have the right to contest the payment of such taxes in good faith by appropriate
proceedings so long as (i) the amount so contested is shown on its financial
statements, (ii) the contesting of any such payment does not give rise to a lien
for taxes, (iii)
34
upon the occurrence of an Event of Default, the Borrower keeps on deposit with
LaSalle (such deposit to be held without interest) an amount of money which, in
the sole judgment of LaSalle, is sufficient to pay such taxes and any interest
or penalties that may accrue thereon, and (iv) if the Borrower or the Guarantor
fails to prosecute such contest with diligence, LaSalle may apply the money so
deposited in payment of such taxes. If the Borrower or the Guarantor fails to
pay any such taxes and in the absence of any such contest, LaSalle may (but
shall be under no obligation to) advance and pay any sums required to pay any
such taxes and/or to secure the release of any lien therefor, and any sums so
advanced by LaSalle shall constitute Revolving Loans hereunder, shall be payable
by the Borrower to LaSalle on demand, and, until paid, shall bear interest at
the highest rate then applicable to Revolving Loans hereunder;
(i) neither of the Borrower and the Guarantor shall, without the prior written
consent of LaSalle, (i) incur, create, assume or suffer to exist any
indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to its trade
suppliers, (C) Permitted Inter-Company Debt, notice of which has been given to
LaSalle, (D) the Subordinated Debt, subordinated in favour of LaSalle, and
subject to such terms and conditions as LaSalle shall approve in its sole
discretion, and (E) any other indebtedness described in SECTION 9(p)(ii) hereof;
or (ii) assume, guarantee or endorse, or otherwise become liable in connection
with, the obligations of any Person, except by endorsement of instruments for
deposit or collection or similar transactions in the ordinary course of
business;
(j) neither of the Borrower and the Guarantor shall, without the prior written
consent of LaSalle, enter into any merger, amalgamation or consolidation, or
sell, lease or otherwise dispose of all or substantially all of its assets or
create any new subsidiary or affiliate or issue any shares of, or warrants or
other rights to receive or purchase any shares of, any class of its stock or
enter into any transaction outside the ordinary course of its business;
(k) neither of the Borrower and the Guarantor shall make any distribution of
funds or property and, without limitation, neither shall (i) declare or pay any
bonus, dividend or other distribution (whether in cash or in kind) on, purchase,
redeem or retire any shares of any class of its stock, or make any payment on
account of, or set apart assets for the repurchase, redemption, defeasance or
retirement of, any class of its stock unless such repurchase, redemption,
defeasance or retirement is made from the proceeds of indebtedness incurred and
subordinated on terms satisfactory to LaSalle; or (ii) make any optional payment
or prepayment on or redemption (including without limitation by making payments
to a sinking fund or analogous fund) or repurchase of any indebtedness for
borrowed money other than indebtedness pursuant to this Agreement, or (iii) make
any payment on or in respect of any indebtedness, or any interest, fee or other
payment, to any parent, subsidiary, affiliate corporation or other related
Person, or to any Person in respect of the Subordinated Debt; provided that, so
long as no Default or Event of Default has occurred or will occur as a
consequence thereof, the Borrower may make regularly scheduled payments in
respect of the Subordinated Debt in accordance with its terms approved by
LaSalle as in effect on the date hereof;
(l) neither of the Borrower and the Guarantor shall make any loans to, or
investments in, any Person, whether in cash, securities or other property of any
kind, other than (i) investments that are direct obligations of the Canadian
government or the United States
35
government pledged and delivered to LaSalle pursuant to documentation
satisfactory to LaSalle in its absolute discretion, (ii) negotiable certificates
of deposit issued by any bank satisfactory to LaSalle, payable to the order of
Borrower or to bearer and delivered to LaSalle with related documentation
satisfactory to LaSalle, and (iii) travel advances, employee relocations, loans
and other employee loans and advances in the ordinary course of business of the
Borrower and Guarantor, provided that at any time the aggregate amount thereof
outstanding at any time shall not exceed $250,000;
(m) neither of the Borrower and the Guarantor shall, except with the prior
written consent of LaSalle, amend its organizational documents or change its
fiscal year;
(n) neither of the Borrower and the Guarantor will, except with the prior
written consent of LaSalle, pay any amount to any of its officers and/or
directors in their capacities as officers and directors by way of salary, bonus,
commission, directors fees, executive management compensation or otherwise in
excess of the scale of such payments to such officers and/or directors in effect
on the date of this Agreement, subject to normal increases in the ordinary
course of business, which increases shall not exceed ten percent (10%) per annum
(during the fiscal year ending December 31, 2002, bonus payments shall not
exceed Three Hundred Thousand Canadian Dollars (Cdn. $300,000) in the aggregate;
thereafter such bonus payments shall be subject to the foregoing 10% maximum
annual increase); nor shall the Borrower make any payment of the fees presently
owing to PricewaterhouseCoopers Securities Inc. in the aggregate amount of
$300,000 until receipt by LaSalle of evidence satisfactory to LaSalle that all
conditions to payment thereof required by LaSalle and communicated to the
Borrower, including, without limitation, Excess Availability after payment
thereof of not less than Seven Hundred Fifty Thousand Canadian Dollars (Cdn.
$750,000), have been met;
(o) the Borrower shall maintain and keep in full force and effect each of the
financial covenants set forth below. The calculation and determination of each
such financial covenant, and all accounting terms contained therein, shall be
calculated and construed in accordance with GAAP, applied on a basis consistent
with the financial statements of the Borrower delivered on or before the Closing
Date:
(i) Adjusted Net Worth. The Borrower shall maintain consolidated
Adjusted Net Worth in an amount at the Closing Date (the "BASE
AMOUNT") equal to the greater of Four Million Canadian Dollars
(Cdn. $4,000,000) and ninety percent (90%) of the actual
Adjusted Net Worth on the Closing Date; and, after the Closing
Date, at all times in an amount equal to the Base Amount plus
the cumulative total of amounts equal to seventy-five percent
(75%) of consolidated net income for each fiscal quarter of
the Borrower occurring after the Closing Date (after deduction
of distributions made by the Borrower and allowed in writing
by LaSalle, but not including in such calculations any net
loss on the part of the Borrower);
(ii) Interest Coverage Ratio. The Borrower shall maintain a ratio
of (A) EBITDA (after deducting Capital Expenditures not
financed) to (B) interest expense, of not less than 1.50 to
1.00, measured at each Fiscal Quarter End commencing on the
date of this Agreement, on a consolidated
36
year to date basis during the fiscal year ending December 31,
2002, and on a consolidated rolling four-quarter basis
thereafter;
(iii) Capital Expenditures. The Borrower shall not, on a
consolidated basis during any fiscal year, make Capital
Expenditures in an aggregate amount of more than One Hundred
Thousand Canadian Dollars (Cdn. $100,000);
(iv) Debt Service Coverage. The Borrower shall maintain a ratio of
(A) net income after taxes (excluding any after-tax gains or
losses on the sale of assets and excluding other after-tax
extraordinary gains or losses) plus non-cash income tax
expense, plus depreciation and amortization and minus Capital
Expenditures which have not been financed, to (B) the
principal payments of long term debt (including capital leases
and subordinated debt) paid or payable, of not less than (A)
in its fiscal year ending December 31, 2002, 1.00 to 1.00, and
(B) thereafter, 1.25 to 1.00, measured at each Fiscal Quarter
End, commencing on the date of this Agreement, on a fiscal
year to date basis during the fiscal year ending December 31,
2002, and a consolidated rolling four quarter basis
thereafter.
(p) the Borrower shall reimburse LaSalle for all costs and expenses (including,
without limitation, legal fees and disbursements (on a solicitor-client basis)
for both in-house and outside counsel), incurred by LaSalle in connection with
the documentation and consummation of this transaction and any other
transactions between the Borrower and LaSalle including, without limitation,
personal property security and other public record searches, lien filings,
express mail or similar express or messenger delivery, appraisal costs
(including net orderly liquidation value appraisals of Inventory), surveys,
title insurance and environmental audit or review costs, and in seeking to
collect, protect or enforce any rights in or to the Collateral or incurred by
LaSalle in seeking to collect any Liabilities and to administer and enforce any
of LaSalle's rights under this Agreement. The Borrower shall also pay all normal
service charges with respect to accounts maintained by LaSalle for the benefit
of the Borrower. All such costs, expenses and charges shall constitute Revolving
Loans hereunder, shall be payable to LaSalle on demand and, until paid, shall
bear interest at the highest rate then applicable to Revolving Loans hereunder;
(q) the Borrower shall maintain all banking relationships with a financial
institution acceptable to LaSalle in its discretion;
(r) the Borrower and the Guarantor shall not make any material change in the
operation of their businesses; the Borrower and the Guarantor shall purchase
Inventory only from, in the case of the Borrower, parties at arms-length to the
Borrower, its officers and directors and its direct or indirect shareholders,
and in the case of the Guarantor, from such arms-length parties or from the
Borrower;
(s) the Borrower shall conduct its business and occupy its premises and shall
cause each Loan Party to conduct their respective businesses and occupy their
respective premises in full compliance with all Environmental Laws applicable to
them, including, without limitation,
37
those relating to the Borrower's or any Loan Party's generation, handling, use,
storage, and disposal of Hazardous Materials; the Borrower shall take and shall
cause each Loan Party to take prompt and appropriate action to respond to any
non-compliance or alleged non-compliance with any Environmental Laws and shall
regularly report to LaSalle on such non-compliance or alleged non-compliance and
the Borrower's response. Without limiting the generality of the foregoing,
whenever the Borrower gives the notice to LaSalle contemplated by SUBSECTION
10(t) the Borrower shall at LaSalle's request and at the Borrower's expense:
(i) cause an independent environmental engineer acceptable to
LaSalle to conduct such tests of the site where the Borrower's
or such Loan Party's non-compliance or alleged non-compliance
with Environmental Laws has occurred and prepare and deliver
to LaSalle a report addressed to LaSalle and on which LaSalle
may rely without qualifications 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 LaSalle a supplemental report of such engineer
whenever the scope of the environmental problems, or the
Borrower's response thereto or the estimated costs thereof
shall change. Such reports shall also be addressed to LaSalle
and shall, as requested by LaSalle, set out the results of
such engineers' review of, inter alia:
A. the internal policies and procedures of the Borrower
or such Loan Party relating to environmental
regulatory compliance to ensure that all appropriate
steps are being taken by or on behalf of the Borrower
or such Loan Party to comply with all applicable
requirements of Environmental Laws;
B. progress of compliance deficiencies;
C. all other environmental audit reports which the
Borrower or any Loan Party, or any predecessor
thereof has commissioned in the normal conduct of its
business; and
D. all environmental reports which have been
commissioned by or made available to the Borrower or
any Loan Party in connection with new acquisitions,
and the engineers' report and recommendations on
results of tests performed or samples taken by it
during the course of its review, irregularities or
steps which may be taken to ensure continued
compliance, as well as such other matters as the
Borrower and/or LaSalle may request from time to
time;
(t) the Borrower shall provide written notice to LaSalle no later than five (5)
days after the happening of any of the following:
(i) the receipt of a notice of non-compliance, violation or
contravention from any Governmental Authority with respect to
the activities carried on by
38
the Borrower or any other Loan Party or as to any other matter
whatsoever;
(ii) there has been a spill or other Release of Hazardous Materials
upon, under or about or affecting any of the properties owned,
operated, leased or occupied by the Borrower or any other Loan
Party in amounts that are required to be reported under
Environmental Laws, or Hazardous Materials at levels or in
amounts that are required to be reported, remedied or
responded to under Environmental Laws are detected on or in
the soil or groundwater;
(iii) the Borrower or any other Loan Party is or may be liable for
any costs of cleaning up or otherwise remedying a Release of
Hazardous Materials;
(iv) any part of the properties owned, operated, managed,
possessed, leased or occupied by the Borrower or any other
Loan Party or of which the Borrower or any other Loan Party
otherwise have charge, management or control, are subject to a
lien, charge, mortgage or other type of encumbrance under, or
may be subject to any order, direction or other administrative
proceeding under, any Environmental Laws; or
(v) the Borrower or any other Loan Party undertakes any remedial
work with respect to any Hazardous Materials;
(u) the Borrower shall provide written notice to LaSalle promptly of the
following:
(i) the occurrence of any "reportable event" (as defined in the
Employee Retirement Income Security Act of 1974) which might
result in the termination by the Pension Benefit Guaranty
Corporation (the "PBGC") of any employee benefit plan ("PLAN")
covering any officers or employees of any Loan Party, any
benefits of which are, or are required to be, guaranteed by
the PBGC;
(ii) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor;
or
(iii) the intention of any Loan Party to terminate or withdraw from
any Plan;
(v) neither of the Borrower and the Guarantor shall hold or use any of the
Collateral in a location outside of jurisdictions where LaSalle has
registered notice of its security interest applicable to such
Collateral.
39
11. CONDITIONS PRECEDENT
(a) Closing Deliveries.
The obligation of LaSalle to fund the initial Loans and issue the
initial Letter of Credit (if any) is subject to the satisfaction or waiver on or
before the Closing Date of the following conditions precedent:
(i) Completion by LaSalle to its sole satisfaction of its review
of the fiscal 2001 audited consolidated financial statements
of the Borrower and management prepared interim financial
statements (including individual and consolidated balance
sheets, cash flow statements and profit and loss statements)
as at February 28, 2002 with respect to the Borrower, and of a
consolidated current opening balance sheet of the Borrower,
and any other information and material requested by LaSalle to
ensure that, among other things, no changes have occurred that
would result in an amendment to any of the financial forecasts
and other information provided by the Borrower to LaSalle, and
that the Borrower is solvent and has sufficient capital.
(ii) No material adverse change in LaSalle's understanding of the
facts and information presented to it by the Borrower or
others on the Borrower's behalf has occurred and no material
litigation or claims (in the sole judgment of LaSalle) with
respect to any aspect of Borrower's or any other Loan Party's
business or assets shall have occurred.
(iii) LaSalle shall have received, in form and substance
satisfactory to it in its absolute discretion, each of the
security documents, agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the
closing document list attached hereto as SCHEDULE 11(a)(iii),
including without limitation evidence of all registrations as
required and confirmation of its first priority lien, charge
and security interest in the Collateral (subject only to
Permitted Liens).
(iv) Since December 31, 2001, no event shall have occurred which
has had or could be expected to have a Material Adverse Effect
with respect to the Borrower or the Guarantor, as determined
by LaSalle in its sole discretion.
(v) LaSalle shall have received payment in full of all fees and
expenses payable to it by the Borrower, including, without
limitation, legal fees and expenses incurred by LaSalle in
connection with this Agreement and the consummation of the
transactions contemplated hereby, on or before the Closing
Date.
(vi) LaSalle shall have determined that immediately after giving
effect to (A) the making of the initial Revolving Loans
requested to be made on the Closing Date, (B) the issuance of
the initial Letter of Credit, if any, on the
40
Closing Date, and (C) the payment or reimbursement by the
Borrower of LaSalle for all closing costs and expenses
incurred in connection with the transactions contemplated
hereby, on a pro forma basis Excess Availability shall not be
less than Seven Hundred Fifty Thousand Canadian Dollars (Cdn.
$750,000).
(vii) LaSalle shall have received evidence of repayment of all of
the Borrower's and the Guarantor's indebtedness owing to
creditors other than the Borrower's indebtedness to unsecured
trade creditors incurred in the normal course of business and
on normal payment terms and other than indebtedness to those
creditors which LaSalle has agreed may continue as creditors
of the Borrower or the Guarantor after the Closing Date (which
creditors include those holding Permitted Liens).
(viii) No request of the Minister of National Revenue for payment
pursuant to Section 224(1.1), or any successor section, of the
Income Tax Act (Canada) shall have been received by LaSalle in
respect of Borrower.
(ix) LaSalle shall have received a Borrowing Base Certificate as at
May 16, 2002, together with a certificate from an Authorized
Officer of the Borrower (the "CLOSING CERTIFICATE") pursuant
to which such Authorized Officer shall certify that: (A) in
calculating the Excess Availability described in clause (vi)
above, the Borrower's outstanding debt was (and is) current
and not past due in any respect; (B) all representations and
warranties contained herein are true and correct; (C) no
Default or Event of Default has occurred and is continuing;
and (D) no event has occurred and is continuing that would
have a Material Adverse Effect with respect to the Borrower or
the Guarantor.
(x) The Borrower and any other Loan Party shall have or cause to
be executed and delivered to LaSalle all documents which
LaSalle determines in its absolute discretion are necessary to
consummate the transactions contemplated hereby.
(xi) Completion of tax, lien, judgment and other searches and
investigations with respect to the Collateral and all security
provided by the Borrower and any other Loan Party, with
results satisfactory to LaSalle, and completion of a review to
its satisfaction of the management, creditworthiness,
financial position, systems and procedures of the Borrower.
(xii) LaSalle shall have received, reviewed and determined as
satisfactory all appraisals, all third party documentation
(including landlord and mortgagee waivers and debt and
security subordinations and postponements it may require) and
all contracts entered or to be entered into by or binding on
the Borrower or any other Loan Party (including all supply,
service, purchase and rental contracts and all collective
41
agreements with employees or their union) as it may consider
material in its absolute discretion.
(xiii) Completion of final pre-closing field audit and collateral
roll-forward, ineligibles and Borrowing Base calculations, and
confirmation of a level of backorders, all to the satisfaction
of LaSalle.
(xiv) Confirmation of completion of the Acquisition pursuant to the
NRG Agreement as approved by LaSalle, and provision of
financial information in respect of NRG confirming gross
profit in its operations during the past two fiscal years, and
year to date on a pro-rated basis, of not less than US$400,000
per year.
(xv) Without limiting the generality of SUBSECTION 11(a)(iii),
LaSalle shall have received a legal opinion from the
Borrower's counsel, in form and substance satisfactory to
LaSalle and its counsel, opining with respect to, but not
limited to, the Borrower's and each Loan Party's incorporation
and subsistence, the Borrower's and each Loan Party's
corporate power and capacity to enter into this Agreement and
the Other Agreements, any applicable fraudulent preference
issues, the Borrower's and each Loan Party's due
authorization, execution and delivery and performance of this
Agreement and the Other Agreements and the enforceability of
this Agreement and the Other Agreements against the Borrower
and each Loan Party, as applicable.
(xvi) Confirmation that accounts payable to CommScope by the
Borrower amounting to not less than ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (U.S. $2,200,000) have been
converted to a two (2) year unsecured subordinated loan on
terms and conditions satisfactory to LaSalle.
(xvii) Confirmation in writing from Alpha Technologies Inc. and
CommScope, and from any other suppliers deemed material by
LaSalle, in form and substance satisfactory to LaSalle, to the
effect that they will continue to supply Inventory to the
Borrower on trade terms that LaSalle considers representative
of normal trade terms.
(b) Post Closing Deliveries.
After the Closing Date, the obligation of LaSalle to make any requested
Loan or issue any requested Letter of Credit is subject to the satisfaction of
the conditions precedent set forth in SUBSECTIONS 11(a)(ii), (iii), (iv),
(viii), (x) AND (xii) above and also as set forth below. Each such request shall
constitute a representation and warranty that such conditions are satisfied:
(i) All representations and warranties contained in this Agreement
and the Other Agreements shall be true and correct on and as
of the date of such
42
request, as if then made, other than representations and
warranties that relate solely to an earlier date; and
(ii) No Default or Event of Default shall have occurred, or would
result from the making of the requested Revolving Loan or
issue of the requested Letter of Credit, which has not been
waived in writing by LaSalle.
12. DEFAULT
The occurrence of any one or more of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) the failure of the Borrower or any other Loan Party to pay when due,
declared due, or demanded by LaSalle in accordance with the terms hereof or
thereof, any of the Liabilities;
(b) the failure of the Borrower or any other Loan Party to perform, keep or
observe any of the covenants, conditions, promises, agreements or obligations
(other than as described in SUBSECTION 12(a) above) of the Borrower or such Loan
Party under this Agreement or any of the Other Agreements and such failure shall
continue unremedied for five (5) days, provided that such period of five (5)
days shall not apply in the case of (i) any failure to perform any such
covenant, condition, promise, agreement or obligation which is not capable of
being cured at all or within such period of five (5) days, or (ii) the failure
to observe or perform any covenant, condition, promise, agreement or obligation
contained in SECTIONS 6, 7 OR 10 hereof (with the exception of SUBSECTIONS
10(a), 10(h) AND 10(q));
(c) the making or furnishing by the Borrower or any other Loan Party or any
director, officer, employee or other representative thereof to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between the Borrower or such Loan Party and
LaSalle, which is untrue or misleading in any respect, or the failure of the
Borrower or any other Loan Party to perform, keep or observe any of the
covenants, conditions, promises, or agreements of the Borrower or such Loan
Party under any other agreement with any Person if such failure, in the opinion
of LaSalle, has or is likely to have a Material Adverse Effect with respect to
the Borrower or any other Loan Party;
(d) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral or any property
or assets of the Borrower or any other Loan Party, other than the Permitted
Liens, or the making or any attempt to make any levy, seizure or attachment
thereof or (except as permitted hereby) sale, lease or furnishing under a
contract of service of, any of the Collateral or any property or asset of the
Borrower or any other Loan Party, or the loss, theft, damage or destruction of
all or a substantial portion of the property and assets of the Borrower or a
Loan Party;
(e) the making of an assignment or proposal in bankruptcy by the Borrower or any
other Loan Party or the filing by the Borrower or any other Loan Party of notice
of its intention to make a proposal in bankruptcy or the commencement of any
proceedings in bankruptcy by or
43
against the Borrower or any other Loan Party for the liquidation or
reorganization of the Borrower or any other Loan Party or alleging that the
Borrower or such Loan Party is insolvent or unable to pay its debts as they
mature or for the readjustment or arrangement of the Borrower's or any other
Loan Party's debts, whether under the Bankruptcy and Insolvency Act (Canada),
the Companies' Creditors Arrangement Act (Canada) or the United States
Bankruptcy Code or under any other law, whether state, provincial or federal,
now or hereafter existing for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving the Borrower or any
other Loan Party, provided however, that if such commencement of proceedings
against the Borrower or such Loan Party is involuntary, such action shall not
constitute an Event of Default unless such proceedings are not forthwith
contested in good faith by the Borrower or such Loan Party and dismissed within
ten (10) days after the commencement of such proceedings;
(f) the appointment of a receiver or trustee for the Borrower or any other Loan
Party, for any of the Collateral or for any substantial part of the Borrower's
or any other Loan Party's assets or the institution of any proceedings for the
dissolution or winding up, or the full or partial liquidation, or (without the
consent of LaSalle) the merger, amalgamation or consolidation, of the Borrower
or any other Loan Party which is a corporation or a partnership;
(g) the entry of any judgment or the issuance or registration of any writ of
enforcement or order against the Borrower or any other Loan Party which, or the
Canadian Dollar Equivalent Amount of which, is in excess of Fifty Thousand
Canadian Dollars (Cdn. $50,000) for any one occurrence or One Hundred Thousand
Canadian Dollars (Cdn. $100,000) in the aggregate and which remains unsatisfied
or undischarged and in effect for ten (10) days after such entry without a stay
of enforcement or execution;
(h) the occurrence of a default or an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to LaSalle pursuant to which such Person has guaranteed to LaSalle
the payment of all or any of the Liabilities or has granted LaSalle a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure directly or indirectly the payment of all or any of the
Liabilities;
(i) the occurrence of a default or an event of default, which continues after
the passage of any cure period, under any other agreement or instrument
evidencing indebtedness for borrowed money in excess of One Hundred Thousand
Canadian Dollars (Cdn. $100,000) executed or delivered by the Borrower or any
other Loan Party or pursuant to which agreement or instrument the Borrower or
any other Loan Party or its properties is or may be bound (including, without
limitation, the Subordinated Debt); or
(j) the occurrence of any event or condition (including without limitation any
change in the operations or business of the Borrower or any other Loan Party, or
any adverse order or ruling pursuant to the Competition Act (Canada) in respect
of or affecting the Borrower or any other Loan Party) which has or is likely to
have a Material Adverse Effect in respect of the Borrower or any other Loan
Party, or any change in ownership of, or pledge, transfer, assignment or
disposition of, or grant of security in, any shares of, the Borrower or any
other Loan Party, all as determined by LaSalle in its sole discretion.
44
13. REMEDIES UPON AN EVENT OF DEFAULT
(a) Upon the occurrence of a Default or Event of Default, LaSalle shall have no
further obligation to make or extend any Loan hereunder, to issue or cause to be
issued any Letter of Credit hereunder or to grant any other financial
accommodation to the Borrower.
(b) Upon the occurrence of an Event of Default described in SUBSECTION 12(e)
hereof, all of the Liabilities shall immediately and automatically become due
and payable, without notice of any kind, and upon the occurrence of any other
Event of Default, any or all of the Liabilities may, at the option of LaSalle,
and without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable. Upon either occurrence, LaSalle may,
in addition to any other right or remedy which it may have at law or in equity,
proceed to realize its security hereunder and to enforce its rights by:
(i) entry;
(ii) the appointment by instrument in writing of a receiver or
receivers of the Collateral or any part thereof (which
receiver or receivers may be any person or persons, whether an
officer or officers or employee or employees of LaSalle or not
and LaSalle may remove any receiver or receivers so appointed
and appoint another or others in his or their stead);
(iii) proceedings in any court of competent jurisdiction for the
appointment of a receiver or receivers or for sale of the
Collateral or any part thereof; or
(iv) any other action, suit, remedy or proceeding authorized or
permitted hereby or by law or by equity.
In addition, LaSalle may file such proofs of claim and other documents
as may be necessary or advisable in order to have its claim lodged in any
bankruptcy, winding-up or other judicial proceedings.
(c) Any receiver or receivers so appointed shall have power to:
(i) take possession of and to use the Collateral of any part
thereof;
(ii) carry on the business of the Borrower or any other Loan Party
(including, but not limited to, the taking or defending of any
actions or legal proceedings, and the doing or refraining from
doing all other things as to the receiver may seem necessary
or desirable in connection with the business, operations and
affairs of the Borrower or any other Loan Party);
(iii) borrow money required for the maintenance, preservation or
protection of the Collateral or any part thereof or the
carrying on of the business of the Borrower or any other Loan
Party;
(iv) further charge the Collateral in priority to the security
interests of this Agreement as security for money so borrowed;
and
45
(v) sell, lease or otherwise dispose of the whole or any part of
the Collateral on such terms and conditions and in such manner
as the receiver shall determine.
LaSalle shall not be responsible for any actions or errors of omission
by the receiver or receivers in exercising any such powers.
In addition, LaSalle may enter upon, use, occupy and possess the
Collateral or any part thereof, free from all encumbrances, liens and charges,
except for Permitted Liens, without hindrance, interruption or denial of the
same by the Borrower or any other Loan Party or by any other person or persons
save only a landlord pursuant to its rights of reversion under any lease of real
property on expiry of its term, and may lease or sell the whole or any part or
parts of the Collateral. Any sale hereunder may be made by public auction, by
public tender or by private contract, with or without notice and with or without
advertising and without any other formality (except as required by law), all of
which are hereby waived by the Borrower. Such sale shall be on such terms and
conditions as to credit or otherwise and as to upset or reserve bid or price as
to LaSalle in its sole discretion may seem advantageous. Such sale may take
place whether or not LaSalle has taken possession of the Collateral.
No remedy for the realization of the security interests granted
pursuant hereto or pursuant to any security held by LaSalle or for the
enforcement of the rights of LaSalle shall be exclusive of or dependent on any
other such remedy, but any one or more of such remedies may from time to time be
exercised independently or in combination. The term "receiver" as used in this
Agreement includes a receiver and manager.
At LaSalle's request, the Borrower shall, at the Borrower's expense,
assemble the Collateral and make it available to LaSalle at one or more places
to be designated by LaSalle. The Borrower recognizes that if the Borrower fails
to perform, observe or discharge any of its Liabilities under this Agreement or
the Other Agreements, no remedy at law will provide adequate relief to LaSalle,
and the Borrower agrees that LaSalle shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages. Any notification of intended disposition of any of the
Collateral required by law will be deemed reasonably and properly given if given
at least fifteen (15) calendar days before such disposition or such longer
period as required by applicable law. Any proceeds of any disposition by LaSalle
of any of the Collateral may be applied by LaSalle to the payment of expenses
and any borrowings in connection with the Collateral and its realization
including, without limitation, legal fees and disbursements (on a
solicitor-client basis) of both in-house and outside counsel and any balance of
such proceeds may be applied by LaSalle toward the payment of such of the
Liabilities, and in such order of application, as LaSalle may from time to time
elect or re-elect, subject to the requirements of applicable law.
14. INDEMNIFICATION
(a) General Indemnity.
The Borrower agrees to defend (with counsel satisfactory to LaSalle),
protect, indemnify and hold harmless LaSalle, each affiliate or subsidiary of
LaSalle, and each of their
46
respective officers, directors, employees, attorneys and agents (each an
"INDEMNIFIED PARTY") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the fees (on a solicitor-client basis) of internal and
external counsel for each Indemnified Party (the "CLAIMS") in connection with
any investigative, administrative or judicial proceeding, whether or not the
Indemnified Party shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement or any act, event or transaction related or
attendant to any of the foregoing, the making and the management of the Loans or
the use or intended use of the proceeds of the Loans. To the extent that the
undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party on demand, and,
failing prompt payment, shall, together with interest thereon at the highest
rate then applicable to Revolving Loans hereunder from the date incurred by each
Indemnified Party until paid by the Borrower, be added to the Liabilities of the
Borrower and be secured by the Collateral. The Borrower shall have no obligation
to indemnify any Indemnified Party for any Claims to the extent resulting from
the gross negligence or wilful misconduct of such Indemnified Party. The
provisions of this SECTION 14 shall survive the satisfaction and payment of the
other Liabilities and the termination of this Agreement.
(b) Environmental Indemnity.
Without limiting the generality of SUBSECTION 14(a), the Borrower shall
at all times indemnify and hold harmless the Indemnified Parties from and
against any and all liabilities and costs suffered or incurred by such
Indemnified Parties including, without limitation, any and all orders,
directions, suits, actions, proceedings, claims, settlements, damages, losses,
liabilities, costs and expenses (including, without limitation, legal fees and
disbursements on a solicitor-client basis, litigation costs and any costs of
settlement), with respect to: (i) any actual or threatened Release of Hazardous
Materials or the presence of any Hazardous Materials affecting any of the
properties of the Borrower or any other Loan Party, whether or not the same
originates or emanates from any such properties or any contiguous property,
including any loss of value of any such properties as a result of any of the
foregoing; (ii) any costs of remedial, preventative or similar action which may
be imposed by any Governmental Authority on the Borrower or any other Loan
Party, including without limitation, any prosecution initiated or threatened
with respect to non-compliance with Environmental Laws, (iii) any costs of
remedial, preventative or similar action incurred by any Governmental Authority
or any costs incurred by any other person or damages from injury to, destruction
of, or loss of natural resources, including costs of assessing such injury,
destruction or loss incurred pursuant to any Environmental Laws; (iv) liability
for personal injury or property damage arising under any statutory, common law,
tort, breach of statutory duty, riparian rights, strict liability or any other
doctrine or theory, including, without limitation, damages assessed for the
maintenance of a public or private nuisance, trespass or for the carrying on an
abnormally dangerous activity
47
at or near any of the properties of the Borrower or any other Loan Party; (v)
any environmental liabilities and costs affecting any of the properties of the
Borrower or any other Loan Party within the jurisdiction of any Governmental
Authority; and/or (vi) any other environmental liabilities and costs. The
Borrower shall have no obligation to indemnify any Indemnified Party for any
Environmental Claims with respect to any specific property of the Borrower or
any other Loan Party if the Borrower can establish that such Environmental
Claims have resulted solely from an environmental condition that has arisen or
an environmental damage that has occurred: (A) after the date that LaSalle or a
receiver or a receiver-manager appointed by, or on the application of, LaSalle
has taken possession or control of such property of the Borrower or any other
Loan Party, as the case may be; and (B) as a result of the gross negligence or
wilful misconduct of LaSalle or of the receiver or receiver-manager appointed
by, or on the application of, LaSalle.
15. MISCELLANEOUS
(a) Notices.
All written notices and other written communications with respect to
this Agreement or any of the Other Agreements shall be sent by ordinary or
registered mail, by telecopy or delivered in person, and in the case of LaSalle
shall be sent to it at Maritime Life Tower, 15th Floor, P.O. Box 114, ▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ Attention: Vice President,
Asset Based Lending, (if by telecopy to telecopy number 416-367-7943) and in the
case of the Borrower or any other Loan Party shall be sent to or in care of the
Borrower at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, Attention: Executive
Vice-President (if by telecopy to telecopy no. 905-475-9571). The notice or
other communication so sent shall be deemed to be received: (i) on the day of
personal delivery; (ii) if by telecopy, upon confirmation of receipt; (iii) if
by a nationally recognized overnight courier service with instructions to
deliver the next Business Day, one (1) Business Day after sending; and (iv) if
mailed, five (5) days following the date of such mailing.
(b) Choice of Governing Law and Construction.
Except as expressly set forth therein, this Agreement and the Other
Agreements shall be governed and controlled by the laws of the Province of
Ontario and the laws of Canada applicable therein as to interpretation,
enforcement, validity, construction, effect, and in all other respects,
including, without limitation, the legality of the interest rate and other
charges, but excluding perfection of the security interests in the Collateral,
which shall be governed and controlled by the laws of the relevant jurisdiction.
(c) Forum Selection and Service Of Process.
To induce LaSalle to accept this Agreement, the Borrower, for itself
and the other Loan Parties, irrevocably: (i) agrees that, subject to LaSalle's
sole and absolute election, all actions or proceedings in any way, manner or
respect, arising out of or from or related to this agreement, the other
agreements or the collateral shall be litigated in courts having situs within
the city of Toronto, Province of Ontario; (ii) consents and submits to the
jurisdiction of any local, provincial or federal courts located within said city
and province; and (iii) hereby waives any
48
right it may have to transfer or change the venue of any litigation brought by
LaSalle in accordance with this paragraph.
(d) Modification and Benefit of Agreement
This Agreement shall be binding upon the Borrower, the other Loan
Parties and LaSalle and their respective successors and assigns and shall enure
to the benefit of the Borrower and LaSalle and their respective successors and
assigns. This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by the Borrower and/or the
other Loan Parties as applicable and LaSalle. The Borrower may not sell, assign
or transfer this Agreement, or the Other Agreements or any portion thereof
including, without limitation, any right, title, interest, remedies, powers or
duties thereunder. The Borrower, for itself and the other Loan Parties, hereby
consents to LaSalle's sale, assignment, transfer or other disposition, at any
time and from time to time hereafter, of this Agreement, or the Other
Agreements, or of any portion thereof, or participation therein including,
without limitation, LaSalle's right, title, interest, remedies, powers and/or
duties thereunder. The Borrower agrees that it shall execute and deliver such
documents as LaSalle may request in connection with any such sale, assignment,
transfer or other disposition.
(e) Headings of Subdivisions.
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
(f) Power of Attorney.
The Borrower, for itself and the other Loan Parties, acknowledges and
agrees that its appointment of LaSalle as its attorney and agent-in-fact for the
purposes specified in this Agreement is an appointment coupled with an interest
and shall be irrevocable until all of the Liabilities are paid in full and this
Agreement is terminated.
(g) Waiver of Jury Trial, Other Waivers, Confidentiality.
LaSalle and the Borrower (for itself and the other Loan Parties) hereby
waive all rights to trial by jury in any action or proceeding which pertains
directly or indirectly to this Agreement, any of the Other Agreements, the
liabilities, the collateral or any alleged tortious conduct or which, in any
way, directly or indirectly, arises out of or relates to the relationship
between the Borrower and LaSalle. In no event shall LaSalle be liable for lost
profits or other special or consequential damages. The Borrower (for itself and
the other Loan Parties) hereby waives all rights to notice and hearing of any
kind prior to the exercise by LaSalle of its rights to repossess the Collateral
without judicial process or to replevy, attach or levy upon such Collateral
without prior notice or hearing, and hereby waives demand, presentment, protest
and notice of nonpayment, and further waives the benefit of all valuation,
appraisal and exemption laws. LaSalle's failure, at any time or times hereafter,
to require strict performance of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of LaSalle
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by LaSalle of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default
49
under this Agreement or any other default under any of the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of LaSalle in the exercise of
any right or remedy under this Agreement or any Other Agreement shall preclude
other or further exercise thereof or the exercise of any right or remedy. None
of the undertakings, agreements, warranties, covenants and representations
contained in this Agreement or any of the Other Agreements and no Event of
Default under this Agreement or default under any of the Other Agreements shall
be deemed to have been suspended or waived by LaSalle unless such suspension or
waiver is in writing, signed by two duly authorized officers of LaSalle and
directed to the Borrower specifying such suspension or waiver.
(h) Timing of Payments.
Any payment required to be made by the Borrower to LaSalle hereunder or
under any security shall be made in the currency in respect of which the
obligation requiring such payment arose. Any payment received by LaSalle after
3:00 p.m. (Toronto time) on a Business Day, or on any day that is not a Business
Day, shall be credited to the account of the Borrower as applicable on the next
following Business Day.
(i) Canadian Currency.
All dollar amounts specified herein are in Canadian Dollars unless
otherwise indicated.
(j) Judgment Currency.
If in the recovery by LaSalle of any amount owing hereunder or under
any of the Other Agreements in any currency, judgment can only be obtained in
another currency and because of changes in the exchange rate of such currencies
between the date of judgment and payment in full of the amount of such judgment,
the amount of recovery under the judgment differs from the full amount owing
hereunder, the Borrower shall pay any such shortfall to LaSalle; such shortfall
can be claimed by LaSalle against the Borrower as an alternative or additional
cause of action and any surplus received by LaSalle will be repaid to the
Borrower.
(k) Severability.
In the event any provision of this Agreement is for any reason held by
a court of competent jurisdiction to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(l) Conflicts.
In the event there occurs any conflict or inconsistency between any
provision of this Agreement and any provision of the Other Agreements, the
provision of this Agreement shall govern.
50
(m) Counterparts.
This Agreement and any amendments, waivers, consents, acknowledgements
or supplements may be executed in number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all of which counterparts together
shall constitute but one agreement.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
51
(n) Proposal Letter Superseded.
For greater certainty, the provisions of this Agreement supersede the
related provisions in the proposal letter dated February 22, 2002 (and any
earlier proposal letters) from LaSalle to the representative of the Borrower.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
CABLETEL COMMUNICATIONS CORP.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
ABN AMRO BANK N.V., CANADA BRANCH
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
52
TO: ABN AMRO BANK N.V., CANADA BRANCH
The undersigned hereby acknowledges and consents to the provisions of
the foregoing credit agreement, confirms any covenant, representation or
warranty in any way relating to it and confirms the continuing nature thereof,
and covenants and agrees to abide by all covenants and agreements of the
Borrower to cause any action or thing to be done by it and all covenants and
agreements otherwise relating to it.
STIRLING CONNECTORS U.S.A., INC.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
SCHEDULE A
AUTHORIZED OFFICERS OF THE BORROWER
NAME OF OFFICER POSITION HELD
--------------- -------------
1. D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Chief Executive Officer
2. ▇▇▇ Eilath Chief Financial Officer and Executive Vice
President
3. ▇▇▇▇▇ ▇▇▇▇▇ Vice President
4. ▇▇▇▇▇ ▇▇▇▇▇▇ Vice President Operations
SCHEDULE B
BUSINESS AND COLLATERAL LOCATIONS
A. The Borrower's and Guarantor's business locations (please indicate
which location is the principal place of business and at which
locations originals and all copies of the Borrower's and Guarantor's
books, records and accounts are kept):
1. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
2. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
3. ▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇
Doors ▇▇-▇▇-▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
4. ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Units 15, 16 15B
Dartmouth, Nova Scotia
3B3 1L4
5. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇
6. ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ #▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
B. Other locations of Collateral owned by the Borrower or the Guarantor
(including, without limitation, warehouse locations, processing
locations, consignment locations) and all post office boxes of the
Borrower or the Guarantor. Please indicate the relationship of such
location to the Borrower or the Guarantor (i.e. public warehouse,
processor, etc.).
NIL
SCHEDULE C
PERMITTED LIENS
[TO INCLUDE BDC LIENS]
SCHEDULE 9(c)
BORROWER FURNITURE, FIXTURES AND EQUIPMENT
SCHEDULE 9(h)
ACTIONS AND PROCEEDINGS
NIL
SCHEDULE 9(p)
INDEBTEDNESS
SCHEDULE 9(r)
AFFILIATES, JOINT VENTURES AND PARTNERSHIPS
SCHEDULE 9(v)
INTELLECTUAL PROPERTY
SCHEDULE 9(x)
ENVIRONMENTAL MATTERS
NIL
SCHEDULE 11(a)(iii)
CLOSING DOCUMENTS LIST
LOAN & SECURITY DOCUMENTS
Proposal Letter by LaSalle Business Credit, a division of ABN AMRO Bank N.V.,
Canada Branch (the "LENDER") to Cabletel Communications Corp. (the "BORROWER")
dated February 22, 2002.
Credit Agreement between the Lender and the Borrower (the "LOAN AGREEMENT").
BORROWER DOCUMENTS
Revolving Promissory Note by the Borrower in favour of the Lender in the amount
of $15,000,000 (Cdn.).
Debenture issued by the Borrower in favour of the Lender in the principal amount
of $25,000,000 charging all of the present and after-acquired property, assets
and undertaking of the Borrower and governed by Ontario law (the "ONTARIO
DEBENTURE").
Delivery Agreement by the Borrower in favour of the Lender with respect to the
Ontario Debenture.
Charge/Mortgage by the Borrower in favour of the Lender charging the Borrower's
leasehold interest in the property located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ and attaching a copy of the Ontario Debenture (the "ONTARIO
CHARGE").
Hypothec issued by the Borrower in favour of the Lender charging all of the
present and after-acquired property, assets and undertaking of the Borrower in
Quebec (the "BORROWER HYPOTHEC").
Debenture issued by the Borrower in favour of the Lender in the principal amount
of $25,000,000 charging all of the present and after-acquired property, assets
and undertaking of the Borrower and governed by British Columbia law (the "B.C.
DEBENTURE").
Delivery Agreement by the Borrower in favour of the Lender with respect to the
B.C. Debenture.
Section 427 Bank Act Security granted by the Borrower to the Lender consisting
of:
(a) Notice of Intention
(b) Agreement as to Loans and Advances and Security therefor
(c) Application for credit and promise to give security
(d) Grant of Security under Section 427.
Share Pledge Agreement by the Borrower in favour of the Lender in respect of
shares held by the Borrower in the capital of Stirling Connectors U.S.A., Inc.
("STIRLING").
Stock Transfer Power (undated) by the Borrower in favour of the Lender with
respect to the pledge of shares in the capital of Stirling.
Share certificate(s) in respect of the pledge of shares of Stirling by the
Borrower.
Application and Master Indemnity Agreement by the Borrower in favour of the
Lender in respect of letters of credit.
Assignment of Insurance Monies in favour of the Lender in respect of proceeds of
insurance policies which may become payable to the Borrower.
Direction to Pay under EDC Policy.
Certified copy of property insurance policy(ies) referred to in item 17 above in
respect of the Borrower, including loss payable to the Lender.
CERTIFIED COPY OF EDC POLICY.
PPSA financing statements filed in Ontario, Nova Scotia and British Columbia
against the Borrower in respect of the Ontario Debenture, the B.C. Debenture and
other security.
Certified PPSA printouts in the name of the Borrower (together with printouts in
the names of Borrower's predecessors (if any)).
Registration in Ontario against the Borrower pursuant to s. 427 of the Bank Act.
Registration of the Ontario Charge.
Registration in Quebec of the Borrower Hypothec.
Certificate of Status issued in the name of the Borrower.
Officer's Certificate issued by an officer of the Borrower relating to the
Borrower and, inter alia, corporate status, power and authority and attaching
copies of:
(a) the Articles of Incorporation of the Borrower
(b) the by-laws of the Borrower
(c) the requisite corporate authorizing resolution.
Statutory Declaration by an officer of the Borrower in respect of Ontario PPSA
registrations
[BRINGDOWN OFFICER'S CERTIFICATE BY AN OFFICER OF THE BORROWER (IF THE DATE OF
THE FIRST ADVANCE OCCURS AFTER THE DATE THAT THE LOAN AGREEMENT IS SIGNED)].
STIRLING DOCUMENTS
Guaranty (unlimited) by Stirling in favour of the Lender with respect to the
indebtedness and liabilities of the Borrower to the Lender.
General Security Agreement issued by Stirling in favour of the Lender charging
all of the present and after-acquired property, assets and undertaking of
Stirling (the "STIRLING GSA").
UCC financing statements filed in Delaware against Stirling in respect of the
Stirling GSA.
Certified UCC/PPSA printouts in the name of Stirling (together with printouts in
the names of Stirling's predecessors (if any))
Consent and Confirmation by Stirling in favour of the Lender with respect to the
pledge of its shares by the Borrower.
Certificate of Status (or equivalent) issued in the name of Stirling.
Officer's Certificate issued by an officer of Stirling relating to Stirling and,
inter alia, corporate status, power and authority and attaching copies of:
(a) the Articles of Incorporation of Stirling
(b) the by-laws of Stirling
(c) the requisite corporate authorizing resolution.
THIRD PARTY DOCUMENTS
Waiver agreements from each of the following landlords/mortgagees of the
Borrower's and Stirling's premises:
(a) Tibanda Investments Inc.
(b) Lifestyle Properties LLC
(c) Immeubles Quatrere Inc.
Copies of all real and personal property leases and mortgages/security
agreements of the Borrower.
PPSA/UCC Estoppel Letters from each of the following secured creditors of the
Borrower and Stirling:
(a) BDC
(b) Newcourt Financial Ltd.
(c) IBM Canada Ltd.
(d) AT&T Capital Canada Inc.
Certified copy of two year, unsecured subordinated promissory note in the
principal amount of US$2,200,000 from the Borrower to CommScope, satisfactory to
the Lender.
Acknowledgement from CommScope (and agreed to by Borrower) that the Lender is
the Senior Creditor referenced in the unsecured subordinated promissory note
referenced above
Copies of Purchase and Sale Agreement and related documents in respect of
acquisition of NRG Control Company's Stirling Connector business by the
Borrower.
Confirmation of the re-establishment of regular trade terms by the Borrower with
Alpha Technologies Inc., Commscope, Inc. and others required by Lender.
MISCELLANEOUS DOCUMENTS
Copies of security search results in respect of the Borrower and Stirling.
Copies of all material contracts and purchase orders.
Details as to backorder log.
Borrower's audited, consolidated financial statements as at December 31, 2001,
current month-end interim financial statements and updated opening balance
sheet.
DRAWDOWN DOCUMENTS
Notice of Borrowing by the Borrower to the Lender.
Closing Certificate by the Borrower to the Lender.
Borrowing Base Certificate by the Borrower to the Lender.
Current Account Authorities and other Lender standard documentation including,
without limitation, signature cards, funds transfer authorizations etc. (All
documentation delivered to the Lender prior to closing).
Payout letter and release of security from HSBC.
Indemnity from Lender to HSBC
Direction re: funds by the Borrower to the Lender.
Receipt of funds by the Borrower to the Lender.
OPINIONS
Opinion of Gowling ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP in respect of, inter alia, (i) the
corporate status of the Borrower, (ii) the power and capacity of the Borrower to
execute and deliver the loan and security documents and perform its obligations
thereunder, (iii) the due authorization, execution, delivery and enforceability
of the loan and security documents provided by the Borrower, (iv) validity of
security interests, and (v) searches and registrations (relying on agents when
necessary).
Opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP in respect of, inter alia, (i) the
corporate status of Stirling, (ii) the power and capacity of Stirling to execute
and deliver the guarantee and security documents and perform its obligations
thereunder, (iii) the due authorization, execution, delivery and enforceability
of the guarantee and security documents provided by Stirling, (iv) validity of
security interests, (v) searches and registrations, and (vi) corporate approvals
in respect of the pledge and future transfer on realization of Stirling's
shares.
Opinion of ▇▇▇ ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in respect of, inter alia, (i) validity
of security interests, and (ii) searches and registrations.
Reporting Letter of FMC addressing various matters relating to the transaction
(To be delivered to the Lender only).
EXHIBIT 2(d)(ii)
FORM OF REVOLVING PROMISSORY NOTE
Executed as of the [ o ] day of April, 2002
Amount Cdn. $15,000,000
FOR VALUE RECEIVED, the undersigned promises to pay to the order of ABN AMRO
BANK N.V., CANADA BRANCH (hereinafter, together with any holder hereof, called
the "LENDER"), at the main office of the Lender, the lesser of: (A) the
principal sum of Fifteen Million Canadian Dollars (Cdn. $15,000,000) plus the
aggregate unpaid principal amount of all advances made by the Lender to the
undersigned pursuant to and in accordance with SUBSECTION 2(b) of the Credit
Agreement (as hereinafter defined) in excess of such amount; and (B) the
aggregate unpaid principal amount of all advances made by the Lender to the
undersigned pursuant to and in accordance with SUBSECTION 2(b) of the Credit
Agreement. The undersigned further promises to pay interest on the outstanding
principal amount hereof on the dates and at the rates provided in the Credit
Agreement with respect to Revolving Loans from the date hereof until payment in
full hereof.
This Revolving Note (this "NOTE") is referred to in and is delivered pursuant to
that certain credit agreement, dated as of April [ o ], 2002 between the
undersigned as borrower and the Lender (as amended, supplemented, restated or
extended from time to time the "CREDIT AGREEMENT"). Unless otherwise defined
herein, all capitalized terms set forth in this Note shall have the meanings
ascribed to such terms in the Credit Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THE UNDERSIGNED'S LIABILITIES TO THE LENDER
UNDER THIS NOTE SHALL BE PAYABLE PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT
RELATING TO REVOLVING LOANS.
The undersigned hereby authorizes the Lender to charge any account of the
undersigned for all sums due hereunder. If payment hereunder becomes due and
payable on a Saturday, Sunday or legal holiday under the laws of Canada of the
Province of Ontario, the due date thereof shall be extended to the next
succeeding business day, and interest shall be payable thereon at the rate
specified during such extension. Credit shall be given for payments made in the
manner and at the times provided in the Credit Agreement. It is the intent of
the parties that the rate of interest and other charges to the undersigned under
this Note shall be lawful; therefore, if for any reason the interest or other
charges payable hereunder are found by a court of competent jurisdiction, in a
final determination, to exceed the limit which the Lender may lawfully charge
the undersigned, then the obligation to pay interest or other charges shall
automatically be reduced to such limit and, if any amount in excess of such
limit shall have been paid, then such amount shall be refunded to the
undersigned.
The principal hereunder may be prepaid by the undersigned, in part or in full,
at any time; provided, however, that if Borrower terminates the Credit Agreement
or reduces the amount of the Revolving Credit Commitment at any time prior to
the end of the term of the Credit Agreement, the undersigned shall pay a
prepayment fee as provided in the Credit Agreement.
The undersigned waives the benefit of any law that would otherwise restrict or
limit the Lender in the exercise of its right, which is hereby acknowledged, to
set-off against the Liabilities, without notice and at any time hereafter, any
indebtedness matured or unmatured owing from the Lender to the undersigned. The
undersigned waives every counterclaim or set-off which the undersigned may now
have or hereafter may have to any action by the Lender in enforcing this Note
and/or any of the other Liabilities, or in enforcing the Lender's rights in the
Collateral and agrees that the Lender shall not be liable for any error in
judgment or mistakes of fact or law.
The undersigned, any other party liable with respect to the Liabilities and any
and all endorsers and accommodation parties, and each one of them, if more than
one, waive any and all presentment, demand, notice of dishonour, protest, and
all other notices and demands in connection with the enforcement of the Lender's
rights hereunder.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE PROVINCE OF
ONTARIO AND OF CANADA APPLICABLE THEREIN AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING WITHOUT
LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, and shall be
binding upon the undersigned and the undersigned's legal representatives,
successors and assigns. If this Note contains any blanks when executed by the
undersigned, the Lender is hereby authorized, without notice to the undersigned,
to complete any such blanks according to the terms upon which the loan or loans
were granted. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited by or be invalid under
such law, such provision shall be severable, and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
this Note.
To induce the Lender to make the loan evidenced by this Note, the undersigned
(i) irrevocably agrees that, subject to the Lender's sole and absolute election,
all actions arising directly or indirectly as a result or in consequence of this
Note or any other agreement with the Lender, or the Collateral, shall be
instituted and litigated only in courts having situs in the City of ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, (ii) hereby consents to the exclusive jurisdiction and venue of any
Court located and having its situs in said city, and (iii) waives any objection
based on forum non-conveniens. IN ADDITION, THE UNDERSIGNED HEREBY WAIVES TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS NOTE, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY THE
UNDERSIGNED OR THE LENDER OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES
OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN THE UNDERSIGNED AND THE LENDER,
waives personal service of any and all process, and consents that all such
service of process may be made by registered mail, return receipt requested,
directed to the undersigned at the address indicated in the Lender's records;
and
service so made shall be complete five (5) days after the same has been
deposited in the Canadian mails as aforesaid.
As used herein, all provisions shall include the masculine, feminine, neuter,
singular and plural thereof, wherever the context and facts require such
construction and in particular the word "undersigned" shall be so construed.
In the event of a conflict between any provision of the Credit Agreement and any
provision of this Note, the provision of the Credit Agreement shall prevail.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date above set
forth.
CABLETEL COMMUNICATIONS CORP.
Per: _________________________________________
Name:
Title:
Per: _________________________________________
Name:
Title
EXHIBIT 4(a)
(Your letterhead) Cabletel Communications Corp.
Date: ______________________________
To: ▇▇▇▇▇ Early, Lasalle Business Credit, Toronto
Ph: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
From: [NAME OF BORROWER]
Ph: Fax:
Please transfer the following funds from our account
CAD Revolver ____________________ DDA # CDS XX
USD Revolver ____________________ DDA # CDS XX
--------------------------------------------------------------------------------
Value Date: __________________________________
Currency: __________________________________
Amount: __________________________________
Pay to: (bank)__________________________________________
_____________________________________________________
_____________________________________________________
Favour: a/c # ____________________________
(beneficiary
name) _____________________________________________________
_____________________________________________________
--------------------------------------------------------------------------------
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the proposed Borrowing, before and
after giving effect thereto and to the application of the proceeds therefrom:
(a) the representations and warranties contained in Section 9 of
the Credit Agreement and in the Other Agreements are true and
correct as though made on and as of such date except to the extent
that such representations and warranties expressly relate to an
earlier date and except for changes therein expressly permitted or
contemplated by the Credit Agreement or Other Agreements; and
(b) no Default or Event of Default has occurred and is continuing
or would result from such proposed Borrowing.
___________________________ _____________________________
authorized signature authorized signature
EXHIBIT 7(a)
FORM OF COLLATERAL LOAN REPORT
See Attached.
EXHIBIT 7(b)
FORM OF BORROWING BASE CERTIFICATE
CABLETEL COMMUNICATIONS CORP.
TO: LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V., CANADA BRANCH
Reference is hereby made to that certain credit agreement
dated as of May 13, 2002 made between CABLETEL COMMUNICATIONS CORP., as borrower
(the "BORROWER") and LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V.,
CANADA BRANCH, as lender (the "LENDER") (as amended, supplemented, restated or
extended from time to time the "CREDIT Agreement"). This certificate is
delivered pursuant to SUBSECTION 7(b) of the Credit Agreement. Unless otherwise
defined herein, capitalized terms used herein shall have the same meanings
ascribed to such terms in the Credit Agreement.
The undersigned certifies on behalf of the Borrower that as of
the close of business on the date set forth below, the Borrowing Base is
computed as set forth below.
The undersigned represents and warrants on behalf of the
Borrower that this Borrowing Base Certificate is a true and correct statement
of, and that the information contained herein is true and correct in all
respects regarding, the status of Eligible Accounts and Eligible Inventory and
that the amounts reflected herein are in compliance with the provisions of the
Credit Agreement. The undersigned further represents and warrants on behalf of
the Borrower that there is no Default or Event of Default and all
representations and warranties contained in the Credit Agreement and Other
Agreements are true and correct as of the date of this Borrowing Base
Certificate, except to the extent that such representations and warranties
expressly relate to an earlier date and except for changes therein expressly
permitted or contemplated by the Credit Agreement or any Other Agreements. The
undersigned understands that the Lender will extend loans in reliance upon the
information contained herein. In the event of a conflict between the following
summary of eligibility criteria and the Credit Agreement, the Credit Agreement
shall govern.
BORROWING BASE
AR Balance (As of: ______________) $_______
Less: East Link balances over 180 days from $___________
Invoice Date
Other Balances over 90 days from Invoice Date $___________
East Link Credits over 180 days $___________
Other Credits over 90 days $___________
Balances over 30 days past Due Date $___________
Insiders and Related Parties $___________
Cash/COD Accounts $___________
Consignments Out $___________
Finance Charges $___________
Concentration at (as applicable): 10% $___________
20% $___________
30% $___________
Cross Aged Accounts at 25% $___________
Contras $___________
Foreign Accounts not backed by $___________
letter of credit or insurance
Pre-▇▇▇▇▇▇▇▇ $___________
▇▇▇▇ and Holds $___________
Progress ▇▇▇▇▇▇▇▇ $___________
Future Date Receivables $___________
Debit Memos $___________
Rebate Accruals $___________
Other: ______________ $___________
Other: ______________ $___________
Total Ineligible Accounts Receivable $_______
Eligible Accounts Receivable $_______
Eligible Accounts Receivable at 85.0% A1 $___________
INVENTORY BALANCE LOWER OF COST OR MARKET VALUE
(As of: ______________) $_______
Less: Profit Component Deduction From Cost on
Purchase From Related Party $___________
Raw Materials $___________
Work-In-Process $___________
Slow Moving/Obsolete $___________
Consignment $___________
Packaging $___________
Parts, stores $___________
Samples, demonstration, display $___________
In-Transit $___________
Offsite $___________
Inventory subject to liens, charges etc. $___________
Other: ______________* $___________
Other: ______________ $___________
Total Ineligible Inventory $_______
Eligible Inventory $_______
Eligible Inventory at lesser of (a) 50% of lower B1 $___________
of cost/market and (b) 80% OLV (Not to exceed
$5,000,000)
* Ensure this includes all items referred to
in subparagraph (vi) of definition of Eligible
Inventory and not otherwise specified above
DOCUMENTARY L/C LIABILITIES (As of: __________) $___________
Less: Documentary L/C Liabilities not
related to purchase of Eligible Inventory $___________
Documentary L/C Liabilities
related to purchase of Eligible Inventory C1 $___________
Documentary L/C Liabilities C1 at 100% less C2 $___________
applicable percentage under subparagraph 2(b)(i)C
RESERVES (As of: ______________) D1 $___________
HEDGING RESERVES (As of: ______________) E1 $___________
TOTAL L/C LIABILITIES (As of: ______________) $___________
Less: C1 $___________
Net L/C Liabilities at 100% F1 $___________
REVOLVING CREDIT COMMITMENT
(As of: ______________) $15,000,000
Less Total L/C Liabilities $___________
Total G1 $___________
BORROWING BASE AVAILABILITY THE LESSER OF
(A1 + ▇▇ - ▇▇ - ▇▇ - ▇▇ - ▇▇) $_______
- and -
G1 $_______
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as the [ o ] of the Borrower as of the [ o ] day of [ o ], [ o ].
CABLETEL COMMUNICATIONS CORP.
Per: ___________________________________
Authorized Officer
EXHIBIT 7(b)(ii)
FORM OF STATUTORY PAYABLES REPORT
TO: LASALLE BUSINESS CREDIT, a division of ABN AMRO BANK N.V., CANADA
BRANCH
Reference is hereby made to that certain credit agreement dated as of
April [ o ], 2002 made between CABLETEL COMMUNICATIONS CORP., as borrower (the
"BORROWER") and LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V.,
CANADA BRANCH, as lender (the "LENDER") (as amended, supplemented, restated or
extended from time to time the "CREDIT AGREEMENT"). This certificate is
delivered pursuant to SUBSECTION 7(b)(ii) of the Credit Agreement.
STATUTORY CLAIMS COMING DUE DURING:
---------------------------------
COMPANY NAME: CABLETEL COMMUNICATIONS CORP.
DATE AND AMOUNT AMOUNT IN
TOTAL OWED PAID ARREARS
---------- --------------- ---------
1. Employee Income Tax Withholdings
2. Unemployment Insurance (UIC) - Employees' Portion
3. Canada Pension Plan (CPP) - Employees' Portion
4. Employer's Share of Payroll taxes
5. Corporate Income Tax
6. Goods & Services Tax (GST)
7. Provincial Sales Tax (PST)
8. Municipal Taxes
9. Workers' Compensation
10. Pension Plan
DATE AND AMOUNT AMOUNT IN
TOTAL OWED PAID ARREARS
---------- --------------- ---------
11. Vacation Pay
12. Other (including those of Guarantor)
---------- ----------- ---------
TOTAL
========== =========== =========
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
the [ o ] of the Borrower as of the [ o ] day of [ o ], [ o ].
CABLETEL COMMUNICATIONS CORP.
Per: ______________________________
Authorized Officer
EXHIBIT 7(d)
FORM OF FINANCIAL REPORTING CERTIFICATE
[DATE]
LASALLE BUSINESS CREDIT,
a division of ABN AMRO BANK N.V., CANADA BRANCH
15th Floor Maritime Life Tower
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Reference is hereby made to that certain credit agreement dated as of
April [ o ], 2002 made between CABLETEL COMMUNICATIONS CORP., as borrower (the
"BORROWER") and LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V.,
CANADA BRANCH, as lender (the "LENDER") (as amended, supplemented, restated or
extended from time to time the "CREDIT AGREEMENT"). This certificate is
delivered pursuant to SUBSECTION 7(d) of the Credit Agreement. Unless otherwise
defined herein, capitalized terms used herein shall have the same meanings
ascribed to such terms in the Credit Agreement.
The undersigned Authorized Officer of the Borrower hereby certifies as
of the date hereof that he/she is the Chief Financial Officer of the Borrower,
and that, as such, he/she is authorized to execute and deliver this Financial
Reporting Certificate to the Lender on the behalf of the Borrower and its
consolidated subsidiaries, and that:
1. Attached hereto are true and correct copies of the unaudited consolidated
balance sheet of the Borrower as of the end of the fiscal month ended [ o ] or
at the end of the fiscal year ended [ o ] and the related statement of income,
statement of cash flow and statement of retained earnings for the period
commencing on the first day of the current fiscal year and of such month and
ending on the last day of such month or such fiscal year, as the case may be,
which are complete and accurate in all respects and fairly present, consistently
in accordance with GAAP (subject to ordinary, year-end audit adjustments and the
absence of footnotes), the consolidated financial position and results of
operations of the Borrower. Included with the financial statements are
comparisons to the prior year and to the Borrower's budget, as required by the
Credit Agreement.
2. The undersigned has reviewed and is familiar with the terms of the Credit
Agreement and has made, or has caused to be made under his/her supervision, a
review of the transactions and financial condition of the Borrower and its
subsidiaries during the accounting period covered by the attached financial
statements.
3. The Borrower and its subsidiaries, during such period, have observed,
performed or satisfied all of the covenants and other agreements, and satisfied
every condition in the Credit Agreement to be observed, performed or satisfied
by the Borrower and its subsidiaries, and the
undersigned has no knowledge of any Default or Event of Default, except [ANY
EXCEPTIONS TO BE DESCRIBED IN REASONABLE DETAIL.]
4. All of the representations and warranties contained in the Credit Agreement
and Other Agreements are correct and complete as if made as of this date
including, without limitation, that neither the Borrower nor the Guarantor is in
arrears in respect of any lease, rental or other payment due under any property
lease or to any warehousemen, bailee or similar Person.
5. The financial covenant analyses and information set forth on Schedule 1
attached hereto are true and accurate on and as of the date of this Financial
Reporting Certificate. All amounts and ratios in Schedule 1 refer to the
financial statements of the Borrower attached hereto and are determined in
accordance with the specifications set forth in the Credit Agreement.
6. All adjustments made to the financial results of the Borrower, as
set forth in the accompanying financial statements, in order to perform the
covenant analyses set forth in Schedule 1 are set forth in Schedule 2 attached
hereto.
7. As at the date hereof, no notice of non-compliance, violation or
contravention has been received from any Governmental Authority with respect to
the activities carried on by the Borrower or any other Loan Party or as to any
matter whatsoever;
or
7. As at the date hereof, the Borrower has received the following notice(s) of
non-compliance, violation(s) or contravention(s) from [INSERT GOVERNMENTAL
AUTHORITY], copies of which are attached hereto, with respect to [PROVIDE
DETAILS OF NON-COMPLIANCE];
8. Attached hereto is a written action plan to remedy the non-compliance,
violation or contravention referred to in PARAGRAPH 7 above.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
the Chief Financial Officer of the Borrower as of the [ o ] day of [ o ], [ o ].
CABLETEL COMMUNICATIONS CORP.
Per: ________________________________
Authorized Officer
SCHEDULE 1
to the Financial Reporting Certificate
Dated [ o ]/ For the fiscal [QUARTER][YEAR] ended [ o ].
SUBSECTION 10(o)(i)
Required Monthly Adjusted Net Worth
Period - ________ months ended ____________, _______ $_________________
Required as of ________________, _____________ $ ________________
Compliance - Yes/No
Note: Please attach schedule showing calculation
SUBSECTION 10(o)(ii)
Required Quarterly Interest Coverage Ratio
-----------------------
Period - _________ months ended ________, _____
(a) net income after taxes (excluding after tax losses or gains on the sale
of assets other than the sale of inventory in the ordinary course of
business and excluding other after tax extraordinary losses or gains) $_____________________
(b) Add: interest expenses
income tax expenses
depreciation
amortization $_____________________
(c) Less: Capital expenditures not financed $_____________________
(d) Add or Less: any other non-cash charges or gains
which have been subtracted or added in
calculating net income after taxes $_____________________
TOTAL $_____________________
(e) interest expense on indebtedness $_____________________
Interest Coverage Ratio _____________________
Minimum per Credit Agreement 1.50 to 1.00
Compliance Yes/No
SUBSECTION 10(o)(iv)
Required Quarterly Debt Service Coverage
---------------------
Period - months ended ,
a) net income after taxes (excluding after tax losses or gains on the sale
of assets other than the sale of inventory in the ordinary course of
business and excluding other after tax extraordinary losses or gains)
$_____________________
b) Add: non-cash income tax expense
depreciation
amortization $_____________________
c) Less: Capital expenditures not financed $_____________________
TOTAL $_____________________
d) long term indebtedness (including subordinated debt) and capital
leases paid or scheduled to be paid during the
period $_____________________
Debt Service Coverage ______________________
Minimum per Credit Agreement [ o ] to 1.00
Compliance Yes/No
SUBSECTION 10(o)(iii)
Required Quarterly Capital Expenditures
--------------------
Period - months ended , $_____________________
Maximum Capital Expenditures (annual) (in the aggregate) $100,000
--------
Compliance Yes/No
SCHEDULE 2
to the Financial Reporting Certificate
Dated [ o ]/ For the fiscal [QUARTER][YEAR] ended [ o ].
EXHIBIT 11(a)(ix)
FORM OF CLOSING CERTIFICATE
TO: LASALLE BUSINESS CREDIT, a division of ABN AMRO BANK N.V., CANADA
BRANCH
Reference is hereby made to that certain credit agreement dated as of
April [ o ], 2002 made between CABLETEL COMMUNICATIONS CORP., as borrower (the
"BORROWER") and LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V.,
CANADA BRANCH, as lender (the "LENDER") (as amended, supplemented, restated or
extended from time to time the "CREDIT AGREEMENT"). This certificate is
delivered pursuant to SUBSECTION 11(a)(ix) of the Credit Agreement. Unless
otherwise defined herein, capitalized terms used herein shall have the same
meanings ascribed to such terms in the Credit Agreement.
The undersigned Authorized Officer of the Borrower, hereby certifies on
behalf of the Borrower as follows:
1. As at the date hereof, all representations and warranties contained in the
Credit Agreement are true and correct;
2. As at the date hereof, no Default or Event of Default has occurred and is
continuing;
3. As at the date hereof, no event has occurred and is continuing which could be
expected to have a Material Adverse Effect with respect to the Borrower or the
Guarantor; and
4. As at the date hereof after giving effect to all matters set out in
SUBSECTION 11(a)(vi) of the Credit Agreement, the Canadian Dollar Equivalent
Amount of Excess Availability is equal to $[ o ]. In calculating such amount,
the Borrower's outstanding debt was and is current and not past due in any
respect.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
the [ o ] of the Borrower as of the [ o ] day of [ o ], [ o ].
CABLETEL COMMUNICATIONS CORP.
Per: ____________________________
Authorized Officer