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Exhibit 10.17
[Letterhead of the Royal Bank of Canada]
PRIVATE AND CONFIDENTIAL
June 5, 2000
D.C. Food Processing Inc.
00 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Dear Sir:
Further to our recent discussions, we are pleased to confirm the Credit
Facilities described below, which are to supersede all previous letter
agreements, subject to the following terms and conditions.
Definitions: The definitions attached hereto in Schedule "A" are
incorporated in this agreement by reference as if set out in
full herein.
Borrower: D.C. FOOD PROCESSING INC. (the "Borrower").
Lender: Royal Bank of Canada (the "Bank"), through its Branch at 00
Xxxx Xx. X. 0xx Xxxxx, Xxxxxxxxx, Xxxxxxx, X0X 0X0 (the
"Branch of Account").
Credit
Facilities: The Credit Facilities are available in the following segments
in Canadian by way of:
SEGMENT (1): Term
RBP Loans.
SEGMENT (2): Demand Instalment
RBP Loan.
SEGMENT (3): Lease line of credit/Equipment lease ("Leases").
(collectively the "Borrowings".)
Amounts: SEGMENT (1): $ 55,886.61
SEGMENT (2): $ 593,016.20
SEGMENT (3): $1,500,000.00
Terms of
Segment (3): The terms and conditions regarding Leases will be as outlined
in separate agreements entered into by the Borrower with the
Bank.
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June 5, 2000
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Purpose: SEGMENTS (1) and (2): Renewal of existing facilities.
Repayment: SEGMENT (1): Borrowings are repayable by blended monthly
payments of $4,010.00 principal and interest,
on the 9th day of each month, based on a 15 month
amortization, with the balance due and payable on
September 9, 2001.
SEGMENT (2): In the interim, and in the absence of a demand
for payment, Borrowings are repayable by blended
monthly payments of $6,810.00 principal and
interest on the 5th day of each based on
remaining 136 months amortization.
Notwithstanding compliance with the Covenants
Section contained herein, Borrowings under this
segment are repayable on demand.
Availability: SEGMENTS (1) and (2) - Already drawn.
Interest
Rates & Fees: SEGMENT (1): Royal Bank Prime plus .75%.
SEGMENT (2): RBP plus 1%.
Payment of
Interest & Fees: RBP Loans
Interest on these loans shall be computed on the daily
principal amounts outstanding, at the aforementioned rates,
based on the actual number of days elapsed divided by 365, and
shall be payable in arrears.
The yearly rates of interest to which the rates determined in
accordance with this Payment of Interest and Fees section are
equivalent, are the rates so determined multiplied by the
actual number of days in the calendar year and divided by 365.
Overdue Payments
Any overdue payment in Canadian Dollars shall be deemed to be
a RBP Loan with interest payable at RBP plus 5% per annum.
Other Fees: Re-Negotiation Fee -
The Borrower acknowledges that fees may be levied for the
re-negotiation of the amount, collateral security and/or the
terms and conditions of this agreement during the currency of
this agreement.
Nothing in this agreement shall be construed as obliging the
Borrower to pay any interest, charges or other expenses as
provided by this agreement or in any other security agreement
related thereto in excess of what is permitted by law.
Collateral
Security: (a) The Banks form 812, Guarantee and Postponement of Claim
in the amount of $500,000. signed by International Menu
Solutions Inc. supported by a Director's Resolution.
(b) Form 917, Collateral 1st charge mortgage in the amount
of $900,000 covering property located 00 Xxxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxx.
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June 5, 2000
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(c) The Bank's form 610, Cash Collateral Agreement in the
amount of $200,000. pledged by the Borrower.
(d) The Bank's form 918, Postponement of Claim, signed by
International Menu Solutions Inc.
Life Insurance: The Borrower acknowledges that loans are not life insured
under the Bank's Business Loan Insurance Plan.
Conditions
Precedent: The obligation of the Bank to make available the Borrowings
to the Borrower is subject to and conditional upon:
(1) Receipt by the Bank of a properly executed copy of this
agreement;
(2) Receipt by the Bank of the within stipulated Collateral
Security in form and substance satisfactory to the Bank,
together with such corporate authorizations and legal
opinions as the Bank may require.
Evidence of
Indebtedness: The Bank shall open and maintain at the Branch of Account
accounts and records evidencing the Borrowings made available
to the Borrower by the Bank under this agreement. The Bank
shall record the principal amount of such Borrowings, the
payment of principal and interest on account of the loans, and
all other amounts becoming due to the Bank under this
agreement.
The Bank's accounts and records constitute, in the absence of
manifest error, prima facie evidence of the indebtedness of
the Borrower to the Bank pursuant to this agreement.
The Borrower authorizes and directs the Bank to automatically
debit, by mechanical, electronic or manual means, any bank
account of the Borrower for all amounts payable under this
agreement, including but not limited to, the repayment of
principal and the payment of interest, fees and all charges
for the keeping of such bank accounts.
Representations
and Warranties: The Borrower represents and warrants to the Bank that:
(a) It is a corporation validly incorporated and subsisting
under the laws of Ontario, and that it is duly
registered or qualified to carry on business in all
jurisdictions where the character of the properties
owned by it or the nature of its business transacted
makes such registration or qualification necessary;
(b) The execution and delivery of this agreement has been
duly authorized by all necessary actions and does not
violate any law or any provision of its constating
documents or by-laws or any unanimous shareholders'
agreement to which it is subject, or result in the
creation of any encumbrance on its properties and assets
except as contemplated hereunder; and
(c) All Potential Preferred Claims, i.e. claims that could
rank ahead of the Bank's security, including employee
source deductions, have been paid or remitted as
required.
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Non-Merger: The provisions of this agreement shall not merge with any
security given by the Borrower to the Bank, but shall continue
in full force for the benefit of the parties hereto.
Covenants: The Borrower agrees:
(a) To pay all sums of money when due under this agreement;
(b) To provide the Bank with the following reports on a
annual basis, within 90 days of its fiscal year-end:
(i) aged listing of accounts receivable;
(ii) aged listed of accounts payable;
(iii) accountant prepared review engagement financial
statements; and
(iv) auditor prepared annual financial statements for
International Menu Solutions Inc.;
(c) To give the Bank prompt notice of any breach of covenant
any event which, with notice or lapse of time or both,
would constitute an breach;
(d) To maintain the ratio of its total liabilities to
Tangible Net Worth at not greater than 2.25:1. Total
liabilities include all direct liabilities, but exclude
deferred taxes; (tested annually);
(e) To maintain Debt Service Coverage Ratio of not less than
1.25:1; (tested annually);
(f) To refrain from declaring inter-company loans /
dividends / bonuses, in excess of 50% of net income
after tax and all debt servicing has been satisfied
unless prior written permission has been received by the
Bank;
(g) To file all material tax returns which are or will be
required to be filed, to pay or make provision for
payment of all material taxes (including interest and
penalties) and other Potential Preferred Claims
including the timely remittance of all employee source
deductions which are or will become due and payable and
to provide adequate reserves for the payment of any tax,
the payment of which is being contested;
(h) Not to dispose of shares of any of its subsidiaries;
(i) Not to grant, create, assume or suffer to exist any
mortgage, charge, lien, pledge, security interest,
including a purchase money security interest, or other
encumbrance affecting any of its properties, assets or
other rights;
(j) Not to sell, transfer, convey, lease or otherwise
dispose of any part of its property or assets, without
the prior written consent of the Bank, except in the
ordinary course of business;
(k) Not to, directly or indirectly, guarantee or otherwise
provide for, on a direct or indirect or contingent
basis, the payment of any monies or performance of any
obligations by any third party except as provided
herein;
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(l) To give the Bank 30 days prior notice in writing of any
intended change in the ownership of its shares;
(m) To insure and to keep fully insured all properties
customarily insured by companies carrying on a similar
business;
(n) Not to change its name or merge, amalgamate or
consolidate with any other corporation;
(o) To comply with all applicable environmental laws and
regulations; to advise the Bank promptly of any Action
Requests or Violation Notices (as such terms are defined
under the Environmental Protection Act Ontario))
received concerning any of the Borrower's property; and
to hold the Bank harmless for any costs or expenses
which it incurs for any environment-related liabilities
existent now or in the future with respect to the
Borrowers property; and
(p) The Borrower hereby grants permission to any entity
having information of the following nature to release to
the Bank, solely for the purpose of assisting the Bank
to evaluate the financial condition of the Borrower, all
information in such entity's possession relating to
"employee source deductions" that the Borrower may be
required to make, including with respect to federal and
Quebec income tax, the Canada Pension Plan, the Quebec
Pension Plan, and employment insurance. The foregoing
permission shall remain in force as long as (i) credit
facilities from the Bank are at the Borrowers disposal;
or (ii) any balance thereof remains outstanding.
Events of
Default: With respect to the Borrowings under SEGMENT (1), without
limitation and notwithstanding the terms for repayment as
recited herein, if any one or more of the following events has
occurred and is continuing:
(a) The non-payment when due of principal, interest and any
other amounts due under this agreement;
(b) The breach by the Borrower of any provisions of this
agreement or any other agreement with the Bank;
(c) If any representation or warranty made herein shall be
false or inaccurate in any materially adverse respect;
(d) If in the opinion of the Bank there is material adverse
change in the financial condition, ownership, or
operation of the Borrower;
(e) The breach at any time and in any material respect of
the provisions of any applicable law, regulation,
by-law, ordinance or work order of any lawful authority
whether federal, provincial, state, municipal, local or
otherwise, (including without restriction, those dealing
with pollution of the environment and toxic materials or
other environmental hazards, or public health and
safety), affecting any property of the Borrower or any
activity or operation carried out thereon; or
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(f) If proceedings for the dissolution, liquidation or
winding-up of the Borrower or for the suspension of the
operations of the Borrower are commenced, unless such
proceedings are being actively and diligently contested
by the Borrower in good faith, or in the event of the
bankruptcy, liquidation, or general insolvency of the
Borrower, or if a receiver or receiver-manager is
appointed for all or any part of the business or assets
of the Borrower;
Then the right of the Borrower to make further Borrowings
under this agreement shall immediately terminate and the Bank
may, by written notice to the Borrower, declare the Borrowings
under this agreement to be immediately due and payable without
further notice or demand.
Expenses: The Borrow agrees to pay all of the Banks costs incurred from
time to time in the preparation, negotiation and execution of
this agreement and the collateral security, and any costs
incurred in the operation or enforcement of this agreement or
any other agreement entered into pursuant to this agreement.
GAAP: Unless otherwise provided, all accounting terms used in this
agreement shall be interpreted in accordance with Canadian
Generally Accepted Accounting Principles from time to time.
Severability: If any provision of this agreement is or becomes prohibited or
unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate or render unenforceable
the provision concerned in any other jurisdiction nor shall it
invalidate, affect or impair any of the remaining provisions.
Governing Law: This agreement shall be construed in accordance with and
governed by the laws of the Province of Ontario and of Canada
applicable therein.
Acceptance: This offer expires if not accepted by June 26 2000, unless
extended in writing by the Bank.
If this agreement is acceptable, kindly sign and return the attached copy to the
Bank.
Yours truly,
/s/ L. R. (Xxxxx) Xxxxx
X. X. (Xxxxx) Xxxxx
Account Manager
/js
We acknowledge and accept the within terms and conditions on this 6th day of
JUNE 2000.
D.C. FOOD PROCESSING INC.
Per: /s/
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Per: /s/
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SCHEDULE "A"
Schedule "A" to the Letter Agreement dated the 5th day of June 2000, between
D.C. Food Processing Inc. as the Borrower and Royal Bank of Canada as the Bank.
For purposes of the foregoing agreement, the following terms and phrases shall
have the following meanings:
"Business Day" means a day on which the Branch of Account is open for business;
"Canadian Dollars" and "Cdn$" means lawful money of Canada;
"Debt Service Coverage Ratio" means the ratio of net income (before interest,
depreciation and amortization) of the Borrower as reported in its financial
statements for its fiscal year, prepared in accordance with GAAP, to interest
and principal payments for that year;
"Potential Preferred Claims" means amounts that may from time to time be owing
for wages, employee deductions, sales tax, excise tax, income tax, worker's
compensation, Government royalties, pension fund obligations, overdue rents or
taxes including Business Taxes and any other claims which would effectively rank
in priority to any of the Bank's security, including without limitation, any
claims arising under the Bankruptcy and Insolvency Act;
"RBP" means the annual rate of interest announced by the Bank from time to time
as being a reference rate then in effect for determining interest rates on
Canadian Dollar commercial loans in Canada;
"Tangible Net Worth" means the aggregate of stated capital, retained earnings,
and debt, repayment of which is formally postponed and assigned to the Bank less
amounts invested in or owed by other Persons (other than trade accounts
receivable meeting normal terms) and less goodwill, leasehold improvements,
deferred costs and other assets normally regarded as intangible under GAAP in
Canada;
