<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1999
SPARKLING SPRING WATER GROUP LIMITED
19 FIELDING AVENUE, DARTMOUTH, NOVA SCOTIA, CANADA B3B 1C9
(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F]
Form 20-F X Form 40-F
------ ---------
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3 - 2(b) under the
Securities Exchange Act of 1934.]
Yes No X
------ ---------
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sparkling Spring Water Group Limited
By:
----------------------------------------
Name: David M. Arnold
Title: Vice President Finance, Treasurer
Date:
--------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD
INDUSTRIAL
STATE OR OTHER JURISDICTION OF CLASSIFICATION CODE
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER INCORPORATION OF ORGANIZATION NUMBER
<S> <C> <C>
Sparkling Spring Water Limited Nova Scotia 5149
Spring Water, Inc. Delaware 5149
Cullyspring Water Co., Inc. Washington 5149
Crystal Springs Acquisition, Inc. Delaware 5149
Canadian Springs Water Company Limited Nova Scotia 5149
Nature Springs Water Company Limited England 5149
Aquaporte (UK) Limited England 5149
Krystal Fountain Water Co. Limited England 5149
Marlborough Employment Limited Scotland 5149
Water at Work Limited Scotland 5149
Natural Water Limited Scotland 5149
</TABLE>
The address of the principal executive offices of each of the
Additional Registrants is the same as for Sparkling Spring Water Group Limited,
as set forth on the cover page of this Report.
<PAGE>
Sparkling Spring Water Group Limited
Quarterly Report On Form 6 - K
For The Quarter Ended June 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998.......................................................1
Consolidated Statements of Operations for the three and six month
periods ended June 30, 1999 and 1998........................................2
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998................................................3
Notes to Consolidated Financial Statements................................. 4
Item 2. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations...............................7
Part II. Other Information
Item 6. Exhibits and Reports on Form 6-K...........................................11
</TABLE>
<PAGE>
Part I Financial Information
Item 1. Financial Statements
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in U.S. dollars) June 30, December 31,
1999 1998
------------ -------------
ASSETS (Unaudited)
<S> <C> <C>
Current
Cash and cash equivalents $ 986,728 $ 9,728,373
Accounts receivable 12,445,720 10,983,492
Inventories [NOTE 3] 1,156,687 1,340,350
Prepaid expenses 1,790,122 1,320,054
------------ -------------
Total current assets 16,379,257 23,372,269
Deferred taxes 472,096 854,240
Fixed assets 32,935,175 31,136,458
Goodwill and deferred charges 50,025,681 51,127,488
Due from parent company 1,142,872 1,142,872
Other assets [NOTE 4] 616,728 -
------------- -------------------
Total assets $101,571,809 $107,633,327
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current
Accounts payable and accrued liabilities $ 8,441,514 $ 9,107,830
Income tax payable - 130,000
Customer deposits 5,186,493 5,032,841
Senior bank debt - operating line [NOTE 8] 5,889,067 -
Debt due within one year 1,084,384 1,399,116
------------ -------------
Total current liabilities 20,601,458 15,669,787
------------ -------------
Obligations under capital leases and other debt 2,813,445 3,252,032
Senior bank debt - term loan [NOTE 8] 8,551,615 7,664,961
Subordinated notes payable [NOTE 4] 90,000,000 100,000,000
Other liabilities [NOTE 4] - 835,998
------------ -------------
Total long-term liabilities 101,365,060 111,752,991
------------ -------------
Shareholder's equity (deficit)
Capital Stock
Issued and outstanding:
Class D common shares - 1,383,328 6,085,838 5,769,132
Class E common shares - 5,860 173,087 164,080
Less: Subscriptions receivable (107,984) (230,003)
------------ -------------
6,150,941 5,703,209
Cumulative translation adjustment (3,364,019) (3,180,597)
Deficit (23,181,631) (22,312,063)
------------ -------------
Total shareholder's equity (deficit) (20,394,709) (19,789,451)
------------ -------------
Total liabilities and
shareholder's equity (deficit) $101,571,809 $107,633,327
------------ -------------
------------ -------------
</TABLE>
SEE ACCOMPANYING NOTES
1
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30,1999 June 30, 1998 June 30,1999 June 30, 1998
------------ ------------- ------------ -------------
(in U.S. dollars)
<S> <C> <C> <C> <C>
Revenue:
Water $ 10,498,912 $ 9,139,369 $ 19,705,381 $ 16,481,226
Rental 3,826,037 3,441,498 7,208,904 6,313,815
Other 1,779,133 1,870,847 3,602,729 3,518,420
------------ ------------ ------------ ------------
Total revenue 16,104,082 14,451,714 30,517,014 26,313,461
------------ ------------ ------------ ------------
Cost of sales:
Water 2,141,003 1,913,638 4,136,117 3,750,151
Other 726,112 763,623 1,491,290 1,442,110
------------ ------------ ------------ ------------
Total cost of sales 2,867,115 2,677,261 5,627,407 5,192,261
------------ ------------ ------------ ------------
Gross profit 13,236,967 11,774,453 24,889,607 21,121,200
Expenses:
Selling, delivery and administrative 8,241,603 7,552,096 16,483,447 14,123,458
Depreciation and amortization 2,369,157 1,813,695 4,894,221 3,592,004
------------ ------------ ------------ ------------
Operating profit 2,626,207 2,408,662 3,511,939 3,405,738
Interest and related expenses 2,396,857 929,175 5,139,255 4,303,165
------------ ------------ ------------ ------------
Income (loss) before income taxes and extraordinary item 229,350 1,479,487 (1,627,316) (897,427)
Provision for (recovery of) income taxes -- 945,401 -- (186,820)
------------ ------------ ------------ ------------
Net income (loss ) before extraordinary item 229,350 534,086 (1,627,316) (710,607)
Extraordinary item [NOTE 5] 757,748 -- 757,748 --
------------ ------------ ------------ ------------
Net income (loss) 987,098 534,086 (869,568) (710,607)
Other comprehensive income (loss):
Foreign currency translation adjustment 41,480 88,495 (183,422) (31,808)
------------ ------------ ------------ ------------
Comprehensive income (loss) $ 1,028,578 $ 622,581 $ (1,052,990) $ (742,415)
------------ ------------ ------------ ------------
Basic earnings (loss) per share before extraordinary item $ 0.17 $ 0.39 $ (1.17) $ (0.51)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted earnings per share before extraordinary item $ 0.16 $ 0.35 N/A N/A
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic earnings (loss) per share $ 0.71 $ 0.39 $ (0.63) $ (0.51)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted earnings per share $ 0.62 $ 0.35 N/A N/A
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
June 30, June 30,
1999 1998
------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (869,568) $ (710,607)
Items not requiring cash
Depreciation and amortization 4,894,221 3,592,004
Deferred taxes -- (93,963)
Amortization of deferred financing costs 250,620 195,357
Extraordinary item (757,748) --
Cross currency swap (1,349,582) (1,322,438)
------------ ------------
2,167,943 1,660,353
Net change in non-cash working capital balances (2,417,095) (2,615,071)
------------ ------------
Cash used in operating activities (249,152) (954,718)
------------ ------------
INVESTING ACTIVITIES
Purchase of fixed assets, net (5,898,539) (5,396,341)
Acquisitions -- (11,435,477)
------------ ------------
Cash used in investing activities (5,898,539) (16,831,818)
------------ ------------
FINANCING ACTIVITIES
Increase in long-term debt 6,864,796 666,990
Repayment of long-term debt (889,736) (945,975)
Repurchase of subordinated notes payable (8,500,000) --
Issuance of common shares -- 262,080
Increase in deferred charges (265,749) (957,904)
Decrease in subscription receivable 122,019 --
------------ ------------
Cash used in financing activities (2,668,670) (974,809)
------------ ------------
Effect of foreign currency translation on cash 74,716 391,995
Decrease in cash and cash equivalents during the period (8,741,645) (18,369,350)
Cash and cash equivalents, beginning of period 9,728,373 27,507,257
------------ ------------
Cash and cash equivalents, end of period $ 986,728 $ 9,137,907
------------ ------------
------------ ------------
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid $ 6,319,851 $ 5,979,191
------------ ------------
------------ ------------
Income taxes paid $ 24,666 $ 25,604
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
1. Basis of Presentation
Sparkling Spring Water Group Limited ("Sparkling Spring") is
incorporated under the laws of the Province of Nova Scotia, Canada and provides
containered water to home and office markets in British Columbia and the
Maritime provinces of Canada, England, Scotland and the Pacific Northwestern
United States.
The Company uses the US$ as its reporting currency. Balance sheet
accounts of all non-U.S. entities are translated into U.S. dollars at the
exchange rates in effect at the balance sheet date. Income statement accounts of
all non-U.S. entities are translated into U.S. dollars at average exchange rates
prevailing during the period. Gains and losses on translation are included in a
separate component of shareholder's equity titled "cumulative translation
adjustment".
The accompanying unaudited consolidated financial statements have been
prepared on a historical cost basis by management in accordance with United
States generally accepted accounting principles for interim financial
information. Accordingly, they do not include all information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited interim consolidated financial
statements of the Company reflect all adjustments necessary to present fairly
the financial position of the Company, the results of its operations and the
changes in its cash flows for the interim periods presented. All such
adjustments are of a normal recurring nature.
The accompanying consolidated financial statements should be read in
conjunction with the Audited Financial Statements for the year ended December
31, 1998 and the notes thereto contained in the Company's Annual Report on Form
20-F filed with the Securities and Exchange Commission.
2. Seasonal Nature of Business
Operating results for the three and six month periods ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999 due to the seasonal nature of the business. This
seasonality results from a combination of higher unit sales of the Company's
products in the second and third quarters and the accounting for such
administrative and other overhead costs including but not limited to
depreciation, amortization and interest expense which are not significantly
impacted by business seasonality.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
(unaudited)
<S> <C> <C>
Packaging materials $ 543,204 $ 598,985
Goods for resale 352,923 482,733
Cooler parts 148,723 142,695
Other 111,837 115,937
---------- ----------
$1,156,687 $1,340,350
---------- ----------
---------- ----------
</TABLE>
4
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
4. Derivative Financial Instruments
In December 1997, the Company entered into two cross currency interest
rate swaps with a US bank to more closely match the interest requirements of its
subordinated notes with the cash flows earned by the Company's Canadian and UK
subsidiaries. The Company entered into a $30 million US six year swap in British
Pound Sterling and a $28 million US five year swap in Canadian dollars which was
terminated in October 1998. The semi annual interest payments on the Pound
Sterling swap are approximately 1.1 million pounds. At June 30, 1999 the
aggregate fair market value of the Pound Sterling swap asset was approximately
$617,000 in favor of the Company (at December 31, 1998 it was a $836,000
liability in favor of the bank). For the six months ended June 30, 1999,
approximately $1.3 million of the $1.4 million decrease in the swap liability
between December 31, 1998 and June 30, 1999 was recorded as a decrease in
interest expense. For the six months ended June 30, 1998, approximately $1.3
million of the increase in the swap asset between December 31, 1997 and June 30,
1998 was recorded as a decrease in interest expense.
5. Extraordinary Item
In May 1999, the Company paid $8.5 million to repurchase $10 million
face value of its outstanding Subordinated Notes Payable. A gain of $757,748
related to the repurchase of the Subordinated Notes has been recorded, net of
applicable income taxes of $386,000 and costs of $356,252 representing a write
off of a proportionate amount of deferred charges incurred in connection with
the issuance of the Subordinated Notes in November of 1997.
6. Earnings per Share
The Company has adopted Statement of Financial Accounting Standard No.
128 (SFAS No. 128), Earnings per Share. SFAS No. 128 replaces the previous
standards for presentation of primary and fully diluted earnings per share (EPS)
with basic and diluted EPS. Basic EPS excludes the dilutive effect of the
exercise of all outstanding options and warrants. Diluted EPS includes the
dilutive effect of the exercise of all outstanding options and warrants.
The weighted average number of shares calculated under this method for
basic and diluted earnings per share is 1,389,188 and 1,636,385 respectively for
the three and six months ended June 30, 1999 and 1,383,328 and 1,635,525
respectively for the three and six months ended June 30, 1998.
7. Acquisitions
On February 24, 1998, the Company purchased all of the outstanding
capital stock of Coastal Mountain Water Corp. (Coastal) for approximately $4.3
million. Coastal is based in Vancouver, British Columbia and focuses on the
direct delivery of eighteen litre containers of water to residential and
commercial customers and the rental of water coolers.
On May 15, 1998, the Company purchased all of the outstanding shares of
Krystal Fountain Water Co. Limited (Krystal Fountain) for approximately $6.7
million. Krystal Fountain operates in the M25 area in London, England.
On August 31, 1998, the Company purchased the assets of the Springfield
Water Division of Brio Industries Inc. ("Springfield") for approximately $3.9
million. Springfield operates primarily in the Vancouver, British Columbia
market.
The following unaudited pro forma information presents a summary of
consolidated results of operations as if the acquisitions of Coastal Mountain
Water Corp., Krystal Fountain Water Co. Limited and the Springfield Water
Division of Brio Industries Inc. had occurred at January 1, 1998.
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Total revenue $30,517,014 $28,797,539
Net loss (869,568) (613,179)
Extraordinary item 757,748 -
Basic earnings (loss) per share (0.63) (0.44)
</TABLE>
5
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
8. Senior Credit Facility
On May 26, 1998, the Company completed a $40 million Senior Credit
Facility for purposes of financing future capital investments, working capital,
business acquisitions and general corporate purposes. As at December 31, 1998,
the Company was in violation of a financial covenant under the Senior Credit
Facility. On May 17, 1999, the Company finalized an agreement with its lenders
to amend the Senior Credit Facility (the "Amended Facility"). The Amended
Facility restores the Company's compliance with all financial covenants and
includes three separate credit facilities totaling $30 million.
The Amended Facility is structured as a multi-currency facility and
provides for a $15 million operating line which is renewable annually by April
30th, a $5 million five year acquisition line and a $10 million short term
credit line expiring October 31, 1999 that provides the Company with flexibility
to repurchase, at its discretion, certain of the Company's outstanding
Subordinated Notes Payable. Any amounts borrowed under this Facility will be
repaid ratably over a five-year period commencing October 31, 2000. The Company
has pledged as collateral a first priority security interest granted in favor of
the lenders over substantially all of the assets of the Company. The Company's
obligations under the Amended Facility rank senior to the payment of the
Company's Subordinated Notes Payable.
9. Summary of Business Segments
The Company's business segments derive substantially all their revenues
from the sale of bottled water and the rental of water coolers. The Company has
identified three primary business segments: Canada, the United Kingdom and the
United States.
Segment detail is summarized as follows:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Canada $ 6,594,048 $ 5,826,404 $12,100,812 $10,392,122
United Kingdom 6,183,723 5,653,920 11,887,466 10,178,948
United States 3,326,311 2,971,390 6,528,736 5,742,391
----------- ----------- ----------- -----------
$16,104,082 $14,451,714 $30,517,014 $26,313,461
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income before depreciation,
interest, income taxes and extraordinary item:
Canada $2,081,463 $1,621,518 $3,207,131 $2,360,734
United Kingdom 2,224,652 1,878,373 4,132,668 3,320,358
United States 895,141 922,182 1,506,888 1,516,366
Unallocated corporate overhead (205,892) (199,716) (440,527) (199,716)
---------- ---------- ---------- ----------
$4,995,364 $4,222,357 $8,406,160 $6,997,742
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
10. Comparative Figures
Certain of the comparative figures have been reclassified to conform
with the presentation adopted in the current period.
6
<PAGE>
ITEM 2. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated certain
statement of operations and other data of the Company.
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue 100% 100% 100% 100%
Cost of sales 17.8 18.5 18.4 19.7
---- ---- ---- ----
Gross profit 82.2 81.5 81.6 80.3
Selling, delivery and administrative 51.2 52.3 54.0 53.7
---- ---- ---- ----
EBITDA 31.0 29.2 27.6 26.6
Depreciation and amortization 14.7 12.6 16.0 13.7
---- ---- ---- ----
Operating profit 16.3 16.6 11.6 12.9
Interest and related expenses 14.9 6.4 16.9 16.3
---- --- ---- ----
Income (loss) before income taxes and
extraordinary item 1.4 10.2 (5.3) (3.4)
Provision for (recovery of) income taxes - 6.5 - (0.7)
---- --- ---- ---
Net income (loss) before extraordinary item 1.4 3.7 (5.3) (2.7)
Extraordinary item 4.7 - 2.5 -
--- ---- --- ----
Net income (loss) before extraordinary item 6.1 3.7 (2.8) (2.7)
--- ---- --- ----
--- ---- --- ----
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998
REVENUE. Revenue increased $1.6 million or 11.4% to $16.1 million in
the three months ended June 30, 1999 compared to $14.5 million in the three
months ended June 30, 1998. Revenues from acquisitions completed during and
after the 1998 second quarter accounted for approximately $0.9 million of the
increase. Revenue growth was reduced by approximately $0.3 million or 2.1% due
to declines in both the Canadian Dollar and Pound Sterling. The balance of the
increase was from growth in sales from the Company's higher customer location
base. The Company's customer locations ended the second quarter at 153,000, down
2,000 from December 31, 1998. Excluding a customer base adjustment to eliminate
accounts that have not purchased a product in the last 84 days, the Company's
actual customer base grew by approximately 2,800 during the quarter.
7
<PAGE>
COST OF SALES. The cost of sales increased by $0.2 million or 7.1% to
$2.9 million in 1999 compared to $2.7 million in 1998 as a result of both
acquisitions completed since the 1998 period and growth in the company's
underlying customer base. The cost of sales as a percentage of revenue decreased
by 0.7% from 18.5% in the 1998 period to 17.8% in the 1999 second quarter as a
result of an increase in the percentage of revenues derived from higher margin
home and office water sales and cooler rental revenues. Revenues from sales of
lower margin small pack cases declined approximately 5% during the second
quarter.
OPERATING EXPENSES. Selling, delivery, and administrative operating
expenses increased by $0.7 million or 9.1% to $8.2 million in the 1999 second
quarter from $7.5 million in the 1998 period. This increase is primarily due to
a $0.2 million increase in bad debt reserves and approximately $0.4 million from
businesses acquired during and after the 1998 period. As a percentage of
revenue, selling, delivery and administrative expenses decreased from 52.3% in
the 1998 period to 51.2% in the 1999 second quarter. Increases in the Company's
semi-fixed operating expenses were more than offset by the growth in the
Company's revenues.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by 30.6% or $0.6 million to $2.4 million from $1.8 million in the 1998
period. This increase was the result of depreciation of capital expenditures
made in 1999 to support the growth in the Company's water cooler customer base
and due to the significant increase in fixed and intangible assets acquired as a
result of acquisitions consummated during and after the 1998 period.
OPERATING PROFIT. The Company's operating profit increased by 9.0% or
$0.2 million to $2.6 million from $2.4 million in 1998 as a result of the
changes noted above. As a percentage of revenue, operating profit decreased to
16.3% in the 1999 second quarter from 16.6% in the 1998 period due principally
to the increase in depreciation and amortization expense as discussed above.
Earnings before interest, taxes, depreciation and amortization expense
("EBITDA") increased by 18.3% or $0.8 million to $5.0 million from $4.2 million
in the 1998 period. As a percentage of revenue, EBITDA increased to 31.0% in the
1999 quarter from 29.2% in the 1998 period as a result of the changes noted
above.
INTEREST EXPENSE. Interest expense increased by $1.5 million from $0.9
million in the second quarter of 1998 to $2.4 million in the 1999 quarter.
Interest expense was reduced by $0.9 million in the second quarter of 1999 and
by $1.9 million in the 1998 quarter as a result of interest accrued due to the
fluctuating value of the Company's currency swap (see Note 4 of the Notes to
Consolidated Financial Statements included elsewhere in this Report). Excluding
the impact of accounting for the cross currency swap, interest expense in the
1999 second quarter increased by $0.5 million over the 1998 period as a result
of higher borrowing levels incurred to fund capital expenditures and business
acquisitions during and after the 1998 period.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
REVENUE. Revenue increased $4.2 million or 16.0% to $30.5 million in
the six months ended June 30, 1999 compared to $26.3 million in the six months
ended June 30, 1998. Revenues from acquisitions completed during and after the
1998 second quarter accounted for approximately $2.5 million of the increase.
Revenue growth was reduced by approximately $0.7 million or 2.5% due to declines
in both the Canadian Dollar and Pound Sterling. The balance of the increase was
from growth in water sales from the Company's higher customer location base. The
Company's customer locations ended the second quarter at 153,000, down 2,000
from December 31, 1998. Excluding a customer base adjustment to eliminate
accounts that have not purchased a product in the last 84 days, the Company's
actual customer base grew by approximately 4,000 during the first half of 1999.
COST OF SALES. The cost of sales increased by $0.4 million or 8.4% to
$5.6 million in 1999 compared to $5.2 million in 1998 as a result of both
acquisitions completed since the 1998 period and growth in the Company's
underlying customer base. The cost of sales as a percentage of revenue decreased
by 1.3% from 19.7% in the 1998 period to 18.4% in 1999. This decrease was
primarily due to an increase in the percentage of revenues derived from higher
margin home and office water sales, increased cooler rental revenues and
improved production efficiencies. Revenues from sales of lower margin small pack
cases declined approximately 3% during the first half of 1999.
OPERATING EXPENSES. Selling, delivery, and administrative operating
expenses increased by $2.4 million or 16.7% to $16.5 million for the six months
ended June 30, 1999 compared to $14.1 million in the 1998 period. This increase
is primarily due to a $0.4 million increase in bad debt reserves and
approximately $1.2 million from businesses acquired during and after the 1998
period. The balance of the increase was primarily related to additional expenses
necessary to support the Company's increased customer base that was up over 12%
from the year ago period, including an increase in general and administrative
expenditures to fund increases in corporate personnel and enhanced computer
systems. As a percentage of revenue, operating expenses increased from 53.7% to
54.0%. This increase was a result of increased bad debt reserves (1.1%) and
increased spending on corporate personnel which was partially offset by improved
operating efficiencies on the increased revenues.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by 36.3% or $1.3 million to $4.9 million from $3.6 million in the 1998
period. As a percentage of revenue, depreciation and amortization expense
increased by 2.3% from 13.7% to 16.0%. This increase was the result of
depreciation of capital expenditures made in 1999 to support the growth in the
Company's water cooler customer base and due to the significant increase in
fixed and intangible assets acquired as a result of acquisitions consummated
during and after the 1998 period.
8
<PAGE>
OPERATING PROFIT. The Company's operating profit increased by 3.1% or
$0.1 million to $3.5 million from $3.4 million as a result of the changes noted
above. As a percentage of revenue, operating profit decreased from 12.9% in the
1998 period to 11.6% in the six months ended June 30, 1999 as the decrease in
the cost of sales percentage was offset by the increase in the depreciation and
amortization expense as discussed above. EBITDA increased by 20.1% or $1.4
million to $8.4 million from $7.0 million in the 1998 period as a result of the
changes noted above. As a percentage of revenues, EBITDA increased to 27.6% in
the 1999 first half from 26.6% in the 1998 period due principally to the
improvement in the Company's gross profit margin.
INTEREST EXPENSE. Interest expense increased by $0.8 million from $4.3
million in the 1998 period to $5.1 million in the 1999 period. Interest expense
was reduced by approximately $1.3 million in both the six months ended June 30,
1999 and 1998 as a result of interest accrued due to the fluctuating value of
the Company's currency swap (see Note 4 of the Notes to Consolidated Financial
Statements included elsewhere in this Report). Excluding the impact of
accounting for the cross currency swap, interest expense for the six months
ended June 30, 1999 increased by approximately $0.8 million as a result of
higher borrowing levels incurred to fund capital expenditures and business
acquisitions during and after the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its capital and operating
requirements with a combination of cash flow from operations, borrowings under
bank credit facilities and equity investments from shareholders. The Company has
utilized these sources of funds to make acquisitions, to fund significant
capital expenditures at its properties, to fund operations and to service debt.
The Company presently expects to fund its future capital and operating
requirements at its existing operations through a combination of existing cash
balances, cash generated from operations and borrowings under the Senior Credit
Facility (see below).
Net cash used in operating activities was $0.2 million for the six
months ended June 30, 1999 and $1.0 million for the 1998 period. Net cash used
in investment activities was $5.9 million in 1999 and $16.8 million in 1998. The
1998 balance includes $11.4 million related to the acquisitions of Coastal
Mountain Water Corp. and Krystal Fountain Water Co. Limited. The Company made
net capital expenditures of $5.9 million in the six months ended June 30, 1999
and $5.4 million in the six months ended June 30, 1998. Capital expenditures in
the 1999 period are primarily related to the purchase of $1.1 million of
production equipment for a new plant in Vancouver, Canada, and the addition of
water bottles, water coolers, delivery trucks and computer equipment. Based on
the Company's existing operations, management expects that the Company's capital
expenditures will total approximately $9.7 million in 1999.
In May 1999, the Company paid $8.5 million to repurchase $10 million
face value of its outstanding Subordinated Notes Payable. An extraordinary gain
of $757,748 related to the repurchase of the Subordinated Notes has been
recorded, net of applicable income taxes of $386,000 and costs of $356,252
representing a write off of a proportionate amount of deferred charges incurred
in connection with the issuance of the Subordinated Notes in November of 1997.
The Company believes that existing cash balances together with cash
generated from operations and available borrowings under the Senior Credit
Facility will be sufficient to finance the Company's working capital and capital
expenditure requirements for the remainder of 1999 as well as some small
acquisitions. However, there can be no assurance that such resources will be
sufficient to meet the Company's anticipated requirements or that capital will
be available to the Company on terms and conditions acceptable to the Company.
SENIOR CREDIT FACILITY
On May 26, 1998, the Company completed a $40 million Senior Credit
Facility (the "Credit Facility") with the Toronto-Dominion Bank. The Credit
Facility was to be used for purposes of financing future capital investments,
working capital, business acquisitions and general corporate purposes. As at
December 31, 1998, the Company was in violation of a financial covenant under
the Senior Credit Facility. On May 17, 1999, the Company reached agreement with
its lenders to amend the Senior Credit Facility (the "Amended Facility"). The
Amended Facility will provide the Company with increased operating flexibility
and restored the Company's compliance with all financial covenants.
The Amended Facility is structured as a multi- currency facility and
provides for a $15 million operating line which is renewable annually by April
30, a $5 million five year acquisition line and a $10 million short term credit
line expiring October 31, 1999 that provides the Company with flexibility to
repurchase, at its discretion, certain of the Company's outstanding Subordinated
Notes Payable. The Company's payment obligation under the Amended Facility is
secured by a first priority security interest over substantially all of the
assets of the Company; obligations under the Amended Facility rank senior to the
payment of the Subordinated Notes Payable. Any amounts borrowed under the
Amended Facility will be repaid ratably over a five year period commencing
October 31, 2000 based on the balances outstanding as of that date.
9
<PAGE>
Amounts outstanding under the Amended Facility bear interest at
specified rates based on the Canadian prime, U.S. prime, London inter-bank
market and Bankers' Acceptances rates. As of June 30, 1999, the Company had
approximately $7.9 million of available credit under its $15.0 million operating
line, $1.5 million available under its $10 million Subordinated Note repurchase
facility and $5.0 million available under the acquisition facility.
YEAR 2000
The Year 2000 issue arises due to computer programs using two digits
rather than four to define an applicable year. Computer programs may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in the Company's
operations. If the Company or its significant customers or suppliers fail to
adequately address the Year 2000 issue, such failure could have an adverse
impact on the Company's ability to operate its business.
Sparkling Spring has taken action to address and complete the work
associated with the Year 2000. Each of the Company's business locations has
established a team to identify and correct Year 2000 issues. The Company's
principal financial and operational computer systems utilize software developed
and supported by an outside computer software supplier. It is the Company's
understanding that this supplier has completed an analysis of the changes
required to accommodate the Year 2000 and that these changes are incorporated in
the most recent software upgrades provided to the Company. To date the Company
has installed these software upgrades at five of its locations and intends to
complete the installation and testing of these upgrades at all of its locations
by the end of September 1999. In addition, the impact of Year 2000 on
manufacturing plants and building facilities is also being addressed. The
Company is also investigating the Year 2000 capabilities of suppliers, customers
and other external entities, and developing contingency plans where necessary.
The Company estimates that the total cost of addressing and completing
the work associated with the Year 2000 issue will be approximately $250,000
exclusive of expenditures for software and telephone system upgrades required to
accommodate the Company's growth and anticipated future requirements. This
expectation is based on the assumption that the Company has contemplated all
significant actions required and that significant costs related to Year 2000
will not be incurred on behalf of the Company's customers or suppliers. This
assumption also excludes any capital costs that may be required to purchase
returnable bottles if the Company's customers decide to increase inventories as
a precaution over the year-end period.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, Reporting Comprehensive Income, and SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information
were issued. These standards are applicable to the Company commencing with its
December 31, 1998 Financial Statements and its March 31, 1999 Interim Financial
Statements.
The impact of SFAS No. 130 is to include the change in the cumulative
translation adjustment account in the determination of Comprehensive Income.
The impact of SFAS No. 131 is to disclose certain information about the
revenues the Company derives from each of its major products in addition to
segmented information for the countries in which it earns revenues and holds
assets.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included in this Report that do not relate to present or
historical conditions are "forward looking statements" within the meaning of the
Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995
(the "1995 Reform Act"). Additional oral or written forward-looking statements
may be made by the Company from time to time, and such statements may be
included in documents other than this Report that are filed with the SEC. Such
forward-looking statements involve risks and uncertainties that could cause
results or outcomes to differ materially from those expressed in such
forward-looking statements. Forward-looking statements in this Report and
elsewhere may include without limitation, statements relating to the Company's
plans, strategies, objectives, expectations, intentions and adequacy of
resources and are intended to be made pursuant to the safe harbor provisions of
the 1995 Reform Act. Words such as "believes," "forecasts," "intends,"
"possible," "expects," "estimates," "anticipates," or "plans" and similar
expressions are intended to identify forward-looking statements. Investors are
cautioned that such forward-looking statements involve risks and uncertainties
including without limitation the following: (i) the Company's plans, strategies,
objectives, expectations and intentions are subject to change at any time at the
discretion of the Company; (ii) the Company's ability to expand by acquisitions
is dependent upon, and may be limited by, the availability of suitable
acquisition candidates and the availability of financing therefor on suitable
terms; (iii) the Company's ability to obtain financing will be affected by
restrictions contained in the Indenture and the Company's other existing and
future financing arrangements; (iv) the Company's proposed expansion strategy
will be substantially dependent upon the Company's ability to hire and retain
skilled management, financial, marketing and other personnel; (v) the Company's
plans and results of operations will be affected by the Company's ability to
successfully manage growth (including monitoring operations, controlling costs
and maintaining effective quality and inventory
10
<PAGE>
controls; (vi) the market for attractive acquisitions in the bottled water
industry is becoming increasingly competitive, which could make the Company's
acquisition strategy more difficult to achieve; (vii) the Company's operations
are subject to the jurisdiction of various governmental and regulatory agencies
which regulate the quality of drinking water and other products and any failure
by the Company to comply with existing and future laws and regulations could
subject the Company to significant penalties or impose additional costs on the
Company or otherwise have a material adverse affect on its financial position or
results of operations; (viii) any interruption in the availability of water to
the Company from municipal sources and local natural springs could have a
material adverse affect on the Company's operations until suitable replacement
sources are located; (ix) risks associated with issues surrounding Year 2000 for
the Company, its customers and suppliers; and (x) other risks and uncertainties
indicated from time to time in the Company's filings with the SEC.
Part II Other Information
Item 6. Exhibits and Reports on Form 6-K
(a) Exhibits
Amended and Restated Credit Agreement between Sparkling Spring
Water Group Limited, Sparkling Spring Water Limited, Nature
Springs Water Company Limited and Spring Water, Inc. as
Borrowers and The Toronto-Dominion Bank, Toronto Dominion
(Texas), Inc. and The Toronto-Dominion Bank, London Branch as
Lenders, dated as of May 17, 1999.
(b) Reports on 6-K (incorporated by reference)
Report on Form 6-K dated April 16, 1999 covering the Press
Release dated April 12, 1999 announcing record revenue for
1998 and improved 1st quarter 1999 performance.
Report on Form 6-K dated May 11, 1999 covering the Press
Release dated May 5, 1999 announcing amendment of the
Company's Senior Credit Facility.
11
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
BETWEEN
SPARKLING SPRING WATER GROUP LIMITED
SPARKLING SPRING WATER LIMITED
NATURE SPRINGS WATER COMPANY LIMITED
AND
SPRING WATER, INC.
AS BORROWERS
AND
THE TORONTO-DOMINION BANK,
TORONTO DOMINION (TEXAS), INC.
AND
THE TORONTO-DOMINION BANK, LONDON BRANCH
AS LENDERS
DATED AS OF MAY 17, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
ARTICLE 1
INTERPRETATION
<S> <C>
1.01 DEFINED TERMS.......................................................... 2
1.02 COMPUTATION OF TIME PERIODS............................................24
1.03 ACCOUNTING TERMS.......................................................24
1.04 INCORPORATION OF APPENDICES AND SCHEDULES..............................24
1.05 SINGULAR, PLURAL, ETC..................................................24
ARTICLE 2
CREDIT FACILITIES
2.01 CREDIT FACILITIES......................................................24
2.02 AVAILABILITY...........................................................25
2.03 TERMINATION OF AVAILABILITY............................................25
2.04 REVOLVING NATURE OF OPERATING FACILITY AND ACQUISITION FACILITY........25
2.05 NON-REVOLVING NATURE OF TERM FACILITY..................................25
2.06 BORROWING OPTIONS......................................................25
2.07 REPAYMENT OF CREDIT FACILITIES.........................................27
2.08 OPTIONAL REPAYMENTS AND PREPAYMENTS....................................27
2.09 EXTENSION OF OPERATING MATURITY DATE...................................28
2.10 OPTIONAL REDUCTION OF COMMITMENTS......................................28
2.11 REPAYMENT OF OUTSTANDINGS TO REFLECT COMMITMENTS.......................28
2.12 GENERAL INTEREST PROVISIONS............................................28
2.13 BUSINESS DAY PAYMENTS..................................................29
2.14 INTEREST ON OVERDUE AMOUNTS............................................29
2.15 BREAKAGE COSTS.........................................................30
2.16 APPLICATION OF PAYMENTS................................................30
2.17 CONDITIONS SOLELY FOR THE BENEFIT OF THE LENDERS.......................31
2.18 NO WAIVER..............................................................31
2.19 AUTHORIZED DEBIT.......................................................31
2.20 COMMITMENT FEE.........................................................31
2.21 ARRANGEMENT FEE........................................................31
2.22 ADJUSTMENTS TO INTEREST RATES AND FEES.................................31
ARTICLE 3
LOANS AND LETTERS OF CREDIT
3.01 ADVANCES...............................................................32
3.02 MINIMUM ADVANCES.......................................................32
3.03 NOTICE REQUIREMENTS FOR ADVANCES.......................................33
3.04 NOTICES IRREVOCABLE....................................................34
3.05 ELECTION OF INTEREST RATES AND CURRENCIES..............................34
3.06 CIRCUMSTANCES REQUIRING CANADIAN PRIME, U.S. BASE OR U.S. PRIME RATE
PRICING................................................................35
3.07 INTEREST PERIODS.......................................................37
3.08 INTEREST ON ADVANCES...................................................37
3.09 INTEREST PAYMENT DATES.................................................37
</TABLE>
<PAGE>
- ii -
<TABLE>
<CAPTION>
Page No.
<S> <C>
3.10 PAYMENTS...............................................................37
3.11 LETTERS OF CREDIT. ...................................................38
ARTICLE 4
BANKERS' ACCEPTANCES
4.01 CREATION OF BANKERS' ACCEPTANCE........................................38
4.02 DRAWINGS...............................................................38
4.03 POWER OF ATTORNEY......................................................39
4.04 COMPLETION AND DELIVERY OF DRAFTS......................................39
4.05 STAMPING FEES..........................................................39
4.06 NETTING................................................................40
4.07 PAYMENT ON MATURITY....................................................40
4.08 CUSTODY OF DRAFTS......................................................40
4.09 RENEWAL OR OTHER PAYMENT OF BANKERS' ACCEPTANCE........................41
4.10 PREPAYMENTS OF BANKERS' ACCEPTANCES....................................41
4.11 NO DAYS OF GRACE.......................................................41
4.12 SUSPENSION OF BANKERS' ACCEPTANCE OPTION...............................41
ARTICLE 5
CLOSING CONDITIONS
5.01 CLOSING CONDITIONS.....................................................42
5.02 ADDITIONAL CONDITIONS PRECEDENT FOR ACQUISITION FACILITY...............43
5.03 ADDITIONAL CONDITIONS PRECEDENT FOR TERM FACILITY......................47
5.04 CONDITIONS PRECEDENT TO SUBSEQUENT BORROWINGS..........................48
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.01 REPRESENTATIONS AND WARRANTIES BY THE BORROWERS........................48
ARTICLE 7
FINANCIAL STATEMENTS AND INFORMATION
7.01 PROVISION OF INFORMATION...............................................53
ARTICLE 8
POSITIVE COVENANTS
8.01 GENERAL AFFIRMATIVE COVENANTS..........................................55
ARTICLE 9
NEGATIVE COVENANTS
9.01 GENERAL NEGATIVE COVENANTS.............................................58
ARTICLE 10
BORROWER GUARANTEE
10.01 GUARANTEES.............................................................62
10.02 GUARANTEE ABSOLUTE AND UNCONDITIONAL. .................................63
</TABLE>
<PAGE>
- iii -
<TABLE>
<CAPTION>
Page No.
<S> <C>
10.03 DEMAND.................................................................64
10.04 REMEDIES...............................................................65
10.05 SET-OFF................................................................65
10.06 AMOUNT OF GUARANTEED OBLIGATIONS.......................................65
10.07 PAYMENT FREE AND CLEAR OF TAXES........................................65
10.08 SUBROGATION AND REPAYMENT..............................................66
10.09 POSTPONEMENT AND ASSIGNMENT............................................66
10.10 RIGHTS ON SUBROGATION..................................................67
10.11 CONTINUING GUARANTEE...................................................67
10.12 THIRD PARTY BENEFICIARIES..............................................67
10.13 NO MODIFICATION........................................................67
10.14 ADDITIONAL GUARANTEE...................................................67
10.15 REMEDIES CUMULATIVE....................................................67
10.16 NO WAIVERS, REMEDIES...................................................67
10.17 TIME OF ESSENCE........................................................68
ARTICLE 11
SECURITY
11.01 SECURITY...............................................................68
11.02 CONTINUED PERFECTION OF SECURITY.......................................68
11.03 SET-OFF................................................................68
11.04 CONFLICT...............................................................69
ARTICLE 12
EVENTS OF DEFAULT
12.01 EVENTS OF DEFAULT......................................................69
12.02 CANCELLATION AND ACCELERATION..........................................72
12.03 REMEDIES CUMULATIVE....................................................72
12.04 WAIVERS................................................................72
ARTICLE 13
MISCELLANEOUS
13.01 RECORDS................................................................72
13.02 AMENDMENTS.............................................................73
13.03 NOTICES................................................................73
13.04 NO WAIVER; REMEDIES....................................................75
13.05 EXPENSES...............................................................75
13.06 MAINTENANCE OF ACCOUNTS................................................76
13.07 TAXES..................................................................76
13.08 INCREASED COSTS........................................................77
13.09 ENVIRONMENTAL INDEMNITY................................................78
13.10 JUDGMENT CURRENCY......................................................79
13.11 GOVERNING LAW..........................................................79
13.12 CONSENT TO JURISDICTION................................................79
13.13 SUCCESSORS AND ASSIGNS.................................................79
</TABLE>
<PAGE>
- iv -
<TABLE>
<CAPTION>
Page No.
<S> <C>
13.14 CONFLICT...............................................................80
13.15 SEVERABILITY...........................................................80
13.16 PRIOR UNDERSTANDINGS...................................................81
13.17 TIME OF ESSENCE........................................................81
13.18 COUNTERPARTS...........................................................81
</TABLE>
Appendix 1 - Mandatory Liquid Asset Cost
Appendix 2 - Interest Rates and Fees
Schedule 1 - Borrowing Notice - Canadian Prime Rate Advances, U.S. Base Rate
Advances, Bankers' Acceptances and (Term Facility) U.S. Libor
Advances
Schedule 2 - Borrowing Notice - U.S. Prime Rate Advances and (Operating
Facility and Acquisition Facility) U.S. Libor Advances
Schedule 3 - Borrowing Notice - Sterling Libor Advances
Schedule 4 - List of Wholly-Owned Subsidiaries
Schedule 5 - Bankers' Acceptance Power of Attorney
Schedule 6 - Quarterly Financial Certificate
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of the 17th day of May, 1999
BETWEEN:
SPARKLING SPRING WATER GROUP LIMITED, a corporation incorporated
under the laws of the Province of Nova Scotia
OF THE FIRST PART
AND:
SPARKLING SPRING WATER LIMITED, a corporation incorporated under
the laws of the Province of Nova Scotia
OF THE SECOND PART
AND:
NATURE SPRINGS WATER COMPANY LIMITED, a company incorporated under
the laws of England and Wales (formerly called Sparkling Spring
Water UK Limited)
OF THE THIRD PART
AND:
SPRING WATER, INC., a corporation incorporated under the laws of
the State of Delaware
OF THE FOURTH PART
AND:
THE TORONTO-DOMINION BANK, a chartered bank of Canada
OF THE FIFTH PART
AND:
TORONTO DOMINION (TEXAS), INC., a corporation incorporated under
the laws of the State of Delaware
OF THE SIXTH PART
AND:
THE TORONTO-DOMINION BANK, London Branch
OF THE SEVENTH PART
<PAGE>
-2-
WHEREAS:
A. Sparkling Spring Water Group Limited, Sparkling Spring Water Limited,
Nature Springs Water Company Limited (then called Sparkling Spring Water UK
Limited) and Spring Water, Inc. as Borrowers and The Toronto-Dominion Bank,
Toronto Dominion (Texas), Inc. and The Toronto-Dominion Bank, London Branch as
Lenders entered into a Credit Agreement dated as of April 30, 1998 (the
"Original Credit Agreement");
B. The parties have agreed to amend and restate the Original Credit
Agreement to reflect certain amendments to the credit facility provided under
the Original Credit Agreement, to provide for additional credit facilities, and
to make certain other amendments, as herein provided.
THIS AGREEMENT WITNESSES that in consideration of the mutual covenants
and agreements contained herein, it is agreed by and between the parties hereto
as follows:
ARTICLE 1
INTERPRETATION
1.01 DEFINED TERMS. As used in this Agreement, the following terms have the
following meanings:
(a) "ACCOMMODATION" means the making of any Advance by the Lenders
(including any renewal of an outstanding Advance), the creation of
a Bankers' Acceptance by TD Bank and the issuance of a Letter of
Credit or Guarantee Letter by TD Bank;
(b) "ACQUIRED COMPANY" means a company which is, or assets of which
are, acquired by a Group Entity during any particular period,
including without limitation any Target Companies acquired during
such period;
(c) "ACQUIRED COMPANY EBITDA" means, for any particular period, an
amount determined for any Acquired Company and its Subsidiaries in
the same manner as the determination of Adjusted Consolidated
EBITDA for SSWG and its Subsidiaries pursuant to this Agreement;
(d) "ACQUISITION COMMITMENT" means U.S.$5,000,000, subject to any
reduction under any provision of this Agreement;
(e) "ACQUISITION FACILITY" means the credit facility to be made
available to the Borrowers hereunder as set out in Section
2.01(b);
(f) "ACQUISITION MATURITY DATE" means April 30, 2004;
<PAGE>
-3-
(g) "ACTUAL CAPITAL EXPENDITURES" means, for any period, the actual
aggregate capital expenditures of all Group Entities for that
period;
(h) "ADJUSTED CONSOLIDATED EBITDA" means, for any particular period,
an amount determined as follows:
(i) the Consolidated Net Income of SSWG and its Subsidiaries
for that period;
plus
(ii) Total Interest for that period, to the extent such Total
Interest was deducted in determining Consolidated Net
Income of SSWG and its Subsidiaries for that period;
plus
(iii) income taxes recorded by SSWG and its Subsidiaries for that
period, to the extent such income taxes were included in
determining Consolidated Net Income of SSWG and its
Subsidiaries for that period;
plus
(iv) the amount of depreciation and amortization recorded by
SSWG and its Subsidiaries for that period, to the extent
the amount of such depreciation and amortization was
deducted in determining the Consolidated Net Income of SSWG
and its Subsidiaries for that period;
plus
(v) Acquired Company EBITDA for that period for any Acquired
Company acquired during that period;
in each case adjusted for reasonable operating expense
efficiencies, as approved by the Lenders, provided that in
determining Adjusted Consolidated EBITDA: (A) the amount of
U.S.$1,823,000, representing an acquisition charge incurred in the
fiscal quarter ended September 30, 1998, may be added back for
each of the quarters ending September 30, 1998, December 31, 1998,
March 31, 1999 and June 30, 1999; and (B) the amount of
U.S.$3,369,000, representing a special charge incurred in the
fiscal quarter ended December 31, 1998, may be added back for each
of the periods ended December 31, 1998, March 31, 1999, June 30,
1999 and September 30, 1999;
(i) "ADVANCES" means advances made by the Lenders hereunder, including
any renewal of outstanding Advances; Advances may be denominated
in Canadian Dollars (a "Canadian Dollar Advance"), in U.S. Dollars
(a "U.S. Dollar
<PAGE>
-4-
Advance") or in Sterling (a "Sterling Advance"); a Canadian Dollar
Advance shall be designated as a "Canadian Prime Rate Advance", a
U.S. Dollar Advance may from time to time, by election of the
Borrowers, be designated as a "U.S. Base Rate Advance", a "U.S.
Prime Rate Advance" or a "U.S. Libor Advance", and a Sterling
Advance shall be designated as a "Sterling Libor Advance"; each of
a Canadian Prime Rate Advance, a U.S. Base Rate Advance, a U.S.
Prime Rate Advance, a U.S. Libor Advance and a Sterling Libor
Advance is a "Type" of Advance;
(j) "AFFILIATE" of any designated person means any other person that,
directly or indirectly, controls or is controlled by or is under
common control with such designated person; provided that in any
event any person that beneficially owns directly or indirectly
securities having 50% or more of the voting power for the election
of directors or other governing body or 50% or more of the
partnership or other ownership interests of any other person will
be deemed to control such corporation or other person; for the
purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any person, means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract
or otherwise;
(k) "ALTERNATE STERLING RATE" means the rate of interest per annum
(based on a 365 day year) as determined by TDUK as the rate it may
make available for a period equal to one month Sterling obtained
by TDUK in the London interbank market, plus the applicable
Mandatory Liquid Asset Cost;
(l) "ALTERNATE STERLING RATE ADVANCES" means Advances deemed to have
been made to a Borrower pursuant to Section 3.05(e) or Section
3.06(a)(viii);
(m) "AUTHORIZED OFFICER" means, with respect to a Borrower, the
chairman, the president, the chief executive officer, the chief
financial officer, the secretary or the chief legal officer of
such Borrower;
(n) "BANKERS' ACCEPTANCE" means a bankers' acceptance in Canadian
Dollars created by acceptance of a Draft in accordance with the
provisions of this Agreement;
(o) "BENEFICIARY" means, in respect of any Letter of Credit or
Guarantee Letter, the beneficiary specified therein or any other
person to whom payments may be required to be made pursuant to
such Letter of Credit or Guarantee Letter;
(p) "BORROWERS" means, collectively, SSWG, SSW, SSUK and SWUS and
their respective successors, and "BORROWER" means any one of them;
(q) "BORROWING" means a utilization by a Borrower of the Credit
Facilities:
<PAGE>
-5-
(i) in the case of the Operating Facility, by way of Canadian
Prime Rate Advances, U.S. Base Rate Advances, U.S. Prime
Rate Advances, U.S. Libor Advances, Sterling Libor
Advances, Bankers' Acceptances, Letters of Credit or
Guarantee Letters;
(ii) in the case of the Acquisition Facility, by way of Canadian
Prime Rate Advances, U.S. Base Rate Advances, U.S. Prime
Rate Advances, U.S. Libor Advances, Sterling Libor Advances
or Bankers' Acceptances; and
(iii) in the case of the Term Facility, by way of Canadian Prime
Rate Advances, U.S. Base Rate Advances, U.S. Libor Advances
or Bankers' Acceptances,
and "BORROWINGS" means the aggregate of such utilizations;
(r) "BORROWING NOTICE" means a notice by a Borrower to the Lenders:
(i) substantially in the form attached as Schedule 1 hereto:
(1) requesting a Canadian Prime Rate Advance;
(2) requesting a U.S. Base Rate Advance;
(3) requesting the creation of Bankers' Acceptances; or
(4) in the case only of the Term Facility:
A. requesting a U.S. Libor Advance; or
B. requesting the continuation of a U.S. Libor
Advance for an additional Interest Period;
(ii) substantially in the form attached as Schedule 2 hereto:
(1) requesting a U.S. Prime Rate Advance;
(2) requesting a U.S. Libor Advance; or
(3) requesting the continuation of a U.S. Libor Advance
for an additional Interest Period; or
(iii) substantially in the form attached as Schedule 3 hereto:
(1) requesting a Sterling Libor Advance; or
<PAGE>
-6-
(2) requesting the continuation of a Sterling Libor
Advance for an additional Interest Period;
(s) "BUSINESS DAY" means any day of the year, other than a Saturday,
Sunday or other day on which:
(i) banks are required or authorized to close in Vancouver;
(ii) where used in the context of a U.S. Prime Rate Advance,
banks are required or authorized to close in New York City
or Houston, Texas;
(iii) where used in the context of a U.S. Libor Advance, banks
are required or authorized to close in New York City or
Houston, Texas and dealings are not carried on in the
London interbank market; or
(iv) where used in the context of a Sterling Libor Advance,
banks are required or authorized to close in London and
dealings are not carried on in the London interbank market;
(t) "BUSINESS PLAN" means a business plan prepared by the Borrowers in
respect of the consolidated business and financial activities of
the Group Entities for the ensuing year, containing financial
forecasts, an operating budget, and other matters typically
included in an annual business plan;
(u) "CANADIAN DOLLARS" and "CDN.$" each mean lawful money of Canada;
(v) "CANADIAN PRIME RATE" on any day means the greater of:
(i) the rate of interest per annum then in effect (based on a
year of 365 days or, in leap years, 366 days) established
and reported by TD Bank to the Bank of Canada from time to
time as the reference rate of interest for the
determination of interest rates that TD Bank charges to
customers of varying degrees of creditworthiness in Canada
for Canadian Dollar loans made by it in Canada and
designated by it as its "prime rate"; and
(ii) the annual rate of interest equal to the CDOR Rate plus
0.75% per annum;
provided that each change in the Canadian Prime Rate shall be
effective from and including the date such change is made without
any requirement of notification to any Borrower or any other
person;
(w) "CANADIAN PRIME RATE ADVANCES" means Advances on which interest
is determined by reference to the Canadian Prime Rate in effect
from time to time;
(x) "CAPEX" means, for any particular period, the greater of:
<PAGE>
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(i) the actual aggregate capital expenditures of all Group
Entities for that period, as determined by the Borrowers,
for the purposes of the maintenance of the existing
business of the Group Entities;
and
(ii) 3% of the consolidated revenue for all Group Entities for
that period;
(y) "CAPITAL LEASE OBLIGATIONS" means, for any person, all obligations
of such person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) property, to the
extent such obligations are required to be classified and
accounted for as capital lease obligations or finance lease
obligations on a balance sheet of such person in accordance with
GAAP;
(z) "CASH FLOW" means, for any particular period, an amount determined
as follows:
(i) Adjusted Consolidated EBITDA for that period;
less
(ii) Capex for that period;
less
(iii) current income taxes actually paid by SSWG and its
Subsidiaries during that period;
(aa) "CDOR RATE" means the annual rate equal to the average "BA 1
Month" rates for bankers' acceptances in Canadian Dollars
displayed and identified as such on the "Reuters Screen CDOR
Page" (as defined in the International Swap Dealer Association,
Inc. definitions, as modified and amended from time to time) as
of 10:00 a.m. (Vancouver time) on any particular day or, if such
day is not a Business Day, then on the immediately preceding
Business Day (as adjusted by TD Bank after 10:00 a.m. (Vancouver
time) to reflect any error in a posted rate or in the posted
average annual rate); provided that if such rates are not
available on the Reuters Screen CDOR Page on any particular day,
then the CDOR Rate on that day shall be calculated as the
arithmetic mean of the 30 day rates applicable to bankers'
acceptances in Canadian Dollars quoted by three major Canadian
Schedule I chartered banks selected by the Lenders as of 10:00
a.m. (Vancouver time) on such day, or if such day is not a
Business Day, then on the immediately preceding Business Day;
(ab) "CHANGE OF CONTROL" means:
(i) any person or group other than John Kredeit, Stephen
Larson, Clairvest Group Inc., or the management and
directors of the Group Entities
<PAGE>
-8-
becoming the beneficial owner, directly or indirectly, of
more than 50% of the Voting Stock of SSWG; or
(ii) the transfer of all or substantially all of the assets of
SSWG or its Subsidiaries, taken as a whole, to any person
or group other than another Group Entity;
(ac) "CLOSING CONDITIONS" means the various conditions precedent set
out in Section 5.01 hereof;
(ad) "CLOSING DATE" means such date as the Borrowers and the Lenders
may agree upon;
(ae) "COMMITMENTS" means, collectively, the Operating Commitment, the
Acquisition Commitment and the Term Commitment, and "COMMITMENT"
means any one of them;
(af) "COMMITMENT FEE" has the meaning ascribed to that term in Section
2.20;
(ag) "CONSOLIDATED NET INCOME" means, for any particular period, the
consolidated net income of SSWG and its Subsidiaries for such
period determined in accordance with GAAP; provided that
Consolidated Net Income shall not include:
(i) any loss, writedown, gain or other amount classified as an
extraordinary item in accordance with GAAP;
(ii) any portion of the net income or loss of any person that is
not a Subsidiary of SSWG, except to the extent cash
dividends received by SSWG or any Subsidiary of SSWG in any
period are included in consolidated net income of SSWG for
that period in accordance with GAAP;
(iii) any gain or loss on the disposition of fixed assets or any
income or loss attributable to discontinued operations; or
(iv) any charges related to the acquisition in 1997 by SSWG of
the shares of SSW and the related acquisition of stock
options by SSW, or any other charges permitted under this
Agreement;
(ah) "CORPORATION" includes a corporation incorporated under the CANADA
BUSINESS CORPORATIONS ACT and any other corporation wherever or
however incorporated;
(ai) "CREDIT FACILITIES" means, collectively, the Acquisition Facility,
the Operating Facility and the Term Facility, and "CREDIT
FACILITY" means any one of them;
<PAGE>
-9-
(aj) "CREDIT FACILITY DOCUMENTS" means this Agreement, the Subsidiary
Guarantees, the Security Documents, the Guarantors' Consent and
Acknowledgement, and all other documents to be executed and
delivered to the Lenders by the Group Entities or any of them
pursuant to this Agreement;
(ak) "DEBENTURE/SECURITY AGREEMENTS" means debenture/security
agreements in the principal amount of U.S.$60,000,000 each,
executed by each of the Group Entities in a form satisfactory to
the Lenders, acting reasonably, granting to the Lenders a first
financial charge on all real property of each of the Group
Entities and a security interest in all personal property of each
of the Group Entities ranking in priority to any other security
interest (other than Permitted Liens) in such personal property;
(al) "DEBT SERVICE" means, for any particular period, an amount
determined as follows:
(i) Total Interest for that period;
plus
(ii) scheduled principal payments by the Borrowers in respect of
the Credit Facilities for that period;
plus
(iii) without duplication, interest and scheduled principal
payments payable by SSWG and its Subsidiaries in respect of
other Indebtedness for that period, including without
limitation the Senior Subordinated Notes and any Vendor
Debt, provided that, for each of the fiscal quarters ended
December 31, 1997, March 31, 1998, June 30, 1998 and
September 30, 1998, no scheduled principal payments in
respect of other Indebtedness shall be included for the
period prior to January 1, 1998;
(am) "DEFAULT" means an event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default;
(an) "DISPOSITIONS" has the meaning ascribed to that term in Section
9.01(f);
(ao) "DRAFT" means, at any time, a blank bill of exchange drawn by a
Borrower on TD Bank in Canadian Dollars and bearing such
distinguishing letters and numbers as TD Bank may determine, but
which has not been completed or accepted by TD Bank;
(ap) "DRAWING" means the creation of Bankers' Acceptances by TD Bank in
accordance with the provisions of this Agreement;
<PAGE>
-10-
(aq) "DRAWING DATE" means any Business Day fixed in accordance with the
provisions of this Agreement for a Drawing;
(ar) "ENVIRONMENTAL LAWS" means any Laws relating, in whole or in part,
to the protection and enhancement of the environment, public
health, or transportation of dangerous goods;
(as) "EQUIVALENT AMOUNT" means, on any particular date, the amount of
U.S. Dollars into which an amount of Canadian Dollars or Sterling
may be converted, the amount of Canadian Dollars into which an
amount of U.S. Dollars or Sterling may be converted, or the amount
of Sterling into which an amount of Canadian Dollars or U.S.
Dollars may be converted, in each case determined on the basis of
the applicable Spot Buying Rates on the date of determination;
provided that if the date of determination is not a Business Day,
the applicable Spot Buying Rates shall be the Spot Buying Rates
quoted for the immediately preceding Business Day;
(at) "EVENT OF DEFAULT" means any of the events specified in Section
12.01;
(au) "EXISTING BANKERS TRUST SWAP AGREEMENT" means the ISDA Master
Agreement dated as of November 18, 1997 between SSWG and Bankers
Trust Company;
(av) "FACE AMOUNT" means, in respect of:
(i) a Bankers' Acceptance, the amount payable to the holder
thereof on its maturity; and
(ii) a Letter of Credit or Guarantee Letter, the maximum amount
payable to the Beneficiary;
(aw) "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the
Lenders from three federal funds brokers of recognized standing
selected by them;
(ax) "GAAP" means, in relation to any person at any time, accounting
principles generally accepted in the United States of America as
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial
Accounting Standards Board, or in such other statements by such
other entities as may be approved by a significant segment of the
accounting profession in the United States of America, applied on
a basis consistent with the most recent audited financial
statements of such person and its consolidated Subsidiaries
<PAGE>
-11-
(except for changes accepted without qualification in an auditor's
report by such person's independent auditors and shown in such
statements);
(ay) "GUARANTORS' CONSENT AND ACKNOWLEDGEMENT" means a consent and
acknowledgement regarding the Subsidiary Guarantees and the
Security Documents executed by each of the Group Entities other
than the Borrowers in favour of the Lenders, in a form
satisfactory to the Lenders, acting reasonably;
(az) "GENERAL ASSIGNMENTS OF BOOK DEBTS" means general assignments of
book debts, or other similar security agreements in any
jurisdiction other than Canada, executed by each of the Group
Entities in favour of the Lenders, in a form satisfactory to the
Lenders, acting reasonably, ranking in priority to any other
security interest in book debts or accounts of such Group Entity;
(ba) "GOVERNMENTAL BODY" means any government (including without
limitation any federal, provincial, state, municipal or local
government) or political subdivision or any agency, authority,
bureau, central bank, monetary authority, commission, department
or instrumentality thereof, or any court or tribunal, whether
foreign or domestic;
(bb) "GROUP ENTITIES" means, collectively, the Borrowers, Canadian
Springs Water Company Limited, Water at Work Limited, Natural
Water Limited, Krystal Fountain Water Co. Limited, Crystal Spring
Acquisition, Inc. and Cullyspring Water Co., Inc. and any
additional Wholly-Owned Subsidiaries acquired by the Borrowers
after the date of this Agreement, and "GROUP ENTITY" means any one
of them;
(bc) "GUARANTEE" or "GUARANTEED", as applied to an obligation, include:
(i) a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of
business), direct or indirect, in any manner, of any part
or all of such obligation; and
(ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the
payment or performance (or payment of damages in the event
of non-performance) of any part or all of such obligation;
(bd) "GUARANTEE LETTERS" means letters of guarantee issued by TD Bank
pursuant to Section 3.11;
(be) "GUARANTEEING BORROWER" has the meaning ascribed to that term in
Article 10;
(bf) "HAZARDOUS MATERIALS" means any substance declared to be hazardous
or toxic under any Law now or hereafter enacted or promulgated by
any Governmental Body having jurisdiction over the Group Entities
or their properties or assets;
<PAGE>
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(bg) "INDEBTEDNESS" of any person means, without duplication and
without regard to any interest component with respect thereto
(whether actual or imputed) that is not due and payable:
(i) all overdrafts in accounts with banks or other similar
institutions and all obligations represented by notes
payable and drafts accepted representing extensions of
credit, including in respect of such obligation issued at a
discount from par, as at any date of determination, any
amount reasonably regarded as the amortized discount or
accrued interest for any such obligation for the 12 month
period ended on such date of determination;
(ii) all obligations of such person (whether or not for borrowed
money) that are evidenced by bonds, debentures, notes or
other similar instruments or that, whether or not so
evidenced, would be considered indebtedness in respect of
borrowed money in accordance with GAAP, including in
respect of any such obligation issued at a discount from
par, as at any date of determination, any amount reasonably
regarded as the amortized discount or accrued interest for
any such obligation for the 12 month period ended on such
date of determination;
(iii) all Capital Lease Obligations of such person;
(iv) all obligations in respect of which interest charges are
customarily paid by such person;
(v) all obligations of such person for borrowed money which are
convertible into shares of stock or other equity interests
of such person (whether at the option of such person or of
the holder), until any such conversion is actually made;
(vi) all shares of stock or other equity interests of such
person that are required to be redeemed or repurchased by
such person at the option of the holder thereof, whether
upon the happening of any event or contingency or
otherwise;
(vii) all obligations of such person for the deferred purchase
price of property or services acquired by such person;
(viii) all obligations for borrowed money secured by any Lien upon
or in any property owned by such person whether or not such
person has assumed or become liable for the payment of such
obligations for borrowed money;
(ix) all obligations of such person in respect of letters of
credit;
(x) all obligations of such person under Treasury Contracts;
and
<PAGE>
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(xi) all obligations of the type described in any of clauses (i)
through (x) above that are guaranteed, directly or
indirectly, or endorsed (otherwise than for collection or
deposit in the ordinary course of business) or discounted
with recourse by such person;
provided that in determining Indebtedness of each Group Entity the
following items shall be excluded:
(xii) trade accounts payable;
(xiii) accrued liabilities which would be classified as current
liabilities in accordance with GAAP (other than
indebtedness for borrowed money) and which have been
incurred in the ordinary course of business;
(xiv) unearned revenues;
(xv) current and deferred income taxes;
(xvi) accruals for pension obligations;
(xvii) minority interests;
(xviii) indebtedness of any Group Entity to any other Group
Entity; and
(xix) the Out-of-the-Money Mark-to-Market Amount in respect of
the Existing Bankers Trust Swap Agreement, to the extent
only that such Out-of-the-Money Mark-to-Market Amount is
secured, as permitted under this Agreement, by indebtedness
of any Group Entity which otherwise constitutes
Indebtedness as determined in accordance with the
foregoing;
(bh) "INTEREST PERIOD" means, for each U.S. Libor Advance and each
Sterling Libor Advance, a period commencing:
(i) in the case of the initial Interest Period for such
Advance, on the date of such Advance; and
(ii) in the case of any subsequent Interest Period for such
Advance, on the last day of the immediately preceding
Interest Period;
and ending, in either case, on the last day of the period as
selected by a Borrower pursuant to this Agreement;
(bi) "INVESTMENT" means any investment (in cash or by delivery of other
property) by any Group Entity made directly or indirectly:
<PAGE>
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(i) in any other person by stock purchase, capital
contribution, loan or advance or other credit extension or
by purchase of property from such person subject to an
understanding to resell such property to such person or
otherwise;
(ii) in any property purchased, leased pursuant to a lease which
would constitute a capital lease under GAAP, or otherwise
acquired by any Group Entity;
excluding in any case routine purchases of property to be used or
consumed in the ordinary course of business;
(bj) "JUDGMENT CURRENCY" means the currency in which a court of
competent jurisdiction may render judgment in connection with any
litigation relating to the repayment of Outstandings under this
Agreement;
(bk) "LAW" means any law (including common law and equity),
constitution, statute, order, treaty, regulation or rule of any
Governmental Body;
(bl) "LENDERS" means, collectively, TD Bank, TDUS and TDUK and their
respective successors and assigns, and "LENDER" means any one of
them;
(bm) "LETTERS OF CREDIT" means letters of credit issued by TD Bank
pursuant to Section 3.11;
(bn) "LIEN" means, with respect to any person, any mortgage, lien,
pledge, adverse claim, charge, security interest or other
encumbrance, or any interest or title of any vendor, lessor,
lender or other secured party to or of such person under any
conditional sale or other title retention agreement or capital
lease, upon or with respect to any property or asset of such
person, or the signing or filing of a financing statement that
names such person as debtor, or the signing of any security
agreement authorizing any other person as the secured party to
file any financing statement;
(bo) "MANDATORY LIQUID ASSET COST" means the applicable percentage (if
any) calculated in accordance with Appendix 1 to be included in
Sterling Libor;
(bp) "MARGIN" means the applicable percentage (if any) set out in
Appendix 2 to be added to the Canadian Prime Rate, the U.S. Base
Rate, the U.S. Prime Rate, U.S. Libor, Sterling Libor or the
Alternate Sterling Rate to determine the interest rate payable on
Canadian Prime Rate Advances, U.S. Base Rate Advances, U.S. Prime
Rate Advances, U.S. Libor Advances, Sterling Libor Advances or
Alternate Sterling Rate Advances, respectively;
(bq) "MATERIAL ADVERSE EFFECT" means:
<PAGE>
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(i) a material adverse effect on the financial condition,
business or prospects of the Group Entities taken as a
whole;
(ii) any effect on the ability of the Borrowers to perform their
respective obligations under this Agreement; or
(iii) any effect on the validity or enforceability of this
Agreement, any Subsidiary Guarantee or any of the Security
Documents;
(br) "MATURITY DATES" means, collectively, the Operating Maturity Date,
the Acquisition Maturity Date and the Term Maturity Date, and
"MATURITY DATE" means any one of them;
(bs) "NON-RENEWAL DATE" has the meaning ascribed to that term in
Section 2.07(d);
(bt) "NON-RESIDENT OF CANADA" has the meaning assigned to the
expression "non-resident" in the INCOME TAX ACT (Canada);
(bu) "OPERATING COMMITMENT" means U.S.$15,000,000, subject to any
reduction under any provision of this Agreement;
(bv) "OPERATING FACILITY" means the credit facility to be made
available to the Borrowers hereunder as set out in Section
2.01(a);
(bw) "OPERATING MATURITY DATE" means April 30, 2000, subject to any
extension under any provision of this Agreement;
(bx) "ORIGINAL CURRENCY" means the currency in respect of which any
Outstandings are owed by the Borrowers to the Lenders in
accordance with the provisions of this Agreement;
(by) "OUT-OF-THE-MONEY MARK-TO-MARKET AMOUNT" means at any particular
time in respect of a Treasury Contract, the amount, if any, by
which the value of such Treasury Contract, calculated based upon
the interest rate at which such Treasury Contract was booked,
exceeds the value of such Treasury Contract calculated based upon
the then prevailing applicable market interest rate;
(bz) "OUTSTANDINGS" means, with respect to any Credit Facility on any
day, an amount equal to:
(i) the aggregate principal amount of all Advances under such
Credit Facility;
(ii) the aggregate Face Amount of all outstanding Bankers'
Acceptances under such Credit Facility; and
<PAGE>
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(iii) in the case of the Operating Facility, the aggregate Face
Amount of all issued Letters of Credit and Guarantee
Letters;
(ca) "PERMITTED CAPITAL EXPENDITURES" means, for any fiscal year of
SSWG, an amount determined as follows:
(i) U.S.$5,000,000;
plus
(ii) 4% of the aggregate purchase price of all Acquired
Companies acquired by all Group Entities after January 1,
1999;
plus
(iii) U.S.$400 for each new customer acquired by any Group Entity
in such fiscal year;
plus
(iv) the lesser of:
(1) U.S.$2,000,000; and
(2) the amount by which the Permitted Capital
Expenditures for the previous fiscal year exceeded
the Actual Capital Expenditures for such previous
fiscal year;
(cb) "PERMITTED LIENS" means with respect to any Group Entity:
(i) carriers', warehousemen's, builders' and mechanics' and
other like Liens arising in the ordinary course of business
by operation of law and other Liens resulting from
judgments or awards the time for the appeal or petition for
rehearing of which shall not have expired or in respect of
which such Group Entity shall 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 obtained;
(ii) Liens or trusts for taxes, assessments and other
governmental charges either not yet due and payable or, to
the extent nonpayment thereof shall be permitted by Section
8.01(d), in respect of which enforcement proceedings shall
have been effectively stayed;
(iii) pledges or deposits made under workers' compensation laws
or similar legislation or good faith deposits or bonds or
similar instruments to secure the performance of bids,
tenders, leases, contracts (other than for the
<PAGE>
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payment of Indebtedness) or expropriation proceedings, or
deposits to secure surety and appeal bonds or deposits as
security for contested taxes or export or import duties,
levies, charges or surcharges;
(iv) the right reserved to or vested in any Governmental Body by
the terms of any lease, franchise, tenure, contract, grant
or permit acquired by the Group Entities, or by any
statutory provisions, to terminate any such lease, license,
franchise, tenure, contract, grant or permit (provided that
such right is not then being exercised), or to require
annual or other periodic payments or the performance of
obligations or imposition of conditions, as a condition of
the continuance thereof;
(v) security given to a public utility or to any Governmental
Body when required by such public utility or Governmental
Body in connection with operations in the ordinary course
of business of any of the Group Entities;
(vi) the reservations, limitations, provisos and conditions, if
any, expressed in any grants from the Crown in the right of
Canada or in the right of any Province or Territory
thereof;
(vii) minor survey exceptions, minor encumbrances, leases, rights
or options to repurchase, restrictions, easements or
reservations of or rights of others for rights of way,
sewers, electric lines, telegraph and telephone lines and
other similar purposes, title defects or irregularities or
zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of business
or the ownership of properties which were not incurred in
connection with the incurrence of Indebtedness or other
extensions of credit and which do not in the aggregate
materially detract from the value of such properties or
materially impair their use in the operation of the
business of the Group Entities;
(viii) Liens constituted by capital leases or finance leases which
create Capital Lease Obligations;
(ix) Liens on vehicles or office or computer equipment in
existence on December 31, 1997 as reflected in the audited
financial statements of SSWG;
(x) Liens (other than Purchase Money Mortgages) incurred in the
ordinary course of business securing obligations which are
not yet due and payable;
(xi) any Lien renewing, extending or refunding any Lien
permitted by paragraphs (i) through (x); provided that
<PAGE>
-18-
(1) the principal amount of Indebtedness secured by such
Lien immediately prior to such extension, renewal or
refunding is not increased or the maturity thereof
reduced;
(2) such Lien is not extended to any other property; and
(3) immediately after such extension, renewal or
refunding no Default or Event of Default would
exist;
(xii) Liens in the amount of up to U.S.$4,000,000 to secure the
Out-of-the-Money Mark-to-Market Amount in respect of the
Existing Bankers Trust Swap Agreement, provided that at no
time shall the amount of such Liens in the form of cash
collateral security total more than U.S.$2,000,000, and
that any other such Liens shall be in the form of Letters
of Credit or Guarantee Letters issued by TD Bank and
payable to Bankers Trust Company as Beneficiary; and
(xiii) Liens created by or contained in the Security Documents;
(cc) "PERSON" includes an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity, or a
foreign state or political subdivision thereof or any agency of
such state or subdivision;
(cd) "POWER OF ATTORNEY" has the meaning ascribed to that term in
Section 4.03;
(ce) "PURCHASE MONEY MORTGAGE" means:
(i) a Lien existing upon assets at the time of their
acquisition by SSWG or any of its Subsidiaries, or at the
time of acquisition by SSWG or any of its Subsidiaries of
any business entity then owning such assets, whether or not
such existing Lien was given to secure the purchase price
of the assets which are subject to such Lien; and
(ii) a Lien created by SSWG or any of its Subsidiaries to secure
all or any part of the unpaid purchase price, or to secure
Indebtedness incurred solely for the purpose of financing
all or any part of the purchase price or cost of
construction, of property or any improvement to property
acquired or constructed by SSWG or such Subsidiary;
(cf) "QUARTERLY FINANCIAL CERTIFICATE" means the certificate of the
chief financial officer or vice-president, finance of SSWG
required to be delivered to the Lenders following each fiscal
quarter of SSWG pursuant to Section 7.01(a)(vii), substantially in
the form attached as Schedule 6;
(cg) "RESPONSIBLE OFFICER" means with respect to each of the Borrowers,
any Authorized Officer of such Borrower, any vice president,
treasurer or controller
<PAGE>
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of such Borrower, and any other officer of such Borrower
responsible for monitoring compliance with, or otherwise
administering, this Agreement;
(ch) "SECURITY DOCUMENTS" means, collectively, the Debenture/Security
Agreements and the General Assignments of Book Debts;
(ci) "SENIOR DEBT" means, at any particular time, for SSWG and its
Subsidiaries:
(i) all outstanding Indebtedness under the Credit Facilities;
(ii) all outstanding Capital Lease Obligations;
(iii) all outstanding secured Vendor Debt;
(iv) the Out-of-the-Money Mark-to-Market Amount in respect of
the Existing Bankers Trust Swap Agreement, less the amount
of such Out-of-the-Money Mark-to-Market Amount that is
secured, as permitted under this Agreement, by other
Indebtedness of any Group Entity; and
(v) without duplication, all other outstanding Indebtedness
secured by Permitted Liens;
but, for greater certainty, excludes Purchase Money Mortgages;
(cj) "SENIOR DEBT PLUS CONTINGENCY" means, at any particular time, for
SSWG and its Subsidiaries:
(i) all outstanding Indebtedness under the Credit Facilities;
(ii) all outstanding Capital Lease Obligations;
(iii) all outstanding secured Vendor Debt;
(iv) 30.5% of the notional amount of all Indebtedness under
Treasury Contracts; and
(v) without duplication, all other outstanding Indebtedness
secured by Permitted Liens;
(ck) "SENIOR DEBT TO ADJUSTED CONSOLIDATED EBITDA RATIO" means the
ratio of Senior Debt as at each fiscal quarter end to Adjusted
Consolidated EBITDA for the four fiscal quarters then ended;
(cl) "SENIOR DEBT PLUS CONTINGENCY TO ADJUSTED CONSOLIDATED EBITDA
RATIO" means the ratio of Senior Debt plus Contingency as at each
fiscal quarter end to Adjusted Consolidated EBITDA for the four
fiscal quarters then ended;
<PAGE>
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(cm) "SENIOR INTEREST" means all interest, Stamping Fees and other fees
payable by the Borrowers with respect to the Credit Facilities
pursuant to this Agreement other than the arrangement fee payable
pursuant to Section 2.21;
(cn) "SENIOR SUBORDINATED NOTES" means all notes of SSWG now or at any
time hereafter issued under the Senior Subordinated Note
Indenture;
(co) "SENIOR SUBORDINATED NOTE INDENTURE" means the note indenture
dated November 19, 1997 among SSWG, certain other Group Entities
as guarantors, and Bankers Trust Company as trustee, providing for
the issuance of unsecured subordinated notes of SSWG, as
supplemented by the First Supplemental Indenture dated as of
February 1, 1998, by the Second Supplemental Indenture dated as of
March 1, 1998 and by the Third Supplemental Indenture dated as of
February 2, 1999;
(cp) "SPOT BUYING RATES" means the Bank of Canada noon spot rates for
Canadian Dollars against U.S. Dollars and Sterling, U.S. Dollars
against Canadian Dollars and Sterling against Canadian Dollars (as
quoted or published from time to time by the Bank of Canada), or
any combination thereof, as the case may be, on the relevant date
of determination;
(cq) "SSUK" means Nature Springs Water Company Limited (formerly called
Sparkling Spring Water UK Limited), a company incorporated under
the laws of England and Wales with registered number 2899075;
(cr) "SSW" means Sparkling Spring Water Limited, a corporation
incorporated under the laws of the Province of Nova Scotia;
(cs) "SSWG" means Sparkling Spring Water Group Limited, a corporation
incorporated under the laws of the Province of Nova Scotia;
(ct) "STAMPING FEE" has the meaning ascribed to that term in Section
4.05;
(cu) "STERLING" and "U.K.(L)" each mean lawful money of the United
Kingdom;
(cv) "STERLING LIBOR" means, with respect to any Sterling Libor Advance
for any Interest Period, the rate of interest per annum as
determined by TDUK to be the arithmetic mean (rounded upwards, if
necessary, to the nearest four decimal places) of the offered
quotations in Sterling and for the Interest Period which appear on
the display designated as page "LIBP" on the Reuter Monitor Money
Rates Service (or such other displays, pages or service as may
replace those displays, pages or service, as the case may be, or
such system for the purpose of displaying London interbank offered
rates of leading banks as there may be from time to time) as at
11:00 a.m. (London time) two Business Days before the first day of
such Interest Period, plus the applicable Mandatory Liquid Asset
Cost;
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(cw) "STERLING LIBOR ADVANCES" means Advances on which interest is
determined by reference to Sterling Libor;
(cx) "SUBSIDIARY" means, with respect to any corporation, any other
corporation of which or in which such corporation (alone or with
its Subsidiaries) owns directly or indirectly more than 50% of the
combined voting power of all classes of Voting Stock;
(cy) "SUBSIDIARY GUARANTEE" means a guarantee of each of the
Wholly-Owned Subsidiaries other than the Borrowers in a form
satisfactory to the Lenders, acting reasonably;
(cz) "SWUS" means Spring Water, Inc., a corporation incorporated under
the laws of the State of Delaware;
(da) "TARGET COMPANY" means a company which, or assets of which, a
Borrower proposes to acquire by means of, in whole or in part, a
Borrowing under the Acquisition Facility;
(db) "TAXES" means any and all present or future taxes (including
without limitation all stamp, documentary, excise or property
taxes), levies, imposts, deductions, charges or withholdings and
liabilities with respect thereto;
(dc) "TD BANK" means The Toronto-Dominion Bank, its successors and
assigns;
(dd) "TDUK" means the London Branch of the TD Bank;
(de) "TDUS" means Toronto Dominion (Texas), Inc., its successors and
assigns;
(df) "TERM COMMITMENT" means U.S.$10,000,000, subject to any reduction
under any provision of this Agreement;
(dg) "TERM FACILITY" means the credit facility to be made available to
SSWG hereunder as set out in Section 2.01(c);
(dh) "TERM MATURITY DATE" means October 31, 2004;
(di) "THIS AGREEMENT", "herein", "hereof", "hereto" and "hereunder" and
similar expressions mean and refer to this Agreement as
supplemented or amended and not to any particular Article,
Section, Schedule or other portion hereof, and the expressions
"Article", "Section" and "Schedule" followed by a number mean and
refer to the specified Article, Section or Schedule of this
Agreement;
(dj) "TOTAL DEBT" means, at any particular time, all Indebtedness of
SSWG and its Subsidiaries on a consolidated basis;
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(dk) "TOTAL DEBT TO ADJUSTED CONSOLIDATED EBITDA RATIO" means the ratio
of Total Debt as at each fiscal quarter end to Adjusted
Consolidated EBITDA for the four fiscal quarters then ended;
(dl) "TOTAL INTEREST" means for any particular period, all amounts
payable by SSWG and its Subsidiaries as interest, fees and
commissions in respect of Indebtedness for such period, net of
interest income during the period and net of applicable set-up
fees, all in accordance with GAAP, including without limitation:
(i) interest, fees and commissions payable by the Borrowers
with respect to the Credit Facilities pursuant to this
Agreement, but excluding the arrangement fee payable
pursuant to Section 2.21 and amortized interest,
arrangement fees, costs and expenses incurred under this
Agreement;
(ii) interest, fees and commissions payable by SSWG in respect
of the Senior Subordinated Notes pursuant to the Senior
Subordinated Note Indenture, but excluding amortized
interest, fees, costs and expenses incurred under the
Senior Subordinated Note Indenture; and
(iii) imputed interest in respect of Capital Lease Obligations of
SSWG and its Subsidiaries;
(dm) "TREASURY CONTRACTS" means any agreement entered into by the
Borrowers or any other Group Entity to control, fix or regulate
currency exchange fluctuations or the rate or rates of interest
payable on indebtedness, and includes interest rate swaps,
interest rate agreements, caps, collars, futures or hedging
agreements and other like money market facilities;
(dn) "TREASURY CONTRACT BREAKAGE COSTS" means the aggregate of all
costs and liabilities incurred by the Lenders as a result of the
termination or cancellation of any Treasury Contract or Treasury
Contracts;
(do) "U.S. BASE RATE" on any day means the greater of:
(i) the rate of interest per annum (based on a year of 365
days) established from time to time by TD Bank as the
reference rate of interest then in effect for the
determination of interest rates that TD Bank charges to
customers on commercial loans in U.S. Dollars made by TD
Bank in Canada and which it refers to as its "base rate";
and
(ii) the Federal Funds Effective Rate in effect on that day,
multiplied by the fraction which has as numerator 365 and
as denominator 360, plus 0.50% per annum;
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provided that each change in the U.S. Base Rate shall be effective
from and including the date such change is made without any
requirement of notification to any Borrower or any other person;
(dp) "U.S. BASE RATE ADVANCES" means Advances on which interest is
determined by reference to the U.S. Base Rate in effect from time
to time;
(dq) "U.S. DOLLARS" and "U.S.$" each mean lawful money of the United
States of America;
(dr) "U.S. LIBOR" means, with respect to any U.S. Libor Advance for any
Interest Period, the rate for deposits in U.S. Dollars for a
period comparable to such Interest Period which is quoted on the
British Bankers Association Libor Rates Telerate (Page 3750) (or
such other displays, pages or service as may replace those
displays, pages or service, as the case may be, or such system for
the purpose of displaying London interbank offered rates of
leading banks as there may be from time to time) as at 11:00 a.m.
(London time) two Business Days before the first day of such
Interest Period;
(ds) "U.S. LIBOR ADVANCES" means Advances on which interest is
determined by reference to U.S. Libor;
(dt) "U.S. PRIME RATE" on any day means the greater of:
(i) the rate of interest per annum then in effect established
and declared by TDUS to the New York Federal Reserve as its
New York prime rate on U.S. Dollar loans; and
(ii) the Federal Funds Effective Rate in effect on that day,
plus 0.50% per annum;
provided that each change in the U.S. Prime Rate shall be
effective from and including the date such change is made without
any requirement of notification to any Borrower or any other
person;
(du) "U.S. PRIME RATE ADVANCES" means Advances on which interest is
determined by reference to the U.S. Prime Rate in effect from time
to time;
(dv) "VENDOR DEBT" means all Indebtedness of SSWG and its Subsidiaries
to any person from whom any Group Entity has acquired, prior to,
on, or after the date of this Agreement, an Acquired Company;
(dw) "VOTING STOCK" of any designated corporation means any and all
shares of capital stock of such corporation of any class the
shareholders of which have the right (not depending upon the
happening of a contingency) to elect the members of the board of
directors of such corporation; and
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(dx) "WHOLLY-OWNED SUBSIDIARY" means any Subsidiary of any Borrower
which is wholly-owned, directly or indirectly, by such Borrower.
1.02 COMPUTATION OF TIME PERIODS. Where, in this Agreement, a notice must be
given a number of days prior to a specified action, the day on which such notice
is given shall be included and the day of the specified action shall be
excluded.
1.03 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP.
1.04 INCORPORATION OF APPENDICES AND SCHEDULES. The following Appendices and
Schedules to this Agreement shall, for all purposes hereof, form an integral
part of this Agreement:
Appendix 1 - Mandatory Liquid Asset Cost
Appendix 2 - Interest Rates and Fees
Schedule 1 - Borrowing Notice - Canadian Prime Rate Advances, U.S.
Base Rate Advances, Bankers' Acceptances and
(Term Facility) U.S. Libor Advances
Schedule 2 - Borrowing Notice - U.S. Prime Rate Advances and
(Operating Facility and Acquisition Facility)
U.S. Libor Advances
Schedule 3 - Borrowing Notice - Sterling Libor Advances
Schedule 4 - List of Wholly-Owned Subsidiaries
Schedule 5 - Bankers' Acceptance Power of Attorney
Schedule 6 - Quarterly Financial Certificate
1.05 SINGULAR, PLURAL, ETC. As used herein, each gender shall include all
genders, and the singular shall include the plural and the plural the singular
as the context shall require.
ARTICLE 2
CREDIT FACILITIES
2.01 CREDIT FACILITIES. The Credit Facilities to be made available to the
Borrowers hereunder are as follows:
(a) a revolving operating facility (the "Operating Facility") in the
maximum principal amount of U.S.$15,000,000 (or the Equivalent
Amount in Canadian Dollars or Sterling), to be made available to
the Borrowers to finance their working capital and operating
requirements from time to time, with all Outstandings under the
Original Credit Agreement as at the date of this Agreement being
continued as Outstandings under the Operating Facility;
(b) a revolving reducing term facility (the "Acquisition Facility") in
the maximum principal amount of U.S.$5,000,000 (or the Equivalent
Amount in Canadian
<PAGE>
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Dollars or Sterling), to be made available to the Borrowers for
the acquisition of one or more Target Companies; and
(c) a non-revolving reducing term facility (the "Term Facility") in
the maximum principal amount of U.S.$10,000,000 (or the Equivalent
Amount in Canadian Dollars), to be made available to SSWG for the
purchase of Senior Subordinated Notes.
2.02 AVAILABILITY. Subject to Section 2.03 and the provisions of Article 5:
(a) the Operating Facility shall be available for drawdown commencing
on the Closing Date, or prior thereto at the Lenders' sole
discretion, and terminating on the Operating Maturity Date;
(b) the Acquisition Facility shall be available for drawdown
commencing on the Closing Date, or prior thereto at the Lenders'
sole discretion, and terminating on the day prior to the
Acquisition Maturity Date; and
(c) the Term Facility shall be available for drawdown commencing on
the Closing Date, or prior thereto at the Lenders' sole
discretion, and terminating on October 31, 1999, with the Term
Commitment being permanently reduced on October 31, 1999 to the
amount of Outstandings under the Term Facility as at October 31,
1999.
2.03 TERMINATION OF AVAILABILITY. If the Closing Date does not occur on or
before July 31, 1999, the Credit Facilities shall no longer be available and,
subject to the obligations of the Borrowers under Section 13.05 (which shall
continue), this Agreement shall terminate.
2.04 REVOLVING NATURE OF OPERATING FACILITY AND ACQUISITION FACILITY. The
Operating Facility and the Acquisition Facility shall each revolve and any
amounts borrowed thereunder and repaid may be borrowed again, provided that any
such reborrowing would not result in the amount of the Outstandings under the
Operating Facility or the Acquisition Facility exceeding the then applicable
Operating Commitment or Acquisition Commitment, as the case may be.
2.05 NON-REVOLVING NATURE OF TERM FACILITY. The Term Facility shall not
revolve, and any amount repaid or prepaid thereunder may not be borrowed again.
Any amount repaid or prepaid in respect of the Term Facility shall reduce the
Term Commitment by the same amount.
2.06 BORROWING OPTIONS. Subject to the provisions of this Agreement, the
Borrowers may, at their option:
(a) utilize the Operating Facility by way of:
(i) Canadian Prime Rate Advances or U.S. Base Rate Advances
pursuant to Article 3 hereof to a maximum amount of
U.S.$15,000,000 (or the
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Equivalent Amount in Canadian Dollars), made
available by TD Bank to SSW and SSWG in Canada;
(ii) Letters of Credit or Guarantee Letters issued by TD
Bank in Canadian Dollars, U.S. Dollars or Sterling,
as requested by SSW or SSWG pursuant to Section 3.11
hereof, to a maximum aggregate Face Amount of
U.S.$7,000,000 (or the Equivalent Amount in Canadian
Dollars or Sterling) and with the aggregate Face
Amount payable to Bankers Trust Company as
Beneficiary not to exceed U.S.$4,000,000 (or the
Equivalent Amount in Canadian Dollars or Sterling)
and the aggregate Face Amount payable to all other
Beneficiaries not to exceed U.S.$3,000,000 (or the
Equivalent Amount in Canadian Dollars or Sterling);
(iii) U.S. Prime Rate Advances or U.S. Libor Advances
pursuant to Article 3 hereof to a maximum amount of
U.S.$10,000,000, to be made available by TDUS to
SWUS in the United States of America;
(iv) Sterling Libor Advances pursuant to Article 3 hereof
to a maximum amount of U.K.L5,000,000, to be
made available by TDUK to SSUK in the United
Kingdom; and
(v) Bankers' Acceptances for terms of one month to six
months (or, subject to availability, shorter or
longer terms) created by TD Bank in Canadian Dollars
as requested by SSW and SSWG pursuant to Article 4
hereof;
(b) utilize the Acquisition Facility by way of:
(i) Canadian Prime Rate Advances or U.S. Base Rate
Advances pursuant to Article 3 hereof to a maximum
amount of U.S.$5,000,000 (or the Equivalent amount
in Canadian Dollars), to be made available by TD
Bank to SSW and SSWG in Canada;
(ii) U.S. Prime Rate Advances or U.S. Libor Advances
pursuant to Article 3 hereof to a maximum amount of
U.S.$5,000,000, to be made available by TDUS to SWUS
in the United States of America;
(iii) Sterling Libor Advances pursuant to Article 3 hereof
to a maximum amount of U.K.L2,000,000, to be
made available by TDUK to SSUK in the United
Kingdom; and
(iv) Bankers' Acceptances for terms of one month to six
months (or, subject to availability, shorter or
longer terms) created by TD Bank in Canadian Dollars
as requested by SSW and SSWG pursuant to Article 4
hereof; and
(c) utilize the Term Facility by way of:
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(i) Canadian Prime Rate Advances, U.S. Base Rate Advances
or U.S. Libor Advances pursuant to Article 3 hereof, to be
made available by TD Bank to SSWG in Canada; and
(ii) Bankers' Acceptances for terms of one month to six
months (or, subject to availability, shorter or
longer terms) created by TD Bank in Canadian Dollars
as requested by SSWG pursuant to Article 4 hereof.
2.07 REPAYMENT OF CREDIT FACILITIES.
(a) All Outstandings under the Operating Facility shall be repaid in
full on the Operating Maturity Date.
(b) The Acquisition Commitment shall be permanently reduced on the
dates set out below to the following amounts:
Date Acquisition Commitment (U.S.$)
---- ------------------------------
April 30, 2000 $4,000,000
April 30, 2001 $3,000,000
April 30, 2002 $2,000,000
April 30, 2003 $1,000,000
and the Borrowers shall on such dates permanently repay the
Outstandings under the Acquisition Facility to the extent
necessary to reduce the Outstandings to an amount that is not
greater than the Acquisition Commitment (as reduced pursuant to
this paragraph (b)). All remaining Outstandings under the
Acquisition Facility shall be repaid in full on the Acquisition
Maturity Date.
(c) All Outstandings under the Term Facility shall be repaid and the
Term Commitment reduced to nil by five mandatory equal annual
repayments (subject to adjustment to reflect prepayments of the
Term Facility pursuant to Section 2.08) on each of October 31,
2000, October 31, 2001, October 31, 2002, October 31, 2003 and the
Term Maturity Date.
2.08 OPTIONAL REPAYMENTS AND PREPAYMENTS. The Borrowers may at any time repay
all or any part of the amounts outstanding under the Operating Facility and the
Acquisition Facility together with interest thereon, and SSWG may at any time
prepay in whole or in part amounts outstanding under the Term Facility, together
with interest thereon. The Term Commitment shall be permanently reduced by the
amount of any prepayment under the Term Facility pursuant to this Section 2.08.
Subject to Section 2.15, no repayment or prepayment may be made in respect of a
U.S. Libor Advance or a Sterling Libor Advance on a day other than the last day
of an Interest Period applicable to such U.S. Libor Advance or Sterling Libor
Advance, and no repayment or prepayment may be made in respect of a Bankers'
Acceptance on a date other than the maturity date of such Bankers' Acceptance.
<PAGE>
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2.09 EXTENSION OF OPERATING MATURITY DATE. The Borrowers may, by written notice
to the Lenders (an "Operating Extension Request") given not less than 60 nor
more than 90 days prior to the then prevailing Operating Maturity Date, request
that the Operating Maturity Date be extended by 364 days. Provided that the
Lenders have received the audited consolidated financial statements of SSWG for
the 12 month period ending on December 31 of the preceding year in accordance
with Section 7.01(a)(i) sufficiently in advance of the then prevailing Operating
Maturity Date, the Lenders may, in their absolute discretion, agree to extend
the Operating Maturity Date by 364 days on one or more occasions by notice given
to the Borrowers not later than the then prevailing Operating Maturity Date, in
which case the then prevailing Operating Maturity Date shall be deemed to be
extended by 364 days, without the need for any amending agreement or further
documentation to be executed.
2.10 OPTIONAL REDUCTION OF COMMITMENTS. The Borrowers may at any time on 30
days' notice to the Lenders permanently reduce the Commitment in respect of any
Credit Facility in whole or in part, and upon such reduction of such Commitment
the Borrowers shall permanently repay the Outstandings to the extent necessary
to reduce the Outstandings to an amount that is not greater than the Commitment
(as reduced pursuant to this Section 2.10).
2.11 REPAYMENT OF OUTSTANDINGS TO REFLECT COMMITMENTS. If on any date the
Outstandings under any Credit Facility exceed the then prevailing Commitment for
such Credit Facility, the Borrowers shall forthwith permanently repay such
amount as will result in the Outstandings under such Credit Facility being less
than or equal to the relevant Commitment.
2.12 GENERAL INTEREST PROVISIONS. The following provisions shall apply in
respect of interest payable under this Agreement:
(a) in the event of any dispute, disagreement or adjudication
involving or pertaining to the determination of Canadian Prime
Rate, U.S. Base Rate, U.S. Prime Rate, U.S. Libor or Sterling
Libor in effect at any time, the certificate of the Lenders or any
of them as to such rate shall be accepted, in the absence of
demonstrable error, as PRIMA FACIE evidence thereof for all
purposes of this Agreement;
(b) each determination by the Lenders of the amount of interest,
Stamping Fees or other amounts due from the Borrowers hereunder
shall, in the absence of demonstrable error or other error of
which the Borrowers shall give notice to the Lenders within a
period of 60 days from the date of entry of the relevant
information, be PRIMA FACIE evidence of the accuracy of such
determination;
(c) all interest and other amounts payable shall accrue daily, be
computed as described herein, and be payable both before and after
demand, maturity, default and judgment;
(d) to the maximum extent permitted by law, the covenant of the
Borrowers to pay interest at rates provided herein shall not merge
in any judgment relating to any obligation of the Borrowers to the
Lenders;
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(e) in no event shall any interest, fees or other amounts payable
hereunder exceed the maximum permitted by law; in the event any
such interest or fee exceeds such maximum rate, such interest or
fee shall be reduced to the maximum rate recoverable under law and
the Lenders and the Borrowers shall be deemed to have agreed to
such amount by contract;
(f) for the purposes of the INTEREST ACT (Canada):
(i) the annual rate of interest which is equivalent to the
interest rate determined by reference to U.S. Libor or the
U.S. Prime Rate shall be the determined rate multiplied by
a fraction, the numerator of which is the total number of
days in such year and the denominator of which is 360;
(ii) the annual rate of interest which is equivalent to the
interest rate determined by reference to Sterling Libor
shall be the determined rate multiplied by a fraction, the
numerator of which is the total number of days in such year
and the denominator of which is 365;
(iii) unless otherwise stated, the rates of interest specified in
this Agreement are to be calculated on the basis of a year
of 365 days and the annual rate of interest which is
equivalent to the interest rate determined by reference to
such 365 day period hereunder shall be the determined rate
multiplied by a fraction, the numerator of which is the
total number of days in such year and the denominator of
which is 365;
(iv) the principle of deemed reinvestment of interest shall not
apply to any interest calculation under this Agreement; and
(v) the rates of interest specified in this Agreement are
intended to be nominal rates and not effective rates.
2.13 BUSINESS DAY PAYMENTS. Except as otherwise provided herein in the case of
a U.S. Libor Advance or a Sterling Libor Advance, whenever any payment hereunder
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, as the case may
be.
2.14 INTEREST ON OVERDUE AMOUNTS. If all or a portion of the principal amount
of any Advance, any interest payable thereon, any Stamping Fee, Commitment Fee
or other fee or any other amount payable by the Borrowers hereunder shall not be
paid when due (whether at stated maturity, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum equal to the Canadian
Prime Rate plus 2.25% in the case of any overdue amount in Canadian Dollars, the
U.S. Base Rate plus 2.25% in the case of any overdue amount in U.S. Dollars
under the Term Facility, the U.S. Prime Rate plus 2.25% in the case of any
overdue amount in U.S. Dollars under the Operating Facility or the Acquisition
Facility, and the Alternate Sterling Rate plus 3.25% in the case of any overdue
amount in Sterling. Interest on
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any such overdue amount shall be computed from and including the date the
Lenders or any of them give notice to the Borrowers that such amount is overdue
to the date such amount is paid, and shall be compounded monthly and be paid on
demand both before and after maturity, default and judgment.
2.15 BREAKAGE COSTS. The Borrowers shall promptly pay to the Lenders any
amounts required to compensate the Lenders for any loss, cost of redeploying
funds or other cost or expense suffered or incurred by the Lenders as a result
of:
(a) any payment being made by the Borrowers in respect of a U.S. Libor
Advance, Sterling Libor Advance or a Bankers' Acceptance (due to
acceleration of the maturity of the Advance hereunder or a
mandatory or optional prepayment of principal or for any other
reason) on a day other than the last day of an Interest Period or
a maturity date applicable thereto, respectively;
(b) the Borrowers' failure to give notice in the manner and at the
times required hereunder;
(c) the failure of the Borrowers to accept an Advance or make a
Drawing after delivery of a Borrowing Notice in the manner and at
the time specified in such Borrowing Notice; or
(d) the failure of the Borrowers to make a payment or a prepayment to
the Lenders in the manner and at the time specified in a notice
given to the Lenders.
A certificate of the Lenders or any of them as to the amount necessary so to
compensate the Lenders shall be PRIMA FACIE evidence, absent demonstrable error,
of the amount due from the Borrowers to the Lenders.
2.16 APPLICATION OF PAYMENTS. So long as no Event of Default has occurred and is
continuing, all amounts received by the Lenders from or on behalf of the
Borrowers and not previously applied in another manner in accordance with this
Agreement shall be applied by the Lenders as follows:
(a) first, to fulfil the Borrowers' obligation to pay accrued and
unpaid interest due and owing on the principal amount of Advances
or unpaid Stamping Fees in respect of Bankers' Acceptances;
(b) second, to fulfil the Borrowers' obligation to pay any other fees
which are due and owing, and any accrued and unpaid costs and
expenses of the Lenders in connection with any of the Credit
Facility Documents;
(c) third, to fulfil the Borrowers' obligation to pay any amounts due
and owing on account of the unpaid principal amount of Borrowings
and the Borrowers' reimbursement obligations in respect of
Bankers' Acceptances;
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(d) fourth, to fulfil any other obligation of the Borrowers under this
Agreement; and
(e) fifth, to the Borrowers or as the Borrowers or any court of
competent jurisdiction may otherwise direct.
After the occurrence of an Event of Default, unless such Event of Default is
cured or waived by the Lenders, payments received by the Lenders shall be
applied to the Borrowers' obligations as the Lenders see fit.
2.17 CONDITIONS SOLELY FOR THE BENEFIT OF THE LENDERS. All conditions to the
obligations of the Lenders to make any Accommodation under any of the Credit
Facilities are solely for the benefit of the Lenders, and no other person shall
have standing to require satisfaction of any condition and no other person shall
be deemed to be a beneficiary of any such condition, any and all of which may be
freely waived in whole or in part by the Lenders at any time.
2.18 NO WAIVER. The making of an Accommodation without fulfilment of one or
more of the conditions set forth in this Agreement shall not constitute a waiver
by the Lenders of any such condition, and the Lenders reserve the right to
require the fulfilment of each condition prior to the making of any subsequent
Accommodation.
2.19 AUTHORIZED DEBIT. The Borrowers authorize the Lenders to debit the
Borrowers' accounts with the amounts required to pay principal, interest,
Stamping Fees, Commitment Fees and other amounts required to be paid by the
Borrowers under this Agreement.
2.20 COMMITMENT FEE. SSW shall pay to TD Bank a fee (the "Commitment Fee") at
the rate of 0.50% per annum calculated on the amount of the Commitment for each
of the Credit Facilities not utilized by the Borrowers, provided that, in the
case of the Term Facility, such Commitment Fee shall be calculated and payable
only up to and including October 31, 1999. In determining the amount of each
Commitment not utilized by the Borrowers, Accommodations in Canadian Dollars and
Sterling shall be deemed to be the Equivalent Amount thereof in U.S. Dollars.
The Commitment Fee shall be paid in U.S. Dollars calculated on a daily basis on
the difference between the Commitment and the Outstandings under the relevant
Credit Facility on such date, and shall be payable quarterly in arrears to TD
Bank at the address set out in Section 13.03(b)(i) on the first Business Day
following the notification by TD Bank to SSW of the amount of such Commitment
Fee payable for the preceding fiscal quarter.
2.21 ARRANGEMENT FEE. On the Closing Date, the Borrowers shall pay to the
Lenders a non-refundable arrangement fee in respect of the Credit Facilities in
an amount separately agreed upon by the Lenders and the Borrowers.
2.22 ADJUSTMENTS TO INTEREST RATES AND FEES. Any increase or decrease in the
Margin to be added to the Canadian Prime Rate, U.S. Base Rate, U.S. Prime Rate,
U.S. Libor, Sterling Libor or Alternate Sterling Rate in respect of Canadian
Prime Rate Advances, U.S. Base Rate Advances, U.S. Prime Rate Advances, U.S.
Libor Advances, Sterling Libor Advances or Alternate Sterling Rate Advances,
respectively, and any increase or decrease in the rate of Stamping Fees, in each
case as determined in accordance with Appendix 2, shall become
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effective on or after the date (the "Adjustment Date") which is 46 days after
the end of each quarterly fiscal period in each fiscal year of SSWG in which
there is a change in the Senior Debt to Adjusted Consolidated EBITDA Ratio
giving rise to an adjustment in the applicable Margin or the Stamping Fee, as
follows:
(a) for Canadian Prime Rate Advances, U.S. Base Rate Advances, U.S.
Prime Rate Advances and Alternate Sterling Rate Advances, the
adjustment to the Margin shall become effective on the Adjustment
Date;
(b) for any U.S. Libor Advances or Sterling Libor Advances requested
on or before the Adjustment Date, the adjustment to the Margin
shall become effective on the first day of the first Interest
Period in respect of such U.S. Libor Advance or Sterling Libor
Advance, as the case may be, which commences after the Adjustment
Date;
(c) for any other U.S. Libor Advance or Sterling Libor Advance, the
adjustment to the Margin shall become effective on the Adjustment
Date; and
(d) for Bankers' Acceptances, the adjustment to the Stamping Fee shall
become effective in respect of any Draft which is accepted by TD
Bank after the Adjustment Date, and shall not apply to any Draft
which is accepted by TD Bank on or before the Adjustment Date.
ARTICLE 3
LOANS AND LETTERS OF CREDIT
3.01 ADVANCES. The Lenders agree, subject to and on the terms and conditions
hereinafter set forth, from time to time to make Canadian Prime Rate Advances,
U.S. Base Rate Advances, U.S. Prime Rate Advances, U.S. Libor Advances and
Sterling Libor Advances (or any combination thereof) under the Credit
Facilities.
3.02 MINIMUM ADVANCES.
(a) Each Canadian Prime Rate Advance shall be in an aggregate amount
of not less than:
(i) under the Acquisition Facility, Cdn.$500,000; and
(ii) under the Term Facility, Cdn.$1,000,000.
There shall be no minimum aggregate amount required for Canadian
Prime Rate Advances under the Operating Facility.
(b) Each U.S. Base Rate Advance shall be in an aggregate amount of not
less than:
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(i) under the Acquisition Facility, U.S.$500,000; and
(ii) under the Term Facility, U.S.$1,000,000.
There shall be no minimum aggregate amount required for U.S. Base
Rate Advances under the Operating Facility.
(c) Each U.S. Prime Rate Advance shall be in an aggregate amount of
not less than:
(i) under the Operating Facility and the Term Facility,
U.S.$1,000,000; and
(ii) under the Acquisition Facility, U.S.$500,000.
(d) Each U.S. Libor Advance under any Credit Facility shall be in an
aggregate amount of not less than U.S.$1,000,000 and in an
integral multiple of U.S.$100,000.
(e) Each Sterling Libor Advance under the Operating Facility or the
Acquisition Facility shall be in an aggregate amount of not less
than U.K.L1,000,000 and in an integral multiple of
U.K.L100,000.
3.03 NOTICE REQUIREMENTS FOR ADVANCES. Each Advance shall be made:
(a) in the case of Canadian Prime Rate Advances and U.S. Base Rate
Advances:
(i) under the Acquisition Facility, on at least ten Business
Days' prior written notice; and
(ii) under the Term Facility, on at least two Business Days'
prior written notice;
(b) in the case of U.S. Prime Rate Advances:
(i) under the Operating Facility, on at least one Business
Days' prior written notice; and
(ii) under the Acquisition Facility, on at least ten Business
Days' prior written notice;
(c) in the case of a U.S. Libor Advance:
(i) under the Operating Facility or the Term Facility, on at
least three Business Days' prior written notice; and
(ii) under the Acquisition Facility, on at least ten Business
Days' prior written notice; and
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(d) in the case of a Sterling Libor Advance:
(i) under the Operating Facility, on at least four Business
Days' prior written notice; and
(ii) under the Acquisition Facility, on at least ten Business
Days' prior written notice.
Notice shall be given not later than 12:00 noon (Vancouver time) by the
Borrowers by way of a Borrowing Notice, provided that, for greater certainty, no
prior written notice or Borrowing Notice shall be required from the Borrowers
for Canadian Prime Rate Advances or U.S. Base Rate Advances under the Operating
Facility.
3.04 NOTICES IRREVOCABLE. Each Borrowing Notice shall be irrevocable and
binding on the Borrowers. The Borrowers shall indemnify the Lenders against any
loss or expense (excluding loss of profit or other consequential losses)
incurred by the Lenders in reliance on a Borrowing Notice as a result of any
failure by the Borrowers to fulfil or honour the provisions of this Agreement if
the Advance, as a result of such failure, is not made on the date specified in
any Borrowing Notice.
3.05 ELECTION OF INTEREST RATES AND CURRENCIES.
(a) Each Advance shall be the Type of Advance specified in the
applicable Borrowing Notice and shall bear interest at the rate
applicable to such Type of Advance, determined in accordance with
the provisions of this Agreement, until:
(i) in the case of a U.S. Libor Advance or Sterling Libor
Advance, the end of the initial Interest Period applicable
thereto as specified in the applicable Borrowing Notice; or
(ii) in the case of a Canadian Prime Rate Advance, U.S. Base
Rate Advance or U.S. Prime Rate Advance, the date on which
such Advance is repaid in full.
(b) The Borrowers may from time to time, by delivering a Borrowing
Notice, elect to continue a U.S. Libor Advance or Sterling Libor
Advance for an additional Interest Period in each case beginning
on the last day of the then current Interest Period applicable to
such U.S. Libor Advance or Sterling Libor Advance;
(c) Each election under paragraph (b) shall be made:
(i) on at least three Business Days' prior written notice, in
the case of a U.S. Libor Advance; and
(ii) on at least four Business Days' prior written notice, in
the case of a Sterling Libor Advance;
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given not later than 12:00 p.m. (Vancouver time).
(d) Each Borrowing Notice delivered pursuant to paragraph (b) above
shall specify the duration of the additional Interest Period and
the date on which such Interest Period is to begin.
(e) Each Borrowing Notice delivered pursuant to paragraph (b) above
shall be irrevocable and binding upon the Borrowers. If the
Borrowers fail, in the manner required herein, to give to the
Lenders in respect of all or any part of a U.S. Libor Advance or a
Sterling Libor Advance:
(i) a Borrowing Notice pursuant to paragraph (b) above; or
(ii) a notice of repayment;
then any such U.S. Libor Advance, or part thereof, under the
Operating Facility or the Acquisition Facility shall become a U.S.
Prime Rate Advance, any such U.S. Libor Advance, or part thereof,
under the Term Facility shall become a U.S. Base Rate Advance, and
any such Sterling Libor Advance, or part thereof, shall become an
Alternate Sterling Rate Advance on the last day of the Interest
Period applicable thereto, and shall bear interest at the rate
otherwise applicable to such U.S. Prime Rate Advances, U.S. Base
Rate Advances or Alternate Sterling Rate Advances, respectively.
The Borrowers shall also promptly pay to the Lenders any amounts
required to compensate the Lenders for any loss, cost or expense
suffered or incurred by the Lenders as a result of the Borrowers'
failure to give to the Lenders any of the notices described in
this paragraph (e).
3.06 CIRCUMSTANCES REQUIRING CANADIAN PRIME, U.S. BASE OR U.S. PRIME RATE
PRICING.
(a) If the Lenders determine in good faith that:
(i) by reason of circumstances affecting financial markets
inside or outside Canada, deposits of U.S. Dollars and/or
Sterling are unavailable to the Lenders;
(ii) adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided in the
definition of U.S. Libor and/or Sterling Libor;
(iii) the making or continuation of any U.S. Libor Advance and/or
Sterling Libor Advance has been made impracticable by:
(1) the occurrence of a contingency which materially and
adversely affects the funding of the relevant Credit
Facility at any interest rate computed on the basis
of U.S. Libor and/or Sterling Libor;
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(2) the introduction or change in the interpretation of
any Law since the date of this Agreement;
(3) compliance by the Lenders with any guideline,
official directive or request from any central bank
or Governmental Body (whether or not having the
force of Law); or
(4) a change since the date of this Agreement in any
relevant financial market which results in U.S.
Libor and/or Sterling Libor no longer representing
the effective cost to the Lenders of deposits in
such market for a relevant Interest Period or other
applicable period; or
(iv) any introduction or change in the interpretation of any Law
since the date of this Agreement, or any compliance by the
Lenders with any guideline, official direction or request
from any central bank or Governmental Body (whether or not
having the force of Law) has made it unlawful for the
Lenders to make or maintain or to give effect to their
obligations in respect of U.S. Libor Advances and/or
Sterling Libor Advances as contemplated hereby;
then:
(v) the right of the Borrowers to select a U.S. Libor Advance
and/or Sterling Libor Advance, as the case may be, shall be
suspended;
(vi) if any affected U.S. Libor Advance or Sterling Libor
Advance is not yet outstanding, any applicable Borrowing
Notice shall be cancelled and the U.S. Libor Advance or
Sterling Libor Advance requested therein shall not be made
in that form, without affecting the right of the Borrowers
to request another Type of Advance (without any additional
notice period if the Borrowers request a Canadian Prime
Rate Advance, U.S. Base Rate Advance or a U.S. Prime Rate
Advance);
(vii) if any U.S. Libor Advance is already outstanding at any
time when the right of the Borrowers to select a U.S. Libor
Advance is suspended, it and all other U.S. Libor Advances
shall, upon ten days' notice to the Borrowers and subject
to the Borrowers having the right as permitted in this
Agreement to select Canadian Prime Rate Advances, U.S. Base
Rate Advances or U.S. Prime Rate Advances at such time,
become U.S. Prime Rate Advances, in the case of U.S. Libor
Advances under the Operating Facility or the Acquisition
Facility, and U.S. Base Rate Advances, in the case of U.S.
Libor Advances under the Term Facility, in each case on the
last day of the then current Interest Period applicable
thereto (or on such earlier date as may be required to
comply with applicable Law); and
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(viii) if any Sterling Libor Advance is already outstanding at any
time when the right of the Borrowers to select a Sterling
Libor Advance is suspended, it and all other Sterling Libor
Advances shall, upon ten days' notice to the Borrowers,
become an Alternate Sterling Rate Advance on the last day
of the then current Interest Period applicable thereto (or
on such earlier date as may be required to comply with
applicable Law), and shall forthwith be repaid by the
Borrowers and redrawn, at the election of the Borrowers, as
another Type of Advance permitted under this Agreement.
(b) The Lenders shall promptly notify the Borrowers of the suspension
of the Borrowers' right to select U.S. Libor Advances and/or
Sterling Libor Advances and of the termination of any such
suspension.
3.07 INTEREST PERIODS. Interest Periods for U.S. Libor Advances and Sterling
Libor Advances shall be the period, as requested by the Borrowers, from one to
six months or such other period as the Lenders may allow, provided that the
Lenders may at their discretion restrict the availability of any Interest
Period, acting reasonably. No Interest Period may be selected under any Credit
Facility which would end on a day after the applicable Maturity Date or, in the
reasonable opinion of the Lenders, conflict with the repayment schedule for such
Credit Facility set out in this Agreement. Whenever the last day of an Interest
Period would otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding Business
Day.
3.08 INTEREST ON ADVANCES. The Borrowers shall pay interest on the daily
unpaid principal amount of each Advance from the date of such Advance until such
principal amount shall be repaid in full, at the annual rate applicable to each
of such days which corresponds to the Canadian Prime Rate, U.S. Base Rate, U.S.
Prime Rate, U.S. Libor, Sterling Libor or the Alternate Sterling Rate, as the
case may be, at the close of business on each of such days, plus the applicable
Margin.
3.09 INTEREST PAYMENT DATES. Interest on U.S. Libor Advances and Sterling
Libor Advances shall be calculated and payable at the end of the applicable
Interest Period except where the Interest Period exceeds three months in
duration, in which case such interest shall be calculated and payable at the end
of each successive three month portion thereof (determined with reference to the
commencement of the Interest Period) and, finally, at the end of such Interest
Period. Interest on Canadian Prime Rate Advances, U.S. Base Rate Advances and
U.S. Prime Rate Advances shall be calculated on the daily balance up to and
including the last day of each month, and shall be payable by the Borrowers
monthly in arrears.
3.10 PAYMENTS.
(a) SSWG and SSW shall make each payment to be made hereunder in
respect of Canadian Prime Rate Advances, U.S. Base Rate Advances
and, in the case only of the Term Facility, in respect of U.S.
Libor Advances, to TD Bank at the address set out in Section
13.03(b)(i);
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(b) SWUS shall make each payment to be made hereunder in respect of
U.S. Prime Rate Advances and U.S. Libor Advances to TDUS at the
address set out in Section 13.03(b)(ii) or by wire transfer
according to the following instructions:
Bank of America National Trust and Savings Assoc
ABA#026009593 (BOFAUS3N)
Acct No: 6550-6-52270
Acct Name: Toronto Dominion (Texas), Inc.
Ref: Spring Water, Inc.;
(c) SSUK shall make each payment to be made hereunder in respect of
Sterling Libor Advances to TDUK at the address set out in Section
13.03(b)(iii);
in each case not later than 1:00 p.m. (local time at place of payment) on the
day when due, in same day funds.
3.11 LETTERS OF CREDIT. As part of the credit available under the Operating
Facility, each of SSW and SSWG may request that TD Bank issue one or more
Letters of Credit or Guarantee Letters, subject to the execution by SSW or SSWG,
as the case may be, of TD Bank's standard documentation then currently used in
connection with such Letters of Credit or Guarantee Letters. TD Bank shall have
the right to restrict the expiry date of any Letter of Credit or Guarantee
Letter to the then applicable Operating Maturity Date or such other date as TD
Bank may approve. SSW or SSWG, as the case may be, shall pay letter of credit
fees in respect of any such Letters of Credit or Guarantee Letters at the
applicable rate (based on the Face Amount of such Letters of Credit or Guarantee
Letters) set out in Appendix 2 and upon other terms and conditions to be
negotiated between SSW or SSWG, as the case may be, and TD Bank.
ARTICLE 4
BANKERS' ACCEPTANCES
4.01 CREATION OF BANKERS' ACCEPTANCE. TD Bank agrees, on the terms and subject
to the conditions herein set forth, to create Bankers' Acceptances under the
Credit Facilities by accepting Drafts in Canadian Dollars in accordance with the
provisions of this Agreement, provided that the only Borrowers that may present
Drafts for acceptance are SSW and SSWG.
4.02 DRAWINGS.
(a) Each Draft presented by the Borrowers for acceptance shall be in
an integral multiple of Cdn.$100,000 and shall mature and be
payable on a Business Day which occurs from one month to six
months (or such other period as TD Bank may agree) after the date
thereof, provided that TD Bank may at its discretion restrict the
availability of the term or maturity date of any Bankers'
Acceptance, acting reasonably. All Drafts presented by the
Borrowers to TD Bank for acceptance on a particular day shall
aggregate at least Cdn.$1,000,000.
<PAGE>
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(b) Each Drawing shall be made on three Business Days' prior written
notice (or, in the case of a Drawing under the Acquisition
Facility, ten Business Days' prior written notice) given not later
than 12:00 noon (Vancouver time) by the Borrowers to TD Bank at
the address set out in Section 13.03(b)(i) by way of a Borrowing
Notice.
(c) The Borrowers shall not request in a Borrowing Notice a maturity
date for a Bankers' Acceptance under any Credit Facility which
would be subsequent to the applicable Maturity Date or, in the
reasonable opinion of TD Bank, would conflict with the repayment
schedule for the relevant Credit Facility set out in this
Agreement.
(d) Each Borrowing Notice shall be irrevocable and binding on the
Borrowers. The Borrowers shall indemnify TD Bank against any loss
or expense (excluding loss of profits or other consequential
losses) incurred by TD Bank in reliance on a Borrowing Notice as a
result of any failure by the Borrowers to fulfil or honour the
provisions of this Agreement before the date specified for any
Drawing if the Drawing, as a result of such failure, is not made
on such date.
4.03 POWER OF ATTORNEY. Each of the Borrowers shall deliver to TD Bank, on or
prior to the Closing Date, a Power of Attorney substantially in the form of
Schedule 5 (the "Power of Attorney") authorizing TD Bank to draw Drafts on TD
Bank on behalf of such Borrower and to complete such Drafts in accordance with
Borrowing Notices submitted from time to time pursuant to Section 4.02.
4.04 COMPLETION AND DELIVERY OF DRAFTS. Not later than 1:00 p.m. (Vancouver
time) on an applicable Drawing Date, TD Bank will, in accordance with the
applicable Borrowing Notice:
(a) sign each Draft on behalf of the Borrower requesting such Draft
pursuant to the Power of Attorney;
(b) complete the date, amount and maturity of each Draft to be
accepted;
(c) accept such Drafts; and
(d) upon such acceptance deliver the stamped Draft to the applicable
Borrower or, in accordance with such Borrower's instructions, to a
person designated in writing by such Borrower.
TD Bank shall not be obligated to purchase or discount any Bankers' Acceptances
and the Borrowers shall be responsible for arranging the purchase or discounting
of any such Bankers' Acceptances by a money market dealer.
4.05 STAMPING FEES. The Borrowers shall pay to TD Bank at the time of each
acceptance of a Draft a Stamping Fee in each case calculated on the basis of the
number of days from and including the date of acceptance to and including the
date immediately preceding the date of
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maturity of the applicable Bankers' Acceptance, and on the basis of a year of
365 days or, in leap years, 366 days, determined in accordance with the
applicable percentage set out in Appendix 2.
4.06 NETTING. The Borrowers authorize TD Bank to retain the amount received by
TD Bank (the "Acceptance Purchase Price") from any purchaser of a Bankers'
Acceptance created by TD Bank (including proceeds received by TD Bank from any
person to whom a Bankers' Acceptance has been delivered pursuant to instructions
of the Borrowers under Section 4.04(d)) and to apply the Acceptance Purchase
Price to the reimbursement obligations of the Borrowers in respect of any
Bankers' Acceptance created by TD Bank which matures on the date of creation of
the Bankers' Acceptance in respect of which the Acceptance Purchase Price is
received. If the Acceptance Purchase Price received by TD Bank is less than the
undiscounted Face Amount of the then maturing Bankers' Acceptance, the Borrowers
shall pay the amount of such deficiency to TD Bank pursuant to Section 4.07.
4.07 PAYMENT ON MATURITY. The Borrowers shall provide payment for any Bankers'
Acceptances issued by any of them by payment to TD Bank of the Face Amount
thereof (or alternatively any deficiency in the Acceptance Purchase Price
retained by TD Bank pursuant to Section 4.06) at the address set out in Section
13.03(b)(i) by 1:00 p.m. (Vancouver time) on the maturity date of the Bankers'
Acceptance. If the Borrowers fail to provide payment to TD Bank of an amount
equal to the Face Amount of a Bankers' Acceptance on its maturity, the unpaid
amount due and payable in respect thereof shall be converted as of such date,
and without any necessity for the Borrowers to give a Borrowing Notice in
accordance with this Agreement to, and thereafter be outstanding as, a Canadian
Prime Rate Advance made by, and due and payable on such date to, TD Bank and
shall bear interest for the three day period following the maturity of such
Bankers' Acceptance at a rate equal to 115% of the Margin applicable to Canadian
Prime Rate Advances, and thereafter at the rate applicable to Canadian Prime
Rate Advances. The Borrowers shall also promptly pay to TD Bank any amounts
required to compensate TD Bank for any loss, cost or expense suffered or
incurred by TD Bank as a result of any Borrower's failure to pay any Bankers'
Acceptance when due.
4.08 CUSTODY OF DRAFTS. If requested by TD Bank, each of the Borrowers shall
execute and deliver to TD Bank a supply of Drafts executed by such Borrower. TD
Bank shall not be responsible or liable for its failure to accept a Draft as
required hereunder if the cause of the failure is, in whole or in part, due to
the failure of the Borrowers to provide such Drafts to TD Bank on a timely
basis, nor shall TD Bank be liable for any damage, loss or other claim arising
by reason of any loss or improper use of such Drafts except a loss or improper
use arising by reason of the negligence or wilful act of TD Bank. TD Bank agrees
to use its best efforts to advise the Borrowers in a timely manner when it
requires additional executed Drafts. In case any authorized signatory of any
Borrower whose signatures shall appear on the pre-signed Drafts shall cease to
have such authority before the creation of a Bankers' Acceptance with respect to
such Draft, such signature shall nevertheless be valid and sufficient for all
purposes as if such authority had remained in force at the time of such
creation. Drafts held by TD Bank need only be held in safekeeping with the same
degree of care as if they were TD Bank's property. If executed but incomplete
Drafts are delivered to TD Bank, TD Bank may complete the same on behalf of the
applicable Borrower and in accordance with its instructions following a request
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from such Borrower to accept a Draft. All Drafts will be cancelled by TD Bank
upon payment thereof.
4.09 RENEWAL OR OTHER PAYMENT OF BANKERS' ACCEPTANCE. Not later than 12:00
noon (Vancouver time) three Business Days prior to the maturity of a Bankers'
Acceptance, the Borrowers shall:
(a) request, by way of a Borrowing Notice, the issuance of further
Bankers' Acceptances in an amount sufficient, upon receipt of the
Acceptance Purchase Price by TD Bank, to pay the Face Amount of
the maturing Bankers' Acceptance; or
(b) give written notice to TD Bank that they will pay the maturing
Bankers' Acceptance.
If the Borrowers fail to give any of the notices required under this Section,
the amount due and payable in respect of such Bankers' Acceptances on the
maturity date thereof shall be converted as of such date, and thereafter be
outstanding as, a Canadian Prime Rate Advance made by and due and payable on
such date to the Lenders, and shall bear interest for the three day period
following the maturity of such Bankers' Acceptance at a rate equal to 115% of
the Margin applicable to Canadian Prime Rate Advances, and thereafter at the
rate applicable to Canadian Prime Rate Advances.
4.10 PREPAYMENTS OF BANKERS' ACCEPTANCES. If for whatever reason a Bankers'
Acceptance becomes due and payable on a date which is not its maturity date,
such Bankers' Acceptance shall be paid by the Borrowers paying the face amount
of the maturing Bankers' Acceptance to TD Bank, which amount shall be held in an
interest bearing trust account for future set-off against such maturing Bankers'
Acceptance. Interest accrued on the amount so held shall be for the account of
the Borrowers.
4.11 NO DAYS OF GRACE. The Borrowers shall not claim any days of grace from TD
Bank for the payment at maturity of any Bankers' Acceptances.
4.12 SUSPENSION OF BANKERS' ACCEPTANCE OPTION. If at any time or from time to
time there no longer exists a market for Bankers' Acceptances, or if as a result
of a change in any law, regulation or guideline (whether or not having the force
of law) it is not practical or becomes more expensive for TD Bank to create or
commit to create Bankers' Acceptances, TD Bank shall so advise the Borrowers.
After such notice, TD Bank shall not be obliged to accept Drafts of the
Borrowers presented to TD Bank pursuant to the provisions of this Agreement and
the option of the Borrowers to request the creation of Bankers' Acceptances
shall be suspended until such time as TD Bank has determined that the
circumstances giving rise to such suspension no longer exist.
ARTICLE 5
CLOSING CONDITIONS
5.01 CLOSING CONDITIONS. The Borrowers shall only be entitled to an initial
Borrowing under any Credit Facility if, on the Closing Date, the following
Closing Conditions have been fulfilled to the reasonable satisfaction of the
Lenders:
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(a) the Credit Facility Documents shall have been executed and
delivered to the Lenders by the Group Entities and all
registrations, filings and recordings necessary or desirable to
preserve, protect or perfect the enforceability of the security
created by the Security Documents shall have been completed;
(b) all of the representations and warranties of the Borrowers
contained in this Agreement are true and correct as of the Closing
Date as though made on and as of such date, and the Borrowers
shall have delivered to the Lenders a certificate executed by an
Authorized Officer of each of the Borrowers to that effect;
(c) no event has occurred and is continuing which constitutes a
Default or an Event of Default, and the Borrowers shall have
delivered to the Lenders a certificate executed by an Authorized
Officer of each of the Borrowers to that effect;
(d) the Lenders shall have received copies certified by the Secretary
or an Assistant Secretary of each of the Group Entities of the
charter documents of such Group Entity, resolutions of the board
of directors of such Group Entity approving the Credit Facility
Documents to which it is a party and all documents evidencing any
other necessary corporate action of such Group Entity with respect
to the Credit Facility Documents;
(e) the Lenders shall have received a certificate of the Secretary or
an Assistant Secretary of each of the Group Entities certifying
the names and true signatures of its officers authorized to sign
the Credit Facility Documents to which it is a party and any other
documents to be delivered by it hereunder;
(f) the Lenders shall have received a recently-dated certificate of
good standing or like certificate for each of the Group Entities
issued by appropriate government officials of the jurisdiction of
formation of such Group Entity;
(g) since the date of the most recent consolidated financial
statements prepared by SSWG and received by the Lenders, there
shall have occurred no Material Adverse Effect, as determined by
the Lenders acting reasonably;
(h) the Lenders shall have received a certificate of the chief
financial officer or vice-president, finance of SSWG calculating
and setting forth the ratios referred to in Sections 8.01(l), (m),
(n), (o), (p) and (q) hereof as at the fiscal quarter of SSWG
ended December 31, 1998;
(i) the Lenders shall have received satisfactory certificates of
insurance issued by the relevant insurer or its agent in respect
of all insurance maintained by the Group Entities, showing, in the
case of property insurance, the Lenders as first loss
<PAGE>
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payees with a mortgage endorsement satisfactory to the Lenders,
acting reasonably, and, in the case of liability insurance, the
Lenders as additional named insureds;
(j) the Lenders shall have received an opinion of the counsel for the
Borrowers, addressed to the Lenders and counsel for the Lenders,
in a form satisfactory to counsel for the Lenders;
(k) all fees required to be paid by the Borrowers pursuant to Sections
2.20, 2.21 or 13.05 on or before the Closing Date shall have been
paid;
(l) all Outstandings under the Original Credit Agreement shall have
been converted to Borrowings under the Operating Facility;
(m) the Lenders shall have received a recently-dated Y2K questionnaire
of the Borrowers in form and content satisfactory to the Lenders;
(n) the Lenders shall have received a certificate of the Borrowers,
executed by an Authorized Officer of each of the Borrowers,
confirming that all conditions precedent to the entitlement of the
Borrowers to an initial Borrowing under the Credit Facilities have
been satisfied, including, in the event that the initial Borrowing
is under the Acquisition Facility, all conditions precedent set
out in Section 5.02 or, in the event that the initial Borrowing is
under the Term Facility, all conditions precedent set out in
Section 5.03; and
(o) the Lenders shall have received such other certificates and
documentation as the Lenders may reasonably request.
If all of the Closing Conditions set forth above have not been satisfied by the
Borrowers or waived by the Lenders on or before the Closing Date, the
obligations of the Lenders to make any Advance or any other Accommodation and
all other obligations of the Lenders hereunder shall, at the option of the
Lenders, terminate without prejudice to any rights or remedies available to the
Lenders under this Agreement or otherwise.
5.02 ADDITIONAL CONDITIONS PRECEDENT FOR ACQUISITION FACILITY. In addition to
the satisfaction of the conditions precedent set out in Section 5.01, the
Borrowers shall only be entitled to a Borrowing under the Acquisition Facility
in accordance with the provisions of this Agreement if the following conditions
have been fulfilled to the reasonable satisfaction of the Lenders:
(a) the principal business of the Target Company shall be incidental
to the delivery, distribution, rental or provision of water cooler
and water delivery services in Canada, the United Kingdom or the
United States of America;
(b) the Lenders shall have received copies certified by the Secretary
or an Assistant Secretary of each Group Entity acquiring an
interest in the Target Company of resolutions of the board of
directors of such Group Entity approving the
<PAGE>
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acquisition of the Target Company and all documents evidencing any
other necessary corporate action of such Group Entity with respect
to the acquisition of the Target Company;
(c) the Lenders shall have received a certificate of the Secretary or
an Assistant Secretary of the Borrower requesting such Borrowing
and of each Group Entity acquiring an interest in the Target
Company certifying the names and true signatures of its officers
authorized to sign the documents to be delivered by it hereunder;
(d) the Lenders shall have received a recently-dated certificate of
good standing or like certificate for the Target Company and a
certified copy of the charter documents of the Target Company,
each issued by appropriate government officials of the
jurisdiction of formation of the Target Company;
(e) the Lenders shall have received detailed financial and business
projections for the Target Company, and shall be satisfied, acting
reasonably, with such projections;
(f) the Lenders shall have received a certificate of the chief
financial officer or vice-president, finance of the Borrower
requesting such Borrowing calculating and setting forth the
Acquired Company EBITDA for the Target Company's most recent
fiscal year or preceding four quarters, which Acquired Company
EBITDA shall be greater than U.S.$1;
(g) the Lenders shall have received a certificate of the chief
financial officer or vice-president, finance of SSWG setting forth
computations in reasonable detail showing that the Borrowers are
prior to the Borrowing, and will be following the Borrowing and
after giving effect to the acquisition of the Target Company, in
full compliance with Sections 8.01(l), (m), (n), (o), (p), (q) and
(r) hereof;
(h) the Lenders shall have received an undertaking of the Borrowers to
provide to the Lenders within 30 days of such Borrowing
satisfactory certificates of insurance issued by the relevant
insurer or its agent in respect of all insurance maintained by the
Target Company, showing, in the case of property insurance, the
Lenders as first loss payees with a mortgage endorsement
satisfactory to the Lenders, acting reasonably, and, in the case
of liability insurance, the Lenders as additional named insureds;
(i) in the event the acquisition is an acquisition of assets of the
Target Company (the "Acquired Assets"), then prior to the
completion of the acquisition:
(i) all registrations, filings and recordings necessary or
desirable to preserve, protect or perfect the
enforceability of the security interest over the Acquired
Assets constituted by the Security Documents executed by
the acquiring Borrower shall have been completed in all
necessary jurisdictions; and
<PAGE>
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(ii) the Lenders shall have received an opinion of counsel for
the Borrowers in form and content satisfactory to the
Lenders (including without limitation an opinion that all
registrations, filings and recordings in respect of the
security interest in favour of the Lenders over the
Acquired Assets, as described in subparagraph (i) above,
have been completed) on escrow conditions satisfactory to
the Lenders, providing for delivery of the opinion to the
Lenders immediately upon the completion of the acquisition
of the Acquired Assets by the acquiring Borrower;
(j) in the event the acquisition is an acquisition of shares of the
Target Company (the "Acquired Shares"):
(i) the Lenders shall prior to the completion of the
acquisition of the Acquired Shares have been provided with:
(A) a pledge of the Acquired Shares, in form
satisfactory to the Lenders, executed by the
acquiring Borrower;
(B) an undertaking by the acquiring Borrower, in form
satisfactory to the Lenders, to deliver to the
Lenders immediately after the completion of the
acquisition of the Acquired Shares share
certificates representing the Acquired Shares duly
endorsed for transfer in blank or, if requested by
the Lenders, registered in the name of a nominee of
the Lenders; and
(C) an opinion of counsel for the Borrowers in form and
content satisfactory to the Lenders as to the due
authorization, execution and delivery of the pledge
of the Acquired Shares, the registration, filing or
recording of the pledge of the Acquired Shares in
all places necessary to preserve, protect or perfect
the security interest of the Lenders in the Acquired
Shares, and as to such other matters as the Lenders
may reasonably require, on escrow conditions
satisfactory to the Lenders providing for delivery
of the opinion to the Lenders immediately upon the
completion of the acquisition of the Acquired
Shares;
(ii) the Lenders shall prior to completion of the acquisition of
the Acquired Shares have been provided with:
(A) satisfactory evidence that the Target Company has no
Indebtedness for borrowed money, or
(B) a plan by the Borrowers to cause the Target Company
to repay such Indebtedness at or within a reasonably
short period following completion of the acquisition
of the Acquired Shares, either by
<PAGE>
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means of advances by the Borrowers to the Target
Company or by other means satisfactory to the
Lenders;
and if repayment of Indebtedness of the Target Company is
to be funded by advances from the Borrowers, the Borrowers
shall if requested by the Lenders require security for such
advances to be granted by the Target Company and shall
assign such security to the Lenders;
(iii) the Lenders shall prior to the completion of the
acquisition of the Acquired Shares have been provided with:
(A) an undertaking by the Borrowers to cause the Target
Company to execute and deliver to the Lenders,
within 30 days after the completion of the
acquisition, a Subsidiary Guarantee,
Debenture/Security Agreement and General Assignment
of Book Debts together with an opinion of counsel
for the Lenders in all material respects in the form
provided pursuant to clause (B) below; and
(B) the form of opinion of counsel for the Borrowers to
be delivered pursuant to clause (A), such form to be
satisfactory to the Lenders and to include, without
limitation, an opinion that the Subsidiary
Guarantee, Debenture/Security Agreement and General
Assignment of Book Debts executed by the Target
Company are legal, valid, binding and enforceable
against the Target Company and that all
registrations, filings and recordings necessary or
desirable to preserve, protect or perfect the
enforceability of the security thereby created have
been completed;
(k) the amount of such Borrowing shall not exceed the greater of:
(i) the acquisition cost of the Target Company, including
transaction costs, less any deferred payments, Vendor Debt
or other Permitted Encumbrances;
(ii) the cost of capital expenditures which are incidental to
the operations of the Target Company; and
(iii) the amount of the unused Acquisition Commitment as at the
date of such Borrowing;
(l) the Lenders shall have received evidence satisfactory to the
Lenders of the completion of all necessary corporate action of the
Target Company in respect of the acquisition of the Target
Company, including without limitation any necessary shareholder
approval;
<PAGE>
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(m) the Lenders shall have received copies of all material
documentation in respect of the acquisition of the Target Company,
and shall be satisfied with the form of such documentation;
(n) the Lenders shall have received a certificate of the Borrowers,
executed by an Authorized Officer of each of the Borrowers
confirming that all conditions precedent to the entitlement of the
Borrowers to the Borrowing under the Acquisition Facility have
been satisfied, other than the completion of the acquisition of
the Target Company; and
(o) the Lenders shall have received such other certificates and
documentation as the Lenders may reasonably request; and
(p) the acquisition of the Target Company shall be completed
concurrently with the completion of such Borrowing under this
Agreement.
5.03 ADDITIONAL CONDITIONS PRECEDENT FOR TERM FACILITY. In addition to the
satisfaction of the conditions precedent set out in Section 5.01, SSWG shall
only be entitled to a Borrowing under the Term Facility in accordance with the
provisions of this Agreement if the following conditions have been fulfilled to
the reasonable satisfaction of the Lenders:
(a) the Lenders shall have received an undertaking of SSWG to the
effect that:
(i) such Borrowing will be used by SSWG to purchase publicly
issued Senior Subordinated Notes (the "Purchased Notes") at
a purchase price less than par; and
(ii) SSWG will provide to the Lenders evidence of cancellation
of the Purchased Notes within 30 days of the date of the
Advance;
(b) the Lenders shall have received copies certified by the Secretary
or an Assistant Secretary of SSWG of resolutions of the board of
directors of SSWG approving the purchase and cancellation of the
Purchased Notes and all documents evidencing any other necessary
corporate action of SSWG with respect to the purchase and
cancellation of the Purchased Notes;
(c) the Lenders shall have received a certificate of a Responsible
Officer of SSWG certifying that:
(i) the Borrowers are in compliance with all terms and
conditions of this Agreement both before and after the
purchase and cancellation of the Purchased Notes, including
in particular the financial covenants set out in Sections
8.01(l), (m), (n), (o), (p), (q) and (r); and
(ii) no Default or Event of Default has occurred and is
continuing or would result from the purchase and
cancellation of the Purchased Notes;
<PAGE>
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(d) the amount of such Borrowing shall not exceed the amount of the
unused Term Commitment as at the date of such Borrowing;
(e) the Lenders shall have received copies of all material
documentation in respect of the purchase of the Purchased Notes,
including without limitation evidence of the availability of the
Purchased Notes and the purchase price thereof, and shall be
satisfied with such documentation;
(f) the Lenders shall have received a certificate of the Borrowers,
executed by an Authorized Officer of each of the Borrowers
confirming that all conditions precedent to the entitlement of
SSWG to the Borrowing under the Term Facility have been satisfied;
and
(g) the Lenders shall have received such other certificates and
documentation as the Lenders may reasonably request.
5.04 CONDITIONS PRECEDENT TO SUBSEQUENT BORROWINGS. In addition to the
satisfaction of the conditions precedent set out in Section 5.02 in the case of
a Borrowing under the Acquisition Facility and the satisfaction of the
conditions precedent set out in Section 5.03 in the case of a Borrowing under
the Term Facility, it shall be a condition of each Borrowing under this
Agreement, with the exception only of Canadian Prime Rate Advances and U.S. Base
Rate Advances under the Operating Facility, that the representations and
warranties contained in Article 6 hereof shall be true on and as of the date of
each Borrowing and that no Default or Event of Default shall exist on the date
of the Borrowing or be created by such Borrowing. The Borrowers will, at the
request of the Lenders, deliver to the Lenders a certificate or certificates of
a Responsible Officer of each of the Borrowers to that effect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.01 REPRESENTATIONS AND WARRANTIES BY THE BORROWERS. The Borrowers represent
and warrant to the Lenders (and acknowledge that the Lenders are relying thereon
without independent inquiry in entering into this Agreement and providing
Accommodations from time to time) as follows:
(a) ORGANIZATION AND QUALIFICATION. Each of the Group Entities is a
corporation duly incorporated and organized, is validly subsisting
and is in good standing under the laws of its jurisdiction of
incorporation.
(b) CORPORATE POWER. Each of the Group Entities has full corporate
right, power and authority to enter into and perform its
obligations under each of the Credit Facility Documents to which
it is or will be a party and has full corporate power and
authority to own and operate its properties and to carry on its
business as now conducted or as herein contemplated.
<PAGE>
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(c) WHOLLY-OWNED SUBSIDIARIES. Attached hereto as Schedule 4 is a
complete list, as at the date hereof, of all Wholly-Owned
Subsidiaries, setting out in respect of each such Wholly-Owned
Subsidiary:
(i) its jurisdiction of incorporation;
(ii) the number of shares of each class issued and outstanding,
and the registered holders of all such shares; and
(iii) each jurisdiction in which such Wholly-Owned Subsidiary
carries on business or owns or leases property or assets.
(d) CONFLICT WITH OTHER INSTRUMENTS. The execution and delivery by
each of the Group Entities of each of the Credit Facility
Documents and the performance by each of the Group Entities of its
obligations thereunder, do not and will not:
(i) conflict with or result in a breach of any of the terms,
conditions or provisions of:
(1) the charter documents of such Group Entity;
(2) any Law applicable to such Group Entity;
(3) any contractual restriction binding on or affecting
such Group Entity or its properties; or
(4) any writ, judgment, injunction, determination or
award which is binding on such Group Entity; or
(ii) result in, require or permit:
(1) the imposition of any Lien other than as provided
for herein; or
(2) the acceleration of the maturity of any Indebtedness
of such Group Entity under any contractual provision
binding on or affecting such Group Entity.
(e) AUTHORIZATION AND GOVERNMENTAL APPROVALS. The execution and
delivery of each of the Credit Facility Documents and the
performance by each of the Group Entities of its obligations
thereunder have been duly authorized by all necessary corporate
action on the part of each of the Group Entities and no permit,
licence or approval under any applicable Law, and no registration,
qualification, designation, declaration or filing with any
Governmental Body having jurisdiction over the Group Entities, is
or was necessary therefor or to preserve the benefit thereof to
the Lenders.
<PAGE>
- 50 -
(f) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly
executed and delivered by each of the Borrowers, and this
Agreement constitutes, and the remaining Credit Facility Documents
when duly executed by the Group Entities pursuant to and in
accordance with this Agreement and delivered will constitute,
legal, valid and binding obligations of the Group Entities
enforceable against them in accordance with their respective
terms, subject to Laws relating to bankruptcy, insolvency and the
enforcement of creditors' rights generally and to the
qualification that equitable remedies are in the discretion of a
court.
(g) PERMITS. All permits, licences and approvals which are necessary
in connection with the business, properties or assets of the Group
Entities have been issued and are in full force and effect except
where the failure so to possess any such permit, licence or
approval would not in the aggregate have a Material Adverse
Effect, and there is no default thereunder or any failure to
observe or perform any condition thereof which would have or
result in a Material Adverse Effect. No action is pending or, to
the knowledge of the Borrowers, threatened which has as its object
the revocation or amendment of any such permit, licence or
approval which would have or result in a Material Adverse Effect.
(h) MATERIAL DISCLOSURE. The Borrowers have not failed to disclose to
the Lenders in writing any fact (other than facts which are a
matter of public knowledge or record) of which the Borrowers are
aware which will result in a Material Adverse Effect, or so far as
it can now reasonably foresee may result in a Material Adverse
Effect. None of the Credit Facility Documents contained at the
time furnished any untrue statement of a material fact.
(i) TITLE TO ASSETS. The Group Entities have good and marketable title
to or the right to use all of the assets necessary for the
operation of their businesses, free and clear of any Liens other
than Permitted Liens, and no person has any agreement or right to
acquire any of such properties out of the ordinary course of
business.
(j) NO DEFAULTS. None of the Group Entities is in breach of or in
default under:
(i) its charter documents;
(ii) any applicable Law;
(iii) any contract or agreement binding on or affecting it or its
assets (including without limitation the Credit Facility
Documents); or
(iv) any writ, judgment, injunction, determination or award
binding on or affecting it;
which breach or default would, either alone or in aggregate, have
a Material Adverse Effect.
<PAGE>
- 51 -
(k) FINANCIAL STATEMENTS. SSWG has delivered to the Lenders a copy of
the audited consolidated balance sheet of SSWG as of December 31,
1998 and the related consolidated statements of earnings and
retained earnings and changes in financial position of SSWG for
the fiscal year then ended. Each of the other Group Entities has
delivered to the Lenders copies of the unaudited unconsolidated
balance sheet of such Group Entity as of the fiscal year most
recently ended, and the related unconsolidated statements of
earnings and retained earnings and changes in financial position
of such Group Entity for the fiscal year so ended, and the most
recent unaudited interim unconsolidated balance sheet of such
Group Entity and the related statements of earnings and retained
earnings and changes in financial position.
Such financial statements (including in each case any related
schedules and notes) have been prepared in accordance with GAAP
consistently applied throughout the periods involved, except as
set forth in any notes thereto, and fairly present the
consolidated financial position of each of the Group Entities as
of the respective dates of such balance sheets and the
consolidated results of their operations for the respective
periods covered by such statements of earnings and retained
earnings and changes in financial position.
There are no material liabilities, contingent or otherwise, of any
Group Entity as of December 31, 1998 not reflected in the
consolidated balance sheet of SSWG as of such date. Since December
31, 1998, there have been no changes in the consolidated assets,
liabilities or financial position of any Group Entity from that
set forth in the consolidated balance sheet of SSWG as of that
date, except such changes in the ordinary course of business that
have not, in the aggregate, had a Material Adverse Effect.
(l) LITIGATION. There are no actions, suits or proceedings (including
counterclaims) pending or, to the knowledge of the Borrowers,
threatened against or affecting any of the Group Entities or any
property of any of the Group Entities in any court or before any
arbitrator of any kind or before or by any Governmental Body
which, if adversely determined, would, in the aggregate, have a
Material Adverse Effect (taking into account applicable insurance
coverage and related deductibles with respect to such matters).
(m) TAXES. Each of the Group Entities has filed all tax returns which
are required to have been filed in any jurisdiction, except for
tax returns the failure of which to file would not, in the
aggregate, have a Material Adverse Effect. Each of the Group
Entities has paid all taxes shown to be due and payable on any tax
return filed by it and all other taxes and assessments payable by
it, to the extent the same have become due and payable and before
they have become delinquent, except for any taxes or assessments
the failure of which to pay would not, in the aggregate, have a
Material Adverse Effect, and except for any taxes or assessments:
<PAGE>
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(i) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings,
(ii) the execution of any judgment with respect thereto has been
stayed, and
(iii) with respect to which such Group Entity has set aside on
its books reserves (segregated to the extent required by
GAAP) deemed by it to be adequate.
The Borrowers are not aware of any proposed material tax
assessment against any of the Group Entities except as disclosed
in writing by the Borrowers to the Lenders, and in the opinion of
the Borrowers all tax liabilities likely to be due and payable in
the current fiscal year are adequately provided for on the books
of the Group Entities in accordance with GAAP.
(n) INDEBTEDNESS OF WHOLLY-OWNED SUBSIDIARIES. None of the
Wholly-Owned Subsidiaries has any Indebtedness, other than
Indebtedness permitted under Section 9.01(c).
(o) COMPLIANCE WITH ENVIRONMENTAL LAWS. Each of the Group Entities is
in compliance with all Environmental Laws applicable to its
respective businesses and operations in all jurisdictions in which
it is presently doing business, except for any failure to so
comply which would not, in the aggregate, have a Material Adverse
Effect. Each of the Group Entities makes all reasonable efforts to
manage its business so that it will not incur or be subject to any
liability or penalty under such Environmental Laws.
(p) REPRESENTATIONS OF WHOLLY-OWNED SUBSIDIARIES. The representations
and warranties of each Wholly-Owned Subsidiary contained in the
Subsidiary Guarantee of such Wholly-Owned Subsidiary are true and
correct.
(q) SOLVENCY. The Borrowers represent and warrant to and in favour of
the Lenders that the Group Entities, in the aggregate, are not
and, after entering into the Credit Facility Documents or
performing any of their respective obligations thereunder, would
not be unable to pay any of their respective liabilities as they
become due, and the realizable value of all assets of the Group
Entities, after entering into the Credit Facility Documents or
performing any of their respective obligations thereunder, would
not be less than the aggregate of the Group Entities' liabilities
and stated capital of all classes.
<PAGE>
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ARTICLE 7
FINANCIAL STATEMENTS AND INFORMATION
7.01 PROVISION OF INFORMATION. The Borrowers covenant and agree to and with the
Lenders that so long as an Advance, Bankers' Acceptance or any other obligation
of the Borrowers under this Agreement is outstanding or the Commitment has not
been wholly terminated:
(a) FINANCIAL STATEMENTS AND INFORMATION. The Borrowers shall furnish
to the Lenders:
(i) within five Business Days after approval by the Board of
Directors of SSWG and in any event within 120 days after
the end of each fiscal year of SSWG, copies of the
comparative financial statements of SSWG as of the end of
such fiscal year, prepared in accordance with GAAP,
accompanied by a report thereon of independent chartered
accountants or certified public accountants of recognized
national standing in Canada or the United States to the
effect that the consolidated statements present fairly, in
all material respects, the consolidated financial position
of SSWG as of the end of such fiscal year and the
consolidated results of the operations and changes in
financial position for such year in conformity with GAAP;
(ii) if differences between GAAP as at the date of the financial
statements referred to in subparagraph (i) and GAAP as at
December 31, 1998 result in the calculation of any amount
or financial ratio under this Agreement being different
than if calculated using GAAP as at the date of such
financial statements, a reconciliation of the differing
calculations of such amounts and a report on such
reconciliation by the independent accountants reporting on
the financial statements;
(iii) within five Business Days after approval by the Board of
Directors of each Group Entity other than SSWG and in any
event within 120 days after the end of each fiscal year of
such Group Entity, copies of the unaudited unconsolidated
financial statements of such Group Entity as of the end of
such fiscal year;
(iv) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods
in each fiscal year of SSWG, copies of the comparative
consolidated financial statements of SSWG as of the end of
such period, all prepared in accordance with GAAP, and
certified by a senior financial officer of SSWG to the
effect that the statements present fairly, in all material
respects, the consolidated financial position of SSWG as of
the end of such period and the related consolidated results
of operations and changes in financial position for such
period in accordance with GAAP consistently applied;
<PAGE>
- 54 -
(v) if differences between GAAP as at the date of the financial
statements referred to in subparagraph (iv) and GAAP as at
December 31, 1998 result in the calculation of any amount
or financial ratio under this Agreement being different
than if calculated using GAAP as at the date of such
financial statements, a reconciliation of the differing
calculations of such amounts and a report on such
reconciliation by a senior financial officer of SSWG;
(vi) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods
in each fiscal year of each Group Entity other than SSWG,
copies of the unaudited unconsolidated financial statements
of such Group Entity as of the end of such period;
(vii) concurrently with the financial statements furnished
pursuant to subparagraphs (i), (iii), (iv) and (vi) above,
a Quarterly Financial Certificate duly executed by the
chief financial officer or vice-president, finance of
SSWG:
(1) stating that, based upon such examination or
investigation and review of this Agreement as in the
opinion of the signer is necessary to enable the
signer to express an informed opinion with respect
thereto, no Default or Event of Default has occurred
during such period or as at the date of such
certificate or, if any Default or Event of Default
shall have occurred, specifying all such Defaults
and Events of Default, the nature and period of
existence thereof and what action the Borrowers have
taken, are taking or propose to take with respect
thereto; and
(2) setting forth computations in reasonable detail
showing as of the end of the period covered by such
financial statements whether the Borrowers were in
compliance with Sections 8.01(l), (m), (n), (o), (p)
and (q) and reporting any transaction under Section
9.01(f);
(viii) not less than 45 days prior to the commencement of each
fiscal year of SSWG, a Business Plan for the ensuing fiscal
year;
(ix) promptly after the Borrowers become aware thereof, written
notice of any material change to any Business Plan
previously provided to the Lenders, and as soon as
reasonably practicable an updated Business Plan;
(x) promptly and in any event within four Business Days after a
Responsible Officer of any of the Borrowers becomes aware
of the existence of a Default or Event of Default under
this Agreement or a default or event of default under the
Senior Subordinated Note Indenture or any other
Indebtedness, a certificate duly executed by an Authorized
Officer of such Borrower specifying the nature and period
of existence thereof and what
<PAGE>
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action the Borrowers have taken, are taking or propose to
take with respect thereto;
(xi) with reasonable promptness:
(A) written notice of the attachment of any Lien other
than a Permitted Lien to any of the assets of any
Group Entity;
(B) written notice of any actual or probable material
litigation or other legal proceedings affecting any
of the Group Entities (including any proceeding
before an arbitrator, quasi-judicial tribunal or
other Governmental Body) involving a potential
liability of more than U.S.$1,000,000 (or the
equivalent thereof in any other currency), including
copies of relevant legal documentation;
(C) written notice of any occurrence, including without
limitation any third party claim or liability, of
which any Borrower becomes aware which may prevent
such Borrower or any of the other Group Entities
from performing any of its obligations under this
Agreement or any of the other Credit Facility
Documents; and
(D) such other information, including financial
statements and computations, relating to the
performance of the provisions of this Agreement and
the affairs of the Group Entities as the Lenders may
from time to time reasonably request.
(b) INSPECTION OF PROPERTIES AND BOOKS. The Lenders shall have the
right to visit and inspect any of the properties of the Group
Entities, to examine the books of account and records of the Group
Entities, to make or be provided with copies and extracts
therefrom, to discuss the affairs, finances and accounts of the
Group Entities with, and to be advised as to the same by, the
officers, employees and independent accountants of the Group
Entities (and by this provision the Borrowers authorize such
accountants to discuss such affairs, finances and accounts,
whether or not a representative of any Borrower is present), all
upon reasonable notice and at such reasonable times and intervals
and to such reasonable extent as the Lenders may desire. The
Borrowers agree to pay all out-of-pocket expenses incurred by the
Lenders in connection with the exercise of rights pursuant to this
paragraph (b) at any time when a Default or Event of Default has
occurred and is continuing.
ARTICLE 8
POSITIVE COVENANTS
8.01 GENERAL AFFIRMATIVE COVENANTS. The Borrowers covenant and agree to and with
the Lenders that so long as an Advance, Bankers' Acceptance or other obligation
of the Borrowers
<PAGE>
-56-
under this Agreement is outstanding or the Commitment of the
Lenders has not been wholly terminated:
(a) PAYMENT WHEN DUE. The Borrowers will duly and punctually pay or
cause to be paid all amounts required to be paid by them to the
Lenders pursuant to this Agreement or any of the other Credit
Facility Documents or any Treasury Contract, including principal,
interest, Stamping Fees, other fees and expenses and any other
amounts, at the times, in the currencies and in the manner set
forth herein or therein.
(b) OBSERVANCE OF COVENANTS. The Borrowers will observe and perform
all of the covenants, agreements, terms and conditions to be
observed and performed by them in this Agreement and other Credit
Facility Documents.
(c) CONDUCT OF BUSINESS. The Group Entities will continue to carry on
the business of the delivery, distribution and rental of water
coolers and water delivery services in Canada, the United Kingdom,
the United States of America and Europe, will keep all of their
assets in a good state of repair and in proper working condition,
and will keep or cause to be kept proper books of account and set
aside appropriate reserves in accordance with GAAP.
(d) PAYMENT OF TAXES. Each of the Group Entities will from time to
time pay or cause to be paid all rents, taxes, rates, levies or
assessments, ordinary or extraordinary, and governmental fees or
dues levied, assessed or imposed upon any of the Group Entities or
their assets capable of forming a Lien on any of the assets of the
Group Entities, as and when the same become due and payable,
unless their validity is disputed in good faith by such Group
Entity and the Lenders are provided security acceptable to them,
acting reasonably, for the payment of the same.
(e) MAINTENANCE OF CORPORATE EXISTENCE. The Group Entities will
maintain their corporate existence and all registrations in those
jurisdictions in which they carry on business, provided that a
Group Entity may make such changes in corporate existence and
registrations as may be required in connection with an arrangement
or reorganization of the Group Entities and any holding companies
thereof permitted under this Agreement.
(f) MAINTENANCE OF LICENCES AND PERMITS. The Group Entities will
maintain all licences and permits required to carry on their
respective businesses and will not transfer, surrender or
otherwise dispose of any such licences or permits, except pursuant
to a Disposition permitted under Section 9.01(f).
(g) COMPLIANCE WITH LAWS. The Group Entities will comply with all Laws
(including Environmental Laws), non-compliance with which could
have a Material Adverse Effect.
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(h) MAINTENANCE OF PROPERTY INSURANCE. The Group Entities will cause
all the property and assets of the Group Entities which are of a
character usually insured by companies operating like businesses
to be insured and kept insured against loss or damage from any
cause which is customarily insured against (including business
interruption) by companies carrying on like businesses, in such
amounts and with such deductibles as are in accordance with good
business practice and with financially sound and reputable
insurers. The Group Entities will pay all premiums necessary for
such purpose as the same shall become due and will provide
particulars of all such policies and all renewals thereof to the
Lenders upon request; and, at the request of the Lenders, will add
the Lenders as first loss payees to such policies, together with a
mortgage endorsement on terms satisfactory to the Lenders, acting
reasonably.
(i) MAINTENANCE OF LIABILITY INSURANCE. The Group Entities will
maintain public liability and other liability insurance in such
amounts as are in accordance with good business practice and with
financially sound and reputable insurers, will pay all premiums
necessary for such purpose as the same shall become due and will
provide particulars of all such policies and all renewals thereof
to the Lenders.
(j) USE OF PROCEEDS. All Borrowings by the Borrowers will be used for
the purposes described in Section 2.01 and for no other purposes.
Without limiting the foregoing, the Borrowers will not borrow any
amount by way of an Advance for the purpose of investing such
amount directly or indirectly in bankers' acceptances (whether or
not such bankers' acceptances have been issued or accepted by the
Lenders).
(k) OPERATING ACCOUNTS. The Borrowers shall maintain, and shall cause
the Wholly-Owned Subsidiaries to maintain, with TD Bank the
operating accounts of all Group Entities incorporated in Canada.
(l) RATIO OF ADJUSTED CONSOLIDATED EBITDA TO SENIOR INTEREST. The
Borrowers shall maintain the ratio of Adjusted Consolidated EBITDA
to Senior Interest for the four fiscal quarters ending at each
fiscal quarter end at no less than 3.0 to 1.
(m) RATIO OF ADJUSTED CONSOLIDATED EBITDA TO TOTAL INTEREST. The
Borrowers shall maintain the ratio of Adjusted Consolidated EBITDA
to Total Interest for the four fiscal quarters ending at each
fiscal quarter end at no less than:
(i) 1.35 to 1 for each fiscal quarter ending before December
31, 1999;
(ii) 1.5 to 1 for each fiscal quarter ending on or after
December 31, 1999 and before December 31, 2000;
(iii) 1.75 to 1 for each fiscal quarter ending on or after
December 31, 2000 and before December 31, 2001; and
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(iv) 2.0 to 1 for each fiscal quarter ending on or after
December 31, 2001 and on or before the date on which all
Outstandings under this Agreement have been repaid in full.
(n) SENIOR DEBT TO ADJUSTED CONSOLIDATED EBITDA RATIO. The Borrowers
shall maintain the Senior Debt to Adjusted Consolidated EBITDA
Ratio as at each fiscal quarter end at no more than 2.5 to 1.
(o) SENIOR DEBT PLUS CONTINGENCY TO ADJUSTED CONSOLIDATED EBITDA
RATIO. The Borrowers shall maintain the Senior Debt plus
Contingency to Adjusted Consolidated EBITDA Ratio as at each
fiscal quarter end at no more than 3.0 to 1.
(p) RATIO OF CASH FLOW TO DEBT SERVICE. The Borrowers shall maintain
the ratio of Cash Flow for the four quarters ending at each fiscal
quarter end to Debt Service for such four quarters at no less than
1.2 to 1, with the exception of the fiscal quarter ending
September 30, 1999, for which such ratio shall be no less than 1.1
to 1.
(q) TOTAL DEBT TO ADJUSTED CONSOLIDATED EBITDA RATIO. The Borrowers
shall maintain the Total Debt to Adjusted Consolidated EBITDA
Ratio as at each fiscal quarter end at no more than:
(i) 7.0 to 1 for each fiscal quarter ending before December 31,
1999;
(ii) 6.5 to 1 for each fiscal quarter ending on or after
December 31, 1999 and before December 31, 2000;
(iii) 6.0 to 1 for each fiscal quarter ending on or after
December 31, 2000 and on or before the date on which all
Outstandings under this Agreement have been repaid in full.
(r) CAPITAL EXPENDITURES. The Actual Capital Expenditures for each
fiscal year of SSWG, not including the value of property, plant
and equipment owned by an Acquired Company as at the date of the
Acquired Company's acquisition by a Borrower, shall be less than
or equal to the Permitted Capital Expenditures for such fiscal
year.
ARTICLE 9
NEGATIVE COVENANTS
9.01 GENERAL NEGATIVE COVENANTS. The Borrowers covenant and agree to and with
the Lenders that, unless the Lenders consent in writing, so long as an Advance,
Bankers' Acceptance or other obligation of the Borrowers is outstanding or the
Commitment of the Lenders has not been wholly terminated:
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(a) RESTRICTION ON LIENS. The Borrowers will not grant, create, assume
or permit to exist, or permit any Wholly-Owned Subsidiary to
grant, create, assume or permit to exist, any Lien upon any of the
properties or assets of any Group Entity, other than the security
constituted by the Security Documents and Permitted Liens.
(b) RESTRICTION ON INDEBTEDNESS. The Borrowers will not have or incur
any Indebtedness, except:
(i) Indebtedness under this Agreement;
(ii) Indebtedness in existence as at the date of this Agreement,
as reflected in the audited consolidated financial
statements of SSWG dated December 31, 1997;
(iii) Indebtedness under the Senior Subordinated Note Indenture;
(iv) Indebtedness of SSWG under the Existing Bankers Trust Swap
Agreement;
(v) Vendor Debt permitted under this Agreement; and
(vi) other Indebtedness which has the benefit of a Permitted
Lien securing the payment thereof (but only to the extent
of such Permitted Lien).
(c) RESTRICTION ON SUBSIDIARY INDEBTEDNESS. No Wholly-Owned Subsidiary
will have or incur, and the Borrowers shall ensure that no
Wholly-Owned Subsidiary has or incurs, any Indebtedness other
than:
(i) Indebtedness under this Agreement;
(ii) Indebtedness in existence as at the date of this Agreement,
as reflected in the audited consolidated financial
statements of SSWG dated December 31, 1997;
(iii) Indebtedness to any other Group Entity;
(iv) Indebtedness constituted by a Subsidiary Guarantee;
(v) Vendor Debt permitted under this Agreement; and
(vi) other Indebtedness which has the benefit of a Permitted
Lien securing the payment thereof (but only to the extent
of such Permitted Lien).
(d) RESTRICTION ON GUARANTEES. None of the Group Entities shall enter
into any Guarantee of, or any indemnity or suretyship arrangement
relating to, or any other transaction intended to assure the
repayment or satisfaction of, any
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Indebtedness or other liabilities or obligations of any other
person, other than the Guarantees of the Borrowers contained in
this Agreement, the Subsidiary Guarantees executed by the
Wholly-Owned Subsidiaries pursuant to this Agreement, the
Guarantees of the Group Entities in respect of the obligations of
SSWG under the Senior Subordinated Note Indenture, or indemnities
contained in any operating lease or other agreement entered into
by any Group Entity in the ordinary course of business (excluding
any agreement relating to Indebtedness for borrowed money).
(e) RESTRICTION ON AMALGAMATIONS AND REORGANIZATIONS. Without the
Lenders' prior written consent, the Borrowers will not, and will
not permit any Wholly-Owned Subsidiary to, directly or indirectly,
consolidate, amalgamate or merge with, or sell, lease or otherwise
dispose of all or substantially all of its respective assets, or
alter its capital structure, or enter into any arrangement or
reorganization having a similar effect, other than with one or
more other Group Entities or holding companies thereof.
(f) RESTRICTION ON DISPOSITIONS. The Borrowers will not, and will not
permit any Wholly-Owned Subsidiary to, directly or indirectly,
sell, lease, assign, transfer, abandon, convey or otherwise
dispose of (any such action being herein called a "Disposition")
any of its assets (including any capital stock of any Subsidiary
or other corporation and any Investment by any Group Entity, other
than an Investment permitted under paragraphs (g) or (h) below),
except as follows:
(i) any Group Entity may, in the ordinary course of business,
sell any inventory or other assets that are customarily
sold by such Group Entity on an on-going basis as part of
the normal operation of its respective business;
(ii) any Group Entity may, in the ordinary course of business,
sell equipment, fixtures, materials or supplies that are no
longer required in the business of such Group Entity or
that are worn-out or obsolete;
(iii) any Group Entity may effect a Disposition of its assets on
arms' length terms and for the lower of fair market value
and book value if, after giving effect to such Disposition,
the aggregate net proceeds of all assets disposed of by all
Group Entities pursuant to this subparagraph (iii) in any
one fiscal year would not exceed U.S.$500,000 (or the
equivalent thereof in any other currency);
(iv) any Group Entity may repay Indebtedness permitted to be
repaid under the terms of this Agreement;
(v) provided that no Default or Event of Default has occurred
and is continuing as at the date of such Disposition, any
Group Entity may effect
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a Disposition of all or any portion of its assets to any
other Group Entity; and
(vi) any Group Entity may effect a Disposition of its assets on
arms' length terms and for fair market value not otherwise
permitted under subparagraphs (i) to (v) above, provided
that, after giving effect to the Disposition:
(A) the aggregate net proceeds of all Dispositions in
the current fiscal year is less than U.S.$500,000
(or the equivalent thereof in any other currency);
or
(B) the aggregate net proceeds of all Dispositions in
the current fiscal year is greater than or equal to
U.S.$500,000 (or the equivalent thereof in any other
currency) and the amount, if any, of the excess of
such aggregate net proceeds over U.S.$500,000 (or
the equivalent amount in any other currency), after
the payment of any taxes arising therefrom, are used
by the Group Entities to acquire assets of a similar
nature and approximately equal value to be used in a
business then being carried on by the Group Entities
within 180 days of the completion of the
Disposition.
(g) RESTRICTION ON DISTRIBUTIONS. The Borrowers will not, and
will not permit any Wholly-Owned Subsidiary to, without the
Lenders' prior written consent, pay dividends on any
capital stock, or pay any amount to redeem, reduce,
purchase or retire in any manner any capital stock in an
aggregate amount of more than U.S.$500,000 (or the
equivalent thereof in any other currency) over the term of
this Agreement unless:
(i) the Borrowers shall be in compliance with all terms
and conditions of this Agreement both before and
after any such payment, including in particular the
financial covenants set out in Sections 8.01(l),
(m), (n), (o), (p), (q) and (r); and
(ii) no Default or Event of Default has occurred and is
continuing or would result from any such payment.
(h) RESTRICTION ON LOANS. The Borrowers will not, and will not
permit any Wholly-Owned Subsidiary to, make any loans or
grant any credit to or for the benefit of any other person
except for:
(i) amounts of credit allowed by any Group Entity in the
normal course of the trading activities of such
Group Entity;
(ii) loans made by one Group Entity to another Group
Entity; and
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(iii) loans made by a Group Entity to employees of such
Group Entity, provided that the aggregate
outstanding amount of such loans made by Group
Entities does not exceed U.S.$1,500,000, and
provided that the Group Entities shall be in
compliance with all terms and conditions of this
Agreement and the other Credit Facility Documents
both before and after the making of such loans.
(i) RESTRICTION ON ACQUISITION OF WHOLLY-OWNED SUBSIDIARIES.
The Borrowers will not incorporate or acquire any
additional Wholly-Owned Subsidiaries unless such
Wholly-Owned Subsidiary executes a Subsidiary Guarantee in
favour of the Lenders and provides such Security Documents,
certificates and legal opinions as may be requested by the
Lenders.
(j) RESTRICTION ON PARTIALLY-OWNED SUBSIDIARIES. The Borrowers
will not create or acquire any Subsidiary which is not a
Wholly-Owned Subsidiary, or permit any Wholly-Owned
Subsidiary to issue shares with the result that it would
cease to be a Wholly-Owned Subsidiary, without the prior
written approval of the Lenders, which approval shall not
be unreasonably withheld.
(k) RESTRICTION ON OTHER ACTIVITIES. The Borrowers will not
carry on in any fiscal year any activities materially
different from those activities anticipated and described
in the Business Plan for such fiscal year.
(l) PAYMENT OF FEES AND COMMISSIONS. The Borrowers will not pay
any fees or commissions to any person other than on open
market terms and for the purpose of and in the ordinary
course of business of the business carried on by the Group
Entities.
(m) PAYMENT OF MANAGEMENT CHARGE. The Borrowers will not pay
any management charge to C.F. Capital Corporation other
than in accordance with the terms of the Management
Agreement dated December 16, 1993 made between SSW, C.F.
Capital Corporation, John Kredeit and Stephen Larson, as
amended and restated on January 12, 1996 and on October 27,
1997.
(n) CHANGE IN FISCAL YEAR. SSWG will not change its fiscal year
without the prior written consent of the Bank.
ARTICLE 10
BORROWER GUARANTEES
10.01 GUARANTEES. Each of the Borrowers (each called a "Guaranteeing Borrower"
in this Article 10) hereby absolutely, unconditionally and irrevocably
guarantees to the Lenders the due and punctual performance, satisfaction,
payment and discharge of the following (the "Guaranteed Obligations"):
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(a) all payment obligations (whether at stated maturity, by
acceleration or otherwise) of each of the other Borrowers
hereunder (each an "Other Borrower") under the Credit Facilities,
whether for principal, interest, fees, expenses, indemnity or
otherwise;
(b) all covenants and other obligations of each Other Borrower on its
part to be performed or observed under this Agreement; and
(c) all obligations of each Other Borrower to the Lenders under
Treasury Contracts.
10.02 GUARANTEE ABSOLUTE AND UNCONDITIONAL. The obligations of each
Guaranteeing Borrower under this Guarantee shall be absolute and unconditional,
shall not be subject to any counterclaim, set-off, deduction or defence based
upon any claim such Guaranteeing Borrower may have against either Other Borrower
or any other person, whether in connection with this Guarantee or any other
transaction, and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected or impaired by any
occurrence, matter, circumstance or condition whatsoever (whether or not such
Guaranteeing Borrower has any knowledge or notice thereof or has consented
thereto), other than the complete performance of the Guaranteed Obligations,
including without limitation:
(a) any amendment or modification of any provision of this Agreement,
any of the other Credit Facility Documents, the Security Documents
or any of the Guaranteed Obligations or any assignment or transfer
thereof, including without limitation any extension of the time
for payment of or compliance with any of the Guaranteed
Obligations;
(b) any waiver, consent, extension, granting of time, forbearance,
indulgence, renewal or other action or inaction under or in
respect of this Agreement, the other Credit Facility Documents,
the Security Documents or any of the Guaranteed Obligations, or
any exercise or nonexercise of any right, remedy or power in
respect thereof;
(c) any dealings with any security or other guarantee which the
Lenders hold or may hold pursuant to this Agreement or otherwise,
including the taking and giving up of security or any other
guarantee, the accepting of compositions and the granting of
releases and discharges;
(d) any bankruptcy, receivership, insolvency, reorganization,
amalgamation, arrangement, readjustment, composition, liquidation
or similar proceedings with respect to any Borrower or any other
person or the properties or creditors of any of them;
(e) any informality in, omission from, invalidity or unenforceability
of, or any misrepresentation, irregularity or other defect in,
this Agreement, the other Credit Facility Documents, the Security
Documents, any of the Guaranteed Obligations or any other
agreement or instrument;
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(f) any lack or limitation of capacity, status, power or authority of
any Borrower or any of their respective directors, officers,
employees, partners or agents acting or purporting to act on their
behalf, and any defect or any failure to comply with a formal
legal requirement in the execution or delivery of any document;
(g) any transfer of any assets to or from any Borrower to any Other
Borrower, any consolidation, amalgamation or merger of any of the
Borrowers with or into any person, or any change whatsoever in the
name, objects, capital structure, corporate existence, membership,
constitution or business of any Borrower;
(h) any failure on the part of any Other Borrower or any other person
to perform or comply with any term of this Agreement, the other
Credit Facility Documents, the Security Documents, any of the
Guaranteed Obligations or any other agreement or instrument;
(i) any action or other proceeding brought by any beneficiaries or
creditors of, or by, any Other Borrower or any other person for
any reason whatsoever, including without limitation any action or
proceeding in any way attacking or involving any issue in respect
of this Agreement, the other Credit Facility Documents, the
Security Documents, any of the Guaranteed Obligations or any other
agreement or instrument;
(j) any lack or limitation of status or of power of any Other Borrower
or any incapacity or disability of any Other Borrower; or
(k) the assignment of all or any part of the benefits of this
Guarantee in accordance with the terms of this Agreement, any
other agreement in respect of the Guaranteed Obligations, or any
other agreement or instrument.
10.03 DEMAND. If any Other Borrower shall fail to pay or cause to be paid all
or any portion of the Guaranteed Obligations as and when the same shall become
due and payable pursuant to this Agreement or otherwise, then the Lenders shall
be entitled, by notice to a Guaranteeing Borrower, to make a demand upon such
Guaranteeing Borrower for the payment of the Guaranteed Obligations or that
portion thereof which any Other Borrower has failed to pay. The Guaranteed
Obligations or any portion thereof in respect of which demand shall have been
made pursuant hereto shall become immediately due and payable by such
Guaranteeing Borrower under this Guarantee upon such demand for payment being
made, and shall bear interest from the date of such demand at the rate or rates
provided in this Agreement or otherwise in respect of the Guaranteed Obligations
or that portion thereof which the Other Borrower has failed to pay.
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10.04 REMEDIES. The Lenders may, at their option, proceed against any
Guaranteeing Borrower under this Guarantee to enforce any of the Guaranteed
Obligations when due without first proceeding against any Other Borrower or any
other person and without first resorting to any direct or indirect security, any
Subsidiary Guarantee or any other remedy. Each Guaranteeing Borrower hereby
unconditionally waives diligence, presentment, demand for payment, protest and
all notices whatsoever, renounces the benefit of division and discussion, and
unconditionally waives any requirement that the Lenders exhaust any right, power
or remedy against any Other Borrower under this Agreement, the other Credit
Facility Documents, any Security Document, any Subsidiary Guarantee, any other
Guaranteed Obligations or any other agreement or instrument referred to herein
or therein, or against any other person under any other guarantee of, or
security for, any of the Guaranteed Obligations, before proceeding against such
Guaranteeing Borrower under this Guarantee. Each Guaranteeing Borrower hereby
waives any duty on the part of the Lenders to disclose to such Borrower anything
which the Lenders may now or hereafter know concerning any Other Borrower, any
other person or any other matter whatsoever, even if the Lenders have reason to
believe any such information materially increases the risk beyond that which
such Guaranteeing Borrower intends to assume hereunder.
10.05 SET-OFF. The Lenders may at any time setoff and apply any deposits
(general or special, time or demand, provisional or final) or other indebtedness
owing by any Lender to or for the credit of any Guaranteeing Borrower against
that portion of the Guaranteed Obligations comprising principal, interest or
fees, or, following the occurrence of an Event of Default, any and all of the
Guaranteed Obligations, and the Lenders shall promptly notify such Guaranteeing
Borrower of any such set-off or application, provided that the failure to do so
shall not affect the validity thereof. The rights of the Lenders under this
Section 10.05 are in addition to any other rights and remedies, including any
other rights of set-off, that they may have.
10.06 AMOUNT OF GUARANTEED OBLIGATIONS. Any account settled or stated by or
between the Lenders and any Other Borrower or, if any such account has not been
so settled or stated immediately before demand for payment under this Guarantee,
any account thereafter stated by the Lenders shall, in the absence of
demonstrable error, fraud, dishonesty or improper conduct, be accepted by each
Guaranteeing Borrower as PRIMA FACIE evidence of the amount of the Guaranteed
Obligations which at the date of the account so settled or stated is due by such
Other Borrower to the Lenders or remains unpaid by such Other Borrower to the
Lenders.
10.07 PAYMENT FREE AND CLEAR OF TAXES. Any and all payments by each
Guaranteeing Borrower under this Guarantee shall be made free and clear of and
without deduction or withholding for Taxes unless such Taxes are required by
applicable Law to be deducted or withheld. If a Guaranteeing Borrower shall be
required by applicable Law to deduct or withhold any Taxes from or in respect of
any sum payable under this Guarantee:
(a) the sum payable shall be increased as may be necessary so that
after making all required deductions or withholdings (including
deductions or withholdings applicable to additional amounts paid
under this Section 10.07) the Lenders receive an amount equal to
the sum they would have received if no deduction or withholding
had been made;
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(b) such Guaranteeing Borrower shall make such deductions or
withholdings; and
(c) such Guaranteeing Borrower shall pay the full amount deducted or
withheld to the relevant taxation or other authority in accordance
with applicable Law.
Each Guaranteeing Borrower shall indemnify and save harmless the Lenders for the
full amount of Taxes levied by any jurisdiction in Canada, the United States of
America or the United Kingdom on, or in relation to, any amount payable by such
Guaranteeing Borrower hereunder (other than Taxes imposed on the income or
capital of the Lenders). Payment under this indemnity shall be made within 30
days from the date the Lenders make written demand therefor. A certificate as to
the amount of such Taxes submitted to such Guaranteeing Borrower by the Lenders
or any of them shall be PRIMA FACIE evidence, absent demonstrable error, of the
amount due from such Borrower to the Lenders. The Lenders shall provide each
Guaranteeing Borrower the benefit of any tax credit received by the Lenders as a
result of such Guaranteeing Borrower indemnifying the Lenders for Taxes levied
on or in relation to any amount received or receivable by the Lenders under this
Guarantee, or as a result of such Guaranteeing Borrower withholding any amount
for Taxes in accordance with applicable law and increasing the amount payable to
the Lenders in accordance with paragraph (a) above, provided that the amount of
such credit is reasonably possible to calculate and that a certificate of the
Lenders or any of them as to the amount of any such credit shall be PRIMA FACIE
evidence of such amount.
Notwithstanding the foregoing, no Guaranteeing Borrower shall be required to pay
any Taxes or indemnify the Lenders in respect of Taxes payable to any
Governmental Body in Canada which are levied, withheld, deducted or paid on
payments to the Lenders by reason of the fact that any Lender is a Non-Resident
of Canada.
10.08 SUBROGATION AND REPAYMENT. Upon receipt by the Lenders of any payments by
any Guaranteeing Borrower on account of its liability under this Guarantee, such
Guaranteeing Borrower shall not be entitled to claim repayment of such amount
against any Other Borrower until the Guaranteed Obligations and all other
amounts due to the Lenders under this Agreement have been paid or repaid in
full. In the case of the liquidation, winding-up or bankruptcy of any Other
Borrower (whether voluntary or compulsory) or in the event that any Other
Borrower shall make a bulk sale of any of its assets within the provisions of
any bulk sales legislation or any composition with creditors or scheme of
arrangement, the Lenders shall have the right to rank in priority to each
Guaranteeing Borrower for the full claims of the Lenders in respect of the
Guaranteed Obligations and receive all dividends or other payments in respect
thereof until the Guaranteed Obligations have been paid in full, and the
Guaranteeing Borrowers shall continue to be liable for any balance of the
Guaranteed Obligations which may be owing to the Lenders by any Other Borrower.
If any amount shall be paid to any Guaranteeing Borrower on account of any
subrogation rights at any time when all the Guaranteed Obligations have not been
paid in full, such amount shall be held in trust for the benefit of the Lenders
and shall forthwith be paid to the Lenders to be credited and applied against
the Guaranteed Obligations, whether matured or unmatured.
10.09 POSTPONEMENT AND ASSIGNMENT. As security for the performance of its
obligations hereunder, each Guaranteeing Borrower assigns to the Lenders all
claims of such Guaranteeing
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Borrower against any Other Borrower and any other guarantors, and, except as
otherwise expressly permitted under this Agreement, subordinates and postpones
the payment of all such claims to the payment of the Guaranteed Obligations.
Each Guaranteeing Borrower shall hold all of its claims against each Other
Borrower and any other guarantors as agent and trustee of the Lenders and shall
collect, enforce and prove all such claims in accordance with this Agreement and
this Guarantee. Any monies received by any Guaranteeing Borrower in respect
thereof shall, upon the occurrence of any Event of Default, be paid over to the
Lenders. Without the prior written consent of the Lenders, no Guaranteeing
Borrower shall release or discharge any of its claims against any Other Borrower
or any other guarantor, permit the prescription of any such claims pursuant to
any Law, assign any such claims to any person other than the Lenders, or ask for
or obtain any security or negotiable paper for or other evidence of any such
claims except for the purpose of delivering the same to the Lenders.
10.10 RIGHTS ON SUBROGATION. If any Guaranteeing Borrower acquires any right of
subrogation by reason of a payment under or pursuant to this Guarantee, such
Guaranteeing Borrower shall not be entitled to vote as a Lender under the
provisions of this Agreement or otherwise until the Guaranteed Obligations and
all other amounts due to the Lenders under this Agreement have been paid or
repaid in full to the Lenders.
10.11 CONTINUING GUARANTEE. The obligations of each Guaranteeing Borrower under
this Guarantee constitute a continuing guarantee and shall remain in full force
and effect until payment in full of all of the Guaranteed Obligations. The
obligations of any Guaranteeing Borrower shall be reinstated if at any time any
payment of any of the Guaranteed Obligations is rescinded or must otherwise be
returned by the Lenders upon the insolvency, bankruptcy or reorganization of any
Other Borrower or otherwise, all as though such payment had not been made.
10.12 THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth in this
Guarantee, nothing herein is intended or shall be construed to confer upon or to
give any person other than the Lenders any right, remedy or claim under or by
reason of the obligations of the Guaranteeing Borrowers under this Guarantee.
10.13 NO MODIFICATION. No amendment or other modification of this Guarantee
shall be effective unless in writing and signed by the Lenders in accordance
with the provisions of this Agreement.
10.14 ADDITIONAL GUARANTEE. This Guarantee is in addition and supplemental to,
and not in substitution for, all other guarantees, assignments and postponement
agreements, whether or not in the same form as this Guarantee, now or hereafter
held by the Lenders.
10.15 REMEDIES CUMULATIVE. The rights, remedies and recourses of the Lenders
under this Guarantee and any other Credit Facility Documents are cumulative and
do not exclude any other rights, remedies and recourses that they may have.
10.16 NO WAIVERS, REMEDIES. No failure on the part of the Lenders to exercise,
and no delay in exercising, any right under this Guarantee shall operate as a
waiver thereof, nor shall any
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single or partial exercise of any right under this Guarantee preclude any other
or further exercise thereof or the exercise of any other right, nor shall any
waiver of one provision be deemed to constitute a waiver of any other provision
(whether or not similar). No waiver of any of the provisions of this Guarantee
shall be effective unless it is in writing duly executed by the waiving party.
The remedies herein provided are cumulative and not exclusive of any other
remedies provided by law.
10.17 TIME OF ESSENCE. Time shall be of the essence of this Guarantee.
ARTICLE 11
SECURITY
11.01 SECURITY. As continuing collateral security for the performance of all
obligations of the Borrowers to the Lenders under this Agreement and the payment
when due of all Outstandings under the Credit Facilities and all other amounts
from time to time owing to the Lenders by the Borrowers, including interest,
interest on overdue interest, Stamping Fees and other fees and expenses, as
continuing collateral security for the obligations of the Guaranteeing Borrowers
to the Lenders under Article 10, and as continuing collateral security for the
performance of all obligations of the Borrowers to the Lenders under Treasury
Contracts (including Treasury Contract Breakage Costs), the Group Entities shall
execute and deliver to the Lenders the following documents:
(a) the Security Documents; and
(b) such other agreements, assignments, certificates, undertakings,
declarations and other supporting documentation (including
consents of third parties to any hypothec, assignment, mortgage,
charge or security interest) as the Lenders may reasonably require
in furtherance of the above.
11.02 CONTINUED PERFECTION OF SECURITY. The Group Entities shall take such
action and execute and deliver to the Lenders such agreements, conveyances,
deeds and other documents and instruments as the Lenders may reasonably request
for the purpose of establishing, perfecting, preserving and protecting the
Security Documents, in each case forthwith upon request by the Lenders and in
form and substance satisfactory to the Lenders, acting reasonably.
11.03 SET-OFF. In addition to any rights now or hereafter available under
applicable Law and not by way of limitation of any such rights, the Lenders are
authorized at any time or from time to time after a declaration of acceleration
under Section 12.02, without notice to the Borrowers, to set-off, compensate and
to appropriate and to apply any and all money deposits, matured or unmatured,
general or special, held for or in the name of any Borrower and any other
indebtedness or liability at any time owing or payable by any Lender to or for
the credit of or the account of any Borrower against and on account of the
obligations and liabilities of the Borrowers due and payable to the Lenders
under this Agreement, irrespective of currency and whether or not obligations,
liabilities or claims of any Borrower are contingent or unmatured.
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11.04 CONFLICT. In the event of a conflict between the provisions of this
Agreement and the provisions of any Security Document, the provisions of this
Agreement shall prevail.
ARTICLE 12
EVENTS OF DEFAULT
12.01 EVENTS OF DEFAULT. An Event of Default shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or by operation of law or otherwise) if:
(a) PAYMENT OF PRINCIPAL. The Borrowers shall fail to pay all or any
part of any Borrowing under this Agreement as and when the same
shall become due and payable, whether at stated maturity, by
acceleration or otherwise, and such default shall have continued
for a period of five Business Days after written notice from the
Lenders or any of them specifying such default;
(b) PAYMENT OF INTEREST AND OTHER AMOUNTS. The Borrowers shall fail to
pay any interest, Stamping Fee or any other amount due under this
Agreement (other than a Borrowing described in paragraph (a)) as
and when the same shall become due and payable, and such default
shall have continued for a period of five Business Days after
written notice from the Lenders or any of them specifying such
default;
(c) FAILURE TO OBSERVE FINANCIAL COVENANTS. The Borrowers shall fail
to perform or observe any of their obligations or undertakings
contained in Sections 8.01(l), (m), (n), (o), (p), (q) and (r)
hereof;
(d) FAILURE TO OBSERVE OTHER COVENANTS. Any of the Group Entities
shall fail to perform or observe any of its other obligations or
undertakings under this Agreement or any of the other Credit
Facility Documents and such default shall have continued for a
period of at least 30 days after a Responsible Officer of a
Borrower knows or should have known of such default;
(e) INCORRECT REPRESENTATION OR WARRANTY. Any representation or
warranty made by any of the Group Entities in this Agreement or in
any certificate or other instrument delivered hereunder or
pursuant hereto or in connection with any provision hereof shall
prove to be false or incorrect in any material respect on the date
as of which made;
(f) CROSS-DEFAULT. A default or event of default occurs under any
agreement, indenture or other instrument relating to other
Indebtedness of any of the Group Entities exceeding U.S.$500,000
(or the equivalent thereof in any other currency) or under any
foreign exchange, currency or interest rate swap agreement having
a notional principal amount exceeding U.S.$500,000 (or the
equivalent thereof
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in any other currency) beyond any applicable grace period
contained in the agreement, indenture or other instrument relating
to such Indebtedness;
(g) DISSOLUTION PROCEEDINGS. Proceedings are commenced for the
dissolution, liquidation or winding-up of any of the Group
Entities, other than a dissolution, liquidation or winding-up
required in connection with an arrangement or reorganization of
the Group Entities and holding companies thereof permitted under
this Agreement, unless such proceedings are being actively and
diligently contested in good faith by such Group Entity and such
proceedings are stayed within 30 days of being commenced;
(h) BANKRUPTCY OR INSOLVENCY. Any of the Group Entities is adjudged or
declared bankrupt or becomes insolvent or makes an assignment for
the benefit of creditors, or admits in writing its inability to
pay its debts generally as they become due, or petitions or
applies to any tribunal for the appointment of a receiver or
trustee for it or for any substantial part of its property, or
commences any proceedings relating to it under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction whether now or hereafter in effect,
or by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding for it or for any substantial
part of its property;
(i) APPOINTMENT OF RECEIVER. A receiver, receiver and manager,
receiver-manager, custodian, liquidator or trustee (or any person
with like powers) shall be appointed for all or any substantial
part of the property of any of the Group Entities, provided that
such appointment shall not constitute an Event of Default if and
for so long as:
(i) such Group Entity obtains within two Business Days of such
appointment an order of a court of competent jurisdiction
staying such appointment and such order (or a replacement
thereof to similar effect) remains in full force and
effect; or
(ii) such Group Entity forthwith bona fide disputes and
continues to dispute such appointment and provides or
causes to be provided to the Lenders such security as the
Lenders shall reasonably require, and such appointment is
stayed or vacated within 30 days;
(j) ISSUANCE OF EXECUTION. A writ, execution or attachment or similar
process is issued or levied against all or a substantial portion
of the property of any of the Group Entities in connection with
any judgment against such Group Entity in an amount in excess of
U.S.$1,000,000 (or the equivalent thereof in any other currency),
unless being actively and diligently contested by such Group
Entity in good faith and such Group Entity has provided such
security to the Lenders as the Lenders may reasonably require and
such writ, execution, attachment or similar
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process is released, bonded, satisfied, discharged, vacated or
stayed within 60 days after its entry, commencement or levy;
(k) ACTION BY ENCUMBRANCER. An encumbrancer or lienor takes possession
of any substantial part of the properties or assets of any Group
Entity, unless such Group Entity disputes and continues to dispute
such possession in good faith and provides to the Lenders such
security for the payment of such encumbrance or lien as the
Lenders shall reasonably require;
(l) EXPROPRIATION. An order is made or legislation enacted by any
competent body having authority for the expropriation,
confiscation, forfeiture, escheating, other taking or compulsory
divestiture, whether or not with compensation, of all or a
significant portion of the consolidated assets of the Group
Entities and such order or legislation remains in effect and has
not been stayed by a court of competent jurisdiction for a period
of more than 30 days from the date of pronouncement of the order
or enactment of the legislation, as the case may be;
(m) UNSATISFIED JUDGMENTS OR TAX ASSESSMENTS. Judgment in excess of
U.S.$1,000,000 (or the equivalent thereof in any other currency)
is rendered against a Group Entity in respect of which such Group
Entity does not have insurance coverage or any income tax
reassessment in excess of U.S.$1,000,000 (or the equivalent
thereof in any other currency) is made against a Group Entity, and
any such judgment or tax reassessment remains undischarged or
unsatisfied after the time for appeal has expired without such
Group Entity having appealed the judgment or reassessment and
obtained a stay of execution of the judgment, provided that such
judgment or reassessment shall not constitute an Event of Default
if such Group Entity provides or causes to be provided to the
Lenders such security as the Lenders shall require for the payment
of such judgment or reassessment;
(n) UNENFORCEABLE OBLIGATION. Any material obligation or other
provision of any Group Entity in this Agreement or in any of the
other Credit Facility Documents terminates or ceases to be or is
declared by a court of competent jurisdiction not to be a legally
binding or enforceable obligation of such Group Entity;
(o) SUSPENSION OF BUSINESS. Any voluntary or involuntary suspension of
the business of any Group Entity, or any substantial part thereof,
shall occur, other than temporary weather-related suspensions;
(p) REPAYMENT OF SENIOR SUBORDINATED NOTES. SSWG repays all or any
portion of the Senior Subordinated Notes (other than with the
proceeds of a Borrowing under the Term Facility) and such
repayment is not offset in its entirety by the issuance of equity
or other subordinated Indebtedness by SSWG on terms and conditions
satisfactory to the Lenders, acting reasonably, or is otherwise
approved by the Lenders;
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(q) CHANGE HAVING MATERIAL ADVERSE EFFECT. There shall occur, in the
determination of the Lenders, acting reasonably, a change having a
Material Adverse Effect, written notice of which has been given by
the Lenders or any of them to the Borrower; or
(r) CHANGE OF CONTROL. There shall occur a Change of Control.
12.02 CANCELLATION AND ACCELERATION. Upon the occurrence of an Event of Default
and for so long as such Event of Default shall continue, the Lenders may, by
notice to the Borrowers:
(a) cancel the Credit Facilities and terminate the obligations of the
Lenders to make any further Accommodations;
(b) declare the principal amount of all outstanding Accommodations
made to the Borrowers and all interest and fees accrued thereon
and all other amounts payable under this Agreement and the other
Credit Facility Documents (including liabilities for Bankers'
Acceptances which have not yet matured) to be forthwith due and
payable, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the
Borrowers; and
(c) enforce all rights and remedies provided in the Security
Documents.
12.03 REMEDIES CUMULATIVE. For greater certainty, it is expressly understood and
agreed that the respective rights and remedies of the Lenders under this
Agreement are cumulative and are in addition to and not in substitution for any
rights or remedies provided by law or by equity; and any single or partial
exercise by the Lenders of any right or remedy for a default or breach of any
term, covenant, condition or agreement contained in this Agreement shall not be
deemed to be a waiver of or to alter, affect or prejudice any other right or
remedy to which the Lenders may be lawfully entitled for such default or breach.
12.04 WAIVERS. The Lenders may, by written instrument, at any time and from time
to time waive any breach by the Borrowers of any of the covenants or Events of
Default herein. No course of dealing between the Borrowers and the Lenders nor
any delay in exercising any rights under this Agreement, the Security Documents
or any of the other Credit Facility Documents shall operate as a waiver of any
rights of the Lenders.
ARTICLE 13
MISCELLANEOUS
13.01 RECORDS. The unpaid principal amount of the Accommodations, the unpaid
interest accrued thereon, the interest rate or rates applicable to any unpaid
principal amounts, the duration of such applicability, the date of any Advance
or repayment, the date of issue, Face Amount and maturity of all Bankers'
Acceptances and the Commitment shall at all times be ascertained from the
records of the Lenders, which shall be PRIMA FACIE evidence, absent
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demonstrable error, fraud, dishonesty or improper conduct, and a certificate of
any officer of any of the Lenders as to such records shall be PRIMA FACIE
evidence of such records.
13.02 AMENDMENTS. Any amendment or waiver of any provision of this Agreement or
of any of the other Credit Facility Documents, any consent to any departure by
the Borrowers therefrom, and any consent or approval contemplated to be given by
the Lenders under this Agreement, shall be effective and binding on the Lenders
only if in writing and signed by the Lenders.
13.03 NOTICES. All notices and other communications provided for hereunder or
under any Credit Facility Document shall, except as otherwise permitted
hereunder, be in writing personally delivered:
(a) if to the Borrowers:
(i) if to SSWG or SSW at the following address:
Sparkling Spring Water Group Limited
Sparkling Spring Water Limited
19 Fielding Avenue
Dartmouth, Nova Scotia
B3B 1C9
Fax no.: (902) 468-2751
Attention: President
(ii) if to SSUK at the following address:
Nature Springs Water Company Limited
Unit 5, Alexandra Way
Ashchurch Business Centre
Tewkesbury, Gloucestershire
UK GL20 8NB
Fax no.: 011-44-1684-273835
Attention: President
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(iii) if to SWUS at the following address:
Spring Water, Inc.
c/o Mountain Fresh Bottled Water
9065 South East Jansen
P.O. Box 2590
Clackamas, Oregon
U.S.A. 97015
Fax no.: (503) 657-0527
Attention: Northwest Division Controller
with a copy to:
CF Capital Corporation
c/o 200 Sea Pines Road
Bellingham, Washington
U.S.A. 98226
Fax no.: (360) 671-2604
Attention: Chief Financial Officer
and with an additional copy to:
Stewart McKelvey Stirling Scales
Purdy's Wharf Tower One
1959 Upper Water Street, P.O. Box 997
Halifax, Nova Scotia
B3J 2X2
Fax no.: (902) 420-1417
Attention: L.J. Stordy
(b) if to the Lenders:
(i) if to TD Bank at the following address:
The Toronto-Dominion Bank
Toronto Dominion Tower Branch
700 West Georgia Street, Pacific Centre
P.O. Box 10001
Vancouver, British Columbia
V7Y 1A2
Fax no.: (604) 654-3489
Attention: Vice President
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(ii) if to TDUS at the following address:
Toronto Dominion (Texas), Inc.
Suite 1700, 909 Fannin Street
Houston, Texas
U.S.A. 77010
Fax no.: (713) 951-9921
Attention: Jimmy Simien
(iii) if to TDUK at the following address:
The Toronto-Dominion Bank, London Branch
Triton Court, 14/18 Finsbury Square
London, England
EC2A 1DB
Fax no.: 011-44-171-638-0006
Attention: Denise Payne
or sent by facsimile transmission or similar means of recorded communication to
the applicable address or to such other address as a party hereto may from time
to time designate to the other parties hereto in such manner. All such notices
and communications shall, when required or permitted to be delivered or
confirmed hereunder by facsimile transmission, be effective when so delivered or
confirmed.
13.04 NO WAIVER; REMEDIES. No failure on the part of the Lenders or the
Borrowers to exercise, and no delay in exercising, any right under any of the
Credit Facility Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any of the Credit Facility
Documents preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by Law.
13.05 EXPENSES. The Borrowers shall promptly pay all costs and expenses of the
Lenders, including, without limitation, all reasonable out-of-pocket expenses,
disbursements and the fees and expenses of counsel for the Lenders, incurred in
connection with:
(a) the preparation, negotiation, execution, registration and
administration of this Agreement, the Security Documents, the
other Credit Facility Documents or any agreement or instrument
contemplated hereby or thereby;
(b) the enforcement or preservation of rights under this Agreement,
the Security Documents, the other Credit Facility Documents or any
agreement or instrument contemplated hereby or thereby;
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(c) any requested amendments, waivers or consents or matters initiated
by the Borrowers pursuant to or in respect of the provisions
hereof; and
(d) the collection of Advances or Bankers' Acceptances or any
litigation, proceeding or dispute in any way relating to the
Advances or Bankers' Acceptances.
The Borrowers shall pay interest on any amount due under this Section 13.05 that
remains unpaid more than two Business Days after the Lenders or any of them
notify the Borrowers of such amount, at the U.S. Prime Rate plus 2.25% per annum
until such amount is paid.
13.06 MAINTENANCE OF ACCOUNTS. The Borrowers will maintain all of their
operating accounts with branches of the Lenders, and the Lenders shall have the
right to provide all of the ancillary non-credit banking services, such as cash
management and payroll services, to the extent the Borrowers require such
services from a third party, provided the fees payable for, and the quality and
scope of, such services are competitive.
13.07 TAXES. Any and all payments by the Borrowers under this Agreement and the
other Credit Facility Documents shall be made free and clear of and without
deduction or withholding for Taxes unless such Taxes are required by Law to be
deducted or withheld. If the Borrowers are required by Law to deduct or withhold
any Taxes from or in respect of any sum payable under this Agreement or the
other Credit Facility Documents:
(a) the sum payable shall be increased as may be necessary so that
after making all required deductions or withholdings (including
deductions or withholdings applicable to additional amounts paid
under this Section) the Lenders receive an amount equal to the sum
they would have received if no deduction or withholding had been
made;
(b) the Borrowers shall make such deductions or withholdings; and
(c) the Borrowers shall pay the full amount deducted or withheld to
the relevant taxation or other authority in accordance with
applicable Law.
The Borrowers shall indemnify and save harmless the Lenders for the full amount
of Taxes levied by any jurisdiction in Canada, the United States of America or
the United Kingdom on, or in relation to, any sum received or receivable
hereunder by the Lenders (other than taxes imposed on the income or capital of
the Lenders). Payment under this indemnification shall be made within 30 days
from the date the Lenders or any of them make written demand therefor. A
certificate as to the amount of such Taxes submitted to the Borrowers by the
Lenders or any of them shall be PRIMA FACIE evidence, absent demonstrable error,
of the amount due from the Borrowers to the Lenders. Any such certificate shall
refer to the provision of Law under which such Taxes are levied and shall
contain an explanation relating to and a calculation of the amount due from the
Borrowers. The Lenders shall provide to the Borrowers the benefit of any tax
credit received by the Lenders as a result of the Borrowers indemnifying the
Lenders for Taxes levied on or in relation to any amount received or receivable
by the Lenders hereunder, or as a result of the Borrowers withholding any amount
for Taxes in accordance with applicable law
<PAGE>
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and increasing the amount payable to the Lenders in accordance with paragraph
(a) above, provided that the amount of such credit is reasonably possible to
calculate and that a certificate of the Lenders or any of them as to the amount
of any such credit shall be PRIMA FACIE evidence of such amount.
Notwithstanding the foregoing, no Borrower shall be required to pay any Taxes or
indemnify the Lenders in respect of Taxes payable to any Governmental Body in
Canada which are levied, withheld, deducted or paid on payments to the Lenders
by reason of the fact that any Lender is a Non-Resident of Canada.
The obligations of the Borrowers under this Section 13.07 shall survive the
payment in full of the Outstandings and interest thereon.
13.08 INCREASED COSTS. If the introduction of or any change in any Law,
regulation, treaty, official directive or regulatory requirement now or
hereafter in effect (whether or not having the force of law) on in the
interpretation or application thereof by any court or by any judicial,
governmental or administrative authority charged with the interpretation or
administration thereof, or if compliance by the Lenders with any request from
the Bank of Canada or any other central bank or fiscal, monetary or other
authority (whether or not having the force of law):
(a) subjects any of the Lenders to any tax, or causes the withdrawal
or termination of a previously granted exemption with respect to
any tax, or changes the basis of taxation of payments due to any
of the Lenders, or increases any existing tax on payments of
principal, interest or other amounts payable by the Borrowers to
any of the Lenders under this Agreement (other than taxes of
application to the general income of the Lenders and taxes on
capital);
(b) imposes, modifies or deems applicable any reserve, special
deposit, regulatory or similar requirement against assets held by,
or deposits in or for the account of, or loans by, or any other
acquisition of funds for loans made by any of the Lenders or
Bankers' Acceptances created by the Lenders;
(c) imposes on any of the Lenders or expects there to be maintained by
any of the Lenders any capital adequacy or additional capital
requirement (including, without limiting the generality of the
foregoing, a requirement which affects any of the Lenders'
allocation of capital resources to its obligations) in respect of
the obligations of any of the Lenders hereunder or, without
limiting the generality of the foregoing, imposes any other
condition or requirement with respect to this Agreement or to the
maintenance by any of the Lenders of a contingent liability with
respect to Bankers' Acceptances created by the Lenders pursuant to
this Agreement.
and the result of such occurrence is, in the sole determination of any Lender,
acting reasonably, to increase the cost to such Lender or to reduce the income
received by such Lender in respect of any portion of the Advances or Bankers'
Acceptances, the Borrowers shall pay to such Lender that amount which such
Lender, acting reasonably, estimates will compensate it for such
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additional cost or reduction in income (the "Compensation"). Upon such Lender
having determined that it is entitled to Compensation, and provided that such
Lender has made or proposes to make similar requests of other borrowers in the
same situation, such Lender shall promptly notify the Borrowers and shall
provide the Borrowers with a certificate of such Lender setting forth the amount
of the Compensation and the basis for it. In preparing such certificate the
Lender shall not be required to "match" or isolate particular transactions or
credit facilities and shall be entitled to use estimates and averages. Absent
demonstrable error such certificate shall be PRIMA FACIE evidence of the amount
of the Compensation and shall be binding on the Borrowers, and if the amount of
Compensation set forth therein shall not be paid by the Borrowers to such Lender
within seven Business Days after notice thereof, such amount shall, depending on
the currency in which the Compensation was expressed, be deemed to be either a
Canadian Prime Rate Advance or a U.S. Base Rate Advance under the Operating
Facility and shall bear interest calculated and payable as provided in this
Agreement. If, as a result of events (other than the receipt of Compensation)
occurring subsequent to the receipt by such Lender of any Compensation, the
additional cost or the reduction in income was not suffered by such Lender, such
Lender will forthwith refund to the Borrowers the Compensation and any interest
paid thereon.
13.09 ENVIRONMENTAL INDEMNITY. The Borrowers will protect, indemnify and hold
the Lenders and all directors, officers, employees and agents of each of the
Lenders harmless from and against any and all actual or potential claims,
liabilities, damages (including consequential damages), losses, fines,
penalties, sanctions, judgments, awards, costs and expenses whatsoever
(including, without limitation, costs and expenses of investigating, denying or
defending any of the foregoing and costs and expenses for preparing any
necessary environmental assessment report or other such reports) which arise out
of or relate in any way to:
(a) the presence, use, handling, production, transportation, storage,
release, deposit, discharge or disposal of any Hazardous
Materials, contaminants, wastes or other substances in, on or
about any properties or assets owned, operated or occupied by SSWG
and its Subsidiaries, whether by SSWG, its Subsidiaries or any
other person;
(b) any remedial action taken by the Lenders in connection with any
matter referred to in paragraph (a), including without limitation
any repair, clean-up, remediation or detoxification of any of such
properties or assets and the preparation of any closure or other
required plans; and
(c) any breach by SSWG or any of its Subsidiaries under any
Environmental Law.
If any Hazardous Materials are caused to be removed by SSWG or any of its
Subsidiaries, the Lenders or any other indemnified party, then such Hazardous
Materials will be and remain the property of SSWG or such Subsidiary, as the
case may be, and the Borrowers will assume any and all liability for such
removed Hazardous Materials. The Borrowers understand that their liability to
the indemnified parties under this Section will survive the full payment and
satisfaction of all amounts owing under this Agreement as if this indemnity were
separate and distinct from this Agreement.
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13.10 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder to any Lender from the
Original Currency into the Judgment Currency, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures such Lender
could purchase the Original Currency with the Judgment Currency on the Business
Day preceding that on which final judgment is paid or satisfied. The obligations
of the Borrowers in respect of any sum due in the Original Currency to a Lender
under any of the Credit Facility Documents shall, notwithstanding any judgment
in any Judgment Currency, be discharged only to the extent that on the Business
Day following receipt by such Lender of any sum adjudged to be so due in such
Judgment Currency, such Lender may in accordance with normal banking procedures
purchase the Original Currency with such Judgment Currency. If the amount of the
Original Currency so purchased is less than the sum originally due to such
Lender in the Original Currency, the Borrowers agree, as a separate obligation
and notwithstanding any such judgment, to indemnify such Lender against such
loss, and if the amount of the Original Currency so purchased exceeds the sum
originally due to such Lender in the Original Currency such Lender agrees to
remit such excess to the Borrowers.
If any Group Entity that is resident in the United States is required to
pay an amount to any Lender that is not resident in the United States (whether
pursuant to this Agreement or any guarantee executed by such Group Entity), the
Lender shall provide the Group Entity with such forms or other documents as the
Group Entity may reasonably request to reduce or eliminate withholding tax in
the United States otherwise applicable to such payment.
13.11 GOVERNING LAW. This Agreement and the Credit Facility Documents shall be
governed by, and construed in accordance with, the laws of the Province of
British Columbia and of Canada applicable therein and shall be treated in all
respects as British Columbia contracts.
13.12 CONSENT TO JURISDICTION. The Borrowers and the Lenders hereby irrevocably
submit to the jurisdiction of any British Columbia court sitting in Vancouver,
British Columbia, in any action or proceeding arising out of or relating to this
Agreement or any other Credit Facility Document, and each of them hereby
irrevocably agrees that all claims in respect of any such action or proceeding
may be heard and determined in such British Columbia court. Each of them hereby
irrevocably waives, to the fullest extent each may effectively do so, the
defence of an inconvenient forum to the maintenance of such action or
proceeding. Nothing in this Section shall affect the right of the Lenders to
serve legal process in any other manner permitted by Law or affect the right of
the Lenders to bring any action or proceeding against the Borrowers or their
property in the courts of other jurisdictions.
13.13 SUCCESSORS AND ASSIGNS. This Agreement shall become effective when it has
been executed by the Borrowers and the Lenders and thereafter shall be binding
upon and enure to the benefit of the Borrowers, the Lenders and their respective
successors and permitted assigns. The Borrowers shall not have the right to
assign their rights or obligations hereunder or any interest herein without the
prior consent of the Lenders. The Lenders may assign all or any part of the
Commitment and the Outstandings under this Agreement upon notice to the
Borrowers, provided that:
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(a) TD Bank shall not assign its interest in this Agreement to any
person that is a Non- Resident of Canada;
(b) TDUS shall not assign its interest in this Agreement to any person
that is not a resident of the United States; and
(c) TDUK shall not assign its interest in this Agreement to any person
that is not:
(i) a "bank" within the meaning of section 840(a) INCOME AND
CORPORATIONS TAXES ACT 1998; and
(ii) within the charge to United Kingdom corporation tax;
and the Borrowers shall not be responsible for any stamp duty
payable on an assignment by TDUK.
13.14 CONFLICT. In the event of a conflict between the provisions of this
Agreement and the provisions of any other Credit Facility Document, the
provisions of this Agreement shall prevail.
13.15 SEVERABILITY. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
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13.16 PRIOR UNDERSTANDINGS. This Agreement supersedes all prior understandings
and agreements, whether written or oral, among the parties hereto relating to
the transactions provided for herein.
13.17 TIME OF ESSENCE. Time shall be of the essence hereof.
13.18 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and which, taken together, shall constitute
one and the same instrument, and any executed counterpart may be delivered by
facsimile.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers, as of the date first above
written.
SPARKLING SPRING WATER GROUP LIMITED
Per: /s/ Dillon Schickli
--------------------------------
Authorized Signatory
SPARKLING SPRING WATER LIMITED
Per: /s/ Dillon Schickli
--------------------------------
Authorized Signatory
NATURE SPRINGS WATER COMPANY LIMITED
Per: /s/ Dillon Schickli
--------------------------------
Authorized Signatory
SPRING WATER, INC.
Per: /s/ Dillon Schickli
--------------------------------
Authorized Signatory
<PAGE>
-82-
THE TORONTO-DOMINION BANK
Per: /s/ [ILLEGIBLE]
--------------------------------
Authorized Signatory
TORONTO DOMINION (TEXAS), INC.
Per: /s/ Jimmy Simien
--------------------------------
Authorized Signatory
Jimmy Simien
Vice President
THE TORONTO-DOMINION BANK, LONDON BRANCH
Per: /s/ Denise Payne
--------------------------------
Authorized Signatory
<PAGE>
APPENDIX 1
MANDATORY LIQUID ASSET COST
1. The Mandatory Liquid Asset Cost to be included in Sterling Libor with
respect to a Sterling Libor Advance shall, subject to the following, be the
percentage per annum calculated in accordance with the following formula:
BY + L(Y-X) + S(Y-Z)
--------------------
100 - (B + S)
where, as of the day of the calculation:
B = The percentage of TDUK's eligible liabilities which the Bank
of England then requires TDUK to hold on a non-interest bearing
deposit account in accordance with its cash ratio requirements.
Y = The rate at which Sterling deposits in an amount comparable
with such Sterling Libor Advance are offered by TDUK to leading
banks in the London interbank market at or about 11:00 a.m.
(London time) on such day for the relevant period.
L = The percentage of eligible liabilities which (as a result of
the requirements of the Bank of England) TDUK maintains as secured
money with members of the London Discount Market Association or in
certain marketable or callable securities approved by the Bank of
England, which percentage shall (in the absence of evidence that
any other figure is appropriate) be conclusively presumed to be
5%.
X = The rate at which secured Sterling deposits in an amount
comparable to such Sterling Libor Advance may be placed by TDUK
with members of the London Discount Market Association at or about
11:00 a.m. (London time) on such date for the relevant period or,
if greater, the rate at which Sterling bills of exchange (of an
amount comparable to such Sterling Libor Advance and of a tenor
equal to the relevant period) eligible for rediscounting at the
Bank of England can be discounted in the London Discount Market at
or about 11:00 a.m. (London time) on that date.
S = The percentage of TDUK's eligible liabilities which the Bank
of England required TDUK to place as a special deposit.
Z = The percentage interest rate per annum allowed by the Bank
of England on special deposits.
2. For the purposes of this Appendix 1:
(a) "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" shall bear the
meanings ascribed to such terms from time to time by the Bank of
England;
<PAGE>
- 2 -
(b) "RELEVANT PERIOD" in relation to each Interest Period means:
(i) if it is three months or less, that Interest Period; or
(ii) if it is more than three months, three months;
3. In the application of the above formula, B, Y, L, X, S and Z will be
included in this formula as figures and not as percentages, e.g. if B =
0.5% and Y = 15%, BY will be calculated as 0.5 x 15 and not as 0.5% x
15%.
4. The additional rate computed by TDUK in accordance with this Appendix 1
shall, if not so already, be rounded upward to four decimal places.
5. In the event of a change in circumstances (including the imposition of
alternative or additional official requirements) which renders the above
formula inapplicable, TDUK shall notify the Borrowers of the manner in
which the additional rate shall thereafter be determined, which shall
reflect the additional costs following such change incurred by TDUK at
such time and from time to time.
<PAGE>
APPENDIX 2
INTEREST RATES AND FEES
1. The Margin applicable to Canadian Prime Rate Advances, U.S. Base Rate
Advances, U.S. Prime Rate Advances, U.S. Libor Advances, Sterling Libor
Advances, Alternate Sterling Rate Advances, the Stamping Fees applicable to
Bankers' Acceptances and the fees payable on Letters of Credit and Guarantee
Letters under the Operating Facility and the Acquisition Facility, where
applicable, shall be determined based on the Senior Debt to Adjusted
Consolidated EBITDA Ratio as at each fiscal quarter end of the Borrower as
follows:
(a) If the Senior Debt to Adjusted Consolidated EBITDA Ratio is
greater than or equal to 2.0 to 1 and less than or equal to 2.5 to
1:
Margin for Canadian Prime Rate Advances 1.75% per annum
Margin for U.S. Base Rate Advances 1.75% per annum
Margin for U.S. Prime Rate Advances 1.75% per annum
Margin for U.S. Libor Advances 3.25% per annum
Margin for Sterling Libor Advances 3.25% per annum
Margin for Alternate Sterling Rate Advances 3.25% per annum
Stamping Fee 3.25% per annum
Letter of Credit/Guarantee Letter Fee 1.00% per annum
(b) If the Senior Debt to Adjusted Consolidated EBITDA Ratio is less
than 2.0 to 1:
Margin for Canadian Prime Rate Advances 1.25% per annum
Margin for U.S. Base Rate Advances 1.25% per annum
Margin for U.S. Prime Rate Advances 1.25% per annum
Margin for U.S. Libor Advances 2.75% per annum
Margin for Sterling Libor Advances 2.75% per annum
Margin for Alternate Sterling Rate Advances 2.75% per annum
Stamping Fee 2.75% per annum
Letter of Credit/Guarantee Letter Fee 1.00% per annum
2. The Margin applicable to Canadian Prime Rate Advances, U.S. Prime Rate
Advances, U.S. Libor Advances and the Stamping Fees applicable to Bankers'
Acceptances under the Term Facility shall be as follows:
Margin for Canadian Prime Rate Advances 2.00% per annum
Margin for U.S. Base Rate Advances 2.00% per annum
Margin for U.S. Libor Advances 3.50% per annum
Stamping Fee 3.50% per annum
<PAGE>
SCHEDULE 1
BORROWING NOTICE
[CANADIAN PRIME RATE ADVANCES, U.S. BASE RATE ADVANCES, BANKERS' ACCEPTANCES
AND (TERM FACILITY) U.S. LIBOR ADVANCES]
TO: The Toronto-Dominion Bank
Toronto Dominion Tower Branch
700 West Georgia Street, Pacific Centre
P.O. Box 10001
Vancouver, British Columbia
V7Y 1A2
Attention: Credit Assistant - Loan Accounting
Reference is made to the Amended and Restated Credit Agreement dated as
of May 17, 1999 between Sparkling Spring Water Group Limited, Sparkling Spring
Water Limited, Nature Springs Water Company Limited, Spring Water, Inc., The
Toronto-Dominion Bank, Toronto Dominion (Texas), Inc. and The Toronto-Dominion
Bank, London Branch (the "Credit Agreement"). Capitalized terms in this
Borrowing Notice have the meanings ascribed to such terms in the Credit
Agreement.
Notice is hereby given pursuant to Section 3.03, 4.02(b) or 4.09 of the
Credit Agreement (as applicable) that the undersigned requests a Canadian Prime
Rate Advance, a U.S. Base Rate Advance, a Drawing of Bankers' Acceptances or (in
the case only of the Term Facility) a U.S. Libor Advance or a continuation of a
U.S. Libor Advance for an additional Interest Period, under the
___________________________ [specify Credit Facility], on the following basis:
1. CANADIAN PRIME RATE ADVANCE [complete only if applicable]
(a) The date of the Canadian Prime Rate Advance will be
_________________________________.
(b) The principal amount of the Canadian Prime Rate Advance will be
Cdn. $___________________________.
2. U.S. BASE RATE ADVANCE [complete only if applicable]
(a) The date of the U.S. Base Rate Advance will be
_________________________________.
(b) The principal amount of the U.S. Base Rate Advance will be U.S.
$___________________________.
3. U.S. LIBOR ADVANCE [complete only if applicable - Term Facility only]
(a) The date of the U.S. Libor Advance will be ______________________.
<PAGE>
- 2 -
(b) The principal amount of the U.S. Libor Advance will be
U.S.$___________________.
(c) The initial Interest Period applicable to the U.S. Libor Advance
will be ___________________________ [specify period pursuant to
Section 3.07].
4. CONTINUATION OF U.S. LIBOR ADVANCE [complete only if applicable - Term
Facility only]
(a) The last day of the Interest Period applicable to the relevant
U.S. Libor Advance is ____________________________.
(b) The principal amount of U.S. $_______________________ of such U.S.
Libor Advance is to continue as such for a further period of
_____________________ [specify period pursuant to Section 3.07].
5. DRAWING OF BANKERS' ACCEPTANCES [complete only if applicable]
(a) The date of the Drawing will be _________________________.
(b) The aggregate Face Amount of Drafts to be accepted will be Cdn.
$___________________________.
(c) The maturity date for the Bankers' Acceptances created by the
acceptance of such Drafts will be _____________________,
representing a term to maturity of _____________________ [insert
number of months].
If Bankers' Acceptances are requested under this Borrowing Notice, the
undersigned confirms that TD Bank is authorized to sign and complete drafts
pursuant to the Power of Attorney dated May 12, 1998 granted by the undersigned
to TD Bank and to deliver such Bankers' Acceptances in accordance with
instructions of the undersigned contained herein or any subsequent written
notice to TD Bank.
The undersigned confirms that the conditions to the availability of
Borrowings set forth in Section 5.04 of the Credit Agreement have been complied
with or satisfied at the date hereof.
DATED: ___________________________
[Insert name of Borrower]
By: _______________________
Title:
<PAGE>
SCHEDULE 2
BORROWING NOTICE
[U.S. PRIME RATE ADVANCES AND
(OPERATING FACILITY AND ACQUISITION FACILITY) U.S. LIBOR ADVANCES]
TO: Toronto Dominion (Texas), Inc.
c/o The Toronto-Dominion Bank
Toronto Dominion Tower Branch
700 West Georgia Street, Pacific Centre
P.O. Box 10001
Vancouver, British Columbia
V7Y 1A2
Attention: Credit Assistant - Loan Accounting
COPY TO: Toronto Dominion (Texas), Inc.
Suite 1700
909 Fannin Street
Houston, Texas
U.S.A. 77010
Attention: Jimmy Simien
Reference is made to the Amended and Restated Credit Agreement dated as
of May 17, 1999 between Sparkling Spring Water Group Limited, Sparkling Spring
Water Limited, Nature Springs Water Company Limited, Spring Water, Inc., The
Toronto-Dominion Bank, Toronto Dominion (Texas), Inc. and The Toronto-Dominion
Bank, London Branch (the "Credit Agreement"). Capitalized terms in this
Borrowing Notice have the meanings ascribed to such terms in the Credit
Agreement.
Notice is hereby given pursuant to Section 3.03 or 3.05 of the Credit
Agreement (as applicable) that the undersigned requests a U.S. Prime Rate
Advance or a U.S. Libor Advance or a continuation of a U.S. Libor Advance for an
additional Interest Period, under the ___________________________ [specify
Credit Facility], on the following basis:
1. ADVANCE [complete only if applicable]
(a) The date of the Advance will be ______________________.
(b) The Type of Advance will be __________________________________
[specify U.S. Prime Rate Advance or U.S. Libor Advance].
(c) The principal amount of the Advance will be
U.S.$___________________.
<PAGE>
- 2 -
(d) If the Advance is a U.S. Libor Advance, the initial Interest
Period applicable to the Advance will be
___________________________ [specify period pursuant to Section
3.07].
2. CONTINUATION OF U.S. LIBOR ADVANCE [complete only if applicable]
(a) The last day of the Interest Period applicable to the relevant
U.S. Libor Advance is ________________________.
(b) The principal amount of U.S. $_______________________ of such U.S.
Libor Advance is to continue as such for a further period of
_____________________ [specify period pursuant to Section 3.07].
The undersigned confirms that the conditions to the availability of
Borrowings set forth in Section 5.04 of the Credit Agreement have been complied
with or satisfied at the date hereof.
DATED: ___________________________
SPRING WATER, INC.
By: ________________________________________
Title:
<PAGE>
SCHEDULE 3
BORROWING NOTICE
[STERLING LIBOR ADVANCES]
TO: The Toronto-Dominion Bank, London Branch
Triton Court
14/18 Finsbury Square
London, England
EC2A 1DB
Attention: Denise Payne
COPY TO: The Toronto-Dominion Bank, London Branch
c/o The Toronto-Dominion Bank
Toronto Dominion Tower Branch
700 West Georgia Street, Pacific Centre
P.O. Box 10001
Vancouver, British Columbia
V7Y 1A2
Attention: Credit Assistant - Loan Accounting
Reference is made to the Amended and Restated Credit Agreement dated as
of May 17, 1999 between Sparkling Spring Water Group Limited, Sparkling Spring
Water Limited, Nature Springs Water Company Limited, Spring Water, Inc., The
Toronto-Dominion Bank, Toronto Dominion (Texas), Inc. and The Toronto-Dominion
Bank, London Branch (the "Credit Agreement"). Capitalized terms in this
Borrowing Notice have the meanings ascribed to such terms in the Credit
Agreement.
Notice is hereby given pursuant to Section 3.03 or 3.05 of the Credit
Agreement (as applicable) that the undersigned requests a Sterling Libor Advance
or a continuation of a Sterling Libor Advance for an additional Interest Period
under the ___________________________ [specify Credit Facility], on the
following basis:
1. STERLING LIBOR ADVANCE [complete only if applicable]
(a) The date of the Sterling Libor Advance will be
______________________.
(b) The principal amount of the Sterling Libor Advance will be
U.K.(pound)_________________________.
(c) The initial Interest Period applicable to the Sterling Libor
Advance will be __________________________ [specify period
pursuant to Section 3.07].
<PAGE>
- 2 -
2. CONTINUATION OF STERLING LIBOR ADVANCE [complete only if applicable]
(a) The last day of the Interest Period applicable to the relevant
Sterling Libor Advance is _____________________________.
(b) The principal amount of U.K.(pound)______________________ of such
Sterling Libor Advance is to continue as such for a further period
of _______________ [specify period pursuant to Section 3.07].
The undersigned confirms that the conditions to the availability of
Borrowings set forth in Section 5.04 of the Credit Agreement have been complied
with or satisfied at the date hereof.
DATED: ___________________________
NATURE SPRINGS WATER COMPANY LIMITED
By: _______________________________
Title: ____________________________
<PAGE>
SCHEDULE 4
LIST OF WHOLLY-OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME OF WHOLLY-OWNED JURISDICTION OF NUMBER OF SHARES REGISTERED HOLDERS JURISDICTION: WHOLLY-
SUBSIDIARY INCORPORATION ISSUED AND OUTSTANDING OWNED SUBSIDIARY
CARRIES ON BUSINESS OR
OWNS OR LEASES
PROPERTY OR ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sparkling Spring Water Province of Nova (a) 44,727 non-voting common Sparkling Spring Water Nova Scotia, New
Limited Scotia shares Group Limited Brunswick and Prince
Edward Island
(b) 1,728,246 common shares Sparkling Spring Water
Group Limited
- -----------------------------------------------------------------------------------------------------------------------------------
Canadian Springs Water Amalgamated in the 500 common shares Sparkling Spring Water British Columbia
Company Limited Province of Nova Limited
Scotia on January 1,
1999
- -----------------------------------------------------------------------------------------------------------------------------------
Spring Water, Inc. State of Delaware 1,000 common shares Sparkling Spring Water No business operations
Limited Lease - Oregon
- -----------------------------------------------------------------------------------------------------------------------------------
Cullyspring Water Co., State of Washington 2,000 common shares Spring Water, Inc. Washington
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Crystal Spring State of Delaware 2,000 common shares Spring Water, Inc. Oregon and Washington
Acquisition, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Nature Springs Water England and Wales (a) 1,198,999 ordinary shares Sparkling Spring Water United Kingdom
Company Limited Limited (England)
(b) 1 ordinary share Steve Larson (held in
trust for Sparkling
Spring Water Limited)
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-2-
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME OF WHOLLY-OWNED JURISDICTION OF NUMBER OF SHARES REGISTERED HOLDERS JURISDICTION: WHOLLY-
SUBSIDIARY INCORPORATION ISSUED AND OUTSTANDING OWNED SUBSIDIARY
CARRIES ON BUSINESS OR
OWNS OR LEASES
PROPERTY OR ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aquaporte (UK) Limited England and Wales 34,002 ordinary shares Nature Springs Water United Kingdom
- to be struck Company Limited (England)
off/dissolved
- -----------------------------------------------------------------------------------------------------------------------------------
Marlborough Employment United Kingdom 20,000 ordinary shares Nature Springs Water United Kingdom
Limited - to be struck Company Limited (Scotland)
off/dissolved
- -----------------------------------------------------------------------------------------------------------------------------------
Krystal Fountain Water England and Wales (a) 726,310 ordinary shares Nature Springs Water United Kingdom
Co. Limited Company Limited (England)
(b) 50,000 6% cumulative
convertible redeemable
preference shares
- -----------------------------------------------------------------------------------------------------------------------------------
Water at Work Limited United Kingdom 81,100 ordinary shares Marlborough Employment United Kingdom
Limited (Scotland)
- -----------------------------------------------------------------------------------------------------------------------------------
Natural Water Limited United Kingdom (a) 90 ordinary shares Water at Work Limited United Kingdom
(Scotland)
(b) 25,000 preference shares Water at Work Limited
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 5
POWER OF ATTORNEY
The undersigned hereby appoints The Toronto-Dominion Bank (hereinafter
called "TD Bank"), acting by any authorized signatory of TD Bank, the attorney
of the undersigned:
(a) to sign for and on behalf of and in the name of the undersigned as
drawer, Drafts (as defined in the Credit Agreement referred to
below) drawn on TD Bank payable to the order of the undersigned or
payable to the order of TD Bank;
(b) to fill in the amount, date and maturity date of such Drafts; and
(c) to discount and purchase and/or deliver such Drafts which have
been accepted by TD Bank;
provided that such acts in each case are to be undertaken by TD Bank strictly in
accordance with instructions given to TD Bank by the undersigned as provided in
this power of attorney.
Instructions from the undersigned to TD Bank relating to the execution,
completion, endorsement, discount and/or delivery by TD Bank on behalf of the
undersigned of Drafts which the undersigned wishes to submit to TD Bank for
acceptance by TD Bank shall be communicated by the undersigned in writing to TD
Bank pursuant to a Borrowing Notice (as that term is defined in the Credit
Agreement referred to below) in accordance with the terms of the Credit
Agreement dated as of April 30, 1998 between Sparkling Spring Water Group
Limited, Sparkling Spring Water Limited, Sparkling Spring Water UK Limited,
Spring Water, Inc., TD Bank, Toronto Dominion (Texas), Inc. and The
Toronto-Dominion Bank, London Branch to which the undersigned and TD Bank are
parties (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") and shall specify the following information:
(a) reference to this power of attorney;
(b) an amount in Canadian Dollars, which shall be the aggregate face
amount of the Drafts to be drawn in a particular transaction;
(c) a specified period of time (not less than one month or in excess
of six months) which shall be the number of days after the date of
such Drafts that such Drafts are to be payable, and the dates of
issuance and maturity of such Drafts; and
(d) discount/payment instructions specifying the account number of the
undersigned and the financial institution at which the proceeds of
the purchase of such Drafts are to be credited;
all as set out in the Borrowing Notice (as that term is defined in the Credit
Agreement).
<PAGE>
-2-
The communication in writing by the undersigned to TD Bank of the
instructions set out in the Borrowing Notice referred to above shall constitute
(a) the authorization and instruction of the undersigned to TD Bank to complete
and/or endorse Drafts in accordance with such information as set out above and
(b) the request of the undersigned to TD Bank to accept such Drafts and purchase
or deliver the same in accordance with the Borrowing Notice (or subsequent
written notice from the undersigned). The undersigned acknowledges that TD Bank
shall not be obligated to accept any such Drafts except in accordance with the
provisions of the Credit Agreement.
TD Bank shall be and it is hereby authorized to act on behalf of the
undersigned upon and in compliance with instructions communicated to TD Bank as
provided herein if TD Bank reasonably believes them to be genuine. If TD Bank
accepts Drafts pursuant to any such instructions, TD Bank shall confirm
particulars of such instructions and advise the undersigned that TD Bank has
complied therewith by notice in writing addressed to the undersigned and served
personally or by facsimile transmission in accordance with the provisions of the
Credit Agreement. TD Bank's actions in compliance with such instructions,
confirmed and advised to the undersigned by such notice, shall be conclusively
deemed to have been in accordance with the instructions of the undersigned
unless the undersigned notifies TD Bank to the contrary in writing not later
than the third business day next following receipt by the undersigned. Notice in
writing to TD Bank as contemplated hereby shall be delivered in accordance with
the provisions of the Credit Agreement.
The undersigned agrees to indemnify TD Bank and its directors, officers,
employees, affiliates and agents and to hold it and them harmless from and
against any loss, liability, expense or claim of any kind or nature whatsoever
incurred by any of them as a result of any action or inaction in any way
relating to or arising out of this power of attorney or the acts contemplated
hereby; provided that this indemnity shall not apply to any such loss,
liability, expense or claim which results from the gross negligence or wilful
misconduct of TD Bank or any of its directors, officers, employees, affiliates
or agents.
This power of attorney may be revoked at any time upon not less than five
business days' written notice served upon TD Bank, provided that (i) it shall be
replaced with another power of attorney forthwith in accordance with the
requirements of Section 4.03 of the Credit Agreement; and (ii) no such
revocation shall reduce, limit or otherwise affect the obligations of the
undersigned in respect of any Draft executed, completed, endorsed, purchased
and/or delivered in accordance herewith prior to the time at which such
revocation becomes effective.
This power of attorney is in addition to and not in substitution of any
agreement to which TD Bank and the undersigned are parties.
This power of attorney shall be governed in all respects by the laws of
the Province of British Columbia and the laws of Canada applicable therein and
the undersigned and TD Bank hereby irrevocably attorn to the non-exclusive
jurisdiction of the courts of such jurisdiction in respect of all matters
arising out of this power of attorney.
<PAGE>
-3-
In the event of a conflict between the provisions of this power of
attorney (other than the provisions of the immediately preceding paragraph) and
the Credit Agreement, the Credit Agreement shall prevail.
The undersigned has (have) expressly requested that this document be
drawn up in the English language. Le(s) soussigne(s) a(ont) expressement
demande que ce document soit redige en langue anglaise.
DATED at _____________________, this ________ day of __________________.
[Insert name of Borrower]
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
<PAGE>
SCHEDULE 6
QUARTERLY FINANCIAL CERTIFICATE
The undersigned hereby certifies as follows:
1. I am the [Chief Financial Officer/Vice-President, Finance] of Sparkling
Spring Water Group Limited (the "Corporation") and am duly authorized to give
this certificate for and on behalf of the Corporation and as an officer thereof.
2. This Certificate is delivered pursuant to Section 7.01(a)(vii) of the
amended and restated credit agreement dated as of May 17, 1999 between the
Corporation, Sparkling Spring Water Limited, Nature Springs Water Company
Limited, Spring Water, Inc., The Toronto-Dominion Bank, Toronto Dominion
(Texas), Inc. and The Toronto-Dominion Bank, London Branch (the "Credit
Agreement"). Capitalized terms used herein have the meanings ascribed to such
terms in the Credit Agreement.
3. I am familiar with and have examined the provisions of the Credit
Agreement and have made such other examinations and investigations as in my
opinion are necessary to give this Certificate and express an informed
opinion on the matters set out herein. Based on such examinations and
investigations, I confirm that no Default or Event of Default occurred during
the period to which this Certificate relates (being the fiscal quarter ended
_______________________) and that there is no Default or Event of Default
under the Credit Agreement at the date of this Certificate.
4. As of the end of the period to which this Certificate relates, being the
fiscal quarter ended
__________________________;
(a) the ratio of Adjusted Consolidated EBITDA to Senior Interest for
the four fiscal quarters then ended, as referred to in Section
8.01(l) of the Credit Agreement, was _______________________;
(b) the ratio of Adjusted Consolidated EBITDA to Total Interest for
the four fiscal quarters then ended, as referred to in Section
8.01(m) of the Credit Agreement, was _______________________;
(c) the Senior Debt to Adjusted Consolidated EBITDA Ratio as at
the fiscal quarter then ended, as referred to in Section 8.01(n)
of the Credit Agreement, was ____________________________;
(d) the Senior Debt plus Contingency to Adjusted Consolidated
EBITDA Ratio as at the fiscal quarter then ended, as referred
to in Section 8.01(o) of the Credit Agreement,was ______________;
(e) the ratio of Cash Flow for the four quarters then ended to Debt
Service for such four quarters, as referred to in Section 8.01(p)
of the Credit Agreement, was _______________________________; and
<PAGE>
-2-
(f) the Total Debt to Adjusted Consolidated EBITDA Ratio as at the
fiscal quarter then ended, as referred to in Section 8.01(q) of
the Credit Agreement, was ________________________________.
5. The foregoing calculations are correct and accurate.
6. Attached hereto are schedules setting forth the foregoing calculations in
reasonable detail.
7. The Corporation or a Wholly-Owned Subsidiary [has] [has not] effected a
Disposition referred to in Section 9.01(f) of the Credit Agreement during the
most recent fiscal quarter. [Details of any such Disposition are attached].
8. I am aware that the Lenders are entitled to rely upon the accuracy of
the information herein contained.
DATED this _________ day of ________________, ______.
------------------------------------------
[Chief Financial Officer/Vice-President, Finance]
Sparkling Spring Water Group Limited
