CREDIT AGREEMENT dated as of June 22, 2007 among INTERNATIONAL CONDUITS LTD. as Borrower - and - UNIVERSAL SECURITY INSTRUMENTS, INC., and USI ELECTRIC, INC. as Guarantors - and - CIT FINANCIAL LTD. as Lender
Exhibit
10.3
dated
as
of
June
22,
2007
among
INTERNATIONAL
CONDUITS LTD.
as
Borrower
-
and
-
UNIVERSAL
SECURITY INSTRUMENTS, INC.,
and
USI
ELECTRIC, INC.
as
Guarantors
-
and
-
CIT
FINANCIAL LTD.
as
Lender
THIS
CREDIT AGREEMENT
is dated
as of June 22, 2007 and is entered into among International Conduits Ltd.,
as
Borrower, Universal Security Instruments, Inc. and USI Electric, Inc. as
Guarantors, and CIT Financial Ltd., as Lender.
RECITALS
| A. |
The
Lender has agreed to provide certain credit facilities to the
Borrower.
|
|
B.
|
The
Guarantors have agreed to guarantee the obligations of the Borrower
in
connection herewith.
|
NOW
THEREFORE, in consideration of the mutual conditions and agreements set forth
in
this Agreement and for good and valuable consideration, the receipt of which
is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined
Terms.
As
used
in this Agreement, the following terms have the meanings specified
below:
“Accounts”
means,
in respect of each Credit Party, all of such Credit Party’s now existing and
future: (a) accounts (as defined in the PPSA), and any and all other
receivables (whether or not specifically listed on schedules furnished to the
Lender), including all accounts created by, or arising from, all of such Credit
Party’s sales, leases, loans, rentals of goods or renditions of services to its
customers, including those accounts arising under any of such Credit Party’s
trade names or styles, or through any of such Credit Party’s divisions;
(b) any and all instruments, documents, chattel paper (including electronic
chattel paper) (all as defined in the PPSA); (c) unpaid seller’s or
lessor’s rights (including rescission, replevin, reclamation, repossession and
stoppage in transit) relating to the foregoing or arising therefrom;
(d) rights to any goods represented by any of the foregoing, including
rights to returned, reclaimed or repossessed goods; (e) reserves and credit
balances arising in connection with or pursuant hereto; (f) guarantees,
indemnification rights, supporting obligations, payment intangibles, tax refunds
and letter of credit rights; (g) insurance policies or rights relating to
any of the foregoing; (h) intangibles pertaining to any and all of the
foregoing (including all rights to payment, including those arising in
connection with bank and non-bank credit cards), and including books and records
and any electronic media and software relating thereto; (i) notes, deposits
or property of borrowers or other account debtors securing the obligations
of
any such borrowers or other account debtors to such Credit Party; (j) cash
and non cash proceeds (as defined in the PPSA) of any and all of the foregoing;
and (k) all monies and claims for monies now or hereafter due and payable in
connection with any and all of the foregoing or otherwise.
“Action
Request” means
any
request received by any Credit Party or any of its Subsidiaries from any
Governmental Authority under any Environmental Law whereby such Governmental
Authority requests that it take action or steps or do acts or things in respect
of any property or assets in its charge, management or control to remediate
a
matter which is not or is alleged not to be in compliance with all Environmental
Laws.
“Acquisition”
means
any transaction, or any series of related transactions, consummated after the
Effective Date, by which any Credit Party, directly or indirectly, by means
of a
take-over bid, tender offer, amalgamation, merger, purchase of assets or
otherwise (a) acquires any business or all or substantially all of the
assets of any Person engaged in any business, (b) acquires control of
securities of a Person engaged in a business representing more than 50% of
the
ordinary voting power for the election of directors or other governing position
if the business affairs of such Person are managed by a board of directors
or
other governing body, (c) acquires control of more than 50% of the
ownership interest in any Person engaged in any business that is not managed
by
a board of directors or other governing body, or (d) otherwise acquires Control
of a Person engaged in a business.
“Adjusted
Tangible Net Worth”
means,
for the Credit Parties on a consolidated basis, the excess of total consolidated
assets over total consolidated liabilities, as determined in accordance with
GAAP on a consistent basis, provided,
however,
that
the determination of total consolidated assets shall exclude (i) all
goodwill, organizational expenses, research and development expenses, trade
marks, trade xxxx applications, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof, and other similar intangibles,
(ii) all prepaid expenses, deferred charges or unamortized debt discount
and expense, (iii) all reserves carried and not deducted from consolidated
assets, (iv) Equity Securities of, obligations or other securities of, or
capital contributions to, or investments in, any Subsidiary, (v) securities
which are not readily marketable, (vi) cash held in a sinking fund or other
analogous fund established for the purpose of redemption, retirement or
prepayment of Equity Securities or Indebtedness, (vii) any write-up in the
book value of any asset resulting from a revaluation thereof after the
acquisition thereof by the Borrower or a Restricted Subsidiary, as the case
may
be, and (viii) any items not included in clauses (i) through (vii) above
which are treated as intangibles under GAAP.
“Affiliate”
means,
(a) any Person which, directly or indirectly, Controls, is Controlled by or
is under common Control with any other Person; (b) any Person which
beneficially owns or holds, directly or indirectly, 10% or more of any class
of
voting stock or equity interest (including partnership interests) of any other
Person; (c) any Person, 10% or more of any class of the voting stock (or if
such Person is not a corporation, 10% or more of the equity interest, including
partnership interests) of which is beneficially owned or held, directly or
indirectly, by any other Person; or (d) any Person related within the
meaning of the ITA to any such Person and includes any “Affiliate” within the
meaning specified in the Canada
Business Corporations Act
on the
date hereof. The term control (including the terms “controlled by” and “under
common control with”), means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of the
Person in question.
“Agreement”
means
this Credit Agreement, as it may be amended, modified, supplemented or restated
from time to time.
“Applicable
Law”
means
all federal, provincial, municipal, foreign and international statutes, acts,
codes, ordinances, decrees, treaties, rules, regulations, municipal by-laws,
judicial or arbitral or administrative or ministerial or departmental or
regulatory judgments, orders, decisions, rulings or awards or any provisions
of
the foregoing, including general principles of common and civil law and equity,
and all policies, practices and guidelines of any Governmental Authority binding
on or affecting the Person referred to in the context in which such word is
used
(including, in the case of tax matters, any accepted practice or application
or
official interpretation of any relevant taxation authority).
“Assignment
and Assumption”
means
an assignment and assumption entered into by the Lender and an assignee (with
the consent of any party whose consent is required by Section 8.4), and accepted
by the Lender.
“Availability
Reserves”
means,
as of any date of determination, such amounts as the Lender may from time to
time establish and revise in its sole discretion reducing the Borrowing Base
which would otherwise be available to the Borrower under the lending formulas
provided for herein (a) to reflect criteria, events, conditions,
contingencies or risks which, as determined by the Lender in its sole
discretion, do or may affect either (i) any component of the Borrowing Base
or its value, (ii) the assets, business, operations, industry, financial
performance, financial condition or prospects of the Credit Parties, or
(iii) the security interests and other rights of the Lender in the
Collateral (including the enforceability, perfection and priority thereof),
or
(b) to reflect the Lender’s customary practice or its reasonable belief
that any collateral report or financial information furnished by or on behalf
of
the Borrower to the Lender is or may have been incomplete, inaccurate or
misleading, or (c) in respect of any state of facts which the Lender
determines constitutes a Default or an Event of Default. Without limiting the
foregoing, the Lender, in its sole discretion, may establish and/or increase
Availability Reserves in respect of: (a) (i) three months rental
payments or similar charges for any of the Borrower’s leased premises or other
collateral locations for which the Borrower has not delivered to the Lender
a
landlord’s waiver or bailee’s letter substantially in the form attached hereto
as Exhibits C and D, respectively, plus (ii) three months estimated
payments plus any other fees or charges owing by the Borrower to any applicable
warehousemen or third party processor (as determined by the Lender in its
reasonable business judgement), provided
that any
of the foregoing amounts shall be adjusted from time to time hereafter upon
(x) delivery to the Lender of any such acceptable waiver, (y) the
opening or closing of a collateral location and/or (z) any change in the
amount of rental, storage or processor payments or similar charges; (b) any
reserve established by the Lender on account of statutory claims, deemed trusts,
or inventory subject to rights of suppliers under Section 81.1 of the BIA
(generally known as the “30-day goods” rule), any amendments to the BIA to the
extent such become Applicable Law and which have the effect of implementing
any
aspect of Xxxx C-55 as of the date hereof, or any other Applicable Law;
(c) liabilities of any Credit Party under any Blocked Account Agreement, or
swap, cap, floor, collar, futures contract or option designed to hedge against
fluctuations in commodity prices, securities prices or other financial market
conditions, (d) employee or employee benefit related liabilities,
(e) any other claims which may have priority over the claims of the Lender,
including Priority Payables; and (f) such other reserves as the Lender may
at any time or times deem necessary in its reasonable judgment as a result
of
(x) negative forecasts and/or trends in the Borrower’s business,
operations, industry, prospects, profits, operations or financial condition
or
assets or (y) other issues, circumstances or facts that could otherwise
negatively impact the Borrower, its business, operations, industry, prospects,
profits, operations or financial condition or assets.
-2-
“Authorization”
means,
with respect to any Person, any authorization, order, permit, approval, grant,
licence, consent, right, franchise, privilege, certificate, judgment, writ,
injunction, award, determination, direction, decree, by-law, rule or regulation
of any Governmental Authority having jurisdiction over such Person, whether
or
not having the force of Law.
“BIA”
means
the Bankruptcy
and Insolvency Act
(Canada).
“Blocked
Account Agreement”
has the
meaning set out in Section 2.14(d).
“Blocked
Accounts”
has the
meaning set out in Section 2.14(d).
“Borrower”
means
International Conduits Ltd., an Ontario corporation.
“Borrowing”
means
any availment of the Credit, which includes a Loan.
“Borrowing
Base”
means,
at any time, the lesser at such time of (a) Maximum Revolving Line of Credit;
and (b) an amount (which may not be less than zero) equal to the sum of
(i) 85% of the aggregate amount of all Eligible Accounts of the Credit
Parties, plus (ii) 50% of the appraised net orderly liquidation value of all
Eligible Inventory of the Credit Parties, minus (iii) an amount equal to
all Priority Payables, and minus (iv) an amount equal to all other
Availability Reserves.
“Borrowing
Base Report”
means
the report of the Borrower concerning the amount of the Borrowing Base, to
be
delivered pursuant to Section 4.2, substantially in the form attached as Exhibit
A.
“Borrowing
Request”
means
a
request by the Borrower for a Borrowing substantially in the form of Exhibit
B.
“Business
Day”
means
any day that is not a Saturday, Sunday or other day on which commercial banks
in
Toronto, Ontario or New York, New York are authorized or required by Applicable
Law to remain closed.
“Canadian
Dollars”
and
“Cdn.$”
refer
to lawful money of Canada.
“Canadian
$ Equivalent”
means,
on any day, the amount of Canadian Dollars that the Lender could purchase,
in
accordance with its normal practice, with a specified amount of U.S. Dollars
based on the Bank of Canada noon spot rate on such date.
“Canadian
Prime Borrowing”
means
a
Borrowing comprised of one or more Canadian Prime Loans.
“Canadian
Prime Loan”
means
a
Loan denominated in Canadian Dollars made by the Lender to the Borrower
hereunder pursuant to a drawdown of a Loan which bears interest at a rate based
upon the Canadian Prime Rate.
“Canadian
Prime Rate”
shall
mean a fluctuating interest rate per annum equal at all times to the rate of
interest announced publicly from time to time by publication as the Bloomberg
PRIMECAN Screen (base rate); provided, that such rate is not necessarily the
best rate offered to its customers by the Lender, and, should the Lender be
unable to determine such rate, such other indication of the prevailing prime
rate of interest as may reasonably be chosen by the Lender; provided, further,
that each change in the Canadian Prime Rate shall take effect simultaneously
with the corresponding change in the Bloomberg PRIMECAN Screen (base rate)
or
the other reasonably chosen prevailing prime rate of interest.
“Canadian
Resident Lender”
means,
in respect of a particular Loan, (i) a Lender which holds such Loan and which
is
resident in Canada for the purposes of the ITA, or (ii) a Lender which is an
“authorized foreign bank”, as defined in section 2 of the Bank
Act
(Canada)
and in section 248(1) of the ITA, and which holds the Loan as part of its
“Canadian banking business”, as defined in subsection 248(1) of the ITA.
“Capital
Expenditures”
means
all payments due or accruing due (whether or not paid) during a Fiscal Year
in
respect of the cost (including expenditures on materials, contract labour and
direct labour, but excluding expenditures properly chargeable to repairs and
maintenance in accordance with GAAP) of any fixed asset or improvement, or
replacement, substitution, or addition thereto, which have a useful life of
more
than one (1) year, including, without limitation, those arising in connection
with the direct or indirect acquisition of such assets by way of increased
product or service charges or offset items or in connection with Capital Leases
all as required to be capitalized in accordance with GAAP.
“Capital
Lease Obligations”
of
any
Person means the obligations of such Person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person
under GAAP, and the amount of such obligations shall be the capitalized amount
thereof determined in accordance with GAAP.
-3-
“Change
in Control”
means
(a) the acquisition of ownership, directly or indirectly, beneficially or
of record, by any Person or group of Persons acting jointly or otherwise in
concert, other than Universal Security Instruments, Inc. or its Affiliates,
of
Equity Securities representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Securities of the
Borrower; (b) the occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither
(i) nominated by the board of directors of the Borrower nor
(ii) appointed by directors so nominated; or (c) the acquisition of
direct or indirect Control of the Borrower by any Person or group of Persons
acting jointly or otherwise in concert, other than Universal Security
Instruments, Inc. or its Affiliates.
“Change
in Law”
means
(i) the adoption of any new Applicable Law after the date of this
Agreement, (ii) any change in any existing Applicable Law or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement, or (iii) compliance by the Lender (or, for purposes
of Section 2.10(b), by any lending office of the Lender or by the Lender’s
holding company, if any) with any request, guideline or directive (whether
or
not having the force of law, but in the case of a request, guideline or
directive not having the force of law, being a request, guideline or directive
with which persons customarily comply) of any Governmental Authority made or
issued after the date of this Agreement.
“Collateral”
means
the property described in and subject to the Liens, privileges, priorities
and
security interests purported to be created by any Security
Document.
“Consolidated
Net Income”
means,
for any period, the net income on a consolidated basis of the Borrower and
its
consolidated Subsidiaries in accordance with GAAP; provided,
however, that Consolidated Net Income shall not include or take into
account:
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(i)
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any
net income (or loss) of any Unrestricted Subsidiary, except that
(subject
to the exclusions contained in clauses (iii) and (iv) below), the
Borrower’s equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period
to
the Borrower or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
paid to a Restricted Subsidiary, to the limitations contained in
clause (ii) below);
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(ii)
|
any
net income of any Restricted Subsidiary which is subject to restrictions,
directly or indirectly, on the payment of dividends or the making
of
distributions, directly or indirectly, to the Borrower, except that
(A) subject to the exclusion contained in clauses (iii) and
(iv) below,
the Borrower’s equity in the net income of any such Restricted Subsidiary
for such period shall be included in such Consolidated Net Income
up to
the aggregate amount of cash that could have been distributed by
such
Restricted Subsidiary consistent with such restriction during such
period
to the Borrower or another Restricted Subsidiary as a dividend or
other
distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained
in this
clause), and (B) the Borrower’s equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income;
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(iii)
|
any
gain (or loss) realized upon the sale or other disposition of any
assets
of the Borrower or any Subsidiary (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed
of
in the ordinary course of business and any gain (or loss) realized
upon
the sale or other disposition of any capital stock of any
Person;
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(iv)
|
extraordinary
or nonrecurring gains or non-cash losses;
and
|
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(v)
|
the
effect of a change in GAAP.
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“Control”
means,
in respect of a particular Person, the possession, directly or indirectly,
of
the power to direct or cause the direction of the management or policies of
such
Person, whether through the ability to exercise voting power, by contract or
otherwise. “Controlling”
and
“Controlled”
have
meanings correlative thereto.
“Credit
Party”
means
the Borrower and each Restricted Subsidiary.
“Credits”
means
the Revolving Credit and the Term Credit.
“Default”
means
any event or condition which constitutes an Event of Default or which, upon
notice, lapse of time or both, would, unless cured or waived, become an Event
of
Default.
“Disclosed
Matters”
means
the actions, suits and proceedings and the environmental matters disclosed
in
Schedule A.
“EDC”
means
Export Development Corporation (Canada) and its successors and
assigns.
“Effective
Date”
means
the date on which all of the conditions specified in Section 4.1 are satisfied
or waived in accordance with Section 8.2, as confirmed in a written notice
from
the Lender to the Borrower.
-4-
“Eligible
Account”
means,
at any time, the invoice amount (which shall be the Canadian $ Equivalent at
such time of any amount denominated in U.S.$) owing on each Account of a Credit
Party (net of any credit balance, returns, trade discounts, contras unapplied
cash, unbilled amounts, tax refunds that have not yet been received or retention
or finance charges) which meet such standards of eligibility as the Lender
shall
establish from time to time in its reasonable discretion; provided
that, in
any event, no account shall be deemed an Eligible Account unless each of the
following statements is accurate and complete (and by including such Account
in
any computation of the applicable Borrowing Base, the Borrower shall be deemed
to represent and warrant to the Lender the accuracy and completeness of such
statements and the compliance of each such Account with each such other
eligibility standard established by the Lender):
(1) Such
Account is a binding and valid obligation of the obligor thereon and is in
full
force and effect;
(2) Such
Account is evidenced by an invoice and is payable in either Canadian Dollars
or
U.S. Dollars;
(3) Such
Account is genuine as appearing on its face or as represented in the books
and
records of the Borrower and the applicable Credit Party;
(4) Such
Account is free from claims regarding rescission, cancellation or avoidance,
whether by operation of Applicable Law or otherwise;
(5) Payment
of such Account is less than 90 days past the original invoice date thereof
and
less than 60 days past the original due date thereof;
(6) Such
Account is net of concessions, offset, deduction, contras, returns, chargebacks
or understandings with the obligor thereon that in any way could reasonably
be
expected to adversely affect the payment of, or the amount of, such
Account;
(7) The
Lender, has a first-priority perfected Lien covering such Account and such
Account is, and at all times will be, free and clear of all Liens other than
Permitted Liens;
(8) The
obligor on such Account is not an Affiliate or a director, officer or employee
of any Credit Party;
(9) Such
Account arose in the ordinary course of business of the Credit Party out of
the
sale of goods or services by the Credit Party;
(10) Such
Account is not payable by an obligor in respect of which 50% or more (by amount)
of the total aggregate Accounts owed to the Credit Party by such obligor or
any
of its Affiliates are more than 90 days past the original invoice date thereof
or more than 60 days past the original due date thereof;
(11) All
consents, licenses, approvals or authorizations of, or registrations or
declarations with, any Governmental Authority required to be obtained, effected
or given in connection with the execution, delivery and performance of such
Account by each party obligated thereunder, or in connection with the
enforcement and collection thereof by the Lender, have been duly obtained,
effected or given and are in full force and effect;
(12) The
obligor on such Account is not an individual, and is not the subject of any
bankruptcy or insolvency proceeding, does not have a trustee or receiver
appointed for all or a substantial part of its property, has not made an
assignment for the benefit of creditors, admitted its inability to pay its
debts
as they mature, suspended its business or initiated negotiations regarding
a
compromise of its debt with its creditors, and the Lender, in its reasonable
discretion, is otherwise satisfied with the credit standing of such
obligor;
(13) The
chief
executive office of the obligor of such Account is located in the United States
of America or Canada and the obligor of such Account is organized and existing
under the laws of the United States of America or a state thereof or the federal
laws of Canada, a province or territory thereof, or if the obligor is not so
organized and existing, such Account is covered under letters of credit or
export/import insurance provided by the EDC on terms and in a manner reasonably
satisfactory to the Lender;
(14) The
obligor of such Account is not a Governmental Authority, if the enforceability
or effectiveness against such Governmental Authority of an assignment of such
Account is subject to any precondition which has not been
fulfilled;
(15) In
the
case of the sale of goods, the subject goods have been completed, sold and
shipped, on a true sale basis on open account, or subject to contract, and
not
on consignment, on approval, on a “sale or return” basis, or on a “xxxx and
hold” or “pre-sale” basis or subject to any other repurchase or return
agreement; no material part of the subject goods has been returned, rejected,
lost or damaged; and such Account is not evidenced by chattel paper or a
promissory note or an instrument of any kind, unless such chattel paper,
promissory note or other instrument has been delivered to the Lender and is
subject to a Lien under the Security Documents;
-5-
(16) Each
of
the representations and warranties set forth herein and in the Loan Documents
with respect to such Account is true and correct on such date;
(17) A
cheque,
promissory note, draft, trade acceptance or other instrument has not been
received with respect to such Account (or with respect to any other account
due
from the same account debtor), presented for payment and returned uncollected
for any reason;
(18) Such
Account is not in respect of a volume rebate; and
(19) The
Lender does not believe, in the exercise of its reasonable discretion, that
the
prospect of collection of such Account is impaired or that the Account may
not
be paid because of the account debtor’s inability to pay;
(20) Such
Account is not a pre-billed account or an account arising from progress billing;
and
(21) The
assignment (whether absolutely or by way of security) of such Account is not
limited or restricted by the terms of the contract evidencing or relating to
such Account or, if assignment of such Account is so restricted, such limitation
or restriction has been complied with and the laws of the jurisdiction(s)
governing the validity of such assignment do not provide that such limitation
or
restriction is ineffective as against the secured creditor with a security
interest therein;
(22) Such
Account is not an Account which the Lender, in the exercise of its good faith
credit discretion, determines to be ineligible for any other reasons deemed
necessary by Lender in its reasonable business judgment, including those which
are customary either in the commercial lending industry or in the lending
practices of the Lender.
provided
that, if
at any time the aggregate amount of all Eligible Accounts owed to a Credit
Party
by a particular obligor or its Affiliates exceeds 10% of the aggregate amount
of
all Eligible Accounts at such time owed to such Credit Party (determined without
giving effect to any reduction in Eligible Accounts pursuant to this proviso),
then, unless the Accounts of such obligors and its Affiliates are insured
pursuant to credit insurance acceptable to the Lender which has been assigned
to
the Lender in form acceptable to the Lender, the amount of such Accounts in
excess of 10% of such aggregate amount of all Eligible Accounts shall be
excluded in determining the aggregate amount of all Eligible Accounts at such
time.
“Eligible
Assignee”
means
(a) another Lender, (b) with respect to any Lender, any Affiliate of
that Lender, (c) any commercial bank having total assets of $25,000,000,000
or more, (d) any (i) trust company, savings bank, savings and loan
association or similar financial institution, or (ii) insurance company
engaged in the business of writing insurance which, in either case (A) has
total assets of $25,000,000,000 or more, (B) is engaged in the business of
lending money and extending credit under credit facilities substantially similar
to those extended under this Agreement, (C) is operationally and
procedurally able to meet the obligations of a Lender hereunder to the same
degree as a commercial bank, and (e) any other financial institution
(including a mutual fund or other fund) having total assets of $25,000,000,000
or more which meets the requirements set forth in subclauses (B) and (C) of
clause (d) above.
“Eligible
Inventory”
means,
at any time with respect to a Credit Party, all Inventory of such Credit Party
valued in Canadian Dollars on a lower of cost (on a first-in, first out basis
and excluding any component of cost representing intercompany profit in the
case
of Inventory acquired from an Affiliate) or market basis in accordance with
GAAP, with detailed calculations of lower of cost or market to occur on at
least
a monthly basis, which meets such standards of eligibility as the Lender shall
establish from time to time in its reasonable discretion; provided
that, in
any event, no Inventory shall be deemed Eligible Inventory unless each of the
following statements is accurate and complete (and by including such Inventory
in any computation of the applicable Borrowing Base, the Borrower shall be
deemed to represent and warrant to the Lender the accuracy and completeness
of
such statements and the compliance of such Inventory with each such other
eligibility standard established by the Lender):
(1) Such
Inventory is in good condition, merchantable, meets all standards imposed by
any
Governmental Authority having regulatory authority over it or its use and/or
sale and is not obsolete and is either currently usable or currently saleable
in
the normal course of business of a Credit Party;
(2) Such
Inventory is
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(a)
|
in
possession of such Credit Party and located on real property owned
or
leased by such Credit Party within the United States of America or
Canada
(provided
that if such Inventory is located on real property leased by such
Credit
Party, the landlord of such real property shall have executed and
delivered to the Lender a landlord waiver substantially in the form
attached hereto as Exhibit C), or
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-6-
|
(b)
|
in
the possession of a bailee within Canada and such bailee shall have
executed and delivered to the Lender, a bailee letter substantially
in the
form attached hereto as Exhibit D, or
|
|
(c)
|
in
transit within the United States of America or Canada and between
Credit
Parties, and upon arrival at its destination, will comply with either
paragraph (a) or (b) above until title to such Inventory passes to
purchaser;
|
(3) Each
of
the representations and warranties set forth in the Loan Documents with respect
to such Inventory is true and correct on such date;
(4) The
Lender has a first-priority perfected Lien covering such Inventory, and such
Inventory is, and at all times will be, free and clear of all Liens other than
Permitted Liens;
(5) Such
Inventory does not include goods (i) that are not owned by such Credit Party,
(ii) that are held by such Credit Party pursuant to a consignment agreement,
or
(iii) that are special order goods or discontinued goods;
(6) Such
Inventory is not subject to repossession under the BIA except to the extent
the
applicable vendor has entered into an agreement with the Lender, in form and
substance reasonably satisfactory to the Lender, waiving its right to
repossession;
(7) Such
Inventory does not consist of work-in-process, store room materials, supplies,
parts, samples, prototypes, or packing and shipping materials;
(8) Such
Inventory does not consist of goods that are discontinued, obsolete, slow-moving
or returned or repossessed or used goods taken in trade;
(9) Any
portion of the value of such Inventory which results from a profit or gain
resulting from an inter-company sale or other disposition of such inventory
shall be excluded;
(10) Such
Inventory is not evidenced by negotiable documents of title unless delivered
to
the Lender with endorsements;
(11) Such
Inventory does not constitute Hazardous Materials;
(12) Such
Inventory is covered by casualty insurance;
(13) Such
Inventory is located on real property where there is Inventory of such Credit
Party in the aggregate amount of at least Cdn.$100,000;
(14) Such
Inventory is not Inventory which the Lender has determined in the exercise
of
its reasonable discretion that the Lender may not sell or otherwise dispose
of
in accordance with the terms of the applicable Security Documents without
infringing upon the rights of another Person or violating any contract with
any
other Person; and
(15) Such
Inventory is not Inventory which the Lender, in the exercise of its good faith
credit discretion, determines to be not acceptable for any other reasons,
including those which are customary either in the commercial lending industry
or
in the lending practices of the Lender.
“Environmental
Laws”
means
all Applicable Laws relating in any way to the environment, preservation or
reclamation of natural resources, the generation, use, handling, collection,
treatment, storage, transportation, recovery, recycling, release, threatened
release or disposal of any Hazardous Material, or to health and safety
matters.
“Environmental
Liability”
means
any liability, contingent or otherwise (including any liability for damages,
costs of environmental remediation, fines, penalties or indemnities), of any
Credit Party directly or indirectly resulting from or based upon
(a) violation of any Environmental Laws, (b) the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling
or
disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the Release or threatened Release of any Hazardous Materials
into the environment, or (d) any contract, agreement or other consensual
arrangement pursuant to which liability is assumed or imposed with respect
to
any of the foregoing.
“Equity
Securities”
means,
with respect to any Person, any and all shares, interests, participations,
rights in, or other equivalents (however designated and whether voting and
non-voting) of, such Person’s capital, whether outstanding on the date hereof or
issued after the date hereof, including any interest in a partnership, limited
partnership or other similar Person and any beneficial interest in a trust,
and
any and all rights, warrants, debt securities, options or other rights
exchangeable for or convertible into any of the foregoing.
“ETA”
means
Part IX of the Excise
Tax Act
(Canada).
“Event
of Default”
has
the
meaning set out in Section 7.1.
“Excess
Availability”
means,
as of any date, the remainder of (a) the Borrowing Base as of such date,
less (b) the aggregate outstanding balance of the Indebtedness of the
Borrower hereunder as of such date and the aggregate face amount of undrawn
Letters of Credit as of such date. Excess Availability shall always be
determined on the basis that all debts and obligations shall be current, and
all
accounts payable shall be handled in the normal course of the Borrower’s
business consistent with its past practices.
-7-
“Excluded
Taxes”
means,
with respect to the Lender or any other recipient of any payment to be made
by
or on account of any obligation of the Borrower hereunder, income or franchise
Taxes imposed on (or measured by) its taxable income or capital Taxes imposed
on
(or measured by) its taxable capital, in each case by Canada, or by the
jurisdiction under the Applicable Laws of which such recipient is organized,
in
which the recipient is resident for tax purposes or in which its principal
office is located or in which it is otherwise deemed to be engaged in a trade
or
business for Tax purposes, or any subdivision thereof or therein, and any branch
profits taxes imposed by Canada, the United States of America or any similar
tax
imposed by any jurisdiction on the recipient.
“Exposure”
means,
with respect to the Lender at any time, the sum of the outstanding principal
amount of the Lender’s Revolving Loans at such time.
“Financial
Officer”
means
the chief financial officer, principal accounting officer, treasurer or
controller of the Borrower.
“Fiscal
Quarter”
means
any fiscal quarter of the Borrower.
“Fiscal
Year”
means
any fiscal year of the Borrower.
“Foreign
Lender”
means
any Lender that is not a Canadian Resident Lender.
“GAAP”
means
at any particular time with respect to any Credit Party, generally accepted
accounting principles as in effect at such time in Canada, consistently applied;
provided, however, that, if employment of more than one principle shall be
permissible at such time in respect of a particular accounting matter, “GAAP”
shall refer to the principle which is then employed by the applicable Credit
Party with the concurrence of its independent public or chartered accountants,
who are acceptable to the Lender provided further that, for the purposes of
determining compliance with the financial covenants herein, “GAAP” means GAAP as
at the date hereof.
“Governmental
Authority”
means
the government of Canada, any other nation or any political subdivision thereof,
whether provincial, state, territorial or local, and any agency, authority,
instrumentality, regulatory body, court, central bank, fiscal or monetary
authority or other authority regulating financial institutions, and any other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, including
the
Bank Committee on Banking Regulation and Supervisory Practices of the Bank
of
International Settlements.
“GST”
means
all amounts payable under the ETA or any similar legislation in any other
jurisdiction of Canada, including QST and HST.
“Guarantee”
of
or
by any Person (in this definition, the “guarantor”)
means
any obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of
any
other Person (in this definition, the “primary credit party”) in any manner,
whether directly or indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
thereof (whether in the form of a loan, advance, stock purchase, capital
contribution or otherwise), (b) to purchase or lease property, securities
or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity
capital solvency, or any other balance sheet, income statement or other
financial statement condition or liquidity of the primary credit party so as
to
enable the primary credit party to pay such Indebtedness or other obligation,
(d) as an account party in respect of any letter of credit or letter of
guarantee issued to support such Indebtedness or other obligation, or
(e) to purchase, sell or lease (as lessor or lessee) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor
to
make payment of such Indebtedness or to assure the holder of such Indebtedness
against loss.
“Guarantor”
means
Universal Security Instruments, Inc. and USI Electric, Inc. and each other
Person (other than a Credit Party) which has executed and delivered to the
Lender, a guarantee of the obligations of the Borrower hereunder.
“Hazardous
Materials”
means
any substance, product, liquid, waste, pollutant, chemical, contaminant,
insecticide, pesticide, gaseous or solid matter, organic or inorganic matter,
fuel, micro-organism, ray, odour, radiation, energy, vector, plasma, constituent
or material which (a) is or becomes listed, regulated or addressed under
any Environmental Laws, or (b) is, or is deemed to be, alone or in any
combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious
substance, a contaminant or a source of pollution or contamination under any
Environmental Laws, including petroleum or petroleum distillates, asbestos
or
asbestos containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Laws.
-8-
“HST”
means
all amounts payable as harmonised sales tax in the Provinces of Nova Scotia,
Newfoundland and New Brunswick under the ETA.
“Indebtedness”
of
any
Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges
are customarily paid, (d) all obligations of such Person under conditional
sale or other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred
purchase price of property or services (excluding current accounts payable
incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned
or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guarantee, (j) all obligations, contingent
or otherwise, of such Person in respect of bankers’ acceptances, (k) the
net amount of obligations of such Person (determined on a xxxx-to-market basis)
under Swap Agreements, and (l) all obligations of such Person to purchase,
redeem, retire, defease or otherwise acquire for value (other than for other
Equity Securities) any Equity Securities of such Person, valued, in the case
of
redeemable Equity Securities, at the greater of voluntary or involuntary
liquidation preference, plus accrued and unpaid dividends. The Indebtedness
of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general or limited partner) to the extent
such Person is liable therefor as a result of such Person’s ownership interest
in or other relationship with such entity, except to the extent the terms of
such Indebtedness provide that such Person is not liable therefor.
“Indemnified
Taxes”
means
all Taxes other than Excluded Taxes.
“Indemnitee”
has
the
meaning set out in Section 8.3(b).
“Interest
Payment Date”
means
the first Business Day of each calendar month.
“Inventory”
means,
in respect of each Credit Party, all of such Credit Party’s present and
hereafter acquired inventory (as defined in the PPSA) and including all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in
all
stages of production from raw materials through work in process to finished
goods, and all “stores” inventory or “operating and maintenance supplies”
inventory, and all proceeds of any thereof (of whatever sort).
“Investment”
means,
as applied to any Person (the “investor”),
any
direct or indirect purchase or other acquisition by the investor of, or a
beneficial interest in, Equity Securities of any other Person, including any
exchange of Equity Securities for Indebtedness, or any direct or indirect loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business)
or
capital contribution by the investor to any other Person, including all
Indebtedness and Accounts owing to the investor from such other Person that
did
not arise from sales or services rendered to such other Person in the ordinary
course of the investor’s business, or any direct or indirect purchase or other
acquisition of bonds, notes, debentures or other debt securities of, any other
Person. The amount of any Investment shall be the original cost of such
Investment plus
the cost
of all additions thereto, without any adjustments for increases or decreases
in
value, or write-ups, write-downs or write-offs with respect to such Investment
minus
any
amounts (a) realized upon the disposition of assets comprising an
Investment (including the value of any liabilities assumed by any Person other
than the Borrower or any Restricted Subsidiary in connection with such
disposition), (b) constituting repayments of Investments that are loans or
advances or (c) constituting cash returns of principal or capital thereon
(including any dividend, redemption or repurchase of equity that is accounted
for, in accordance with GAAP, as a return of principal or capital).
“ITA”
means
the Income
Tax Act
(Canada).
“Lender”
means
CIT Financial Ltd. and any other Person that shall have become a party hereto
pursuant to an Assignment and Assumption, other than any such Person that ceases
to be a party hereto pursuant to an Assignment and Assumption.
“Lender
Affiliate”
means,
with respect to any Lender, an Affiliate of such Lender.
“Lien”
means,
(a) with respect to any asset, any mortgage, deed of trust, lien, pledge,
hypothec, hypothecation, encumbrance, charge, security interest, royalty
interest, adverse claim, defect of title or right of set off in, on or of such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease, title retention agreement or consignment agreement
(or
any financing lease having substantially the same economic effect as any of
the
foregoing) relating to any asset, (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities, (d) any netting arrangement, defeasance arrangement or
reciprocal fee arrangement, and (e) any other arrangement having the effect
of providing security.
-9-
“Loan”
means
any loan made by the Lender to the Borrower pursuant to this Agreement,
including the Revolving Loans and the Term Loan.
“Loan
Documents”
means
this Agreement, the Security Documents, the Blocked Account Agreement, the
Borrowing Requests, and the Borrowing Base Reports, together with any other
document, instrument or agreement (other than participation, agency or similar
agreements among the Lender or between the Lender and any other bank or creditor
with respect to any indebtedness or obligations of any Credit Party hereunder
or
thereunder) now or hereafter entered into in connection with this Agreement,
as
such documents, instruments or agreements may be amended, modified or
supplemented from time to time.
“Material
Adverse Change”
means
any event, development or circumstance that has had or could reasonably be
expected to have a Material Adverse Effect.
“Material
Adverse Effect”
means
a
material adverse effect on (a) the business, assets, operations, prospects
or condition, financial or otherwise, of the Credit Parties, or (b) the
validity or enforceability of any of the Loan Documents, the priority of the
Liens created thereby or the rights and remedies of the Lender thereunder or
(c) any Material Contract, or (d) the amount which the Lender would be
likely to receive (after giving effect to delays in payment and costs of
enforcement) upon the liquidation of the Collateral.
“Material
Contract”
means
(a) the contracts, licences and agreements listed and described on
Schedule B, and
(b) any other contract, licence or agreement (i) to which any Credit
Party is a party or bound, (ii) which is material to, or necessary in, the
operation of the business of any Credit Party, and (iii) which a Credit
Party cannot promptly replace by an alternative and comparable contract with
comparable commercial terms.
“Material
Indebtedness”
means
(a) the obligations of Universal Security Instruments, Inc. to The CIT
Group/Commercial Services Inc. pursuant to the amended and restated factoring
agreement dated as of the date hereof between The CIT Group/Commercial Services
Inc. and Universal Security Instruments, Inc. and all ancillary documents
connected therewith, which obligations have been guaranteed by the Credit
Parties, and (b) any Indebtedness of any one or more of the Credit Parties
in an
aggregate principal amount exceeding Cdn.$250,000. “Maturity
Date”
means
initially the first day following the third anniversary of the Effective Date
(or, if such day is not a Business Day, the next Business Day thereafter),
and
thereafter such other date in the future as may be agreed to in accordance
with
Section 2.6.
“Maximum
Revolving Line of Credit”
means
the Canadian $ Equivalent of US$7,000,000.
“Obligations”
means
all obligations, liabilities and indebtedness of the Borrower to the Lender
with
respect to the principal of and interest on the Loans and the payment or
performance of all other obligations, liabilities and indebtedness of the
Borrower to the Lender hereunder or arising under or pursuant to any one or
more
of the other Loan Documents or with respect to the Loans, including, without
limitation, all reimbursement and indemnity obligations of the Borrower to
the
Lender hereunder.
“Operating
Account”
means
the bank account maintained by the Borrower at a financial institution
acceptable to the Lender, acting reasonably.
“Out-of-Pocket
Expenses”
means
all of the Lender’s present and future expenses incurred relative to this
Agreement or any other Loan Documents, whether incurred heretofore or hereafter,
which expenses shall include, without being limited to: the reasonable cost
of
retaining external legal counsel, record searches, all costs and expenses
incurred by the Lender in opening bank accounts, depositing cheques, receiving
and transferring funds, and wire transfer charges, any charges imposed on the
Lender due to returned items and “insufficient funds” of deposited cheques and
the Lender’s standard fees relating thereto, reasonable travel, lodging and
similar expenses of the Lender’s personnel (or any of its agents) in connection
with inspecting and monitoring the Collateral from time to time at reasonable
intervals hereunder, any applicable reasonable counsel fees and disbursements,
fees and taxes relative to the filing of financing statements, and all expenses,
costs and fees set forth incurred by or imposed on the Lender by reason of
the
exercise of any of its rights and remedies under this Agreement or any of the
other Loan Documents.
“Participant”
has
the
meaning set out in Section 8.4.
-10-
“Payment
Office”
means
the Lender’s office located at 207 Queen’s Quay West, Toronto, Ontario, M5J 1A7,
Attention: Chief Credit Officer (or such other office or individual as the
Lender may hereafter designate in writing to the other parties
hereto).
“Pension
Plan”
means
any pension benefit plan within the meaning of the Pension
Benefits Act
(Ontario) in respect of which any Credit Party makes or has made contributions
in respect of its employees.
“Permitted
Investments”
means:
|
(a)
|
direct
obligations of, or obligations the principal of and interest on which
are
unconditionally guaranteed by, the Government of Canada or of any
Canadian
province (or by any agency thereof to the extent such obligations
are
backed by the full faith and credit of the Government of Canada or
of such
Canadian province), in each case maturing within one year from the
date of
acquisition thereof;
|
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(b)
|
investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, the highest credit
rating
obtainable from any of Xxxxx’x, S&P or
DBRS;
|
|
(c)
|
investments
in certificates of deposit, bankers’ acceptances and time deposits
maturing within 180 days from the date of acquisition thereof issued
or
guaranteed by or placed with, and money market deposit accounts issued
or
offered by, any Schedule I bank under the Bank
Act
(Canada).
|
“Permitted
Liens”
means:
|
(a)
|
Liens
in favour of the Lender for the obligations of the Borrower or any
other
Credit Party under or pursuant to the Loan
Documents;
|
|
(b)
|
Liens
granted by a Credit Party in favour of another Credit Party in order
to
secure any of its indebtedness to such other Credit Party, provided
that such Liens are subject to assignment and postponement arrangements
satisfactory to the Lender;
|
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(c)
|
Purchase
Money Liens securing Indebtedness and Liens to secure Capital Lease
Obligations, in each case only to the extent permitted by
Section 6.1(e);
|
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(d)
|
Liens
imposed by any Governmental Authority for Taxes not yet due and delinquent
or which are being contested in good faith in compliance with
Section 5.3, and, during such period during which such Liens are
being so contested, such Liens shall not be executed on or enforced
against any of the assets of any Credit
Party;
|
|
(e)
|
carrier’s,
warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction and
other like Liens arising by operation of Applicable Law, arising
in the
ordinary course of business, which are not overdue for a period of
more
than 30 days or which are being contested in good faith and by appropriate
proceedings, and, during such period during which such Liens are
being so
contested, such Liens shall not be executed on or enforced against
any of
the assets of the Credit Party, provided
that the Credit Party shall have set aside on its books reserves
deemed
adequate therefor and not resulting in qualification by
auditors;
|
|
(f)
|
statutory
Liens incurred or pledges or deposits made under employment standards,
pension benefits, worker’s compensation, unemployment insurance and other
social security legislation;
|
|
(g)
|
Liens
or deposits to secure the performance of bids, tenders, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance
bonds
and other obligations of a like nature (other than for borrowed money)
incurred in the ordinary course of
business;
|
|
(h)
|
Liens
of or resulting from any judgement or award, the time for the appeal
or
petition for rehearing of which shall not have expired, or in respect
of
which the Credit Parties shall at any time in good faith be prosecuting
an
appeal or proceeding for review and in respect of which a stay of
execution pending such appeal or proceeding for review shall have
been
secured;
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-11-
|
(i)
|
undetermined
or inchoate Liens and charges arising or potentially arising under
statutory provisions which have not at the time been filed or registered
in accordance with Applicable Law or of which written notice has
not been
duly given in accordance with Applicable Law or which although filed
or
registered, relate to obligations not due or
delinquent;
|
|
(j)
|
statutory
Liens incurred or pledges or deposits made in favour of a Governmental
Authority to secure the performance of obligations of a Credit Party
under
Environmental Laws to which any assets of such Credit Party are subject,
provided
that no Default or Event of Default shall have occurred and be
continuing;
|
|
(k)
|
a
Lien granted by a Credit Party to a landlord to secure the payment
of
arrears of rent in respect of leased properties in the Province of
Quebec
leased from such landlord, provided
that such Lien is limited to the assets located at or about such
leased
properties;
|
|
(l)
|
any
Lien on any owned real property of a Credit Party existing on the
date
hereof and set forth in Schedule
3.9;
|
|
(m)
|
any
Lien on any property or asset of a Credit Party existing on the date
hereof and set forth in Schedule 3.10; provided
that (i) such Lien shall not apply to any other property or asset
of such
Credit Party, and (ii) such Lien shall secure only those obligations
which
it secures on the date hereof;
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|
(n)
|
any
Lien existing on any property or asset prior to the acquisition thereof
by
a Credit Party or existing on any property or asset of any Person
that
becomes a Credit Party after the date hereof prior to the time such
Person
becomes a Credit Party; provided
that (i) such
Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Credit Party, as the case may
be,
(ii)
such
Lien shall not apply to any other property or assets of such Credit
Party,
and (iii)
such
Lien shall secure only those obligations which it secures on the
date of
such acquisition or the date such Person becomes a Credit Party,
as the
case may be; and
|
|
(o)
|
any
extension, renewal or replacement of any of the foregoing; provided,
however, that the Liens permitted hereunder shall not be extended
to cover
any additional Indebtedness of the Credit Parties or their property
(other
than a substitution of like property), except Liens in respect of
Capital
Lease Obligations and Purchase Money Liens as permitted by (c)
above.
|
“Person”
includes any natural person, corporation, company, limited liability company,
trust, joint venture, association, incorporated organization, partnership,
Governmental Authority or other entity.
“PPSA”
means
the Personal
Property Security Act (Ontario),
as amended from time to time.
“Priority
Payables”
means,
with respect to any Person, any amount payable by such Person which is secured
by a Lien in favour of a Governmental Authority which ranks or is capable of
ranking prior to or pari passu with the Liens created by the Security Documents
in respect of any Eligible Accounts or Eligible Inventory, including amounts
owing for wages, vacation pay, severance pay, employee deductions, sales tax,
excise tax, Tax payable pursuant to Part IX of the Excise
Tax Act (Canada)
(net of GST input credits), income tax, workers compensation, government
royalties, pension fund obligations, and other statutory or other claims that
have or may have priority over, or rank pari
passu
with,
such Liens created by the Security Documents.
“PST”
means
all taxes payable under the Retail
Sales Tax Act
(Ontario) or any similar statute of another jurisdiction of Canada.
“Purchase
Money Lien”
means
a
Lien taken or reserved in personal property to secure payment of all or part
of
its purchase price, provided
that
such Lien (i) secures an amount not exceeding the purchase price of such
personal property, (ii) extends only to such personal property and its
proceeds, and (iii) is granted prior to or within 30 days after the
purchase of such personal property.
“QST”
means
the Quebec sales tax imposed pursuant to an Act
respecting the Québec sales tax.
“Related
Parties”
means,
with respect to any Person, such Person’s Affiliates and the respective
directors, officers, employees, agents and advisors of such Person and of such
Person’s Affiliates.
-12-
“Release”
means an
actual or potential discharge, deposit, spill, leak, pumping, pouring, emission,
emptying, injection, escape, leaching, seepage or disposal of a Hazardous
Materials which is in breach of any Environmental Laws.
“Responsible
Officer”
means,
with respect to any Person, the chairman, the president, any vice president,
the
chief executive officer or the chief operating officer, and, in respect of
financial or accounting matters, any Financial Officer of such Person; unless
otherwise specified, all references herein to a Responsible Officer mean a
Responsible Officer of the Borrower.
“Restricted
Payment”
shall
mean, with respect to any Person, any payment by such Person (i) of any
dividends on any of its Equity Securities, (ii) on account of, or for the
purpose of setting apart any property for a sinking or other analogous fund
for,
the purchase, redemption, retirement or other acquisition of any of its Equity
Securities or any warrants, options or rights to acquire any such shares, or
the
making by such Person of any other distribution in respect of any of its Equity
Securities, (iii) of any principal of or interest or premium on or of any
amount in respect of a sinking or analogous fund or defeasance fund for any
Indebtedness of such Person ranking in right of payment subordinate to any
liability of such Person under the Loan Documents, (iv) of
any
principal of or interest or premium on or of any amount in respect of a sinking
or analogous fund or defeasance fund for any Indebtedness of such Person to
a
shareholder of such Person or to an Affiliate of a shareholder of such Person,
(v) in respect of an Investment, or (vi) of any management, consulting
or similar fee or any bonus payment or comparable payment, or by way of gift
or
other gratuity, to any Affiliate of such Person or to any director or officer
thereof.
“Restricted
Subsidiary”
means
each Subsidiary of the Borrower which is not an Unrestricted Subsidiary.
“Revolving Credit”
means
the revolving credit facility in the Canadian $ Equivalent of US$7,000,000
established by the Lender pursuant to this Agreement.
“Revolving
Loan”
has
the
meaning set out in Section 2.1.
“Rolling
Period”
means,
as at the end of any calendar month such calendar month taken together with
the
eleven immediately preceding calendar months.
“Security
Documents”
means
the agreements, documents or instruments described or referred to in Section
4.1(h) and Section 5.11 (including, to the extent such Section describes an
amendment, the agreement, document or instrument amended thereby) and any and
all other agreements, documents or instruments now or hereafter executed and
delivered by any Credit Party or any other Person as security for the payment
or
performance of all or part of the obligations of the Borrower (or such Credit
Party or other Person) hereunder or under any other Loan Documents, as any
of
the foregoing may have been, or may hereafter be, amended, modified or
supplemented.
“Subsidiary”
means,
with respect to any Person (in this definition, the “parent”)
at any
date, any other Person the accounts of which would be consolidated with those
of
the parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any
other Person (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or,
in
the case of a partnership, more than 50% of the general partnership interests
are, as of such date, owned, controlled or held, or (b) that is, as of such
date, otherwise Controlled, by the parent or one or more Subsidiaries of the
parent or by the parent and one or more Subsidiaries of the parent.
“Taxes”
means
all taxes, charges, fees, levies, imposts and other assessments, including
all
income, sales, use, goods and services, value added, capital, capital gains,
alternative, net worth, transfer, profits, withholding, payroll, employer
health, excise, real property and personal property taxes, and any other taxes,
customs duties, fees, assessments, or similar charges in the nature of a tax,
including Canada Pension Plan and provincial pension plan contributions,
unemployment insurance payments and workers’ compensation premiums, together
with any instalments with respect thereto, and any interest, fines and penalties
with respect thereto, imposed by any Governmental Authority (including federal,
state, provincial, municipal and foreign Governmental Authorities), and whether
disputed or not.
“Term
Credit”
means
the term loan credit facility in the Canadian $ Equivalent (as of June 20,
2007)
of US$3,000,000 (which is Canadian $3,207,330) established by the Lender
pursuant to this Agreement.
“Term
Loan”
means
a
loan made pursuant to Section 2.1(b).
“Termination
Date”
means,
with respect to any Credit, the date that such Credit is terminated, whether
or
not such date is the Maturity Date.
“Transactions”
means
the execution, delivery and performance by the Borrower of this Agreement and
the other Loan Documents, the borrowing of Loans and the use of the proceeds
thereof.
“Unrestricted
Subsidiary”
means
any Subsidiary of the Borrower which, together with its Subsidiaries, represents
less than 5% of the consolidated assets or consolidated gross revenues of the
Borrower.
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“U.S.
Dollars”
and
“U.S.$”
refer
to lawful money of the United States of America.
“U.S.$
Equivalent”
means,
on any day, the amount of U.S. Dollars that the Lender could purchase, in
accordance with its normal practice, with a specified amount of Canadian Dollars
based on the Bank of Canada noon spot rate on such date.
“Violation
Notice”
means
any notice received by any Obligor from any Governmental Authority under any
Environmental Law that the applicable Obligor or any of its property and assets
is not in compliance with the requirements of any Environmental
Law.
1.2 Terms
Generally.
The
definitions of terms herein shall apply equally to the singular and plural
forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word ‘shall”. The word “or” is disjunctive; the word
“and” is conjunctive. The word “shall” is mandatory; the word “may” is
permissive. The words “to the knowledge of” means, when modifying a
representation, warranty or other statement of any Person, that the fact or
situation described therein is known by the Person (or, in the case or a Person
other than a natural Person, known by the Responsible Officer of that Person)
making the representation, warranty or other statement, or with the exercise
of
reasonable due diligence under the circumstances (in accordance with the
standard of what a reasonable Person in similar circumstances would have done)
would have been known by the Person (or, in the case of a Person other than
a
natural Person, would have been known by such Responsible Officer of that
Person). Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any statute or any section thereof shall,
unless otherwise expressly stated, be deemed to be a reference to such statute
or section as amended, restated or re-enacted from time to time, (c) any
reference herein to any Person shall be construed to include such Person’s
successors and permitted assigns, (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof,
(e) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Agreement, and (f) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any
and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
1.3 Accounting
Terms; GAAP.
Any
accounting term
used
in this Agreement shall have, unless otherwise specifically provided herein,
the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise specifically provided
herein, in accordance with GAAP as consistently applied and using the same
method for inventory valuation as used in the preparation of the Financial
Statements.
1.4 Time.
All time
references herein shall, unless otherwise specified, be references to local
time
in Xxxxxxx, Xxxxxxx. Time is of the essence of this Agreement and the other
Loan
Documents.
1.5 Permitted
Liens.
Any
reference in any of the Loan Documents to a Permitted Lien is not intended
to
subordinate or postpone, and shall not be interpreted as subordinating or
postponing, or as any agreement to subordinate or postpone, any Lien created
by
any of the Loan Documents to any Permitted Lien.
ARTICLE
2
THE
CREDITS
2.1 Credits.
(a) Subject
to the terms and conditions set forth herein, the Lender agrees to make Loans
(each such Loan made under this Section 2.1(a), a “Revolving
Loan”)
to the
Borrower, solely in the Lender’s discretion and not on a committed basis, from
time to time during the period commencing on the Effective Date and ending
on
the Termination Date in an aggregate principal amount no greater than the
Maximum Revolving Line of Credit, provided that any Revolving Loan made by
the
Lender as requested by the Borrower will not result in the Lender’s Exposure
exceeding the Borrowing Base. Within the foregoing limit and subject to the
terms and conditions set forth herein, the Borrower may borrow, repay and
reborrow Revolving Loans.
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(b) Subject
to the terms and conditions set forth herein, the Lender commits to make a
Loan
(such Loan made under this Section 2.1(b), the “Term
Loan”)
to the
Borrower in a single Borrowing on the Effective Date in a principal amount
equal
to the Canadian $ Equivalent of US$3,000,000.
2.2 Loans
and Borrowings.
Subject
to the Borrowing Base limitations and the other limitations on Loans and
Borrowings as provided in this Agreement, each Borrowing shall be comprised
entirely of Canadian Prime Loans, as the Borrower may request in accordance
herewith.
2.3 Requests
for Borrowings.
(a) To
request a Borrowing of a Revolving Loan, the Borrower shall notify the Lender
of
such request by written Borrowing Request not later than 10:00 a.m., Toronto
time, on the date of the proposed Borrowing. The Lender is entitled to rely
and
act upon any written Borrowing Request given or purportedly given by the
Borrower, and the Borrower hereby waives the right to dispute the authenticity
and validity of any such request or resulting transaction once the Lender has
advanced funds based on such written Borrowing Request. Each such written
Borrowing Request shall be substantially in the form of Exhibit B and shall
specify the following information:
|
(i)
|
the
aggregate amount of the requested
Borrowing;
|
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(ii)
|
the
date of such Borrowing, which shall be a Business Day;
and
|
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(iii)
|
the
location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of this
Agreement.
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(b) Each
Borrowing shall be denominated in Canadian dollars.
(c) The
Term
Loan shall be made in one advance on the Effective Date.
2.4 Funding
of Borrowings.
The
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds by 12:00 noon, Toronto
time, to the account of the Borrower designated by the Borrower in the
applicable Borrowing Request.
2.5 Interest.
(a) The
Loans
comprising each Canadian Prime Borrowing shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 365 days or 366 days,
as the case may be) at a rate per annum equal to the Canadian Prime Rate from
time to time in effect.
(b) If
there
is a Default or an Event of Default has occurred and is continuing, all amounts
outstanding hereunder shall bear interest, after as well as before judgment,
at
a rate per annum equal to 2% plus the rate otherwise applicable to such Loan
or,
in the case of any amount not constituting principal or interest on a Loan,
at a
rate equal to 2% plus the rate otherwise applicable to Canadian Prime Loans.
(c) Accrued
interest on each Loan shall be payable in arrears on the earlier of (i) each
Interest Payment Date, and (ii) the date of termination of the Credits. In
addition, in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the
date
of such repayment or prepayment.
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(d) All
interest hereunder shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). Any Loan that is repaid
on
the same day on which it is made shall bear interest for one day. The Canadian
Prime Rate shall be determined by the Lender, and such determination shall
be
conclusive absent manifest error.
(e) For
the
purposes of the Interest
Act (Canada)
and disclosure thereunder, whenever any interest or any fee to be paid hereunder
or in connection herewith is to be calculated on the basis of a 365-day or
366-day year, the yearly rate of interest to which the rate used in such
calculation is equivalent is the rate so used multiplied by the actual number
of
days in the calendar year in which the same is to be ascertained and divided
by
365 or 366, as applicable. The rates of interest under this Agreement are
nominal rates, and not effective rates or yields. The principle of deemed
reinvestment of interest does not apply to any interest calculation under this
Agreement.
(f) If
any
provision of this Agreement would oblige the Borrower to make any payment of
interest or other amount payable to the Lender in an amount or calculated at
a
rate which would be prohibited by any Applicable Law or would result in a
receipt by that Lender of “interest” at a “criminal rate” (as such terms are
construed under the Criminal
Code (Canada)),
then, notwithstanding such provision, such amount or rate shall be deemed to
have been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by Applicable Law
or
so result in a receipt by the Lender of “interest” at a “criminal rate”, such
adjustment to be effected, to the extent permitted by Applicable Laws, as
follows:
|
(i)
|
first,
by reducing the amount or rate of interest required to be paid to
the
affected Lender under Section 2.5;
and
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(ii)
|
thereafter,
by reducing any fees, commissions, costs, expenses, premiums and
other
amounts required to be paid to the Lender which would constitute
interest
for purposes of section 347 of the Criminal
Code (Canada).
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2.6 Termination
and Reduction of Credits.
Unless
previously terminated, the Credits shall terminate on the Maturity Date. The
Revolving Loan Credit may be terminated at any time by the Lender upon sixty
(60) days prior written notice to the Borrower. The Credit Facility is an
extendible credit for the period (the “Initial
Period”)
from
the Effective Date to the Maturity Date. The Initial Period may, but need not,
be extended from time to time for a period not exceeding 364 days at the option
of the Lender provided a written request for such an extension is made by the
Borrower to the Lender not more than 60 days and not less than 30 days prior
to
the Maturity Date and, with respect to each 364 day period after the Maturity
Date not more than 60 days and not less than 30 days prior to the end of each
such 364 day period. If the Lender has not responded to a request made by the
Borrower under this Section prior to the 10th day before the end of the
applicable 364 day period, the request shall, in the absence of a written
agreement between the Lender and the Borrower to the contrary, be deemed to
have
been denied. If the request is granted by the Lender, the Initial Period shall
be extended from the Maturity Date to the day 364 days after the Maturity Date
with respect to the first extension and, to the day 364 days after the end
of
the first extension, with respect to the second extension and in each subsequent
year with respect to further extensions, to the day 364 days after the end
of
the immediately previous period.
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2.7 Repayment
of Loans.
The
Borrower hereby unconditionally promises to pay to the Lender the then unpaid
principal amount of each Loan and all interest thereon on the earlier of the
Maturity Date and the applicable Termination Date.
2.8 Evidence
of Debt.
(a) The
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the Indebtedness of the Borrower to the Lender resulting
from each Borrowing made by the Lender hereunder, including the amounts of
principal and interest payable and paid to the Lender from time to time
hereunder.
(b) The
Lender shall maintain accounts in which it shall record (i) the amount of
each Borrowing made hereunder, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to the Lender
hereunder, and (iii) the amount of any sum received by the Lender
hereunder.
(c) The
entries made in the accounts maintained pursuant to Sections 2.8(a) and (b)
shall be conclusive evidence (absent manifest error) of the existence and
amounts of the obligations recorded therein; provided
that the
failure of the Lender to maintain such accounts or any error therein shall
not
in any manner affect the obligation of the Borrower to repay the Borrowings
in
accordance with the terms of this Agreement.
(d) The
Lender may request that Loans made by it be evidenced by a promissory note.
In
such event, the Borrower shall prepare, execute and deliver to the Lender a
promissory note payable to the order of the Lender (or, if requested by such
Lender, to such Lender and its registered assigns) and in a form approved by
the
Lender. Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times be represented by one or more promissory notes in
such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
2.9 Prepayments.
(a) Mandatory
Borrowing Base Prepayments.
If at
any time the aggregate Exposure of the Lender is in excess of the Borrowing
Base, the Borrower shall immediately pay to the Lender, the amount of such
excess to be applied as a prepayment of the Revolving Loans.
(b) Currency
Fluctuations.
If, at
any time, the US $ Equivalent of the Exposure exceeds US$7,000,000, or the
US $
Equivalent of the outstanding Term Loan exceeds US$3,000,000 (any such excess
being referred to in this Section as an “Excess
Amount”),
then
the Borrower will repay to the Lender, an amount equal to the Excess Amount.
If
the amount of any Excess Amount is equal to or greater than 3% of the applicable
Credit, then the repayment of the Excess Amount to the Lender shall be made
by
the Borrower within one Business Day after the Lender requests such repayment.
If the amount of any Excess Amount is less than 3% of the applicable Credit,
then the repayment of the Excess Amount to the Lender shall be made on the
next
Interest Payment Date. As of June 20, 2007, the Canadian $ Equivalent is agreed
to be 1.06911.
(c) Voluntary
Prepayment.
The
Borrower may, upon delivery of written notice to the Lender (delivered in
accordance with the notice periods applicable to delivery of a Borrowing Request
under Section 2.3(a)), prepay all or any part of a Canadian Prime Borrowing.
Each notice delivered pursuant to this Section 2.9(c) shall be irrevocable.
No
prepayment under this Section 2.9(c) shall permanently reduce or terminate
any
of the Revolving Credit, but prepayment of a Term Loan shall permanently reduce
the Term Credit which may not be re-borrowed.
(d) Mandatory
Term Loan Principal Payments.
The
principal amount of the Borrowing under the Term Loan shall be repaid by the
Borrower in equal monthly instalments of the Canadian $ Equivalent as at the
Effective Dateof U.S.$83,333.33 (i.e., Canadian $ $89,092.50) on each Interest
Payment Date, commencing on the first Interest Payment Date following the
Effective Date, with any unpaid amount paid in accordance with Section
2.7.
-17-
2.10 Increased
Costs; Illegality.
(a) If
any
Change in Law shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Lender, and the result of any of the
foregoing shall be to increase the cost to the Lender of making or maintaining
any Loan (or of maintaining its obligation to make any such Loan) or to increase
the cost to the Lender of participating in, issuing or maintaining any Letter
of
Credit or any Loan or to reduce the amount of any sum received or receivable
by
the Lender hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to the Lender, such additional amount or amounts as will
compensate the Lender, for such additional costs incurred or reduction
suffered.
(b) If
the
Lender determines that any Change in Law regarding capital requirements has
or
would have the effect of reducing the rate of return on the Lender’s capital or
on the capital of the Lender’s, if any, as a consequence of this Agreement or
the Loans made hereby, to a level below that which the Lender or the Lender’s
holding company could have achieved but for such Change in Law (taking into
consideration the Lender’s policies and the policies of the Lender’s holding
company with respect to capital adequacy) and the Lender’s desired return on
capital, then from time to time the Borrower will pay to the Lender, such
additional amount or amounts as will compensate the Lender or the Lender’s
holding company for any such reduction suffered.
(c) A
certificate of the Lender setting forth amount or amounts necessary to
compensate the Lender as specified in Sections 2.10(a) or (b), together with
a
brief description of the Change of Law, shall be delivered to the Borrower,
and
shall be conclusive absent manifest error. In preparing any such certificate,
the Lender shall be entitled to use averages and to make reasonable estimates,
and shall not be required to “match contracts” or to isolate particular
transactions. The Borrower shall pay the Lender the amount shown as due on
any
such certificate within 10 days after receipt thereof.
(d) Failure
or delay on the part of the Lender to demand compensation pursuant to this
Section 2.10 shall not constitute a waiver of the Lender’s right to demand such
compensation.
(e) In
the
event that the Lender shall have determined (which determination shall be
reasonably exercised and shall, absent manifest error, be final, conclusive
and
binding upon all parties) at any time that the current or reasonably expected
foreign currency markets are unusually unstable or that the making or
continuance of any Loan denominated in a currency other than Canadian Dollars
has become unlawful or materially restricted as a result of compliance by the
Lender in good faith with any Applicable Law, or by any applicable guideline
or
order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, in any such event, the Lender shall
give prompt notice (by telephone and confirmed in writing) to the Borrower
of
such determination. Upon the giving of the notice to the Borrower referred
to in
this Section 2.10(e), the Borrower’s right to request (by continuation,
conversion or otherwise), and the Lender’s obligation to make, Loans denominated
in a currency other than Canadian Dollars shall be immediately suspended, and
thereafter any requested Borrowing of Loans denominated in a currency other
than
Canadian Dollars shall be deemed to be a request for a Canadian Prime Loan,
and
if the affected Loan or Loans are then outstanding, the Borrower shall
immediately, or if permitted by Applicable Law, no later than the date permitted
thereby, upon at least one Business Day prior written notice to the Lender,
convert each such Loan denominated in a currency other than Canadian Dollars
into a Canadian Prime Loan.
2.11 Taxes.
(a) Any
and
all payments by or on account of any obligation of the Borrower hereunder shall
be made free and clear of and without deduction or withholding for any
Indemnified Taxes; provided
that if
the Borrower shall be required to deduct or withhold any Indemnified Taxes
from
such payments, then (i) the sum payable shall be increased as necessary so
that, after making all required deductions or withholdings (including deductions
or withholdings applicable to additional sums payable under this Section 2.11),
the Lender receives an amount equal to the sum it would have received had no
such deduction or withholding been made, (ii) the Borrower shall make such
deduction or withholding, and (iii) the Borrower shall pay to the relevant
Governmental Authority in accordance with Applicable Law the full amount
deducted or withheld.
-18-
(b) In
addition to the payments by the Borrower required by Section 2.11(a), the
Borrower shall pay any and all present or future stamp or documentary Taxes
or
any other excise or property Taxes, charges or similar levies arising from
any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement to the relevant Governmental Authority
in accordance with Applicable Law.
(c) The
Borrower shall indemnify the Lender, within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes paid by the Lender on
or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes imposed or asserted on or attributable
to
amounts payable under this Section 2.11) and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to the Borrower by the Lender shall be conclusive absent
manifest error.
(d) As
soon
as practicable after any payment of Indemnified Taxes by the Borrower to a
Governmental Authority, the Borrower shall deliver to the Lender the original
or
a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence
of
such payment reasonably satisfactory to the Lender.
(e) If
the
Lender determines, in its sole discretion, that it has received a refund of
any
Taxes as to which it has been indemnified by the Borrower or with respect to
which the Borrower has paid additional amounts pursuant to this Section 2.11
and, in the Lender’s opinion, such refund amount is both reasonably identifiable
and quantifiable by it without involving it in an unacceptable administrative
burden, it shall pay over such refund amount to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.11 with respect to the Taxes giving rise to such refund,
and only to the extent that the Lender is satisfied that it may do so without
prejudice to its right, as against the relevant Governmental Authority, to
retain such refund), net of all out-of-pocket expenses of the Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request
of
the Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Lender if the Lender is required to repay such refund to
such
Governmental Authority. Nothing herein contained shall (i) interfere with the
right of the Lender to arrange its affairs in whatever manner it thinks fit
and,
in particular, the Lender shall not be under any obligation to claim relief
for
tax purposes on its corporate profits or otherwise, or to claim such relief
in
priority to any other claims, reliefs, credits or deductions available to it,
or
(ii) require the Lender to make available its tax returns (or any other
information relating to its Taxes which it deems confidential) to the Borrower
or any other Person.
2.12 Payments
Generally .
The
Borrower shall make each payment required to be made by it hereunder (whether
of
principal, interest, fees or amounts payable in respect of Reimbursement
Obligations, amounts payable under any of Sections 2.10, or 2.11, or amounts
otherwise payable hereunder) prior to 12:00 noon, Toronto time, on the date
when
due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Lender, be deemed to have been received on the next succeeding Business Day
for
purposes of calculating interest thereon. All such payments shall be made to
the
Lender at the Payment Office, except that payments pursuant to any indemnities
contained herein shall be made directly to the Persons entitled thereto. The
Lender shall distribute any such payments received by it for the account of
any
other Person to the appropriate recipient promptly following receipt thereof.
If
any payment hereunder shall be due on a day that is not a Business Day, the
date
for payment shall be extended to the next succeeding Business Day, and, in
the
case of any payment accruing interest, interest thereon shall be payable for
the
period of such extension. All payments under this Section 2.12 shall be made
in
Canadian dollars.
2.13 Currency
Indemnity.
If, for
the purposes of obtaining judgment in any court in any jurisdiction with respect
to this Agreement or any other Loan Document, it becomes necessary to convert
into a particular currency (the “Judgment
Currency”)
any
amount due under this Agreement or under any other Loan Document in any currency
other than the Judgment Currency (the “Currency
Due”),
then
conversion shall be made at the rate of exchange prevailing on the Business
Day
before the day on which judgment is given. For this purpose “rate of exchange”
means the rate at which the Lender is able, on the relevant date, to purchase
the Currency Due with the Judgment Currency in accordance with its normal
practice at its head office in Xxxxxxx, Xxxxxxx. In the event that there is
a
change in the rate of exchange prevailing between the Business Day before the
day on which the judgment is given and the date of receipt by the Lender of
the
amount due, the Borrower will, on the date of receipt by the Lender, pay such
additional amounts, if any, or be entitled to receive reimbursement of such
amount, if any, as may be necessary to ensure that the amount received by the
Lender on such date is the amount in the Judgment Currency which when converted
at the rate of exchange prevailing on the date of receipt by the Lender is
the
amount then due under this Agreement or such other Loan Document in the Currency
Due. If the amount of the Currency Due which the Lender is so able to purchase
is less than the amount of the Currency Due originally due to it, the Borrower
shall indemnify and save the Lender harmless from and against all loss or damage
arising as a result of such deficiency. This indemnity shall constitute an
obligation separate and independent from the other obligations contained in
this
Agreement and the other Loan Documents, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by the Lender from time to time and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect of an
amount due under this Agreement or any other Loan Document or under any judgment
or order.
-19-
2.14 Collection
of Accounts.
(a) The
Borrower shall, and shall cause each other Credit Party to, at its expense,
enforce, collect and receive all amounts owing on its Accounts in the ordinary
course of its business and any proceeds it so receives shall be subject to
the
terms hereof. Any proceeds received by a Credit Party in respect of Accounts,
and any cheques, cash, credit card sales and receipts, notes or other
instruments or property received by a Credit Party with respect to any
Collateral, shall be held by such Credit Party in trust for the Lender, separate
from such Credit Party’s own property and funds, and promptly turned over to the
Lender with proper assignments or endorsements by deposit to the Blocked
Accounts.
(b) The
Borrower shall, and shall cause each other Credit Party to: (i) irrevocably
authorize and direct any bank which maintains any Credit Party’s initial receipt
of cash, cheques and other items to promptly wire transfer all available funds
to a Blocked Account; and (ii) advise all such banks of the Lender’s
security interest in such funds. The Borrower shall, and shall cause each other
Credit Party to, provide the Lender with prior written notice of any and all
deposit accounts opened or to be opened subsequent to the Effective Date. All
amounts received by the Lender in payment of Accounts will be credited to the
Operating Account when the Lender is advised by its bank of its receipt of
“collected funds” at the Lender’s bank account in Toronto, Ontario on the
Business Day of such advise if advised no later than 12:00 noon, Toronto time,
or on the next succeeding Business Day if so advised after 12:00 noon, Toronto
time. Amounts received in U.S. Dollars will be converted into Canadian Dollars
by the Lender and the Canadian $ Equivalent shall be credited against
outstanding Loans. No cheques, drafts or other instrument received by the Lender
shall constitute final payment to the Lender unless and until such instruments
have actually been collected.
(c) The
Borrower shall, and shall cause each Credit Party to: (i) indicate on all of
its
invoices that funds should be delivered to and deposited in a lock box or a
Blocked Account, as applicable; and (ii) direct all of its account debotors
to
deposit any and all proceeds of Collateral into the lock boxes or the Blocked
Accounts, as applicable.
(d) The
Borrower shall, and shall cause each other Credit Party to, establish and
maintain, in its own respective name and at its expense, deposit accounts and
lock boxes with such banks as are acceptable to the Lender (the “Blocked
Accounts”)
into
which the Borrower shall promptly cause to be deposited: (i) all proceeds
of Collateral received by any Credit Party, including all amounts payable to
any
Credit Party from credit card issuers and credit card processors, and
(ii) all amounts on deposit in deposit accounts used by any Credit Party at
each of its locations, all as further provided in Section 2.14(b). The banks
at
which the Blocked Accounts are established and the applicable Credit Parties
shall enter into three-party agreements, in form and substance satisfactory
to
the Lender (the “Blocked
Account Agreements”),
providing that, among other things, all cash, cheques and items received or
deposited in the Blocked Accounts are subject to Liens in favour of the Lender,
that the depository bank has no Lien upon, or right of set off against, the
Blocked Accounts and any cash, cheques, items, wires or other funds from time
to
time on deposit therein, except as otherwise provided in the Blocked Account
Agreements, and that on a daily basis the depository bank will wire, or
otherwise transfer, in immediately available funds, all funds received or
deposited into the Blocked Accounts to such bank account as the Lender may
from
time to time designate for such purpose. The Borrower hereby confirms and agrees
that all amounts deposited in such Blocked Accounts and any other funds received
and collected by the Lender, whether as proceeds of Inventory or other
Collateral or otherwise, shall be subject to the Liens in favour of the
Lender.
-20-
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
In
order
to induce the Lender to enter into this Agreement, to make any Loans hereunder
and to issue any Letters of Credit hereunder, each Credit Party hereby
represents and warrants to the Lender that each statement set forth in this
Article 3 is true and correct on the date hereof, and will be true and
correct on the date of each Borrowing (except where such representation or
warranty refers to a different date):
3.1 Organization;
Powers.
The
Borrower and each other Credit Party is duly organized, validly existing and
in
good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now and formerly
conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
3.2 Authorization;
Enforceability.
The
Transactions are within each Credit Party’s corporate powers and have been duly
authorized by all necessary corporate and, if required, shareholder action.
This
Agreement and the other Loan Documents have been duly executed and delivered
by
the Borrower and each other Credit Party party thereto and constitute legal,
valid and binding obligations of the Borrower and each other Credit Party party
thereto, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganisation, moratorium or other Applicable Laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at
law.
3.3 Governmental
Approvals; No Conflicts.
The
Transactions (a) do
not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except as disclosed in Schedule 3.3,
(b) will
not
violate any Applicable Law or the charter, by-laws or other organizational
documents of the Borrower or any other Credit Party or any order of any
Governmental Authority, (c) will
not
violate or result in a default under any indenture, agreement or other
instrument binding upon the Borrower or any other Credit Party or their
respective assets, or give rise to a right thereunder to require any payment
to
be made by the Borrower or any other Credit Party, and (d) will
not
result in the creation or imposition of any Lien on any asset of the Borrower
or
any other Credit Party, except for any Lien arising in favour of the Lender
under the Loan Documents.
3.4 Financial
Condition; No Material Adverse Effect.
(a) Universal
Security Instruments, Inc. has furnished to the Lender its consolidated balance
sheets and statements of income, retained earnings and changes in financial
position (i) as
of and
for its fiscal years ended March 31, 2005, March 31, 2006 and March 31, 2007,
reported on by its auditors. Such financial statements present fairly, in all
material respects, the consolidated financial position and results of operations
and cash flows of the Borrower as of such dates and for such periods in
accordance with GAAP, subject to year end audit adjustments and the absence
of
footnotes in the case of the statements referred to in clause (ii) above. The
Borrower has furnished to the Lender its 12 month projection of monthly balance
sheets, income statements and cash flow projections in respect of the 12 month
period following the Effective Date.
(b) Since
March 31, 2007, there has been no event, development or circumstance that has
had or could reasonably be expected to have a Material Adverse
Effect.
-21-
(c) All
information (including that disclosed in all financial statements) pertaining
to
the Borrower and its Subsidiaries (other than projections) (in this Section
3.4(c), the “Information”)
that
has been or will be made available to the Lender by the Borrower or any
representative of the Borrower and the other Credit Parties, taken as a whole,
is or will be, when furnished, complete and correct in all material respects
and
does not or will not, when furnished, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made. The projections that have been or will be made
available to the Lender by the Borrower or any representative of the Borrower
have been or will be prepared in good faith based upon reasonable assumptions.
3.5 Litigation.
(a) Except
as
disclosed in Schedule 3.5, there are no actions, suits, counterclaims or
proceedings (including any Tax-related matter) by any Person or investigation
by
any Governmental Authority pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of the other Credit Parties
(i) as
to
which there is a reasonable possibility of an adverse determination and that,
if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters), or (ii) that
involve this Agreement, any other Loan Document, or the
Transactions.
(b) Since
the
date of this Agreement, there has been no change in the status of the Disclosed
Matters that, individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.
3.6 Compliance
with Applicable Laws and Agreements.
The
Borrower and each other Credit Party is in compliance with all Applicable Laws
applicable to it or its property and all indentures, agreements and other
instruments binding upon it or its property, except where the failure to do
so,
individually or in the aggregate, could not reasonably be expected to result
in
a Material Adverse Effect. Neither the Borrower nor any other Credit Party
has
violated or failed to obtain any Authorization necessary to the ownership of
any
of its property or assets or the conduct of its business, which violation or
failure could reasonably be expected to have (in the event that such a violation
or failure were asserted by any Person through appropriate action) a Material
Adverse Effect.
3.7 Ownership.
As at
the Effective Date, the registered and beneficial holders of all of the Equity
Securities of the Borrower are as set out on Schedule 3.7.
3.8 Taxes.
The
Borrower and each other Credit Party has timely filed or caused to be filed
all
Tax returns and reports required to have been filed and has paid or caused
to be
paid all Taxes required to have been paid by it (including all instalments
with
respect to the current period) and has made adequate provision for Taxes for
the
current period, except Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such other Credit Party,
as applicable, has set aside on its books adequate reserves.
3.9 Titles
to Real Property.
The
Borrower and each other Credit Party have indefeasible fee simple title to
their
respective owned real properties (or in Quebec, immoveable properties), and
with
respect to leased real properties, indefeasible title to the leasehold estate
with respect thereto, pursuant to valid and enforceable leases, free and clear
of all Liens except Permitted
Liens,
including the Permitted Liens disclosed in Schedule 3.9.
3.10 Titles
to Personal Property.
The
Borrower and each other Credit Party have title to their respective owned
personal properties (or, in Quebec, moveable properties), and with respect
to
leased personal properties, title to the leasehold estate with respect thereto,
pursuant to valid and enforceable leases, free and clear of all Liens except
Permitted
Liens,
including the Permitted Liens disclosed in Schedule 3.10.
3.11 Pension
Plans.
The
Pension Plans are duly registered under the ITA and
any
other Applicable Laws which require registration, have been administered in
accordance with the ITA and such other Applicable Laws and no event has occurred
which could reasonably be expected to cause the loss of such registered status,
except to the extent that any failure to do so could not reasonably be expected
to have a Material Adverse Effect. All material obligations of the Borrower
and
each other Credit Party (including fiduciary, funding, investment and
administration obligations) required to be performed in connection with the
Pension Plans and the funding agreements therefor have been performed on a
timely basis, except to the extent that any failure to do so could not
reasonably be expected to have a Material Adverse Effect. No promises of benefit
improvements under the Pension Plans or any benefit plans have been made except
where such improvement could not reasonably be expected to have a Material
Adverse Effect. All contributions or premiums required to be made or paid by
the
Borrower and each other Credit Party to the Pension Plans have been made on
a
timely basis in accordance with the terms of such plans and all Applicable
Laws.
There have been no improper withdrawals or applications of the assets of the
Pension Plans or any benefit plans. Any assessments owed to the Pension Benefits
Guarantee Fund established under the Pension Benefits Act (Ontario), or other
assessments or payments required under similar legislation in any other
jurisdiction, have been paid when due. Except as disclosed in
Schedule 3.11,
as of
the date hereof, each of the Pension Plans is fully funded on a solvency basis
and going concern basis (using actuarial methods and assumptions which are
consistent with the valuations last filed with the applicable Governmental
Authorities.
-22-
3.12 Disclosure.
The
Borrower has disclosed to the Lender all agreements, instruments and corporate
or other restrictions to which it or any other Credit Party is subject, and
all
other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
3.13 [Intentionally
Deleted.].
3.14 Casualties;
Taking of Properties.
Since
March 31, 2007, neither the business nor the properties of the Borrower or
any
other Credit Party have been affected in a manner that has had, or could
reasonably be expected to have, a Material Adverse Effect as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labour disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any domestic or foreign
Governmental Authority, riot, activities of armed forces, or acts of God or
of
any public enemy.
3.15 Subsidiaries.
As of
the Effective Date, Schedule 3.15 correctly sets forth the (i) names,
(ii) form
of
legal entity, (iii) Equity
Securities issued and outstanding, (iv) Equity
Securities owned by the Borrower or a Subsidiary of the Borrower (and specifying
such owner), and (v) jurisdictions
of organization of all Subsidiaries of the Borrower. Except as described in
Schedule 3.15, as of the Effective Date, the Borrower does not own any Equity
Securities or debt security which is convertible, or exchangeable, for Equity
Securities of any other Person. Unless otherwise indicated in Schedule 3.15,
as
of the Effective Date, all of the outstanding Equity Securities of each
Restricted Subsidiary
is owned of record and beneficially by the Borrower, there are no outstanding
options, warrants or other rights to purchase Equity Securities of any such
Restricted Subsidiary,
and all such Equity Securities so owned are duly authorized, validly issued,
fully paid and non-assessable, and were issued in compliance with all applicable
federal, provincial or foreign securities and other Applicable Laws, and are
free and clear of all Liens, except for Permitted Liens.
3.16 Insurance.
All
policies of fire, liability, workers’ compensation, casualty, flood, business
interruption and other forms of insurance owned or held by the Borrower or
any
other Credit Party are (a) sufficient
for compliance with all requirements of Applicable Law and of all agreements
to
which the Borrower or any other Credit Party is a party, (b) are
valid, outstanding and enforceable policies, (c) provide
adequate insurance coverage in at least such amounts and against at least such
risks (but including in any event public liability) as are usually insured
against in the same general area by Persons engaged in the same or a similar
business to the assets and operations of the Borrower and each other Credit
Party, and (d) will
not
in any way be adversely affected by, or terminate or lapse by reason of, the
Transactions. All such material policies are in full force and effect, all
premiums with respect thereto have been paid in accordance with their respective
terms, and no notice of cancellation or termination has been received with
respect to any such policy. Neither the Borrower nor any other Credit Party
maintains any formalized self-insurance program with respect to its assets
or
operations or material risks with respect thereto. The certificate of insurance
delivered to the Lender pursuant to Section 4.1(e) contains an accurate and
complete description of all material policies of insurance owned or held by
the
Borrower and each other Credit Party on the Effective Date.
3.17 Solvency.
Neither
the Borrower nor any other Credit Party is an “insolvent person” within the
meaning of the BIA.
-23-
3.18 Material
Contracts.
Schedule
B sets out all Material Contracts as of the Effective Date. A true and complete
copy of each Material Contract has been delivered to the Lender as of the
Effective Date. Each of the Material Contracts is in full force and effect.
Neither the Borrower nor any Restricted Subsidiary
is in default under or in breach of any term or condition of any Material
Contract that would have, either individually or in the aggregate, a Material
Adverse Effect, nor is the Borrower or any Restricted Subsidiary
aware of any default under or breach of any term or condition of any Material
Contract by any other party thereto that would have a Material Adverse Effect,
except as disclosed to the Lender in Schedule 3.13.
3.19 Environmental
Matters.
Except
as disclosed to the Lenders in the Disclosed Matters:
(a) Environmental
Laws.
Neither
any property of the Borrower or its Subsidiaries nor the operations conducted
thereon violate any applicable order of any court or Governmental Authority
or
any Environmental Laws, which violation could reasonably be expected to result
in remedial obligations having a Material Adverse Effect, assuming disclosure
to
the applicable Governmental Authority of all material relevant facts, conditions
and circumstances, if any, pertaining to the relevant property.
(b) Notices
and Permits.
All
notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed by the Borrower or its Subsidiaries in connection with the
operation or use of any and all property of the Borrower or its Subsidiaries
,
including but not limited to past or present treatment, transportation, storage,
disposal or Release of Hazardous Materials into the environment, have been
duly
obtained or filed, except to the extent the failure to obtain or file such
notices, permits, licenses or similar authorizations could not reasonably be
expected to have a Material Adverse Effect, or which could not reasonably be
expected to result in remedial obligations having a Material Adverse Effect,
assuming disclosure to the applicable Governmental Authority of all material
relevant facts, conditions and circumstances, if any, pertaining to the relevant
property.
(c) Hazardous
Substances Carriers.
All
Hazardous Materials generated at any and all property of the Borrower or its
Subsidiaries have been treated, transported, stored and disposed of only in
accordance with all Environmental Laws applicable to them, except to the extent
the failure to have such Hazardous Materials transported, treated or disposed
by
such carriers could not reasonably be expected to have a Material Adverse
Effect, and only at treatment, storage and disposal facilities maintaining
valid
permits under applicable Environmental Laws, which carriers and facilities,
to
the knowledge of the Borrower, have been and are operating in compliance with
such permits, except to the extent the failure to have such Hazardous Materials
treated, transported, stored or disposed at such facilities could not reasonably
be expected to have a Material Adverse Effect or which could not reasonably
be
expected to result in remedial obligations having a Material Adverse Effect,
assuming disclosure to the applicable Governmental Authority of all material
relevant facts, conditions and circumstances, if any, pertaining to the relevant
property.
(d) Hazardous
Materials Disposal.
The
Borrower and its Subsidiaries have taken all reasonable steps necessary to
determine and have determined that no Hazardous Materials have been disposed
of
or otherwise released and there has been no threatened Release of any Hazardous
Materials on or to any property of the Borrower or its Subsidiaries other than
in compliance with Environmental Laws, except to the extent the failure to
do so
could not reasonably be expected to have a Material Adverse Effect or which
could not reasonably be expected to result in remedial obligations having a
Material Adverse Effect, assuming disclosure to the applicable Governmental
Authority of all material relevant facts, conditions and circumstances, if
any,
pertaining to the relevant property.
(e) No
Contingent Liability.
The
Borrower and its Subsidiaries have no material contingent liability in
connection with any Release or threatened Release of any Hazardous Materials
into the environment which could reasonably be expected to result in remedial
obligations having a Material Adverse Effect, assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Release or threatened
Release.
-24-
3.20 Employee
Matters.
(a) Except
as
set forth on Schedule 3.20 as of the Effective Date, none of the Borrower or
any
of the other Credit Parties, nor any of their respective employees, is subject
to any collective bargaining agreement. There are no strikes, slowdowns or
work
stoppages pending or, to the best knowledge of the Borrower, threatened against
the Borrower or any other Credit Party, which could reasonably be expected
to
have, either individually or in the aggregate, a Material Adverse Effect. Except
as set forth in Schedule 3.20 as of the Effective Date, none of the Borrower
nor
any other Credit Party is subject to an employment contract providing for a
fixed term of employment or providing for payments other than severance in
respect of termination of employment.
(b) Each
of
the Borrower and the other Credit Parties has withheld from each payment to
each
of their respective officers, directors and employees the amount of all Taxes,
including income tax, Canada pension plan, employment insurance and other
payments and deductions required to be withheld therefrom, and has paid the
same
to the proper taxation or other receiving authority in accordance with
Applicable Law. None of the Borrower nor any other Credit Party is subject
to
any claim by or liability to any of their respective officers, directors or
employees for salary (including vacation pay) or benefits which would rank
in
whole or in part pari
passu
with or
prior to the Liens created by the Security Documents, other than Permitted
Liens
to the extent reserved for as Priority Payables.
(c) Neither
the Borrower nor any Restricted Subsidiary is subject to the United
States Employee Retirement Income Security Act
of 1974,
as amended.
3.21 Fiscal
Year.
The
Fiscal Year of the Borrower ends on March 31 of each calendar year.
3.22 Intellectual
Property Rights.
The
Borrower and each Restricted Subsidiary
is the registered and beneficial owner of, with good and marketable title,
free
of all licenses, franchises and Liens other than Permitted Liens, to all
patents, patent applications, trade marks, trade xxxx applications, trade names,
service marks, copyrights, industrial designs, integrated circuit topographies,
or other rights with respect to the foregoing and other similar property, used
in or necessary for the present and planned future conduct of its business,
without any conflict with the rights of any other Person, other than as listed
on Schedule 3.22, or other than for such conflicts as could not reasonably
be
expected to have a Material Adverse Effect. All material patents, trade marks,
trade names, service marks, copyrights, industrial designs, integrated circuit
topographies, and other similar rights owned or licensed by the Borrower or
any
Restricted Subsidiary,
and all rights of the Borrower and each Restricted Subsidiary
to the use of any patents, trade marks, trade names, service marks, copyrights,
industrial designs, integrated circuit topographies, or other similar rights,
are described in Schedule 3.22 (collectively, the “Intellectual
Property Rights”).
Except as set forth in Schedule 3.22, no material claim has been asserted and
is
pending by any Person with respect to the use by the Borrower or any
Restricted Subsidiary
of any intellectual property or challenging or questioning the validity,
enforceability or effectiveness of any intellectual property necessary for
the
conduct of the business of the Borrower or any Restricted Subsidiary.
Except as disclosed in Schedule 3.22 or except as could not reasonably be
expected to have a Material Adverse Effect, (i) the
Borrower and each Restricted Subsidiary
has the exclusive right to use the intellectual property which the Borrower
(or
each Restricted Subsidiary)
owns, (ii) all
applications and registrations for such intellectual property are current,
and
(iii) to
the
knowledge of the Borrower, the conduct of the Borrower’s and each
Restricted Subsidiary’s
business does not infringe the intellectual property rights of any other
Person.
3.23 Residency
of Borrower for Tax Purposes.
The
Borrower is a resident of Canada for tax purposes.
3.24 Distributions.
From
and after the Effective Date, no Distribution has been declared, paid, or made
upon or in respect of Equity Securities in any Credit Party except as expressly
permitted hereby.
3.25 Debt.
None of
the Credit Parties nor any of their Subsidiaries has any Indebtedness except
(a) the Obligations, (b) the Indebtedness set forth in the most recent
financial statements delivered to the Lender, or the notes thereto, (c) Tax
obligations (including deferred Taxes), trade payables and other contractual
obligations arising in the ordinary course of business as carried on by the
Credit Parties and their Subsidiaries since the date of such financial
statements, and (d) Indebtedness created in accordance with Section
6.1.
-25-
3.26 Workers’
Compensation.
None of
the Credit Parties has any unpaid workers’ compensation or like obligations
except as are being incurred, and paid on a current basis in the ordinary course
of business, and there are no proceedings, claims, actions, orders or
investigations of any Governmental Authority relating to workers’ compensation
outstanding, pending or, to their knowledge, threatened relating to them or
any
of their employees or former employees which could reasonably be expected to
have a Material Adverse Effect.
3.27 Bank
Accounts.
Schedule 3.27 contains as of the Effective Date a complete and accurate list
of
all bank accounts maintained by the Credit Parties with any bank or other
financial institution.
3.28 Real
Property and Leases.
Schedule 3.28 hereto is a correct and complete list, of all real property owned
by each Credit Party, all leases and subleases of real property or movable
or
personal property by any Credit Party, as lessee or sublessee, and all leases
and subleases of real property or movable or personal property by any Credit
Party, as lessor or sublessor. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect, and
no
default by any party to any such lease or sublease exists which could reasonably
be expected to have a Material Adverse Effect.
3.29 Further
Real Property Matters.
(a) Except
as
advised in writing to the Lender, no investigation or proceeding of any
Governmental Authority is pending in respect of real property owned by any
of
the Credit Parties. No part of any such real property has been condemned, taken
or expropriated by any Governmental Authority, federal, state, provincial,
municipal or any other competent authority.
(b) Except
as
advised in writing to the Lender, all present uses in respect of any real
property of the Credit Parties may lawfully be continued and all permitted
uses
are satisfactory for the Credit Parties’ current and intended purposes;
and
(c) No
Inventory is located at any leased real property of the Credit Parties except
as
indicated in Schedule 3.28.
3.30 Jurisdictions
of Credit Parties.
Schedule 3.30 sets out the various jurisdictions in which the Borrower and
each
other Credit Party carries on business or has tangible assets having an
aggregate value in excess of Cdn.$100,000.
ARTICLE
4
CONDITIONS
4.1 Effective
Date.
The
right of the Borrower to request Borrowings hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 8.2):
(a) Credit
Agreement.
The
Lender (or its counsel) shall have received from each party hereto either
(i) a
counterpart of this Agreement signed on behalf of each party hereto, or
(ii) written
evidence satisfactory to the Lender (which may include facsimile or other
electronic transmission of a signed signature page of this Agreement) that
each
such party has signed a counterpart of this Agreement.
(b) Legal
Opinions.
The
Lender shall have received a favourable written opinion of counsel to the
Borrower covering such matters relating to the Borrower, the Credit Parties,
this Agreement, the other Loan Documents, or the Transactions as the Lender
shall reasonably request (together with copies of all factual certificates
and
legal opinions delivered to such counsel in connection with such opinion upon
which counsel has relied). All opinions and certificates referred to in this
Section 4.1(b) shall be addressed to the Lender and dated the Effective
Date.
(c) Corporate
Certificates.
The
Lender shall have received:
|
(i)
|
certified
copies of the resolutions of the Board of Directors of the Borrower,
and
any other Credit Party which is a party to any Loan Document, dated
as of
the Effective Date, and approving, as appropriate, the Loans, this
Agreement and the other Loan Documents, and all other documents,
if any,
to which the Borrower or such other Credit Party is a party and
evidencing
corporate authorization with respect to such documents;
and
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-26-
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(ii)
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a
certificate of an officer of the Borrower, and any other Credit Party
which is a party to any Loan Document, dated as of the Effective
Date, and
certifying (A) the
name, title and true signature of each officer of such Person authorized
to execute this Agreement and the other Loan Documents to which it
is a
party, (B) the
name, title and true signature of each officer of such Person authorized
to provide the certifications required pursuant to this Agreement,
including certifications required pursuant to Section 5.1 and Borrowing
Requests, and (C) that
attached thereto is a true and complete copy of the articles of
incorporation and bylaws of the Borrower, and any other Credit Party
which
is a party to any Loan Document, as amended to date, and a recent
certificate of status, certificate of compliance, good standing
certificate or analogous
certificate.
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(d) Fees.
The
Lender shall have received all fees and other amounts due and payable on or
prior to the Effective Date, including, to the extent invoiced, reimbursement
or
payment of all legal fees and other Out-of-Pocket Expenses required to be
reimbursed or paid by the Borrower hereunder or under any other Loan
Document.
(e) Insurance.
The
Lender shall have received a certificate of insurance coverage, naming the
Lender, as first loss payee dated not more than 30 days prior to the Effective
Date, evidencing that the Borrower and its Restricted Subsidiaries are carrying
insurance in accordance with Section 5.9 hereof.
(f) Inventory
Control Systems; Appraisal; Field Audit; Opening Availability.
The
Lender shall have reviewed and be satisfied with the Collateral, the inventory
control systems, the books and records and the reporting capability of the
Credit Parties. In addition, the Lender shall have received the results of
an
updated field audit, and the Borrowing Base on the Effective Date shall be
sufficient in value, as determined by Lender, to provide Borrower with a
Borrowing Base, after giving effect to the extensions of credit to be made
hereunder on the Effective Date, in an amount satisfactory to Lender in its
sole
discretion.
(g) Execution
and Delivery of Documentation.
The
Borrower and any other Credit Party which is a party to any Loan Document shall
have duly authorized, executed and delivered all documents, including Loan
Documents, required hereunder, all in form and substance satisfactory to the
Lender, acting reasonably, and all of the Security Documents shall have been
registered in all offices in which, in the opinion of the Lender or its counsel,
registration is necessary or of advantage to preserve the priority of the Liens
intended to be created thereby, and duplicate copies of such Security Documents
bearing or accompanied by appropriate endorsements or certificates of
registration shall have been delivered to the Lender. The Lender shall have
received and be satisfied with the results of all personal property, pending
litigation, judgment, bankruptcy, execution and other searches conducted by
the
Lender and its counsel with respect to the Borrower and any other Credit Party
in all jurisdictions selected by the Lender and its counsel.
(h) Security
Documents.
The
Lender shall have received:
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(i)
|
a
guarantee executed by each Guarantor in favour of the Lender dated
as of
the Effective Date; and
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(ii)
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a
general security agreement executed by each Credit Party in favour
of the
Lender dated as of the Effective Date, constituting a first-priority
Lien
on all property from time to time of each Credit Party, subject only
to
Permitted Liens;
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-27-
provided
that if
any of the foregoing documents are not suitable for use in any jurisdiction,
the
applicable Credit Party shall provide to the Lender alternative documents with
substantially equivalent substantive effect and which are suitable for use
in
such jurisdiction.
(i) Landlord
Waivers; Bailee Letters.
The
Lender shall have received (i) executed copies of a landlord waiver, in form
and
substance satisfactory to the Lender, acting reasonably, from each landlord
of
Real Property where any Collateral of any of the Credit Parties is located
and
(ii) bailee letters, in form and substance reasonably satisfactory to the
Lender, from each bailee who is in possession of any Collateral of any of the
Credit Parties.
(j) Regulatory
Approval; Consents; Waivers.
The
Lender shall be satisfied, acting reasonably, that all material Authorizations
required in connection with the Transactions contemplated hereby have been
obtained and are in full force and effect (including all approvals listed in
Schedule 3.3), and that all consents and waivers required to consummate the
Transactions have been obtained, to the extent that consummation of the
Transactions would otherwise be restricted or prohibited under the terms of
any
Material Contract to which the Borrower or any other Credit Party is a party,
or
by which it is bound, in each case without the imposition of any burdensome
provisions.
(k) Delivery
of Financial Statements.
The
Lender shall have received and be satisfied with the financial statements
described in Section 3.4(a) and unaudited consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries (pro
forma
as of
the Effective Date).
(l) No
Material Adverse Change.
The
Lender shall be satisfied that, since March
31,
2007, there has not been a Material Adverse Change.
(m) Indebtedness.
The
Transactions contemplated in this Agreement and the other Loan Documents shall
not have caused any event or condition to occur which has resulted, or which
will result, in any Material Indebtedness becoming due prior to its scheduled
maturity or that permits (with or without the giving of notice, the lapse of
time, or both) the holder or holders of any Material Indebtedness or any trustee
or Lender on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity, or which will result in the creation of any
Liens under any Indebtedness.
(n) Blocked
Account/Cash Management Systems.
The
Lender shall have received evidence satisfactory to the Lender that, as of
the
Effective Date, blocked account and cash management systems complying with
Section 2.14 have been established and are currently being maintained in the
manner set forth in such Section 2.14, and the Lender shall have received copies
of duly executed tri-party blocked account, lockbox and other control agreements
satisfactory to the Lender, acting reasonably.
(o) Material
Contracts.
The
Lender shall be satisfied with the terms and conditions of each of the Material
Contracts.
(p) Cancellation
of Existing Credit Lines.
The
Borrower shall have repaid all amounts outstanding under its existing credit
lines with HSBC Bank Canada, and all such existing credit lines shall have
been
cancelled permanently.
(q) Capitalization
Arrangement.
The
Lender shall be satisfied with the capital structure of the Borrower, that
the
Borrower is solvent, and that the Borrower has sufficient working capital to
pay
its debts as they become due.
(r) Background
Checks.
The
Lender shall have received and be satisfied with the results of the background
checks conducted on the key senior management and principals of the Credit
Parties.
(s) Other
Documentation.
The
Lender shall have received such other documents and instruments as are customary
for transactions of this type or as they may reasonably request.
-28-
The
right
of the Borrower to request a borrowing hereunder shall not become effective
unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 8.2) at or prior to 3:00 p.m., Toronto time,
on
July
15, 2007 (and, in the event such conditions are not so satisfied or waived
by
such time, the such right shall terminate at such time).
4.2 Each
Credit Event.
The
right of the Borrower to request a Borrowing, (including on the occasions of
the
initial Borrowings hereunder), is subject to the satisfaction of the following
conditions:
(a) the
representations and warranties of the Borrower set forth in this Agreement
shall
be true and correct on and as of the date of each such Borrowing as if made
on
such date (except where such representation or warranty refers to a different
date);
(b) at
the
time of and immediately after giving effect to such Borrowing, no Default shall
have occurred and be continuing;
(c) the
Lender shall have received a Borrowing Request in the manner and within the
time
period required by Section 2.3;
(d) the
Lender shall have received a Borrowing Base Report dated one day prior to the
date of the requested Borrowing; and
(e) except
as
may be otherwise agreed to from time to time by the Lender and the Borrower
in
writing, after giving effect to the extension of credit requested to be made
by
the Borrower on such date, the aggregate Exposure will not exceed the lesser
of
(i) the Maximum Revolving Line of Credit, or (ii) an amount equal to
the Borrowing Base.
Each
Borrowing, shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the accuracy of the matters specified in
paragraphs (a) and (b) above. This requirement does not apply on the conversion
or rollover of an existing Borrowing provided
that the
aggregate outstanding Borrowings will not be increased as a consequence
thereof.
ARTICLE
5
AFFIRMATIVE
COVENANTS
From
(and
including) the Effective Date until the Credits have expired or been terminated
and the principal of and interest on each Loan and all fees payable hereunder
shall have been paid in full, the Borrower and each other Credit Party covenants
and agrees with the Lender that:
5.1 Financial
Statements and Other Information.
The
Borrower will furnish to the Lender:
(a) as
soon
as available and in any event within 90 days after the end of each Fiscal Year
of the Borrower, its reviewed consolidated balance sheet and related statements
of income, retained earnings and changes in financial position as of the end
of
and for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year all reported on by Xxxxx LLP or
other
independent auditors of recognized national standing to the effect that such
consolidated financial statements present fairly in all material respects the
financial condition and results of operations of the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;
(b) as
soon
as available and in any event within 30 days after the end of each six
month period, its unaudited consolidated balance sheet and related statements
of
income, retained earnings and changes in financial position as of the end of
such month and the then elapsed portion of the Fiscal Year which includes such
calendar month, setting forth in each case in comparative form the figures
for
the corresponding period or periods of (or, in the case of the balance sheet,
as
of the end of) the previous Fiscal Year, all certified by a Responsible Officer
as presenting fairly in all material respects the financial condition and
results of operations of the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments;
-29-
(c) concurrently
with the financial statements required pursuant to Sections 5.1(a) and (b)
above, a certificate of the Borrower substantially in the form of Exhibit E,
signed by a Responsible Officer (i) stating
that a review of such financial statements during the period covered thereby
and
of the activities of the Borrower and the Subsidiaries has been made under
such
Responsible Officer’s supervision with a view to determining whether the
Borrower and the Subsidiaries have fulfilled all of their obligations under
this
Agreement and the other Loan Documents, (ii) stating
that the Borrower and the Subsidiaries have fulfilled their obligations under
this Agreement and the other Loan Documents and that all representations made
in
this Agreement continue to be true and correct as if made on the date of such
certification (or specifying the nature of any change), except where such
representation or warranty refers to a different date, or, if there shall be
a
Default or Event of Default, specifying the nature and status thereof and the
Borrower’s proposed response thereto, and (iii)
containing or accompanied by such financial or other details, information and
material as the Lender may reasonably request to evidence such
compliance;
(d) promptly
upon the request of the Lender, and in any event no less frequently than the
15th
Business
Day of each calendar month (together with a copy of all or any part of the
following reports (requested by the Lender in writing after the Effective Date),
a Borrowing Base Report as of the last day of the immediately preceding calendar
month accompanied by such supporting detail and documentation as shall be
requested by the Lender it is reasonable discretion including but not limited
to:
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(i)
|
an
accounts receivable aging (including both summary and detail format)
showing Accounts outstanding aged from invoice date as follows: 1
to 30
days past due, 31 to 60 days past due, 61 to 90 days past due, and
91 days
or more past due, accompanied by such supporting detail and documentation
as shall be requested by the Lender in its reasonable discretion,
including the ledger for disputed/legal accounts;
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(ii)
|
a
copy of the internally generated month end cash receipts and collections
journal;
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(iii)
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a
detailed, monthly, Inventory listing of the Borrower and each Restricted
Subsidiary by location, type and product group with a supporting
perpetual
Inventory report, in each case, accompanied by such supporting detail
and
documentation as shall be requested by the Lender in its reasonable
discretion; such summaries and reports shall include the dollar value
thereof both at cost, determined on a first in, first out basis,
and at
fair market value;
and
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(iv)
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detailed
monthly accounts payable aging.
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(e) such
other reports designating, identifying and describing the Accounts and Inventory
as required by the Lender and on a more frequent basis as the Lender may
reasonably request in its reasonable credit discretion.
(f) the
results of each physical verification, if any, that the Borrower may have made,
or caused any other Person to have made on its behalf, of all or any portion
of
its Inventory, within 10 Business Days of completion of any such physical
verification (and, if a Default or an Event of Default has occurred and be
continuing, the Borrower shall, upon the request of the Lender, conduct, and
deliver the results of, such physical verifications as the Lender may
require);
(g) promptly
after the Borrower learns of the receipt or occurrence of any of the following,
a certificate of the Borrower, signed by a Responsible Officer, specifying
(i) any
official notice of any violation, possible violation, non-compliance or possible
non-compliance, or claim made by any Governmental Authority pertaining to all
or
any part of the properties of the Borrower or any of the Subsidiaries which
could reasonably be expected to have a Material Adverse Effect, (ii) any
event
which constitutes a Default or Event of Default, together with a detailed
statement specifying the nature thereof and the steps being taken to cure such
Default or Event of Default, (iii) the
receipt of any notice from, or the taking of any other action by, the holder
of
any promissory note, debenture or other evidence of Indebtedness of the Borrower
or any of the Subsidiaries in an amount in excess of Cdn.$100,000 with respect
to an actual or alleged default, together with a detailed statement specifying
the notice given or other action taken by such holder and the nature of the
claimed default and what action the Borrower or the relevant Subsidiary is
taking or proposes to take with respect thereto, (iv) any
default or non-compliance of any party to any of the Loan Documents with any
of
the terms and conditions thereof or any notice of termination or other
proceedings or actions which could reasonably be expected to adversely affect
any of the Loan Documents, (v) the
creation, dissolution, merger or acquisition of any Restricted Subsidiary,
(vi) any
event
or condition not previously disclosed to the Lender, which violates any
Environmental Law and which could potentially, in the Borrower’s reasonable
judgment, have a Material Adverse Effect, (vii) any
material amendment to, termination of, or material default under a Material
Contract or any execution of, or material amendment to, termination of, or
material default under, any material collective bargaining agreement, and
(viii) any
other
event, development or condition which may reasonably be expected to have a
Material Adverse Effect;
-30-
(h) promptly
after the occurrence thereof, notice of the institution of or any material
adverse development in any action, suit or proceeding or any governmental
investigation or any arbitration before any court or arbitrator or any
Governmental Authority or official against the Borrower or any Restricted
Subsidiary or any material property of any thereof which could reasonably be
expected to have a Material Adverse Effect;
(i) promptly
after the filing thereof with any Governmental Authority (if requested by the
Lender), copies of each annual and other report (including applicable schedules)
with respect to each Pension Plan of the Borrower or any Restricted
Subsidiary or
any
trust created thereunder;
(j) at
the
cost of the Borrower, a report or reports of an independent collateral field
examiner (which collateral field examiner may be the Lender or an Affiliate
thereof) approved (i) by
the
Borrower, whose approval shall not be unreasonably withheld, and (ii) by
the
Lender with respect to the Eligible Accounts and Eligible Inventory components
included in the Borrowing Base. The Lender may request such reports or
additional reports as it shall reasonably deem necessary.
Fees
for such examinations shall be limited to US$25,000,00 in any year on a combined
basis for the Credit Parties and the Guarantors;
(k) upon
request by the Lender, a summary of the insurance coverages of the Borrower
and
the other Credit Parties, in form and substance reasonably satisfactory to
the
Lender, and upon renewal of any insurance policy, a copy of an insurance
certificate summarizing the terms of such policy, and upon request by the
Lender, copies of the applicable policies;
(l) on
or
before the earlier of the 10th
day
after approval by the Board of Directors of the Borrower and the 30th
day
before each Fiscal Year end, an annual budget of the Borrower and each
Restricted Subsidiary
(consolidating on the basis of principal lines of business of the Borrower
and
its Subsidiaries ), approved by the Board of Directors of the Borrower, setting
forth in reasonable detail and on a monthly basis the
projected revenues and expenses of the Borrower for the following Fiscal Year,
it being recognized by the Lender that projections as to future results are
not
to be viewed as fact and that the actual results for the period or periods
covered by such projections may differ from the projected results;
and
(m) concurrently
with any delivery of financial statements under Section 5.1 (a) or (b) above,
a
certificate of a Responsible Officer of the Borrower (i) stating whether
any change in GAAP or in the application thereof has occurred since the date
of
the audited financial statements referred to in Section 5.1(a) and, if any
such
change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate, (ii) identifying all its
Subsidiaries existing on the date of such certificate and indicating, for each
such Subsidiary, whether such Subsidiary is a Restricted Subsidiary and
whether such Subsidiary was formed or acquired since the end of the previous
calendar month, (iii) identifying any parcels of real property or
improvements thereto that have been acquired by any Credit Party since the
end
of the previous calendar month, and (iv) identifying any Permitted
Acquisitions that have been completed since the end of the previous calendar
month, including the date on which each such Permitted Acquisition was completed
and the consideration therefor.
5.2 Existence;
Conduct of Business.
The Borrower will, and will cause each Restricted Subsidiary
to, do or cause to be done all things necessary to preserve, renew and keep
in
full force and effect its legal existence (subject only to Section 6.3), and
obtain, preserve, renew and keep in full force and effect any and all rights,
licenses, permits, privileges and franchises material to the conduct of its
business.
-31-
5.3 Payment
of Obligations.
The
Borrower will, and will cause each Restricted Subsidiary to, pay its
obligations, including Tax liabilities, that, if not paid, could result in
a
Material Adverse Effect before the same shall become delinquent or in default,
except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the
Borrower or such Restricted Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, and (c) the
failure to make payment pending such contest could not reasonably be expected
to
result in a Material Adverse Effect.
5.4 Maintenance
of Properties.
The Borrower will, and will cause each Restricted Subsidiary to, keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, except to the extent
that
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.5 Books
and Records; Inspection Rights.
The Borrower will, and will cause Restricted Subsidiary to, keep proper books
of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each Restricted Subsidiary to, permit any
representatives designated by the Lender, upon reasonable prior notice, to
visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
5.6 Compliance
with Applicable Laws and Material Contracts.
The
Borrower will, and will cause each Restricted Subsidiary to, comply with all
Applicable Laws and orders of any Governmental Authority applicable to it or
its
property and with all of its material contractual obligations, except where
the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. The Borrower shall not modify,
amend or alter its certificate or articles of incorporation other than in a
manner which does not adversely affect the rights of the Lender.
5.7 Use
of Proceeds.
The
proceeds of the Revolving Loans will be used for working capital and other
general corporate purposes of the Borrower.
The
proceeds of the Term Loan will be used to repay existing Indebtedness of the
Borrower owing to 2113824 Ontario Inc. in the amount of US$1,912,533 and owing
to Universal Security Instruments, Inc. in the amount of
US$1,087,467.
5.8 Further
Assurances.
The
Borrower will and will cause each other Credit Party to cure promptly any
defects in the execution and delivery of the Loan Documents, including this
Agreement. Upon request, the Borrower will, at its expense, as promptly as
practical, execute and deliver to the Lender, all such other and further
documents, agreements and instruments (and cause each other Credit Party to
take
such action) in compliance with or performance of the covenants and agreements
of the Borrower or any other Credit Party in any of the Loan Documents,
including this Agreement, or to further evidence and more fully describe the
Collateral, or to correct any omissions in any of the Loan Documents, or more
fully to state the security obligations set out herein or in any of the Loan
Documents, or to perfect, protect or preserve any Liens created pursuant to
any
of the Loan Documents, or to make any recordings, to file any notices, or obtain
any consents, all as may be necessary or appropriate in connection therewith,
in
the judgment of the Lender, acting reasonably.
-32-
5.9 Insurance.
The Borrower shall, and shall cause each other Credit Party to, maintain
insurance on its property and assets under such policies of insurance, with
such
insurance companies, in such reasonable amounts and covering such insurable
risks as are at all times reasonably satisfactory to the Lender. All such
policies are subject to the rights of any holders of Permitted Liens holding
claims senior to the Lender, to be made payable to the Lender, to the extent
required herein, in case of loss, under a standard non contributory “mortgagee”,
“lender” or “secured party” clause and are to contain such other provisions as
the Lender may require to fully protect the Lender’s interest in the property
and assets subject to the Liens in favour of the Lender and to any payments
to
be made under such policies. All original policies or true copies thereof are
to
be delivered to the Lender, premium prepaid, with the loss payable endorsement
in the Lender’s favour, and shall provide for not less than thirty (30) days
prior written notice to the Lender of the exercise of any right of cancellation.
Upon the occurrence and continuance of an Event of Default which is not waived
in writing by the Lender, the Lender shall, subject to the rights of any holders
of Permitted Liens holding claims senior to the Lender, have the sole right,
in
the name of the Lender, the Borrower or any other applicable Credit Party,
to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute
any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. If any part of
the
Collateral is lost or damaged by fire or other casualty and the insurance
proceeds for such loss or damage is less than or equal to $100,000, such
insurance proceeds shall be paid to the applicable Credit Party. Notwithstanding
the foregoing, to the extent such insurance proceeds are received by the Lender,
the Lender shall promptly, and in any event within one (1) Business Day of
receipt, remit such insurance proceeds to the applicable Credit Party. If any
part of the Collateral is lost or damaged by fire or other casualty and the
insurance proceeds for such loss or damage is greater than $100,000, such
insurance proceeds shall be paid to the Borrower, the Borrower may irrevocably
elect (by delivering written notice to the Lender) to replace, repair or restore
such Collateral to substantially the equivalent condition prior to such fire
or
other casualty as set forth herein. If such election is not made by the
Borrower, insurance proceeds shall be used by the Borrower to repay outstanding
Revolving Loans. Notwithstanding the foregoing, to the extent that such
insurance proceeds are received by the Lender, the Lender shall promptly, and
in
any event within one (1) Business Day of receipt, remit such insurance proceeds
to the Borrower to be applied in accordance with this Section 5.9. If the
Borrower does not, or cannot, elect to use the insurance proceeds as set forth
above, or if the Lender believes that the applicable Credit Party will not
be
able to timely replace, repair or restore such Collateral to substantially
the
equivalent condition prior to such fire or other casualty, the Lender may,
subject to the rights of any holders of Permitted Liens holding claims senior
to
the Lender in respect of such insurance proceeds, (i) if no Event of
Default has occurred and is continuing, apply the insurance proceeds to the
payment of any Revolving Loans until paid in full and (b) if an Event of
Default has occurred and is continuing, apply the insurance proceeds to the
Obligations in such manner and in such order as the Lender may reasonably elect.
Upon the occurrence and during the continuance of an Event of Default, all
insurance proceeds in respect of any Collateral shall be paid to the Lender.
The
Lender may apply such insurance proceeds to the Obligations in such manner
as it
may deem advisable in its sole discretion. In the event the Borrower fails
to
provide the Lender with timely evidence, acceptable to the Lender, of the
maintenance of insurance coverage required pursuant to this Section 5.9, or
in
the event that any Credit Party fails to maintain such insurance, the Lender
may
purchase or otherwise arrange for such insurance, but at the Borrower’s expense
and without any responsibility on the Lender’s part for: (i) obtaining the
insurance; (ii) the solvency of the insurance companies; (iii) the
adequacy of the coverage; or (iv) the collection of claims. The insurance
acquired by the Lender may, but need not, protect the Borrower’s or any other
Credit Party’s interest in the Collateral, and therefore such insurance may not
pay claims which the Borrower may have with respect to the Collateral or pay
any
claim which may be made against the Borrower in connection with the Collateral.
In the event the Lender purchases, obtains or acquires insurance covering all
or
any portion of the Collateral, the Borrower shall be responsible for all of
the
applicable costs of such insurance, including premiums, interest (at the
applicable interest rate for Revolving Loans set forth in Section 2.5), fees
and
any other charges with respect thereto, until the effective date of the
cancellation or the expiration of such insurance. The Lender may charge all
of
such premiums, fees, costs, interest and other charges to the Borrower’s
Operating Account. The Borrower hereby acknowledges that the costs of the
premiums of any insurance acquired by the Lender may exceed the costs of
insurance which the Borrower may be able to purchase on its own. In the event
that the Lender purchases such insurance, the Lender will promptly, and in
any
event within fifteen (15) days, notify the Borrower of said
purchase.
5.10 Operation
and Maintenance of Property.
The Borrower will, and will cause each other Credit Party to, manage and operate
its business or cause its business to be managed and operated (i) in
accordance with prudent industry practice in all material respects and in
compliance in all material respects with the terms and provisions of all
applicable licenses, leases, contracts and agreements, and (ii) in
compliance with all Applicable Laws of the jurisdiction in which such businesses
are carried on, and all Applicable Laws of every other Governmental Authority
from time to time constituted to regulate the ownership, management and
operation of such businesses, except where a failure to so manage and operate
would not have a Material Adverse Effect.
-33-
ARTICLE
6
NEGATIVE
COVENANTS
From
(and
including) the Effective Date until the Credits have expired or been terminated
and the principal of and interest on each Loan and all fees payable hereunder
shall have been paid in full, the Borrower and each Credit Party covenants
and
agrees with the Lender that:
6.1 Indebtedness.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, create, incur, assume or permit to exist any Indebtedness,
except:
(a) any
Indebtedness created hereunder;
(b) any
Indebtedness existing on the date hereof and set forth in Schedule 6.1
(including, any extensions or renewals of any such Indebtedness but excluding
any replacements of any such Indebtedness);
(c) any
Indebtedness of one Credit Party to another Credit Party;
(d) any
Guarantee by a Credit Party of Indebtedness of any other Credit
Party;
(e) any
Indebtedness of the Credit Parties incurred under Purchase Money Liens or to
Capital Lease Obligations in an aggregate amount not exceeding Cdn.$250,000
for
all Credit Parties;
(f) any
Indebtedness of any Person that becomes a Credit Party after the date hereof,
provided
that
(i) such
Indebtedness exists at the time such Person becomes a Credit Party and is not
created in contemplation of or in connection with such Person becoming a Credit
Party, and (ii) the
aggregate principal amount of Indebtedness permitted by this clause (f) shall
not exceed Cdn.$250,000 at any time outstanding; and
(g) any
Indebtedness in respect of trade letters of credit.
6.2 Liens.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, create, incur, assume or permit to exist any Lien on any property or asset
now owned or hereafter acquired by the Credit Party or any
Restricted Subsidiary,
or assign or sell any income or revenues (including Receivables) or rights
in
respect of any thereof, except Permitted Liens.
6.3 Fundamental
Changes.
(a) No
Credit
Party will, and no Credit Party will permit any Restricted Subsidiary
to, merge into or amalgamate or consolidate with any other Person, or permit
any
other Person to merge into or amalgamate or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a series
of
transactions) all or substantially all of its assets, or all or any of the
Equity Securities of any of its Subsidiaries (in each case, whether now owned
or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing, (i) any
Restricted Subsidiary
may amalgamate with the Borrower, (ii) any
Restricted Subsidiary
may amalgamate with any other Restricted Subsidiary,
(iii) any
Restricted Subsidiary
may sell, transfer, lease or otherwise dispose of its assets to the Borrower
or
to another Restricted Subsidiary,
and (iv) any
Restricted Subsidiary
may liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and the
Lender determines that such liquidation or dissolution is not disadvantageous
to
the Lender; provided
that any
amalgamation pursuant to Sections 6.3(a)(i) or (ii) shall not be permitted
unless permitted by Section 6.4 and unless the amalgamated corporation confirms
to the Lender in writing that the amalgamated corporation is liable, by
operation of law or otherwise, for the obligations of the Borrower under this
Agreement.
(b) No
Credit
Party will, and no Credit Party will permit any Restricted Subsidiary
to, engage to any material extent in any material business other than businesses
of the type conducted by the Credit Party on the date of execution of this
Agreement and businesses reasonably related thereto.
-34-
6.4 Investments,
Loans, Advances, Guarantees and Acquisitions.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, purchase, hold or acquire (including pursuant to any amalgamation with
any
Person that was not a wholly-owned Restricted Subsidiary
prior to such amalgamation) any Equity Securities, evidences of indebtedness
or
other securities (including any option, warrant or other right to acquire any
of
the foregoing) of, make or permit to exist any loans or advances to, Guarantee
any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person or
otherwise make an Acquisition, except:
(a) investments
by a Credit Party in the Equity Securities of any other Credit
Party;
(b) loans
or
advances made by one Credit Party to any other Credit Party;
(c) Guarantees
constituting Indebtedness permitted by Section 6.1; and
(d) Permitted
Investments.
6.5 Restricted
Payments.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, declare, pay or make, or agree to pay or make, directly or indirectly,
any
Restricted Payment, except (a) the
Borrower may declare and pay dividends with respect to its Equity Securities
payable solely in additional Equity Securities, (b) any
Restricted Subsidiary
may declare and pay dividends to the Borrower or any wholly-owned
Restricted Subsidiary
and any wholly-owned Restricted Subsidiary
may redeem or repurchase its own Equity Securities, (c) the
Borrower may make Restricted Payments pursuant to and in accordance with stock
option plans, profit sharing plans and/or other benefit plans for management
or
employees of the Borrower and its Subsidiaries , provided
that the
aggregate amount of cash payments made by the Borrower and the Subsidiaries
in
any Fiscal Year pursuant to all such stock option plans, profit sharing plans
and other compensation benefit plans shall not exceed Cdn.$100,000.
6.6 Transactions
with Affiliates.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, sell, lease or otherwise transfer any property or assets to, or purchase,
lease or otherwise acquire any property or assets from, or otherwise engage
in
any other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less
favourable to the Credit Party than could be obtained on an arm’s-length basis
from unrelated third parties, (b) transactions between or among the Credit
Parties not involving any other Affiliate and (c) any Restricted Payment
permitted by Section 6.5. The foregoing restrictions shall not apply to:
(i) the payment of reasonable and customary fees to directors of the Credit
Party, (ii) any other transaction with any employee, officer or director of
a Credit Party pursuant to employee profit sharing and/or benefit plans and
compensation and non-competition arrangements in amounts customary for
corporations similarly situated to the Credit Party and entered into in the
ordinary course of business and approved by the board of directors of the Credit
Party, or (iii) any reimbursement of reasonable out-of-pocket costs
incurred by an Affiliate of the Credit Party on behalf of or for the account
of
the Credit Party.
6.7 Repayment
of Debt.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, repay, prepay, redeem, repurchase, defease or otherwise make any payment
on
account of any Indebtedness for borrowed money except for (a) payment on
account of Indebtedness owing to the Lender or the Lenders under this Agreement,
(b) any payment consented to in writing by the Required Lenders, and
(c) payment on account of Indebtedness for borrowed money permitted by
Section 6.1.
6.8 Restrictive
Agreements.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that prohibits, restricts or imposes any condition upon
(a) the ability of the Borrower or any Restricted Subsidiary
to create, incur or permit to exist any Lien upon any of its property or assets,
(b) the ability of any Restricted Subsidiary
to pay dividends or other distributions with respect to any Equity Securities
or
with respect to, or measured by, its profits or to make or repay loans or
advances to the Borrower or any Restricted Subsidiary
or to provide a Guarantee of any Indebtedness of the Borrower or any
Restricted Subsidiary,
(c) the ability of the Borrower or any Restricted Subsidiary
to make any loan or advance to the Borrower or any of the Subsidiaries , or
(d) the ability of the Borrower or any Restricted Subsidiary
to sell, lease or transfer any of its property to the Borrower or any of the
Subsidiaries; provided
that
(i) the foregoing shall not apply to restrictions and conditions imposed by
Applicable Law or by this Agreement, (ii) the foregoing shall not apply to
restrictions and condition existing on the date hereof identified on Schedule
6.8 (but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of an
Restricted Subsidiary
pending such sale, provided
such
restrictions and conditions apply only to the Restricted Subsidiary
that is to be sold and such sale is permitted hereunder, (iv) clause (a) of
the foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness, and (v) clause (a) of the foregoing shall not apply to
customary provisions in leases and other ordinary course contracts restricting
the assignment thereof.
-35-
6.9 Capital
Lease Obligations.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist, any Capital Lease Obligations,
whether directly or as a guarantor, if, after giving effect thereto, the
aggregate amount of all payments required to be made by the Credit Parties
on a
consolidated basis pursuant to such Capital Lease Obligations would exceed
Cdn.$250,000 in any Fiscal Year.
6.10 Sales
and Leasebacks.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, enter into any arrangement, directly or indirectly, with any Person whereby
the Credit Party or any such Restricted Subsidiary
shall sell or transfer any property, whether now owned or hereafter acquired,
and whereby the Credit Party or any such Restricted Subsidiary
shall then or thereafter rent or lease as lessee such property or any part
thereof or other property which the Credit Party or any such
Restricted Subsidiary
intends to use for substantially the same purpose or purposes as the property
sold or transferred.
6.11 Pension
Plan Compliance.
No
Credit Party will (a) terminate, or permit any Restricted Subsidiary
to terminate, any Pension Plan in a manner, or take any other action with
respect to any Pension Plan, which could reasonably be expected to result in
any
Material Adverse Effect, (b) fail to make, or permit any
Restricted Subsidiary
to fail to make, full payment when due of all amounts which, under the
provisions of any Pension Plan, agreement relating thereto or Applicable Law,
the Credit Party or any Restricted Subsidiary
is required to pay as contributions thereto, except where the failure to make
such payments could not reasonably be expected to have a Material Adverse
Effect, (c) permit to exist, or allow any Restricted Subsidiary
to permit to exist, a going-concern or solvency deficiency, with respect to
any
Pension Plan in an amount which could reasonably be expected to cause a Material
Adverse Effect.
6.12 Sale
or Discount of Receivables.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to,
discount or sell (with or without recourse) any of its or the Restricted
Subsidiaries’ Accounts.
6.13 Unconditional
Purchase Obligations.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to,
enter into or be a party to, any material contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery of such
materials, supplies or other property or services is ever made, provided that
this Section 6.13 shall not restrict the ability of any Credit Party or any
Restricted Subsidiary
to enter into any such contract in the ordinary course of its business to the
extent that the materials, supplies or other property or services which are
the
subject matter of such contract are reasonably expected to be used by the
applicable Credit Party in the ordinary course of its business.
6.14 No
Amendments to Material Contracts.
No
Credit Party will, and no Credit Party will permit any Restricted Subsidiary
to, amend, modify or terminate (or waive any provision of or provide any consent
under), any Material Contract in a manner which may reasonably be expected
to
have a Material Adverse Effect.
6.15 Environmental
Laws. Each
of
the Credit Parties shall conduct its business in compliance in all material
respects with all Environmental Laws applicable to it or them, including,
without limitation, those relating to the Credit Parties’ generation, handling,
use, storage and disposal of Hazardous Materials. The Credit Parties shall
take
prompt and appropriate action to respond to any non-compliance or alleged
non-compliance with Environmental Laws, and shall regularly report to the Lender
on any response which relates to any non-compliance or alleged non-compliance
which could reasonably be expected to result in a Material Adverse Effect.
Without limiting the generality of the foregoing, whenever any Credit Party
gives notice to the Lender pursuant to 5.1(l)(vi) and the Lender so requests,
the Credit Parties shall, at the applicable Credit Party’s expense:
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(i)
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Cause
an independent environmental engineer acceptable to the Lender
in its
reasonable discretion to conduct such tests of the site where the
non-compliance or alleged non-compliance with Environmental Laws
has
occurred, and prepare and deliver to the Lender a report setting
forth the
results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof;
and
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-36-
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(ii)
|
Provide
to the Lender a supplemental report of such engineer whenever the
scope of
the environmental problems, or the Credit Party’s, and any other Person’s
response thereto or the estimated costs thereof, shall change. Such
reports shall also be addressed to the Lender and the Lenders and
shall,
as requested by the Lender, set out the results of such engineers’ review
of, inter
alia:
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A.
|
progress
of compliance satisfaction, capital expenditures required to effect
remedial steps and compliance
deficiencies;
|
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B.
|
all
other environmental audit reports which the Credit Parties or any
predecessor has commissioned in the normal conduct of its business;
and
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C.
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all
environmental reports which have been commissioned by or made available
to
a Credit Party in connection with new acquisitions, and the engineers’
report and recommendations on results of tests performed or samples
taken
by it during the course of its review, irregularities or steps which
may
be taken to ensure continued compliance, as well as such other matters
as
the Borrower and/or the Lender may reasonably request from time to
time.
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ARTICLE
7
EVENTS
OF DEFAULT
7.1 Events
of Default.
If any
of the following events (“Events
of Default”)
shall
occur:
(a) the
Borrower shall fail to pay any principal of any Loan when and as the same shall
become due and payable, whether at the due date thereof or at a date fixed
for
prepayment thereof or otherwise;
(b) the
Borrower shall fail to pay any interest on any Loan or any fee or any other
amount (other than an amount referred to in clause (a) above) payable under
this
Agreement, when and as the same shall become due and payable;
(c) any
representation or warranty made or deemed made by or on behalf of any Credit
Party in or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been materially incorrect when made or deemed
to
be made and, if the circumstances giving rise to the incorrect representation
or
warranty are capable of modification or rectification (such that, thereafter
the
representation or warranty would be correct), the representation or warranty
remains uncorrected for a period of 10 days;
(d) any
Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.1(g)(ii) (notices of Defaults or Events of
Default), 5.2 (with respect to the Credit Party’s existence), 5.7, or in Article
6 (or in any comparable provision of any other Loan Document);
-37-
(e) any
Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in clauses
(a), (b) or (d) above) or any other Loan Document, and such failure shall
continue unremedied for a period of 30 days after notice thereof from the Lender
to the Borrower;
(f) any
Credit Party or Guarantor shall fail to make any payment whether of principal
or
interest, and regardless of amount, in respect of any Material Indebtedness,
when and as the same shall become due and payable;
(g) any
event
or condition occurs that results in any Material Indebtedness becoming due
prior
to its scheduled maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of any Material
Indebtedness or any trustee or Lender on its or their behalf to cause any
Material Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided
that
this Section 7.1(g) shall not apply to secured Indebtedness that becomes due
as
a result of the voluntary sale or transfer of the property or assets securing
such Indebtedness so long as the proceeds of such sale or transfer are
sufficient to, and are applied to, reduce such secured Indebtedness to
nil;
(h) any
Credit Party or Guarantor:
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(i)
|
becomes
insolvent, or generally does not or becomes unable to pay its debts or
meet its liabilities as the same become due, or admits in writing
its
inability to pay its debts generally, or declares any general moratorium
on its indebtedness, or proposes a compromise or arrangement between
it
and any class of its creditors;
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(ii)
|
commits
an act of bankruptcy under the BIA, or makes an assignment of its
property
for the general benefit of its creditors under the BIA, or makes
a
proposal (or files a notice of its intention to do so) under the
BIA;
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(iii)
|
institutes
any proceeding seeking to adjudicate it an insolvent, or seeking
liquidation, dissolution, winding-up, reorganization, compromise,
arrangement, adjustment, protection, moratorium, relief, stay of
proceedings of creditors generally (or any class of creditors), or
composition of it or its debts or any other relief, under any federal,
provincial or foreign Applicable Law now or hereafter in effect relating
to bankruptcy, winding-up, insolvency, reorganization, receivership,
plans
of arrangement or relief or protection of debtors (including the
BIA, the
Companies’
Creditors Arrangement Act
(Canada), the
United States Bankruptcy Code
and any applicable corporations legislation) or at common law or
in
equity, or files an answer admitting the material allegations of
a
petition filed against it in any such
proceeding;
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(iv)
|
applies
for the appointment of, or the taking of possession by, a receiver,
interim receiver, receiver/manager, sequestrator, conservator, custodian,
administrator, trustee, liquidator or other similar official for
it or any
substantial part of its property;
or
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(v)
|
threatens
to do any of the foregoing, or takes any action, corporate or otherwise,
to approve, effect, consent to or authorize any of the actions described
in this Section 7.1(h) or in Section 7.1(i), or otherwise acts in
furtherance thereof or fails to act in a timely and appropriate manner
in
defense thereof,
|
(i) any
petition is filed, application made or other proceeding instituted against
or in
respect of any Credit Party or Guarantor:
|
(i)
|
seeking
to adjudicate it an insolvent;
|
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(ii)
|
seeking
a receiving order against it under the
BIA;
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-38-
|
(iii)
|
seeking
liquidation, dissolution, winding-up, reorganization, compromise,
arrangement, adjustment, protection, moratorium, relief, stay of
proceedings of creditors generally (or any class of creditors), or
composition of it or its debts or any other relief under any federal,
provincial or foreign Applicable Law now or hereafter in effect relating
to bankruptcy, winding-up, insolvency, reorganization, receivership,
plans
of arrangement or relief or protection of debtors (including the
BIA, the
Companies’
Creditors Arrangement Act
(Canada) or the United
States Bankruptcy Code
and any applicable corporations legislation) or at common law or
in
equity; or
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(iv)
|
seeking
the entry of an order for relief or the appointment of, or the taking
of
possession by, a receiver, interim receiver, receiver/manager,
sequestrator, conservator, custodian, administrator, trustee, liquidator
or other similar official for it or any substantial part of its
property;
|
and
such
petition, application or proceeding continues undismissed, or unstayed and
in
effect, for a period of 30 days after the institution thereof, provided
that if
an order, decree or judgment is granted or entered (whether or not entered
or
subject to appeal) against the Credit Party thereunder in the interim, such
grace period will cease to apply, and provided further
that if
the Credit Party files an answer admitting the material allegations of a
petition filed against it in any such proceeding, such grace period will cease
to apply;
(j) any
other
event occurs which, under the Applicable Laws of any applicable jurisdiction,
has an effect equivalent to any of the events referred to in either of Sections
7.1(h) or (i);
(k) one
or
more judgments for the payment of money in a cumulative amount in excess of
Cdn.$50,000 (or its then equivalent in any other currency) in the aggregate
is
rendered against the Borrower, any other Credit Party or any combination thereof
and the Borrower or the other Credit Party has not (i) provided for its
discharge in accordance with its terms within 30 days from the date of entry
thereof, or (ii) procured a stay of execution thereof within 30 days from
the date of entry thereof and within such period, or such longer period during
which execution of such judgment has not been stayed, appealed such judgment
and
caused the execution thereof to be stayed during such appeal, provided
that if
enforcement and/or realization proceedings are lawfully commenced in respect
thereof in the interim, such grace period will cease to apply;
(l) any
property of any Credit Party having a fair market value in excess of Cdn.$50,000
(or its then equivalent in any other currency) in the aggregate is seized
(including by way of execution, attachment, garnishment, levy or distraint),
or
any Lien thereon securing Indebtedness in excess of Cdn.$50,000 (or its then
equivalent in any other currency) is enforced, or such property has become
subject to any charging order or equitable execution of a Governmental
Authority, or any writ of execution or distress warrant exists in respect of
the
Borrower, any other Credit Party or the property of any of them, or any sheriff
or other Person becomes lawfully entitled by operation of law or otherwise
to
seize or distrain upon such property and in any case such seizure, enforcement,
execution, attachment, garnishment, distraint, charging order or equitable
execution, or other seizure or right, continues in effect and is not released
or
discharged for more than 45 days or such longer period during which entitlement
to the use of such property continues with the Credit Party (as the case may
be), and the Credit Party (as the case may be) is contesting the same in good
faith and by appropriate proceedings, provided
that if
the property is removed from the use of the Credit Party (as the case may be),
or is sold, in the interim, such grace period will cease to apply;
(m) one
or
more final judgments, not involving the payment of money and not otherwise
specified in this Section 7.1(m), has been rendered against any Credit Party,
the result of which could reasonably be expected to result in a Material Adverse
Effect, so long as the Credit Party (as the case may be) has not
(i) provided for its discharge in accordance with its terms within 30 days
from the date of entry thereof, or (ii) procured a stay of execution
thereof within 30 days from the date of entry thereof and within such period,
or
such longer period during which execution of such judgment has been stayed,
appealed such judgment and caused the execution thereof to be stayed during
such
appeal, provided
that if
enforcement and/or realization proceedings are lawfully commenced in respect
thereof in the interim, such grace period will cease to apply;
-39-
(n) this
Agreement, any other Loan Document or any material obligation or other provision
hereof or thereof at any time for any reason terminates or ceases to be in
full
force and effect and a legally valid, binding and enforceable obligation of
any
Credit Party, is declared to be void or voidable or is repudiated, or the
validity, binding effect, legality or enforceability hereof or thereof is at
any
time contested by any Credit Party, or any Credit Party denies that it has
any
or any further liability or obligation hereunder or thereunder or any action
or
proceeding is commenced to enjoin or restrain the performance or observance
by
any Credit Party of any material terms hereof or thereof or to question the
validity or enforceability hereof or thereof, or at any time it is unlawful
or
impossible for any Credit Party to perform any of its material obligations
hereunder or thereunder;
(o) any
Lien
purported to be created by any Security Document shall cease to be, or shall
be
asserted by any Credit Party not to be, a valid, perfected, first priority
(except as otherwise expressly provided in this Agreement or such Security
Document) Lien in Collateral with a fair market value or book value (whichever
is greater) in excess, individually or in the aggregate, of
$1,000,000;
(p) a
Material Adverse Change shall occur;
(q) a
Change
in Control shall occur;
(r) if
any
Credit Party or any of its Subsidiaries violates any Environmental Law which
results in an Action Request, Violation Notice or other notice or control order
or cancellation of any license or certificate or approval, that could reasonably
be expected to have a Material Adverse Effect;
(s) any
event
or condition shall occur or exist with respect to a Pension Plan that could
reasonably be expected to subject any Credit Party to any tax, penalty or other
liabilities under the Pension
Benefits Act (Ontario)
or any
other Applicable Laws which could reasonably be expected to give rise to a
Material Adverse Effect;
then,
and
in every such event, and at any time thereafter during the continuance of such
event or any other such event, the Lender may by notice to the Borrower, take
any or all of the following actions, at the same or different times:
(i) terminate the Credits, and thereupon the Credits shall terminate
immediately, (ii) declare the Loans then outstanding to be due and payable
in whole (or in part, in which case any principal not so declared to be due
and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind except as set forth earlier in
this
paragraph, all of which are hereby waived by the Borrower, (iii) apply any
amounts outstanding to the credit of the Borrower to repayment of all amounts
outstanding under this Agreement, and (iv) declare any or all of the Security
Documents to be immediately enforceable.
ARTICLE
8
MISCELLANEOUS
8.1 Notices.
(a) Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to paragraph (b) below), all notices
and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by facsimile in each case to the addressee, as
follows:
(i)
if
to the
Borrower or any other Credit Party:
000
Xxxxxx Xxxx
Xxxxxxxxxxx,
Xxxxxxx
X0X
0X0
Attention:
Xxxxxx X. Xxxxx, President
Fax:
000-
000-0000
(ii)
with a copy to:
Universal
Security Instruments, Inc.
0X
Xxxxxx
Xxxx Xxx.
Xxxxxx
Xxxx
Xxxxxxxx,
XX
00000
Attention:
Xxxxx X. Xxxx, Chief Financial Officer
Fax:
000-000-0000
-40-
(ii)
if
to the
Lender:
CIT
FINANCIAL LTD.
000
Xxxxx’x Xxxx Xxxx,
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Legal
Department
Facsimile:
(000)
000-0000
(b) The
Lender or the Borrower may, in its discretion, agree to accept notices and
other
communication to it hereunder by electronic communications pursuant to
procedures approved by it; provided
that
approval of such procedures may be limited to particular notices or
communications.
(c) Any
party
hereto may change its address or facsimile number for notices and other
communications hereunder by notice to the other parties hereto. All notices
and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of
receipt.
8.2 Waivers;
Amendments.
(a) No
failure or delay by the Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Lender
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by Section 8.2(b), and then such
waiver or consent shall be effective only in the specific instance and for
the
purpose for which given. Without limiting the generality of the foregoing,
the
making of a Loan or issuance of a Letter of Credit shall not be construed as
a
waiver of any Default, regardless of whether the Lender may have had notice
or
knowledge of such Default at the time.
(b) Neither
this Agreement nor any other Loan Document (or any provision hereof or thereof)
may be waived, amended or modified except pursuant to an agreement or agreements
in writing entered into by the Borrower and the Lender (and for greater
certainty, any such waiver, amendment or modification shall not require any
consent or other agreement of any Credit Party other than the Borrower,
notwithstanding that any such Credit Party may be a party to this Agreement
or
any other Loan Document).
8.3 Expenses;
Indemnity; Damage Waiver.
(a) The
Borrower shall pay (i) all reasonable Out-of-Pocket Expenses incurred by
the Lender and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Lender and all applicable Taxes, in connection
with the syndication of the credit facilities provided for herein and the
preparation and administration of this Agreement and the other Loan Documents,
(ii) all reasonable Out-of-Pocket Expenses incurred by the Lender and its
Affiliates, including the reasonable fees, charges and disbursements of counsel
for the Lender and applicable Taxes, in connection with any amendments,
modifications or waivers of the provisions hereof or of any of the other Loan
Documents, (whether or not the transactions contemplated hereby or thereby
shall
be consummated), and (iii) all Out-of-Pocket Expenses incurred by the
Lender, including the fees, charges and disbursements of any counsel for the
Lender and all applicable Taxes, in connection with the enforcement or
protection of their rights in connection with this Agreement, including its
rights under this Section, or in connection with the Loans made hereunder,
including all such Out-of-Pocket Expenses incurred during any workout,
restructuring or negotiations in respect of such Loans.
-41-
(b) The
Borrower shall indemnify the Lender, as well as each Related Party and each
assignee of any of the foregoing Persons (each such Person and each such
assignee being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
cost recovery actions, damages, expenses and liabilities of whatsoever nature
or
kind and all Out-of-Pocket Expenses and all applicable Taxes to which any
Indemnitee may become subject arising out of or in connection with (i) the
execution or delivery of the Loan Documents or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their respective
obligations thereunder, and the consummation of the Transactions or any other
transactions thereunder, (ii) any Loan or any actual or proposed use of the
proceeds therefrom, (iii) any presence or release of Hazardous Materials on
or from any property owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, (iv) any actual claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based
on
contract, tort or any other theory and regardless of whether any Indemnitee
is a
party thereto, (v) any other aspect of this Agreement and the other Loan
Documents, or (vi) the enforcement of any Indemnitee’s rights hereunder and
any related investigation, defence, preparation of defence, litigation and
enquiries, in each case regardless of whether or not the Acquisition is
consummated; provided
that
such indemnity shall not, as to any Indemnitee, be available to the extent
that
such losses, claims, damages, liabilities or related expenses are determined
by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence (it being acknowledged that ordinary
negligence does not necessarily constitute gross negligence) or wilful
misconduct of or material breach of this Agreement by such
Indemnitee.
(c) The
Borrower shall not assert, and hereby waives (to the fullest extent permitted
by
applicable Law), any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, any
Loan Document, or any agreement or instrument contemplated thereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds
thereof.
(d) Any
inspection of any property of the Borrower or any of its Subsidiaries made
by or
through the Lender is for purposes of administration of the Credits only, and
neither the Borrower nor any of its Subsidiaries is entitled to rely upon the
same (whether or not such inspections are at the expense of the
Borrower).
(e) By
accepting or approving anything required to be observed, performed, fulfilled
or
given to the Lender pursuant to the Loan Documents, the Lender shall not be
deemed to have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition thereof,
and
such acceptance or approval thereof shall not constitute a warranty or
representation to anyone with respect thereto by the Lender.
(f) The
relationship between the Borrower and the Lender is, and shall at all times
remain, solely that of borrowers and lender. The Lender shall not under any
circumstance be construed to be partners or joint venturers of the Borrower
or
its Affiliates. The Lender shall not under any circumstance be deemed to be
in a
relationship of confidence or trust or a fiduciary relationship with the
Borrower or its Affiliates, or to owe any fiduciary duty to the Borrower or
its
Affiliates. The Lender does not undertake or assume any responsibility or duty
to the Borrower or its Affiliates to select, review, inspect, supervise, pass
judgment upon or inform the Borrower or its Affiliates of any matter in
connection with their property or the operations of the Borrower or its
Affiliates. The Borrower and its Affiliates shall rely entirely upon their
own
judgment with respect to such matters, and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or assumed by the
Lender in connection with such matters is solely for the protection of the
Lender, and neither the Borrower nor any other Person is entitled to rely
thereon.
(g) The
Lender shall not be responsible or liable to any Person for any loss, damage,
liability or claim of any kind relating to injury or death to Persons or damage
to Property caused by the actions, inaction or negligence of the Borrower or
any
Subsidiary and/or their Affiliates and the Borrower hereby indemnifies and
holds
the Lender harmless from any such loss, damage, liability or claim.
-42-
(h) This
Agreement is made for the purpose of defining and setting forth certain
obligations, rights and duties of the Borrower and the Lender in connection
with
the Loans, and is made for the sole benefit of the Borrower and the Lender,
and
the Lender’s successors and assigns. Except as provided in Sections 8.3(b) and
8.4, no other Person shall have any rights of any nature hereunder or by reason
hereof.
(i) All
amounts due under this Section 8.3 shall be payable not later than three
Business Days after written demand therefor.
8.4 Successors
and Assigns.
(a) The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the parties hereto and their respective successors and assigns permitted hereby,
except that (i) the Borrower may not assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Lender
(and any attempted assignment or transfer by the Borrower without such consent
shall be null and void), and (ii) the Lender may not assign or otherwise
transfer its rights or obligations hereunder except in accordance with this
Section. Nothing in this Agreement, expressed or implied, shall be construed
to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Lender) any legal or
equitable right, remedy or claim under or by reason of this
Agreement.
(b) The
Lender may assign to one or more Eligible Assignees (treating any fund that
invests in bank loans and any other fund that invests in bank loans and is
managed by the same investment advisor of such fund or by an Affiliate of such
investment advisor as a single assignee) all or a portion of its rights and
obligations under this Agreement and the other Loan Documents (including all
or
a portion of its Credits and the Loans at the time owing to it); provided
that (i)
Borrower must give its prior written consent to such assignment (which consent
shall not be unreasonably withheld or delayed); and provided further
that
(ii) the Borrower’s consent shall not be required with respect to any assignment
made at any time after the occurrence and during the continuance of an Event
of
Default, (iii) each partial assignment in respect of a Credit and the related
Loans shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement in respect of
such Credit and the related Loans, (iv) the parties to each assignment
shall execute and deliver to the Lender an Assignment and Assumption, together
with (except in the case of an assignment to a Lender or a Lender Affiliate)
a
processing and recordation fee of Cdn.$3,500, payable by the assigning Lender,
and (v) in the case of an assignment to a Foreign Lender prior to the
occurrence of an Event of Default, such Foreign Lender shall not be entitled
to
require any payment under Section 2.11(a)(b) or (c) as a result of any
withholding tax exigible in respect of any payment by the Borrower to such
Foreign Lender hereunder. From and after the effective date specified in each
Assignment and Assumption, the assignee thereunder shall be a party hereto
and,
to the extent of the interest assigned by such Assignment and Assumption, shall
have all of the rights and obligations of a Lender under this Agreement, and
the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of
the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.10, and 2.11 and 8.3). Any assignment or transfer by
a
Lender of rights or obligations under this Agreement that does not comply with
this Section 8.4 shall be treated for purposes of this Agreement as a sale
by
such Lender of a participation in such rights and obligations.
(c) The
Lender may, without notice to the Borrower or the consent of the Borrower,
sell
participations to one or more Persons (a “Participant”)
in all
or a portion of the Lender’s rights and obligations under this Agreement and the
other Loan Documents (including all or a portion of its Commitment and the
Loans
owing to it); provided
that
(i) the Lender’s obligations under this Agreement shall remain unchanged,
(ii) the Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, and (iii) the Borrower shall
continue to deal solely and directly with the Lender in connection with the
Lender’s rights and obligations under this Agreement. Any agreement or
instrument pursuant to which the Lender sells such a participation shall provide
that the Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided
that
such agreement or instrument may provide that the Lender will not, without
the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 8.2(b) that affects such Participant.
Subject to Section 8.4(d), the Borrower agrees that each Participant shall
be
entitled to the benefits of Sections 2.10 and 2.11 to the same extent as if
it
were a Lender and had acquired its interest by assignment pursuant to Section
8.4(b). To the extent permitted by Applicable Law, each Participant also shall
be entitled to the benefits of Section 8.8 as though it were a
Lender.
-43-
(d) A
Participant shall not be entitled to receive any greater payment under Section
2.11 than the applicable Lender would have been entitled to receive with respect
to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower’s prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 2.11.
8.5 Survival.
All
covenants, agreements, representations and warranties made by the Borrower
herein and in the certificates or other instruments delivered in connection
with
or pursuant to this Agreement shall be considered to have been relied upon
by
the other parties hereto and shall survive the execution and delivery of this
Agreement and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Lender or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time
any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or
any
other amount payable under this Agreement is outstanding and unpaid and so
long
as the Credits have not expired or terminated. Sections 2.10, 2.11 and
8.3
shall
survive and remain in full force and effect, regardless of the consummation
of
the Transactions, the repayment of the Loans, the expiration or termination
of
the Letters of Credit and the Credits or the termination of this Agreement
or
any provision hereof.
8.6 Counterparts;
Integration; Effectiveness.
This
Agreement may be executed in counterparts (and by different parties hereto
on
different counterparts), each of which shall constitute an original, but all
of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to
fees
payable to the Lender, constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements
and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.1, this Agreement shall become effective when it shall
have been executed by the Lender and when the Lender shall have received
counterparts hereof which, when taken together, bear the signatures of each
of
the other parties hereto, and thereafter shall be binding upon and inure to
the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed original counterpart of a signature page of this
Agreement by facsimile or other electronically scanned method of delivery shall
be as effective as delivery of a manually executed original counterpart of
this
Agreement.
8.7 Severability.
Any
provision of this Agreement held to be invalid, illegal or unenforceable in
any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof, and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
8.8 Right
of Set-Off.
If an
Event of Default shall have occurred and be continuing, the Lender and each
of
its Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by Applicable Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any
time
held and other obligations at any time owing by the Lender or Affiliate to
or
for the credit or the account of the Borrower against any of and all of the
obligations of the Borrower now or hereafter existing under this Agreement
held
by the Lender, irrespective of whether or not the Lender shall have made any
demand under this Agreement and although such obligations may be unmatured.
The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of set off) which such Lender may
have.
-44-
8.9 Governing
Law; Jurisdiction; Consent to Service of Process.
(a) This
Agreement shall be construed in accordance with and governed by the Laws of
the
Province of Ontario.
(b) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the non-exclusive jurisdiction of the Courts of the Province of
Ontario, and any appellate court thereof, in any action or proceeding arising
out of or relating to this Agreement, or any other Loan Document or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any
such action or proceeding may be heard and determined in Ontario. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Applicable Law. Nothing in this
Agreement shall affect any right that the Lender or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against the Borrower or its properties in the courts of any other
jurisdiction.
(c) The
Borrower hereby irrevocably and unconditionally waives, to the fullest extent
it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of
or
relating to this Agreement in any court referred to in this Section 8.9. Each
of
the parties hereto hereby irrevocably waives, to the fullest extent permitted
by
Applicable Law, any forum
non conveniens
defence
to the maintenance of such action or proceeding in any such court.
(d) Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 8.1. Nothing in this Agreement will affect
the
right of any party to this Agreement to serve process in any other manner
permitted by Applicable Law.
8.10 WAIVER
OF JURY TRIAL.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, LENDER OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
8.11 Headings.
Article
and Section headings and the Table of Contents used herein are for convenience
of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this
Agreement.
8.12 Confidentiality.
The
Lender agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to each of its, and
each of its Affiliates’, directors, officers, employees, Lenders and advisors,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to
the
extent requested by any rating agency, regulatory authority or other
Governmental Authority, or their legal counsel, (c) to
the
extent required by applicable laws or regulations or by any subpoena or similar
legal process, (d) to
any
other party to this Agreement, (e) in
connection with the exercise of any remedies under any Loan Document or any
suit, action or proceeding relating to any Loan Document or the enforcement
of
rights thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any
actual or prospective assignee of or Participant (or such assignee’s or
Participant’s advisors) in any of its rights or obligations under this
Agreement, or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower and its obligations, (g) any
financial institution, credit reporting agency or credit bureau, or
(h) with
the
consent of the Borrower. For the purposes of this Section, “Information”
means
all information received from the Borrower or any Credit Party relating to
the
Borrower, any of the Credit Parties, or their respective business, other than
Information that is (i) is or becomes publicly available other than as a
result of a breach of this Section, (ii) any such information that is or
becomes available to the Lender on a non-confidential basis prior to disclosure
by the Borrower, or (iii) was already in the possession of the Lender,
prior to its disclosure by the Borrower; provided
that, in
the case of information received from the Borrower after the date hereof, such
information is clearly identified as confidential in writing at the time of
delivery. Any Person required to maintain the confidentiality of Information
as
provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord
to
its own confidential information.
-45-
8.13 Press
Releases and Related Materials.
Each
Credit Party agrees that neither it nor its Affiliates will in the future issue
any press releases or other public disclosure using the name of the Lender
or
referring to this Agreement, or the other Loan Documents without at least two
(2) Business Days’ prior notice to the Lender unless (and only to the extent
that) such Credit Party or Affiliate is required to do so under law and then,
in
any event, such Credit Party or Affiliate will consult with the Lender before
issuing such press release or other public disclosure. Each Credit Party
consents to the publication by the Lender of advertising material relating
to
the financing transactions contemplated by this Agreement using its name,
product photographs, logo or trademark. The Lender reserves the right to provide
to industry trade organizations information necessary and customary for
inclusion in league table measurements.
8.14 No
Strict Construction.
The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this
Agreement.
8.15 Paramountcy.
In
the
event of any inconsistency between the provisions of this Agreement and the
provisions of any other Loan Document, the provisions of this Agreement shall
prevail.
8.16 Withholding
Tax.
(a) The
Lender represents and warrants to the Borrower that it is a Canadian Resident
Lender at all times and that no payments made to it by the Borrower are subject
to any deduction or reduction on account of withholding or other
taxes;
and
(b) Notwithstanding
paragraph (a) of this Section, subject to Article 8, the Lender may assign
or
transfer its Loan to a Foreign Lender, provided that the provisions of Section
2.11 shall not apply to Indemnified Taxes which arise solely as a result of
the
fact such assignee or transferee is not a Canadian Resident Lender.
[Remainder
of this page intentionally left blank. Signature pages
follow.]
-46-
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
|
INTERNATIONAL
CONDUITS LTD.
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
SIGNATURE
PAGE TO CREDIT AGREEMENT DATED AS OF JUNE
22,
2007 BETWEEN
CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.
S-1
|
UNIVERSAL
SECURITY INSTRUMENTS, INC.
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
SIGNATURE
PAGE TO CREDIT AGREEMENT DATED AS OF JUNE
22,
2007 BETWEEN
CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.
S-2
|
USI
ELECTRIC, INC.
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
SIGNATURE
PAGE TO CREDIT AGREEMENT DATED AS OF JUNE
22,
2007 BETWEEN
CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.
S-3
| CIT FINANCIAL LTD., as Lender | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
SIGNATURE
PAGE TO CREDIT AGREEMENT DATED AS OF JUNE
22,
2007 BETWEEN
CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.
S-4
SCHEDULE
A
DISCLOSURE
MATTERS
Nil.
SCHEDULE
B
MATERIAL
CONTRACTS
Nil.
SCHEDULE
3.3
APPROVALS
None.
SCHEDULE
3.5
LITIGATION
None.
SCHEDULE
3.7
OWNERSHIP
OF BORROWER
|
SHAREHOLDER:
|
NUMBER
OF SHARES:
|
|
2113824
Ontario Inc.
Xxxxxx
X. Xxxxx
|
22
Common Shares
11
Common Shares
|
SCHEDULE
3.9
LIENS
ON REAL PROPERTY
Nil
SCHEDULE
3.10
LIENS
ON PERSONAL PROPERTY
SCHEDULE
3.11
PENSION
PLANS
Not
applicable. Pension Plans are government sponsored.
SCHEDULE
3.13
DEFAULTS
None.
SCHEDULE
3.15
SUBSIDIARIES
None.
SCHEDULE
3.20
EMPLOYEE
MATTERS
Employment
Contract - Xxxxxx X. Xxxxx
SCHEDULE
3.22
INTELLECTUAL
PROPERTY MATTERS
None.
SCHEDULE
3.28
REAL
PROPERTY AND LEASES
Operating
lease for premises located at 000 Xxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx between
the
Borrower and Xxxxxx Xxxxxxxx Developments Limited for 40,080 sq. ft., expiring
January 31, 2010.
Substantially
all of the Inventory is located at 000 Xxxxxx Xxxx, however small amounts of
Inventory may, from time to tome, be located with sales representatives
throughout Canada and possibly the U.S.
SCHEDULE
3.30
JURISDICTIONS
Ontario
*
*At
this
time all assets are located in Ontario. Small amounts of Inventory may, from
time to time, be located with sales representatives throughout Canada and
possibly the U.S.
SCHEDULE
6.1
EXISTING
INDEBTEDNESS
Indebtedness
owing the Borrower to 2113824 Ontario Inc. in the amount of
U.S.$1,912,533.
Indebtedness
owing by the Borrower to Universal Security Instruments, Inc. in the amount
of
U.S.$1,087,467.
Indebtedness
owing by each of Xxxx X’Xxxx, Xxxxxxx X’Xxxx and Xxxxxxx Xxxxxxxxx. See attached
amortization schedules.
See
Schedule 3.10.
SCHEDULE
6.8
RESTRICTIVE
AGREEMENTS
Nil
EXHIBIT
A
FORM
OF
BORROWING
BASE REPORT
[Please
see attached CIT form of report]
EXHIBIT
B
Form
of Notice of Borrowing
(Letter
to be typed on Borrower's Letterhead)
[•],
200__
CIT
FINANCIAL LTD.
000
Xxxxxx Xxxx Xxxx,
Xxxxxxx,
Xxxxxxx, X0X 0X0
Attention: Collateral
Analyst
FAX: (000)
000-0000
BORROWING
NOTICE
Gentlemen:
We
refer
to the credit agreement dated as of [•], 200__
(as amended, restated, supplemented, replaced or otherwise modified from time
to
time the “Credit
Agreement”;
capitalized terms used herein but not otherwise defined shall have the meanings
set forth in the Credit Agreement), between International Conduits Ltd., as
borrower (the “Borrower”)
and
CIT Financial Ltd. (the “Lender”).
We
hereby
instruct and authorize the Lender to make advances to our disbursement
account(s), subject to and in accordance with the terms and provisions of the
Credit Agreement to the account numbers specified below and to charge the
Borrower’s loan account as Revolving Loans with each such
advance(s).
The
Borrower hereby requests an advance (the “Advance”)
be
made under the Revolving Credit Facility as follows:
|
A.
|
the
Borrowing Amount :
|
Prime
Rate Loan (Cdn$): _______________
B. the
Drawdown Date:
Notice
requirements as stated in the Credit Agreement are:
|
-
|
10:00
AM (Toronto time) on the requested Drawdown Date for Prime Rate Loans
|
Proceeds
of the Advance are to be directed as follows:
Bank
Name: _______________
Account
Name: _______________
Branch
#:
_______________
Account
Number: CAD#
The
Borrower hereby acknowledges that the Lender will make payments strictly on
the
basis of the account number furnished herein even if such account number
identifies a party other than the name of the account listed above. In the
event
the above account number is incorrect, we hereby agree to be fully liable for
any and all losses, costs, and expenses arising therefrom.
The
Borrower hereby confirms as follows:
|
(a)
|
Each
of the representations and warranties made by the Borrower in or
pursuant
to the Credit Agreement and the other Loan Documents are true and
correct
in all material respects on and as of the date hereof as if made
on and as
of such date, except as the Borrower and the Lender have otherwise
agreed
herein or in a separate writing.
|
|
(b)
|
No
Default or Event of Default has occurred and is continuing on the
date
hereof or will occur after the making of the Advance(s) requested
hereunder.
|
| (c) |
Except
as may have been otherwise agreed to from time to time by the
Lender and
the Borrower in writing, after making the Advance(s) requested
to be made
by the Borrower hereunder, the aggregate outstanding balance
of the
Revolving Loans will not exceed the lesser of (i) the Maximum
Revolving
Credit Line, and (ii) the Borrowing
Base.
|
| DATED this ___ day of _______, 200_ | |||
| Yours truly, | |||
|
INTERNATIONAL
CONDUITS LTD.
|
|||
| By: | |||
|
Name: |
|||
|
Title:
|
EXHIBIT
C
FORM
OF
LANDLORD
WAIVER
The
undersigned is the owner of the premises known as
_____________________________________________________________________________ (the
“Premises”),
which
Premises are leased by the undersigned to [NAME
OF CREDIT PARTY],
a
[JURISDICTION]
corporation, or one of its affiliates (collectively, the “Obligors”)
pursuant to a lease agreement dated as of _________________________________
(as
it may be amended, restated, supplemented, replaced or otherwise modified from
time to time, the “Lease”).
The
undersigned understands that the Obligors will enter (or have entered) into
a
credit facility with CIT Financial Ltd., in its capacity as Lender (the
“Lender”)
for
certain lenders (the “Lenders”),
pursuant to which (a) the Lenders may make loans to certain of the Obligors
from
time to time, and (b) the Obligors will grant (or have granted) to the Lender,
a
security interest on all of the Obligors' present and after-acquired accounts
receivable, Inventory, general intangibles (including, without limitation,
trademarks and intellectual property rights), capital assets, documents of
title, collateral proceeds accounts and capital stock (collectively, the
“Collateral”).
1. The
undersigned hereby waives and relinquishes in favour of the Lender any
landlord's lien, all rights of levy or distraint, security interest or other
interest that the undersigned may now or hereafter have, whether by statute,
contract (including the Lease) or by common law, in any of the Collateral (the
“Landlord's
Liens”),
whether for rent or otherwise, and agrees that the Lender's security interests
and liens in the Collateral, now existing or hereafter arising, shall have
priority over and rank senior to any and all of the Landlord’s Liens. The
undersigned disclaims any interest in the Collateral and agrees not to assert
any claim to the Collateral while the Obligors are indebted to the
Lenders.
2. In
order
to exercise any rights as a secured party holding a security interest in the
Collateral, the Lender is expressly authorized and privileged at any time to
enter the Premises and inspect, remove or repossess the Collateral and may
advertise and conduct a public auction or private sale of the Collateral;
provided, however, that the Lender will repair, or pay the reasonable cost
to
repair, any injury to the realty resulting from such inspection, removal,
repossession, auction or sale.
3. If
the
Lease is terminated by the undersigned whether by reason of any default by
the
Obligors or otherwise, or if the Obligors default under any of their agreements
with the Lender or any Lender, and in any such case the Lender, on behalf of
itself or the Lenders, desires to exercise its rights as a secured party holding
a security interest in any of the Collateral, then the Lender may thereafter
at
its option occupy the Premises for up to 90 days and may keep thereon such
property as it determines appropriate, provided that the Lender shall pay rent
for its period of occupancy (pro-rated on a daily basis and computed on the
basis of a 30-day month) at the rate provided in the Lease based on the rate
in
effect just prior to such termination or default, without incurring any other
obligations of the Obligors.
4. The
undersigned hereby consents to the acquisition by the Lender, at the Lender’s
option, of the absolute ownership of the Obligors' interest in the Lease and
agrees that if the Lender, at its option, takes possession of the Obligors’
leasehold estate in the Premises, the Lender will thereupon, be recognized
as
the tenant under the Lease. If the Lender shall become the tenant under the
Lease, it may, on behalf of the Lenders, sublease or assign the Lease for any
lawful purpose with the express written consent of the undersigned and the
assignment of the Lease shall release and relieve the Lender of all obligations
thereunder. The undersigned agrees to give notice within 5 days of any default
by any Obligor of any of the provisions of the Lease, such notice to be provided
to:
CIT
Financial Ltd.
000
Xxxxxx Xxxx Xxxx,
Xxxxxxx,
Xxxxxxx
X0X
0X0
Attn:
Credit Manager
5. All
of
the Lender's rights and privileges hereunder shall inure to the benefit of
its
successors and assigns and shall bind the undersigned's successors or
assigns.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be executed
this
_____ day of _________________, 200_.
|
[NAME
OF LANDLORD]
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
EXHIBIT
D
FORM
OF
BAILEE
LETTER
___________
____, 200_
[NAME
OF BAILEE]
[ADDRESS
OF BAILEE]
_______________________
_______________________
Re: [NAME
OF CREDIT PARTY]
(the
“Xxxxxx”)
Ladies
and Gentlemen:
This
letter (the “Letter”)
is to
advise _________________ (the “Bailee”)
that
the Xxxxxx executed and delivered to CIT Financial Ltd., in its capacity as
Lender for certain lenders (the “Lender”)
a
Credit Agreement (as may be modified, amended, renewed, extended, restated,
or
replaced from time to time, the “Credit
Agreement”),
pursuant to which the Xxxxxx granted to the Lender a security interest in,
among
other things, all inventory of the Xxxxxx, some of which is in possession of
the
Bailee from time to time (the “Controlled
Inventory”).
By
executing this Letter, the Bailee acknowledges that from time to time the Bailee
is in possession of Controlled Inventory and that, because of the Lender’s
interest in the Controlled Inventory, the instructions contained in this Letter
are irrevocable and cannot be altered or amended without the prior written
consent of the Lender. The Xxxxxx’x execution of this Letter is conclusive
evidence to the Bailee of its confirmation of and agreement to the foregoing
and
of its agreement to be bound by all terms of this Letter on which the Bailee
is
entitled to rely for all purposes until written notice of termination of this
Letter is given to the Bailee by the Lender.
The
Bailee recognizes the Lender’s continuing security interest in the Controlled
Inventory and in the proceeds thereof. The Bailee covenants and agrees that
the
Controlled Inventory is and shall remain owned by the Xxxxxx, and that the
Lender may at any time and from time to time inspect, remove and/or repossess
the Controlled Inventory while in possession of the Bailee without
accountability to the Bailee therefor and free of any lien, security interest,
right or claim which the Bailee may now or hereafter have, such right of the
Lender being independent of any other right or remedy the Lender may have.
The
Bailee hereby authorizes and empowers the Lender to access the premises where
the Controlled Inventory is located for the purposes of guarding and maintaining
the Controlled Inventory, preparing and showing the same for sale and/or
conducting a sale thereof. The Bailee hereby waives and releases, for the
benefit of the Lender, its successors and assigns, any and all liens, security
interests, rights and claims of every kind, whether statutory, contractual
or by
law, which the Bailee may now or hereafter have with respect to the Controlled
Inventory, including, without limitation, any rights to seize, hold, restrain,
levy upon, take possession of, sell or otherwise transfer or dispose of the
Controlled Inventory and the Bailee further acknowledges and agrees that no
negotiable warehouse receipts or documents of title will be issued covering
the
Controlled Inventory.
So
long
as no Default Period (hereinafter defined) is continuing, the Xxxxxx may control
the Controlled Inventory. From the date on which the Lender notifies the Bailee
that an “Event
of Default”
(as
defined in the Credit Agreement) has occurred and thereafter until the Bailee
receives notice from the Lender that such Event of Default is no longer
continuing and that no other Event of Default is continuing (such period being
referred to herein as a “Default
Period”),
the
Bailee, the Xxxxxx and the Lender agree that the Lender shall have the exclusive
right to direct the Bailee as to control of the Controlled Inventory, which
includes, without limitation, the right to dispose of, repossess or remove
the
Controlled Inventory, and the Bailee shall not comply in any respect with any
request or direction by the Xxxxxx in connection with the Controlled Inventory,
unless consented to in writing by the Lender.
At
any
time when the Bailee has possession of the Controlled Inventory, the Bailee
agrees to prevent the commingling of the Controlled Inventory in its possession
with other Inventory, goods or items in the Bailee’s possession by clearly
separating, dividing or otherwise isolating the Controlled Inventory from all
such other items in the Bailee’s possession. The Bailee will also clearly
identify the Controlled Inventory as belonging to the Xxxxxx, through the use
of
labels, tags, or other similar coding methods.
The
Bailee will from time to time deliver to the Lender, upon the written request
of
the Lender (which request may be by facsimile transmission) and at the Xxxxxx’x
cost and expense, such information regarding the Controlled Inventory as may
be
reasonably requested by the Lender, and the Bailee will notify the Lender
promptly if the Bailee acquires knowledge that the Controlled Inventory shall
become subject to any injunction, writ or warrant of attachment or garnishment,
judgment, levy and execution, or similar process. The Bailee confirms in favour
of the Lender that it has not, prior to the date hereof, executed in favour
of
any third party any document, instrument or agreement pursuant to which (a)
the
Bailee has acknowledged a security interest in the Controlled Inventory in
favour of such third party, or (b) the Bailee has agreed to follow the
instructions of such third party in respect of the Controlled
Inventory.
The
Xxxxxx agrees that the Bailee shall be fully protected in acting on any notice
or direction by the Lender relating to the Controlled Inventory without making
any inquiry whatsoever as to the Lender’s right or authority to give such notice
or direction. Further, the Bailee shall have no liabilities to the Xxxxxx or
the
Lender other than those imposed upon it by law for its own lack of good faith,
gross negligence or wilful misconduct. The Bailee shall not be liable for
consequential, indirect or special damages, even if the Bailee has been advised
of the possibility of such damages. The Bailee shall not be liable for any
failure or delay in performing any service under this Letter in the event and
to
the extent that such failure arises out of causes beyond the Bailee’s control,
including but not limited to war, civil commotion, an Act of God, fire, flood,
explosion, sabotage, failure or interruption of electrical or other power
supplies or of transportation services, compliance with governmental laws,
regulations or orders, and strikes and lockouts.
The
Xxxxxx agrees to pay the Bailee’s costs and expenses, including reasonable legal
fees, in connection with the execution, delivery and administration of this
Letter.
The
Xxxxxx and the Lender, jointly and severally, hereby agree to indemnify and
save
the Bailee harmless from and against any and all losses, costs and expenses
arising out of the compliance by the Bailee with the terms of the instructions
contained herein.
If
the
Xxxxxx is unable to fulfill its obligations to the Bailee in respect of
warehouse fees and other expenses payable by the Xxxxxx to the Bailee in
connection with the storage, handling and delivery of the Controlled Inventory
(collectively, the “Storage
Fees”),
the
Lender agrees that, as a condition to the Lender’s rights of access to the
Controlled Inventory and the Lender’s rights of inspection, removal and/or
repossession of the Controlled Inventory provided for in this Letter, it will
pay to the Bailee all Storage Fees which remain unpaid as at the commencement
of
any Default Period together with any Storage Fees incurred during the
continuance of a Default Period.
The
Xxxxxx acknowledges and agrees that (a) any amounts paid by the Lender to the
Bailee hereunder shall constitute “Obligations”
of
the
Xxxxxx for purposes of the Credit Agreement, and (b) that this Letter is a
“Loan
Document”
as
such
term is defined in the Credit Agreement dated ______________________ between
the
Lender and the Xxxxxx, as borrower.
This
Letter may only be terminated by the Lender upon written notice to the
Bailee.
This
Letter may be execute in one or more counterparts 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.
If
the
foregoing instructions, terms and agreements are acceptable to the Bailee,
please indicate the Bailee’s acceptance by signing this letter in the space
provided below and returning it to the Xxxxxx.
| Sincerely, | ||
|
[NAME
OF CREDIT PARTY]
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
AGREED
AND ACCEPTED:
| CIT FINANCIAL LTD. | Address for Notice: | ||
| By: | 000 Xxxxxx Xxxx West, | ||
|
Name:
|
Xxxxxxx, Xxxxxxx
X0X 0X0
|
||
|
Title:
|
Attention: Credit Manager |
| [BAILEE] | |||
| By: | |||
|
Name:
|
|||
|
Title:
|
EXHIBIT
E
FORM
OF RESPONSIBLE OFFICER’S CERTIFICATE
|
TO:
|
CIT
Financial Ltd., as Lender
|
The
undersigned, ____________________ [TITLE
of AUTHORIZED SIGNING OFFICER],
of
l
(the
“Borrower”),
pursuant to Section 5.1 of the credit agreement dated as of May
•,
2007, between, amongst others, CIT Financial Ltd., as Lender, and the Borrower
(as amended, restated, supplemented, replaced or otherwise modified from time
to
time the “Credit
Agreement”),
DOES
HEREBY CERTIFY
in
[his/her] capacity as an authorized signing officer of the Borrower and not
in
[his/her]
personal
capacity that:
1. The
financial statements attached hereto fairly and accurately represent the
Borrower’s financial condition at the end of the particular accounting period
set out in such financial statements, as well as the Borrower’s and its
Subsidiaries’ operating results during such accounting period, subject to
year-end audit adjustments;
2. A
review
of such financial statements and
of
the activities of the Borrower and its
Subsidiaries during
the period covered by
such
financial statements has been made under my supervision has been
made
with a
view to determining whether the Borrower and the Subsidiaries
have
fulfilled all of their obligations;
3. During
the accounting period set out in such financial statements:
(a) each
of
the Borrower and the Subsidiaries have fulfilled each of its respective
obligations under each of the Loan Documents to which it is a
party;
(b) there
has
been no
Default
or Event of Default
under
the Credit Agreement,
(c) the
Borrower is not aware of any event or circumstance which could reasonably have
or could reasonably have had a Material Adverse Effect (as such term is defined
in the Credit Agreement);
(d) the
representation and warranties contained in the Credit Agreement and the other
Loan Documents are correct in all material respects on and as of the date hereof
as though made on and as of such date, other than any such representation or
warranty which relates to a specified prior date and except to the extent that
the Lender has been notified in writing by the Borrower that any representation
or warranty is not correct and the Lenders have explicitly waived in writing
compliance with such representation or warranty;
(e) the
Borrower has been in full compliance with all covenants set out in the Credit
Agreement;
(f) Annex
B
hereto sets out all Subsidiaries and indicates, for each such Subsidiary,
whether such Subsidiary is a Restricted Subsidiary and the date of the formation
or acquisition of each Subsidiary was formed or acquired since the end of the
previous calendar month;
(g) no
change
in GAAP or in the application thereof has occurred since the date of the most
recent audited annual financial statements of the Borrower delivered to the
Lender [Note
to Draft: - If a change has occurred, specify the details of the change and
its
effect on the accompanying financial statements];
and
(h) the
Borrower and the other Credit Parties have been in compliance with Section
6.4
of the Credit Agreement and Annex C hereto sets out details of all transactions
contemplated by Section 6.4 of the Credit Agreement and the details of such
compliance.
[Note
to Draft: if any of the foregoing is incorrect, revise wording accordingly
to
include particulars of any variation.]
4. Capitalized
terms used herein and not otherwise defined shall have the meanings given to
such terms in the Credit Agreement.
IN
WITNESS WHEREOF,
the
undersigned has executed this Responsible Officer’s certificate on behalf of the
Borrower as of the _______ day of ________________, 20l.
| By: | ||
|
Name:
|
||
|
Title:
|
||
ANNEX
1
|
DEFINITIONS
|
1
|
|||
|
1.1
|
Defined
Terms
|
1
|
||
|
1.2
|
Terms
Generally
|
21
|
||
|
1.3
|
Accounting
Terms; GAAP
|
22
|
||
|
1.4
|
Time
|
22
|
||
|
1.5
|
Permitted
Liens
|
22
|
||
|
ARTICLE
2
|
THE
CREDITS
|
22
|
||
|
2.1
|
Credits
|
22
|
||
|
2.2
|
Loans
and Borrowings
|
23
|
||
|
2.3
|
Requests
for Borrowings
|
23
|
||
|
2.4
|
Funding
of Borrowings
|
23
|
||
|
2.5
|
Interest
|
24
|
||
|
2.6
|
Termination
and Reduction of Credits
|
25
|
||
|
2.7
|
Repayment
of Loans
|
25
|
||
|
2.8
|
Evidence
of Debt
|
25
|
||
|
2.9
|
Prepayments
|
26
|
||
|
2.10
|
Increased
Costs; Illegality
|
27
|
||
|
2.11
|
Taxes
|
28
|
||
|
2.12
|
Payments
Generally
|
29
|
||
|
2.13
|
Currency
Indemnity
|
29
|
||
|
2.14
|
Collection
of Accounts
|
30
|
||
|
ARTICLE
3
|
REPRESENTATIONS
AND WARRANTIES
|
31
|
||
|
3.1
|
Organization;
Powers
|
31
|
||
|
3.2
|
Authorization;
Enforceability
|
31
|
||
|
3.3
|
Governmental
Approvals; No Conflicts
|
31
|
||
|
3.4
|
Financial
Condition; No Material Adverse Effect
|
32
|
||
|
3.5
|
Litigation
|
32
|
||
|
3.6
|
Compliance
with Applicable Laws and Agreements
|
32
|
||
|
3.7
|
Ownership
|
33
|
||
|
3.8
|
Taxes
|
33
|
||
|
3.9
|
Titles
to Real Property
|
33
|
||
|
3.10
|
Titles
to Personal Property
|
33
|
||
|
3.11
|
Pension
Plans
|
33
|
||
|
3.12
|
Disclosure
|
34
|
||
|
3.13
|
[Intentionally
Deleted.]
|
34
|
||
|
3.14
|
Casualties;
Taking of Properties
|
34
|
||
|
3.15
|
Subsidiaries
|
34
|
||
|
3.16
|
Insurance
|
34
|
||
|
3.17
|
Solvency
|
35
|
||
|
3.18
|
Material
Contracts
|
35
|
||
|
3.19
|
Environmental
Matters
|
35
|
||
|
3.20
|
Employee
Matters
|
36
|
||
|
3.21
|
Fiscal
Year
|
36
|
||
|
3.22
|
Intellectual
Property Rights
|
37
|
||
|
3.23
|
Residency
of Borrower for Tax Purposes
|
37
|
||
|
3.24
|
Distributions
|
37
|
||
|
3.25
|
Debt
|
37
|
||
|
3.26
|
Workers’
Compensation
|
37
|
||
|
3.27
|
Bank
Accounts
|
38
|
||
|
3.28
|
Real
Property and Leases
|
38
|
||
|
3.29
|
Further
Real Property Matters
|
38
|
||
|
3.30
|
Jurisdictions
of Credit Parties
|
38
|
||
|
ARTICLE
4
|
CONDITIONS
|
38
|
||
|
4.1
|
Effective
Date
|
38
|
||
|
4.2
|
Each
Credit Event
|
42
|
||
|
ARTICLE
5
|
AFFIRMATIVE
COVENANTS
|
42
|
|
5.1
|
Financial
Statements and Other Information
|
42
|
||
|
5.2
|
Existence;
Conduct of Business
|
47
|
||
|
5.3
|
Payment
of Obligations
|
47
|
||
|
5.4
|
Maintenance
of Properties
|
47
|
||
|
5.5
|
Books
and Records; Inspection Rights
|
47
|
||
|
5.6
|
Compliance
with Applicable Laws and Material Contracts
|
47
|
||
|
5.7
|
Use
of Proceeds
|
48
|
||
|
5.8
|
Further
Assurances
|
48
|
||
|
5.9
|
Insurance
|
48
|
||
|
5.10
|
Operation
and Maintenance of Property
|
49
|
||
|
5.11
|
Additional
Subsidiaries; Additional Liens
|
50
|
||
|
ARTICLE
6
|
NEGATIVE
COVENANTS
|
50
|
||
|
6.1
|
Indebtedness
|
50
|
||
|
6.2
|
Liens
|
51
|
||
|
6.3
|
Fundamental
Changes
|
51
|
||
|
6.4
|
Investments,
Loans, Advances, Guarantees and Acquisitions
|
52
|
||
|
6.5
|
Restricted
Payments
|
52
|
||
|
6.6
|
Transactions
with Affiliates
|
52
|
||
|
6.7
|
Repayment
of Debt
|
53
|
||
|
6.8
|
Restrictive
Agreements
|
53
|
||
|
6.9
|
Capital
Lease Obligations
|
53
|
||
|
6.10
|
Sales
and Leasebacks
|
53
|
||
|
6.11
|
Pension
Plan Compliance
|
54
|
||
|
6.12
|
Sale
or Discount of Receivables
|
54
|
||
|
6.13
|
Unconditional
Purchase Obligations
|
54
|
||
|
6.14
|
No
Amendments to Material Contracts
|
54
|
||
|
6.15
|
Environmental
Laws
|
54
|
||
|
ARTICLE
7
|
EVENTS
OF DEFAULT
|
55
|
||
|
7.1
|
Events
of Default
|
55
|
||
|
ARTICLE
8
|
MISCELLANEOUS
|
59
|
||
|
8.1
|
Notices
|
59
|
||
|
8.2
|
Waivers;
Amendments
|
60
|
||
|
8.3
|
Expenses;
Indemnity; Damage Waiver
|
61
|
||
|
8.4
|
Successors
and Assigns
|
63
|
||
|
8.5
|
Survival
|
64
|
||
|
8.6
|
Counterparts;
Integration; Effectiveness
|
64
|
||
|
8.7
|
Severability
|
65
|
||
|
8.8
|
Right
of Set-Off
|
65
|
||
|
8.9
|
Governing
Law; Jurisdiction; Consent to Service of Process
|
65
|
||
|
8.10
|
WAIVER
OF JURY TRIAL
|
66
|
||
|
8.11
|
Headings
|
66
|
||
|
8.12
|
Confidentiality
|
66
|
||
|
8.13
|
Press
Releases and Related Materials
|
67
|
||
|
8.14
|
No
Strict Construction
|
67
|
||
|
8.15
|
Paramountcy
|
67
|
||
|
8.16
|
Withholding
Tax.
|
67
|
