Exhibit 4.55
September 8, 2005
Pine Valley Mining Corporation
Suite 501 -- 535 Xxxxxxx Street
Vancouver, B.C. V6E 3L2
Falls Mountain Coal Inc.
Xxxxx 000 -- 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Pine Valley Coal Ltd.
Xxxxx 000 -- 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attention: Xx. Xxxx Xxxx and Xx. Xxxxxx Xxxxxxxxx
RE: ROYAL BANK OF CANADA OFFER TO PINE VALLEY MINING CORPORATION, FALLS MOUNTAIN
COAL INC., AND PINE VALLEY COAL LTD. OF REVOLVING WORKING CAPITAL CREDIT
FACILITY OF UP TO $20,000,000
Dear Sirs:
Royal Bank Asset Based Finance, a division of Royal Bank of Canada the "BANK")
is pleased to offer to PINE VALLEY MINING CORPORATION, PINE VALLEY COAL LTD.,
AND FALLS MOUNTAIN COAL INC., jointly and severally (collectively the
"Borrower", and individually "Pine Valley" "PVC" and "Falls Mountain"
respectively) a revolving working capital credit facility (the "CREDIT
FACILITY") through its branch at 000 Xxxxx Xxxxxx West, 9th Floor, Toronto,
Ontario (the "BRANCH OF ACCOUNT"), subject to the terms and conditions set out
below:
1. SCHEDULES:
The attached schedules are incorporated in this agreement by reference as if set
out in full herein (collectively this agreement and all schedules attached
hereto, as amended, supplemented or replaced from time to time by the Bank, are
referred to as the "Agreement").
2. AMOUNT:
The amount available under the Credit Facility shall be the Credit Limit or the
Equivalent Amount in US Dollars.
3. PURPOSE:
The Borrower shall use the Credit Facility to finance the working capital
requirements of Pine Valley and Falls Mountain and refinance existing
indebtedness.
4. BORROWING BASE:
Subject to the Credit Limit, the Credit Facility is available by way of Canadian
Dollar RBP Loans, Bankers Acceptances Loans, US Dollar RBUSBR Loans, Libor
Loans, and Letters of Credit and/or Letters of Guarantee ("L/GS").
Subject to the Credit Limit and the terms and conditions hereof and provided
that there has been no default, at least weekly the Bank will make advances to
the Borrower, based upon the Facility Borrowing Base, the Borrower's Eligible
Accounts Receivable and Eligible Inventory, each as defined in Schedule "A". The
Borrower shall submit each week, or at such other intervals as determined by the
Bank in its sole and absolute discretion, a Statement of Assets substantially in
the form attached as Schedule "D" (the "STATEMENT"), together with an electronic
download of the Borrower's account ledger, an inventory report and a copy of the
Borrower's accounts payable ledger, including, without limitation, a listing of
all accounts payable referred to in Schedule "E", together with such other
documents, reports, information or certificates as the Bank may deem necessary
in its sole and absolute discretion, all in formats acceptable to the Bank. Once
all required documents, reports, information and certificates have been received
by the Bank to its satisfaction, and the amount of availability under the Credit
Facility has been determined and communicated by the Bank to the Borrower, funds
shall be made available to the Borrower jointly and severally to the account of
Falls Mountain on behalf of the Borrower by the Bank within one Business Day
from the time of such communication. The Borrower directs and authorizes the
Bank to communicate with Falls Mountain as representative and authority for the
Borrower in connection with the Credit Facility, and payments of funds pursuant
to the Credit Facility. The Borrower acknowledges its joint and several
obligation to the Bank for funds made available to Pine Valley, PVC or Falls
Mountain pursuant to the Credit Facility.
The Borrower acknowledges and agrees that the determination by the Bank of the
Facility Borrowing Base, the eligibility of Accounts Receivable for margining
purposes and margin rates in relation to Eligible Accounts Receivable shall in
no way be construed by the Borrower as an assessment, adjudication or opinion by
the Bank of the strength or creditworthiness of any of the Borrower's Accounts
Receivable or account debtors in relation to such Accounts Receivable.
The Borrower shall perform its own due diligence and credit inquiries in
relation to its account debtors and Accounts Receivable and shall not rely upon
anything in this Agreement in support of its decisions to extend credit to any
trade or account debtor.
RBP based loans RBUSBR based loans
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BA stamping fee Libor Loans
Arrangement Fee Monitoring Fee Unused Line Fee Field Examination Fee
Inventory Appraisal Fee
5. TERM:
Provided that there has been no default, the Credit Facility is available for an
initial term of two years ending on the second anniversary of the Effective Date
which term shall automatically be renewed for successive 6 month periods unless
and until the Borrower or the Bank gives prior written notice to the other of
its intention not to renew the term, not less than 90 days in advance of the end
of the initial term or any successive term. In the event that the initial term
or any successive term is not so renewed, all outstanding indebtedness of the
Borrower to the Bank under the Credit Facility and any other facilities
contemplated herein shall be immediately due and payable, all rights to any such
accommodations of credit shall be immediately terminated at the end of such term
and the Borrower shall also pay to the Bank an amount equal to the face amount
of all outstanding BAs, L/Gs, Libor Loans and the Fx Reserve which amounts may
be held by the Bank in a collateral account as general continuing collateral
security for the obligations of the Borrower in respect of such BAs, L/Gs, Libor
Loans and the Fx Contracts.
In the event the Borrower wishes to terminate the initial term or any successive
term of the Credit Facility at any time prior to the expiry thereof, it shall
provide the Bank with not less than 90 days prior written notice of such
termination and shall pay to the Bank at the time of giving such notice a one
time termination fee of 2% of the maximum authorized Credit Facility during the
first year of the term and 1% of the maximum Authorized Credit Facility
thereafter.
In the event that the Credit Facility is transferred to a Royal Bank of Canada
business banking centre, the aforesaid termination fee will be waived by the
Bank.
6. INTEREST RATES AND FEES:
The following rates of interest and non-refundable fees shall apply to the
Credit Facility:
RBP based loans - RBP + 1.00% per annum.
RBUSBR based loans - RBUSBR + 1.00% per annum.
BA stamping fee - 2.50% per annum
Libor Loans - Libor + 2.50% per annum.
Arrangement Fee - CAD$75,000
Monitoring Fee - CAD$2,000 per month.
Unused Line Fee - .25% per annum.
Field Examination Fee - Any and all costs, fees and expenses incurred by the Bank in
connection with its initial and ongoing field examinations.
Inventory Appraisal Fee - Any and all costs, fees and expenses incurred by the Bank in
connection with its initial and ongoing inventory appraisals
or examinations.
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The Bank acknowledges receipt of $15,000 of the Arrangement Fee, earned by the
Bank and paid to the Bank at the time the Bank's term sheet was delivered. The
balance of the Arrangement Fee shall be, and shall be deemed to have been, fully
earned by the Bank and payable to the Bank on the Effective Date. The Field
Examination Fee and Inventory Appraisal Fee shall be immediately payable by the
Borrower to the Bank upon such fees being incurred by the Bank. The Unused Line
Fee shall be calculated at the end of each month on the basis of a year of 365
days on the amount equal to the difference between the maximum authorized Credit
Facility (currently $20,000,000) and, other than the outstanding amounts owing
under the L/Gs issued in favour of the Borrower and under the Fx Facility, the
average balance outstanding under the Credit Facility owing by the Borrower to
the Bank during such month and shall be payable by the Borrower to the Bank on
the first Business Day of the next succeeding month, in arrears.
The Bank may charge from time to time general administration fees in accordance
with its usual practices and procedures relating to or in connection with any
amendments or modifications to this Agreement or the Credit Facility or to any
other agreement or security delivered or contemplated in connection therewith.
The Bank shall have the right, without prior notice to or consent of the
Borrower upon a default, or otherwise on 30 days prior written notice, to
adjust: a) any rates of interest applicable to the Credit Facility in the Bank's
sole and absolute discretion, or b) the Monitoring Fee where it is determined by
the Bank in its sole and absolute discretion that the existing Monitoring Fee is
inadequate to service and monitor the Credit Facility and cover, amongst other
things, the internal administration costs of the Bank.
In the event of an increase in any rates of interest applicable to the Credit
Facility or the Monitoring Fee pursuant to the preceding paragraph where there
is not a default, the Borrower shall have the right to terminate this Agreement
by notice in writing within 30 days of the date of notice of the increase in any
rates of interest applicable to the Credit Facility or in the Monitoring Fee, as
applicable and, notwithstanding the provisions of paragraph 5 hereof, without
payment of the termination fee. For greater certainty, in the event the Borrower
wishes to terminate the Credit Facility where there is a default, the
termination fee referred to in paragraph 5 hereof shall be applicable and
payable by the Borrower to the Bank. Should the Borrower not terminate this
Agreement within the said 30 day period, all terms and conditions of this
Agreement, including, without limitation, the increased rates of interest or
Monitoring Fee, shall continue to apply.
Any termination by the Borrower under this Agreement shall not be effective
until all of the indebtedness and obligations of the Borrower to the Bank owing
at such time have been indefeasibly paid and performed in full to the Bank's
satisfaction and any increase in the rates of interest or Monitoring Fee shall
be effective until such time unless all of the indebtedness and obligations of
the Borrower to the Bank have been indefeasibly paid and performed in full to
the Bank's satisfaction within the 30 day period from the date of notice of the
increase in any rates of interest applicable to the Credit Facility or
Monitoring Fee.
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7. OTHER FACILITIES:
A. Letters of Credit
Provided that there has been no default, the Bank may at its sole option, upon
the Borrower's written request, make L/Gs available to the Borrower subject to
the following terms and conditions:
(a) the aggregate face amount of all L/Gs outstanding at any time may
not exceed the lesser of the L/G Limit and the Facility Borrowing
Base;
(b) fees applicable to L/Gs will be advised on a transaction by
transaction basis;
(c) L/Gs are made available at the sole discretion of the Bank and the
Bank may cease to make L/Gs available to the Borrower at any time;
(d) L/Gs will be governed by separate agreements entered into between
the Borrower and the Bank from time to time and will have expiry
dates not exceeding one year, unless otherwise agreed to in writing
by the Bank; and
(e) the L/Gs shall be guaranteed by the Guarantor and shall be secured
by any and all security granted to the Bank.
B. Foreign Exchange Facility
In addition to the Credit Facility, and provided that there has been no default,
the Bank may at its sole option and discretion, upon the Borrower's written
request, enter into foreign exchange transactions, agreements or options ("FX
CONTRACTS") with the Borrower from time to time on terms and conditions to be
negotiated on a transaction-by-transaction basis (the "FX FACILITY"). The Bank
makes no commitment to enter into or arrange any Fx Contracts with the Borrower
and may at any time, in its sole and absolute discretion, decline to enter into
or terminate any Fx Contracts. In the event that the Borrower requests, and the
Bank agrees, to enter into any such Fx Contracts with the Borrower, it will do
so subject to the following:
(a) in no event, and at no time, shall the value of the Fx Contracts
entered into between the Borrower and the Bank exceed the aggregate
amount agreed upon by the Bank and the Borrower (the "FX FACILITY
CREDIT LIMIT"), nor shall the amount of "credit exposure" to the
Bank arising from, or in connection with, such Fx Contracts, exceed
the greater of (i) the unwinding cost determined in accordance with
the provisions of the Fx Contracts or as otherwise determined by the
Bank from time to time in its reasonable credit discretion, and (ii)
the percentage of notional amount of the Fx Contracts as determined
by the Bank from time to time in its reasonable credit discretion as
the percentage it will use to allocate risk to contracts having
similar notional amounts and maturities; which amount of "credit
exposure" shall be reserved, dollar for dollar, from the Facility
Borrowing Base (the "FX RESERVE");
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(b) the Borrower shall promptly issue or countersign and return a
confirmation or acknowledgement of the terms of each such Fx
Contract as required by the Bank;
(c) the Borrower shall, if required by the Bank, promptly enter into a
Foreign Exchange and Options Master Agreement or such other
agreement, in form and substance satisfactory to the Bank, to govern
such Fx Contracts;
(d) in the event of demand for payment concerning any Fx Contracts, the
Bank may terminate all or any other Fx Contracts at its sole option
and discretion. If the agreement governing any such Fx Contracts
does not contain provisions governing termination, any such
termination shall be effected in accordance with customary market
practice applied by the Bank from time to time. The Bank's
determination of amounts owing under any terminated Fx Contracts
shall be conclusive evidence of the amounts owing thereunder, absent
manifest error;
(e) the Bank shall apply any amount owing by the Bank to the Borrower on
termination of any such Fx Contracts against the Borrower's
obligations to the Bank and any amount owing by the Borrower to the
Bank on such termination shall form part of the Borrower's
obligations to the Bank and shall be secured by all of the Bank's
security;
(f) the Borrower shall pay all required fees in connection with any such
Fx Contracts and hereby indemnifies and holds the Bank harmless from
and against any and all losses, costs and expenses incurred by the
Bank in relation to any Fx Contracts, including, without limitation,
the costs of terminating or cancelling any Fx Contracts;
(g) any rights of the Bank in respect of any such Fx Contracts are in
addition to and not in limitation of, or substitution for, any
rights of the Bank under any agreement governing such Fx Contracts.
In the event that there is any inconsistency at any time between the
terms hereof and any agreement governing such Fx Contracts, the
terms of such agreement governing such Fx Contracts shall prevail to
the extent of such inconsistency;
(h) if at any time the Facility Borrowing Base (net of any Fx Reserve)
is less than the Fx Reserve for any reason whatsoever, an amount
equal to the difference between the Facility Borrowing Base and the
Fx Reserve may be retained by the Bank and deposited in a collateral
account as general continuing collateral security for the
outstanding Fx Contracts (the "Fx Deficiency"). The Borrower shall
immediately pay to the Bank such amount as may be necessary to
ensure that the balance of funds held in the collateral account is
at least equal to the Fx Deficiency at all times; and
(i) the Borrower hereby covenants and agrees to and in favour of the
Bank to report the outstanding amounts of any and all Fx Contracts
to the Bank in its Statement required to be delivered to the Bank on
a weekly basis.
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8. FIELD EXAMINATIONS AND INVENTORY APPRAISALS:
The Bank, or anyone authorized by the Bank, shall have the right, from time to
time, to verify the existence, state and value of the Accounts Receivable,
Inventory, and the Borrower's books and records, systems and business in
general, in any manner the Bank may consider appropriate, including, without
limitation, directly contacting Canada Revenue Agency ("CRA") and any other
applicable governmental officials, licensing boards, agencies or similar
regulatory bodies, the Borrower's customers, suppliers, insurers and other
secured creditors, to conduct reviews of the Borrower, the Borrower's business,
the Borrower's books and records, systems, the state and value of the Accounts
Receivable, Inventory, and to conduct Inventory counts and appraisals, and the
Borrower agrees to furnish all assistance and information and to perform all
such acts, and do all such things, as the Bank may reasonably require in
connection therewith and for such purpose grant, or cause others to grant, to
the Bank or its authorized agents, access to all places where Accounts
Receivable, the Borrower's books and records, systems and Inventory may be
located and to all premises occupied, or where business may otherwise be
conducted, by the Borrower. These provisions shall apply notwithstanding any
termination of this Agreement, notice of termination, default, notice of default
or demand or any provisional or final winding up, liquidation, monitoring,
receivership or bankruptcy of the Borrower or any threatened or pending
termination, notice of termination, default, notice of default, demand or any
provisional or final winding up, liquidation, monitoring, receivership or
bankruptcy.
9. CALCULATION AND PAYMENT OF INTEREST AND FEES:
In the case of RBP based loans, interest on each advance will accrue daily on
the basis of a year of 365 days, and will be calculated, payable and compounded
monthly on such day of the month as the Bank shall specify. Any change in RBP
shall be effective as of the opening of business on the day such change takes
place.
In the case of RBUSBR based loans, interest on each advance will accrue daily on
the basis of a year of 360 days, and will be calculated, payable and compounded
monthly on such day of the month as the Bank shall specify. Any change in RBUSBR
shall be effective as of the opening of business on the day such change takes
place.
In the case of Banker's Acceptances, the Borrower shall pay an acceptance fee in
advance on the date of issue of each BA at the applicable rate provided for in
this Agreement. Acceptance fees shall be calculated on the face amount of the BA
issued and based upon the number of days in the term thereof and a year of 365
days.
In the case of Libor Loans, the Borrower shall pay interest on each Libor Loan,
on each Libor Interest Date, calculated in arrears. Such interest will accrue
daily on the basis of the actual number of days elapsed and a year of 360 days.
The annual rates of interest or fees to which the rates calculated in accordance
with this Agreement are equivalent, are the rates so calculated multiplied by
the actual number of days in the calendar year in which such calculation is made
and divided by 365 in the case of RBP, BA and the Unused Line Fee and 360 in the
case of RBUSBR and Libor Loans.
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The Borrower shall not be obligated to pay any interest hereunder to the extent
such interest exceeds the effective annual rate of interest on any credit made
available hereunder that would be lawfully permitted under the Criminal Code
(Canada) and any such obligation shall be deemed to be reduced in accordance
with the maximum rate of interest lawfully permitted under the Criminal Code
(Canada) without affecting the remaining terms and conditions of this Agreement.
10. REPAYMENT:
If at any time, in the sole determination of the Bank, the amounts made
available to the Borrower pursuant to the Credit Facility exceed the Credit
Limit or if the Fx Facility exceeds the Fx Facility Credit Limit, for any reason
whatsoever, including, without limitation, as a result of exchange rate
fluctuations, the Borrower shall, without any notice or demand, immediately
repay such excess amounts to the Bank and the Borrower's right to receive any
further accommodations of credit whatsoever from the Bank shall be immediately
terminated and in particular, the Bank shall not be obligated to make any
advances to cover any cheques drawn on any account of the Borrower with the Bank
or any other, financial institution whatsoever.
Notwithstanding any provision in this Agreement to the contrary, upon the
written request of the Borrower, the Bank may, in its sole and absolute
discretion (but without any obligation), make advances or availment to the
Borrower in excess of the Credit Limit and the LG Limit (any such excess advance
is herein referred to as an 'EXCESS'); provided that the availment of any Excess
shall not constitute a waiver of any of the Bank's rights under this Agreement,
including, without limitation, the right to refuse in its sole discretion any
request for an Excess and the right to demand payment as provided for hereunder.
Upon a default, including, without limitation, if any amounts made available by
the Bank to the Borrower pursuant to the Credit Facility exceeds the Credit
Limit or if the Fx Facility exceeds the Fx Facility Credit Limit, at any time
for any reason whatsoever, or upon the mutual agreement of the Bank and the
Borrower, the Bank may notify any account debtors of the Borrower and direct
such account debtors to make all payments directly to the Bank at X.X. Xxx 000,
00 Xxxxxxxx Xx. Xxxx, Xxxxxxx, Xxxxxxx X0X 0X0. Furthermore, contemporaneously
with such notification, the Borrower shall ensure that the following notice in
clear, bold print is affixed to or stamped on every original and copy Invoice in
respect of all Accounts Receivable originated thereafter: "This account has been
assigned to Royal Bank Asset Based Finance, a division of Royal Bank of Canada
to whom payment must be made, and whose receipt alone, will constitute a valid
discharge of the amount due in terms of this Invoice." The Borrower shall also
ensure that all such account debtors forward payment directly to the Bank in
accordance with its notice and the Borrower acknowledges and agrees that all
such funds received by the Bank at such post office address shall immediately
become, and shall be deemed to be, the sole and exclusive property of the Bank.
In the event that the Borrower receives any cheques, bills of exchange or any
other form of payment directly from its customers it shall not, under any
circumstance, deal with such instrument or deposit such instrument into any
account and shall forward any such instruments directly to the Bank for
processing. Any monies received directly by the Borrower in respect of its
Accounts Receivable shall be, and shall be deemed to be, received and held in
trust for the Bank by the Borrower and shall be, and shall be deemed to be, kept
separate and apart from the Borrower's own funds. The Borrower hereby
unconditionally
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and irrevocably authorizes and directs the Bank to immediately apply such funds
and any insurance proceeds against the outstanding indebtedness of the Borrower
to the Bank in such order and against such facility as it deems fit. For greater
certainty, it is hereby understood and agreed that the Borrower shall only be
given value for the application of such funds, one Business Day from the date of
such application. Any charge backs relating to the clearing of any cheques shall
be for the sole account of the Borrower and shall, at the option of the Bank,
either be added to the principal amount owing under the Credit Facility or
debited to any of the Borrower's accounts with a Royal Bank of Canada business
banking centre.
All amounts due by the Borrower pursuant to this Agreement shall be paid without
set-off, compensation or deduction at the Branch of Account in immediately
available funds for value one Business Day from the date of application of such
funds. If a day on which an amount is due is not a Business Day such amount
shall be deemed for all purposes of this Agreement to be due on the Business Day
next following such day and all interest, fees and other amounts payable
hereunder and under any other document or agreement contemplated herein, shall
continue to accrue until indefeasible payment to the Bank in full. Interest,
fees and all other amounts payable under this Agreement are payable both before
and after any or all of default, notice of default, termination, notice of
termination, demand and judgement.
11. BLOCKED ACCOUNT:
All monies (which term when used in this Agreement includes all cheques, bills
of exchange and other payment instruments as well as cash) received by the
Borrower, including, but not limited to, any receipts in payment of any Accounts
Receivable or in respect of any insurance proceeds, whether or not a notice and
direction has been sent to the Borrower's account debtors, shall be received and
held, and shall be deemed to be received and held, in trust for the Bank and
shall be, and shall be deemed to be, kept separate and apart from the Borrower's
own funds and immediately deposited by the Borrower on a daily basis in a
blocked account set up for this purpose. The Borrower shall execute and deliver
to the Bank, the Bank's standard form blocked accounts agreement, the receipt of
which is a condition precedent to any accommodation of credit hereunder. The
Bank is hereby irrevocably and unconditionally authorized and directed by the
Borrower to sweep the blocked account on a daily basis and to set-off,
compensate and apply any credit balance in the blocked account to repay any
balance outstanding under any credit facilities contemplated hereunder in such
order and against such facility as the Bank sees fit, with any remaining funds
then being deposited to the Borrower's general account with the Royal Bank of
Canada business banking centre. For greater certainty, it is hereby understood
and agreed that the Borrower shall only be given value for the application of
such funds, one Business Day from the date of such application. Provided that,
if at any time the Facility Borrowing Base is less than the net of any reserves
in respect of the L/G Limit, an amount equal to the difference between the L/G
Limit and the amount of the Facility Borrowing Base (the "Security Deficiency")
may be retained by the Bank and deposited in a collateral account as general
continuing collateral security for outstanding L/Gs. The Borrower shall
immediately pay to the Bank such amount as may be necessary to ensure that the
balance of funds held in the collateral account is at least equal to the
Security Deficiency at all times.
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12. REPRESENTATIONS AND WARRANTIES:
The Borrower hereby represents and warrants, which representations and
warranties are deemed to be made by the Borrower at the time of each advance by
the Bank hereunder, that:
(a) the Accounts Receivable are all bona fide accounts receivable owing
to the Borrower;
(b) except for security granted to Marubeni Corporation which shall be
released and discharged by the Borrower on the Effective Date, the
Accounts Receivable have not been assigned, transferred, sold,
discounted, factored, mortgaged, hypothecated or otherwise disposed
of, secured or encumbered, nor are they subject to any other right
in favour of any other Person, other than Permitted Liens;
(c) subject to any adjustments required as a result of the lab analysis
of the quality of the coal, the Accounts Receivable are valid and
enforceable, are unconditionally due and owing to the Borrower, do
not relate to sales on a cash basis and are not subject to any
defence, set-off, compensation, trade dispute, counterclaim or other
dilutive factor, other than as disclosed to the Bank in writing on a
monthly certificate substantially in the form of Schedule "E";
(d) subject to the specific terms of the customer contracts disclosed to
the Bank, all goods supplied under any contract or agreement (oral
or written) giving rise to the Accounts Receivable have been
supplied to acceptable standards as required by Laws and by the
terms (whether express or implied) of any such contract or agreement
in respect thereof and to the satisfaction of the applicable
customer of the Borrower and the goods supplied have been accepted
by such customer, and legal and proper delivery has been made and
accepted by such customer;
(e) the terms of the customer contracts under which the Borrower
supplies coal do not include provisions that would materially affect
the Accounts Receivable of the Borrower;
(f) the amount payable by any customer of the Borrower is not less than
the face value of each Invoice and the Accounts Receivable as
recorded in the Borrower's books and records is unconditionally,
subject as disclosed in Section 12(c) above, due and payable not
later than the date specified on the Invoice and there are no
guarantees, warranty claims, obligations, discounts, rebates,
allowances, joint advertising fees, credits or other dilutive
factors which will affect the collectability of any Accounts
Receivable, save as disclosed to the Bank in writing;
(g) except for security granted to Marubeni Corporation which shall be
released and discharged by the Borrower on the Effective Date, and
except for certain rights granted to BC Rail Partnership and its
successor, CN Rail pursuant to transportation contract BCOL-C-0219,
the Inventory is unconditionally owned by and in the physical
possession of the Borrower and is only located at locations or
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in transit as disclosed to the Bank in writing and has not been
sold, leased, rented, loaned, consigned, on bailment, on xxxx and
hold, or mortgaged, hypothecated or otherwise encumbered or subject
to any rights of any other Person, other than Permitted Liens;
(h) the Eligible Inventory of the Borrower is of merchantable quality
and is in saleable condition;
(i) Schedule "F" sets forth a full, complete and true list of all of the
Borrower's registered and unregistered trade-marks, copyrights,
patents, trade names and service marks (collectively, the
"INTELLECTUAL PROPERTY"), and any applications therefor, and
specifies the jurisdictions in which an application for such
issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered
owners. Falls Mountain is the sole and exclusive owner of, with all
right, title and interest in and to (free and clear of any claims by
any Person, other than Permitted Liens) the Intellectual Property,
and has sole and exclusive rights to the use thereof The
Intellectual Property does not infringe upon or violate and the
Borrower has not knowingly infringed or violated any intellectual
property or other proprietary rights of any other Person and no
Person has made any such claim. None of the Intellectual Property
has been assigned or licensed to any other Person except pursuant to
the Permitted Liens;
(j) Schedule "G" Part I, sets forth a full, complete and true list of
all of the Borrower's contracts material to the business of the
Borrower including all sales contracts with customers and sales
agents, contracts for or with suppliers, operating agreements, and
agreements for distribution and licensing, ("Material Contracts"),
all of which have not been amended and are in full force and effect;
(k) Schedule "G" Part II sets forth copies of those Material Contracts
between the Borrower and each of their customers; the operating
agreement with TerCon Construction Group, the agreements with
Neptune Bulk Terminals (Canada) Ltd., the agreement with BC Rail
Partnership and its successor, CN Rail, the agreements with Marubeni
Corporation and The Rockside Foundation;
(l) Schedule "H" sets out a full, complete and true list of all of the
coal licences and coal leases owned by Falls Mountain or PVC;
(m) PVC holds the coal licences and coal leases set out in Schedule "H"
in trust for Falls Mountain as reflected in the Declaration of Trust
dated May 13, 2004, a copy of which is attached to Schedule "H";
(n) no event has occurred which constitutes, or which with the giving of
notice or lapse of time, or both, would constitute a default under
this Agreement or under any other agreement with the Bank;
including, without limitation, respecting any L/Gs, or any Fx
Contracts or a default which could reasonably be expected to be
material to the Bank under any other agreement to which the Borrower
may be subject, including, without limitation, all Material
Contracts;
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(o) Falls Mountain carries on the business of the exploration,
development and commercial exploitation of coal properties including
the operation of the Willow Creek Project;
(p) except for those coal leases and licences registered in the name of
PVC, Falls Mountain owns all of the Willow Creek Project assets,
licences, and permits required to carry on the Willow Creek Project
in its current state of development free and clear of any Liens
other than Permitted Liens.
(q) Pine Valley, the Guarantor and Falls Mountain are valid and
subsisting companies duly incorporated under the laws of the
Province of British Columbia and have all necessary corporate power
and authority to enter into this Agreement and perform their
obligations hereunder;
(r) PVC is a valid and subsisting corporation duly incorporated under
the laws of the Province of Alberta and has all necessary corporate
power and authority to enter into this Agreement and perform its
obligations hereunder;
(s) this Agreement has been duly authorized, executed and delivered by
the Borrower, the Guarantor and each of them and is a legal, valid
and binding obligation of the Borrower and the Guarantor,
enforceable against the Borrower and the Guarantor in accordance
with its terms except as enforcement may be limited by bankruptcy,
insolvency and other laws affecting creditors' rights generally and
subject to the qualification that specific performance and
injunction, as equitable remedies, may only be granted in the
discretion of a court of competent jurisdiction;
(t) except as set out in the Permitted Liens and in the agreements with
Marubeni Corporation, each of the Borrower and the Guarantor has
good and sufficient right, power, corporate authority and capacity
to enter into and perform its obligations under this Agreement;
(u) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the
terms hereof do not conflict with or result in the breach of, or the
acceleration of, any terms, provisions or conditions of or
constitute a default under: (i) the constating documents of the
Guarantor and each of the Borrower; (ii) any indenture, mortgage,
deed of trust, agreement, lease, franchise, certificate or other
instrument to which the Borrower is a party or is bound; or (iii)
any term or provision of any licenses, permits, registrations or
qualifications of the Borrower or any order of any governmental
authority or any applicable law;
(v) except as disclosed in Schedule "K", no litigation or administrative
proceedings before any court or governmental authority are presently
pending, or have been threatened in writing against the Guarantor,
or any of the Borrower or any of its assets which could have a
material adverse effect on its business or assets;
(w) PVC does not carry on an active business;
12
(x) the Guarantor does not carry on an active business;
(y) Pine Valley is a reporting issuer in the provinces of British
Columbia and Alberta and is compliant with the requirements of
applicable securities legislation in those provinces and the rules
and policies of the TSX Venture Exchange or its listing agreement
with the TSX Venture Exchange; except for those violations that will
not have a material adverse effect on the Borrower;
(z) all statements, information, reports, inventory listings and
certificates made or given to the Bank (either orally or written) by
the Borrower or the Guarantor, or by persons on behalf of the
Borrower and Guarantor, are true, complete and accurate in all
respects;
(aa) the Borrower's books and records and all financial statements are
true, complete and accurate in all material respects and are
prepared and maintained in accordance with Canadian GAAP applied on
a consistent basis;
(bb) since March 31, 2005, there has not been any material adverse change
in the financial condition or operations of the Borrower;
(cc) except as disclosed in Schedule "K", the Borrower is in compliance
with all Laws relating to the operation of its business, including,
without limitation, all applicable environmental Laws and has all
necessary Permits including without limitation the mining permits,
rail haulage agreements, and port agreements required to operate its
business and all such Permits and agreements are in good standing
and in full force and effect, and will not be cancelled, terminated,
rescinded, suspended, revoked or otherwise negatively affected by
any proceeding under any Insolvency Statute or the enforcement by
the Bank of any of its rights or remedies hereunder or under any
security given to the Bank; or except such violations which will not
have a material adverse effect on the business of the Borrower;
(dd) except as set out in Schedule "K", and except as are not likely to
have a material adverse effect on the business of the Borrower, the
Borrower has not been issued with any reports, orders, directions,
warnings, conditions or decisions issued to it by any regulatory
authority concerning the state or condition of the Willow Creek
Project site or operations, including without limitation by a
regulatory authority or inspector acting under the Mines Act, the
Environmental Assessment Act, the Mine Development Assessment Act,
the Land Act, the Forest Act, the Water Act, the Environmental
Management Act, the Coal Act and the Health Act, or any replacement
or similar statute, and including without limitation reports, order,
directions, conditions or decisions concerning the reclamation of
the Willow Creek Project or otherwise concerning the environmental
state or condition of the Willow Creek Project site or the Willow
Creek Project operations;
(ee) the Borrower and the Guarantor have or will have on the Effective
Date obtained all necessary exemptions or consents from, and given
all necessary notices to, all
13
securities regulators with respect to the transactions contemplated
by this letter and required due to the public company status of Pine
Valley;
(ff) except as set out in Schedule "K", 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 the Borrower's knowledge threatened, with
respect to any non-compliance with, or violation of, the
requirements of any Laws or Permits by the Borrower;
(gg) other than The Rockside Foundation, an Ohio non-profit corporation,
the Borrower has no corporate Associates, Affiliates or subsidiaries
who are not a party to this Agreement; except for Pine Valley Coal
Pty Ltd.;
(hh) Pine Valley is the registered and beneficial owner of all of the 12
issued and outstanding shares in the capital of Falls Mountain, and
of both of the 2 issued and outstanding shares in the capital of the
Guarantor, and Falls Mountain is the registered and beneficial owner
of all of the 3 issued and outstanding shares in the capital of PVC,
and the controlling shareholders of Pine Valley are Xxxx Xxxxx and
The Rockside Foundation;
(ii) the Borrower is in compliance in all material respects with and has
not breached any of its material obligations under any insurance
required to be maintained by the Borrower hereunder;
(jj) except for the disclosure of agreements to the Bank that contain
confidentiality obligations prohibiting such disclosure, the
Borrower is in compliance in all material respects with and has not
breached any of its obligations under any Material Contracts; where
such breach has not been waived or otherwise resolved;
(kk) except as agreed with Marubeni Corporation, and as set out in the
security agreement given in favour of The Rockside Foundation as
subordinated by the interlender agreement between the Bank and The
Rockside Foundation, the Inventory is not subject to any licensing,
trade-xxxx or distribution agreement or any restriction whatsoever
restricting the sale or liquidation of any of the Inventory and no
Permits are required to be held and/or maintained to sell or
liquidate such Inventory;
(ll) the contracts of sale with the customers of the Borrower are all in
writing, there are no material defaults under any of such contracts,
and no customer has given notice of cancellation of its contract, or
of its intention not to continue to purchase coal from the Borrower;
(mm) except to the extent that the failure to do so could not reasonably
be expected to result in a material adverse effect or as disclosed
in Schedule "K", the 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 Laws
14
or any Permits and the operations of the Borrower comply in all
respects with all applicable Laws and all Permits; and
(nn) the Borrower has not withheld from or failed to disclose to the Bank
any information relating to the financial condition, property,
assets, insurance, systems, records, Permits, Laws, Material
Contracts, Intellectual Property, customers, supply arrangements, or
the business or prospects of the Borrower, which could reasonably be
expected to be material to the Bank.
13. EVIDENCE OF INDEBTEDNESS:
The Bank shall open and maintain accounts and records evidencing the principal
amount of each advance and the payment of principal and interest and all other
amounts payable to the Bank under this Agreement. The Bank's accounts and
records constitute, in the absence of manifest error, conclusive evidence of all
amounts payable by the Borrower to the Bank.
14. SECURITY/CAPITAL REQUIREMENTS:
The Borrower shall provide or cause to be provided, the security and/or the
capital requirements listed in Schedule "B", in form and substance satisfactory
to the Bank, the receipt and registration in respect of which where deemed
necessary by the Bank, shall be a condition precedent to any accommodations of
credit contemplated hereunder.
15. FINANCIAL, REPORTING AND OTHER COVENANTS:
Both before and after default or demand hereunder:
(a) the Borrower shall pay all amounts when due and comply with and
perform all of its covenants and obligations to the Bank under this
Agreement or any other document or agreement contemplated herein;
(b) the Borrower shall comply and fulfil, and cause the Guarantor to
comply and fulfil all of its financial, reporting and other
covenants and obligations set forth in Schedule "C";
(c) the Borrower shall not allow any extension of time for payment,
compromise or settlement of any Account Receivable or agree to any
waiver, modification, amendment, rescission or termination of any
contract or agreement, without the Bank's prior written consent;
(d) other than the bank accounts set out in the table below ("PERMITTED
ACCOUNTS"), which accounts the Borrower may either keep open
indefinitely, or for a maximum of 30 days after the Effective Date,
as indicated for each account in the table; the Borrower shall not
cause to exist or open any bank account, other than the aforesaid
blocked accounts and a current account with a Royal Bank of Canada
business banking centre, without first informing the Bank in writing
and the Borrower shall deposit all proceeds from Accounts
Receivable, in respect of
15
insurance proceeds and any cash sales, in the Borrower's aforesaid
blocked account;
ACCOUNT ACCOUNT TIME MAY
ACCOUNT # HOLDER BANK NUMBER OTHER DETAILS REMAIN OPEN
--------- -------------- ---------------- -------------- ------------- --------------
1. Pine Valley Bank of 1805-243 Canadian 30 days after
Montreal, dollar amount Effective Date
Vancouver only
2. Pine Valley Bank of Xxxxxxxx 0000-000 XX dollar 30 days after
Vancouver account Effective Date
only
3. Falls Mountain Bank of 1705-162 Canadian 30 days after
and Marubeni Montreal, dollar amount Effective Date
Corporation Vancouver only
4. Falls Mountain Bank of 4610-643 US dollar 30 days after
and Marubeni Montreal, account Effective Date
Corporation Vancouver only
5. Pine Valley KeyBank 352143013295 For BC Hydro Indefinitely
National Letter of
Association, Credit
Brooklyn, Ohio
(d1) with respect to the Permitted Accounts, no cheques shall be drawn by the
Borrower after the Effective Date on those accounts and the Borrower shall
provide the Bank, within 30 calendar days of each month-end, a monthly
account statement for the Permitted Account for the month just ended, for
the following months:
ACCOUNT # NUMBER OF MONTHS
--------- ---------------------------------------------
1 to 4 For the 2 months after the Effective Date
5 For each month until the account is closed
(e) the Borrower shall within 72 hours notify the Bank in writing of any
dispute or any threatened dispute (whether justifiable or not)
between the Borrower and any supplier and between the Borrower and
any of its customers, including, without limitation, any claims by
customers of set-off or compensation, warranty claims, guarantee
claims, service obligations, any trade dispute or counterclaim
against Accounts Receivable and generally any adverse information
(including, without limitation, relating to a customer's
creditworthiness) regarding any of its
16
customers, which could materially impact the recoverability of any
Accounts Receivable;
(f) the Borrower shall immediately notify the Bank in writing of any and
all discounts, rebates, allowances, joint advertising fees, credits,
contras, amounts owing by Associates or Affiliates or any other
dilutive factor or information, which would affect the eligibility
or value of any Accounts Receivable;
(g) the Borrower shall fulfil and perform all service obligations to its
customers which could impact the recoverability of any Accounts
Receivable;
(h) the Borrower shall immediately notify the Bank in writing of any
information or factor which would affect the eligibility or value of
Inventory;
(i) the Borrower shall within 72 hours notify the Bank in writing of any
investigation, proceeding, complaint, order, record, claim, citation
or notice by CRA or any other governmental authority with respect to
any taxes payable or required to be remitted by the Borrower or the
Guarantor or with respect to any Permits or applicable Laws;
(j) the Borrower shall obtain and maintain insurance with reputable
insurers naming the Bank as first loss payee and as an additional
insured and, subject to the IBC 3000 Standard Mortgage Clause
concerning Inventory in favour of the Bank, and an assignment of all
risks, business interruption and account receivable insurance in
such amounts, and against such risks, as required by the Bank and as
is usually carried by prudent owners of similar businesses and
properties including insurance for inventory in transit acceptable
to the Bank;
(k) the Borrower shall comply with all of its obligations under all
Material Contracts; and upon request from the Bank, the Borrower
shall deliver copies of any of the Material Contracts not attached
as Schedule "G" to this Agreement;
(l) provided the Borrower deems it to be in the best interests of the
Borrower to do so, the Borrower shall renew its agreements with
Neptune Bulk Terminals (Canada) Ltd., BC Rail Partnership and its
successor, CN Rail, TerCon Construction Ltd., and all customer
contracts as or when they are up for renewal prior to the applicable
renewal date, or the Borrower will enter into contracts similar to
the aforementioned contracts on terms acceptable to the Bank, acting
reasonably, and shall provide the Bank with satisfactory evidence of
such renewal prior to the expiry of any such agreement, or will give
notice to the Bank of the terms to be agreed to prior to the
execution of the contracts;
(m) the Borrower shall provide the Bank with prior written notice of any
change in the location of the Borrower, or any addition to any of
the Borrower's locations, where the Inventory may be stored, located
or in the possession of a third party, and prior to any such change
or expansion, the Borrower shall procure and deliver to the Bank,
waivers and consents or non-disturbance agreements, as applicable,
in favour of the Bank, in form and substance satisfactory to the
Bank;
17
(n) the Borrower shall pay, or cause to be paid when due, all taxes, all
other amounts referred to in Schedule "E" and all other amounts
which could jeopardise the Bank's first, subject to Permitted Liens,
secured priority position over the Borrower's property and assets;
(o) the Borrower shall not, and shall ensure the Guarantor shall not,
without the Bank's prior written consent (which consent shall not be
unreasonably withheld) enter into any transaction (including,
without limitation, by way of reorganisation, change of control,
consolidation, financing, amalgamation, merger, liquidation,
transfer, sale, purchase, assumption of liabilities or obligations,
or otherwise) whereby all or any material portion of its
undertakings, property or assets - including the shares owned by one
or more of the Borrower in Falls Mountain, PVC or the Guarantor,
respectively, would become the property of any other Person. For the
purposes of this Section 15(o), the Bank shall not withhold its
consent if the transaction or transactions are to be effected with a
view of taking advantage of tax planning opportunities provided the
Bank will not be prejudiced by the proposed transaction or
transactions;
(p) except as set out in the Material Contracts, other than Fx
Contracts, the Borrower shall not provide any financial assistance,
either directly or indirectly, by means of a loan, subscription for
shares, guarantee, provision of security or otherwise to any Person
or become a guarantor or surety of, or otherwise become or be liable
in any manner with respect to, any undertaking, obligation or
liability of any other Person, whatsoever;
(q) the Borrower shall not create, grant, assume or suffer to exist any
Liens, upon any of its undertakings, property or assets, other than
Permitted Liens, and except that the Borrower may grant security to
a lender for the purpose of arranging a term loan from any new term
lender provided that the Bank has given its prior written consent of
the term loan and security, which consent will not be unreasonably
withheld provided that the Bank's paramount security over Inventory
and Receivables must not be prejudiced;
(r) after the Effective Date, when the Marubeni Corporation will be
repaid, the Borrower shall not repay any outstanding indebtedness to
any other Person except for the payment of bona fide trade payables
in the ordinary course of business consistent with past practice and
under equipment and motor vehicle leases which are Permitted Liens,
including any amounts owing to The Rockside Foundation other than
interest payments as provided for in Section 15 (s) or the $600,000
owing to the estate of a past chairman of Pine Valley without the
prior written consent of the Bank, which consent, with respect to
the amounts owing to The Rockside Foundation, will not be
unreasonably withheld;
(s) the Borrower may pay interest to The Rockside Foundation provided
that the payment of interest will not result in the Borrower
breaching its financial covenants under this Agreement, and further
provided that the Borrower will not
18
pay interest to The Rockside Foundation until, at the earliest, the
next draw down of funds after the Effective Date, if there is
availability at that time;
(t) the Borrower shall not pay any management fees, bonuses, dividends
or other similar amounts or repay any indebtedness or other amounts
owing by the Borrower to any Affiliate or Associate of the Borrower,
without the prior written consent of the Bank other than as set out
in the business plan of the Borrower approved by the Bank;
(u) the Borrower shall disclose and deliver to the Bank all documents or
agreements to which it is a party and any and all renewals,
extensions, amendments, supplements or replacements thereof, which
may reasonably be expected to be material to the Bank, including,
without limitation, the Material Contracts, all agreements with
customers, employment or independent contractor agreements, royalty,
distribution, licenses, customer and supply agreements, leases or
any other agreements relating to the borrowing of money;
(v) the Borrower shall comply with all Laws, and maintain all Permits
required to operate its business and shall immediately notify the
Bank in writing of any potential, threatened or actual termination,
cancellation, revocation, rescission, suspension, change, renewal or
expiration of any Permits and of any violation of any Laws that is
likely to have a materially adverse effect on the business of the
Borrower;
(w) FMC will not, and will not give direction to PVC to, transfer,
assign, encumber or otherwise deal with any of the coal licences or
coal leases described in Schedule "H" without the prior written
consent of the Bank;
(x) the Borrower shall maintain a proper and reliable inventory system
in order to provide the Bank with true, complete and accurate
reporting;
(y) the Borrower shall maintain proper books and records, and all
financial statements shall be prepared in accordance with Canadian
GAAP applied on a consistent basis;
(z) the Borrower shall provide the Bank with at least 30 days' prior
written notice of any proposed change in its chief executive or
registered head office or should it wish to maintain tangible
property or its books and records or otherwise commence business
operations in a province or state other than those in which it is
presently located;
(aa) the Borrower shall procure the applicable assignment, waiver or
consent from Neptune Bulk Terminals (Canada) Ltd., and BC Rail
Partnership and its successor, CN Rail, in form and substance
satisfactory to the Bank, concerning any location where Inventory or
the books and records of the Borrower is or may be located;
19
(bb) the Borrower shall immediately notify the Bank of the receipt of any
notice (whether written or oral) from any insurers concerning any
addition, amendment, supplement, replacement or cancellation of any
term or condition or credit limit or termination of any insurance
policy;
(cc) except for an upgrade from Simply Basic to Simply Pro, Borrower
shall not replace, alter or upgrade its accounting or inventory
reportings systems or software without the prior written consent of
the Bank;
(dd) the Borrower shall maintain at all times, a minimum Tangible Net
Worth on a consolidated basis of not less than $25,000,000 to be
tested on a monthly basis;
(ee) the Borrower shall maintain a Fixed Charge Coverage Ratio on a
consolidated basis, calculated as shown in the table below at the
end of each fiscal period as shown below of not less than 1:1:
Period Measured
Beginning of Period End of Period
------------------- -----------------
1. July 1, 2005 September 30, 2005
2. July 1, 2005 December 31, 2005
3. July 1, 2005 March 31, 2006
4. July 1, 2005 July 1, 2005
After the fourth measurement period referred to in the table above, the
Fixed Charge Coverage Ratio will be calculated on a rolling 4 quarter
basis;
(ff) the Borrower shall deliver or cause to be delivered to the Bank such
other information relating to the conduct of the business and
affairs or the financial condition of the Borrower as the Bank may
require from time to time; and
(gg) the Borrower shall forthwith notify the Bank in writing of any
matter which could reasonably be expected to be material to the Bank
or jeopardise its first, subject to Permitted Liens, secured
priority position.
16. DEFAULT:
The occurrence of any one of the following events or conditions shall constitute
a "DEFAULT" hereunder:
(a) the non-payment when due of any amounts to the Bank under this
Agreement or any other agreement entered into among any one or more
of the Bank, the Borrower and the Guarantor including, without
limitation, respecting any L/Gs, or any Fx Contracts;
20
(b) any breach (other than by reason of the non-payment of amounts when
due to the Bank) by the Borrower or the Guarantor of any of their
respective undertakings, warranties, covenants or other obligations
under this Agreement or any security or any other agreement,
certificate, statement or document given by the Borrower or the
Guarantor to the Bank including, without limitation, respecting any
L/Gs, or any Fx Contracts;
(c) if the amounts made available to the Borrower pursuant to the Credit
Facility at any time exceeds the Credit Limit or pursuant to the
L/Gs exceeds the L/G Limit, or if at any time the Fx Facility
exceeds the Fx Facility Credit Limit, for any reason whatsoever;
(d) any withholding or diversion of money by the Borrower or the
Guarantor which is due to the Bank in accordance with the terms of
this Agreement or any other agreement between the parties, or
failure to deposit or otherwise deal with any such money strictly in
accordance with the terms of this Agreement;
(e) the bankruptcy or insolvency of the Borrower or the Guarantor; the
passing of a resolution for, or the making of, an assignment for the
benefit of creditors by the Borrower or the Guarantor; the
appointment of a receiver, receiver and manager, monitor, liquidator
or trustee or similar Person for the Borrower or the Guarantor or
for all or any part of the assets of the Borrower or the Guarantor;
or the institution by the Borrower or the Guarantor of any other
type of insolvency proceeding under the Bankruptcy and Insolvency
Act or any other Insolvency Statute;
(f) the abandonment by the Borrower or the Guarantor of any of their
property or assets or any part thereof including without limitation
the forfeiture or abandonment of any of the coal licenses or coal
leases listed in Schedule "H", or if the Borrower causes any
conditions of its mining permits to be changed or amended with the
result that the mining operations have to cease for a period of
greater than 10 business days;
(g) the project approval certificate #M98-01 issued by the Ministry of
Energy and Mines, and the Ministry of Environment, Lands and Parks
is cancelled, suspended in whole or in part, amended, or new
conditions are attached for any of the reasons set out in Schedule B
of the certificate;
(h) the loss, damage, destruction or confiscation of any part of the
Borrower's or the Guarantor's property or assets or any part
thereof, unless upon such event, the Borrower or the applicable
Guarantor pays to the Bank forthwith such amount as the Bank in its
absolute and sole discretion determines is satisfactory;
(i) the annual reclamation report required to be delivered by the
Borrower to the Bank is, in the Bank's discretion, acting
reasonably, not satisfactory, or the Bank, acting reasonably,
believes there has been an environmental occurrence which has the
potential to materially adversely affect the personal property of
the Borrower;
21
(j) the filing or institution against the Borrower or the Guarantor of a
petition in bankruptcy, any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims or winding up of
the affairs of the Borrower or the Guarantor or of any other type of
insolvency proceeding under the Bankruptcy and Insolvency Act or any
other Insolvency Statute, which is not immediately stayed by
legitimate and appropriate proceedings by the Borrower or the
Guarantor to the Bank's satisfaction in its absolute and sole
discretion;
(k) if the Borrower does not, on or before December 15, 2005, provide
evidence satisfactory to the Bank that Pine Valley Coal Pty Ltd., an
Affiliate of the Borrower incorporated in Australia, has been wound
up, or dissolved with no liability attaching to the Borrower;
(l) if the Borrower or the Guarantor ceases or threatens to cease to
carry on business, makes or agrees to make a disposition of its
assets in bulk or commits or threatens to commit an act of
bankruptcy;
(m) if any execution, sequestration, garnishment, trust claim, extent or
other process of any court, tribunal or Person becomes enforceable
against the Borrower or the Guarantor or if a distress or analogous
process becomes enforceable against or is levied upon any of the
property or assets of the Borrower or the Guarantor;
(n) if the Borrower or the Guarantor defaults in the payment of any
obligation in respect of borrowed money or in the performance or
observance of any agreement in respect of borrowed money where as a
result of such default, the maturity of such indebtedness is or may
be accelerated or such creditor commences any enforcement
proceedings against the Borrower or the Guarantor or any of its
collateral;
(o) if the Borrower defaults in the payment, or performance of any
material obligation, under any Material Contract, such determination
to be made by the Bank in its absolute and sole discretion;
(p) if a judgment or order for payment of monies is rendered against the
Borrower or the Guarantor and is not immediately paid or stayed
after it has been rendered to the Bank's satisfaction, in its
absolute and sole discretion; and
(q) if there occurs, in the Bank's opinion, a materially adverse change,
in the financial condition of the Borrower or the Guarantor, the
value of the Borrower's or the Guarantor's property and assets, the
operation or ownership of the Borrower or the Guarantor, or the
Borrower's or the Guarantor' business.
Upon a default, whether or not there is any availability under the Credit
Facilities, without any notice or demand whatsoever, the right of the Borrower
to receive any advance or other accommodation of credit shall be immediately
terminated and the Bank shall be entitled, in addition to all other remedies at
law and under any security or other agreement, to continue to exercise its
rights under Sections 8, 10 and 11 of this Agreement, including, without
limitation, the right to notify and direct account debtors of the Borrower to
pay Accounts Receivable
22
directly to the Bank, to sweep the aforementioned blocked account on a daily
basis and to apply any credit balance in the blocked account against any
outstanding indebtedness owing to the Bank in such order and against such
facility as it deems fit. In addition, upon a default, all indebtedness of the
Borrower to the Bank, including, without limitation, an amount equal to the face
amount of all outstanding L/Gs and the Fx Reserve which may, at the Bank's
option, be held by the Bank in a general continuing collateral account as
collateral security therefor, shall become immediately due and payable.
17. CONDITIONS PRECEDENT:
The Bank's obligation to make each and every advance or other accommodation of
credit to the Borrower and to make each and every advance at any particular
advance rate, shall be subject to each of the following conditions precedent,
which conditions precedent are inserted for the sole and exclusive benefit of
the Bank and may only be waived by the Bank in writing:
(a) the Bank shall have received evidence satisfactory to the Bank that
Marubeni Corporation will be paid all money owing to it by the
Borrower on the Effective Date, and that Marubeni Corporation will
release its security;
(b) the representations and warranties set out herein shall be true and
correct on the date of each accommodation of credit or date that any
Statement is required to be delivered;
(c) no default shall have occurred or be continuing nor shall there be
any default by the Borrower or the Guarantor under this Agreement
after making any accommodation of credit available to the Borrower;
(d) the Bank shall have received all of the agreements, documents,
statements, information, questionnaires and certificates
contemplated herein and such other agreements, documents,
statements, information, questionnaires and certificates as the Bank
may require, all in form and substance satisfactory to the Bank;
(e) subject to subsection 15(d), confirmation of the closure of all bank
accounts of the Borrower and any predecessors of the Borrower, and
any joint accounts held by the Borrower with other parties including
without limitation the joint account held by the Borrower and
Marubeni Corporation other than the Borrower's bank accounts which
have been disclosed to the Bank and which the Bank has confirmed in
writing can remain open and are subject to the Bank's standard form
blocked accounts agreement referred to herein;
(e1) on the Effective Date the Borrower shall have provided the Bank with
a complete and accurate listing of all cheques drawn on the
Permitted Accounts (which list shall include cheque number, date,
amount and payee information) that have not yet been presented for
payment and are outstanding;
(f) the receipt by the Bank of waivers, consents, acknowledgements and
agreements which the Bank requires to make such accommodations of
credit available to the
23
Borrower and which are satisfactory to it, to be determined by the
Bank in its absolute and sole discretion;
(g) the completion by the Bank of its due diligence, and the receipt by
the Bank of the field examination report, including without
limitation reports concerning the Borrower's inventory system, and
Inventory appraisals, with results acceptable to the Bank, in its
absolute and sole discretion;
(h) the review by the Bank of the accounts receivable insurance policy
of the Borrower with results acceptable to the Bank in its absolute
and sole discretion;
(i) the Bank shall have received full and complete executed copies of
all Material Contracts and conducted reviews of such Material
Contracts, with results acceptable to the Bank in its absolute and
sole discretion;
(j) the Bank shall have received the following documents, each in full
force and effect and in form and substance satisfactory to the Bank
and its solicitors:
(i) a properly executed copy of this Agreement;
(ii) the security listed in Schedule "B", duly registered,
constituting a valid encumbrance on all of the assets and
undertaking of the Borrower and the Guarantor intended to be
charged thereunder, which encumbrance shall rank senior to all
other encumbrances on such assets and undertaking of the
Borrower and the Guarantor, as applicable, except as otherwise
expressly agreed by the Bank in writing;
(iii) a certificate as to corporate and general matters certified by
a director or senior officer of the Borrower and to which
shall be attached certified copies of: (i) the Borrower's
constating documents including the sections of the Articles or
By-laws, as the case may be, dealing with the borrowing of
money, the giving of financial assistance and security and the
execution of documents; and (ii) the corporate proceedings
taken by the Borrower authorizing it to execute, deliver and
perform its obligations under this Agreement and any other
agreement to which the Borrower is a party;
(iv) certificates as to corporate and general matters certified by
directors or senior officers of the Guarantor and to which
shall be attached certified copies of: (i) the Guarantor's
constating documents including the sections of the Articles
dealing with the borrowing of money, the giving of financial
assistance and security and the execution of documents; and
(ii) the corporate proceedings taken by the Guarantor
authorizing it to execute, deliver and perform its obligations
under this Agreement and any other agreement to which the
Guarantor is a party;
(v) an assignment of all risks, business interruption and accounts
receivable insurance with the Bank as first loss payee and as
an additional insured with a standard mortgage clause against
Inventory, supported with an
24
endorsement of all such insurance policies and a certificate
of insurance confirming that the Bank shall receive not less
than 30 days' prior written notice of any amendment, renewal,
endorsement, expiration or cancellation of such policies
(vi) such opinions of legal counsel to the Borrower and the
Guarantor in form and substance satisfactory to the Bank and
its legal counsel; and
(vii) such environmental reports on the property where the Borrower
conducts business as the Bank deems necessary with results
acceptable to the Bank, in its absolute and sole discretion;
and
(viii) such other documents as the Bank may reasonably require.
(k) the Bank shall have received copies of the Borrower's business plan
with projected results for the fiscal years ending March 2006 and
2007; and
(l) the Bank shall have received and reviewed the audited consolidated
financial statements for the year ending March 31, 2005 for Pine
Valley.
18. MISCELLANEOUS:
(a) EXPENSES. The Borrower shall pay the reasonable fees and expenses
incurred by the Bank (including, without limitation, all
professional fees) in connection with the preparation, negotiation,
documentation and operation all of the credit facilities
contemplated hereunder and the enforcement of the Bank's rights and
remedies hereunder and under any other document delivered pursuant
to this Agreement, whether or not any amounts are advanced
hereunder.
(b) INCREASED COSTS. The Borrower shall reimburse the Bank for any
additional costs or reduction in income arising as a result of (i)
the imposition of, or increase in, taxes on payments due to the Bank
hereunder (other than tax on the overall net income of the Bank),
(ii) the imposition of, or increase in, any reserve or other similar
requirements, (iii) the imposition of, or change in, any other
condition affecting the Credit Facilities imposed by any applicable
Law or the interpretation thereof.
(c) TAXATION AND DUTIES. Any and all payments to be made by the Borrower
hereunder will be made free and clear of any and all present and
future taxes, withholdings or deductions of whatsoever nature. The
Borrower will also be responsible for the due payment of any levies,
import duties or charges incurred in connection with any of the
credit facilities contemplated hereunder.
(d) SET-OFF. The Bank is hereby irrevocably and unconditionally
authorized and directed at any time, without notice to the Borrower
or the Guarantor or demand, to apply any amount held by the Bank
pursuant to any blocked account or lock box arrangement established
or any credit balance in any account of the Borrower towards the
payment of any obligation of the Borrower to the Bank hereunder
25
whether in the same or other currency in such order and against such
facility as it deems fit. For greater certainty, it is hereby
understood and agreed that the Borrower shall only be given value
for the application of such funds, one Business Day from the date of
such application.
(e) POWER OF ATTORNEY. The Borrower and the Guarantor hereby grant to
the Bank and its officers, employees and agents from time to time,
with full power of substitution and coupled with an interest, its
power of attorney to do all such acts, matters and things that the
Bank may deem necessary to give effect to this Agreement, including,
without limitation, for the express purpose of notifying and
directing the Borrower's account debtors to make all payments
directly to the Bank and for the express purpose of endorsing any
cheques, bills of exchange or other payment instruments. The
Borrower and the Guarantor shall indemnify and save the Bank
harmless from and against any and all claims, losses, costs, fees
and expenses, demands, debts, liabilities and obligations incurred
by the Bank in connection with any of the foregoing.
(f) INDEMNITY. The Borrower and the Guarantor agree to indemnify and
hold the Bank and its officers, directors, employees, agents and
advisors (each, an "INDEMNIFIED PERSON") harmless from and against
any and all suits, actions, demands, obligations, proceedings,
claims, damages, losses, liabilities, costs, fees and expenses of
any kind or nature whatsoever (including any and all professional
fees and disbursements, on a solicitor and client basis) which may
be instituted, asserted against or incurred by any Indemnified
Person as a result of or in connection with, credit having been
extended, suspended or terminated under this Agreement, the
transactions contemplated hereunder or any other agreement or
document contemplated hereunder or delivered in connection herewith
(collectively, the "DOCUMENTS"), any investigation, litigation or
proceeding in connection herewith or any other Documents, and the
enforcement, performance, administration, action or inaction by any
of the Indemnified Persons of or under this Agreement or any of the
other of the Documents, including, without limitation, relating to
any and all claims for product liability, environmental liability
and non-payment of taxes (collectively, the "INDEMNIFIED
LIABILITIES"), except to the extent that any such Indemnified
Liability is finally determined by a court of competent jurisdiction
to have resulted solely from such Indemnified Person's gross
negligence or wilful misconduct. No Indemnified Person shall be
responsible or liable to any other party to this Agreement or any of
the other Documents, any heir, executor, administrator, other legal
personal representative, successor, assignee or third party
beneficiary of such Person or any other Person asserting claims
derivatively through such party, for indirect, punitive, exemplary
or consequential damages which may be alleged or incurred as a
result of or arising out of any of the above, including, without
limitation, credit having been extended, suspended or terminated
under this Agreement or any of the other Documents, or any of the
transactions contemplated under this Agreement or any of the other
Documents except to the extent that any such Indemnified
Liabilities, as finally determined by a court of competent
jurisdiction, result solely from such Indemnified Persons gross
negligence or wilful misconduct.
26
(g) NOTICES. Any notice or demand or other written communication
hereunder shall be given by facsimile, letter or by electronic means
of communication. A facsimile communication shall be deemed received
on the Business Day following its transmission. A letter shall be
deemed received when delivered to the receiving party, at the
address shown herein. An electronic communication shall be deemed
received on the day of transmittal if a Business Day and before 5:00
p.m., or if not, on the next Business Day. Each party shall be bound
by any notice given hereunder and entitled to act in accordance
therewith.
(h) COUNTERPARTS, ETC. This Agreement may be executed in any number of
counterparts and by facsimile transmission, each of which shall be
deemed to be an original and all of which when taken together, shall
constitute one and the same Agreement. Furthermore, any Statement or
monthly officer's certificate required to be delivered by or on
behalf of the Borrower to the Bank hereunder, may be submitted
electronically by e-mail transmission addressed to xxxxxxxx@xxx.xxx
or to such other e-mail address as shall be notified by the Bank to
the Borrower from time to time. Any Statement or monthly officer's
certificate submitted electronically by way of e-mail, whether or
not a signature appears thereon, shall have the same legal effect as
if it was signed by the Person submitting same and an original
thereof delivered to the Bank. Without limiting the foregoing, the
Bank shall be entitled to consider any Statement or monthly
officer's certificate that the Bank receives by or on behalf of the
Borrower, whether or not a signature appears thereon, as duly
authorized and delivered to the Bank, and the Borrower acknowledges,
confirms and agrees that any such communication shall be binding
upon the Borrower.
(i) AMENDMENTS AND WAIVERS. No amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the
Borrower from any provision of this Agreement will in any event be
effective unless it is in writing and then the amendment,
modification, waiver or consent will be effective only in the
specific instance, and for the specific purpose and length of time
for which it is given by the Bank. No failure to exercise and no
delay in exercising on the part of the Bank, any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude
any other right, power or privilege.
(j) 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 invalidate, affect
or impair any of the remaining provisions hereof.
(k) GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with, and governed by, the laws of the Province of B.C.
(without regard to rules or principles relating to conflicts of
laws) and of Canada applicable therein.
27
(l) WHOLE AGREEMENT. This Agreement and any security or other documents
and agreements delivered pursuant to or referred to in this
Agreement; constitutes the whole and entire agreement between the
parties in respect of the credit facilities contemplated hereunder.
(m) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
enure to the benefit of the Bank, the Borrower and the Guarantor and
their respective heirs, executors, administrators, other legal
representatives, successors and assigns. Neither this Agreement nor
any interest in this Agreement may be assigned by the Borrower
without the prior written consent of the Bank. The Bank may assign
or transfer or grant participations in its rights or obligations
under this Agreement in whole or in part at any time upon giving
reasonable notice to the Borrower and the Guarantor. The Bank may
disclose to potential or actual transferees or assignees or
participants, any information regarding the Borrower and the
Guarantor as the Bank considers necessary and the Borrower and the
Guarantor consent to such disclosure.
(n) FURTHER ASSURANCES. The Borrower shall promptly execute and deliver
all further documents and do all other acts or things and take all
further action that the Bank may require to give effect to the
provisions of this Agreement, including, without limitation,
providing the Bank with any further security it may require in
connection with the debts, liabilities and obligations of the
Borrower to the Bank at any time and from time to time.
(o) EFFECTIVE DATE. This Agreement becomes effective on the Effective
Date.
(p) CONFLICTS,. In the event of any conflict between the terms and
provisions of this Agreement and the terms and provisions of any
security or other agreements delivered to the Bank pursuant to this
Agreement and referred to in Schedule "B" or otherwise, the
provisions of this Agreement shall govern, but only to the extent of
such conflict.
(q) PUBLICATION. The Borrower and the Guarantor hereby consent to the
Bank publishing and disclosing such details of the credit facilities
contemplated hereunder to such Persons as the Bank deems appropriate
for advertising or public relations purposes on the condition that
the Bank permits Pine Valley, as a public company, to first approve
the proposed disclosure.
(r) CREDIT INFORMATION. The Borrower and the Guarantor hereby consent to
the collection, use, exchange and disclosure of credit or other
information from time to time by the Bank with any other financial
institution, credit bureau, credit reporting agency and any Person
which the Borrower and the Guarantor may have business dealings
with. The Borrower and the Guarantor understand that this
information may be used for any purpose relating to the credit
facilities contemplated hereunder, including, without limitation,
the exercise of any of the Bank's rights hereunder or under any
other agreement or document contemplated hereunder.
28
(s) CURRENCY. All amounts referred to herein are in Canadian Dollars
unless otherwise specifically indicated and all U.S. assets,
including without limitation, all U.S. Accounts Receivable, shall be
valued in, and converted into, Canadian Dollars in accordance with
the Bank's customary banking and conversion practices and
procedures.
(t) PERMITTED LIENS. For greater certainty, it is hereby understood and
agreed by the parties hereto that the definition and use of the term
"Permitted Liens" herein shall mean that such encumbrances are
permitted to exist but shall in no way be interpreted to mean that
such encumbrances are entitled to any priority over the Bank's
security interests and hypothecs and the Borrower hereby
specifically and expressly acknowledged and agree that any such
encumbrances not properly perfected under applicable Law shall not
be entitled to priority over the Bank's security interests and that
this Agreement is not intended and shall not confer any rights upon
any Person whatsoever who is not a party to this Agreement.
The rest of this page intentionally left blank
29
Please acknowledge your acceptance of the above terms and conditions by signing
the attached copy of this Agreement in the space provided below and returning it
to the Bank.
Yours truly,
ROYAL BANK ASSET BASED
FINANCE, a division of Royal Bank of
Canada
By: /s/ X. Xxxxxxxxxx
---------------------------------------------
Name: X. Xxxxxxxxxx
Title: Senior Manager, Underwriting
By: /s/__________________________________________
Name:
Title: Senior Manager, Portfolio
WE ACKNOWLEDGE AND ACCEPT the terms and conditions of this Agreement.
PINE VALLEY MINING FALLS MOUNTAIN COAL
CORPORATION INC.
By: /s/ Xxxxxx Rip By: /s/ Xxxxxx Rip
--------------------------- -----------------------------
Name: Xxxxxx Rip Name: Xxxxxx Rip
Title: VP Finance & CFO Title: Secretary
I have the authority to bind the Corporation I have the authority to bind the
Corporation
Suite 000 - 000 Xxxxxxx Xxxxxx Xxxxx 000 - 535 Xxxxxxx Street
Vancouver, B.C. V6E 3L2, Xxxxxxxxx, X.X. X0X 0X0,
Fax No. 000.000.0000 Fax No. 000.000.0000
E-mail address E-mail address
xxxx@xxxxxxxxxxxxxx.xxx xxxx@xxxxxxxxxxxxxx.xxx
[Signatures continued on nex page.]
30
PINE VALLEY COAL LTD.
By: /s/ Xxxxxx Rip
---------------------------
Name:
Title:
I have the authority to bind the Corporation.
XXXXX 000 - 000 XXXXXXX XXXXXX
XXXXXXXXX, X.X. X0X 0X0,
FAX NO. 000.000.0000
E-MAIL ADDRESS
Xxxx@xxxxxxxxxxxxxx.xxx
THE GUARANTOR HEREBY ACKNOWLEDGES AND ACCEPTS the terms and conditions of this
Agreement.
GLOBALTEX GOLD MINING
CORP.
By: /s/ Xxxxxx Rip
---------------------------
Name: Xxxxxx Rip
Title: Secretary
I have the authority to bind the Corporation.
SUITE 501 -- 000 XXXXXXX XXXXXX
XXXXXXXXX, X.X. X0X 0X0,
FAX NO. 000.000.0000
E-MAIL ADDRESS
Xxxx@xxxxxxxxxxxxxx.xxx
31
Schedule "A" to the Agreement between the Borrower and the Bank.
DEFINITIONS
"ACCOUNTS RECEIVABLE" consists of amounts, including applicable taxes, which are
owed to the Borrower by a customer for goods or services sold on credit;
"AFFILIATE" shall have the meaning as such term is defined in the British
Columbia Business Corporations Act;
"ASSOCIATE" shall have the meaning as such term is defined in s.195 of the
British Columbia Business Corporations Act;
"BANKERS' ACCEPTANCE" or "BA" means a xxxx of exchange, including a depository
xxxx issued in accordance with the Depository Bills and Notes Act (Canada),
drawn on the Bank by, and payable to the order of, the Borrower which have been
accepted by the Bank;
"BRANCH OF ACCOUNT" has the meaning ascribed thereto in the opening paragraph on
page 1 of the Agreement;
"BUSINESS DAY" means a day, excluding Saturday, Sunday and any legal holidays in
EITHER ONTARIO OR B.C., on which the Branch of Account is open for business and,
when used in connection with a Libor Loan, means, in addition to the foregoing,
a day on which dealings in US currency deposits by and between leading banks in
the London Interbank Market may be concluded;
"CANADIAN DOLLARS" and the symbols "CAD", "CDN$" and "$" each mean lawful money
of Canada unless otherwise indicated;
"CANADIAN GAAP" shall mean generally accepted accounting principles in Canada as
in effect from time to time and for the period as to which such accounting
principles ought to apply;
"CAPITAL EXPENDITURES" means, for any fiscal period, any amounts accrued or paid
in respect of any purchase or other acquisition for value of capital assets, and
for greater certainty, excludes amounts expended in respect of the normal repair
and maintenance of capital assets utilized in the ordinary course of business;
"CONDITIONAL" means an Eligible Accounts Receivable for which the Borrower is
awaiting the results of lab analysis of the quality of coal that is the subject
of the account receivable, and reported by the Borrower on the Statement of
Assets as a Conditional Accounts Receivable;
"CREDIT LIMIT" means the lesser of the following:
(a) $20,000,000 less the L/G Limit and the Fx Reserve; and
(b) the Facility Borrowing Base less the L/G Limit and the Fx Reserve
1
"EBITDA" means, for any fiscal period, net income from continuing operations
(excluding extraordinary gains or losses) plus, to the extent deducted in
determining net income, any and all Interest Expenses and income taxes accrued
during, and depreciation, depletion and amortization expenses deducted for, such
fiscal period;
"EFFECTIVE DATE" means that date upon which all documents required by the Bank
to complete the transactions contemplated herein, have been executed and
unconditionally delivered to the Bank free of any escrow arrangements, and the
Credit Facility becomes available to the Borrower;
"ELIGIBLE ACCOUNTS RECEIVABLE" means total Accounts Receivable arising in the
ordinary course of the Borrower's business insured by an insurer acceptable to
the Bank, or which are secured by an irrevocable letter of credit, which the
Bank in its sole and absolute discretion shall deem eligible based on such
considerations as the Bank may from time to time deem appropriate and which
conform in all respects to the representations and warranties set forth herein,
less:
(a) any amount which remains unpaid by any customer of the Borrower
after 60 days from Invoice Maturity Date where that amount
represents less than 15% of the total indebtedness owing by that
customer and less the whole account (all amounts owing by such
customer) if the amount over 60 days from Invoice Maturity Date
represents 15% or more of the total indebtedness owing by that
customer, which percentage of the total indebtedness owing by a
customer to the Borrower may be varied by the Bank at any time in
its absolute and sole discretion;
(b) any amounts over accepted credit limits established by the Bank from
time to time in its sole and absolute discretion for each account
debtor of the Borrower which credit limits may be changed by the
Bank at any time and from time to time as the Bank deems appropriate
in its sole and absolute discretion;
(c) any Accounts Receivable granted extended credit terms beyond 30 days
unless pre-approved by the Bank in writing;
(d) any amounts which are conditional upon or subject to any service,
acceptance, guarantee, warranty, rebate, discount, allowance, joint
advertising fee, credit, set-off, trade dispute or other dilutive
factor or other claim of any customer or obligation of the Borrower;
(e) all employee, Affiliated or Associated, contra and foreign accounts
not expressly approved in writing by the Bank;
(f) any lease, rental, royalty or like payments owing by any customer to
the Borrower;
(g) any amount which arises from a sale on a cash basis, xxxx and hold,
guaranteed sale, sale or return, sale on approval, contra account,
consignment or any other repurchase or return basis;
2
(h) any amounts from any customer of the Borrower under any proceeding
under any Insolvency Statute;
(i) the value of all credits available to customers of the Borrower
regardless of whether credit notes have been issued or not;
(j) the value of debit memos in relation to any Accounts Receivable;
(k) any Accounts Receivable which have been sold, transferred or
assigned by the Borrower to any other Person;
(l) any Accounts Receivable in which the account debtor is a federal,
provincial or municipal governmental body, corporation, commission,
board, agency, foundation, association, council or other authority
of any kind whatsoever which are not validly assignable to, and
payment thereof is not enforceable by, the Bank; and
(m) any other amounts deemed ineligible by the Bank, in its sole and
absolute discretion.
"ELIGIBLE INVENTORY" means the value of the Borrower's Inventory which the Bank
considers in its sole and absolute discretion to be eligible based on such
considerations as the Bank may from time to time deem appropriate and which
conform in all respects to the representations and warranties set forth herein
and, without limiting the generality of the foregoing, no Inventory shall be
"Eligible Inventory" unless it consists of saleable coal
(a) that is of merchantable quality and in saleable condition
(b) that is unconditionally owned by, and in the physical possession of,
the Borrower at locations satisfactory to the Bank, provided that
the coal located at the port will be low ash coal, has not been
billed to a customer or is being held by any other Person, unless
waivers and consents have been executed and delivered to the Bank or
reserves have been taken, to the Bank's satisfaction in its absolute
and sole discretion;
(c) which is not in transit from the Borrower unless it is low ash coal
on the rail insured as required by the Bank;
(d) are not unsaleable as determined by the Bank in its sole and
absolute discretion;
(e) meet all standards imposed by any governmental authority and are in
compliance with all Laws, Permits and Material Contracts;
(f) are not subject to any restrictions relating to their sale or
liquidation, including, without limitation, pursuant to any
trade-xxxx, distribution or licensing arrangement unless waivers and
consents have been executed and delivered to the Bank to its
satisfaction, in its absolute and sole discretion;
3
(g) can be verified by an inventory system acceptable to the Bank in its
absolute and sole discretion;
(h) can be sold or liquidated without a Permit unless the Borrower
possesses all such required Permits and such Permits are not
terminable upon any proceeding under any Insolvency Statute;
(i) which are deemed eligible by the Bank in its sole and absolute
discretion;
"EQUIVALENT AMOUNT" means, with respect to an amount of Canadian Dollars, the
amount of any other currency required to purchase that amount of Canadian
Dollars through Royal Bank of Canada in Toronto at its noon spot rate, in
accordance with normal banking procedures.
"FACILITY BORROWING BASE" means at the date of determination, an amount equal to
the aggregate of:
(a) for Eligible Accounts Receivables:
(i) with lab results confirming the quality of the coal when the
Borrower first reports them on the Statement of Assets, 90%;
or
(ii) that are Conditional:
(A) when the Borrower first reports them on the Statement of
Assets; 70%; plus
(B) when the lab results confirm the quality of the coal,
20% if there is no adjustment of the Eligible Accounts
Receivable, or if there is an adjustment necessary, then
the difference between 90% of the adjusted Eligible
Accounts Receivable and 70% of the amount reported as
Conditional; and
(b) 85% of the NOLV of Eligible Inventory,
less any reserves established by the Bank in its sole and absolute
discretion, including, without limitation, the L/G Limit, and any Fx
Reserve in respect of negative cost test variances, any physical inventory
count negative variance and an amount equal to the accounts payable,
pursuant to the weekly Statement of Assets, to Neptune and to BC Rail
Partnership and its successor, CN Rail, and for any matter or thing which
affects the collectability of the Accounts Receivable, a realisation of
the Inventory or the Bank's first (subject to Permitted Liens) secured
priority position. The Borrower hereby acknowledges and agrees that the
aforesaid advance rates may be varied by the Bank at any time in its
absolute and sole discretion without notice to or consent of the Borrower
or the Guarantor as a result of, inter alia, an adverse change in the
value or the quality of the property and assets of the Borrower, any
dilutive effect on any Accounts Receivable, the creditworthiness of the
Borrower's account debtors, or an adverse change in the Borrower's
business, financial condition or prospects. More specifically, the
Borrower hereby acknowledges that the advance rate for Eligible Inventory
is based upon a certain
4
or assumed NOLV and hereby agrees that the Bank may vary such advance
rates as the Bank deems appropriate in its sole and absolute discretion if
there is an adverse change in such NOLV or any market factors which may
affect such liquidation values;
"FALLS MOUNTAIN" means Falls Mountain Coal Inc., a company incorporated under
the laws of the Province of British Columbia;
"FIXED CHARGE COVERAGE RATIO" means, for any fiscal period, the ratio of EBITDA
plus payments under operating leases less cash income taxes and Unfunded Capital
Expenditures to Fixed Charges;
"FIXED CHARGES" means, for any fiscal period, the aggregate amount of Interest
Expenses, scheduled principal payments in respect of any and all obligations for
borrowed money plus, without duplication, all obligations for the deferred
payment of the purchase of any property, all capital lease obligations, payments
under operating leases and any payments to any shareholder, officer, director,
subsidiary, Associate or Affiliate of the Borrower or of any of their respective
subsidiaries, Associates or Affiliates, including, without limitation, any
bonuses, dividends, salaries, repayment of debt, making of loans or other forms
of remuneration other than payments of salaries in the normal course of business
and consistent with past practice;
"FX CONTRACTS" has the meaning ascribed thereto in Section 7; "Fx Deficiency"
has the meaning ascribed thereto in Section 7; "Fx Facility" has the meaning
ascribed thereto in Section 7;
"FX FACILITY CREDIT LIMIT" has the meaning ascribed thereto in Section 7; "Fx
Reserve" has the meaning ascribed thereto in Section 7;
"GOODS" shall mean all "goods" as such term is defined in the Personal Property
Security Act (British Columbia).
"GUARANTOR" shall mean Globaltex Gold Mining Corp., a company incorporated under
the laws of the Province of British Columbia, and any other Person who becomes a
guarantor or surety of the Borrower's obligations to the Bank and any reference
to "Guarantor" shall mean all of them collectively;
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous substances,
materials and wastes, including, without limitation, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any
other kind and/or type of pollutants or contaminants (including, without
limitation, materials which include hazardous constituents), sewage, sludge,
industrial slag, solvents and/or any other similar substances, materials, or
wastes and including any other substances, materials or wastes that are or
become regulated under any Laws (including, without limitation, any that are or
become classified as hazardous or toxic under any Laws);
"INSOLVENCY STATUTE" means any of the Bankruptcy and Insolvency Act (Canada),
the Companies' Creditors Arrangement Act (Canada), the Winding Up and
Restructuring Act, any applicable corporation statute governing the Borrower or
the Guarantor and Title 7 or Title 11 of the United States Code entitled
"Bankruptcy", each as now and hereafter in effect, any
5
successors to such statutes and any other applicable insolvency or other similar
law affecting creditors' rights of any jurisdiction;
"INTEREST DETERMINATION DATE" means, with respect to a Libor Loan, the date
which is 2 Business Days before the first day of the Libor Interest Period
applicable to such Libor Loan;
"INTEREST EXPENSES" means, for any fiscal period, the aggregate costs of
advances of credit outstanding during that period, including, without
limitation, interest charges, capitalized interest, the interest component of
capital leases, fees payable in respect of any and all letters of credit and
letters of guarantee and discounts incurred, and fees payable, in respect of any
and all bankers' acceptances;
"INVENTORY" means "INVENTORY" (as such term is defined in the Personal Property
Security Act (BRITISH COLUMBIA)) of the Borrower;
"INVOICE" means any document or electronic data file issued or forwarded by the
Borrower to its customer, which evidences an account;
"INVOICE DATE" means the date specified on an Invoice as its date of issue.
"INVOICE MATURITY DATE" shall mean the day on which the Invoice matures, based
on the terms of the Invoice. The maturity date will not exceed 30 days from the
Invoice Date unless otherwise authorized by the Bank in writing;
"LAWS" means all laws, regulations, rules, codes, policies, directives,
handbooks, orders, statements, bulletins and industry standards whether or not
having the force of law;
"LETTER OF CREDIT" means a documentary credit issued by the Bank on behalf of
the Borrower for the purpose of paying suppliers of goods;
"LETTER OF GUARANTEE" means a documentary credit issued by the Bank on behalf of
the Borrower for the purpose of providing security to a third party that the
Borrower or a person designated by the Borrower will perform a contractual
obligation owed to such third party;
"LIBOR" means, with respect to each Libor Interest Period applicable to a Libor
Loan, the annual rate of interest (rounded upwards, if necessary, to the nearest
whole multiple of one sixteenth of one percent (1/16th%)), at which the Bank, in
accordance with its normal practice, would be prepared to offer deposits to
leading banks in the London Interbank Market for delivery on the first day of
each of such Libor Interest Period, for a period equal to each such Libor
Interest Period, such deposits being in US currency (or other agreed upon
Eurocurrency specified herein) of comparable amounts to be outstanding during
such Libor Interest Period, at or about 10:00 a.m. (Toronto time) on the
Interest Determination Date;
"LIBOR INTEREST DATE" means with respect to any Libor Loan, the last day of each
Libor Interest Period and, if the Borrower selects a Libor Interest Period for a
period longer than 3 months, the Libor Interest Date shall be the date falling
every 3 months after the beginning of such Libor Interest Period as well as the
last day of such Libor Interest Period;
6
"LIBOR INTEREST PERIOD" means, with respect to any Libor Loan, the initial
period (subject to availability) of approximately 1 month (or longer whole
multiples of 1 month to and including 6 months as selected by the Borrower and
notified to the Bank by written notice) or such shorter or longer period as the
Bank in its sole discretion shall make available commencing on the date on which
such Libor Loan is made or another method of Borrowing is converted to a Libor
Loan, as the case may be, and thereafter, while such Libor Loan is outstanding,
each successive period (subject to availability) of 1 month (or longer whole
multiples of 1 month to and including 6 months, as selected by the borrower and
notified to the Bank by written notice) commencing on the last day of the
immediately preceding Libor Interest Period;
"LIBOR LOANS" means the LIBOR loans in US$ described in Schedule "I";
"LIENS" means any lien, security interest, charge, mortgage, hypothec, prior
claim, right of retention, right of distress, trust claim, deemed trust, right
of repossession or similar right of unpaid suppliers, lease, leasing
(credit-bail), conditional sale, bailment, consignment or any other adverse
claim or other encumbrance whatsoever;
"L/GS" has the meaning ascribed thereto in Section 4;
"L/G LIMIT" means N/A at present or such other amount as may be agreed to in
writing by the Bank from time to time; "MATERIAL CONTRACTS" has the meaning
ascribed thereto in paragraph 12(i) of this Agreement;
"NET ORDERLY LIQUIDATION VALUE" or "NOLV" means the determination by an
independent broker of the average monthly PCI Coal price (including coking coal
when required) adjusted monthly based on the previous month's prices, and
confirmed quarterly by a professional appraisal opinion, from a Bank appointed
appraiser performed in accordance with the guidelines established by the Uniform
Standards of Professional Appraisal Practices, of the net proceeds that could be
expected from an orderly liquidation sale of the inventory, professionally
managed.
"PERMITS" means all licences, certificates, consents, franchises, permits,
approvals or similar authorizations;
"PERMITTED LIENS" means:
(a) any "purchase money security interest" or vendor's hypothec or other
Lien on equipment (as defined in the Personal Property Security Act
(British Columbia)) used by the Borrower in the operation of its
business and which is not for resell, lease or rental to its
customers which is assumed, created or reserved to secure the unpaid
purchase price of such equipment after the date hereof provided that
any such Lien is limited to the equipment so acquired, does not
include, charge, apply or attach to the Equipment, and that the
principal amount secured thereby is not increased;
(b) Liens in favour of each of the secured parties set out in the
schedule attached as Schedule J;
7
(c) Liens in favour of the Bank; and
(d) Liens consented to by the Bank in writing;
"PERSON" means an individual, partnership, corporation, company, trustee, trust,
unincorporated organisation, non-share capital corporation, or any federal,
provincial or municipal governmental body, corporation, commission, board,
agency, foundation, association, counsel or other governmental authority of any
kind whatsoever, or any other entity whatsoever;
"PINE VALLEY" means Pine Valley Mining Corporation, a company incorporated under
the laws of the Province of British Columbia;
"PVC" means Pine Valley Coal Ltd., a company incorporated under the laws of the
Province of Alberta;
"RBP" and "ROYAL BANK PRIME" 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 made in Canada;
"RBUSBR" and "ROYAL BANK U.S. BASE PRIME RATE" means the annual rate of interest
announced by the Bank from time to time as being a reference rate in effect for
determining interest rates on US Dollar commercial loans made in Canada;
"TANGIBLE NET WORTH" shall mean the aggregate amount of all contributed capital,
retained earnings, contributed surplus and shareholder loans formally and
unconditionally postponed to and in favour of the Bank less any and all
intangibles, including, without limitation, goodwill, deferred charges, net
leasehold improvements, investments in or advances to any shareholders or any
subsidiary, Affiliate or Associate of the Borrower or any of its officers,
directors, employees or shareholders any capitalized interest, future income
taxes, and any or all other assets classified as intangibles under Canadian
GAAP;
"UNFUNDED CAPITAL EXPENDITURES" means any Capital Expenditure made solely with
the use of the Borrower's cash flow generated from its operations and for
greater certainty, not with the use of any Credit Facilities provided by the
Bank to the Borrower;
US DOLLARS" and the symbols "US$" each mean lawful money of the United States of
America; and
"WILLOW CREEK PROJECT" means the coal mine in the Peace River District of
British Columbia, 45 kilometres from the town of Chetwynd known as the Willow
Creek Coal Project.
8
This is Schedule "B" to the Agreement between the Borrower and the Bank.
SECURITY/CAPITAL REQUIREMENTS
1. A general security agreement providing for a first (subject to Permitted
Liens) charge over all of the Borrower's present and after acquired
property and including a floating charge on land to be provided by each of
Pine Valley, Falls Mountain, and PVC.
2. Section 426 and 427 Bank Act Security providing for a first (subject to
Permitted Liens) charge over all of the Borrower's Inventory, including
the coal in situ.
3. All necessary acknowledgements, delivery acceptance certificates,
subordinations, priority agreements, consents, assignments, landlord's
waivers (including any applicable future waivers) or assignments of
lease(s) which are necessary in the Bank's sole opinion to ensure the
first (subject to Permitted Liens) priority position of all of the Bank's
security.
4. Unlimited guarantee from the Guarantor in relation to each Borrower.
5. A general security agreement providing for a first (subject to Permitted
Liens) charge over all of the Guarantor's present and after acquired
property and including a floating charge on land
6. Postponement of Claims from the Guarantor in relation to each of Pine
Valley, Falls Mountain and PVC.
7. CRA's business consent form whereby the Borrower provides its
authorisation and consent for the Bank to communicate directly with CRA
concerning the Borrower.
8. An assignment of all risks, business interruption and accounts receivable
insurance with coverage acceptable to the Bank in its sole and absolute
discretion with the Bank as first loss payee and as an additional insured
with a standard mortgage clause against Inventory, supported with an
endorsement of all such insurance policies and a certificate of insurance
confirming that the Bank shall receive not less than 30 days' prior
written notice of any amendment, renewal, endorsement, expiration or
cancellation of such policies.
9. Postponement and subordination agreement with The Rockside Foundation.
10. Assignments of Material Contracts from Falls Mountain.
11. Such other security and other documents as the Bank deems necessary at any
time in its sole and absolute discretion which shall be reviewed by the
Bank from time to time.
12. Assignments of the Spot Contract and the Agency Agreements between Falls
Mountain and Neptune Bulk Terminals (Canada) Ltd.
1
This is Schedule "C" to the Agreement between the Borrower and the Bank.
FINANCIAL, REPORTING AND OTHER COVENANTS
1. The Borrower shall deliver to the Bank, at least weekly, a Statement of
Assets for Pine Valley and Falls Mountain, substantially in the form
attached as Schedule "D", together with an electronic download of their
accounts receivable ledger, debtor listing, a copy of their accounts
payable ledger and a copy of their inventory listing by tonnage at the
Mine, in transit, and at the Port with high ash tonnage at the Port to be
broken out, and for product delivered and to which any outstanding
accounts receivable relate, copies of relevant supporting documents from
SGS Canada and from Neptune Bulk Terminals (Canada) Ltd. (as applicable)
as to quantity, price and quality of that product, all in a form
acceptable to the Bank, to substantiate all amounts on the Statement.
2. Within 30 calendar days of each month-end, the Borrower shall deliver to
the Bank, for Pine Valley and Falls Mountain, monthly internally prepared
financial statements which include at least a revenue and expense
statement, a cash flow statement, trial balance and detailed balance
sheet; a detailed inventory listing and accounts receivable and accounts
payable listing; copies of supporting sales documentation (including bills
of lading, and product quality test reports); all SGS Canada Inc. reports,
and copies of all bank statements.
3. The Borrower shall deliver to the Bank audited consolidated year end
financial statements of Pine Valley within 120 days of its year end,
accountant reviewed year-end statements for Falls Mountain (effective
March 2006); and accountant reviewed year-end statements (unconsolidated)
for Pine Valley and the consolidation schedule prepared by the Borrower
for Falls Mountain, the Guarantor and Pine Valley Coal Ltd.
4. The Borrower shall deliver to the Bank on a monthly basis within 30
calendar days of each month-end, certificates signed by an authorized
officer of the Borrower, substantially in the form attached as Schedule
"E".
5. The Borrower shall cause the Guarantor to deliver to the Bank internally
prepared quarterly financial statements within 45 days of the end of each
financial quarter of the Guarantor's fiscal year.
6. The Borrower shall promptly deliver to the Bank the annual reclamation
report, and the annual water quality results currently due on March 31 and
July 31 of each year, respectively. The Borrower will deliver to the Bank
a list of any other environmental consultants' reports the Borrower
receives in relation to the Willow Creek Project site, and all other
annual reports filed by it with any regulatory authority concerning the
state or condition of the Willow Creek Project site or Willow Creek
Project operations. The Borrower will, at the Bank's written request,
deliver to the Bank any of the reports on the list delivered by the
Borrower and other reports filed by the Borrower with, or received by the
Borrower from, a regulatory authority or inspector acting under the Mines
Act, the Environmental Assessment Act, the Mine Development Assessment
Act, the Land Act,
1
the Forest Act, the Water Act, the Environmental Management Act, the Coal
Act and the Health Act, or any replacement or similar statute including
without limitation monthly water and air quality reports, monthly PM10
particulate report, deficiency reports or any other report or document
concerning the environmental state or condition of the Willow Creek
Project site or the Willow Creek Project operations.
7. The Borrower shall provide evidence satisfactory to the Bank that the
Borrower has verified the Letter of Credit used to support the Borrower's
asset retirement obligation is fully funded.
8. The Borrower shall confirm annually that all coal licenses and leases have
been renewed and paid prior to the annual expiry date of March 31.
9. The Borrower shall deliver to the Bank its annual internally prepared
business plan, including, without limitation, financial projections for
the upcoming fiscal year, at least 30 calendar days prior to the end of
the then current fiscal year.
10. The Borrower shall deliver to the Bank all documents or confirmations
required by the Bank in connection with the Borrower's participation in an
accounts receivable insurance program including, without limitation
confirmation of payment of premiums and an authorization to permit direct
contact between the insurance company and the Bank.
11. The Borrower shall deliver to the Bank any other documents, agreements,
records and reports which the Bank reasonably requests from time to time.
2
This is Schedule "D" to the Agreement between the Borrower and the Bank.
TO: ROYAL BANK ASSET BASED FINANCE A DIVISION OF ROYAL BANK OF CANADA
STATEMENT OF ASSETS
Reference is made to a credit agreement dated with effect as of , 2005, between
Pine Valley Mining Corporation, Pine Valley Coal Ltd., and Falls Mountain Coal
Inc. (the "BORROWER") and Royal Bank Asset Based Finance, a division of Royal
Bank of Canada (the "BANK") (the "AGREEMENT").
Defined terms used and not otherwise defined in this report, have the meanings
given to them in the Agreement.
The undersigned hereby certifies, on behalf of Pine Valley/Falls Mountain
[CIRCLE WHERE APPROPRIATE] (in this Statement, the 'Borrower"), that the
following accurately represents certain assets and accounts and Potential Prior
Ranking Claims (as indicated below) of, and against, the Borrower as of
_____________________________
(insert date of Statement)
CDN$ US$
TOTAL ACCOUNTS RECEIVABLE $__________________ $___________________
CONDITIONAL ACCOUNTS RECEIVABLE $__________________ $___________________
INELIGIBLE ACCOUNTS RECEIVABLE
contra accounts $__________________ $___________________
credit notes $__________________ $___________________
debit memos $__________________ $___________________
pre-billed invoices $__________________ $___________________
Rebates $__________________ $___________________
Other $__________________ $___________________
TOTAL ELIGIBLE INVENTORY $__________________ $___________________
tonnage tonnage
less the quantity of Inventory not unconditionally owned, on lease or rental,
held by a third Person for the Borrower, not in physical possession of Borrower
and not subject to a satisfactory waiver and consent, by location:
(specify location) Mine ____________tonnage
(specify location) In transit ____________tonnage
(specify location) Port ___high ash tonnage
(specify location) Port ____low ash tonnage
__________ ___________________
__________ ___________________
1
INELIGIBLE INVENTORY
Uninsured inventory in transit to either the
Borrower or its customers ____________ _________tonnage
____________ _________tonnage
consignment, xxxx and hold or bailment
Inventory ____________ ________________
unsaleable Inventory ____________ ________________
Inventory subject to claims of unpaid
Suppliers ____________ ________________
TOTAL INELIGIBLE INVENTORY IN TONNES
"POTENTIAL PRIOR-RANKING CLAIMS"
G.S.T. $_________________________
H.S.T. $_________________________
P.S.T. $_________________________
Retail Sales Tax $_________________________
Employee Source Deductions $_________________________
Employer Health Tax $_________________________
Capital Tax $_________________________
Municipal Taxes $_________________________
Federal Income Taxes $_________________________
Business Taxes $_________________________
Property Taxes $_________________________
Workers Compensation Board (WCB) (or equivalent) $_________________________
Accrued Vacation Pay $_________________________
Pension Plan Contributions (if applicable) $_________________________
2
Realty Taxes (if applicable) $_________________________
Rent $_________________________
Accrued Wages $_________________________
Accrued Commissions $_________________________
Union Dues Payable (if applicable) $_________________________
Other $_________________________
The undersigned hereby further certifies that, save as specifically set forth
above, there are no past due amounts owing for employee deductions, retail sales
tax, GST any other applicable sales tax, income tax, capital tax, corporate tax,
workplace safety and insurance compensation, vacation pay, pension plan
contributions, utilities (eg. hydro), property taxes, municipal taxes, employee
health tax, insurance premiums, business taxes, property taxes, municipal taxes,
rent or other potential pari passu or prior-ranking claims. The Borrower also
confirms that none of its assets are subject to any purchase-money security
interests or other security interests ranking or purporting to rank pari passu
or in priority to any and all security given by the Bank in connection with the
credit facilities contemplated under the Agreement, other than Permitted Liens.
The Borrower acknowledges, confirms and agrees that this Statement will be used
and relied upon by the Bank in the calculation of the Facility Borrowing Base
and making any accommodations of credit available to the Borrower.
Subject to the calculation of availability by the Bank, the Borrower requests an
advance under the Credit Facility in the amount of (a) Cdn$______________ for
deposit to our Account no.______________ on (b) US$________________ for deposit
to our account no.________________ on_____________________ .
DATED this ______________ day of _______________, 200_______________.
_______________________________________________________
(insert name and title of authorized officer of Borrower
3
This is Schedule "E" to the Agreement between the Borrower and the Bank.
MONTHLY CERTIFICATE EXAMPLE
COMPANY NAME Falls Mountain Coal Inc._________________________________________
(the "COMPANY")
MONTHLY CERTIFICATE DATE _____________________________________________________
1. TAXES
Our Tax Position is as follows:
AMOUNT PAYABLE PAST DUE
Federal Income Tax
Retail Sales Tax
GST HST PST
Property Tax
Business Tax
Municipal Tax
Excise Tax
Employee Income Tax
Employee Health Tax
Corporate Tax
Capital Tax
OTHER
Accrued Payroll
UIC Payable
Canadian Pension Plan
Vacation Pay
Rent
Workers Compensation Board
Utilities (e.g. Hydro)
Other Pension or Benefit Plans
2. BORROWINGS AND SECURITY
Has there been any change to the borrowings of the Company and/or additional
security or guarantees pledged?
YES / NO
1
Name of Lender :
Security given :
Guarantees Given :
Other Assets Pledged :
Amount
3. BANK ACCOUNTS
Have any new bank accounts been opened?
YES / NO
The following bank account was opened.
New Bank Account
Bank :
Account Number :
Address :
The new account was opened for the following reason:
Did you either directly or indirectly have any monies paid into any bank
accounts for invoices.
YES / NO
If yes, provide full details.
DATE OF DEPOSIT AMOUNT DEBTOR INVOICES PAID
Bank statements for the month _______________________are enclosed.
4. SHAREHOLDING
Has there been any change in the shareholdings of the Company, its
associates, affiliates (each as defined in the Canada Business
Corporations Act) or subsidiaries, or has any movement in loan funds,
guarantees or securities between the Company and/or its directors,
officers, shareholders or employees or their respective associates,
affiliates or subsidiaries taken place?
YES / NO
The following movements took place:
2
5. LEGAL ACTIONS/JUDGEMENTS
Were any judgements recorded against the Company, or do you have any
knowledge of any impending legal actions, or are you the subject of any
pressure or threats from your financiers or creditors?
YES / NO
The following judgements, legal actions or creditor pressures are notified
herewith:
6. DEBTOR ACTIONS
Did you take any legal action against any of your customers, or did you
receive any adverse credit information which may effect their ability to
pay the debt on due date?
YES / NO
The following action was taken against delinquent debtors and adverse
credit information is detailed hereunder:
NAME OF CUSTOMER AMOUNT ACTION TAKEN
Are you aware of any invoices that are the subject of unissued credit
notes, contras, offsets, claims or counterclaims, retention's or any other
reasons why the invoices will not be paid in full?
YES / NO
The following are problematical debtors for the reasons given:
DEBTOR AMOUNT REASON FOR DISPUTE
Are there any debtors that the Company, its shareholders, officers,
directors or its executive employees have any direct or indirect interest
in?
YES / NO
We wish to declare the following interest in debtors:
Were any special debtor terms negotiated during the month?
YES / NO
3
The following special debtor terms were agreed:
NAME OF DEBTOR NEW TERMS
7. PRODUCTS OR SERVICE
Has the Company changed its target market or the products or services
offered?
YES/NO
The Company has changed its activities as follows:
8. CHANGE IN ACTIVITIES
The Company has changed its activity as follows:
9. INSURANCE
Has there been any changes to any insurance policies required to be
maintained by the Borrower?
YES / NO
If so, please specify:
10. REGISTERED AND EXECUTIVE HEAD OFFICE
Has the Company moved its accounts receivable collection function, the
location of the decision-makers or changed its registered head office?
YES/NO
If yes, state new location:
4
11. COVENANTS
A. FIXED CHARGE COVERAGE
earnings before interest and taxes $__________________
Depreciation $__________________
Amortization $__________________
payments under operating leases $__________________
less: cash income taxes $__________________
less: unfunded capital expenditures $__________________
TOTAL: $__________________
interest expense $__________________
scheduled principal payments $__________________
payments under operating leases $__________________
distributions to shareholders, etc. $__________________
TOTAL: $__________________
B. TANGIBLE NET WORTH
share capital $__________________
full and unconditionally postponed and subordinated
shareholder loans $__________________
other investments $__________________
retained earnings $__________________
current earnings $__________________
other $__________________
SUBTOTAL: $__________________
less: intangibles $__________________
less: leasehold improvements $__________________
less: inter-company investments $__________________
less: goodwill $__________________
less: other $__________________
TANGIBLE NET WORTH: $__________________
5
12. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company is in compliance with all covenants contained in the credit
agreement with Royal Bank Asset Based Finance, a division of Royal Bank of
Canada and all other documents and agreements contemplated therein and all
representations and warranties contained therein are true and correct as
of the date hereof.
13. DEFAULT
No event or circumstance has occurred which constitutes, or which, with
notice or lapse of time or both, would constitute a default under the
credit agreement with Royal Bank Asset Based Finance, a division of Royal
Bank of Canada or any other document or agreement contemplated therein.
DATED this _________________day of _____________, __________________
_________________________________________________________
[INSERT NAME AND POSITION OF AUTHORIZED OFFICE, BORROWER]
6
This is Schedule "F" to the Agreement between the Borrower and the Bank.
INTELLECTUAL PROPERTY
TRADE NAME "WILLOW CREEK"
1
