1
Exhibit 10.18
EXECUTION COPY
LOAN AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (CANADA)
as Lender
and
BINGO PRESS & SPECIALTY LIMITED
as Borrower
Dated: November 20, 1997
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "ACCOUNTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 "ADJUSTED NET WORTH" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 "AMORTIZED EQUIPMENT VALUE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 "APPLICABLE CANADIAN MARGIN" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "AVAILABILITY RESERVES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.6 "BIA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.7 "BLOCKED ACCOUNTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.8 "BORROWING BASE CERTIFICATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.9 "BUSINESS DAY" or "BUSINESS DAY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.10 "CANADIAN DOLLAR EQUIVALENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "CANADIAN PRIME RATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "CANADIAN PRIME RATE LOANS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "CANADIAN REFERENCE BANK" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "CASH EQUIVALENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 "CDOR RATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 "CCAA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 "COLLATERAL" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "COMBINED EXCESS AVAILABILITY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.19 "CONGRESS (CENTRAL)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 "ELIGIBLE ACCOUNTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 "ELIGIBLE INVENTORY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.23 "EQUIPMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.24 "EVENT OF DEFAULT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.25 "EXCESS AVAILABILITY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.26 "FINANCING AGREEMENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.27 "FORMULA AVAILABILITY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.28 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.29 "GAMING AUTHORITY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.30 "GAMING LAWS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.31 "GAMING LICENSES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.32 "GENERAL ASSIGNMENT OF ACCOUNTS RECEIVABLE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.33 "GENERAL SECURITY AGREEMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.34 "GOVERNMENTAL AUTHORITY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.35 "GUARANTORS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.36 "HAZARDOUS MATERIALS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.37 "HYPOTHEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.38 "INFORMATION CERTIFICATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.39 "INTELLECTUAL PROPERTY SECURITY AGREEMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.40 "INTEREST RATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.41 "INVENTORY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.42 "LETTER OF CREDIT ACCOMMODATIONS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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1.43 "LOANS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.44 "MATERIAL ADVERSE CHANGE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.45 "MATERIAL ADVERSE EFFECT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.46 "MAXIMUM CREDIT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.47 "NET AMOUNT OF ELIGIBLE ACCOUNTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.48 "OBLIGATIONS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.49 "OBLIGOR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.50 "OVERFORMULA AMOUNT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.51 "PAYMENT ACCOUNT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.52 "PENSION PLANS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.53 "PERSON" OR "PERSON" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.54 "PPSA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.55 "PRIORITY PAYABLES RESERVE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.56 "RECORDS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.57 "REVOLVING LOANS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.58 "SPOT RATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.59 "SUBORDINATED NOTE AGREEMENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.60 "SUBORDINATED NOTES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.61 "US BORROWER" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.62 "US DOLLARS" or " US$" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.63 "US DOLLAR EQUIVALENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.64 "US FINANCING AGREEMENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.65 "US L/C ACCOMMODATIONS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.66 "US LOAN AGREEMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.67 "US LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.68 "US MAXIMUM CREDIT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.69 "US REFERENCE BANK" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.70 "VALUE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Letter of Credit Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Availability Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Increases in Maximum Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.5 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations . . . . . . . . . . . . . . . 17
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations . . . . . . . . . . . . . . . . . 19
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SECTION 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Borrower's Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Collection of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Authorization to Make Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7. COLLATERAL REPORTING AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Accounts Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Inventory Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Equipment Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.6 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.7 Access to Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Corporate Existence, Power and Authority; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Financial Statements; No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Chief Executive Office; Collateral Locations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Priority of Liens; Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Compliance with Other Agreements and Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.8 Status of Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.9 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.10 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.11 Accuracy and Completeness of Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.12 Survival of Warranties; Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 New Collateral Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Compliance with Laws, Regulations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Financial Statements and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc . . . . . . . . . . . . . . . . . . . . . 35
9.8 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.10 Loans, Investments, Guarantees, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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9.11 Dividends and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13 Additional Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.14 Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.16 Applications under the Companies' Creditors Arrangement Act . . . . . . . . . . . . . . . . . . . . . 39
9.17 Operation of Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.18 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.19 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver . . . . . . . . . . . . . . . . 44
11.2 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4 Waiver of Counterclaims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.3 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.8 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Borrowing Base Certificate
Schedule 8.4 Existing Liens
Schedule 8.8 Pension Plan Matters
Schedule 8.9 Environmental Matters
Schedule 8.10 Bank Accounts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
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LOAN AGREEMENT
This Loan Agreement dated November 20, 1997 is entered into by
and between Congress Financial Corporation (Canada), an Ontario corporation
("Lender") and Bingo Press & Specialty Limited, an Ontario corporation
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans
and provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in the Personal Property
Security Act (Ontario) shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. The word "including" when used in this Agreement shall mean
"including, without limitation". References herein to any statute or any
provision thereof include such statute or provision as amended, revised,
re-enacted, and/or consolidated from time to time and any successor statute
thereto. An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in
a manner Lender in good faith, deems satisfactory, if such Event of Default is
capable of being cured as determined by Lender in good faith. Any accounting
term used herein unless otherwise defined in this Agreement shall have the
meanings customarily given to such term in accordance with GAAP. Canadian
Dollars and the sign "$" mean lawful money of Canada. "US Dollars" and the
sign "US$" mean lawful money of the United States of America. For purposes of
this Agreement, the following terms shall have the respective meanings given to
them below:
1.1 "ACCOUNTS" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "ADJUSTED NET WORTH" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its
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subsidiaries (if any), the amount equal to the difference between: (i) the
aggregate net book value of all assets of such Person and its subsidiaries,
calculating the book value of inventory for this purpose on a
first-in-first-out basis, after deducting from such book values all appropriate
reserves in accordance with GAAP (including all reserves for doubtful
receivables, obsolescence, depreciation and amortization) and (ii) the
aggregate amount of the indebtedness and other liabilities of such Person and
its subsidiaries (including tax and other proper accruals); provided that, for
purposes hereof, Adjusted Net Worth shall be calculated without giving effect
to extraordinary gains realized after the date hereof and without giving effect
to write-downs of goodwill taken after the date hereof.
1.3 "AMORTIZED EQUIPMENT VALUE" shall mean, at any time, an amount
determined by Lender by subtracting from the Canadian Dollar Equivalent at such
time of US$2,913,750 the product obtained by multiplying the Canadian Dollar
Equivalent at such time of US$45,325 by the number of months elapsed after the
date hereof through and including the date of determination; provided, that if
any appraisal delivered to or obtained by Lender after the date hereof under
Section 7.4 hereof with respect to Equipment deemed acceptable to Lender for
lending purposes indicates that the Amortized Equipment Value exceeds
seventy-five (75%) percent of the orderly liquidation value of such acceptable
Equipment, the Amortized Equipment Value shall be reset by Lender to the amount
in Canadian Dollars equal to seventy- five (75%) percent of such appraised
orderly liquidation value and the Amortized Equipment Value shall be reduced
and further reduced each month thereafter on the first day of each month (but
not below zero), by the product obtained by multiplying the Amortized Equipment
Value, as so reset (and expressed in Canadian Dollars as of the date of
determination) by a fraction, the numerator of which is one (1), and the
denominator of which is the number equal to (x) sixty (60) minus (y) the number
of months elapsed after the date hereof.
1.4 "APPLICABLE CANADIAN MARGIN" shall mean the respective percentage
per annum set forth in the table below for Canadian Prime Rate Loans
corresponding to the average daily Combined Excess Availability as determined
by Lender in US Dollars for the month immediately preceding the month (or
portion thereof) for which the Interest Rate is being determined hereunder:
Average Daily Combined Excess Availability Applicable Canadian Margin for Canadian Prime
------------------------------------------ Rate Loans
---------------------------------------------
0$ to US$4,999,999 1.75%
US$5,000,000 to US$14,999,999 1.50%
US$15,000,000 or more 1.25%
provided, however, if Borrower shall fail to deliver any Borrowing Base
Certificate on the date due hereunder, then, without limiting Lender's other
rights and remedies by reason thereof, if such Borrowing Base Certificate is
not delivered in accordance with the terms hereof within two (2) Business Days
after such date due hereunder, the Applicable Canadian Margin shall, at
Lender's option, be deemed to be one and three- quarters of one percent (1.75%)
for Canadian Prime Rate Loans.
1.5 "AVAILABILITY RESERVES" shall mean, as of any date of
determination, such amounts as Lender may from time to time actually establish
and revise in good faith reducing the amount of
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Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect, without duplication, and in amounts not in excess of a good faith
estimate by Lender of, the potential adverse effect of any events, conditions,
contingencies or risks which, as determined by Lender in good faith, do or may
affect either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) the assets, business or prospects of
Borrower or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Lender's good faith belief that any collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect or (c) to reflect outstanding Letter of Credit
Accommodations as provided in Section 2.2 hereof, or (d) in respect of any
state of facts which Lender determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of
Default or (e) to reflect any Priority Payables Reserve or to effect any
reserves required by Lender under Section 2.3(b) or any other provision of this
Agreement.
1.6 "BIA" means the Bankruptcy and Insolvency Act (Canada).
1.7 "BLOCKED ACCOUNTS" shall have the meaning set forth in Section 6.3
hereof.
1.8 "BORROWING BASE CERTIFICATE" shall mean a certificate
substantially in the form of Exhibit B hereto, as such form may from time to
time be modified by Lender, in a manner consistent with the reporting
Obligations of Borrower hereunder, which is duly completed (including all
schedules thereto) and executed by the chief financial officer or other
appropriate financial officer of Borrower acceptable to Lender and delivered to
Lender.
1.9 "BUSINESS DAY" or "BUSINESS DAY" shall mean any day other than a
Saturday, Sunday, or other day on which commercial banks are authorized or
required to close under the laws of Canada, the Province of Ontario, the State
of Illinois or the Commonwealth of Pennsylvania, and a day on which the US
Reference Bank, the Canadian Reference Bank and Lender are open for the
transaction of business, except that if a determination of a Business Day shall
relate to any Eurodollar Rate Loans, the term Business Day shall also exclude
any day on which banks are closed for dealings in dollar deposits in the London
interbank market or other applicable Eurodollar Rate market.
1.10 "CANADIAN DOLLAR EQUIVALENT" of an amount of money in US Dollars
shall mean an amount, as determined by Lender, equal to the value in Canadian
Dollars of such amount of US Dollars, based on the Spot Rate for the purchase
of Canadian Dollars with US Dollars. Lender may make such determination
utilizing the closing Spot Rate for the preceding business day or may, from
time to time, at its option, utilize a more current Spot Rate with respect to
any determination of Canadian Dollar Equivalent for purposes hereof.
1.11 "CANADIAN PRIME RATE" shall mean, at any time, the greater of (i)
the rate from time to time publicly announced by the Canadian Reference Bank as
its prime rate in effect for determining interest rates on Canadian Dollar
denominated commercial loans in Canada, and (ii) the annual rate of interest
equal to the sum of (A) the CDOR Rate at such time and (B) one (1%) percent per
annum.
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1.12 "CANADIAN PRIME RATE LOANS" shall mean any Loans or portion
thereof denominated in Canadian Dollars and on which interest is payable based
on the Canadian Prime Rate in accordance with the terms hereof.
1.13 "CANADIAN REFERENCE BANK" shall mean Bank of Montreal, or its
successors and assigns, or such other Schedule I Canadian chartered bank as
Lender may from time to time designate.
1.14 "CASH EQUIVALENTS" shall have the meaning set forth in Section
9.10 hereof.
1.15 "CDOR RATE" shall mean, on any day, the annual rate of interest
which is the rate based on an average 30 day rate applicable to Canadian Dollar
bankers' acceptances appearing on the "Reuters Screen CDOR Page" (as defined in
the International Swap Dealer Association, Inc, definitions, as modified and
amended from time to time) as of 10:00 a.m. on such day; provided that if such
rate does not appear on the Reuters Screen CDOR Page as contemplated, then the
CDOR Rate on any day shall be the 30 day rate applicable in Canadian Dollar
bankers' acceptances quoted by any major Schedule I chartered bank selected by
Lender as of 10:00 a.m. on such day.
1.16 "CCAA" means the Companies' Creditors Arrangement Act (Canada).
1.17 "COLLATERAL" shall mean, collectively, Collateral as such term is
defined in the General Security Agreement, Collateral as such term is defined
in the Intellectual Property Security Agreement, Rights as such term is defined
in the General Assignment of Accounts Receivable, and hypothecated claims as
such term is defined in the Hypothec.
1.18 "COMBINED EXCESS AVAILABILITY" shall mean, at any time, as
determined by Lender, the amount in US Dollars equal to the sum of (a) the
positive or negative Excess Availability of Borrower at such time plus (b) the
positive or negative "Excess Availability" as defined in the US Loan Agreement
of the US Borrower at such time.
1.19 "CONGRESS (CENTRAL)" shall mean Congress Financial Corporation
(Central), an Illinois Corporation, and its successors and assigns.
1.20 "ELIGIBLE ACCOUNTS" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts are payable in Canada in Canadian Dollars
and arise from the actual and bona fide sale and delivery of goods by Borrower
or rendition of services by Borrower in the ordinary course of its business
which transactions are completed in accordance with the terms and provisions
contained in any documents related thereto;
(b) such Accounts are not unpaid more than one hundred twenty
(120) days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent and such
Accounts are not owed by any account debtor with respect to whom Borrower has
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agreed, under any contingency or condition, to repurchase any inventory from
such account debtor or its lender or customers;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in Canada or, at Lender's option, if
either: (i) the account debtor has delivered to Borrower an irrevocable letter
of credit issued or confirmed by a bank satisfactory to Lender and payable only
in Canada and in Canadian Dollars, sufficient to cover such Account, in form
and substance satisfactory to Lender and, if required by Lender, the original
of such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the assignment of the proceeds of such letter of
credit to Lender, or (ii) such Account is subject to credit insurance payable
to Lender issued by an insurer and on terms and in an amount acceptable to
Lender, or (iii) such Account is otherwise acceptable in all respects to Lender
(subject to such lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇
and hold invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices,
if Lender shall have received an agreement in writing from the account debtor,
in form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts, other than those ordinary course deductions or allowances reflected
on the face of the invoices evidencing such Accounts and reflected as a
deduction in computing and reporting the net amount of the affected Accounts in
the Borrowing Base Certificates and all other Collateral reports delivered in
accordance with this Agreement with respect to Accounts (but the portion of
the Accounts of such account debtor in excess of the amount at any time and
from time to time owed by Borrower to such account debtor or claimed owed by
such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectibility of such Accounts or
reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid
and perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any liens except
those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not
any Governmental Authority, unless (i) if the account debtor is the federal
government of Canada, any Province, political subdivision, department, agency
or instrumentality thereof, upon Lender's request, the Financial Administration
Act (Canada) or any similar provincial or local law, if applicable, has been
complied with in a manner satisfactory to Lender and (ii) if the account
debtors are North American Indian nations, tribes or tribal authorities, or the
account debtors are located or conduct business on North American Indian lands,
upon Lender's request Lender shall have received evidence, in form and
substance satisfactory to Lender, that such account debtor has waived any claim
of crown immunity, which waiver shall be unconditionally valid and enforceable
by Lender against such account debtor under all applicable
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laws, and the account debtor shall have consented to be sued by Borrower and
its assigns (including Lender) and consented to personal jurisdiction in each
provincial and federal court located in the province where it is located or
conducts business, and Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has a valid and enforceable first
priority perfected security interest in the Accounts owing by such account
debtor and Lender may collect and otherwise realize thereon in the same manner
as any other Eligible Account;
(l) there are no proceedings or actions which are threatened
or pending against the account debtors with respect to such Accounts which, if
adversely determined against any such account debtor, could reasonably be
expected to result in any material adverse change in any such account debtor's
financial condition;
(m) such Accounts of a single account debtor or its
affiliates do not constitute more than ten (10%) percent of all otherwise
Eligible Accounts (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than one hundred twenty (120) days after the date of the
original invoice for them which constitute more than fifty (50%) percent of the
total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit (if any) with respect
to such account debtors that Lender has elected from time to time to establish
or revise for purposes of determining Eligible Accounts of such account debtors
(but the portion of the Accounts not in excess of such credit limit may be
deemed Eligible Accounts);
(p) such Accounts do not arise from the sale of Borrower's
"Power Bingo" products or rendition of services in relating thereto; and
(q) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender in good faith.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.21 "ELIGIBLE INVENTORY" shall mean Inventory located in Canada
consisting of finished goods held for resale in the ordinary course of the
business of Borrower which are acceptable to Lender based on the criteria set
forth below. In general, Eligible Inventory shall not include (a) raw
materials or work-in-process; (b) components which are not part of finished
goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e)
supplies used or consumed in Borrower's business; (f) Inventory at premises
other than those owned and controlled by Borrower, except if Lender shall have
received an agreement in writing from the person in possession of such
Inventory and/or the owner or operator of such premises in form and substance
satisfactory to Lender acknowledging Lender's first priority security interest
in the Inventory, waiving security interests and claims by such person against
the Inventory and permitting Lender access to, and the right to remain on, the
premises so as to exercise Lender's rights and remedies and otherwise deal with
the Collateral; (g) Inventory subject to a security interest or lien in favour
of any person other than Lender except those permitted in this Agreement; (h)
▇▇▇▇ and hold goods; (i) unserviceable, obsolete or slow moving Inventory; (j)
Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (k) returned, damaged and/or defective
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Inventory; (l) Inventory as to which, or as to the manufacture or sale or
offering for sale of which by Borrower, there is a claim of patent, trademark,
copyright, infringement or other claim of violation of intellectual property
rights of others; (m) Inventory consisting of Borrower's "Power Bingo"
products; and (n) Inventory purchased or sold on consignment. General criteria
for Eligible Inventory may be established and revised from time to time by
Lender in good faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.22 "ENVIRONMENTAL LAWS" shall mean with respect to any Person all
federal (United States of America and Canada), state, provincial, district,
local, municipal and foreign laws, statutes, rules, regulations, ordinances,
orders, directives, permits, licenses and consent decrees relating to health,
safety, hazardous, dangerous or toxic substances, waste or material, pollution
and environmental matters, as now or at any time hereafter in effect,
applicable to such Person and/or its business and facilities (whether or not
owned by it), including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contamination, chemicals, or hazardous,
toxic or dangerous substances, materials or wastes into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or hazardous,
toxic or dangerous substances, materials or wastes.
1.23 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used
in connection therewith, and substitutions and replacements thereof, wherever
located.
1.24 "EVENT OF DEFAULT" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.25 "EXCESS AVAILABILITY" shall mean the US Dollar Equivalent of the
amount, as determined by Lender, calculated at any time, equal to: (a) the
lesser of (i) the amount of the Formula Availability at such time and (ii) the
Maximum Credit, less the face amount of outstanding Letter of Credit
Accommodations, minus (b) the sum of: (i) the amount of all then outstanding
and unpaid Obligations (other than the face amount of outstanding Letter of
Credit Accommodations), plus (ii) the aggregate amount of all trade payables of
Borrower which are more than sixty (60) days past due as of such time.
1.26 "FINANCING AGREEMENTS" shall mean, collectively, this Agreement
and all Borrowing Base Certificates, the General Security Agreement, the
General Assignment of Accounts Receivable, the Hypothec, the Intellectual
Property Security Agreement and all notes, guarantees, security agreements and
other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower or any Obligor in connection with this
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.27 "FORMULA AVAILABILITY" shall mean the amount, as determined by
Lender, calculated at any time, equal to the amount of Revolving Loans
available to Borrower at such time, assuming (for purposes of such calculation)
that the outstanding principal balance of Revolving Loans and Letter of Credit
Accommodations is zero and based on the applicable lending formulas under
Section 2.1 hereof, subject to the sublimits and Availability Reserves from
time to time actually established by Lender hereunder.
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1.28 "GAAP" shall mean generally accepted accounting principles in
Canada as in effect from time to time as set forth in the opinions and
pronouncements of the relevant Canadian public and private accounting boards
and institutes which are applicable to the circumstances as of the date of
determination consistently applied, except that, for purposes of Section 9.14
hereof, GAAP shall be determined on the basis of such principles in effect on
the date hereof and consistent with those used in the preparation of the
audited financial statements delivered to Lender prior to the date hereof.
1.29 "GAMING AUTHORITY" shall mean any Governmental Authority which
regulates gaming in a jurisdiction in which Borrower or any of its subsidiaries
conducts gaming activities or activities relating to the design, manufacture or
distribution of gaming machines, equipment or systems or, whether or not
included in the foregoing, bingo supplies or bingo equipment.
1.30 "GAMING LAWS" shall mean all laws, rules, regulations, orders and
interpretations of any Governmental Authority relating to gaming activities or
activities relating to the design, manufacture or distribution of gaming
machines, equipment or systems, or whether or not included in the foregoing,
bingo supplies or bingo equipment.
1.31 "GAMING LICENSES" shall mean all licenses, franchises, or other
authorizations required to design, manufacture or distribute gaming machines,
equipment or systems or, whether or not included in the foregoing, bingo
supplies or bingo equipment in any state or jurisdiction where Borrower or any
of its Subsidiaries conduct such business (including any North American Indian
lands where any account debtor of Borrower is located or conducts business.)
1.32 "GENERAL ASSIGNMENT OF ACCOUNTS RECEIVABLE" shall mean the
general assignment of accounts receivable dated on or about the date hereof
given by Borrower in favour of Lender in respect of the Obligations.
1.33 "GENERAL SECURITY AGREEMENT" shall mean the general security
agreement dated on or about the date hereof given by Borrower in favour of
Lender in respect of the Obligations.
1.34 "GOVERNMENTAL AUTHORITY" shall mean the United States of America,
any State of the United States of America, Canada, any Province of Canada, any
other foreign government, or a district, county or municipality or other
political subdivision, and any North American Indian nation or tribe, or any
body, department, authority, agency, public corporation or instrumentality, of
any of the foregoing.
1.35 "GUARANTORS" shall mean US Borrower, Video King Gaming Systems,
Inc., a Colorado corporation, and each other Person that guarantees payment of
all or any portion of the Obligations.
1.36 "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and
any other kind and/or type of pollutants or contaminants (including materials
which include hazardous constituents), sewage, sludge, industrial slag,
solvents and/or any other similar substances, materials, or wastes and
including any other substances, materials or wastes that are or become
regulated under any Environmental Law (including any that are or become
classified as hazardous or toxic under any Environmental Law).
1.37 "HYPOTHEC" shall mean the hypothec on a universality of claims
dated the date hereof given by Borrower in favour of Lender in respect of the
Obligations.
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1.38 "INFORMATION CERTIFICATE" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.39 "INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean the
intellectual property security agreement dated on or about the date hereof
given by Borrower in favour of Lender in respect of the Obligations.
1.40 "INTEREST RATE" shall mean, as to Canadian Prime Rate Loans, the
per annum rate equal to the Canadian Prime Rate plus the Applicable Canadian
Margin, provided, that, the Interest Rate shall be increased by two (2%)
percent per annum above the otherwise applicable Interest Rate, at Lender's
option, without notice, (a) for the period (i) from and after the effective
date of termination or non-renewal hereof until Lender has received full and
final payment of all Obligations (notwithstanding entry of any judgment against
Borrower) and (ii) from and after the date of the occurrence of an Event of
Default for so long as such Event of Default is continuing and (b) on the
Revolving Loans at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es) arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default).
1.41 "INVENTORY" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.42 "LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of
credit, merchandise purchase or other guarantees denominated in Canadian
Dollars which are from time to time either (a) issued or opened by Lender for
the account of Borrower or any Obligor or (b) with respect to which Lender has
agreed to indemnify the issuer or guaranteed to the issuer the performance by
Borrower of its obligations to such issuer.
1.43 "LOANS" shall mean the Revolving Loans.
1.44 "MATERIAL ADVERSE CHANGE" shall mean a material adverse change in
the condition (financial or otherwise), operations, performance, properties,
business or affairs of the Borrower or any Obligor.
1.45 "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse
change in, or a material adverse effect upon, the condition (financial or
otherwise), operations, business or affairs of Borrower or any Obligor, (b) any
existing or future impairment of the ability of Borrower or any Obligor to
perform any material Obligations under any of the Financing Agreements, or (c)
any existing or future impairment of Lender's rights or interests in any
Collateral, or Lender's ability to enforce any Obligations or realize upon any
Collateral.
1.46 "MAXIMUM CREDIT" shall mean, at any time, the Canadian Dollar
Equivalent at such time of US$3,333,333, subject to increase as provided in
Section 2.4 below.
1.47 "NET AMOUNT OF ELIGIBLE ACCOUNTS" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits
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and allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect to such Eligible Accounts; provided that the
amounts deducted under clause (a) shall not duplicate items for which
Availability Reserves have been established by Lender.
1.48 "OBLIGATIONS" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
proceeding with respect to Borrower under the BIA, the CCAA, or any similar
statute in any jurisdiction (including the payment of interest and other
amounts which would accrue and become due but for the commencement of such
proceeding, whether or not such amounts are allowed or allowable in whole or in
part in such proceeding), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by Lender.
1.49 "OBLIGOR" shall mean each Guarantor and each endorser, acceptor,
surety or other person liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations, other than
Borrower.
1.50 "OVERFORMULA AMOUNT" shall mean, at any time, as calculated by
Lender, the amount (if any) by which (A) the aggregate amount of outstanding
Obligations (other than the face amount of outstanding Letter of Credit
Accommodations) at such time, exceeds (B) the lesser of (x) the Formula
Availability and (y) the Maximum Credit less the face amount of outstanding
Letter of Credit Accommodations, at such time.
1.51 "PAYMENT ACCOUNT" shall have the meaning set forth in Section 6.3
hereof.
1.52 "PENSION PLANS" means each of the pension plans, if any,
registered in accordance with the Income Tax Act (Canada) which Borrower
sponsors or administers or into which Borrower makes contributions.
1.53 "PERSON" OR "PERSON" shall mean any individual, sole
proprietorship, partnership, limited partnership, corporation, limited
liability company, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.54 "PPSA" shall mean the Personal Property Security Act (Ontario).
1.55 "PRIORITY PAYABLES RESERVE" shall mean, at any time, the full
amount of the liabilities at such time which have a trust imposed to provide
for payment or security interest, lien or charge ranking or capable of ranking
senior to or pari passu with security interests, liens or charges securing the
Obligations on any of the Collateral under federal, provincial, state, county,
municipal, or local law including, but not limited, to claims for unremitted
and accelerated rents, taxes, wages, workers' compensation obligations,
government royalties or pension fund obligations, together with the aggregate
value, determined in accordance with GAAP, of all Eligible Inventory which
Lender, acting reasonably, considers may be or may become subject to a right of
a supplier to recover possession thereof under any federal or provincial law,
where such supplier's right may have priority over the security interests,
liens or
17
charges securing the Obligations including, without limitation, Eligible
Inventory subject to a right of a supplier to repossess goods pursuant to
Section 81.1 of the BIA.
1.56 "RECORDS" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.57 "REVOLVING LOANS" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.58 "SPOT RATE" shall mean, with respect to a currency, the rate
quoted by the Canadian Reference Bank as the spot rate for the purchase by the
Canadian Reference Bank of such currency with another currency.
1.59 "SUBORDINATED NOTE AGREEMENTS" shall mean the Subordinated Notes
and the Indenture dated as of November 13, 1996 between US Borrower and The
Trust Company of Washington, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.60 "SUBORDINATED NOTES" shall mean US Borrower's Series B 12-1/2%
Senior Subordinated Notes due 2004, in the aggregate principal amount of
US$100,000,000, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.61 "US BORROWER" shall mean Borrower's direct parent, Stuart
Entertainment, Inc., a Delaware Corporation, and its successors and assigns.
1.62 "US DOLLARS" or " US$" shall mean dollars of the United States of
America or other lawful currency of the United States of America.
1.63 "US DOLLAR EQUIVALENT" of an amount of money in Canadian Dollars,
shall mean an amount, as determined by Lender, equal to the value in US
Dollars, of such amount of Canadian Dollars, based on the spot price for buying
US Dollars with Canadian Dollars, as quoted to Lender by US Reference Bank.
Lender may make such determination utilizing the closing spot price for the
preceding business day or may, from time to time, at its option, utilize a more
current spot price with respect to any determination of US Dollar Equivalent
for purposes hereof.
1.64 "US FINANCING AGREEMENTS" shall mean the "Financing Agreements"
as defined in the US Loan Agreement.
1.65 "US L/C ACCOMMODATIONS" shall mean the "Letter of Credit
Accommodations" as defined in the US Loan Agreement.
1.66 "US LOAN AGREEMENT" shall mean that certain Loan and Security
Agreement, dated on or about the date hereof, between Congress (Central) and
the US Borrower, as the same now exists or may
18
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced from time to time.
1.67 "US LOANS" shall mean the "Loans" as defined in the US Loan
Agreement.
1.68 "US MAXIMUM CREDIT" shall mean the "Maximum Credit" as defined in
the US Loan Agreement.
1.69 "US REFERENCE BANK" shall mean CoreStates Bank, N.A., or such
other bank as Congress (Central) may from time to time designate.
1.70 "VALUE" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans by way of Canadian Prime Rate
Loans to Borrower from time to time in amounts requested by Borrower up to the
amount equal to the sum of:
(i) eighty (80%) percent of the Net Amount of
Eligible Accounts, plus
(ii) the lesser of: (A) sixty (60%) percent of the
Value of Eligible Inventory, and (B) the
Canadian Dollar Equivalent of US$3,333,333,
plus
(iii) the lesser of: (A) the Canadian Dollar
Equivalent of US$2,913,750 and (B) the
Amortized Equipment Value, less
(iv) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon
not less than five (5) days prior notice to Borrower identifying the basis for
the action being taken under this provision, (i) reduce the lending formula
with respect to Eligible Accounts to the extent that Lender determines in good
faith that: (1) the dilution with respect to the Accounts for any period (based
on the ratio of (A) the aggregate amount of reductions in Accounts other than
as a result of payments in cash to (B) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (2) the general
creditworthiness of account debtors has declined, or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (1) the number of days of the turnover of the Inventory for
any period has changed in any material respect or (2) the liquidation value of
the Eligible Inventory, or any category thereof, has decreased, or (3) the
nature and quality of the Inventory has deteriorated, or (iii) reduce the
amount available under Section 2.1(a)(iii) to the extent the Amortized
Equipment Value at any time exceeds seventy-five (75%) percent of the orderly
liquidation value of the Borrower's Equipment deemed acceptable by Lender for
lending purposes, as such value is set forth in an appraisal pursuant to
Section 7.4 hereof. In determining whether to reduce the lending formula(s),
Lender may, without duplication,
19
consider events, conditions, contingencies or risks which are also considered
in determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of
the Loans and the Letter of Credit Accommodations outstanding at any time shall
not exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2(d) or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or
on any future occasions and Borrower shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
(d) For purposes of applying the sublimit set forth in
Section 2.1(a)(ii)(B) hereof, Lender may treat the amount of its reliance on
Eligible Inventory to be purchased under outstanding Letter of Credit
Accommodations as a Revolving Loan based on Eligible Inventory pursuant to
Section 2(a)(ii). In determining the amount of such reliance, the outstanding
Revolving Loans and Availability Reserves shall first be attributed to any
components of the lending formulas in Section 2.1(a) that are not subject to
such sublimit, before being attributed to the components of the lending
formulas subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms
and conditions acceptable to Lender and the issuer thereof. Any payments made
by Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to two (2%)
percent per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable
in arrears as of the first day of each succeeding month, except that Borrower
shall pay to Lender such letter of credit fee, at Lender's option, without
notice, at a rate equal to four (4%) percent per annum on such daily
outstanding balance for: (i) the period from and after the effective date of
termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
five (365) day year and actual days elapsed and the obligation of Borrower to
pay such fee shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrower (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than:
(i) if the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory and the Letter of Credit Accommodation requires
that all negotiable documents of title with respect to such Eligible Inventory
shall be consigned to the issuer of the Letter of Credit Accommodation, the sum
of (1) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the Value of
such Eligible Inventory, plus (2) freight, taxes, duty and other
20
amounts which Lender estimates must be paid in connection with such Inventory
upon arrival and for delivery to one of Borrower's locations for Eligible
Inventory within Canada and (ii) if the proposed Letter of Credit Accommodation
is for any other purpose, an amount equal to one hundred (100%) percent of the
face amount thereof and all other commitments and obligations made or incurred
by Lender with respect thereto. Effective on the issuance of each Letter of
Credit Accommodation, an Availability Reserve shall be established in the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith shall not at any
time exceed the Canadian Dollar Equivalent of US$1,666,667. At any time an
Event of Default exists or has occurred and is continuing, upon Lender's
request, Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the Letter of Credit
Accommodations, and in either case, the Revolving Loans otherwise available to
Borrower shall not be reduced as provided in Section 2.2(c) to the extent of
such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from
and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating
thereto, including any losses, claims, damages, liabilities, costs and expenses
due to any action taken by any issuer or correspondent with respect to any
Letter of Credit Accommodation, but excluding any losses, claims, damages,
liabilities, costs and expenses directly caused by the gross negligence or
willful misconduct of Lender, as determined by a final non-appealable judgment
of a court of competent jurisdiction. Borrower assumes all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's agent. Borrower assumes all risks for, and agrees to pay,
all foreign, federal, provincial and local taxes, duties and levies relating to
any goods subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder. Borrower hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation. The provisions
of this Section 2.2(e) shall survive the payment of Obligations and the
termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter
of Credit Accommodation provided by an issuer other than Lender unless Lender
has duly executed and delivered to such issuer the application or a guarantee
or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made in good
faith by Lender, or any other issuer or correspondent under or in connection
with any Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of Borrower. Lender shall have the sole and exclusive right
and authority, exercised in good faith, to, and Borrower shall not: (i) at any
time an Event of Default exists or has occurred and is continuing, (1) approve
or resolve any questions of non-compliance of documents, (2) give any
instructions as to acceptance or rejection of any documents or goods or (3)
execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders, and (ii) at all times, (1) grant any extensions
of the maturity of, time of payment for, or time of presentation of, any
drafts, acceptances, or documents, and (2) agree to any amendments, renewals,
21
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included
in the Collateral. Lender may take such actions either in its own name or in
Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favour of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall
be deemed to have been granted or undertaken by Borrower to Lender. Any duties
or obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favour of any issuer or correspondent relating to any Letter of
Credit Accommodation, shall be deemed to have been undertaken by Borrower to
Lender and to apply in all respects to Borrower.
2.3 Availability Reserves. (a) All Revolving Loans otherwise
available to Borrower pursuant to the lending formulas and subject to the
Maximum Credit and other applicable limits hereunder shall be subject to
Lender's continuing right to establish and revise Availability Reserves.
Lender shall notify Borrower of the establishment of and any changes in
Availability Reserves and the basis therefor, as soon as practicable following
each such establishment or change. Upon Borrower's request in writing after
being so advised, Lender will, if it has not already done so, promptly confirm
to Borrower, in writing, the applicable establishment of or changes in
Availability Reserves and the basis therefor.
(b) Without limiting Lender's other rights with respect to
Availability Reserves (and without in any way affecting or impairing the rights
or remedies of Congress (Central) under the US Financing Agreements), Lender
may from time to time establish and revise Availability Reserves in an amount
sufficient to cover the Canadian Dollar Equivalent of (i) the amount by which
the outstanding "Obligations" (as defined in the US Loan Agreement) of the US
Borrower to Congress (Central) exceeds the "Maximum Credit" as defined in the
US Loan Agreement and/or (ii) the amount by which the aggregate amount of the
US Loans and US L/C Accommodations exceed the "Formula Availability" as defined
in the US Loan Agreement. In the case of any Availability Reserves established
under clause (ii) of this Section 2.3(b), Lender may also treat such amount as
a reduction in the Maximum Credit hereunder.
2.4 Increases in Maximum Credit. The Maximum Credit shall be
increased, but not above the Canadian Dollar Equivalent of US $10,000,000, upon
Borrower's written request(s) in accordance with and subject to the following
terms and conditions:
(a) Borrower may submit to Lender up to two (2) requests
for increases in the Maximum Credit hereunder;
(b) Each request shall be made in the form of a joint
written request by Borrower to Lender and by US Borrower to Congress (Central)
requesting an aggregate of US$10,000,000 of increases in the US Dollar amount
used to calculate the Maximum Credit hereunder and/or the US Maximum Credit;
provided, however, in the case of any requested increase(s) of the US Maximum
Credit, that the US Maximum Credit as so increased shall not at any time exceed
US $20,000,000;
(c) Each request received by Lender in accordance with
this Section 2.4 shall become effective as to Borrower on the fifth (5th)
business day following the date of Lender's receipt of such request; provided,
that such request shall not become effective for any purpose hereunder:
22
(i) if, upon the otherwise effective date of such
requested increase, any Event of Default, or any condition or event
that, with notice or passage of time, or both, would constitute an
Event of Default, shall then exist or shall have occurred and be then
continuing, or
(ii) during the final sixty (60) days of the
initial term or any renewal year hereunder, if Lender has given notice
of non-renewal to Borrower as permitted under Section 12.1(a) hereof,
or
(iii) if such request would otherwise take effect
after Borrower has given notice of non-renewal or termination as
permitted in Section 12.1(a) or (c) hereof; and
(d) upon the effective date of each increase in the
Maximum Credit under Section 2.4, Borrower shall pay to Lender (or Lender may,
at its option, charge directly to Borrower's Revolving Loan account) a fee
equal to three-quarters of one (3/4%) percent of the amount of such increase,
which amount shall be deemed earned in full as of such effective date.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest at the Interest
Rate (i) on the outstanding principal amount of the Loans and, (ii) except to
the extent expressly otherwise provided herein as to certain fees, costs,
expenses and other charges, on all other non-contingent Obligations. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Interest shall be payable by Borrower to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty-five (365) day year in the
case of Canadian Prime Rate Loans, and actual days elapsed. The interest rate
on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase
or decrease by an amount equal to each increase or decrease in the Canadian
Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced. The increase or decrease shall be based on the
Canadian Prime Rate in effect on the last day of the month in which any such
change occurs. In no event shall charges constituting interest payable by
Borrower to Lender exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
(c) For purposes of disclosure under the Interest Act
(Canada), where interest is calculated pursuant hereto at a rate based upon a
365 day year (the "First Rate"), it is hereby agreed that the rate or
percentage of interest on a yearly basis is equivalent to such First Rate
multiplied by the actual number of days in the year divided by 365.
(d) Notwithstanding the provisions of this Section 3 or any
other provision of this Agreement, in no event shall the aggregate "interest"
(as that term is defined in Section 347 of the Criminal Code (Canada)) exceed
the effective annual rate of interest on the "credit advanced" (as defined
23
therein) lawfully permitted under Section 347 of the Criminal Code (Canada).
The effective annual rate of interest shall be determined in accordance with
generally accepted actuarial practices and principles over the term of the
applicable Loan, and in the event of a dispute, a certificate of a Fellow of
the Canadian Institute of Actuaries appointed by Lender will be conclusive for
the purposes of such determination.
(e) A certificate of an authorized signing officer of Lender
as to each amount and/or each rate of interest payable hereunder from time to
time shall be conclusive evidence of such amount and of such rate, absent
manifest error.
(f) For greater certainty, whenever any amount is payable
under this Agreement or any Financing Agreement by Borrower as interest or as a
fee which requires the calculation of an amount using a percentage per annum,
each party to this Agreement acknowledges and agrees that such amount shall be
calculated as of the date payment is due without application of the "deemed
reinvestment principle" or the "effective yield method". As an example, when
interest is calculated and payable monthly, the rate of interest payable per
month is 1/12 of the stated rate of interest per annum.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of the Canadian Dollar Equivalent of US$25,000, which shall be fully
earned as of and payable on the date hereof.
3.3 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to three-eighths of one (3/8%) percent per annum
calculated upon the amount (if any) by which eighty (80%) percent of the
Maximum Credit exceeds the average daily principal balance of the outstanding
Revolving Loans and Letter of Credit Accommodations during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.
3.4 Servicing Fee. Borrower shall pay to Lender monthly a servicing
fee in an amount equal to the Canadian Dollar Equivalent of US$666.67 in
respect of Lender's services for each month (or part thereof) while this
Agreement remains in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be fully earned as of and payable
in advance on the date hereof and on the first day of each month hereafter.
3.5 Payments. Unless otherwise specified by Lender, all interest,
fees and other payments by Borrower hereunder shall be in the currency in which
such Obligations are denominated.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by the existing
lender or lenders to Borrower, US Borrower and any of their subsidiaries of
their respective financing arrangements with Borrower, US Borrower and any of
their subsidiaries and the termination and release by it or them, as the case
may be, of any interest in and to any assets and properties of Borrower, US
Borrower and each subsidiary, duly authorized, executed and delivered by it
24
or each of them including, but not limited to, (i) financing change statements
and UCC termination statements providing for the discharge and/or termination
of all financing statements previously filed by it or any of them or their
predecessors, as secured party and Borrower, US Borrower or any subsidiary, as
debtor and (ii) satisfactions and discharges of any mortgages, deeds of trust
or deeds to secure debt by Borrower, US Borrower or any subsidiary in favour of
such existing lender or lenders, in form acceptable for recording in the
appropriate government office;
(b) Lender shall have received evidence (including any
releases of any other liens or security interests in the Collateral required by
Lender), in form and substance satisfactory to Lender, that Lender has valid
perfected and first priority security interests in and liens upon the
Collateral and any other property which is intended to be security for the
Obligations or the liability of any Obligor in respect thereof, subject only to
the security interests and liens permitted herein or in the other Financing
Agreements;
(c) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(d) no Material Adverse Change shall have occurred since the
date of Lender's latest field examination;
(e) Lender shall have received a Borrowing Base
Certificate setting forth the Revolving Loans available to Borrower as of the
end of Borrower's fiscal month ended on or about October 31, 1997, as completed
in a manner satisfactory to Lender and duly authorized, executed and delivered
on behalf of Borrower;
(f) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrower, the results
of which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
(g) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including acknowledgements by lessors,
mortgagees and warehousemen of Lender's security interests in the Collateral,
waivers by such persons of any security interests, liens or other claims by
such persons to the Collateral and agreements permitting Lender access to, and
the right to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral;
(h) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(i) the Combined Excess Availability, as determined by Lender
as at the date hereof, shall not be less than US$5,000,000 after giving effect
to the initial Loans made or to be made and Letter
25
of Credit Accommodations issued or to be issued in connection with the initial
transactions hereunder and after giving effect to the initial US Loans made or
to be made and the US L/C Accommodations issued or to be issued by Congress
(Central) under the US Loan Agreement in connection with the initial
transactions hereunder and thereunder;
(j) Lender shall have received evidence that Borrower has
provided each Governmental Authority to whose jurisdiction it or any of its
subsidiaries subject, with all required notices (if any) with respect to the
Financing Agreements, the US Financing Agreements, and all Obligations and
Collateral hereunder and thereunder;
(k) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower and the
Obligors with respect to the Financing Agreements and such other matters as
Lender may request including, without limitation, (i) the status of the
Obligations of US Borrower to Lender and Congress (Central) as "Senior
Indebtedness" and "Designated Senior Indebtedness" under the indenture
governing the Subordinated Notes, and (ii) the non-contravention of any
provision of the Subordinated Note Agreements by reason of the execution,
delivery or performance of the Financing Agreements and the US Financing
Agreements (including, without limitation, the loans and other financial
accommodations and guarantees hereunder and thereunder and the granting of
liens and security interests as herein and therein provided);
(l Lender shall have received, in form and substance
satisfactory to Lender, a guarantee of payment by each Guarantor in favour of
Lender of all Obligations secured by a first and only security interest in
favor of Lender granted by each Guarantor in all of its existing and future
assets (except real property);
(m the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender;
(n the US Financing Agreements, and all instruments and
documents thereunder shall have been duly executed and delivered by the US
Borrower and Congress (Central), in form and substance satisfactory to Congress
(Central), and all of the conditions precedent to the initial Loans under the
US Loan Agreement contained in Sections 4.1(a) through 4.1(m) thereof, shall
have been fully satisfied.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a all representations and warranties contained herein and
in the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto
(except as to those representations and warranties expressly made as of a
specified earlier date, in which case, they shall be true and correct as of
such earlier date); and
(b no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of
26
the date of the making of such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto.
SECTION 5. INTENTIONALLY DELETED.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in
accordance with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a
statement setting forth the balance in the Borrower's loan account(s)
maintained by Lender for Borrower pursuant to the provisions of this Agreement,
including principal, interest, fees, costs and expenses. Each such statement
shall be subject to subsequent adjustment by Lender but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower of any specific exceptions
of Borrower thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to
Borrower a written statement as provided above, the balance in Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrower.
6.3 Collection of Accounts.
(a Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, and Lender may establish and
maintain a bank account of Lender ("Payment Account") with such bank as is
acceptable to Lender, into which Borrower shall, in accordance with Lender's
instructions, promptly deposit and direct its account debtors that remit
payments by electronic funds transfers to directly remit, all payments on
Accounts and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made, whether by
cash, cheque or other manner. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance satisfactory
to Lender, providing that all items received or deposited in the Blocked
Accounts are the property of Lender, that the depository bank has no lien upon,
or right to setoff against, the Blocked Accounts, the items received for
deposit therein, or the funds from time to time on deposit therein and that the
depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, at such time as Lender shall direct, all funds
received or deposited into the Blocked Accounts to the Payment Account or such
other bank account of Lender as Lender may from time to time designate for such
purpose. Lender shall instruct the depository banks at which the Blocked
Accounts are maintained to transfer the funds on deposit in the Blocked
Accounts to such operating bank account of Borrower as Borrower may specify in
writing to Lender until such time as Lender shall notify the depository bank
otherwise. Lender may instruct the depository banks at which the Blocked
Accounts are maintained to transfer all funds received or deposited into the
Blocked Accounts to the Payment Account at any time that any of the following
shall occur or exist: (i) an Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred, or (ii) Borrower shall have failed to deliver any Borrowing Base
Certificate in accordance with the terms hereof
27
when due hereunder or within two (2) Business Days thereafter, or (iii) upon
Lender's good faith belief that any information contained in any Borrowing Base
Certificate is incomplete, inaccurate or misleading, or (iv) Combined Excess
Availability shall at any time be less than US$5,000,000, or (v) the US Dollar
Equivalent of the aggregate outstanding principal amount of Loans and Letter of
Credit Accommodations, plus the aggregate outstanding principal amount of
"Loans" and "Letter of Credit Accommodations" under the US Loan Agreement shall
equal or exceed US$15,000,000. Borrower agrees that all payments made to such
Blocked Accounts or Payment Account or other funds received and collected by
Lender, whether on the Accounts or as proceeds of Inventory or other Collateral
or otherwise, shall be the property of Lender to be applied in payment of the
Obligations.
(b For purposes of calculating the amount of the Loans
available to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next business day.
For the purposes of calculating interest on the Obligations, such payments or
other funds received will be applied (conditional upon final collection) to the
Obligations on the date of receipt of immediately available funds by Lender in
the Payment Account provided such payments or other funds and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
account on such day, and if not, then on the next Business Day.
(c Borrower and all of its subsidiaries, employees or agents
shall, acting as trustee for Lender, receive, as the property of Lender, any
monies, cheques, notes, drafts or any other payment relating to and/or proceeds
of Accounts or other Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause the same
to be deposited in the Blocked Accounts or remit the same or cause the same to
be remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account or Payment Account
is established or any other bank or person involved in the transfer of funds to
or from the Blocked Accounts or the Payment Account arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from
time to time. Lender may apply payments received or collected from Borrower or
for the account of Borrower (including the monetary proceeds of collections or
of realization upon any Collateral) to such of the Obligations, whether or not
then due, in such order and manner as Lender determines. Payments and
collections received in any currency other than Canadian Dollars will be
accepted and/or applied at the sole discretion of Lender. At Lender's option,
all principal, interest, fees, costs, expenses and other charges provided for
in this Agreement or the other Financing Agreements may be charged directly to
the loan account(s) of Borrower; provided, however, that so long as the
outstanding principal amount of the Loans is zero ($0), Lender will notify
Borrower of any fees, costs, expenses or other charges due under this
Agreement, and will not debit the Revolving Loan account of Borrower for such
fees, costs, expenses and other charges if Lender receives payment thereof from
Borrower within five (5) days after Borrower is so notified, and, in addition,
if payment is so timely received by Lender, Lender agrees that no interest will
accrue on the fees, costs, expenses or other charges so paid; provided,
further, that in the case of the monthly servicing fee under Section 3.5, (i)
such fee may be charged to the Revolving Loan account of Borrower and interest
shall
28
accrue thereon unless payment of such fee is received by Lender on or before
the fifth (5th) day of each month, and (ii) Lender need not give Borrower any
notice under the preceding proviso, or otherwise. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is
required to surrender or return such payment or proceeds to any Person for any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify
and hold Lender harmless for the amount of any payments or proceeds surrendered
or returned. This Section 6.4 shall remain effective notwithstanding any
contrary action which may be taken by Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of Borrower
or other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a business day) and the amount of the requested Loan. Requests
received after 12 noon Toronto time on any day shall be deemed to have been
made as of the opening of business on the immediately following business day.
All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. All Loans made or Letter of Credit
Accommodations provided by Lender to Borrower pursuant to the provisions hereof
shall be used by Borrower only for general operating, working capital and other
proper corporate purposes and uses of Borrower not otherwise prohibited by the
terms hereof or by the Subordinated Note Agreements or by any other agreement
or rule or regulation of any Gaming Authority or other Governmental Authority
to which Borrower or any subsidiary is a party or by which or to which Borrower
or any subsidiary or any of their property is bound or is subject.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a Borrower shall provide, or cause to be provided to, Lender with
the following documents in a form satisfactory to Lender:
(i as soon as available, but in any event, by no later
than the seventh (7th) day after the end of each
fiscal month of Borrower, a Borrowing Base
Certificate setting forth Borrower's calculation of
the Revolving Loans and Letter of Credit
Accommodations available to Borrower pursuant to the
terms and conditions contained herein (x) with
respect to Accounts, as of the last Business Day of
the month ended most recently prior to the due date
thereof and (y) with respect to Inventory, as of the
last business day of the month prior to the month
ended most
29
recently prior to the due date thereof and (y) with
respect to Inventory, as of the last business day of
the month prior to the month ended most recently
prior to such duedate, each such Borrowing Base
Certificate to be duly completed and executed by the
chief financial officer or other appropriate
financial officer acceptable to Lender, together with
all schedules required pursuant to the terms of the
Borrowing Base Certificate duly completed; provided,
that, (I) for purposes of clause (y) of Section
7.1(a)(i), upon Borrower's implementation of a
perpetual Inventory reporting system, each monthly
Borrowing Base Certificate delivered under this
Section shall be prepared with respect to Inventory
as of the last business day of the month ended most
recently prior to the due date of such Borrowing Base
Certificate, and (II) prior to the implementation of
a perpetual Inventory reporting system, upon Lender's
request, Borrower shall update the information set
forth in each monthly Borrowing Base Certificate with
respect to Inventory as of the last business day of
the month ended most recently prior to the due date
thereof, as soon as such information is available
(but in any event such information shall be contained
in the next succeeding Borrowing Base Certificate);
provided, further that, without limiting any other
rights of Lender, upon Lender's request, Borrower
shall provide Lender on a weekly basis with a
schedule of sales, collections received and credits
issued and, on a weekly basis to the extent
available, inventory reports, in each case under this
proviso upon and after any of the following:
(A an Event of Default or event which with
notice or passage of time or both would
constitute an Event of Default, shall exist
or have occurred and be continuing or
(B Borrower shall have failed to deliver any
Borrowing Base Certificate in accordance with
the terms hereof when due or within two (2)
Business Days thereafter, or
(C upon Lender's good faith belief that any
information contained in any Borrowing Base
Certificate is incomplete, inaccurate or
misleading, or
(D the Combined Excess Availability shall be
less than US$5,000,000, or
(E the US Dollar Equivalent of the aggregate
outstanding principal amount of Loans and
Letter of Credit Accommodations, plus the
aggregate outstanding principal amount of
"Loans" and "Letter of Credit Accommodations"
under the US Financing Agreements shall equal
or exceed US$15,000,000;
(ii on a monthly basis, to the extent not included in a
schedule to the monthly Borrowing Base Certificate or
otherwise delivered to Lender hereunder,
(A perpetual inventory reports, to the extent
available, and inventory reports by category
and location,
(B agings of accounts receivable, and
(C agings of accounts payable;
30
(iii upon Lender's request,
(A copies of customer statements and credit
memos, remittance advices and reports, and
copies of deposit slips and bank statements,
(B copies of shipping and delivery documents,
and
(C copies of purchase orders, invoices and
delivery documents for Inventory and
Equipment acquired by Borrower; and
(iv such other reports as to the Collateral as Lender
shall reasonably request from time to time.
(b Nothing contained in any Borrowing Base Certificate shall be
deemed to limit, impair or otherwise affect the rights of
Lender contained herein and in the event of any conflict or
inconsistency between the calculation of the Revolving Loans
and Letter of Credit Accommodations available to Borrower as
set forth in any Borrowing Base Certificate and as determined
by Lender, the determination of Lender in good faith
(including the determination in good faith of Letter of Credit
Accommodations available based on the provisions hereof) shall
govern and be conclusive and binding upon Borrower. Without
limiting the foregoing, Borrower shall furnish to Lender any
information which Lender may reasonably request regarding the
determination and calculation of any of the amounts set forth
in the Borrowing Base Certificate. If any of Borrower's
records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or
other agent, Borrower hereby irrevocably authorizes such
service, contractor, shipper or agent to deliver such records,
reports and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a In addition to Borrower's other reporting Obligations
hereunder, Borrower shall notify Lender promptly and on a separate basis of:
(i) any material delay in Borrower's performance of any of its obligations to
any account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor, or any disputes with account debtors, or
any settlement, adjustment or compromise thereof involving an amount greater
than the Canadian Dollar Equivalent of US$37,500, individually, or greater
than the Canadian Dollar Equivalent of US$187,500, in the aggregate, (ii) all
material adverse information relating to the financial condition of any account
debtor obligated for Accounts in excess of the Canadian Dollar Equivalent of
US$37,500, and (iii) any event or circumstance which, to Borrower's knowledge
would cause Lender to consider any then existing Accounts involving an amount
greater than the Canadian Dollar Equivalent of US$37,500, individually or
greater than the Canadian Dollar Equivalent of US$187,500, in the aggregate, to
no longer constitute Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor without Lender's consent, except those granted in the ordinary course of
Borrower's business in accordance with practices and policies previously
disclosed in writing to Lender, and which are reported to Lender in accordance
with this Agreement. So long as no Event of Default exists or has occurred and
is continuing, Borrower shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is
31
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances with respect thereto in
good faith and on a commercially reasonable basis.
(b Without limiting the obligation of Borrower to deliver
any other information to Lender, Borrower shall promptly and separately report
to Lender any return of Inventory by any one account debtor if the inventory so
returned in such case has a value in excess of the Canadian Dollar Equivalent
of US$37,500. At any time that Inventory is returned, reclaimed or
repossessed, the Account (or portion thereof) which arose from the sale of such
returned, reclaimed or repossessed Inventory shall not be deemed an Eligible
Account. In the event any account debtor returns Inventory when an Event of
Default exists or has occurred and is continuing, Borrower shall, upon Lender's
request, (i) hold the returned Inventory in trust for Lender, (ii) segregate
all returned Inventory from all of its other property, (iii) dispose of the
returned Inventory solely according to Lender's instructions, and (iv) not
issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c With respect to each Account: (i) the amounts shown on
any invoice delivered to Lender or schedule thereof delivered to Lender shall
be true and complete, (ii) no payments shall be made thereon except payments
made to one of the Blocked Accounts, (iii) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto, other than those ordinary course deductions and
allowances reflected on the face of the invoice evidencing such Account and
reflected as a deduction in computing and reporting the net amount of the
affected Account in the Borrowing Base Certificates and all other Collateral
reports delivered in accordance with this Agreement with respect to Accounts,
and (iv) none of the transactions giving rise thereto will violate any
applicable federal or provincial laws or regulations in any manner that does
result in, or could reasonably be expected to result in, a Material Adverse
Effect, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally
enforceable in accordance with its terms.
(d Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by
mail, telephone, facsimile transmission or otherwise.
(e Borrower shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to
Borrower, all chattel paper and instruments which Borrower now owns or may at
any time acquire immediately upon Borrower's receipt thereof, except as Lender
may otherwise agree.
(f Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest or lien therein and Lender may direct any or all account debtors to
make payment of Accounts directly to Lender, (ii) extend the time of payment
of, compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may in good ▇▇▇▇▇
▇▇▇▇ necessary or desirable for the protection of its interests. At any time
that an Event of Default exists or has occurred and is continuing, at Lender's
request, all invoices
32
and statements sent to any account debtor shall state that the Accounts and
such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower's cost therefor and
withdrawals therefrom and additions thereto; (b) Borrower shall, at its sole
cost and expense, conduct a physical count of the Inventory at least once
during each twelve (12) month period after the date hereof, and up to an
additional three (3) times during each twelve (12) month period as Lender may
request on or after an Event of Default, and at any other time or times as
Lender may request at Lender's sole cost and expense, and promptly following
such physical inventory shall supply Lender with a report in the form and with
such specificity as may be reasonably satisfactory to Lender concerning such
physical count; (c) Borrower shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Lender,
except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location; (d upon Lender's request, Borrower shall, at
its sole cost and expense, no more than once in any twelve (12) month period,
and up to an additional three (3) times during each twelve (12) month period at
any time or times as Lender may request on or after an Event of Default, and at
any other time or times as Lender may request at Lender's sole cost and
expense, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrower shall produce, use,
store and maintain the Inventory with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws; (f) Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory; (g) Borrower shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate
Borrower to repurchase such Inventory, except for inventory repurchase
agreements permitted under Section 9.9(e) hereof; (h) Borrower shall keep the
Inventory in good and marketable condition; and (i) Borrower shall not, without
prior written notice to Lender, acquire or accept any Inventory on consignment
or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its sole cost and expense, once during
each twelve (12) month period after the date hereof, and up to an additional
three times during each twelve (12) month period as Lender may request on or
after an Event of Default, or, at Lender's sole cost and expense, at any other
time or times, deliver or cause to be delivered to Lender written reports or
appraisals as to the orderly liquidation value of the Equipment in form, scope
and methodology acceptable to Lender and by an appraiser acceptable to Lender;
(b) Borrower shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrower shall use
the Equipment in accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d) Borrower shall not remove any
Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (e) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (f) Borrower assumes all
responsibility and liability arising from the use of the Equipment.
33
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms
and for such amount as are commercially reasonable, and at such time or times
as the Lender deems advisable, (v) settle, adjust, compromise, extend or renew
an Account, (vi) discharge and release any Account, (vii) prepare, file and
sign Borrower's name on any proof of claim in bankruptcy or other similar
document against an account debtor, (viii) notify the post office authorities
to change the address for delivery of Borrower's mail to an address designated
by Lender, and open and dispose of all mail addressed to Borrower, and (ix) do
all acts and things which are necessary, in Lender's determination, to fulfil
Borrower's obligations under this Agreement and the other Financing Agreements,
and (b) at any time after one of the events referred to in clauses (i) through
(iv) of Section 6.3(a) has occurred, to (i) take control in any manner of any
item of payment or proceeds thereof, (ii) have access to any lockbox or postal
box into which Borrower's mail is deposited, (iii) endorse Borrower's name upon
any items of payment or proceeds thereof and deposit the same in the Lender's
account for application to the Obligations and (iv) endorse Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any other
Collateral and (c) at any time to (i) sign Borrower's name on any verification
of Accounts and notices thereof to account debtors and (ii) execute in
Borrower's name and file any PPSA or other financing statements or amendments
thereto. Borrower hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Lender's own gross negligence or wilful misconduct as determined
pursuant to a final non- appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, in good faith, (a) cure
any default by Borrower under any agreement with a third party or pay or bond
on appeal any judgment entered against Borrower, if, in Lender's commercially
reasonable judgment, such action is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with
respect thereto, (b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral,
except any of the foregoing the validity of which is being contested in good
faith by appropriate proceedings, diligently pursued by Borrower and as to
which no enforcement action has been commenced or taken against any Collateral,
and (c) pay any amount, incur any expense or perform any act which, in Lender's
commercially reasonable judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with
respect thereto. Lender may add any amounts so expended to the Obligations and
charge Borrower's account therefor, such amounts to be repayable by Borrower on
demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have
complete access to all of Borrower's premises during normal business hours and
after notice to Borrower, or at any time and without notice to Borrower if an
Event of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender
34
may request, and (c) use during normal business hours such of Borrower's
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral;
provided, however, that, prior to an Event of Default, Lender's use of
Borrower's personnel, equipment, supplies and premises as provided in this
Section 7.7 shall be conducted in a reasonable manner with a view to avoiding
unreasonable interference with Borrower's operations.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
is a corporation duly incorporated, validly existing and duly organized under
the laws of its jurisdiction of incorporation and is duly qualified or
registered as a foreign or extra-provincial corporation and in good standing in
all provinces, states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
has not, individually or in the aggregate, resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of Borrower's certificate of incorporation or
by-laws or any indenture, agreement or undertaking to which Borrower is a party
or by which Borrower or its property are bound, except any such contravention
that, individually or in the aggregate, has not resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect. This Agreement
and the other Financing Agreements constitute legal, valid and binding
Obligations of Borrower enforceable in accordance with their respective terms,
except to the extent enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights generally and by equitable principles (regardless
of whether enforcement is sought in equity or at law). Borrower does not have
any subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered
by Borrower to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrower as at
the dates and for the periods set forth therein, subject, however, in the case
of Borrower's interim unaudited financial statements delivered hereunder, to
normal year- end adjustments and the absence of footnotes and formatting of
items as required under GAAP. Except as disclosed in any interim financial
statements furnished by Borrower to Lender prior to the date of this Agreement,
there has been no Material Adverse Change since the date of the most recent
audited financial statements furnished by Borrower to Lender prior to the date
of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
35
8.4 Priority of Liens; Title to Properties. The security interests
and liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
Schedule 8.4 hereto and the other liens permitted under Section 9.8 hereof.
Borrower has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, hypothecs,
encumbrances or charges of any kind, except those granted to Lender and such
others as are specifically listed on Schedule 8.4 hereto or permitted under
Section 9.8 hereof and except for such defects of title, individually or in the
aggregate, as have not resulted in, and could not, individually or in the
aggregate, be reasonably expected to result in, a Material Adverse Effect. As
to leased real and personal property, Borrower has valid leasehold interests,
which leasehold interest are subject to no liens, mortgages, pledges, security
interests, encumbrances or charges of any kind, except as are specifically
listed on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to
be filed by it (without requests for extension except as previously disclosed
in writing to Lender). Borrower has paid or caused to be paid all taxes due
and payable or claimed due and payable in any assessment received by it, except
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or its business, or against or affecting any
transactions contemplated by this Agreement, which, if adversely determined
against Borrower, could reasonably be expected to result in a Material Adverse
Effect.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is
not in default under, or in violation of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound and, to Borrower's knowledge, Borrower
is in compliance with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders of any Gaming Authority or other
Governmental Authority, except any such defaults, violations or non-compliance
that, individually or in the aggregate, have not resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect.
8.8 Status of Pension Plans.
Except as set forth on Schedule 8.8 hereto, to the best of the
Borrower's knowledge,
(a The Pension Plans are duly registered under all
applicable provincial pension benefits legislation.
(b All obligations of Borrower (including fiduciary,
funding, investment and administration obligations) required to be performed in
connection with the Pension Plans or the funding agreements therefor have been
performed in a timely fashion. There are no outstanding disputes concerning
the assets held pursuant to any such funding agreement.
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(c All contributions or premiums required to be made by
Borrower to the Pension Plans have been made in a timely fashion in accordance
with the terms of the Pension Plans and applicable laws and regulations.
(d All employee contributions to the Pension Plans
required to be made by way of authorized payroll deduction have been properly
withheld by Borrower and fully paid into the Pension Plans in a timely fashion.
(e All reports and disclosures relating to the Pension
Plans required by any applicable laws or regulations have been filed or
distributed in a timely fashion.
(f There have been no improper withdrawals, or
applications of, the assets of any of the Pension Plans.
(g No amount is owing by any of the Pension Plans under
the Income Tax Act (Canada) or any provincial taxation statute.
(h The Pension Plans are fully funded both on an ongoing
basis and on a solvency basis (using actuarial assumptions and methods which
are consistent with the valuations last filed with the applicable governmental
authorities and which are consistent with generally accepted actuarial
principles).
(i Borrower, after diligent enquiry, has neither any
knowledge, nor any grounds for believing, that any of the Pension Plans is the
subject of an investigation, any other proceeding, an action or a claim. There
exists no state of facts which after notice or lapse of time or both could
reasonably be expected to give rise to any such proceeding, action or claim.
8.9 Environmental Compliance.
(a Except as set forth on Schedule 8.9 hereto, to the
best of Borrower's knowledge, Borrower has not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder, and
the operations of Borrower comply with all Environmental Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder, except
for any such violations or non-compliance that, individually or in the
aggregate, have not resulted in, and could not reasonably be expected to result
in, a Material Adverse Effect.
(b Except as set forth on Schedule 8.9 hereto, there has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice by any governmental authority or any other person nor is any pending
or to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law
by Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, that affects Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials, except with respect
to any such actual or alleged violation or non-compliance that, individually or
in the aggregate, has not resulted in, and could not reasonably be expected to,
result in a Material Adverse Effect (including, but not limited to, any
Material
37
Adverse Effect if any such pending or threatened investigation or proceeding
were adversely determined against Borrower).
(c Except as set forth on Schedule 8.9 hereto, Borrower
has no liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.
(d Except as set forth on Schedule 8.9 hereto, to the
best of Borrower's knowledge, Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations
are valid and in full force and effect, except any of the foregoing where the
failure to obtain, file or maintain any of the foregoing as valid and in full
force and effect, individually or in the aggregate, has not resulted in, and
could not reasonably be expected to result in, a Material Adverse Effect.
8.10 Bank Accounts. All of the deposit accounts, investment accounts
or other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.11 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material
fact necessary in order to make such information not misleading. No event or
circumstance has occurred that, individually or in the aggregate, has resulted
in, or could reasonably be expected to result in, a Material Adverse Effect,
which has not been fully and accurately disclosed to Lender in writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto. Borrower shall at all times preserve and
maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted, except to the extent
that any failure to do so, individually or in the aggregate, does not, and
could not reasonably be expected to, result in a Material Adverse Effect.
Borrower shall give Lender ten (10) days prior written notice of any proposed
change in its corporate name, which notice shall set
38
forth the new name and Borrower shall deliver to Lender a certified copy of the
Articles of Amendment of Borrower providing for the name change immediately
following its filing.
9.2 New Collateral Locations. Borrower may open any new location
within Canada provided Borrower (a) gives Lender ten (10) days prior written
notice of the intended opening of any such new location and (b) executes and
delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender may deem reasonably necessary or desirable
to protect its interests in the Collateral at such location, including PPSA and
other financing statements and such other evidence as Lender may require of the
perfection of Lender's first priority security interests and liens where
required by Lender.
9.3 Compliance with Laws, Regulations, Etc.
(a Borrower shall, at all times, comply with all laws,
rules, regulations, licenses, permits, approvals and orders applicable to it
and duly observe all requirements of any Governmental Authority, including all
statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws, and including all Gaming Laws and all requirements of any
Gaming Authority, except where the failure to so comply does not, individually
or in the aggregate, and could not reasonably be expected to, result in a
Material Adverse Effect.
(b Borrower shall give both oral and written notice to
Lender immediately upon Borrower's receipt of any notice of, or Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event that could
reasonably be expected to result in any suspension, revocation or limitation on
any Gaming Licenses, or otherwise adversely affect the rights of Borrower to
operate its business in accordance with the Gaming Laws, or any material
liability pursuant to any Gaming Laws or (ii) any investigation, proceeding,
complaint, order, directive, claims, citation or notice with respect to any
non-compliance with or violation of any Gaming Laws by Borrower which, in the
case of clauses (i) and (ii), individually or in the aggregate, does result in,
or could (or, if adversely determined against Borrower, could) reasonably be
expected to result in, a Material Adverse Effect. Borrower shall indemnify and
hold harmless Lender, its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses, including reasonable legal
fees and expenses directly or indirectly arising out of or attributable to the
compliance by Borrower and/or (if applicable) by Lender with any Gaming Laws,
or actual or alleged non-compliance by Borrower with any Gaming Laws, except
that Borrower shall not be required to indemnify Lender for any such losses,
claims, damages, liabilities, costs and expenses resulting from Lender's own
gross negligence or wilful misconduct, as determined by a final non-appealable
judgment of a court of competent jurisdiction.
(c Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrower to Lender. Borrower shall
take prompt and appropriate action to respond to any non-compliance with any of
the Environmental Laws (except for any such non-compliance that, individually
or in the aggregate, does not, and could not reasonably be expected to, result
in a Material Adverse Effect) and shall regularly report to Lender on such
response.
(d Borrower shall give both oral and written notice to
Lender immediately upon Borrower's receipt of any notice of, or Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to:
39
(A) any non-compliance with or violation of any Environmental Law by Borrower
or (B) the release, spill or discharge, threatened or actual, of any Hazardous
Material or (C) the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or (D)
any other environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower transported,
stored or disposed of any Hazardous Materials, except that such notice to
Lender shall not be required as to any such matter if the actual or potential
liability or claimed liability of Borrower, or actual or potential expenditures
by Borrower as a result of any such matter (including any such matter if
adversely determined against Borrower), individually or in the aggregate, does
not, and could not reasonably be expected to, result in a Material Adverse
Effect.
(e Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is non-compliance, or any
condition which requires any action by or on behalf of Borrower in order to
avoid any non- compliance, with any Environmental Law, where the failure to so
comply, individually or in the aggregate, does result in, or could reasonably
be expected to result in, a liability or expenditure of in excess of the
Canadian Dollar Equivalent of US$375,000, Borrower shall, at Lender's request
and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender and Borrower to conduct such tests of the site where
Borrower's non- compliance or alleged non-compliance with such Environmental
Laws has occurred as to such non-compliance and prepare and deliver to Lender a
report as to such non- compliance setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such non-compliance, or
Borrower's response thereto or the estimated costs thereof, shall change in any
material respect.
(f Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including reasonable legal fees and expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property
of Borrower and the preparation and implementation of any closure, remedial or
other required plans, except that Borrower shall not be required to indemnify
Lender for any such losses, claims, damages, liabilities, costs and expenses
resulting from Lender's own gross negligence or wilful misconduct, as
determined by a final non-appealable judgment of a court of competent
jurisdiction. All representations, warranties, covenants and indemnifications
in this Section 9.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon
or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower. Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements provided
for herein and Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by Borrower such amount shall be added and deemed part of the
Loans, provided, that, nothing contained herein shall be construed to require
Borrower to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
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9.5 Insurance. Borrower shall, at all times, maintain insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies
or endorsements to Lender as Lender shall require as proof of such insurance,
and, if Borrower fails to do so, Lender is authorized, but not required, to
obtain such insurance at the expense of Borrower. All policies shall provide
for at least thirty (30) days prior written notice to Lender of any
cancellation or reduction of coverage and that Lender may act as attorney for
Borrower in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and cancelling such
insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrower or any of its affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may
determine or hold such proceeds as cash collateral for the Obligations;
provided, however, so long as (i) no Event of Default, and no event or
condition that, with notice or passage of time, or both, exists or has occurred
and is continuing and (ii) there is Combined Excess Availability of at least
US$5,000,000 after giving effect to the loss or damage to Collateral to which
any portion of the insurance proceeds relates and without regard to the
insurance proceeds themselves, then Lender shall make the insurance proceeds
available to Borrower.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which
true and complete entries shall be made of all dealings or transactions of or
in relation to the Collateral and the business of Borrower and its subsidiaries
(if any), which shall be reconciled and conformed to the requirements of GAAP
no less frequently than quarterly and Borrower shall furnish or cause to be
furnished to Lender: (i) within forty (40) days after the end of each fiscal
month, other than the end of the third, sixth, ninth and twelfth fiscal months,
in each fiscal year, and within ninety (90) days after the end of the twelfth
fiscal month in each fiscal year, monthly unaudited consolidated financial
statements of US Borrower and its subsidiaries, if any, (including, in each
case, balance sheets and statements of operations), fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month, (ii) within
forty-five (45) days after the end of each fiscal quarter, unaudited
consolidated financial statements of US Borrower and its subsidiaries
(including, in each case, balance sheets and statements of operations), fairly
presenting the results of operations of Borrower and its subsidiaries as of the
end of and through such fiscal quarter, and (iii) within ninety (90) days after
the end of each fiscal year, audited consolidated financial statements of US
Borrower and its subsidiaries (including in each case balance sheets,
statements of operations, statements of changes in financial position and
statements of shareholders' equity), and the accompanying notes thereto, fairly
presenting the financial position and the results of the operations of US
Borrower and its subsidiaries as of the end of and for such fiscal year,
together with the unqualified opinion of independent chartered accountants,
which accountants shall be an independent accounting firm of nationally
recognized standing selected by US Borrower, that such financial statements
have been prepared in conformity with GAAP, and present fairly, in all material
respects, the results of operations and financial condition of US Borrower and
its subsidiaries as of the end of and for the fiscal year then ended.
41
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for
the Obligations involving an amount in excess of the Canadian Dollar Equivalent
of US$37,500 or which has resulted in, or could reasonably be expected to
result in, any Material Adverse Effect and (ii) the occurrence of any Event of
Default or event which, with the passage of time or giving of notice or both,
would constitute an Event of Default.
(c) Borrower shall promptly notify Lender in writing in the
event that, at any time after the delivery of a Borrowing Base Certificate by
Borrower to Lender, but prior to the delivery of the next Borrowing Base
Certificate to be delivered by Borrower to Lender in accordance with the terms
hereof, the amount of Formula Availability is less than ninety (90%) percent of
the amount of Formula Availability calculated based on the information set
forth in the most recent Borrowing Base Certificate previously delivered by
Borrower to Lender pursuant to Section 7.1 hereof. Borrower will immediately
notify Lender in writing if (A) the Revolving Loans made by Lender to Borrower
and/or Letter of Credit Accommodations outstanding at any time exceed the
Formula Availability at any time under the terms and conditions hereof or (B)
the Combined Excess Availability shall be less than US$5,000,000 at any time.
(d) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
Borrower sends to its shareholders generally and copies of all reports and
prospectuses which Borrower files with any Canadian or provincial securities
commission or securities exchange.
(e) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request; provided, that so long as no Event of Default exists or has
occurred and is continuing, the budgets, forecasts and projections required by
Lender under this Section 9.6(e) shall be limited to a twelve (12) month
financial statement projection which shall be provided to Lender once each year
which shall be provided to Lender within thirty (30) days after the
commencement of each of Borrower's fiscal years; provided, further that such
requirement may be fulfilled by the inclusion of information with respect to
Borrower on a consolidated basis with US Borrower and its other subsidiaries.
Lender is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrower to any court or other
government agency or to any participant or assignee or prospective participant
or assignee. Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrower's expense, copies of
the financial statements of Borrower and any reports or management letters
prepared by such accountants or auditors on behalf of Borrower (unless the same
are furnished by Borrower to Lender) and to disclose to Lender, in conjunction
with Borrower (unless an Event of Default has occurred in which case such
disclosure need not be in conjunction with Borrower) such information as they
may have regarding the business of Borrower. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) year after the same are delivered to Lender,
except as otherwise designated by Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc.
Borrower shall not, directly or indirectly: (a) amalgamate with any other
Person or permit any other Person to amalgamate with it; or (b) sell, assign,
lease, transfer, abandon or otherwise dispose of any shares or indebtedness to
any other Person or any of its assets to any other Person (except for (i) sales
of Inventory in the ordinary course of business and (ii) the disposition of
worn-out or obsolete Equipment or Equipment no longer used in the business of
Borrower upon prior written notice to Lender, so long as (1) if an Event of
Default exists or
42
has occurred and is continuing, any proceeds are paid to Lender and (2) such
sales do not involve Equipment having an aggregate fair market value in excess
of the Canadian Dollar Equivalent of US$187,500 for all such Equipment disposed
of in any fiscal year of Borrower) and (3) whether or not an Event of Default
exists or has occurred and is continuing, an adjustment to the Amortized
Equipment Value shall be made upon such sale in the same manner as provided
under Section 7.4 of the US Loan Agreement mutatis mutandis (as if such
Equipment were relocated to the facilities of US Borrower's subsidiary in
Reynosa, Mexico), and no Overformula Loan shall exist after giving affect to
such adjustment; or, (c) form or acquire any subsidiaries, except in connection
with investments permitted under, and upon compliance with, Section 9.10(c)
hereof; or (d) wind up, liquidate or dissolve; or (e) agree to do any of the
foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower and provided no enforcement action
has been commenced or taken against any Collateral with respect thereto; (c)
non-consensual statutory liens (other than liens securing the payment of taxes)
arising in the ordinary course of Borrower's business to the extent: (i) such
liens secure indebtedness which is not overdue or (ii) such liens secure
indebtedness relating to claims or liabilities which are fully insured and
being defended at the sole cost and expense and at the sole risk of the insurer
or being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower, in each case prior to the commencement of
foreclosure or other similar proceedings; (d) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of real property
which do not interfere in any material respect with the use of such real
property or ordinary conduct of the business of Borrower as presently conducted
thereon or materially impair the value of the real property which may be
subject thereto; (e) purchase money security interests in Equipment (including
capital leases) and purchase money mortgages on real estate not to exceed
$2,500,000 of obligations (including capitalized lease obligations) secured
thereby incurred in any fiscal year of Borrower (and including for the purposes
of such limitation, the obligations of US Borrower's and its subsidiaries
secured by any purchase money security interests in Equipment (including
capitalized leases) and purchase money mortgages in real estate incurred during
such fiscal year), provided, that, such security interests and mortgages do not
apply to any property of Borrower other than the Equipment or real estate so
acquired, and the indebtedness secured thereby does not exceed the cost of the
Equipment or real estate so acquired, as the case may be; and (f) the security
interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except: (a) the Obligations (including, without limitation, all
Obligations to Lender hereunder and all obligations, liabilities and
indebtedness of Borrower to Congress (Central) under the US Financing
Agreements); (b) trade obligations and normal accruals in the ordinary course
of business not yet due and payable, or with respect to which the Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower; (c) purchase money
indebtedness (including capital leases) to the extent not incurred or secured
by liens (including capital leases) in violation of any other provision of this
Agreement; (d) indebtedness of Borrower to its subsidiaries, if any, or to US
Borrower or any of its other subsidiaries, for short term loans in the ordinary
course of business, provided that any notes or other instruments evidencing any
such indebtedness shall be pledged and delivered to Lender; (e) contingent
obligations of Borrower under inventory repurchase agreements with its account
debtors or their lenders or customers, not to exceed, for the Borrower, US
Borrower and their subsidiaries, and including the face amount of Accounts and
other accounts receivable or indebtedness owed to Borrower and its subsidiaries
43
by account debtors having the right to return any goods sold by Borrower, US
Borrower or their subsidiaries, US$2,500,000 in the aggregate at any time
outstanding; (f) Intentionally Deleted; and (g) indebtedness of Borrower under
forward contracts permitted under Section 9.10(e) hereof; (h) contingent
obligations of Borrower, not to exceed US$500,000 in the aggregate at any one
time outstanding, incurred in the ordinary course of business in the form of
guarantees by Borrower of indebtedness to third parties of financing provided
by such third parties to distributors of Borrower or their customers used to
finance purchases from Borrower or such distributors of Borrower's products
sold in the ordinary course of business; and (i) indebtedness (other than
indebtedness described in clauses (a) through (h) above) that US Borrower may
otherwise permit Borrower to incur as provided under the Indenture governing
the Subordinated Notes, as in effect on the date hereof; provided that no Event
of Default, and no condition or event that, with notice of passage of time, or
both, would constitute an Event of Default, exists or has occurred and is
continuing; and further, provided, that, (i) Borrower gives Lender at least
fifteen (15) days prior written notice of the proposed incurrence of such
indebtedness, accompanied by a certificate of the chief financial officer of
Borrower certifying compliance with this provision and setting forth supporting
calculations for purposes of evidencing compliance with the provisions of the
Indenture, as aforesaid, (ii) Borrower may only make regularly scheduled
payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date of issuance thereof, (iii)
Borrower shall not, directly or indirectly, (A) amend, modify, alter or change
the terms of such indebtedness or any agreement, document or instrument related
thereto as in effect on the date of issuance thereof, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iv) Borrower shall
furnish to Lender all demands and other material notices in connection with
such indebtedness either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its behalf, concurrently with
the sending thereof, as the case may be; and (j) the existing indebtedness set
forth on Schedule 9.9 hereto; provided, that, (i) Borrower may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall
furnish to Lender all demands and other material notices in connection with
such indebtedness either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its behalf, concurrently with
the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the shares or indebtedness or all or a substantial part
of the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States or Canadian Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender, payable to
the order of the Borrower or to bearer and delivered to Lender, and (iii)
commercial paper rated A1 or P1; provided, that, as to any of the foregoing
(collectively, "Cash Equivalents"), unless waived in writing by Lender,
Borrower shall take such actions as are deemed necessary by Lender to perfect
the security interest of Lender in such investments; and (c) repurchases of
inventory from account debtors of Borrower or their lenders or customers to the
extent made pursuant to agreements permitted under Section 9.9(e) hereof and
guarantees permitted under Section 9.9(h) hereof; and (d) investments by
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Borrower, that the US Borrower may otherwise permit Borrower to make under the
provisions of the Indenture governing the Subordinated Notes as in effect on
the date hereof, in the form of cash equity contributions or cash loans to a
wholly- owned direct subsidiary of Borrower that either engages in a similar
line of business as Borrower or is newly formed to acquire the assets or
capital stock of a Person engaged in a similar line of business as Borrower;
provided, that (i) Lender receives not less than fifteen (15) days prior
written notice of each such proposed investment or loan accompanied by (A)
copies of all agreements, documents and instruments proposed to be entered into
in connection therewith and (B) a certificate of the chief financial officer of
Borrower certifying compliance with this provision and setting forth supporting
calculations for purposes of evidencing compliance with the provisions of the
Indenture, as aforesaid, (ii) such subsidiary receiving such investment or loan
and each of its direct and indirect subsidiaries (including any acquired
subsidiaries) shall have executed and delivered to Lender an absolute and
unconditional guaranty of payment of all Obligations of Borrower and granted to
Lender a first priority perfected security interest in and lien upon its assets
(other than real property), together with such financing statements and
agreements of the kind referred to in Section 4.1(g), all in form and substance
satisfactory to Lender and as Lender shall require, (iii) no Event of Default,
and no condition or event that would, with notice or passage of time, or both,
constitute an Event of Default, shall have occurred and be continuing, and (iv)
there shall be Combined Excess Availability of not less than US$5,000,000 at
all times during the period of thirty (30) consecutive days immediately
preceding the making of such investment or loan and after giving effect thereto
and after giving effect to all transactions substantially related thereto; (d)
investments in forward contracts for purchases or sales of US Dollars in
amounts estimated by Borrower to be necessary for payment of intercompany
accounts or other intercompany obligations owed and payable by Borrower to the
US Borrower in the ordinary course of business; and (e) the loans, advances and
guarantees set forth on Schedule 9.10 hereto; provided, that, as to such loans,
advances and guarantees, (i) Borrower shall not, directly or indirectly, (1)
amend, modify, alter or change the terms of such loans, advances or guarantees
or any agreement, document or instrument related thereto, or (2) as to such
guarantees, redeem, retire, defease, purchase or otherwise acquire the
obligations arising pursuant to such guarantees, or set aside or otherwise
deposit or invest any sums for such purpose, and (ii) Borrower shall furnish to
Lender all demands and other material notices in connection with such loans,
advances or guarantees or other indebtedness subject to such guarantees either
received by Borrower or on its behalf, promptly after the receipt thereof, or
sent by Borrower or on its behalf, concurrently with the sending thereof, as
the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of Borrower
now or hereafter outstanding, or set aside or otherwise deposit or invest any
sums for such purpose, or redeem, retire, defease, purchase or otherwise
acquire any shares of any class (or set aside or otherwise deposit or invest
any sums for such purpose) for any consideration other than common shares or
apply or set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares or agree to do any of the
foregoing, except for dividends declared and paid to US Borrower out of legally
available funds therefor, and provided (i) Lender receives not less than
fifteen (15) days prior written notice of each such proposed dividend,
accompanied by a certificate of the chief financial officer of Borrower
certifying compliance with this provision and setting forth supporting and any
required calculations for purposes of evidencing compliance with any applicable
provisions of the Indenture governing the Subordinated Notes, and (ii) no Event
of Default, and no condition or event that would, with notice or passage of
time, or both, constitute an Event of Default, shall have occurred and be
continuing.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable
45
requirements of Borrower's business and upon fair and reasonable terms no less
favourable to the Borrower than Borrower would obtain in a comparable arm's
length transaction with an unaffiliated person or (b) make any payments of
management, consulting or other fees for management or similar services, or of
any indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Borrower except reasonable compensation to officers,
employees and directors for services rendered to Borrower in the ordinary
course of business and consistent with Borrower's past practices.
9.13 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.10 hereto,
except: (a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as
Lender may establish, (b) as to any accounts used by Borrower to make payments
of payroll, taxes or other obligations to third parties, after prior written
notice to Lender, and (c) bank accounts of Borrower not containing Collateral
or proceeds of Collateral and which have an average monthly balance,
individually, in an amount less than US$53,000, and less than US$106,667 in the
aggregate for all such bank accounts.
9.14 Adjusted Net Worth. Borrower shall, at all times when Combined
Excess Availability is less than US$5,000,000, maintain, on a consolidated
basis with US Borrower and its other consolidated subsidiaries, Adjusted Net
Worth of not less than US$13,000,000.
9.15 Intellectual Property. In the event Borrower obtains or applies
for any material intellectual property rights or obtains any material licenses
with respect thereto, Borrower shall immediately notify Lender thereof and
shall provide to Lender copies of all written materials including, but not
limited to, applications and licenses with respect to such intellectual
property rights. At Lender's request, Borrower shall promptly execute and
deliver to Lender an intellectual property security agreement granting to
Lender a perfected security interest in such intellectual property rights in
form and substance satisfactory to Lender.
9.16 Applications under the Companies' Creditors Arrangement Act.
Borrower acknowledges that its business and financial relationships with Lender
are unique from its relationship with any other of its creditors. Borrower
agrees that it shall not file any plan of arrangement under the CCAA ("CCAA
Plan") which provides for, or would permit directly or indirectly, Lender to be
classified with any other creditor of Borrower for purposes of such CCAA Plan
or otherwise.
9.17 Operation of Pension Plans.
(a) Borrower shall administer the Pension Plans in
accordance with the requirements of the applicable pension plan texts, funding
agreements, the Income Tax Act (Canada) and applicable provincial pension
benefits legislation.
(b) Borrower shall deliver to Lender an undertaking of
the funding agent for each of the Pension Plans stating that the funding agent
will notify Lender within 7 days of Borrower's failure to make any required
contribution to the applicable Pension Plan.
(c) Borrower shall not accept payment of any amount from
any of the Pension Plans without the prior written consent of Lender.
46
(d) Without the prior written consent of Lender, Borrower
shall not terminate, or cause to be terminated, any of the Pension Plans, if
such plan would have a solvency deficiency on termination.
(e) Borrower shall promptly provide Lender with any
documentation relating to any of the Pension Plans as Lender may reasonably
request. Borrower shall notify Lender within 30 days of (i) a material
increase in the liabilities of any of the Pension Plans, (ii) the establishment
of a new registered pension plan, (iii) commencing payment of contributions to
a Pension Plan to which Borrower had not previously been contributing.
9.18 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including: (a) all
costs and expenses of filing or recording (including PPSA financing statement
and other similar filing and recording fees and taxes, documentary taxes,
intangibles taxes and mortgage recording taxes and fees, if applicable); (b)
costs and expenses and fees for insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees; (c) costs and expenses of remitting loan proceeds, collecting
cheques and other items of payment, and establishing and maintaining the
Blocked Accounts, if any, and the Payment Account, together with Lender's
customary charges and fees with respect thereto; (d) charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising
out of the transactions contemplated hereby and thereby (including, without
limitation, preparations for and consultations concerning any such matters);
(g) all out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Lender during the course of periodic field examinations
of the Collateral and Borrower's operations, plus a per diem charge equal to
the Canadian Dollar Equivalent of an amount at the rate of US$600 per person
per day for Lender's examiners in the field and office; and (h) the reasonable
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.19 Further Assurances. At the request of Lender at any time and
from time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
liens and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined in good faith that such conditions are satisfied. Where
permitted by law, Borrower hereby authorizes Lender to execute and file one or
more PPSA or other financing statements or notices signed only by Canadian
Lender or Lender's representative.
47
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event
of Default", and collectively as "Events of Default":
(a) Borrower (i) shall fail to pay any of the Obligations
when due or within two (2) days thereafter, or (ii) shall fail to perform any
of the terms, covenants, conditions or provisions contained in this Agreement
or any of the other Financing Agreements other than as described in Section
10.1(a)(i) and such failure shall continue for two (2) Business Days in the
case of a failure under Sections 7.1, 7.2, 7.3 or 7.4 hereof, or ten (10) days
in the case of a failure under any other provision; provided, that, such two
(2) Business Days or ten (10) day period (as the case may be) shall not apply
in the case of: (A) any failure to observe any such term, covenant, condition
or provision which is not capable of being cured at all or within such
applicable period or which has been the subject of a prior failure within a six
(6) month period or (B) an intentional breach by Borrower or any Obligor of any
such term, covenant, condition or provision, or (C) the failure to observe or
perform any of the covenants or provisions contained in Sections 6.3, 6.6, 7.7,
9.1, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 or 9.13 of this Agreement or any covenants
or agreements covering substantially the same matter as such sections in any of
the other Financing Agreements; or
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect (or, if such
representation, warranty or statement of fact is itself qualified by reference
to materiality or a Material Adverse Effect, such representation, warranty or
statement of fact shall, when made or deemed made, be false or misleading in
any respect);
(c) any Obligor revokes, terminates or fails to perform any
of the terms, covenants, conditions or provisions of any guarantee, endorsement
or other agreement of such party in favour of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of the Canadian Dollar Equivalent of
US$50,000 in any one case or in excess of the Canadian Dollar Equivalent of
US$150,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower
or any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner
of an Obligor which is a partnership) dies or Borrower or any Obligor, which is
a general partnership, limited liability company, limited partnership, limited
liability partnership or a corporation, dissolves or suspends or discontinues
doing business;
(f) Borrower or any Obligor becomes insolvent (however
defined or evidenced), makes an assignment for the benefit of creditors, makes
or sends notice of a bulk sale or calls a meeting of its creditors or principal
creditors;
48
(g) a petition, case or proceeding under the bankruptcy laws
of Canada or similar laws of any foreign jurisdiction now or hereafter in
effect or under any insolvency, arrangement, reorganization, moratorium,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed or commenced against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding
or the relief requested is granted sooner;
(h) a petition, case or proceeding under the bankruptcy laws
of Canada or similar laws of any foreign jurisdiction now or hereafter in
effect or under any insolvency, arrangement, reorganization, moratorium,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed or commenced by Borrower or any Obligor or for all or any part of its
property including, without limitation, if Borrower or any Obligor shall:
(i) apply for or consent to the appointment of a
receiver, trustee or liquidator of it or of all or a
substantial part of its property and assets;
(ii) be unable, or admit in writing its inability,
to pay its debts as they mature, or commit any other act of
bankruptcy;
(iii) make a general assignment for the benefit of
creditors;
(iv) file a voluntary petition or assignment in
bankruptcy or a proposal seeking a reorganization, compromise,
moratorium or arrangement with its creditors;
(v) take advantage of any insolvency or other
similar law pertaining to arrangements, moratoriums,
compromises or reorganizations, or admit the material
allegations of a petition or application filed in respect of
it in any bankruptcy, reorganization or insolvency proceeding;
or
(vi) take any corporate action for the purpose of
effecting any of the foregoing;
(i) any default by Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter
of credit, indemnity or similar type of instrument in favour of any person
other than Lender, in any case in an amount in excess of the Canadian Dollar
Equivalent of US$50,000, which default continues for more than the applicable
cure period, if any, with respect thereto, or any default by Borrower or any
Obligor under any material contract, lease, license or other obligation to any
person other than Lender, which default continues for more than the applicable
cure period, if any, with respect thereto;
(j) any change in the ownership or control of Borrower;
(k) charging of Borrower or any Obligor under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against Borrower or any Obligor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
any of the property of Borrower or such Obligor;
49
(l) there shall have occurred a Material Adverse Change;
(m) there shall be an event of default under any of the other
Financing Agreements; or
(n) there shall be an "Event of Default" under the US Loan
Agreement or any of the US Financing Agreements; or
(o) a requirement from the Minister of National Revenue for
payment pursuant to Section 224 or any successor section of the Income Tax Act
(Canada) or Section 317, or any successor section or any other Person in
respect of Borrower of the Excise Tax Act (Canada) or any comparable provision
of similar legislation shall have been received by Lender or any other Person
in respect of Borrower or otherwise issued in respect of Borrower.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred
and is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the PPSA and other applicable law,
all of which rights and remedies may be exercised without notice to or consent
by Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing
Agreements, the PPSA or other applicable law, are cumulative, not exclusive and
enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower of this Agreement or any of
the other Financing Agreements. Lender may, at any time or times, proceed
directly against Borrower or any Obligor to collect the Obligations without
prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the occurrence
of any Event of Default described in Sections 10.1(g) and 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral and carry on the business of Borrower,
(iii) require Borrower, at Borrower's expense, to assemble and make available
to Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose,
(vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as are commercially reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower, (vii) borrow money and use the Collateral directly or indirectly in
carrying on Borrower's business or as security for loans or advances for any
such purposes, (viii) grant extensions of time and other indulgences, take and
give up security, accept compositions, grant releases and discharges, and
otherwise deal with Borrower,
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debtors of Borrower, sureties and others as Lender may see fit without
prejudice to the liability of Borrower or Lender's right to hold and realize
the security interest created under any Financing Agreement, and/or (ix)
terminate this Agreement. If any of the Collateral is sold or leased by Lender
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, five (5) days prior
notice by Lender to Borrower designating the time and place of any public sale
or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable legal costs and expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
(e) Lender may appoint, remove and reappoint any person or
persons, including an employee or agent of Lender to be a receiver (the
"Receiver") which term shall include a receiver and manager of, or agent for,
all or any part of the Collateral. Any such Receiver shall, as far as concerns
responsibility for his acts, be deemed to be the agent of Borrower and not of
Lender, and Lender shall not shall in any way be responsible for any
misconduct, negligence or non-feasance of such Receiver, his employees or
agents. Except as otherwise directed by Lender, all money received by such
Receiver shall be received in trust for and paid to Lender. Such Receiver
shall have all of the powers and rights of Lender described in this Section
10.2. Lender may, either directly or through its agents or nominees, exercise
any or all powers and rights of a Receiver.
(f) Borrower shall pay all costs, charges and expenses
incurred by Lender or any Receiver or any nominee or agent of Lender, whether
directly or for services rendered (including, without limitation, solicitor's
costs on a solicitor and his own client basis, auditor's costs, other legal
expenses and Receiver remuneration) in enforcing this Agreement or any other
Financing Agreement and in enforcing or collecting Obligations and all such
expenses together with any money owing as a result of any borrowing permitted
hereby shall be a charge on the proceeds of realization and shall be secured
hereby.
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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the laws of the Province of Ontario and the
federal laws of Canada applicable therein except to the extent that the law of
another jurisdiction is specified in a Financing Agreement to be the governing
law for that Financing Agreement.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Ontario Court (General Division) and waive
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the other
Financing Agreements or the transactions related hereto or thereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against Borrower or its
property in the courts of any other jurisdiction which Lender deems necessary
or appropriate in order to realize on the Collateral or to otherwise enforce
its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the Canadian
mails, or, at Lender's option, by service upon Borrower in any other manner
provided under the rules of any such courts. Within thirty (30) days after
such service, Borrower shall appear in answer to such process, failing which
Borrower shall be deemed in default and judgment may be entered by Lender
against Borrower for the amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in
52
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonour with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto; without prejudice, however, to Borrower's rights to
assert by way of separate unconsolidated action, any such claims, deductions,
setoffs, or counterclaims (other than compulsory counterclaims).
11.5 Indemnification. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel; provided, that Borrower shall not be required to indemnify
Lender for any losses, claims, damages, liabilities, costs or expenses caused
as a direct result of the gross negligence or wilful misconduct of Lender, as
determined by a final, non-appealable judgment of a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment
of the Obligations and the termination or non-renewal of this Agreement.
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender may terminate
this Agreement and the other Financing Agreements effective on the Renewal Date
or on the anniversary of the Renewal Date in any year by giving Borrower at
least sixty (60) days' prior written notice, and Borrower may terminate the
Agreement at any time by giving not less than sixty (60) days' prior written
notice to Lender; provided, that, this Agreement and all other Financing
Agreements and the US Financing Agreements must be terminated simultaneously.
Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including reasonable legal fees and expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and cheques or other payments provisionally credited to
the Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Canadian Dollars to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Toronto
time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Financing Agreements
and applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid, after which, at Borrower's sole cost and
expense, Lender will execute and deliver to Borrower such PPSA termination
statements and such other lien releases reasonably requested by Borrower as
shall be necessary to evidence the termination and release of the security
interests held by Lender in the Collateral.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
------ ------
(i) 3% of the Maximum Credit then in effect From the date hereof to and including November 20,
1998
(ii) 1% of the Maximum Credit then in effect From November 21, 1998 to but not including
November 20, 2000.
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Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under any applicable reorganization or insolvency legislation. The
early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be
in writing and (a) made to Lender at its address set forth below and to
Borrower at its chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by registered mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. (a) This Agreement, the other Financing Agreements
and any other document referred to herein or therein shall be binding upon and
inure to the benefit of and be enforceable by Lender, Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrower, assign its rights and delegate
its obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein to another
financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.
(b) In the event the rights and interests of Lender under this
Agreement and the other Financing Agreements are assigned (other than pursuant
to a participation) to a person not affiliated with the US Lender (including to
any assignee thereof), and such US Lender provides its written consent for an
action to be taken by US Borrower or Video King Gaming Systems, Inc. under, or
its acknowledgement of the satisfaction of a requirement under, the US
Financing Agreements that requires such written consent or acknowledgement of
performance acceptable to Lender is required by the terms of the General
Security Agreements executed and delivered by such persons in their capacities
as Guarantors hereunder and covering the same action proposed to be taken or
requirement to be satisfied, or, if such consent or acknowledgement (as
applicable) is not so given, Borrower shall, within the sixty (60) day period
following the assignee Lender's determination not to provide such consent or
acknowledgement, be entitled to terminate this Agreement and the other
Financing Agreements without being required to satisfy the otherwise applicable
requirement that the US Financing Agreements also be terminated, but such
termination of this Agreement and the other Financing Agreements shall
otherwise be in accordance with Section 12.1 hereof
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12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information
is furnished by Borrower to Lender, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order, (ii) to bank examiners
and other regulators, auditors and/or accountants, (iii) in connection with any
litigation to which Lender is a party, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant
(or prospective assignee or participant) shall have first agreed in writing to
treat such information as confidential in accordance with this Section 12.5, or
(v) to counsel for Lender or any participant or assignee (or prospective
participant or assignee).
(b) In no event shall this Section 12.5 or any other
provision of this Agreement or applicable law be deemed: (i) to apply to or
restrict disclosure of information that has been or is made public by Borrower
or any third party without breach of this Section 12.5 or otherwise become
generally available to the public other than as a result of a disclosure in
violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Lender on a non-confidential basis from a person
other than Borrower, (iii) require Lender to return any materials furnished by
Borrower to Lender or (iv) prevent Lender from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange
of Credit Information promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other
applicable industry standards relating to the exchange of credit information.
The obligations of Lender under this Section 12.5 shall supersede and replace
the obligations of Lender under any confidentiality letter signed prior to the
date hereof.
12.6 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
12.7 Headings. The division of this Agreement into Sections and the
insertion of headings and a table of contents are for convenience of reference
only and shall not affect the construction or interpretation of this Agreement.
12.8 Judgment Currency. To the extent permitted by applicable law,
the obligations of Borrower in respect of any amount due under this Agreement
shall, notwithstanding any payment in any other currency (the "Other Currency")
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in the currency in which it is due (the "Agreed Currency") that
Lender may, in accordance with normal banking procedures, purchase with the sum
paid in the Other Currency (after any premium and costs of exchange) on the
Business Day immediately after the day on which Lender receives the payment.
If the amount in the Agreed Currency that may be so purchased for any reason
falls short of the amount originally due, Borrower shall pay all additional
amounts, in the Agreed Currency, as may be necessary to compensate for the
shortfall. Any obligation of Borrower not discharged by that payment shall, to
the extent permitted by applicable law, be due as a separate and independent
obligation and, until discharged as provided in this Section, continue in full
force and effect.
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IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWER
------ --------
CONGRESS FINANCIAL CORPORATION (CANADA) BINGO PRESS & SPECIALTY LIMITED
By: By:
----------------------------- -----------------------------
Title: Title:
--------------------------- ---------------------------
Address: Chief Executive Office:
-------- ----------------------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ 301 Louth Street
Toronto, Ontario, ▇▇▇ ▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ L2S 3V6