<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1998
REGISTRATION NO. 333-44747
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT #2
------------------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------------
ROSEDALE DECORATIVE PRODUCTS LTD.
(Name of Small Business Issuer as specified in its charter)
<TABLE>
<S> <C> <C>
ONTARIO, CANADA N/A 5110
(State or other jurisdiction of (I.R.S. Employer (Primary Standard Industrial
incorporation or organization) Identification Number) Classification Code Number)
</TABLE>
731 MILLWAY AVENUE
CONCORD, ONTARIO
CANADA L4K 3S8
(416) 593-4519
(Address and telephone number of principal executive offices)
ALAN FINE, CHIEF EXECUTIVE OFFICER
731 MILLWAY AVENUE
CONCORD, ONTARIO
CANADA L4K 3S8
(416) 593-4519
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GREGORY SICHENZIA, ESQ. ROBERT E. ALTENBACH, ESQ.
SICHENZIA ROSS & FRIEDMAN, L.L.P. KUTAK ROCK
135 WEST 50TH STREET, 20TH FLOOR SUITE 2100
NEW YORK, NEW YORK 10020 225 PEACHTREE STREET N.E.
TELEPHONE NO.: (212) 664-1200 ATLANTA, GEORGIA 30303-1731
FACSIMILE NO.: (212) 664-7329 TELEPHONE NO. (404) 222-4600
FACSIMILE NO. (404) 262-4654
</TABLE>
------------------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
------------------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE AND
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM
AMOUNT MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, no par value per share(2).......................... 1,150,000 5.00 5,750,000 1,696.25
Class A Warrants................................................. 1,150,000 .125 143,750 42.41
Common Stock, no par value per share, issuable upon exercise of
Class A Warrants(3)............................................ 1,150,000 6.00 6,900,000 $2,035.50
Underwriter's Unit purchase option............................... 1 10 $ 10 $ (4)
Common Stock, no par value per share, underlying Underwriter's
Options........................................................ 100,000 7.50 750,000 221.25
Class A Redeemable Warrants issuable upon exercise of
Underwriter's Options(5)....................................... 100,000 .1875 18,750 5.53
Common Stock, no par value per share, issuable upon exercise of
Class A Warrants underlying Underwriter's options(6)........... 100,000 7.50 750,000 $ 221.25
Total...................................................... $ 14,312,510 $4,222.19
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 (a) of the Securities Act of 1933, as amended.
(2) Includes up to 150,000 shares of Common Stock issuable upon exercise of the
Underwriter's over-allotment option.
(3) Represents shares of Common Stock issuable upon exercise of the Warrants
offered pursuant to this Registration Statement.
(4) No fee due pursuant to Rule 457(g).
(5) Reserved for issuance upon exercise of the Underwriter's Option together
with such indeterminate number of Warrants and/or Common Stock as may be
issuable pursuant to anti-dilution provisions under the Underwriter's
Purchase Option or the Warrants.
(6) Reserved for issuance upon exercise of the Warrants obtained upon exercise
of the Underwriter's Purchase Option.
ii
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION CAPTIONS IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Cover Page, Inside Cover Page, Outside Back Page
3. Summary Information and Risk Factors................. Prospectus Summary, Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Cover Page, Underwriting
6. Dilution............................................. Dilution
7. Selling Securityholders.............................. *
8. Plan of Distribution................................. Prospectus Summary, Underwriting
9. Legal Proceedings.................................... Business
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management, Principal Stockholders
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders
12. Description of Securities............................ Description of Securities
13. Interest of Named Experts and Counsel................ *
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Management
15. Organization Within Last Five Years.................. Prospectus Summary, Business
16. Description of Business.............................. Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property.............................. Business
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related Shareholder
Matters............................................ Front Cover Page, Description of Securities
21. Executive Compensation............................... Management
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accounts on
Accounting and Financial Disclosure................ *
</TABLE>
- ------------------------
* Not Applicable
iii
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 28, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
[LOGO]
ROSEDALE DECORATIVE PRODUCTS LTD.
1,000,000 SHARES OF COMMON STOCK AND
1,000,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Rosedale Decorative Products Ltd. (the "Company") is hereby offering to the
public 1,000,000 shares of common stock, no par value (the "Common Stock"), and
1,000,000 Class A redeemable common stock purchase warrants (the "Warrants").
The Common Stock and the Warrants will be offered through J.P. Turner & Company,
L.L.C. and Klein Maus and Shire Incorporated (the "Underwriters"). J.P. Turner &
Company, L.L.C., shall be referred to as the "Managing Underwriter." The Shares
and Warrants are being sold separately and will be separately transferable
immediately upon issuance. The offering of the Shares and Warrants hereby is
sometimes referred to as the "Offering" herein.
Each Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $6.00 per share, subject to adjustment in certain events,
during the four year period commencing one year from the date of this Prospectus
(the "Effective Date"). The Warrants are subject to redemption by the Company at
$.10 per Warrant, at any time commencing one year from the Effective Date (or
earlier with the consent of the Underwriters) and prior to their expiration, on
not less than 30 days' written notice to the holders of the Warrants, provided
the closing bid price per share of Common Stock if traded on the Nasdaq SmallCap
Market, or the last sales price per share if listed on the Nasdaq National
Market or a national exchange has been at least 150% ($9.00 per share) of the
current Warrant exercise price, for a period of 10 consecutive business days
ending on the third day prior to the date upon which the notice of redemption is
given. The Warrants shall be exercisable until the close of the business date
preceding the date fixed for redemption. See "Description of
Securities--Warrants."
Prior to the Offering, there has been no market for the Units, Common Stock
or Warrants, and there can be no assurance that a market will develop for the
Company's securities in the future or that if developed, it will be sustained.
The Company is applying for quotation of the Common Stock and Warrants on the
Nasdaq SmallCap Market under the trading symbols "ROSDF" and "ROSWF",
respectively, and for listing on the Boston Stock Exchange under the symbols
"RDP" and "RDPW", respectively.
The per share public offering price of the Common Stock and the Warrants and
the exercise price and the other terms of the Warrants offered hereby were
determined by negotiation between the Company and the Underwriter and do not
necessarily bear any direct relationship to the Company's assets, earnings, book
value per share or other generally accepted criteria of value. See
"Underwriting".
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 8
AND "DILUTION" ON PAGE 17.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND
PRICE TO PUBLIC COMMISSIONS(1)
<S> <C> <C>
Per Share.............................................. $5.00 $.50
Per Warrant............................................ $.125 $.0125
Total(3)............................................. $5,125,000 $512,500
<CAPTION>
PROCEEDS TO
THE COMPANY(2)
<S> <C>
Per Share.............................................. $4.50
Per Warrant............................................ $.1125
Total(3)............................................. $4,612,500
</TABLE>
(1) Does not include additional consideration to be received by the Underwriters
in the form of (i) a non-accountable expense allowance equal to 3% of the
gross offering proceeds, (ii) any value attributable to the Underwriters'
Purchase Option ("Underwriters' Warrant") entitling the Underwriter to
purchase up to 100,000 Shares at a price per share equal to 150% of the
initial public offering price per Share, and 100,000 Warrants at 150% of the
initial public offering price per Warrant (iii) a financial consulting
agreement with the Managing Underwriter for a period of twenty-five months
for an aggregate consideration of $50,000 payable in full on the closing of
the Offering and (iv) a 5% warrant solicitation fee of the exercise price
received for each warrant exercised. In addition, the Company has agreed to
indemnify the Underwriter against certain liabilities under the Securities
Act of 1933, as amended (the "Act"). See "Underwriting".
(2) After deducting discounts and commission payable to the Underwriters, but
before payment of the Underwriters' non-accountable expense allowance of
$153,750 (or $176,812.50 if the Over-Allotment Option, defined below, is
exercised in full) or the other expenses of the Offering, estimated at
$326,250 payable by the Company. See "Underwriting".
(3) The Company has granted the Underwriters an option, exercisable for 45 days
after the Effective Date to purchase up to an additional 150,000 Shares and
Warrants from the Company upon the same terms and conditions set forth
above, solely for the purpose of covering over-allotments, if any (the
"Over-Allotment Option"). If the Over-Allotment Option is exercised in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company will be $5,893,750, $589,375 and $5,304,375
respectively. See "Underwriting."
The Shares and Warrants offered by the Prospectus are being offered by the
Underwriters on a "firm commitment" basis, when, as and if delivered to and
accepted by the Underwriters, subject to prior sale, and other conditions and
legal matters. The Underwriter reserves the right to withdraw, cancel or modify
the Offering and to reject orders, in whole or in part, for the purchase of any
of the securities offered notwithstanding tender by check or otherwise. It is
expected that delivery of the certificates representing the Common Stock and
Warrants will be made against payment therefor at the offices of the Managing
Underwriter, 3340 Peachtree Road, Suite 450, Atlanta, Georgia 30326 on or about
, 1998.
J.P. TURNER & COMPANY, L.L.C.
<PAGE>
KLEIN MAUS AND SHIRE INCORPORATED
--------------------
The date of this Prospectus is , 1998
<PAGE>
[Picture of exterior of facilities of Ontario Paint & Wallpaper, Ltd.]
[Picture of exterior of facilities of Rosedale Wallcoverings & Fabrics, Inc.]
[Picture of warehouse facilities at Rosedale Wallcoverings & Fabrics, Inc.]
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK AND
WARRANTS OFFERED HEREBY, INCLUDING PURCHASES OF THE COMMON STOCK OR WARRANTS TO
STABILIZE THEIR MARKET PRICE, PURCHASES OF THE COMMON STOCK OR WARRANTS TO COVER
SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK OR WARRANTS MAINTAINED BY
THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S
COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. "SEE PLAN OF
DISTRIBUTION."
----------------------------
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
The Company and its officers, directors and auditors are residents of Canada
and substantially all of the assets of the Company are or may be located outside
the United States. As a result, service of process may be effected upon the
Company through the offices of Sichenzia Ross & Friedman LLP in New York, but it
may be difficult for investors to effect service of process within the United
States upon non-resident officers and directors, or to enforce against them
judgments obtained in the United States courts predicated upon the civil
liability provision of the Securities Act or state securities laws. The Company
has been advised by its Canadian legal counsel, Torkin, Manes, Cohen & Arbus
that a judgment of a United States court predicated solely upon civil liability
under the Securities Act would probably be enforceable in Canada if the United
States court in which the judgment was obtained had a basis for jurisdiction in
the matter that was recognized by a Canadian court for such purposes. However,
there is uncertainty whether an action could be brought in Canada in the first
instance on the basis of liability predicated solely upon such laws. If
investors have questions with regard to these issues, they should seek the
advice of their individual counsel. The Company has also been advised by its
Canadian legal counsel Torkin, Manes, Cohen & Arbus that, pursuant to the
Currency Act (Canada), a judgment by a court in any Province of Canada may only
be awarded in Canadian currency. Pursuant to the provision of the Courts of
Justice Act (Ontario), however, a court in the Province of Ontario shall give
effect to the manner of conversion to Canadian currency of an amount in a
foreign currency, where such manner of conversion is provided for in an
obligation enforceable in Ontario.
EXCHANGE RATE DATA
The Company maintains its books of account in Canadian dollars, but has
provided the financial data in this Prospectus in United States dollars with its
audit conducted in accordance with generally accepted auditing standards in the
United States of America. All references to dollar amounts in this Prospectus,
unless otherwise indicated, are in United States dollars.
The following table sets forth, for the periods indicated, certain exchange
rates based on the noon buying rate in New York City for cable transfers in
Canadian dollars. Such rates are the number of United States dollars per one
Canadian dollar and are the inverse of rates quoted by the Federal Reserve Bank
of New York for Canadian dollars per US$1.00. The average exchange rate is based
on the average of the daily exchange rates during such periods. On January 7,
1998, the exchange rate was Cdn.$1.00 per US$.6994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1994 1995 1996 1997
--------- --------- --------- ---------
RATE AT END OF PERIOD............................. $ 0.7128 $ 0.7323 $ 0.7301 $ 0.6999
AVERAGE RATE DURING PERIOD........................ 0.7320 0.7288 0.7333 0.7222
HIGH.............................................. 0.7632 0.7527 0.7513 0.7487
LOW............................................... 0.7103 0.7023 0.7235 0.6945
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO ROSEDALE DECORATIVE
PRODUCTS LTD. AND ITS WHOLLY-OWNED SUBSIDIARIES ROSEDALE WALLCOVERINGS & FABRICS
INC. ("ROSEDALE") AND ONTARIO PAINT & WALLPAPER LTD. ("ONTARIO"). EXCEPT AS
OTHERWISE INDICATED HEREIN, THE INFORMATION CONTAINED IN THIS PROSPECTUS GIVES
NO EFFECT TO THE EXERCISE OF (I) THE OVER-ALLOTMENT OPTION, (II) THE
UNDERWRITER'S WARRANTS, (III) WARRANTS OFFERED HEREBY, OR (IV) OPTIONS GRANTED
UNDER THE COMPANY'S STOCK OPTION PLAN. ALL PER SHARE INFORMATION IN THIS
PROSPECTUS HAS BEEN ADJUSTED TO REFLECT A 6,818 FOR ONE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK TO BE EFFECTED IMMEDIATELY PRIOR TO THIS OFFERING.
THE COMPANY
The Company, through its two wholly-owned subsidiaries, Ontario and
Rosedale, designs, markets and distributes high quality residential
wallcoverings and designer fabrics. The Company also operates a retail paint and
wallpaper store located in downtown Toronto, Canada which has been in continuous
operation since 1913. The Company's products include wallpaper and wallpaper
borders (which are collectively referred to as wallcoverings), designer fabrics
and paint.
The Company designs wallcovering and designer fabric collections that it
distributes under its own brand names. Wallcoverings and fabrics sold under
Company brand names are manufactured for the Company on an outsource basis by
third party manufacturers. In addition to selling its own brand name
wallcoverings and fabrics, the Company is also a wholesale distributor of
wallcoverings designed and manufactured by other manufacturers. Wholesale
distribution of other manufacturers' wallcoverings is done through the Company's
Ontario subsidiary. Design and distribution of Company brand wallcoverings is
accomplished mainly through the Rosedale subsidiary and to a lesser extent
through the Ontario subsidiary.
Sales of Company brand wallcoverings accounts for approximately 54% of the
Company's total revenues, and wholesale distribution of wallcoverings under
non-company brand names accounts for approximately 29% of the Company's total
revenues. Sales of designer fabrics accounts for approximately 12% of the
Company's revenues, and the Company's retail paint and wallpaper store generates
approximately 5% of the Company's annual revenues.
In 1996, the Company distributed approximately 26 Company brand wallcovering
and fabric collections to its customer base of wholesale distributors who sold
the Company's products to approximately 10,000 to 20,000 retail wallpaper and
paint stores and interior designers worldwide. In addition, the Company's
Ontario subsidiary distributed approximately 47 non-Company brand wallcovering
collections to approximately 1,700-2,000 home decorating stores in Canada in
1996. The Company trademarks all the names and copyrights all the design
patterns of its brands and collections.
The Company believes that its product mix of wallcoverings, designer fabrics
and paints, along with its newer offerings of floor coverings and ceiling tiles
presents significant cross marketing opportunities. Rosedale has recently
introduced wallcovering and fabric sample books that include coordinated carpets
and area rugs.
As part of the Company's growth strategy, its Rosedale subsidiary has
recently expanded its product lines to include coordinated products, namely
decorative fabrics, soft window treatments and Floor coverings. The Company's
decorative fabric products are sold under the Kingsway brand name and are
intended to be utilized by consumers for draperies, upholstery and bed
coverings.
The Company intends to expand the products offered by its Ontario subsidiary
to include a line of decorative ceiling tiles for commercial and residential
customers. The decorative ceiling tiles are designed to fit into standard
suspension ceiling frameworks and are embossed with designs that emulate
ceilings
4
<PAGE>
found in many turn of the century buildings. The Company believes that its
decorative ceiling tiles will be attractive to commercial users, such as
restaurants looking to recreate turn of the century decor.
The Company believes that offering a combination of wallcoverings,
decorative fabrics and floor coverings provides significant opportunities for
cross merchandising of the Company's products. For example, by offering
coordinated lines of wallcoverings, fabrics, and floor coverings, consumers
looking to purchase wallcoverings will be exposed to the Company's designer
fabric and floor covering lines. The end result being that the Company's
products are presented to a wider variety of retail stores and consumers
enabling the Company to diversify its customer base.
The Company's strategy is to continue to capitalize on the brand name
recognition enjoyed by many of its product lines and to utilize its distribution
network to distribute a greater variety of products manufactured by third
parties. The Company intends to increase the number of retail locations that
carry products that are either manufactured, designed or distributed by the
Company, to increase the amount of products carried by such stores and to
penetrate other geographic markets including the United States, with special
emphasis on foreign markets.
Rosedale Decorative Products Ltd., was formed under the laws of Ontario,
Canada on May 14, 1997, to consolidate the business of its two wholly-owned
operating subsidiaries, Ontario Paint & Wallpaper Ltd., a company organized
under the laws of the Province of Ontario, Canada ("Ontario"), and Rosedale
Wallcoverings & Fabrics, Inc., a Company organized under the laws of the
Province of Ontario, Canada ("Rosedale"). Unless the context otherwise requires,
the term "Company" refers to Rosedale Decorative Products Ltd. and its
wholly-owned subsidiaries Ontario and Rosedale.
The Company's principal offices are located at 731 Millway Avenue, Concord,
Ontario, Canada L4K 3S8 and its telephone number is (416) 593-4519.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.............. 1,000,000 Shares of Common Stock and 1,000,000 Warrants.
Each Warrant shall entitle the holder to purchase one
share of Common Stock at $6.00 per share. The Common Stock
and Warrants will be separately transferable immediately
after the closing of this Offering.
Common Stock Outstanding
Prior to Offering(1).......... 1,500,000
Common Stock to be Outstanding
After Offering(1)............. 2,500,000
Warrants Outstanding
Prior to Offering(1).......... 0
Warrants to be Outstanding
After Offering(1)............. 1,000,000. Each Warrant is exercisable at an exercise
price of $6.00 per share. The exercise price of the
Warrants is subject to adjustment in certain
circumstances. The Warrants are exercisable during the
four year period commencing one year from the date of the
prospectus. The Warrants are subject to redemption by the
Company at $.10 per Warrant, at any time commencing one
year from the date of the prospectus (or earlier with the
consent of the Representative) and prior to their
expiration, on not less than 30 days' prior written notice
to the holders of the Warrants, provided the closing bid
price per share of Common Stock if traded on the Nasdaq
SmallCap Market, or the last sales price per share if
listed on the Nasdaq National Market or a national
exchange has been at least 150% ($9.00 per share) of the
current Warrant exercise price, for a period of 10
consecutive business days ending on the third day prior to
the date upon which the notice of redemption is given. The
Warrants shall be exercisable until the close of the
business date preceding the date fixed for redemption. See
"Description of Securities", "Principal Stockholders" and
"Underwriting".
Use of Proceeds................. The net proceeds to the Company from the sale of the
Securities are estimated to be approximately $4,132,500
after deducting commissions and expenses of the Offering,
which expenses are estimated at $992,500. The Company
intends to use the net proceeds of this Offering for new
product development, sales and marketing, hiring
additional personnel, the repayment of certain
indebtedness and for working capital and general corporate
purposes including potential synergistic acquisitions. See
"Use of Proceeds."
Proposed Nasdaq SmallCap
Market Symbols(2):............ ROSDF; ROSWF
Proposed Boston Stock
Exchange Symbols(2):.......... RDP; RDPW
Risk Factors.................... The securities offered hereby are speculative, involve a
high degree of risk and immediate substantial dilution,
and should be considered only by investors who can afford
to sustain a loss of their entire investment. See "Risk
Factors" and "Dilution."
</TABLE>
- ------------------------
(1) Does not include an aggregate of 2,250,000 shares which may be issued upon
exercise of (i) the Warrants offered hereby; (ii) the Underwriters' Option;
and (iii) the Underwriters' over-allotment option; and (iv) 750,000 shares
of Common Stock which may be issued pursuant to an executive bonus plan. See
"Management," "Description of Securities" and "Underwriting."
(2) Notwithstanding quotation on the Nasdaq SmallCap Market and listing on the
Boston Stock Exchange, there can be no assurance that an active trading
market for the Company's securities will develop or, if developed, will be
sustained.
6
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues........................................ $ 20,757,423 $ 18,927,369 $ 18,552,166
Gross Profit.................................... 7,407,390 6,625,768 6,946,170
Income from operations.......................... 1,306,002 912,617 429,435
Earnings (loss) per share(1).................... 0.53 0.28 (0.38)
Weighted average number of shares
outstanding(1)................................ 1,500,000 1,500,000 1,500,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------- DECEMBER 31,
AS ADJUSTED(2) ACTUAL 1996
----------------- ------------- -------------
<S> <C> <C> <C>
Working capital............................. $ 5,562,966 $ 1,532,966 $ 2,019,038
Total assets................................ 16,794,832 15,694,832 13,042,385
Long-term liabilities....................... 2,966,281 2,966,281 2,622,877
Total liabilities........................... 12,833,809 13,933,809 12,012,282
Total shareholders' equity.................. 5,791,023 1,761,023 1,030,103
</TABLE>
- ------------------------
(1) After giving effect to an approximate 1:6,818 stock split which increased
total shares outstanding from 220 to 1,500,000.
(2) Reflects the issuance of 1,000,000 shares of Common Stock and 1,000,000
Warrants, offered hereby and the application of the net proceeds therefrom.
7
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH INVESTMENTS IN THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
1. UNCERTAINTY OF NEW PRODUCT DEVELOPMENT AND NO ASSURANCE OF MARKET
ACCEPTANCE. The perpetuation of the Company's success is dependent upon
continued name recognition and acceptance of the Company's existing and new
products. No assurances can be made that any or all products will achieve or
maintain consumer acceptance. Continued product development and
commercialization efforts are subject to all of the risks inherent in the
development of new products including achieving market acceptance, competition.
There is no assurance that the Company will be able to develop, manufacture and
distribute new products which achieve market acceptance. See "Business".
2. DEPENDENCE ON SUPPLIERS FOR WHOLESALE DISTRIBUTION. The Company is
dependent upon wallcovering suppliers for non-Company brand name wallcoverings
that the Company distributes for third parties. Wholesale distribution of
non-Company brand name wallcoverings accounts for a significant portion of the
Company's total revenues. Any disruption in the supply of wallcoverings could
have a significant adverse impact upon the Company. See "Business".
3. DEPENDENCE ON THIRD PARTY MANUFACTURERS FOR COMPANY BRAND NAME
WALLCOVERINGS AND FABRICS. The Company is dependent upon third parties to
manufacture its Company Brand Name wallcovering and fabric collections. The
Company enters into agreements with wallcovering and fabric manufacturers for
each collection that it designs and maintains no long term agreements with its
manufacturers. It is the Company's intention to use current or additional third
parties to manufacture its Company Brand Name wallcoverings and fabrics. The
Company believes that it will be able to enter into arrangements with third
parties to manufacture its products, as needed, however, no assurance can be
given that it will be able to do so on reasonable terms or otherwise. See
"Business".
4. DEPENDENCE ON THIRD PARTY FREIGHT HAULERS. The Company is dependent on
one independent freight hauler to ship approximately 90% of the Company's
products to distribution facilities. The ability of the Company to control its
freight expenses is a significant factor in the Company's gross profit margin.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." There is no assurance that the Company will be able to maintain
acceptable freight pricing and arrangements. Furthermore, a labor slowdown,
strike or other matters beyond management's control may adversely affect the
Company's ability to ship its products on a timely basis or at all. See
"Business."
5. DEPENDENCE ON MAJOR CUSTOMERS. Approximately 14% of the Company's
revenue is derived from sales to one customer, The Blonder Company. No other
customer accounts for more than 10% of the Company's revenues. There is no
assurance that the Company will maintain its relationship with The Blonder
Company. In the event The Blonder Company does not continue acquiring products
from the Company, the Company's business and results of operations would be
materially adversely effected. See "Business".
6. UNCERTAINTY AS TO COMPANY'S ABILITY TO EXPAND INTO UNITED STATES AND
OTHER MARKETS. In order to further penetrate the U.S., European, Asian and
Southeast Asian markets, the Company will have to devote significant resources
to advertising and marketing in such countries in order to develop consumer
awareness of its products and to procure sufficient shelf space for its
products. There can be no assurance that the Company will be successful in its
efforts. The Company intends to devote a portion of the net
8
<PAGE>
proceeds of this Offering toward the continued expansion into the U.S., Asian,
Southeast Asian and European. See "Business".
7. INTENSE COMPETITION IN WALLCOVERING/FABRIC MARKET. The Company's
business is subject to significant competition. The Company's primary business
of designing and distributing wallcoverings and decorative fabrics is highly
competitive. The Company competes with other wholesale distributors of
wallcoverings and fabrics and with manufacturers of wallcoverings and fabrics
that maintain their own distribution network. All of the competitors that
manufacturer wallcoverings and fabrics have greater financial resources than the
Company and greater control over the products they distribute. Certain of the
Company's competitors that distribute wallcoverings and fabrics, but do not
manufacture, have greater financial resources than the Company.
The Company's Brand Name wallcoverings and fabrics, such as Concord-TM-,
Ridley Nash-TM-, Rosedale-TM-, Cambridge Studios-TM-, Hamilton House-TM-, and
Kingsway Fabrics-TM- compete with other brands of wallcoverings and fabrics
primarily on the basis of quality, design and color and are therefore subject to
consumers' tastes and preferences which may change at any time. In addition, the
Company Brand Name wallcoverings and fabrics compete against brands produced and
distributed by competitors that may have greater financial resources than the
Company.
The Company's major competitors in the United States are York Wallcoverings,
Eisenhart Wallcoverings and S.A. Maxwell & Co. and its major competitors in
Canada are Imperial Home Decor Group, Sunworthy Wallcoverings, Provincial
Wallcoverings and Decorlux. The Company also competes with national and regional
retail distributors, many of which have greater financial and other resources of
the Company. See "Business--Competition".
8. BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT. Approximately
48.4% of the net proceeds of this offering will be applied towards new product
development and 11.7% of the net proceeds of this Offering will be applied to
working capital and general corporate purposes. Accordingly, management of the
Company will have broad discretion over the use of proceeds. The Company may
also use a substantial portion of the net proceeds to make unspecified
acquisitions. Shareholders will not have the ability to review or vote on such
acquisitions should they occur. See "Use of Proceeds".
9. NO FORMAL DISTRIBUTION AGREEMENT. The Company does not maintain formal
agreements with its distributors, as is the practice in the industry. Therefore,
there can be no assurance that the Company will be able to find distributors to
distribute its products under terms and conditions that are reasonable to the
Company. Any future inability to provide for distribution under terms and
conditions that are reasonable may have a material adverse impact on the
Company's profitability. See "Business-Marketing and Distribution."
10. UNCERTAINTIES OF GOVERNMENT REGULATION. The Company is subject to
various Canadian and United States regulations relating to health and safety
standards. Regulations in new markets and future changes in existing regulations
may adversely impact the Company by raising the cost of production. See
"Business-Government Regulation".
11. DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend
to a significant extent on the efforts of key management personnel, Sidney
Ackerman its President, Alan Fine, its Chief Executive Officer. The Company is
in the process of entering into employment agreements with Sidney Ackerman and
Alan Fine. The loss of one or more of these key employees could have a material
adverse effect on the Company's business. The Company has acquired key-person
life insurance policies on Sidney Ackerman and Alan Fine. In addition, the
Company believes that its future success will depend in large part upon its
continued ability to attract and retain highly qualified management, technical
and sales personnel. There can be no assurance that the Company will be able to
attract and retain the qualified personnel necessary for its business. See
"Management".
9
<PAGE>
12. POTENTIAL REVENUE CANADA TAX LIABILITY. In 1992, The Company's Rosedale
subsidiary formed a California corporation for the purpose of manufacturing
window blinds to be sold as an accompaniment to its existing wallcovering and
other products. The window blind company was sold in 1994, and in connection
therewith, Rosedale claimed a business loss deduction on their investment in
such company. Rosedale was subsequently informed by Revenue Canada that the
deduction which it claimed was being allowed as a capital loss and not as a
business loss deduction, and, as a result, Rosedale owed an additional $652,110
in taxes. The Company's Rosedale subsidiary has filed a formal notice of
objection contesting Revenue Canada's classification of its deduction. No
assurance can be given that Rosedale will be able to reach an agreement with the
tax authorities, that the tax authorities will not immediately seek payment of
the taxes, or that the tax authorities will not commence an action or file a
lien against Rosedale in order to recover the taxes. See "Business--Legal
Proceedings."
13. CONTROL BY EXISTING STOCKHOLDERS. Upon the completion of this Offering,
the Company's existing shareholders will collectively beneficially own
approximately 60% (57% if the Underwriters' Over-Allotment Option is exercised
in full) of the Company's outstanding Common Stock. Because of their beneficial
stock ownership, these stockholders will be in a position to continue to elect
the majority members of the Board of Directors and decide matters requiring
stockholder approval. In addition, Sidney Ackerman, Alan Fine, the Ackerman
Family Trust and 454590 Ontario Limited entered into a Common Stock voting
agreement which provides that they agree to vote all of their Shares unanimously
in respect of any matter to be voted on at any meeting of the shareholders of
the Company and to withhold their votes or vote against any such matter
regarding which they are unable to vote their shares unanimously. See
"Business-Voting Agreements." See "Principal Stockholders."
14. NO PRIOR PUBLIC MARKET. Prior to this Offering, there has been no
public market for the Common Stock and/or Warrants. Accordingly, there can be no
assurance that an active trading market will develop and be sustained upon the
completion of this Offering. The initial public offering price of the securities
has been determined by negotiations between the Company and the Underwriters and
does not necessarily bear any relation to the Company's asset value, earnings or
other objective criteria. See "Underwriting." The stock market has, from time to
time, experienced extreme price and volume fluctuations which often have been
unrelated to the operating performance of particular companies. Although it has
no obligation to do so, the Managing Underwriter intends to engage in
market-making activities or solicited brokerage activities with respect to the
purchase or sale of the securities on the Nasdaq SmallCap Market. However, no
assurance can be given that the Managing Underwriter or other Underwriters will
continue to participate as a market-maker in the securities of the Company or
that other broker/ dealers will make a market in such securities which may
adversely impact the liquidity of the securities. Regulatory developments and
economic and other external factors, as well as period-to-period fluctuations in
financial results, may also have a significant impact on the market price of
such securities. See "Description of Securities."
15. NEED FOR ADDITIONAL FINANCING. The Company believes that the proceeds
of the Offering will, together with revenues from operations, be sufficient to
finance the Company's working capital requirements for a period of at least 24
months following the completion of the Offering. In addition, a part of the
Company's strategy is to expand its product mix, increase market share, and
develop markets in Europe and Southeast Asia. The continued expansion and
operation of the Company's business beyond such 24 month period and its ability
to expand its business may be dependent upon its ability to obtain additional
financing. There can be no assurance that additional financing will be available
on terms acceptable to the Company, or at all. In the event that the Company is
unable to obtain such additional financing as it becomes necessary, the Company
may not be able to achieve all of its business plans. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
16. IMMEDIATE AND SUBSTANTIAL DILUTION. This Offering involves an immediate
and substantial dilution to investors. Purchasers of Shares in the Offering will
incur an immediate dilution of $2.65 per Share in the net tangible book value of
their investment from the initial public offering price, which dilution
10
<PAGE>
amounts to approximately 53% of the initial public offering price per Share.
Investors in the Offering will pay $5.00 per Share, excluding the value of the
Warrants, as compared with an average cash price of $1.17 per share of Common
Stock paid by existing stockholders. See "Dilution."
17. SHARES ELIGIBLE FOR FUTURE SALE. Of the 2,500,000 shares of Common
Stock of the Company to be outstanding upon completion of this Offering,
1,500,000 shares shall be "restricted securities," which are owned by
"affiliates" of the Company, as those terms are defined in Rule 144 promulgated
under the Act. Absent registration under the Act, the sale of such shares is
subject to Rule 144, as promulgated under the Act. All of the "restricted
securities" are eligible for resale under Rule 144. In general, under Rule 144,
subject to the satisfaction of certain other conditions, a person, including an
affiliate of the Company, who has beneficially owned restricted shares of Common
Stock for at least one year is permitted to sell in a brokerage transaction,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class, or if
the Common Stock is quoted on Nasdaq or a stock exchange, the average weekly
trading volume during the four calendar weeks preceding the sale. Rule 144 also
permits a person who presently is not and who has not been an affiliate of the
Company for at least three months immediately preceding the sale and who has
beneficially owned the shares of Common Stock for at least two years to sell
such shares without regard to any of the volume limitations as described above.
Holders of 1,500,000 shares of Common Stock are affiliates of the Company. All
of the Company's shareholders who are affiliates have agreed not to sell or
otherwise dispose of any of their shares of Common Stock now owned or issuable
upon the exercise of any option for a period of seventy eight months from the
Effective Date, without the prior written consent of the Managing Underwriter;
provided however, that all such affiliates may sell up to 20% of their holdings
per year over the five year period commencing eighteen months from the Effective
Date. No prediction can be made as to the effect, if any, that sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Company's securities prevailing from time to time. The
possibility that substantial amounts of Common Stock may be sold under Rule 144
into the public market may adversely affect prevailing market prices for the
Common Stock and Warrants and could impair the Company's ability to raise
capital in the future through the sale of equity securities. See "Shares
Eligible for Future Sale".
18. NO DIVIDENDS AND NONE ANTICIPATED. To date, no dividends have been
declared or paid on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. Investors should, therefore, be
aware that it is unlikely that any dividends will be paid on the Common Stock in
the foreseeable future. See "Dividends".
19. RISK OF LOW PRICE STOCKS. The Company has applied to list the Common
Stock and Warrants on the Boston Stock Exchange ("BSE") and expects to list its
securities on this exchange and it is anticipated that such securities will also
be traded on the Nasdaq SmallCap Market. If the Company's securities are
delisted from the Nasdaq SmallCap Market and BSE, they could become subject to
Rule 15g-9 under the Exchange Act, which imposes additional sales practice
requirements on broker-dealers which sell such securities to persons other than
established customers and accredited investors. For transactions in securities
covered by Rule 15g-9, a broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to the sale. Consequently, such rule may
adversely affect the ability of broker-dealers to sell the Company's securities
and may adversely affect the ability of purchasers in this Offering to sell in
the secondary market any of the Company's securities acquired hereby.
20. UNDERWRITER'S INFLUENCE ON THE MARKET. A significant amount of the
securities offered may be sold to customers of the Underwriters. Such customers
subsequently may engage in transactions for the sale or purchase of such
securities and may otherwise effect transactions in such securities. If they
participate in the market, the Underwriters may exert substantial influence on
the market, if one develops, for the
11
<PAGE>
Common Stock and Warrants. Such market-making activity may be discontinued at
any time. The price and liquidity of the Common Stock and Warrants may be
significantly affected by the degree, if any, of the Underwriters' participation
in such market. See "Underwriting."
21. POSSIBLE RESTRICTIONS IN MARKET-MAKING ACTIVITIES IN THE COMPANY'S
SECURITIES. The Managing Underwriter has advised the Company that it intends to
make a market in the Company's securities. Regulation M, which was adopted to
replace Rule 10b-6 and certain other rules promulgated under the Exchange Act,
may prohibit the Underwriters from engaging in any market-making activities with
regard to the Company's securities for a period of five business days (or such
other applicable period as Regulation M may provide) prior to any solicitation
by the Underwriters of the exercise of Warrants until the latter of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriters may have to receive a fee for the
exercise of the Warrants following such solicitation. As a result, the
Underwriters may not be able to provide a market for the Company's securities
during certain periods when the Warrants are exercisable. Any cessation of the
Underwriters' market-making activities could have an adverse effect on the
market price of the Company's securities. See "Underwriting."
22. POSSIBLE ADVERSE EFFECT OF PENNY STOCK REGULATIONS ON THE LIQUIDITY OF
THE COMPANY'S SECURITIES. The Company intends to apply for listing of its
securities on the Nasdaq SmallCap Market. In the absence of the Common Stock
being quoted on Nasdaq and if the Common Stock is not listed on an exchange,
trading in the Common Stock would be covered by Rule 15g-9 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") if the Common
Stock is a "penny stock." Under such rule, broker-dealers who recommend such
securities to persons other than established customers and accredited investors
must make a special written suitability determination for the purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Securities are exempt from this rule if the market price is at least $5.00 per
share.
The Commission adopted regulations that generally define a penny stock to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an equity security listed
on Nasdaq, and an equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three years, (ii) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
If the Company's Common Stock were to become subject to the regulations
applicable to penny stocks, the market liquidity for the Common Stock and
Warrants would be severely affected, limiting the ability of broker-dealers to
sell the Common Stock and Warrants and the ability of purchasers in this
Offering to sell their Common Stock and Warrants in the secondary market. There
is no assurance that trading in the Common Stock and Warrants will not be
subject to these or other regulations that would adversely affect the market for
such securities.
23. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants
offered hereby are redeemable, in whole or in part, at a price of $.10 per
Warrant, commencing one year after the Effective Date (or earlier with the
consent of the Underwriters) and prior to their expiration; provided that (i)
prior notice of not less than 30 days is given to the Warrantholders; (ii) the
closing bid price of the Common Stock if traded on the Nasdaq SmallCap Market,
or the last sales price per share if listed on the Nasdaq National Market or a
national exchange, on each of the 10 consecutive business days ending on the
third business day prior to the date on which the Company gives notice of
redemption has been at least 150% ($9.00 per share) of the current Warrant
exercise price; and (iii) Warrantholders shall have exercise rights until the
close of the business day preceding the date fixed for redemption. Notice of
redemption of the Warrants could force the holders to exercise the Warrants and
pay the Exercise Price at a time when it may be
12
<PAGE>
disadvantageous for them to do so, or to sell the Warrants at the current market
price when they might otherwise wish to hold them, or to accept the redemption
price, which may be substantially less than the market value of the Warrants at
the time of redemption. See "Description of Securities-Warrants."
24. ISSUANCE OF ADDITIONAL SECURITIES. The Board of Directors of the
Company will have authority to issue an unlimited number of Class A Special
Shares with voting liquidation, conversion and other rights without the consent
or vote of the shareholders of the Company. The issuance of additional Class A
Special Shares by the Company's Board of Directors may adversely dilute the
proportionate equity interest and voting power of holders of Common Shares,
including investors under this offering. See "Description of Securities; Class A
Special Shares."
25. REQUIREMENTS OF CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN
CONNECTION WITH THE EXERCISE OF THE WARRANTS. The Warrants offered hereby are
not exercisable unless, at the time of exercise, (i) there is a current
prospectus relating to the Common Stock issuable upon the exercise of the
Warrants under an effective registration statement filed with the Securities and
Exchange Commission, and (ii) such Common Stock is then qualified for sale or
exempt therefrom under applicable state securities laws in the jurisdictions in
which the various holders of Warrants reside. There can be no assurance,
however, that the Company will be successful in maintaining a current
registration statement. After a registration statement becomes effective, it may
require updating by the filing of a post-effective amendment. A post-effective
amendment is required (i) any time after nine months subsequent to the effective
date when any information contained in the prospectus is over sixteen months
old, (ii) when facts or events have occurred which represent a fundamental
change in the information contained in the registration statement, or (iii) when
any material change occurs in the information relating to the plan or
distribution of the securities registered by such registration statement. The
Company anticipates that this Registration Statement will remain effective for
at least nine months following the date of this Prospectus or until September
, 1998 assuming a post effective amendment is not filed by the Company. The
Warrants will be separately tradeable and separately transferable from the
Common Stock offered hereby immediately commencing on the Effective Date. The
Company intends to qualify the Warrants and the shares of Common Stock issuable
upon exercise of the Warrants in a limited number of states, although certain
exemptions under state securities ("blue sky") laws may permit the Warrants to
be transferred to purchasers in states other than those in which the Warrants
were initially qualified. The Company will be prevented, however, from issuing
shares of Common Stock upon exercise of the Warrants in those states where
exemptions are unavailable and the Company has failed to qualify the Common
Stock issuable upon exercise of the Warrants. The Company may decide not to
seek, or may not be able to obtain, qualification of the issuance of such Common
Stock in all of the states in which the holders of the Warrants reside. In such
a case, the Warrants of those holders will expire and have no value if such
Warrants cannot be exercised or sold. See "Description of Securities".
26. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE
WARRANTS. Although the Common Stock and the Warrants will not knowingly be sold
to purchasers in jurisdictions in which they are not registered or otherwise
qualified for sale, purchasers may buy the Common Stock or Warrants in the
aftermarket or may move to jurisdictions in which the shares of Common Stock
issuable upon exercise of the Warrants are not so registered or qualified during
the period that the Warrants are exercisable. In such event, the Company could
be unable to issue shares to those persons desiring to exercise their Warrants
unless and until the shares could be registered or qualified for sale in the
jurisdiction in which such purchasers reside, or an exemption to such
qualification exists or is granted in such jurisdiction. If the Company was
unable to register or qualify the shares in a particular state and no exemption
to such registration or qualification was available in such jurisdiction, in
order to realize any economic benefit from the purchase of the Warrants, a
holder might have to sell the Warrants rather than exercising them. No assurance
can be given, however, as to the ability of the Company to effect any required
registration or qualification of the Common Stock or Warrants in any
jurisdiction in which registration or qualification has not already been
completed. See "Description of Securities--Warrants."
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of Securities
offered hereby at public offering prices of $5.00 per Share and $.125 per
Warrant, after deducting underwriting commissions and offering expenses to be
paid by the Company, is estimated to be $4,132,500. The Company expects to apply
the net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
- ------------------------------------------------------------------ ------------ ---------------
<S> <C> <C>
New Product Development(1)........................................ $ 2,000,000 48.4%
Sales and Marketing(2)............................................ 320,000 7.7%
Hire Additional Personnel(3)...................................... 180,000 4.4%
Payment of Financial Advisory Fee(4).............................. 50,000 1.2%
Repayment of Trade Payables(5).................................... 1,100,000 26.6%
Working Capital(6)................................................ 482,500 11.7%
------------ ---
Total....................................................... 4,132,500 100%
------------ ---
------------ ---
</TABLE>
- ------------------------
(1) The net proceeds allocated to new product development are expected to be
applied towards the development of new lines of wallcoverings and designer
fabrics as well as the development of new products such as decorative
ceiling tiles and floor coverings.
(2) The net proceeds allocated to marketing and sales are expected to be applied
towards the promotion of the Company's brands in their respective markets,
including North America, Europe and Southeast Asia, and expansion of the
Company's markets in the United States and Asia over the next 24 months. The
proceeds are expected to be applied to market research, distributor
incentive programs and sales person incentive programs.
(3) The Company anticipates hiring additional sales and operations employees and
has allocated these net proceeds to fund certain incremental costs over the
next 24 months.
(4) $50,000 will be paid to the Managing Underwriter pursuant to a twenty-five
month financial advisory agreement, all of which is payable upon
consummation of the Offering.
(5) The net proceeds allocated to trade payables are expected to be applied
towards (i) payment of overdue accounts with certain suppliers which include
The Borden Company, and Zen Wallcoverings and (ii) payments required to
finance the increase in the Company's product inventories of Company brand
wallcoverings and designer fabrics as well as paints and, to a lesser
extent, non Company brand wallcoverings necessary to service the Company's
continued growth and expansion of its markets.
(6) The net proceeds allocated to working capital includes funds for general
corporate purposes such as financing accounts receivable and payment of
trade payables.
The foregoing represents the Company's estimate of the allocation of the net
proceeds of the Offering, based upon the current status of its operations and
anticipated business needs. It is possible, however, that the application of
funds will differ considerably from the estimates set forth herein due to
changes in the economic climate and/or the Company's planned business operations
or unanticipated complications, delays and expenses, as well as any potential
acquisitions that the Company may consummate, although no specific acquisition
has been identified. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Any reallocation of the net proceeds will
be at the discretion of the Board of Directors of the Company.
Any additional net proceeds realized from the exercise of the Over-Allotment
Option will be added to the Company's working capital.
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<PAGE>
Pending application, the net proceeds will be invested principally in
short-term certificates of deposit, money market funds or other short-term
interest-bearing investments.
The Company estimates that the net proceeds from this Offering will be
sufficient to meet the Company's liquidity and working capital requirements for
a period of 24 months from the completion of this Offering. In the event that
the Company consummates any acquisition, although no specific acquisition has
been identified, and no plans, proposals or arrangements currently exist in this
regard, such funds will be derived from the funds currently allocated to working
capital or from revenues generated from the Company's operations.
DIVIDEND POLICY
The Company has never paid or declared dividends on its Common Stock. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 and as adjusted to reflect the sale of 1,000,000 Shares of
Common Stock and 1,000,000 Warrants, offered hereby. The information provided
below should be read in conjunction with the other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------
Long-term liabilities, less current maturities...................... 2,966,281 2,966,281
Shareholders' equity:
Capital Stock, unlimited shares authorized: 1,500,000 issued and
outstanding(1); and 2,500,000 issued and outstanding as
adjusted.......................................................... 163 4,132,663
Foreign currency transaction adjustment............................. (175,205) (175,205)
Retained earnings................................................... 1,936,065 1,936,065
Total shareholders' equity........................................ 1,761,023 5,893,523
Total capitalization.............................................. 4,727,304 8,859,804
</TABLE>
- ------------------------
(1) Represents the rollover of 220 shares in the existing companies into
1,500,000 shares of Common Stock of the Company. Does not include 750,000
shares of Common Stock provided for issuance under the Company's Stock
Option Plan.
(2) Reflects the issuance of 1,000,000 shares of Common Stock by the Company in
connection with this Offering. Does not include 750,000 shares of Common
Stock provided for issuance under the Company's Stock Option Plan.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
(3) Trade Payables............................................................................. $ 6,358,585
Repayment of trade payables from offering proceeds (see use of proceeds).................... (1,100,000)
-----------------
Balance..................................................................................... $ 5,258,585
-----------------
-----------------
</TABLE>
16
<PAGE>
DILUTION
Dilution represents the difference between the initial public offering price
paid by the purchasers in the Offering and the net tangible book value per share
immediately after completion of the Offering. Net tangible book value per Share
represents the amount of the Company's total assets minus the amount of its
liabilities and intangible assets divided by the number of shares outstanding.
As of December 31, 1997, the net tangible book value of the Company's Common
Stock was $1,761,023 or $1.17 per share. Without taking into account any changes
in net tangible book value after December 31, 1997, other than to give effect to
the sale of the securities offered hereby and the receipt of the net proceeds of
this Offering, the pro forma net tangible book value of the Company as of
December 31, 1997 would have been $5,893,523 or $2.35 per share. Consequently,
there will be an immediate increase in net tangible book value of $1.18 per
Share to the existing shareholders and an immediate substantial dilution (i.e.
the difference between the offering price of $5.00 per share, assuming no value
is attributed to the Warrants, and the pro forma net tangible book value per
Share after the Offering) of $2.65 or 53% to new investors purchasing the Shares
offered hereby.
The following table illustrates, as of December 31, 1997, this per share
dilution:
<TABLE>
<S> <C> <C>
Public offering price per Share............................... $ 5.00
Net tangible book value before Offering(1).................. $ 1.17
Increase per Share attributable to new investors............ $ 1.18
Pro forma net tangible book value per Share after
Offering(1)................................................. $ 2.35
---------
Dilution per Share to new investors(1)........................ $ 2.65
---------
---------
</TABLE>
The following table summarizes, as of December 31, 1997, the total number of
shares of Common Stock purchased from the Company, the total consideration paid,
and the average price per share paid by the existing shareholders and by new
investors who purchase Common Stock pursuant to this Offering. The computation
excludes any value ascribed to or proceeds relating to the Warrants.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE AVERAGE
OF TOTAL AGGREGATE OF TOTAL PRICE
SHARES PURCHASED(1) SHARES CONSIDERATION CONSIDERATION PER SHARE
------------------- ------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Existing
Shareholders..... 1,500,000 60% $ 1,761,023 26% 1.17
New Investors...... 1,000,000 40% $ 5,000,000 74% 5.00
---------- --- ------------- ---
Total........ 2,500,000 100% $ 6,761,023 100%
---------- --- ------------- ---
---------- --- ------------- ---
</TABLE>
- ------------------------
(1) This information does not include (i) 1,000,000 shares issuable upon
exercise of the Warrants offered hereby, (ii) 750,000 Shares that may be
issued under the Company's Stock Option Plan, (iii) 100,000 Shares issuable
upon the exercise of the Underwriters' Option (an additional 100,000 shares
may be issued upon the exercise of the Warrant component of the
Underwriter's Purchase Option Agreement) , (iv) 150,000 Shares and 150,000
Warrants available from the Company under the over-allotment option.
17
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1997 and 1996 is derived from the
audited financial statements of the Company. The selected financial data set
forth below should be read in conjunction with the Company's financial
statements and notes thereto and with the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Total revenues...................................................... $ 20,757,423 $ 18,927,369 $ 18,552,166
Total costs and expenses............................................ 19,957,595 18,503,798 19,125,056
Net income (loss)................................................... 799,828 423,571 (572,890)
Net income (loss) per common share(1)............................... 0.53 0.28 (0.38)
Weighted average common shares outstanding(1)....................... 1,500,000 1,500,000 1,500,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------- DECEMBER 31,
AS ADJUSTED(2) ACTUAL 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Working capital.................................................... $ 5,665,466 $ 1,532,966 $ 2,164,962
Total assets....................................................... 16,794,832 15,694,832 13,042,385
Total liabilities.................................................. 12,833,809 13,933,809 11,866,358
Total stockholders' equity......................................... $ 5,893,523 1,761,023 1,176,027
</TABLE>
- ------------------------
(1) Reflects the issuance of 1,500,000 shares of Common Stock of the Company in
exchange for all of the outstanding common stock of the predecessor
companies.
(2) Reflects the issuance of 1,000,000 shares of Common Stock and 1,000,000
Warrants, offered hereby and the application of the net proceeds therefrom.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The statements contained in this Prospectus that are not historical are
forward looking statements, including statements regarding the Company's
expectations, intentions, beliefs or strategies regarding the future. Forward
looking statements include the Company's statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All
forward looking statements included in this prospectus are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statement. It is important to note
that the Company's actual results could differ materially from those in such
forward looking statements. Among the factors that could cause actual results to
differ materially are the factors detailed in the risks discussed in the " Risk
Factors" section included in this Prospectus at page 8.
The wallcoverings, decorative fabrics and paint markets are highly
competitive and consists of foreign and domestic manufacturers and distributors
most of whom are larger and have greater resources than the Company.
The Company's future success as a designer and distributor of high quality
wallcoverings and designer fabrics will be influenced by several factors
including the ability of the Company to efficiently meet the quality and design
requirements of its customers, management's ability to evaluate the public's
quality and design requirements and to achieve market acceptance of its
wallcoverings and designer fabrics collections. Further factors impacting the
Company's operations are increases in expenses associated with continued sales
growth, the ability of the Company to control costs, to develop products with
satisfactory profit margins and the ability to develop and manage the
introduction of new product lines and competition.
The Company's customer base is divided among national and regional wholesale
distributors, professional interior designers and large retail chains in the
United States and Canada. The Blonder Company accounts for 14% of the Company's
sales. No other customer accounts for more than 10% of the Company's sales.
Approximately 21.54% of the Company's sales are to national distributors, 21.51%
are to regional distributors, 0.42% to interior designers and 16.22% to retail
chains. The remaining 40.31% are to independent retail stores.
The Company is not dependent upon any major customers for a significant
portion of its revenues. However approximately 12 customers account for 44% of
the Company's revenues. These include The Blonder Company, Color Your World, Key
Wallcoverings, Gardner Wallcoverings, Fashion Wallcoverings, Seabrook
Wallcoverings, Images Wallcoverings, Atlas Wallcoverings, G & W Wallcoverings,
Hunter & Co., Sears Canada and Walltrends.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1996.
Revenues for the fiscal year ended December 31, 1997 were $20,757,423, a
9.67% increase over year revenues of $18,927,369. This increase was due to
greater acceptance of product lines in the market, increased market share from
the independent retail stores, increase in residential real estate sales and
expansion of the export market coupled with the improving economic climate in
North America.
Gross profit for the Company for the fiscal year ended December 31, 1997 was
35.69% of sales, an improvement as compared to the fiscal year ended December
31, 1996 which was 35.00%. This positive change can be attributed to higher
prices, more efficient buying practices and a higher mix of sales to the
independents and an increase in sales to independent retail stores.
19
<PAGE>
Selling expenses for the Company decreased by 4.76% in the fiscal year ended
December 31, 1997 as compared to the fiscal year ended December 31, 1996. This
decrease is attributable primarily to a reduction in freight costs and warehouse
wages.
General and administrative expenses for the Company increased by 9.37% in
the fiscal year ended December 31, 1997 as compared to the fiscal year ended
December 31, 1996. In 1996, management payroll was reduced as part of a cost
reduction plan.
Rosedale develops wallpaper and fabric books which are created for each
collection and sold through distributors. The majority of expenditures for the
creation of these books are incurred in the quarter before the launch of the
collection. Some expenditure is incurred as early as six to eight months in
advance. Revenues generated from the sale of books are netted from the costs
incurred in the same period and the net amount is shown on the income statement.
Because expenditures are made in the quarter before the launch, there is not
always a matching of revenues and expenses e.g. costs for a January launch would
be recorded the last quarter of the fiscal year, whilst the revenue would be
recorded in the following year. The Company ensures that there are form orders
on hand from customers before significant expenditures are incurred to produce
the books. Therefore, there are no speculative risks in their production. Book
development costs for the fiscal year ended December 31, 1997 was $189,566
compared to a recovery of ($278,079) for the same period last year. This is
attributable to delays in the launching of certain collections during 1997.
Design studio expenses for the Company decreased $72,576 to $826,796 for the
fiscal year ended December 31, 1997 versus the same period last year. This
reduction is attributable lower staff requirements as a result of the
implementation of the CAD/CAM design computer system for the studio. Prior to
the implementation of the CAD system, all coloring of new designs and color
changes to existing designs as well as the creation of non sophisticated designs
were done manually. This process required approximately 10 designers (4 full
time and 6 free lance). With the CAD system, the whole process will be
computerized requiring only three designers (2 full time and 1 freelance).
Income from operations increased $393,385 to $1,306,002 for the fiscal year
ended December 31, 1997 versus the prior year. This increase in income from
operation is directly a result for continued sales growt5h and improved margins
coupled with strict cost control.. In addition, for fiscal 1997, the Company
revised its estimate of the useful lies for cylinders and related design costs
extending the amortization period to five years from three years on a straight-
line basis.
This change was necessary to more accurately reflect the estimated useful
lives of the cylinders and related design costs. As the result, the current
year's amortization charge was reduced by approximately $480,000.
Interest expense for the Company for the fiscal year ended December 31, 1997
decreased 10.84% to $209,403 from $234,865 for the fiscal year ended December
31, 1996. This decrease in interest expense is directly attributable to lower
interest rates and the offset of interest earned on the mortgages.
Insurance premiums on life insurance policies taken out by the Company on
the lives of three of its executives have been presented below operating income
because of the magnitude of the premiums. Premium expense for the fiscal year
ended December 31, 1997 decreased 1.50% to $188,963 from $191,845 reflecting an
increase in the capitalization of premiums to the cash surrender values of the
life insurance policies.
Net income for the fiscal year ended December 31, 1997 was $799,8288 as
compared to $423,571 for the fiscal year ended December 31, 1996 an increase of
$376,257 or 88.83%. $174,202 or 46.30% of this increase pertains to a cumulative
effect of a change in accounting principle for book development and design
costs. In 1997, the company changed the accounting principle for recognition of
book development and design costs from a full write-off to a deferral over three
years. The subsidy represent the discount between the costs of the sample books
and the price at which they are sold to major retailers. The company
20
<PAGE>
considers that it is more appropriate to recognize the production of sample
books of wallpaper as an asset, as there is enduring value which should be
recognized over the life of the collection. The balance of the increase in net
income of 53.70% is attributable mainly to the following factors:
- A change in the useful life for cylinders and related design costs from
three years to five years.
- deferral of expenses relating to book development, and design costs for
launches of collections in the following year.
- higher prices for product lines
- better mix of sales
- stricter cost control
FISCAL YEAR ENDED DECEMBER 31, 1996, COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1995
Revenues for the fiscal year December 31, 1996 were $18,927,369, a 2.02%
increase over the prior year revenues of $18,552,166. This marginal increase is
a direct result of a turnaround in the Canadian economy resulting in a larger
volume of sales to independent retail stores.
Gross profit for the Company for the fiscal year ended December 31, 1996 was
35%, a 2.44% decrease as compared to the prior year which was 37.44%. This
decrease is attributable to clearance sales of old collections and overstocks
and a reduction in sales to the United States in 1996 which are at higher
margins
Selling expenses for the Company decreased by 10.72% to $2,437,567 for the
fiscal year ended December 31, 1996 from $2,730,318 for the fiscal year ended
December 31, 1995. This decrease in selling expenses is attributable to stricter
cost control and consolidation of sales territories.
General and administrative expenses for the Company decreased by 15.91% from
$2,382,302 to $2,003,119 in the fiscal year ended December 31, 1996 as compared
to the fiscal year ended December 31, 1995. This significant decrease in general
and administrative expenses is attributable to a reduction in management payroll
as part of a cost reduction plan, a $441,200 reversal in unpaid management
bonuses from 1993 and stricter costs controls.
Book development recovery for the fiscal year ended December 31, 1996
provided income to the Company of $278,079, an increase of $97,840 in recoveries
over the same period for the prior year. This increase was due to increased
sales and improved timing and launches of collections.
Income from operations increased $483,182 in fiscal 1996 from $429,435 to
$912,617, an increase of 112%. As a percentage of sales, income improved to
4.82% as compared to 2.31% for 1996. The increase is as direct result of sales
growth and improved growth margin.
Interest expense decreased $523,795 in fiscal 1996 from $758,660 in fiscal
1995 to $234,865 in fiscal 1996. In 1995, approximately $519,000 was either paid
or accrued in the financial statements as interest expense on the loans taken
out with the Laurentian Bank of Canada to fund premiums on $22,000,000 of life
insurance taken out by the Company on the lives of three key executives. In
1996, the unutilized portion of these loans which were previously invested in
term deposits were collapsed and the proceeds used to pay down the loans. This
resulted in a significant reduction in interest expense.
Insurance premiums increased marginally by $1,258 from $190,587 to $191,845.
These premiums represent the estimated annual expense portion of the premiums on
the insurance policies on the lives of two executives and one shareholder.
Net income for 1996 was $423,571 compared to a loss of $572,890 for 1995.
This significant turnaround is directly attributable to increased sales
especially to independent retail stores resulting from an improved economic
climate in North America, high prices and more efficient buying practices. In
21
<PAGE>
addition, strict cost control and the reduction in interest expense assisted in
the Company being able to achieve this turnaround.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1995, the Company had a net increase in cash of $30,139 from
operations which represented the residual balance from bank borrowings. The
Company continued to acquire inventory in the amount of $1,183,734 financed
primarily from an add back of amortization of $595,176 and collections of
accounts receivable of $754,099. Bank indebtedness increased by $1,914,752,
which was used to purchase capital equipment of $902,570 and inventory of
$1,183,734 and to pay trade payables in the amount of $460,691.
In 1996, the Company used net cash in operating activities of $27,194. The
principal source cash was from net income of $423,571, a decrease in inventory
of $676,507 and an add-back of amortization of $651,143. The Company purchased
capital equipment of $871,703 which was financed primarily from loans from
directors of $510,298, long-term debt of $510,414 and proceeds from bank
indebtedness of $410,106. During the year the Company negotiated special payment
terms with certain major suppliers and implemented strict budgetary and
financial controls. As a result, the company was able to pay down suppliers in
the amount of $1,299,429. As a result although receivables increased $487,558,
the Company was able to increase cash by $464,297.
The Company used cash of $637,168 in operating activities for the fiscal
year ended December 31, 1997 as compared to the fiscal year ended December 31,
1996 when it generated cash of $464,297. Cash was used principally for product
costs, $572,655, accounts receivable, $964,145, inventory $1,222,626, property
plant and equipment, $945,933 and financing two mortgages in the amount of
$415,044 held by related companies. The principal source of cash was from net
income--$799,828, add-back of amortization, $572,655 and account payable,
$1,549,646. Net cash provided from financing activities fiscal 1996 was $833,533
which was provided by proceeds from bank indebtedness--$520,267, proceeds from
long-term debt, $134,616 and loans from the directors, $135,634.
The Company has secured credit arrangements with the National Bank of Canada
in the amount of Cdn.$7,910,000. Of this amount, Ontario has Cdn.$2,750,000 by
way of a demand operating loan and Cdn.$1,250,000 by way of line of credit and
Rosedale has Cdn.$3,500,000 by way of an operating loan and/ or letters of
credit on a revolving demand loan agreement and Cdn.$250,00,000 by way of an
operating loan bulge. The credit facilities bear interest at rates varying
between the bank's prime rate and prime plus 1.5%. All borrowings are
collaterized by the assets of the Company.
The Company will receive net proceeds of this Offering in an amount
estimated to be $4,030,000. The Company believes that the net proceeds of the
Offering, coupled with income from operations and the credit facilities of
Ontario and Rosedale will fulfill the Company's working capital needs for at
least the next two years. AS the Company continues to grow, bank borrowings, or
other debt placements and equity offerings may be considered, in part, or in
combination, as the situation warrants.
22
<PAGE>
BUSINESS
HISTORY OF THE COMPANY
The Company commenced operations as a single retail store, Ontario Paint &
Wallpaper Limited, in 1913 and has operated as a family owned business since its
inception. The focus of the business during its early years was the sale of
paint to homeowners and major contractors. The retail store is still in
operation in its original location and has become a Toronto landmark. In the
early 1970's, Ontario Paint & Wallpaper Limited diversified into wallpaper
distribution. In 1981, the Company's Rosedale subsidiary commenced operations
under the name Desart Wallcoverings Inc. In 1988, Desart Wallcoverings Inc.
changed its name to Rosedale Wallcoverings Inc. and in 1995 the name was changed
to Rosedale Wallcoverings & Fabrics Inc. Over the years, the Company has become
one of the largest independent wholesale wallpaper distributors in Canada. In
the early 1990's the Company continued to diversify by designing wallcovering
collections for distribution in Canada, the United States, Europe, South America
and Asia.
On May 14, 1997 the Company was formed by the shareholders of Rosedale and
Ontario for the purpose of consolidating the business of the two subsidiaries.
GENERAL
The Company, through its two wholly-owned subsidiaries, Ontario and
Rosedale, designs, markets and distributes residential wallcoverings and
designer fabrics. The Company also operates a retail paint and wallpaper store
located in downtown Toronto, Canada which has been in continuous operation since
1913. The Company's products include wallpaper and wallpaper borders (which are
collectively referred to as wallcoverings), designer fabrics and paint.
The Company designs wallcovering and designer fabric collections that it
distributes under its own brand names. Wallcoverings and fabrics sold under
Company brand names are manufactured for the Company on an outsource basis by
third party manufacturers. In addition to selling its own brand name
wallcoverings and fabrics, the Company is also a wholesale distributor of
wallcoverings designed and manufactured by other manufacturers. Wholesale
distribution of other manufacturers' wallcoverings is done through the Company's
Ontario subsidiary. Design and distribution of Company brand wallcoverings is
accomplished primarily through its Rosedale subsidiary and to a lesser extent
through its Ontario subsidiary.
The Company's Rosedale subsidiary has received a number of industry
recognized awards. Since 1994, the Rosedale subsidiary has been received the
"Estate Award for Excellence in Wallcovering Design" on four separate occasions.
This award is presented by a leading trade publications and is given in
recognition of wallcovering collections that exhibit outstanding design
characteristics. In addition, Rosedale has received the "Hot Line Elite" award
on numerous occasions which is presented by another leading trade publication to
the wallcovering producer whose collections have been cited by independent
retail stores throughout the United States as top sellers. Rosedale has also
twice been named "Supplier of the Year" by its largest distributor, The Blonder
Company, most recently in 1997. Rosedale achieved the honor of being The Blonder
Company's supplier of the year twice despite the fact that its collections
represent only approximately 5% of the total wallcovering collections offered by
The Blonder Company in each year.
Sales of Company Name Brand wallcoverings accounts for approximately 54% of
the Company's total revenues and wholesale distribution of wallcoverings under
non-company brand names accounts for approximately 29% of the Company's total
revenues. Sales of designer fabrics accounts for approximately 12% of the
Company's revenues and the Company's retail paint and wallpaper store generates
approximately 5% of the Company's annual revenues.
The Company distributed approximately 26 Company brand wallcovering and
fabric collections to approximately 10,000 to 20,000 retail wallpaper and paint
stores worldwide in 1996. In addition, the
23
<PAGE>
Company's Ontario subsidiary distributed approximately 47 non-Company brand
wallcovering collections to approximately 1,700-2,000 home decorating stores in
Canada in 1996.
The Company believes that its product mix of wallcoverings, designer fabrics
and paints, along with its newer offerings of floor coverings and ceiling tiles
presents significant cross marketing opportunities. Rosedale has recently
introduced wallcovering and fabric sample books that include coordinated carpets
and area rugs, a first in the industry.
COMPANY BRANDS
The Company designs and distributes approximately 10 different lines of
wallcoverings and fabrics sold under the Company's own brand names each year. A
variety of wallcovering and fabric collections are sold under each of the
Company's brand names. Each wallcovering collection sold by the Company consists
of a variety of coordinated wallpapers, borders and fabrics. Collections take
approximately twelve months to develop and are generally available in the
marketplace for a minimum of 2 years after launch. The Company's Rosedale
subsidiary designs and distributes 6 wallcovering collections and 2 fabric
programs per year, sold under 5 brand names, and the Ontario subsidiary designs
and distributes 2 wallcovering collections per year, sold under 2 brand names.
Such products are distributed to approximately 10,000 to 20,000 retail stores
and interior designers worldwide.
Wallcovering and designer fabric collections are developed by the Company's
design staff using a variety of color schemes to create thematically consistent
collections. Each collection is tailored to fit the particular target market for
the brand name for which the collection is being created. The Company's
management, design, marketing and sales staff approve collections for production
based upon their assessment of the commercial potential of those collections in
each of the Company's target markets.
Each of the Company's subsidiaries maintains its own design studio and
creative staff. Rosedale's design studio is located in its Concord, Ontario
facility. Recently, the Company's Rosedale subsidiary installed a state of the
art computer aided design (CAD) system, with two workstations, for the creation
and coloring of wallcovering and fabric designs. The system provides Rosedale's
design staff with the ability to produce a wide variety of designs and color
schemes and has reduced the time required for producing finished designs. The
Company's Ontario subsidiary maintains a design studio and staff in London,
England.
Company brand name wallcoverings and fabrics include; Rosedale, Cambridge
Studios, Hamilton House, Kingsway Fabrics, Concord and Ridley Nash. The
Company's brand name wallcoverings and fabrics are targeted for middle and upper
middle income consumers and to the high end interior designer market where the
Company's wallcoverings can compete based upon quality and design. The Company
does not design wallcovering and fabric collections for the lower end of the
market where competition is based primarily upon price.
The Company's Rosedale and Cambridge Studios brands were established in 1987
and 1993, respectively, and are designed and marketed by the Company's Rosedale
subsidiary. The Concord and Ridley Nash lines of wallcoverings were established
in 1992 and 1995, respectively, and are designed by the design staff of the
Company's Ontario subsidiary. The Company produces approximately 8 different
lines of wallcoverings under its Rosedale, Cambridge Studios, Concord and Ridley
Nash brands each year. Wallcovering collections sold under all four brand names
are targeted to middle to and upper middle income consumers.
The Company's Hamilton House brand, which was introduced in 1995 by the
Company's Rosedale subsidiary in order to provide the Company with a brand which
is specifically designed for the interior design market and decorator boutiques.
With the addition of the Hamilton House brand line of wallcoverings, Rosedale's
product mix was expanded to cover all major price categories from the middle
level market through to the high end interior designer market.
24
<PAGE>
The Concord and Ridley Nash brands were established by the Company's Ontario
subsidiary to provide Ontario with its own brand name of wallpaper products for
introduction into the United States market. Both brands are created in London,
England by the Company's design staff. The Company designs and distributes one
wallcovering collection per year under each brand name. Both lines of
wallcoverings are targeted for middle to upper income consumers.
The Company's various brands enable the Company to take advantage of the
changing nature of the North American wholesale distribution business, including
the growth of large national distributors as well as the trend towards
consolidation amongst the smaller regional distributors, and to broaden its
product mix to cover all major price categories with the market with the
exception of the low margin, mass merchant business.
DECORATIVE FABRICS AND FLOOR COVERINGS
As part of the Company's growth strategy, its Rosedale subsidiary has
recently expanded its product lines to include coordinated products, namely
decorative fabrics, soft window treatments and floor coverings. The Company's
decorative fabric products are sold under the Kingsway Fabrics brand name and
are intended to be utilized by consumers for draperies, upholstery and bed
coverings. The expansion into the coordinated fabric market has been undertaken
in order to take advantage of the tremendous trend towards coordinated selling
in the home decorating industry. These changes encompass the way that products
are introduced into the market as well as the nature of consumer buying habits.
Designer fabrics represent approximately 12% of Rosedale's annual revenues.
Rosedale designs and markets two fabric collections per year which are
coordinated with its wallcovering collections. Recently, Rosedale has added
coordinated area rugs and runners to compliment its wallcovering and fabric
offerings.
The Company believes that offering a combination of wallcoverings,
decorative fabrics and floor coverings provides significant opportunities for
cross merchandising of the Company's products. This in turn opens other markets
for the Company's product lines. For example, by offering coordinated lines of
wallcoverings, fabrics, and floor coverings, consumers looking to purchase
wallcoverings will be exposed to the Company's designer fabric and floor
covering lines. The Company believes that it is now able to offer consumers a
complete home decorating package. The end result being that the Company's
products are saleable to a wider variety of retail stores and consumers.
THIRD PARTY MANUFACTURING
Company brand wallcoverings are manufactured for the Company by wallcovering
manufacturers in the United Kingdom, Canada and the United States. The Company's
Rosedale and Cambridge Studios lines of wallcoverings are manufactured in the
United Kingdom by Borden Wallcoverings Ltd. ("Borden") and Zen Wallcoverings
Ltd. ("Zen"). Borden manufacturers the majority of the Company's wallcoverings
and has been a contract manufacturer with the Company since 1985. The Company's
Hamilton House brand is manufactured in the United States by Hawthorne
Wallcoverings. The Company's wallcoverings are also manufactured in Canada by
Blue Mountain Wallcoverings Ltd. and Sunworthy Wallcoverings Inc.
Designer fabric collections designed by the Company and sold under the
Kingsway Fabrics brand name are manufactured in the United States by two
manufacturers, Santee Print Works Ltd. ("Santee") and New London Textiles, Inc.
("New London").
The Company generally enters into contracts with its manufacturers to
produce its designs to the Company's specifications on a "make and ship" basis
which means that the manufacturers hold no inventory of the Company's products.
The Company's products are manufactured on a pattern by pattern basis. The terms
and conditions of production are outlined by the Company in written instructions
provided to the manufacturers for each new design that the Company produces. The
Company maintains
25
<PAGE>
the exclusive copyrights to each of its designs and the manufacturers do not
have rights to sell the Company's designs unless permitted by the Company.
WHOLESALE DISTRIBUTION OF WALLCOVERINGS MANUFACTURED BY THIRD PARTIES
The Company, through its Ontario subsidiary is a wholesale distributor of
wallcoverings designed and produced by manufacturers located in the United
Kingdom and Canada. The Company markets wallcovering collections produced by
third party manufactures under each manufacturer's brand names. The Company has
distribution agreements with John Wilman Limited ("John Wilman") and Vymura
International PLC ("Vymura"), located in the United Kingdom, and with Norwall
Group Inc. ("Norwall"), located in Canada. The Company's distribution agreements
with John Wilman, Vymura and Norwall provide the Company with the exclusive
Canadian distribution rights for each manufacturers' wallcovering lines. The
Company believes that its position as one of the few remaining distributors not
owned by a manufacturing facility, makes it an attractive distributor to
manufacturers that do not want to sell their products to competitive
manufacturers for distribution.
NEW PRODUCTS
The Company intends to expand the products offered by its Ontario subsidiary
to include a line of retro art decorative ceiling tiles for commercial and
residential customers. The decorative ceiling tiles are designed to fit into
standard suspension ceiling frameworks and are embossed with designs that
emulate ceilings found in many turn of the century buildings. This provides
commercial and residential customers with the ability to add victorian style
ceilings to their decor. The Company believes that its decorative ceiling tiles
will be attractive to commercial users, such as restaurants looking to recreate
the look of the late 1800's.
RETAIL OPERATION
The Company's retail operation, Ontario Paint & Wallpaper, has been in
continuous operation since 1913 and the store has become a landmark in
metropolitan Toronto. The retail store sells Benjamin Moore paints and related
sundry products, including wallcoverings to customers ranging from individual
homeowners to large industrial accounts. The store offers a full line of
wallcoverings, include all brands distributed by the Company. The majority of
Ontario Paint & Wallpaper's paint sales are made to local movie studios for set
designs and to commercial customers for apartment and office buildings. Sales to
commercial customers have been growing steadily over the past two years. The
retail store is the largest single source distributor of Benjamin Moore Paints
in Canada.
The retail store offers special services to attract and maintain commercial
customers. The store maintains detailed records of paint purchases by commercial
customers. Commercial customers that have purchased paint in the past can order
additional paint simply by telephoning the store and indicating which area of
their building requires paint. The store manager then retrieves the stored
information about the building, selects the correct paint colors for the
commercial customer and then delivers the paint to the customer. In addition,
the Company has a portable paint scanner which provides retail store employees
with the ability to visit a building and scan the building's paints and return
to the store where the scanned information is transferred to a paint mixer which
then mixes matching paint colors.
The paint store is also the setting for a monthly home decorating television
show which is broadcast from the store. The television show is hosted by City
T.V., and provides practical advice on home painting and repairs. The television
show is taped from the store in front of a live audience. In June 1997, the
retail store also began presenting bi-monthly seminars for homeowners providing
elementary to advanced instruction on various painting techniques. The seminars
are conducted in conjunction with a local TV personality. The program has been
quite successful with all classes being oversold.
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<PAGE>
MARKETING AND DISTRIBUTION (COMPANY BRANDS)
The Company distributes its brand name wallcoverings and fabrics in the
United States and Canada through regional and national distributors. The Company
appoints a single distributor to a particular geographical area and their
territories generally do not overlap. The Company does not maintain formal
distribution agreements with its distributors, as is the custom in the industry.
It is understood and common practice in the industry that neither the
distributor nor the manufacturer is obligated to maintain a relationship other
than on a collection by collection basis. It is the Company's policy that each
of its distributors is obligated to purchase every collection the Company
markets or forfeit its right to be a Company distributor.
In addition the Company sells directly to selected large national and
regional retail chains and specialty stores that specialize in the sale of
wallcoverings and designer fabrics.
The Company markets and promotes its products through the distribution and
sale of sample books. The Company prepares a sample book for each of its Company
brand collections of wallcoverings and fabrics designs. The majority of the
sample books prepared by the Company contain partial sheets of wallpaper,
coordinated borders and fabrics. Recently, the Company has added coordinated
floor coverings to its sample books. In addition, sample books contain
photographs of model room settings demonstrating how the Company's
wallcoverings, coordinated designer fabrics and floor coverings look in
simulated home environments. By offering coordinated wallcoverings and fabric
collections in its sample books, the Company is able to have its entire product
line shown to a wider variety of end users. The Company also produces sample
books which contain only designer fabric samples which it distributes to fabric
wholesalers. In 1996, the Company distributed over 80,000 Company brand
wallcovering sample books and 12,000 Company brand designer fabric sample books.
The number of sample books that the Company prepares for any given
collection is determined based upon orders from the Company's distributors. The
distributors inform the Company how many books they will require for each
collection and the Company produces the sample books. The Company does not
produce sample books unless a distributor has requested them. The Sample books
are sold to distributors and the distributors, in turn, place the sample books
with retail and interior design customers who ultimately sell the Company's
products to consumers. In addition to purchasing the Company's sample books,
each distributor is also required to purchase inventory for each pattern in each
collection.
It takes between 10 to 12 months from the time that the Company approves
designs for a collection to the shipping of sample books for that collection.
Recently, the Company's Rosedale subsidiary began producing preview copies of
its sample books using its in house computer aided design ("CAD") system. This
allows Rosedale to preview its collections to distributors and to make changes
to its collections based upon feedback from distributors before the final
printing of sample books. This has resulted in a large cost saving to the
Company. Rosedale believes that this innovation will also allow it to more
specifically tailor its collections and sample books to consumer trends in the
markets on a more timely basis.
CANADIAN DISTRIBUTION
The Company sells approximately 45% of its wallcoverings and fabrics in
Canada through its Ontario subsidiary. The balance of its sales are through
regional distributors and national chains such as Color Your World and Sears
Canada. Regional distributors include Crown Wallcoverings, the largest
distributor to the Canadian interior design market, Images Wallcoverings and
Odyssey. Images Wallcoverings Ltd. and Odyssey Designs Inc., both are
distributors located on the west coast of Canada.
UNITED STATES DISTRIBUTION
Approximately 49% of the Company's wallcovering sales are made in the United
States. Distribution of the Company's wallcoverings in the United States is done
through sales to national and regional
27
<PAGE>
distributors as well as sales to large retail wallpaper chains. Regional
distributors in the United States include Walltrends, Hunter & Co., Key
Wallcoverings, G&W Distributors, Fashion Wallcoverings, Atlas Wallcoverings,
Eisenhardt Wallcoverings and Aztec. National distributors include The Blonder
Company, which distributes the Company's Cambridge Studios brand, and Seabrook
Wallcoverings, which distributes the Company's Hamilton House line of
wallcoverings.
The Company also sells directly to retail chains in the United States which
include Wallpapers to Go, Sherwin Williams, Gardener Wallcoverings, Horners and
Tretiaks.
In 1993, Rosedale embarked on the development of a separate distribution
network of wholesalers throughout North America for the purpose of distributing
its decorative fabrics. The Company designer fabrics are sold by approximately
ten independent salespersons who also sell products produced by other fabric
companies. The other fabrics sold by these salespersons generally do not compete
directly with the Company's designer fabrics in either look or price points. The
salespersons are compensated on a commission only basis. The Company does not
have contracts with any of these salespersons.
WALLCOVERING MARKET
Over two billion rolls of wallcoverings were sold worldwide in 1994, with
over 161 million rolls sold in Canada and the United States and over 500 million
rolls of residential wallcoverings were sold in Europe during the same period.
Sales of wallcoverings tend to have a direct relationship to the level of home
renovations and the economy in general, but have lesser relationship to new
housing starts.
The Company competes primarily within the residential wallcovering segment
of the home decorative industry, which is a sector of the building supplies
industry which caters to the do-it-yourself market. Currently the wallcovering
segment is fragmented, comprised of, many small and medium sized companies with
no single large company dominating the market. Management believes that several
of the companies within this segment may consider consolidation and may be
acquisition targets for the Company in the future, although there can be no
assurances that the Company will be able to identify such acquisition target and
consummate an acquisition on terms that are acceptable to the Company.
The Company believes that homes built prior to 1980 account for
approximately 86% of the U.S. housing market. As a result, many of these homes
may warrant renovations. With the bulk of the United States population entering
the post-40 age group, the U.S. Census Bureau estimates that by the year 2000
home ownership will increase to 70% from 66% in 1996. Based upon 1997 economic
data the U.S. Census Bureau predicts that domestic housing will continue to rise
by at least 1 million homes per year through the year 2000.
The trend at the distribution level of the industry has been towards a
market characterized by fewer distributors with higher distribution volumes. The
Company has developed strong relationships with independent regional
distributors. The Company is also well positioned to take advantage of growth in
mass merchandising through its relationship with its national distributors and
large retail chains. In addition, the Company hopes to penetrate alternative
fabric markets such as apparel and soft goods industries.
PATENTS AND TRADEMARKS
The Company trademarks the names of each of its collections and brand names.
In addition, the Company copyrights designs created for its Company brand
wallcovering and fabrics.
GOVERNMENT REGULATION
The Company is subject to various Canadian regulations relating to health
and safety standards applicable warehouse operations. The Company must comply
with Canadian federal regulations administered by the Workman's Compensation
Board, relating to worker safety issues in its warehouse facility.
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<PAGE>
Although the cost of compliance with such regulations is not material, changes
to existing regulations may have a material adverse effect on the Company's
business and result of operations. The Company is also subject to U.S. Federal
Regulations relating to imports of goods and the North American Free Trade
Agreement on its products that it exports to the United States. Although the
cost of compliance with such regulations is not material, changes to existing
regulations may have a material adverse effect on the Company's business and
result of operations.
EMPLOYEES
As of October 9, 1997, the Company employs 64 (62 on a full time basis)
persons, which includes 8 senior executives, 18 sales staff persons (16 full
time, 2 part time), 8 designers, 17 support staff persons and 13 warehouse
workers. The Company has no unionized employees and believes that its
relationship with its employees is satisfactory.
PROPERTIES AND FACILITIES
The Company leases facilities in Concord, Ontario for each of its
subsidiaries. The Company leases an approximately 78,000 square foot facility
for its Ontario subsidiary. The lease was amended July 13, 1995 and expires on
October 31, 2004 with an annual base rent of Cdn. $260,027. The building houses
Ontario's executive offices, warehouse and showroom. The Company leases a 47,000
square foot facility for its Rosedale subsidiary. The lease for the Rosedale
facility runs through October 31, 2004 and has a base annual rent of
Cdn.$176,640. The Rosedale subsidiary houses its design facilities, executive
offices, warehouse and showroom. Management believes that this space is adequate
for its design and warehouse needs in the foreseeable future. Management also
believes that there is ample room for expansion in the future.
The Company also leases space for its retail paint store, located in
downtown Toronto, from a company owned by Alan Fine, Chief Executive Officer of
the Company, and Sid Ackerman, the Company's President. The lease calls for
rental payments in the amount of Cdn. $24,000 per annum, plus general sales
taxes, payable in equal monthly instalments of Cdn. $2,000. The lease is for a
one year term, automatically renewable from year to year unless terminated in
writing by either the landlord or the tenant on 30 days written notice. See
"Certain Transactions."
LEGAL PROCEEDINGS
The Company is involved in legal proceedings with Revenue Canada. The
Revenue Canada proceeding involves the Company's challenge to a Revenue Canada
decision to disallow a business loss deduction taken by Rosedale for losses it
incurred when attempting to create a startup company in California. Rosedale
started the California company in 1992 to make window blinds as an adjunct to
its wallcovering and fabric business. The California company's growth did not
meet the Company's expectations and subsequently was sold in 1994. Rosedale
claimed losses incurred during the operation of the California business as a
business loss deduction on its 1994 tax return. Revenue Canada allowed the
deduction as a capital loss only. Rosedale has filed a formal notice of
objection to Revenue Canada's classification of the deduction. In the event that
Revenue Canada's decision is upheld, Rosedale would be required to pay $664,000
plus interest to satisfy its tax obligation. The Company believes that it has a
meritorious defense and is working to try to settle the matter. The Company is
not aware of any other material legal proceedings pending or threatened against
the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Directors
and Executive Officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Alan Fine.................... 52 Chief Executive Officer and Chairman of the Board
Sidney Ackerman.............. 52 President and Director
Norman G. Maxwell............ 49 Chief Financial Officer, Operations Manager and Director
Sheldon Isenberg............. 54 Treasurer, Corporate Secretary and Director
Ken Page..................... 36 Nominated Director
</TABLE>
Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.
Alan Fine has served as the Chief Executive Officer and Chairman of the
Board of the Company since its inception in May 1997. In 1982, Mr. Fine founded
Rosedale Wallcoverings & Fabrics Inc. and since that time he has served as the
President of Rosedale Wallcovering & Fabrics, Inc. Mr. Fine has also served as
the Secretary and Treasurer for Ontario Paint & Wallpaper Ltd since 1978. From
1972 to 1977 Mr. Fine was the Manager of Wallpaper Distribution for Ontario
Paint & Wallpaper Ltd.
Sidney Ackerman has served as the President of the Company since its
inception in May 1997. In 1971, Mr. Ackerman was responsible for the development
of Ontario Wallcoverings which became the wallpaper distribution arm of Ontario
Paint & Wallpaper Ltd. In December 1978, Mr. Ackerman was elected Director and
Treasurer of Ontario Paint & Wallpaper Ltd. Since 1994, Mr. Ackerman has served
as the President of Ontario Paint & Wallpaper Ltd.
Norman G. Maxwell has been Chief Financial Officer and Operations Manager of
the Company since its inception in May 1997 and has served as a director of the
Company since May 1997. Prior thereto, since 1992, Mr. Maxwell has served as the
Vice President of Finance with Ontario. From 1989 to 1992, Mr. Maxwell served as
the Comptroller of Ontario. Mr. Maxwell has been in the wallcovering industry
for over 20 years and has been a Certified Management Accountant since 1977.
Sheldon Isenberg has served and the Company's Treasurer, Corporate Secretary
and Director since May, 1997. Prior thereto, from 1992 to 1997 Mr. Isenberg was
the General Manager, Wallpaper Manufacturing for the Company's Rosedale
subsidiary. Mr. Isenberg completed the Chartered Accounting Course at Queen's
University in 1964 and prior to joining the Company, he worked for a national
apparel manufacturer where he attained the position of Executive Vice President.
Ken Page has agreed to serve as director of the Company following completion
of the Offering. Since 1992 Mr. Page has been a partner of the law firm of Page
Hill in Toronto, Ontario, Canada. Mr. Page graduated from the University of
Western Ontario with an LLB in 1986 and was admitted to the bar in Ontario 1988.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish a Compensation Committee and an
Audit Committee within 90 days of the Effective Date.
The Compensation Committee will consist of at least two directors who are
not salaried officers of the Company. The purpose of the Compensation Committee
is to review the Company's compensation of its executives, to make
determinations relative thereto and to submit recommendations to the Board of
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<PAGE>
Directors with respect thereto. The Compensation Committee will also select the
persons to whom options to purchase shares of the Company's Common Stock under
the 1998 Stock Option Plan will be granted and to make various other
determinations with respect to such Plan.
The Audit Committee will consist of at least two independent Directors. The
purpose of the Audit Committee is to provide general oversight of audit, legal
compliance and potential conflict of interest matters.
COMPENSATION OF DIRECTORS
The Company has not paid compensation to any director for acting in such
capacity. The Company is currently reviewing its policy on compensation of
outside directors and may pay outside directors in the future.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the last two fiscal years to the Company's
Chief Executive Officer and to each of the Company's executive officers who
earned in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER
-------------------- ANNUAL
YEAR SALARY($) BONUS($) COMPENSATION
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
NAME AND PRINCIPAL POSITION
- -------------------------------------------------
Alan Fine(1)..................................... 1997 173,360 -- 7,020
Chief Executive Officer 1996 41,068 121,003 8,582
1995 195,250 67,755 11,635
1994 163,994 -- 11,692
Sidney Ackerman(1)............................... 1997 173,360 -- 9,595
President 1996 41,068 121,003 8,621
1995 195,250 67,755 6,898
1994 163,994 -- 4,254
</TABLE>
- ------------------------
(1) Reflects total compensation received from both the Company's Ontario and
Rosedale subsidiaries.
EMPLOYMENT AGREEMENTS
On the Effective Date, Alan Fine and Sidney Ackerman will both have five
year employment agreements with the Company. Alan Fine will be retained as Chief
Executive Officer of the Company at an annual salary of $160,000. Sidney
Ackerman will be retained as President of the Company at an annual salary of
$160,000.
The employment agreements with Alan Fine and Sidney Ackerman provide that
upon the death of any of the two employees that three years full salary will be
paid to the employee's estate in a lump sum payment. They also provide for
reimbursement of reasonable business expenses.
Alan Fine and Sidney Ackerman are entitled to bonuses of up to $10,000 each
based on achieving sales, profitability and good management goals as
predetermined by the Board of Directors or compensation committee and other
subjective criteria as determined by the Board of Directors or Compensation
Committee.
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<PAGE>
Alan Fine and Sidney Ackerman shall each receive $20,000 per year additional
compensation including car allowance, insurance and retirement savings matched
contributions by the Company and such other perquisites.
Upon the resignation, retirement upon reaching the age of 60 or based upon
any wrongful termination of either Alan Fine or Sidney Ackerman, the Company
shall pay the employee a lump sum resignation allowance of three years salary.
In the event that there is a change in control of the Company, through an
acquisition where any person acquires more than 50% of the shares of the
Company, an amalgamation, consolidation or merger with another corporation
resulting in at least 50% of the voting shares of the surviving corporation
being controlled by a new acquirer or the sale directly or otherwise of all of
the assets of the Company to a third party in a non-distress situation, then the
Company shall pay to Alan Fine and Sidney Ackerman a lump sum payment equal to
the sum of one and one-half times their respective annual salaries paid or
payable in respect of the most recently completed fiscal year.
STOCK OPTION PLAN
After the effective date of this Offering, the Company intends to adopt a
Stock Option Plan (the "1998 Plan"), pursuant to which 750,000 shares of Common
Stock are reserved for issuance.
The 1998 Plan will be administered by the Compensation Committee or the
board of directors, who determine among other things, those individuals who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of Common Stock issuable upon the
exercise of the options and the option exercise price.
The 1998 Plan will be for a period for ten years. Options may be granted to
officers, directors, consultants, key employees, advisors and similar parties
who provide their skills and expertise to the Company. Options granted under the
1998 Plan may be exercisable for up to ten years, may require vesting, and shall
be at an exercise price all as determined by the board. Options will be
non-transferable except to an option holder's personal holding company or
registered retirement savings plan and except by the laws of descent and
distribution or a change in control of the Company, as defined in the 1998 Plan,
and are exercisable only by the participant during his or her lifetime. Change
in control includes (i) the sale of substantially all of the assets of the
Company and merger or consolidation with another, or (ii) a majority of the
board changes other than by election by the shareholders pursuant to board
solicitation or by vacancies filled by the board caused by death or resignation
of such person.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 70, the option remains
exercisable for three months from such occurrence but not beyond the option's
expiration date. Other termination gives the participant three months to
exercise, except for termination for cause which results in immediate
termination of the option.
Options granted under the 1998 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, Common Stock having a
fair market equal to the cash exercise price, the participant's personal
recourse note, or with an assignment to the Company of sufficient proceeds from
the sale of the Common Stock acquired upon exercise of the Options with an
authorization to the broker or selling agent to pay that amount to the Company,
or any combination of the above.
The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of Canada (the "ITA"). The
exercise price of all future options will be at least 85% of the fair market
value of the Common Stock on the date of grant of the options. A benefit equal
to the amount by which the fair market value of the shares at the time the
employee acquires them exceeds the total of the amount paid for the shares or
the amount paid for the right to acquire the shares shall be deemed to be
received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise
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<PAGE>
price of the option is equal to the fair market value of the shares at the time
the option is granted, paragraph 110(1)(d) of the ITA allows a deduction from
income equal to one quarter of the benefit as calculated above. If the exercise
price of the option is less than the fair market value at the time it is
granted, no deduction under paragraph 110(1)(d) is permitted. Options granted to
any non-employees, whether directors or consultants or otherwise will confer a
tax benefit in contemplation of the person becoming a shareholder pursuant to
subsection 15(1) of the ITA.
Options under the 1998 Plan must be issued within ten years from the
effective date of the 1998 Plan.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the 1998 Plan.
The 1998 Plan may be terminated or amended at any time by the board of
directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1998 Plan may not be
increased without the consent of the shareholders of the Company.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The by-laws of the Company provide that the Company shall indemnify to the
fullest extent permitted by Canadian law directors and officers (and former
officers and directors) of the Company. Such indemnification includes all costs
and expenses and charges reasonably incurred in connection with the defense of
any civil, criminal or administrative action or proceeding to which such person
is made a party by reason of being or having been an officer or director of the
Company if such person was substantially successful on the merits in his or her
defense of the action and he or she acted honestly and in good faith with a view
to the best interests of the Company, and if a criminal or administrative action
that is enforced by a monetary penalty, such person had reasonable grounds to
believe his or her conduct was lawful.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and the Underwriter pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or by the Underwriter in connection with
the securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to the sale of 1,000,000 shares of Common Stock
and 1,000,000 Warrants, by the Company with respect to the beneficial ownership
of the Common Stock by each beneficial owner of more than 5% of the outstanding
shares thereof, by each director, each nominee to become a director and each
executive named in the Summary Compensation Table and by all executive officers,
directors and nominees to become directors of the Company as a group, both
before and after giving effect to the Offering.
PERCENTAGE OF OUTSTANDING COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OFFERING OFFERING
- ---------------------------------------------------- ------------------- ----------- ---------
<S> <C> <C> <C>
Sidney Ackerman(2).................................. 375,000 25% 15%
Alan Fine(3)........................................ 562,500 37.5% 22.50%
Rosalyn Fine(4)..................................... 187,500 12.5% 7.50%
The Ackerman Family Trust(5)........................ 375,000 25% 15%
All Executive Officers and Directors as a Group(2)
persons........................................... 937,500 62.5% 37.5%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address is c/o Rosedale Decorative Products
Ltd., 731 Millway Avenue, Concord, Ontario, Canada L4K 3S8.
(2) Does not include 375,000 shares of Common Stock held by the Ackerman Family
Trust. Includes 106,500 shares of Common Stock owned by 1274152 Ontario Inc.
of which Sidney Ackerman is a 25% owner.
(3) Includes 268,500 shares of Common Stock owned by 454590 Ontario Limited of
which Alan Fine is the sole shareholder and includes 159,750 shares of
Common Stock owned by 1274152 Ontario Inc. of which Alan Fine is a 12.5%
owner.
(4) Includes 53,250 shares of Common Stock owned by 1274152 Ontario, Inc. of
which Rosalyn Fine is a 12.5% owner. Rosalyn Fine is the former wife of Alan
Fine and the sister of Sidney Ackerman.
(5) The Ackerman Family Trust owns 375,000 shares of Common Stock, including
106,500 shares of Common Stock owned by 1274152 Ontario, Inc. of which The
Ackerman Family Trust is a 25% owner, held in trust for the benefit of
Sidney Ackerman's wife and two minor children. Sheldon Shapiro and Fred
Stoppell are trustees of The Ackerman Family Trust. Under the terms of the
trust instrument, the trustees have the power to vote the shares.
VOTING AGREEMENT
Effective November 1997, Sidney Ackerman, Alan Fine, The Ackerman Family
Trust and 454590 Ontario Limited (the "Shareholders"), entered into a Common
Stock voting agreement. Pursuant to the terms of the voting agreement, each of
the Shareholders agrees to vote all of their Shares unanimously in respect of
any matter to be voted on at any meeting of the shareholders of the Company. In
the event the Shareholders cannot express unanimity or any of them abstains from
voting then the Shareholders agree to vote all of their Shares against such
matter or withhold all of their votes in respect of such matter as applicable
and to so instruct their proxies. The provisions of the voting agreement shall
apply to any shares in the capital stock of the Company to which voting rights
attach which may be issued to the Shareholders at any time during the term of
the voting agreement and any shares in the capital stock of the Company which
are issued in replacement of any shares or after acquired shares. The voting
agreement does not apply to any shares that are sold or transferred to a
Shareholder and does not apply to any shares that are sold or transferred to a
third party in an arm's-length transaction.
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<PAGE>
The voting agreement terminates upon Sidney Ackerman or Alan Fine being no
longer employed by the Company or any of its subsidiaries or the date upon which
any Shareholder divests itself of all shares in an arm's-length transaction for
fair market consideration, whichever is earlier.
CERTAIN TRANSACTIONS
In 1995, Alan Fine, Chief Executive Officer of the Company and Sidney
Ackerman, President of the Company each loaned funds to the Company's Ontario
and Rosedale subsidiaries. As at December 31, 1997, the outstanding amounts of
loans made by Alan Fine to Ontario and Rosedale were $358,851 and $523,694,
respectively, and the outstanding amount of the loans made by Sidney Ackerman to
Ontario and Rosedale were $295,727 and $361,519, respectively. These loans are
secured by the real or personal property of Rosedale and Ontario and bear
interest at a rate equal to the prime rate of interest charged by the National
Bank of Canada plus 1.5% per annum and are payable on demand.
In 1995, 521305 Ontario Inc., which was the sole shareholder of Rosedale,
loaned funds to Rosedale and was granted a general security interest in the real
and personal property of Rosedale. As at December 31, 1997, the outstanding
balance of the loan was $238,945. The loan bears interest at a rate equal to the
prime rate of interest charged by the National Bank of Canada plus 1.5%. The
prime rate charged by the National Bank of Canada as of September 30, 1997 was
4.75%.
Alan Fine, Chief Executive Officer of the Company, and Sidney Ackerman,
President of the Company, own all of the issued and outstanding capital stock of
966578 Ontario Inc. and 976168 Ontario Inc. The Company leases space for its
retail store, located in downtown Toronto, from 966578 Ontario Inc. The lease
calls for rental payments in the amount of $16,800 per annum, plus general sales
taxes, payable in equal monthly instalments of $1,400. The lease is for a one
year term, automatically renewable from year to year unless terminated in
writing by either the landlord or the tenant on 30 days written notice.
In 1995, two related companies, 966578 Ontario Inc. and 976168 Ontario Inc.
were loaned funds by the Company. As of December 31, 1997, the Company had
outstanding loans receivable from 966578 Ontario Inc. and 976168 Ontario Inc. in
the amount of $12,409 and $24,475, respectively. The loans bear interest at a
rate equal to the prime rate of interest as charged by the National Bank of
Canada plus 1.5% and are payable on demand.
The Company has second mortgages from two related companies, 1216748 Ontario
Inc. and 1217576 Ontario Inc., both of which are 50% owned by Sidney Ackerman,
President and Alan Fine, Chief Executive Officer. The principal amount of the
loans from 1216748 Ontario Inc. and 1217576 Ontario Inc. are $208,344 and
$194,340, respectively. The mortgages are secured by land and buildings and bear
interest at 9% per annum and are payable on demand.
The Company has available credit facilities up to a maximum of $5,700,700
which bear interest at rates varying between the bank's prime rate and prime
plus 1.5%. The credit facilities are personally guaranteed, up to $723,000, by
each of Alan Fine and Sidney Ackerman, up to $1,445,000 by 521305 Ontario Inc.
and 1010037 Ontario Inc., and up to $595,000 by 1216748 Ontario Inc. and 1217576
Ontario Inc.
All future transactions and loans between the Company and its officers,
directors and 5% shareholders will be on terms no less favorable than could be
obtained from unaffiliated third parties and will be approved by a majority of
the independent, disinterested directors of the Company.
35
<PAGE>
DESCRIPTION OF SECURITIES
The total authorized capital stock of the Company consists of an unlimited
number of shares of Common Stock, with no par value, and an unlimited number of
shares of Preferred Stock, with no par value per share. The following
descriptions contain all material terms and features of the Securities of the
Company, are qualified in all respects by reference to the Certificate of
Incorporation and By laws of the Company, copies of which are filed as Exhibits
to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue an unlimited number of shares of Common
Stock, no par value per share, of which as of the date of this Prospectus
1,500,000 shares of Common Stock are outstanding, not including the Shares
offered herein.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Holders of Common
Stock are entitled to receive ratably dividends as may be declared by the board
of directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining, if any, after
payment of liabilities. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities.
Pursuant to the Business Corporation Act, Ontario ("BCA"), a shareholder of
an Ontario Corporation has the right to have the corporation pay the shareholder
the fair market value for his shares of the corporation in the event such
shareholder dissents to certain actions taken by the corporation such as
amalgamation or the sale of all or substantially all of the assets of the
corporation and such shareholder follows the procedures set forth in the BCA.
WARRANTS
Warrants will be issued pursuant to a Warrant Agreement between the Company
and Continental Stock Transfer & Trust Co. (the "Transfer and Warrant Agent")
and will be in registered form. Each Warrant entitles its holder to purchase,
during the four year period commencing on the date of this Prospectus, one share
of Common Stock at an exercise price of $6.00 per share, subject to adjustment
in accordance with the anti-dilution and other provision referred to below.
The Warrants are subject to redemption by the Company at $.10 per Warrant,
at any time commencing one year from the date of this Prospectus (or earlier
with the consent of the Representative) and prior to their expiration, on not
less than 30 days' prior written notice to the holders of such Warrants,
provided that the closing bid price of the Common Stock if traded on the Nasdaq
SmallCap Market, or the last sale price per share of the Common Stock, if listed
on the Nasdaq National Market or on a national exchange, is at least 150% ($9.00
per share, subject to adjustment) of the current Warrant exercise price, for a
period of 10 consecutive business days ending on the third day prior to the date
the notice of redemption is given. Holders of Warrants shall have exercise
rights until the close of the business day preceding the date fixed for
redemption.
The exercise price and the number of shares of Common Stock purchasable upon
the exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, including stock dividends, stock splits, combinations or
classification of the Common Stock. The Warrants do not confer upon holders any
voting or any other rights of shareholders of the Company.
No Warrant will be exercisable unless at the time of exercise the Company
has filed with the Commission a current prospectus covering the issuance of
Common Stock issuable upon the exercise of the Warrant and the issuance of
shares has been registered or qualified or is deemed to be exempt from
registration or qualification under the securities laws of the state of
residence of the holder of the Warrant.
36
<PAGE>
The Company has undertaken to use its best efforts to maintain a current
prospectus relating to the issuance of shares of Common Stock upon the exercise
of the Warrants until the expiration of the Warrants, subject to the terms of
the Warrant Agreement. While it is the Company's intention to maintain a current
prospectus, there is no assurance that it will be able to do so. See "Risk
Factors-Requirements of Current Prospectus and State Blue Sky Registration in
Connection with the Exercise Warrants".
CLASS A SPECIAL SHARES
The Company's Articles of Incorporation authorize the issuance of an
unlimited number of shares of Class A Special Shares with designations, rights
and preferences determined from time to time by its Board of Directors.
Accordingly, the Company's Board of Directors is empowered, without stockholder
approval, to issue Class A Special Shares with voting, liquidation, conversion,
or other rights that could adversely affect the rights of the holders of the
Common Stock. Although the Company has no present intention to issue any shares
of its Class A Special Shares, there can be no assurance that it will not do so
in the future.
TRANSFER AGENT, REGISTRAR AND REDEEMABLE WARRANT AGENT
The transfer agent, registrar and warrant agent for the Common Stock and
Warrants is Continental Stock Transfer & Trust Co., New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 2,500,000
shares of Common Stock outstanding. In addition, the Company has reserved for
issuance 750,000 shares upon the exercise of options eligible for grant under
the Company's Stock Option Plan. Of the shares to be issued and outstanding
after this Offering, the 1,000,000 Shares offered hereby (plus any additional
Shares sold upon exercise of Warrants offered hereby and exercise of the
Over-Allotment Option) will be freely tradeable without restriction or further
registration under the Act, except for any shares purchased or held by an
"affiliate" of the Company (in general, a person who has a control relationship
with the Company) which will be subject to the limitations of Rule 144 adopted
under the Act ("Rule 144"). In general, under Rule 144, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company, who has beneficially owned restricted shares of Common Stock for at
least one year is permitted to sell in a brokerage transaction, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class, or if the Common Stock
is quoted on Nasdaq or a stock exchange, the average weekly trading volume
during the four calendar weeks preceding the sale. Rule 144 also permits a
person who presently is not and who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned the shares of Common Stock for at least two years to sell such shares
without regard to any of the volume limitations as described above. The
remaining 1,500,000 shares of Common Stock are "restricted securities" as that
term is defined under Rule 144, and may not be sold unless registered under the
Act or exempted therefrom. Of the 1,500,000 restricted shares, all will be
eligible to be sold in accordance with the exemptive provisions and the volume
limitations of Rule 144 90 days after the Effective Date, however, the Company's
directors and executive officers, (who hold in the aggregate 781,250 shares),
have agreed not to sell, offer to sell or otherwise dispose of the their shares
of the Company's Common Stock until seventy eight months from the Effective
Date, except pursuant to gifts or pledges in which the donee or pledgee agrees
to be bound by such restrictions, without the prior written consent of the
Managing Underwriter; provided, however, that such persons may sell up to 20% of
their holdings per year over the five year period commencing eighteen months
from the Effective Date. Further, officers and directors whose compensation
exceeds $100,000 per year or who own 5% or more of the Company's outstanding
common stock shall enter into 3 to 5 year lock-up agreements subject to a 20%
per year lock out provision. These agreements are enforceable only by the
parties thereto, and are subject to rescission or amendment at any time without
approval of other stockholders.
37
<PAGE>
Sales of the Company's Common Stock by certain of the present stockholders
in the future, under Rule 144, may have a depressive effect on the price of the
Company's Common Stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following describes the principal United States federal income tax
consequences of the purchase, ownership and disposition of the Common Stock and
the Warrants and upon the exercise, redemption or expiration of the Warrants by
a Warrant holder, that is a citizen or resident of the United States or a United
States domestic corporation or that otherwise will be subject to United States
federal income tax (a "U.S. Holder"). This summary is based on the United States
Internal Revenue Code of 1986, as amended (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this Prospectus
may affect the tax consequences described herein. This summary discusses only
the principal United States federal income tax consequences to those beneficial
owners holding the securities as capital assets within the meaning of Section
1221 of the Code and does not address the tax treatment of a beneficial owner
that owns 10% or more of the Common Stock. It does not address the consequences
applicable to certain specialized classes of taxpayers such as certain financial
institutions, insurance companies, dealers in securities or foreign currencies,
or United States persons whose functional currency (as defined in Section 985 of
the Code) is not the United States dollar. Persons considering the purchase of
these securities should consult their tax advisors with regard to the
application of the United States and other income tax laws to their particular
situations. In particular, a U.S. Holder should consult his tax advisor with
regard to the application of the United States federal income tax laws to his
situation.
COMMON STOCK
A U.S. Holder generally will realize, to the extent of the Company's current
and accumulated earnings and profits, foreign source ordinary income on the
receipt of cash dividends, if any, on the Common Stock equal to the United
States dollar value of such dividends determined by reference to the exchange
rate in effect on the day they are received by the U.S. Holder (with the value
of such dividends computed before any reduction for any Canadian withholding
tax) payable in U.S. Dollars. U.S. Holders should consult their own tax advisors
regarding the treatment of foreign currency gain or loss, if any, on any
dividends received which are converted into United States dollars on a date
subsequent to receipt. Subject to the requirements and limitations imposed by
the Code, a U.S. Holder may elect to claim Canadian tax withheld or paid with
respect to dividends on the Common Stock as a foreign credit against the United
States federal income tax liability of such holder. Dividends on the Common
Stock generally will constitute "passive income" or, in the case of certain U.S.
Holders, "financial services income" for United States foreign tax credit
purposes. U.S. Holders who do not elect to claim any foreign tax credits may
claim a deduction for Canadian income tax withheld. Dividends paid on the Common
Stock will not be eligible for the dividends received deduction available in
certain cases to United States corporations.
Upon a sale or exchange of a share of Common Stock, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized on
such sale or exchange and the tax basis of such Common Stock. Any such gain or
loss will be capital gain or loss, and will be long term capital gain or loss if
at the time of sale or exchange the Common Stock has been held for more than one
year.
WARRANTS
No gain or loss will be recognized by the holder of a Warrant upon the
exercise of the Warrant. The cost basis of the Common Stock acquired upon such
exercise will be the cost basis of the Warrant plus any additional amount paid
upon the exercise of the Warrant. Gain or loss will be recognized upon the
subsequent sale or exchange of the Common Stock acquired by the exercise of the
Warrant, measured by the difference between the amount realized upon the sale or
exchange and the cost basis of the Common Stock so acquired.
38
<PAGE>
If a Warrant is not exercised, but is sold or exchanged (whether pursuant to
redemption or otherwise), gain or loss will be recognized upon such event,
measured by the difference between the amount realized by the holder of the
Warrant as a result of sale, exchange or redemption and the cost basis of the
Warrant.
If a Warrant is not exercised and is allowed to expire, the Warrants will be
deemed to be sold or exchanged on the date of expiration. In such event, the
holder of the Warrant will recognize a loss to the extent of the cost basis of
the Warrant.
Generally, any gain or loss recognized as a result of the foregoing will be
a capital gain or loss and will either be long-term or short-term depending upon
the period of time the Common Stock sold or exchanged or the Warrant sold,
exchanged, redeemed, or allowed to expire, as the case may be, was held. A
holding period of more than one year results in long-term gain or loss
treatment. If a Warrant is exercised, the holding period of the Common Stock so
acquired will not include the period during which the Warrant was held.
THIS SUMMARY IS OF GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD NOT
BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE INVESTOR AND NO
REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR
IS MADE.
39
<PAGE>
INVESTMENT CANADA ACT
The Investment Canada Act is a Federal Canadian statute which regulates the
acquisition of control of existing Canadian businesses and the establishment of
new Canadian businesses by an entity that is a "non-Canadian" as that term is
defined in the Investment Canada Act.
The Company believes that it is not currently a "non-Canadian" for purposes
of the Investment Canada Act. Generally, a company will be deemed to be
"non-Canadian under the Investment Canada Act if control of the Company is held
by non-Canadian residents. If the Company were to become a "non-Canadian" in the
future, acquisitions of control of Canadian businesses by the Company would
become subject to the Investment Canada Act. Generally, the direct acquisition
by a "non-Canadian" of an existing Canadian business with gross assets of
$5,000,000 or more is reviewable under the Investment Canada Act, with a
threshold of $168 million for 1996 for "NAFTA investors" as defined under the
Investment Canada Act.
Indirect acquisitions of existing Canadian businesses (with gross assets
over certain threshold levels) as well as acquisitions of businesses related to
Canada's cultural heritage or national identity (regardless of the value of
assets involved) may also be reviewable under the Investment Canada Act. In
addition, acquisitions of control of existing investments to establish new,
unrelated businesses are not generally reviewable but do require that a notice
of the investment be given under the Investment Canada Act. An investment in a
new business that is related to the non-Canadian's existing business in Canada
is not notifiable under the Investment Canada Act unless such investment relates
to Canada's cultural heritage or national identity.
Investments which are reviewable under the Investment Canada Act are
reviewed by the Minister, designated as being responsible for the administration
of the Investment Canada Act. Reviewable investments may not be implemented
prior to the Minister determining that the investment is likely to be of "net
benefit to Canada" based on the criteria set out in the Investment Canada Act.
40
<PAGE>
UNDERWRITING
The Company has agreed to sell, and the Underwriters have agreed, subject to
the terms and conditions of the Underwriting Agreement, to purchase from the
Company on a firm commitment basis, the respective number of Shares and Warrants
set forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER COMMON STOCK WARRANTS
- ------------------------------------------------------------------------------------- -------------- ----------
<S> <C> <C>
J.P. Turner & Company, L.L.C......................................................... 500,000 500,000
Klein Maus and Shire Incorporated.................................................... 500,000 500,000
-------------- ----------
Total............................................................................ 1,000,000 1,000,000
</TABLE>
The Underwriters have advised the Company that it proposes to offer the
Shares and Warrants to the public at the public offering price set forth on the
cover page of this Prospectus and that they may allow to selected dealers who
are members of the NASD, concessions of not in excess of $. per Share and
$ per Warrant, of which not more than $. per Share and $ per Warrant
may be re-allowed to certain other dealers who are members of the NASD. After
the public offering, the public prices, concessions and reallowances may be
changed by the Underwriters.
The Underwriting Agreement further provides that the Underwriters will
receive from the Company a non-accountable expense allowance of 3% of the
aggregate public offering price of the Shares and Warrants sold (including any
Shares and Warrants sold pursuant to the Underwriters' Over-Allotment Option),
which allowance amounts to $153,750 (or $176,812.5 if the Underwriters
Over-Allotment Option is exercised in full).
The Company has granted to the Underwriters the Over-Allotment Option, which
is exercisable for a period of 45 days after the Closing, to purchase up to an
aggregate additional (up to 15% of the securities being offered) at the public
offering price, less underwriting discounts and commissions, solely to cover
over-allotments, if any.
The Underwriters have informed the Company that the Underwriters will not
make sales of the securities offered by this Prospectus to accounts over which
they exercise discretionary authority.
The Company has agreed to sell to the Underwriters for a price of $.01 per
Warrant the Underwriters' Option to purchase 100,000 Shares of Common Stock and
100,000 Warrants exclusive of the Over-Allotment Option. The Underwriters'
Option will be nonexercisable for one year after the date of this Prospectus.
Thereafter, for a period of four years, the Underwriters' Option will be
exercisable at $7.50 per Share and $.1875 per Warrant. The Underwriters' Option
is not transferable for a period of one year after the date of this Prospectus,
except to officers and stockholders of the Underwriters and to members of the
selling group and their officers and partners. The Warrants underlying the
Underwriters' Option shall have an exercise price of $7.50 per share of Common
Stock.
For the life of the Underwriters' Option, the holders thereof are given, at
nominal costs, the opportunity to profit from a rise in the market price of the
Company's securities with a resulting dilution in the interest of other
shareholders. Further, the holders may be expected to exercise the Underwriters'
Option at a time when the Company would in all likelihood be able to obtain
equity capital on terms more favorable than those provided in the Underwriters'
Option.
The Company has agreed that upon closing of this Offering, it will for a
period of not less than five years, invite a designee of the Managing
Underwriter to attend all meetings of the board of directors. Such designee will
be entitled to the same notices and communications sent by the Company to its
directors and to attend directors meetings, but will not be entitled to vote or
be compensated therefor.
The Company has agreed to retain the Managing Underwriter as a financial
consultant for a period of twenty-five months to commence on the closing of this
Offering, at a monthly fee of $2,000 all of which
41
<PAGE>
($50,000) shall be payable in advance on the closing of the Offering. Pursuant
to this agreement, the Managing Underwriter will be obligated to provide general
financial advisory services to the Company on an "as needed" basis with respect
to possible future financing or acquisitions by the Company and related matters.
The agreement does not require the Managing Underwriter to provide any minimum
number of hours of consulting services to the Company.
The public offering price of the Shares and Warrants offered hereby and the
exercise price and other terms of the Warrants have been determined by
negotiation between the Company and the Underwriters. Factors considered in
determining the offering price of the Shares and Warrants offered hereby and the
exercise price of the Warrants included the business in which the Company is
engaged, the Company's financial condition, an assessment of the Company's
management, the general condition of the securities markets and the demand for
similar securities of comparable companies.
The Company has agreed, for a period of two years from the date of this
Prospectus not to issue any shares of Common Stock, in any public underwritten
offering without first providing the Underwriter with the right of first refusal
to underwrite and manage such offering.
In connection with this Offering, the Underwriters and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Common Stock and Warrants.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock or Warrants for the purpose of stabilizing their
respective market prices. The Underwriters also may create a short position for
the account of the Underwriters by selling more shares of Common Stock or
Warrants in connection with the Offering than they are committed to purchase
from the Company, and in such case may purchase shares of Common Stock or
Warrants in the open market following completion of the Offering to cover all or
a portion of such short position. The Underwriters may also cover all or a
portion of such short position by exercising the Over-Allotment Option. In
addition, the Underwriters may impose "penalty bids" under contractual
arrangements with the Underwriter whereby it may reclaim from an Underwriter (or
dealer participating in the Offering) for the account of other underwriters, the
selling concession with respect to Shares and Warrants that are distributed in
the Offering but subsequently purchased for the account of the Underwriters in
the open market. Any of the transactions described in this paragraph may result
in the maintenance of the price of the Common Stock and Warrants at a level
above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken they may be discontinued at any time.
Commencing one year after the date of this Prospectus, the Company will pay
the Underwriters a fee of 5% of the exercise price of each Warrant exercised,
provided (i) the market price of the Common Stock on the date the Warrant was
exercised was greater than the Warrant exercise price on that date; (ii) the
exercise price of the Warrant was solicited by a member of the NASD; (iii) the
Warrant was not held in discretionary account; (iv) the disclosure of
compensation arrangements was made both at the time of this Offering and at the
time of exercise of the Warrant; (v) the solicitation of the exercise of the
Warrant was not a violation of Regulation M promulgated under the Exchange Act;
and (vi) the Warrant holder designates in writing which broker-dealer made the
solicitation. The Underwriter and any other soliciting broker-dealers may be
prohibited from engaging in any market-making activities or solicited brokerage
activities with regard to the Company's securities during the periods prescribed
by Regulation M, five business days (or other applicable period as Regulation M
may provide) before the solicitation of the exercise of any Warrant until the
later of the termination of such solicitation activity or the termination of any
right the Underwriters and any other soliciting broker/dealer may have to
receive a fee for the solicitation of the exercise of the Warrants.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.
42
<PAGE>
The foregoing is a summary of the material terms of the Underwriting
Agreement, the Underwriters' Option and the Consulting Agreement. Reference is
made to the copies of the Underwriting Agreement, the Underwriters' Option and
the Consulting Agreement, which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
LEGAL MATTERS
Certain legal matters relating to Ontario law, including the validity of the
issuance of the Common Stock and Warrants offered herein, will be passed upon
for the Company by Torkin, Manes, Cohen & Arbus. Certain legal matters in
connection with the Offering will be passed upon for the Company by its United
States counsel, Sichenzia, Ross & Friedman LLP, 135 West 50th Street, 20th
Floor, New York, New York 10020. Certain legal matters will be passed upon for
the Underwriter by Kutak Rock, 225 Peachtree Street, Suite 2100, Atlanta,
Georgia 30303.
EXPERTS
The combined financial statements of Ontario Wallcoverings Ltd. and Rosedale
Wallcoverings & Fabrics Inc. for each of the fiscal years ended December 31,
1997 and 1996, appearing in this Prospectus and Registration Statement have been
audited by Schwartz Levitsky Feldman, Chartered Accountants, as set forth in
their reports thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Act with respect to the Securities offered hereby. This Prospectus omits certain
information contained in the Registration Statement and the exhibits thereto,
and reference is made to the Registration Statement and the exhibits thereto for
further information with respect to the Company and the Securities offered
hereby. Each such statement is qualified in its entirety by such reference. The
Registration Statement, including exhibits and schedules filed therewith, may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and its public reference facilities in New York, New York and Chicago,
Illinois upon payment of the prescribed fees. Electronic registration statements
filed through the Electronic Data Gathering, Analysis, and Retrieval System are
publicly available through the Commission's Website (http://www.sec.gov). At the
date hereof, the Company was not a reporting company under the Securities
Exchange Act of 1934, as amended.
43
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, AND DECEMBER 31, 1996
TOGETHER WITH AUDITORS' REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Auditors......................................................................... F-2
Combined Balance Sheets as of December 31, 1997 and December 31, 1996.................................. F-3
Combined Statements of Income for the years ended December 31, 1997,
December 31, 1996 and December 31, 1995.............................................................. F-4
Combined Statements of Cash Flows for the years ended December 31, 1997,
December 31, 1996 and December 1, 1995............................................................... F-5
Combined Statements of Stockholders' Equity for the years ended December 31, 1997, 1996, 1995 and
1994................................................................................................. F-6
Notes to Combined Financial Statements................................................................. F-7-F-19
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Ontario Paint & Wallpaper Limited and
Rosedale Wallcoverings and Fabrics Inc.
We have audited the accompanying combined balance sheets of Ontario Paint &
Wallpaper Limited and Rosedale Wallcoverings and Fabrics Inc. (incorporated in
Canada) as of December 31, 1997 and 1996 and the related combined statements of
income, cash flows and changes in stockholders' equity for the years ended
December 31, 1997, 1996 and 1995. These combined financial statements are the
responsibility of the management of Ontario Paint & Wallpaper Limited and
Rosedale Wallcoverings and Fabrics Inc. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Ontario Paint &
Wallpaper Limited and Rosedale Wallcoverings and Fabrics Inc. as of December 31,
1997 and 1996 and the results of their operations and their cash flows for the
years ended December 31, 1997, 1996 and 1995, in conformity with generally
accepted accounting principles in the United States of America.
Toronto, Ontario Schwartz Levitsky Feldman
April 16, 1998 Chartered Accountants
F-2
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
COMBINED BALANCE SHEETS
AS OF DECEMBER 31,
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................................. $ 442,655 $ 1,079,823
Accounts receivable (note 2)..................................................... 4,683,912 3,914,762
Inventory (note 3)............................................................... 7,193,831 6,277,999
Prepaid expenses and sundry assets............................................... 180,096 135,859
------------- -------------
12,500,494 11,408,443
LOANS RECEIVABLE FROM AFFILIATED COMPANIES (note 4)................................ 36,884 64,545
DEFERRED PRODUCT COSTS (note 5).................................................... 641,028 --
DEFERRED POLICY COSTS (note 6)..................................................... 182,873 126,369
MORTGAGES RECEIVABLE (note 7)...................................................... 402,684 --
PROPERTY, PLANT AND EQUIPMENT (note 8)............................................. 1,930,869 1,443,028
------------- -------------
15,694,832 13,042,385
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (note 9)....................................................... 3,970,943 3,598,780
Accounts payable and accrued expenses (note 10).................................. 6,741,431 5,470,806
Income taxes payable............................................................. 172,538 200,429
Current portion of long-term debt (note 11)...................................... 82,616 119,390
------------- -------------
10,967,528 9,389,405
LONG-TERM DEBT (note 11)........................................................... 996,981 871,418
LOANS PAYABLE TO STOCKHOLDERS (note 12)............................................ 238,945 252,209
ADVANCES FROM DIRECTORS (note 13).................................................. 1,539,791 1,470,066
DEFERRED INCOME TAXES.............................................................. 190,564 29,184
------------- -------------
13,933,809 12,012,282
------------- -------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK (note 14)............................................................ 163 163
CUMULATIVE TRANSLATION ADJUSTMENT.................................................. (175,205) (106,297)
RETAINED EARNINGS (note 16)........................................................ 1,936,065 1,136,237
------------- -------------
1,761,023 1,030,103
------------- -------------
15,694,832 13,042,385
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
SALES................................................. $20,757,423 $18,927,369 $18,552,166
COST OF SALES......................................... 13,350,033 12,301,621 11,605,996
---------- ---------- ----------
GROSS PROFIT.......................................... 7,407,390 6,625,748 6,946,170
---------- ---------- ----------
OPERATING EXPENSES
Selling............................................. 2,321,585 2,437,576 2,730,318
General and administrative.......................... 2,379,749 2,194,964 2,572,889
Book development costs (recovery)................... 189,566 (278,079) (180,239)
Design studio....................................... 826,796 899,372 988,638
Amortization........................................ 572,655 651,143 595,716
---------- ---------- ----------
TOTAL OPERATING EXPENSES.............................. 6,290,351 5,904,976 6,707,322
---------- ---------- ----------
OPERATING INCOME...................................... 1,117,039 720,772 238,848
Interest expense.................................... 209,403 234,865 758,660
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES..................... 907,636 485,907 (519,812)
Income taxes (note 15).............................. 282,010 62,336 53,078
---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE................................ 625,626 423,571 (572,890)
Cumulative effect of change in accounting principle
(note 1(c))....................................... 174,202 -- --
---------- ---------- ----------
NET INCOME (LOSS)..................................... 799,828 423,571 (572,890)
---------- ---------- ----------
---------- ---------- ----------
Pro Forma Earnings Per Share Before Impact of Change
in Accounting Principle (note 14)................... 0.42 0.28 (0.38)
Pro Forma Earnings Per Share After Impact of Change in
Accounting Principle (note 14)...................... 0.53 0.28 (0.38)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................. $ 799,828 $ 423,571 $ (572,890)
------------- ------------- -------------
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Amortization....................................................... 572,655 651,143 595,716
(Increase) in deferred product costs............................... (658,762) -- --
(Increase) decrease in accounts receivable......................... (964,145) (487,558) 754,099
(Increase) decrease in inventory................................... (1,222,626) 676,507 (1,183,734)
(Increase) in prepaid expenses and sundry assets................... (51,588) (51,405) (60,055)
Increase (decrease) in accounts payable and accrued expenses....... 1,549,646 (1,299,429) (460,691)
Increase (decrease) in income taxes payable........................ (20,144) 30,642 (10,121)
Increase in deferred income taxes.................................. 168,015 29,335 --
------------- ------------- -------------
Total adjustments................................................ (626,949) (450,765) (364,786)
------------- ------------- -------------
Net cash provided by (used in) operating activities................ 172,879 (27,194) (937,676)
------------- ------------- -------------
Cash flows from investing activities:
Increase in deferred policy costs.................................. (63,854) (25,227) (22,148)
Purchases of property, plant and equipment......................... (945,933) (871,703) (902,570)
Increase in mortgages receivable................................... (415,044) -- --
------------- ------------- -------------
Net cash used in investing activities.............................. (1,424,831) (896,930) (924,718)
------------- ------------- -------------
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from bank indebtedness.................................... 540,267 410,106 1,914,752
(Repayment of) proceeds from loans with affiliated companies....... 25,789 (37,034) (25,501)
Proceeds from long-term debt....................................... 134,616 510,414 212,735
Repayment of stockholders' loans................................... (2,793) -- --
Proceeds from loans with directors................................. 135,654 510,298 (225,764)
------------- ------------- -------------
Net cash provided by financing activities.......................... 833,533 1,393,784 1,876,222
------------- ------------- -------------
Effect of foreign currency exchange rate changes................... (218,749) (5,363) 16,311
------------- ------------- -------------
Net (decrease) increase in cash and cash equivalents............... (637,168) 464,297 30,139
Cash and cash equivalents Beginning of year........................ 1,079,823 615,526 585,387
------------- ------------- -------------
End of year........................................................ 442,655 1,079,823 615,526
------------- ------------- -------------
------------- ------------- -------------
Income taxes paid.................................................. 135,302 59,553 45,146
------------- ------------- -------------
------------- ------------- -------------
Interest paid...................................................... 299,421 358,756 452,972
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
COMMON
CLASS A STOCK CUMULATIVE
NUMBER OF NUMBER OF RETAINED TRANSLATION
SHARES SHARES AMOUNT EARNINGS ADJUSTMENTS
------------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1994..................... 20 220 $ 163 $ 1,432,227 $ (133,610)
Foreign currency translation...................... -- -- -- -- 32,381
Net loss for the year............................. -- -- -- (572,890) --
--- --- ----- ------------ -----------
Balance as of December 31, 1995..................... 20 220 163 859,337 (101,229)
Adjustment due to prior years' income tax
reassessments (note 16)......................... -- -- -- (146,671) --
--- --- ----- ------------ -----------
As restated....................................... 20 220 163 712,666 (101,229)
Foreign currency translation...................... -- -- -- -- (5,068)
Net income for the year........................... -- -- -- 423,571 --
--- --- ----- ------------ -----------
Balance as of December 31, 1996..................... 20 220 163 1,136,237 (106,297)
Foreign currency translation...................... -- -- -- -- (68,910)
Net income for the year........................... -- -- -- 799,828 --
--- --- ----- ------------ -----------
Balance as of December 31, 1997..................... 20 220 163 1,936,065 (175,205)
--- --- ----- ------------ -----------
--- --- ----- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
The combined financial statements of Ontario Paint & Wallpaper Limited
("Ontario") and Rosedale Wallcoverings and Fabrics Inc. ("Rosedale") combine the
accounts of the following companies as at their respective year ends:
<TABLE>
<S> <C>
Ontario Paint & Wallpaper Limited............... December 31, 1997 and 1996
Rosedale Wallcoverings and Fabrics Inc.......... December 31, 1997 and 1996
</TABLE>
All material inter-company accounts and transactions have been eliminated.
(See Note 14)
B) PRINCIPAL ACTIVITIES
The companies, Ontario Paint and Wallpaper Limited and Rosedale
Wallcoverings and Fabrics Inc. were incorporated in Canada on December 3, 1971
and April 7, 1981 respectively. The companies are principally engaged in the
designing, manufacturing and marketing of wallpapers and decorative fabrics in
Canada, U.S. and Europe.
C) DEFERRED PRODUCT COSTS
Expenditures relating to the design and distribution of wallpaper and fabric
sample books consisting of book development and design costs relating to
collections that have not been launched are deferred and amortized over a
three-year period on a straight-line basis. Proceeds from the sale of sample
books are offset against the book development costs when received.
The deferral of a portion of book development and design costs represents a
change in accounting principle from a full write-off to a deferral over three
years.
D) CASH AND CASH EQUIVALENTS (BANK INDEBTEDNESS)
Cash and cash equivalents (bank indebtedness) includes cash on hand, amounts
due from and to banks, and any other highly liquid investments purchased with a
maturity of three months or less. The carrying amounts approximate fair values
because of the short maturity of those instruments.
E) OTHER CURRENT FINANCIAL INSTRUMENTS
The carrying amount of the companies' accounts receivable and payable
approximates fair value because of the short maturity of these instruments.
F) LONG-TERM FINANCIAL INSTRUMENTS
The fair value of each of the companies' long-term financial assets and debt
instruments is based on the amount of future cash flows associated with each
instrument discounted using an estimate of what the companies' current borrowing
rate for similar instruments of comparable maturity would be.
F-7
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G) INVENTORY
Inventory is valued at the lower of cost and fair market value. Cost is
determined on the first-in, first-out basis.
H) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and are amortized on the
basis of their estimated useful lives at the undernoted rates and methods:
<TABLE>
<S> <C> <C>
Leasehold improvements 10% Straight-line
Cylinders and related design costs 5 years Straight-line
Equipment furniture and fixtures 20% Declining balance
Computer equipment 30% and 20% Declining balance
Automobile 30% Declining balance
</TABLE>
Amortization for assets acquired during the year are recorded at one- half
of the indicated rates, which approximate when they were put into use.
The amortization period for cylinders and related design costs was extended
from a period of three years to a five year period to more accurately reflect
their estimated useful lives. This change resulted in a reduction in the
amortization charge for 1997 by approximately $480,000.
I) INCOME TAXES
The companies account for income tax under the provisions of Statement of
Financial Accounting Standards No. 109 , which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.
J) FOREIGN CURRENCY TRANSLATION
The companies maintain their books and records in Canadian dollars. Foreign
currency transactions are translated using the temporal method. Under this
method, all monetary items are translated into Canadian funds at the rate of
exchange prevailing at balance sheet date. Non- monetary items are translated at
historical rates. Income and expenses are translated at the rate in effect on
the transaction dates. Transaction gains and losses are included in the
determination of earnings for the year.
The translation of the financial statements from Canadian dollars ("CDN $")
into United States dollars is performed for the convenience of the reader.
Balance sheet accounts are translated using closing exchange rates in effect at
the balance sheet date and income and expense accounts are translated using an
average exchange rate prevailing during each reporting period. No representation
is made that the Canadian dollar amounts could have been, or could be, converted
into United Sates dollars at the rates on the respective dates and or at any
other certain rates. Adjustments resulting from the translation are included in
the cumulative translation adjustments in stockholders' equity.
F-8
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K) SALES
Sales represents the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers.
L) NET INCOME PER WEIGHTED AVERAGE COMMON STOCK
Net income per common stock is computed by dividing net income for the year
by the weighted average number of common stock outstanding as presented on a
pro-forma basis as explained in note 14 (d).
M) USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
N) ACCOUNTING CHANGES
On January 1, 1996, the companies adopted the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to
be Disposed Of. SFAS No. 121 requires that long-lived assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. Adoption of SFAS No. 121 did not have a
material impact on the companies' result of operations.
In December 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was
issued. It introduced the use of a fair value-based method of accounting for
stock-based compensation. It encourages, but does not require, companies to
recognize compensation expense for stock- based compensation to employees based
on the new fair value accounting rules. Companies that choose not to adopt the
new rules will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. However, SFAS No. 123 requires companies that choose not to adopt the
new fair value accounting rules to disclose pro forma net income and earnings
per share under the new method. SFAS No. 123 is effective for financial
statements for fiscal years beginning after December 15, 1995. The companies
have adopted the disclosure provisions of SFAS No. 123.
2. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Accounts receivable................................................................... $ 4,788,725 $ 4,799,124
Less: Allowance for doubtful accounts................................................. 104,813 884,362
------------ ------------
Accounts receivable, net.............................................................. 4,683,912 3,914,762
------------ ------------
------------ ------------
</TABLE>
F-9
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
2. ACCOUNTS RECEIVABLE (CONTINUED)
During 1997, two accounts receivable amounting to approximately $780,000,
previously provided for were written off against the allowance for doubtful
accounts.
3. INVENTORY
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Inventory comprised the following:
Raw materials......................................................................... $ 41,678 $ 140,035
Finished goods........................................................................ 7,152,153 6,137,964
------------ ------------
7,193,831 6,277,999
------------ ------------
------------ ------------
</TABLE>
4. LOANS RECEIVABLE FROM AFFILIATED COMPANIES
The loans receivable from affiliated companies which are related through
common ownership bear interest at prime plus 1.5%, have no specific repayment
terms, and are not expected to be repaid prior to January 1, 1999.
5. DEFERRED PRODUCT COSTS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Book development costs.................................................................... $ 848,996 $ --
Deferred software costs................................................................... 62,915 --
---------- ----------
Cost...................................................................................... 911,911 --
---------- ----------
---------- ----------
Less: Accumulated amortization............................................................
Book development costs.................................................................. 208,299 --
Deferred software costs................................................................. 12,584 --
---------- ----------
270,883 --
---------- ----------
Net Deferred Product Costs................................................................ 641,028 --
---------- ----------
---------- ----------
</TABLE>
6. DEFERRED POLICY COSTS
Deferred policy costs represents the prepaid portion of premiums on the life
insurance policies referred to in note 21.
F-10
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
7. MORTGAGES RECEIVABLE
Second mortgages from companies related through common ownership, secured by
land and buildings, bear interest at 9% and are payable on demand. No repayments
are expected prior to January 1, 1999.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
1216748 Ontario Inc....................................................................... $ 209,073 $ --
1217576 Ontario Inc....................................................................... 193,611 --
---------- ----------
402,684 --
---------- ----------
---------- ----------
</TABLE>
The fair value of the mortgages receivable is estimated to be $350,000.
8. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Leasehold improvements................................................................ $ 31,331 $ 32,700
Automobile............................................................................ 20,057 20,933
Equipment and furniture............................................................... 255,335 266,346
Furniture and fixtures................................................................ 301,585 297,688
Computer and equipment................................................................ 335,796 308,867
Cylinders and related design costs.................................................... 3,057,727 2,277,325
------------ ------------
Cost.................................................................................. 4,001,831 3,203,859
------------ ------------
Less: Accumulated amortization
Leasehold improvements.............................................................. $ 10,448 $ 7,635
Automobile.......................................................................... 16,485 15,608
Equipment and furniture............................................................. 184,572 174,174
Furniture and fixtures.............................................................. 196,837 177,847
Computer and equipment.............................................................. 228,903 209,073
Cylinders and related design costs.................................................. 1,433,717 1,176,494
------------ ------------
2,070,962 1,760,831
------------ ------------
Net Assets............................................................................ 1,930,869 1,443,028
------------ ------------
------------ ------------
</TABLE>
9. BANK INDEBTEDNESS
The companies have available credit facilities up to a maximum of $5,700,000
($7,910,000 Canadian), which bear interest at rates varying between the bank's
prime rate and prime plus 1.5%. The indebtedness is secured by general
assignments of book debts, pledge of inventory under Section 427 of the Bank Act
of Canada, general security agreements providing a first floating charge over
all assets, guarantees and postponement of claims to a maximum of $722,000 each
from two officers, guarantees and postponement of claims to a maximum of
$1,450,000 from the parent companies, guarantees from affiliated companies up
F-11
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
9. BANK INDEBTEDNESS (CONTINUED)
to $595,000, assignment of life insurance of $1,450,000 on the lives of two key
officers and assignment of fire insurance.
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Accounts payable and accrued expenses is comprised of the following:
Trade payables...................................................................... $ 6,358,585 $ 5,201,663
Accrued expenses.................................................................... 382,846 269,143
------------ ------------
6,741,431 5,470,806
------------ ------------
------------ ------------
</TABLE>
11. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C> <C>
a) Settlement Payable
Settlement of a claim initiated by a third party. The terms of payments are as
follows:
$18,248 monthly for January to March, 1997, $7,242 monthly thereafter. The fair
value of the settlement payable is estimated to be $158,000....................... $ 165,231 $ 291,843
------------ -----------
b) Insurance Loan
Amount in excess of cash surrender values of life insurance policies (note 21)
which is payable on demand but is expected to become due for payment in the year
2004. The loan bears interest at prime plus 1.5% and is secured by letters of
guarantee from a major Canadian Chartered Bank and a second collateral mortgage on
the assets of the companies....................................................... 914,366 698,965
------------ -----------
1,079,597 990,808
Less: Current portion............................................................. (82,616) (119,390)
------------ -----------
Long-term portion................................................................. 996,981 871,418
------------ -----------
------------ -----------
</TABLE>
12. LOANS PAYABLE TO STOCKHOLDERS
Stockholder's advances are secured by general security agreements, bears
interest at prime plus 1.5%, have no specific repayment terms, and the
stockholders are not expected to demand repayment prior to January 1, 1999.
F-12
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
13. ADVANCES FROM DIRECTORS
Advances from directors are secured by general security agreements, bears
interest at prime plus 1.5%, have no specific repayment terms, and the directors
are not expected to demand repayment prior to January 1, 1999.
14. CAPITAL STOCK
A) ONTARIO PAINT & WALLPAPER LIMITED
AUTHORIZED
<TABLE>
<S> <C>
500,020 Class A Preference shares, 8% non-cumulative, non-voting,
redeemable at $12,500 per share
25,000 Class B Preference shares, 8% non-cumulative, non-voting,
redeemable at paid upamount
249,980 Common shares
</TABLE>
ISSUED
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C> <C>
20 Class A Preference shares............................................ $ 1 $ 1
20 Common shares........................................................ 2 2
-- --
3 3
-- --
-- --
</TABLE>
B) ROSEDALE WALLCOVERINGS AND FABRICS INC.
AUTHORIZED
<TABLE>
<S> <C>
3,600 Preference shares, 9% non-cumulative, non-voting, redeemable at the
amount paid up plus a premium of 10%
4,000 Common shares
</TABLE>
ISSUED
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C> <C>
200 Common shares $ 160 $ 160
--------- ---------
</TABLE>
F-13
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
14. CAPITAL STOCK (CONTINUED)
C) ISSUED--COMBINED
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C> <C>
20 Class A Preference shares $ 1 $ 1
220 Common shares 162 162
--------- ---------
163 163
--------- ---------
--------- ---------
</TABLE>
D) WEIGHTED AVERAGE NUMBER OF COMMON SHARES
On May 14, 1997, a newly incorporated holding company, Rosedale Decorative
Products Ltd. (the "Registrant"), was formed by the shareholders of the
companies for the purpose of consolidating and reorganizing their 100% ownership
interests in anticipation of an initial public offering. This reorganization
will be carried out using the pooling of interests method.
For the purpose of determining earnings per share, the weighted average
number of common shares has been presented on a pro-forma basis, on the
assumption that the reorganisation was completed as at December 31, 1997.
This reorganization will result in the transfer of all the outstanding
common shares of the parent companies of Ontario and Rosedale currently held by
the Fine and Ackerman families to the Registrant in exchange for 1,500,000
common shares of the Registrant.
After giving effect to the above transaction, there will be 1,500,000 issued
common shares of the Registrant. Accordingly, the earnings per share data
presented are based on the total weighted average number of common shares on a
pro-forma basis of 1,500,000.
15. INCOME TAXES
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C> <C>
a) Current.......................................................................... 113,995 33,152
Deferred......................................................................... 168,015 29,184
---------- ----------
282,010 62,336
---------- ----------
---------- ----------
b) Current income taxes comprised as follows:
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C> <C>
Amount calculated at basic Canadian federal and provincial rates................. $ 371,806 $ 213,800
Increase (decrease) representing from:
Timing differences............................................................... (168,015) (29,184)
Adjustment to prior year taxes................................................... 40,497 --
Non-deductible expenses.......................................................... 90,400 91,189
Application of losses carry-forward.............................................. (220,693) (242,653)
---------- ----------
113,995 33,152
---------- ----------
---------- ----------
</TABLE>
F-14
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
15. INCOME TAXES (CONTINUED)
c) Deferred income taxes represented the tax charges derived from temporary
differences between amortization of property, plant and equipment and
amounts deducted from taxable income.
d) Rosedale has operating losses of approximately $770,000 which is expected
to he used to reduce future taxable income. The potential tax benefit
relating to the losses have been recognized in the accounts to the extent
that they reduce deferred taxes. The deductibility of these losses if
available expires as follows:
<TABLE>
<S> <C>
2001.............................................................. $ 432,000
2002.............................................................. 312,000
2004.............................................................. 26,000
---------
$ 770,000
---------
---------
</TABLE>
Rosedale has been reassessed by Revenue Canada and the Province of Ontario for
fiscal year ended December 31, 1993 and December 31, 1994 in the amount of
approximately $664,000 [see note 19 (b)]. Should the assessments be upheld,
the benefits of these losses may not be realized.
16. INCOME TAX REASSESSMENTS
Retained earnings at the beginning of 1995 and 1996 previously reported as
$1,432,227 and $859,337, respectively, have been restated to $1,285,556 and
$712,666, respectively to reflect a correction resulting from prior years'
income tax reassessments for fiscal years 1994 and prior. The comparative 1996
figures have also been restated.
F-15
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
17. RELATED PARTY TRANSACTIONS
Amounts due from or paid to companies which are related through common
ownership.
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Loan -- 966578 Ontario Inc................................................................. $ 10,345 $ --
Loan -- 976168 Ontario Inc................................................................. 24,467 27,699
Mortgage receivable -- 1216748 Ontario Inc................................................. 192,640 --
Mortgage receivable -- 1217576 Ontario Inc................................................. 178,544 --
Rent paid -- 966578 Ontario Inc............................................................ 17,648 20,534
</TABLE>
18. SEGMENTED INFORMATION
Rosedale is engaged primarily in the design, manufacturing, marketing, and
distribution whilst Ontario is engaged primarily in the marketing and
distribution of wallpaper and designer fabrics.
a) The breakdown of sales by geographic area is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------
<S> <C> <C> <C>
ONTARIO ROSEDALE TOTAL
------------ ------------- -------------
United States of America............................................. $ 747,267 $ 9,133,266 $ 9,880,533
Canada............................................................... 7,472,673 1,712,487 9,185,160
Other................................................................ 1,120,901 570,829 1,691,730
------------ ------------- -------------
9,340,841 11,416,582 20,757,423
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------
<S> <C> <C> <C>
ONTARIO ROSEDALE TOTAL
------------ ------------- -------------
United States of America............................................. $ 1,166,573 $ 9,233,118 $ 10,399,691
Canada............................................................... 6,067,758 1,530,499 7,598,257
Other................................................................ 113,887 815,534 929,421
------------ ------------- -------------
7,348,218 11,579,151 18,927,369
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
<S> <C> <C> <C>
ONTARIO ROSEDALE TOTAL
------------ ------------- -------------
United States of America............................................. $ 1,739,101 $ 9,478,947 $ 11,218,048
Canada............................................................... 5,086,322 1,335,491 6,421,813
Other................................................................ 157,391 754,914 912,305
------------ ------------- -------------
6,982,814 11,569,352 18,552,166
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
F-16
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
18. SEGMENTED INFORMATION (CONTINUED)
b) The companies' accounting records do not readily provide information on
net income by geographic area. Management is of the opinion that the proportion
of net income based principally on sales, presented below, would fairly present
the results of operations by geographic area.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------
<S> <C> <C> <C>
ONTARIO ROSEDALE TOTAL
---------- ---------- ----------
United States of America..................................................... $ 24,524 $ 255,256 $ 279,780
Canada....................................................................... 245,245 49,775 295,020
Other........................................................................ 36,787 14,039 50,826
---------- ---------- ----------
306,556 319,070 625,626
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------
<S> <C> <C> <C>
ONTARIO ROSEDALE TOTAL
---------- ---------- ----------
United States of America..................................................... $ 18,298 $ 238,089 $ 256,387
Canada....................................................................... 94,922 46,381 141,303
Other........................................................................ 1,144 24,737 25,881
---------- ---------- ----------
114,364 309,207 423,571
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------
<S> <C> <C> <C>
ONTARIO$ ROSEDALE TOTAL
---------- ----------- -----------
United States of America................................................... $ 35,805 $ (551,406) $ (515,601)
Canada..................................................................... 91,762 (107,417) (15,755)
Other...................................................................... 15,755 (57,289) (41,534)
---------- ----------- -----------
125,701 (508,004) (572,890)
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
c) The breakdown of identifiable assets by geographic area is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------
<S> <C> <C> <C>
ONTARIO ROSEDALE TOTAL
------------ ------------ -------------
United States of America.............................................. $ -- $ 1,149,550 $ 1,149,550
Canada................................................................ 5,920,090 7,213,301 13,133,391
Other................................................................. 514,791 897,100 1,411,891
------------ ------------ -------------
6,434,881 9,259,951 15,694,832
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
F-17
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
18. SEGMENTED INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
ONTARIO ROSEDALE TOTAL
------------ ------------ -------------
<S> <C> <C> <C>
United States of America.............................................. $ -- $ 1,053,006 $ 1,053,006
Canada................................................................ 5,077,164 6,023,127 11,100,291
Other................................................................. 305,455 583,633 889,088
------------ ------------ -------------
5,382,619 7,659,766 13,042,385
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
d) Sales to major customers are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Sales................................................................. $ 2,890,783 $ 1,968,456 $ 2,313,870
% of total sales...................................................... 14% 10% 12%
Amounts included in accounts receivable............................... $ 298,595 $ 365,794 $ 148,372
</TABLE>
e) Purchases from major suppliers are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Purchases............................................................. $ 8,070,027 $ 6,101,860 $ 6,859,565
% of total purchases.................................................. 52% 49% 53%
Amounts included in accounts payable.................................. $ 3,101,539 $ 2,480,178 $ 1,792,158
</TABLE>
19. CONTINGENCIES
a) The company is contingently liable under contested lawsuits amounting to
approximately $31,000. Management is of the opinion that the company's defence
is meritorious and the lawsuit will result in no material loss. Accordingly, no
provision is included in the accounts for possible related losses. Should any
expenditures be incurred by the company for resolution of these lawsuits, it
will be charged to the operations of the year in which such expenditures are
incurred.
b) Rosedale has been re-assessed by Revenue Canada and the Province of
Ontario for fiscal years ended December 31, 1993 and December 31, 1994 for
additional taxes estimated to be $664,000 ($950,000 Canadian). The company has
objected to these re-assessments and has no obligation to pay the portion
relating to Revenue Canada in the amount of $440,000 ($617,000 Canadian) until
the objections have been processed. No provision has been made in the accounts
for the additional taxes.
F-18
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
20. COMMITMENTS
Minimum payments under operating leases for premises amount to approximately
$330,000 per annum, exclusive of insurance and other occupancy charges. The
leases expires on October 31, 2004. The future minimum lease payments over the
next four years are as follows:
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Payable during the following periods:
Within one year................................................................................... $ 329,787
Over one year but not exceeding two years......................................................... 329,787
Over two years but not exceeding three years...................................................... 329,787
Over three years but not exceeding four years..................................................... 329,787
Over four years but not exceeding five years...................................................... 329,787
Thereafter........................................................................................ 661,065
------------
$ 2,310,000
</TABLE>
21. LIFE INSURANCE POLICIES
The companies are the beneficiaries of life insurance policies with The
Prudential of America Life Insurance Company (Canada) ("PruCan") taken out on
the lives of three of the officers for a total insured value of $22 million. In
consideration for this benefit, the companies agreed to fund the premiums
payable on the policies. Funding is being provided by advances from the
Laurentian Bank of Canada ("Laurentian").
The Laurentian has a legal right of set-off of the cash surrender values of
the life insurance policies against the debt owing to it by the companies.
Accordingly the related assets and liabilities have been offset in the financial
statements.
The amounts offset were as follows:
<TABLE>
<S> <C>
Cash surrender value of life insurance policies................................. $2,030,532
Advances........................................................................ $(2,030,532)
</TABLE>
The amount in excess of the cash surrender value of the life insurance
policies is included in long-term debt (see note 11).
The advances from Laurentian are payable on demand but are expected to
become due for payment in the year 2004. The companies are liable for the
interest on the advances. Security is provided by first charges on the insurance
policies, letters of credit from a major Canadian chartered bank and general
security agreements creating a second charge over all corporate assets.
22. FOREIGN EXCHANGE CONTRACTS
As at December 31, 1997, Rosedale had outstanding foreign exchange contracts
to sell U.S. dollars to the National Bank of Canada during the period April 1998
to December 1999 at various fixed exchange rates which are higher or lower than
the current exchange rate. Any gains or losses will be taken into income in the
periods the contracts are settled.
F-19
<PAGE>
[Picture of employee using CAD system at Rosedale Wallcoverings & Fabrics, Inc.]
[Picture of graphic designer employed by the Company, manually designing and
coloring wallpaper]
[Picture of finished product of newly designed wallpaper produced by the
Company]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 4
Risk Factors..................................... 8
Use of Proceeds.................................. 14
Capitalization................................... 16
Dilution......................................... 17
Selected Financial Data.......................... 18
Managements' Discussion and Analysis of Financial
Condition and Results of Operations............ 19
Business......................................... 23
Management....................................... 30
Principal Stockholders........................... 34
Certain Transactions............................. 35
Description of Securities........................ 36
Investment Canada Act............................ 40
Underwriting..................................... 41
Legal Matters.................................... 43
Experts.......................................... 43
Additional Information........................... 43
Financial Statements............................. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRIERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
ROSEDALE DECORATIVE
PRODUCTS, INC.
1,000,000 SHARES OF
COMMON STOCK AND
1,000,000 COMMON STOCK
PURCHASE WARRANTS
---------------------
PROSPECTUS
---------------------
J.P. TURNER & COMPANY, L.L.C.
KLEIN, MAUS AND SHIRE
INCORPORATED
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The by-laws of the Company provide that the Company shall indemnify
directors and officers of the Company. The pertinent section of Canadian law is
set forth below in full. In addition, upon effectiveness of this registration
statement, management intends to obtain officers and directors liability
insurance.
See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission (the
"Commission") with respect to the effect of any indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act").
Section 136 of the Canadian Business Corporation Act provides as follows:
(1) INDEMNIFICATION OF DIRECTORS--A corporation may indemnify a director
or officer of the corporation, a former director or officer of the
corporation or a person who acts or acted at the corporation's request as a
director or officer of a body corporate of which the corporation is or was a
shareholder or creditor, and his or her heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, reasonably incurred by him or her in
respect of any civil, criminal or administrative action or proceeding to
which he or she is a party by reason of being or having been a director or
officer of such corporation or body corporate, if,
(a) he or she acted honestly and in good faith with a view to the
best interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she has reasonable grounds
for believing that his or her conduct was lawful.
(2) INDEM.--A corporation may, with the approval of the court, indemnify
a person referred to in subsection (1) in respect of an action by or behalf
of the corporation or body corporate to procure a judgment in its favor, to
which the person is made a party by reason of being or having been a
director or an officer of the corporation or body corporate, against all
costs, charges and expenses reasonably incurred by the person in connection
with such action if he or she fulfills the conditions set out in clauses
(1)(a) and (b).
(3) IDEM.--Despite anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in respect of
all costs, charges and expenses reasonably incurred by him in connection
with the defense of any civil, criminal or administrative action or
proceeding to which he or she is made a party by reason of being or having
been a director or officer of the corporation or body corporate, if the
person seeking indemnity:
(a) was substantially successful on the merits in his or her defense
of the action or proceeding; and
(b) fulfills the conditions set out in clauses (1)(a) and (b).
(4) LIABILITY INSURANCE--A corporation may purchase and maintain
insurance for the benefit of any person referred to in subsection (1)
against any liability incurred by the person,
(a) in his or her capacity as a director or officer of the
corporation, except where the liability relates to the person's failure
to act honestly and in good faith with a view to the best interests of
the corporation; or
(b) in his or her capacity as a director or officer of another body
corporate where the person acts or acted in that capacity at the
corporation's request, except where the liability relates to the
II-1
<PAGE>
person's failure to act honestly and in good faith with a view to the
best interests of the body corporate.
(5) APPLICATION TO COURT--A Corporation or a person referred to in
subsection (1) may apply to the court for an order approving an indemnity
under this section and the court may so order and make any further order it
thinks fit.
(6) IDEM--Upon application under subsection (5), the court may order
notice to be given to any interested person and such person is entitled to
appear and be heard in person or by counsel.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities offered hereby.
<TABLE>
<S> <C>
SEC registration fee........................................... $ 4,222.19
NASD registration fee.......................................... 1,890.88
Nasdaq SmallCap Market listing fee............................. 15,000.00
Boston Stock Exchange listing fee.............................. 7,500.00
Printing and engraving......................................... 60,000
Accountants' fees and expenses................................. 25,000.00
Legal fees..................................................... 125,000.00
Transfer agent's and warrant agent's fees and expenses......... 5,000.00
Blue Sky fees and expenses..................................... 30,000.00
Underwriter's non-accountable expense allowance................ 153,750.00
Underwriter's consulting agreement............................. 50,000.00
Miscellaneous.................................................. 2,636.93
----------
Total.................................................... $480,000.00
----------
----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the past three years the Company has issued securities to a limited
number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith:
Simultaneously with the offering, the Company intends to issue an aggregate
of 1,500,000 shares of its common stock to Sidney Ackerman, Alan Fine, Rosalyn
Fine, The Ackerman Family Trust and various other companies under their control,
collectively or individually, in exchange for their shares in 521305 Ontario
Inc. and 1010037 Ontario Inc.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement**
1.2 Form of Selected Dealers Agreement**
1.3 Form of Agreement Among Underwriters**
3.1(a) Articles of Incorporation of Registrant***
3.1(b) Articles of Amendment***
3.2 By-Laws of Registrant***
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<S> <C>
4.1 Form of Underwriters' Purchase Option**
4.2 Form of Warrant Agreement**
4.3 Specimen Common Stock Certificate**
4.4 Specimen Class A Redeemable Common Stock Purchase Warrant**
5.1 Opinion of Torkin, Manes, Cohen & Arbus*
9.1 Form of Voting Agreement**
10.1 Form of Financial Advisory Agreement with Managing Underwriters**
10.2 1998 Stock Option Plan**
10.31 Lease between Rosedale Wallcoverings & Fabrics, Inc. and NHD Properties, Inc. for the premises at 214
Courtland Ave., Concord, Ontario, Canada.**
10.32 Lease between Ontario Paint & Wallpaper Ltd. and NHD Properties, Inc. for the premises located at 231
Millway Avenue, Concord, Ontario, Canada.**
10.33 Lease between Ontario Paint & Wallpaper Ltd. and 966578 Ontario Inc., for premises located at 273 Queen
St. East Toronto, Ontario, Canada.**
10.4 Employment Agreement between the Company and Alan Fine**
10.5 Employment Agreement between the Company and Sidney Ackerman**
10.6 Credit Facility between Rosedale Wallcoverings & Fabrics, Inc., and National Bank of Canada, dated August
8, 1996, as extended, July 30, 1997.**
10.7 Credit Facility between Ontario Paint & Wallpaper, Ltd., and National Bank of Canada, dated November 26,
1996, as extended, July 30, 1997.**
21.1 List of Subsidiaries of Registrant**
23.1 Consent of Schwartz Levitsky Feldman, the Company's Independent Auditors**
23.2 Consent of Sichenzia, Ross & Friedman LLP*
23.3 Consent of Torkin, Manes, Cohen & Arbus (incorporated into Exhibit 5.1)*
</TABLE>
- ------------------------
(*) To be filed by amendment
(**) Filed herewith
(***) Previously filed
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to any charter provision, by-law, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling
II-3
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) To include
any Prospectus required by section 10(a)(3) of the Act; (ii) To reflect in
the Prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; (iii) To include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the Offering of
such securities at that time shall be deemed to be the initial bona fide
Offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(4) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the small business issuer under Rule 424(b)(1), or (4) or 497(h),
under the Act as part of this registration statement as of the time the
Commission declared it effective.
(5) For determining any liability under the Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement at that time as the initial bona fide Offering of
those securities.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form SB-2 and has duly caused this Amendment No. 1 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Province of Ontario, Canada on May 27, 1998.
<TABLE>
<S> <C> <C> <C> <C> <C>
ROSEDALE DECORATIVE PRODUCTS LTD.
By: /s/ ALAN FINE By: /s/ SIDNEY ACKERMAN
----------------------------------- -----------------------------------
Alan Fine Sidney Ackerman
</TABLE>
Pursuant to the requirements of the Act, this Amendment No. 2 to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
We, the undersigned officers and directors of ROSEDALE DECORATIVE PRODUCTS
LTD. hereby severally constitute and appoint Sidney Ackerman and Alan Fine, our
true and lawful attorneys-in-fact and agents with full power of substitution for
us and in our stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitutes, may lawfully do or cause to
be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- -------------------
<C> <S> <C>
/s/ ALAN FINE
------------------------------------ Chairman of the Board of Directors and Chief May 27, 1998
Alan Fine Executive Officer
/s/ SIDNEY ACKERMAN
------------------------------------ President and Director May 27, 1998
Sidney Ackerman
/s/ NORMAN MAXWELL
------------------------------------ Chief Financial Officer/Principal Accounting May 27, 1998
Norman Maxwell Officer, Operations Manager and Director
/s/ SHELDON ISENBERG
------------------------------------ Treasurer, Corporate Secretary and Director May 27, 1998
Sheldon Isenberg
</TABLE>
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated April 16, 1998 in the Registration Statement on Form
SB-2 and related prospectus of Rosedale Decorative Products Ltd. for the
registration of 1,000,000 shares of common stock and 1,000,000 warrants.
Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ontario, Canada
May 20, 1998
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
1.1 Form of Underwriting Agreement**
1.2 Form of Selected Dealers Agreement**
1.3 Form of Agreement Among Underwriters**
3.1(a) Articles of Incorporation of Registrant***
3.1(b) Articles of Amendment***
3.2 By-Laws of Registrant***
4.1 Form of Underwriters' Purchase Option**
4.2 Form of Warrant Agreement**
4.3 Specimen Common Stock Certificate**
4.4 Specimen Class A Redeemable Common Stock Purchase Warrant**
5.1 Opinion of Torkin, Manes, Cohen & Arbus*
9.1 Form of Voting Agreement**
10.1 Form of Financial Advisory Agreement with Managing Underwriters**
10.2 1998 Stock Option Plan**
10.31 Lease between Rosedale Wallcoverings & Fabrics, Inc. and NHD Properties, Inc. for the premises at
214 Courtland Ave. Concord, Ontario Canada.**
10.32 Lease between Ontario Paint & Wallpaper Ltd. and NHD Properties, Inc. the premises located at 731
Millway Avenue Concord, Ontario Canada.**
10.33 Lease between Ontario Paint & Wallpaper Ltd. and 966578 Ontario Inc., for premises located at 273
Queen St. East Toronto, Ontario, Canada**
10.4 Employment Agreement between the Company and Alan Fine**
10.5 Employment Agreement between the Company and Sidney Ackerman**
10.6 Credit Facility between Rosedale Wallcoverings & Fabrics, Inc. and National Bank of Canada, dated
August 8, 1996, as extended, July 30, 1997.**
10.7 Credit Facility between Ontario Paint & Wallpaper Ltd., and National Bank of Canada, dated
November 26, 1996, as extended July 30, 1997.**
21.1 List of Subsidiaries of Registrant**
23.1 Consent of Schwartz Levitsky Feldman, the Company's Independent Auditors**
23.2 Consent of Sichenzia Ross & Friedman LLP*
23.3 Consent of Torkin, Manes, Cohen & Arbus (incorporated into Exhibit 5.1)*
</TABLE>
- ------------------------
(*) To be filed by amendment
(**) Filed herewith
(***) Previously filed
<PAGE>
Exhibit 1.1
1,000,000 Shares of Common Stock
and
1,000,000 Redeemable Common Stock Purchase Warrants
of
ROSEDALE DECORATIVE PRODUCTS LTD.
UNDERWRITING AGREEMENT
Atlanta, Georgia
_______________, 1998
J.P. Turner & Company, L.L.C.
3340 Peachtree Road, N.E., Suite 450
Atlanta, Georgia 30326
Gentlemen:
Rosedale Decorative Products Ltd.,a corporation organized under the
laws of the Province of Ontario, Canada (the "Company"), confirms its agreement
with J.P. Turner & Company, L.L.C. ("J.P. Turner"), and each of the other
underwriters named in Schedule I hereto (collectively, the "Underwriters" which
term shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom J.P. Turner is acting as representative (in such capacity,
J.P. Turner shall hereinafter be referred to as the "Representative"), with
respect to the sale by the Company, and the purchase by the Underwriters, acting
severally and not jointly, of One Million (1,000,000) shares (the "Shares") of
the Company's common stock, no par value per share (the "Common Stock"), and One
Million (1,000,000) Redeemable Common Stock Purchase Warrants (the "Redeemable
Warrants") ("Firm Securities"), each of the Redeemable Warrants entitles the
holder thereof to purchase one share of Common Stock at an exercise price of
$______ per share pursuant to a warrant agreement (the "Warrant Agreement")
between the Company and the warrant agent, set forth in Schedule II, and with
respect to the grant by the Company to the Underwriters, acting severally and
not jointly, of the option described in Section 2(b) hereof to purchase all or
any part of 150,000 additional Shares and 150,000 Redeemable Warrants (the
"Additional Securities") for the purpose of covering over-allotments, if any.
The aforesaid Firm Securities together with all or any part of the Additional
Securities are hereinafter collectively referred to as the "Securities." The
Company also proposes to issue and sell to the Underwriters for an approximate
price of $100.00 ($0.001 per warrant), non-callable warrants entitling the
Underwriters' to purchase from the Company an Underwriters' Warrant (the
"Underwriters' Warrant") for the purchase of an aggregate of 100,000 Shares (the
"Underwriters' Shares") and 100,000 Redeemable Common Stock Purchase Warrants
(the "Underwriters' Warrants" or "Underwriters' Purchase Option"). The shares of
Common Stock issuable upon exercise of the Redeemable Warrants and the
Underwriters' Warrants are hereinafter sometimes referred to as the "Warrant
Shares." The Shares, the Redeemable Warrants, the Common Stock and Underwriters'
Shares, Underwriters' Warrants, and the Warrant Shares are more fully described
in the Registration Statement (as defined in Subsection 1(a)
<PAGE>
hereof) and the Prospectus (as defined in Subsection 1(a) hereof) referred to
below. Unless the context otherwise requires, all references to the "Company"
shall include all subsidiaries (as defined in Subsection 1(e) hereof) referred
to below and identified in the Prospectus, as if separately stated herein. All
representations, warranties and opinions of counsel shall cover such
subsidiaries.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters as of the
date hereof, and as of the Closing Date and any Option Closing Date, (as defined
in Subsection 2 (c) hereof), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement, and
an amendment or amendments thereto, on Form SB-2 (File No. 333-44747) under the
Act (the "Registration Statement"), including a prospectus subject to completion
relating to the Shares and Redeemable Warrants which registration statement and
any amendment or amendments have been prepared by the Company in material
compliance with the requirements of the Act and the rules and regulations of the
Commission under the Act. The term "Registration Statement" as used in this
Agreement means the registration statement (including all financial schedules
and exhibits), as amended at the time it becomes effective, or, if the
registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Shares may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If an abbreviated
registration statement is prepared and filed with the Commission in accordance
with Rule 462(b) under the Act (an "Abbreviated Registration Statement"), the
term "Registration Statement" as used in this Agreement includes the Abbreviated
Registration Statement. The term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Preliminary Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement with
the Commission, and as such prospectus shall have been amended from time to time
prior to the date of the Prospectus.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed in
all material respects with the requirements of the Act and the Rules and
Regulations, and neither the Preliminary Prospectus, the Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the
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<PAGE>
Underwriters by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing Date
and during such longer period as the Prospectus may be required to be delivered
in connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will contain all material statements which are
required to be stated therein in material compliance with the Act and the Rules
and Regulations, and will in all material respects conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement,
nor any amendment thereto, at the time the Registration Statement or such
amendment is declared effective under the Act, will contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Option Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by or
on behalf of the Underwriters expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the
Closing Date and any Option Closing Date will be, validly existing as a
corporation in good standing under the laws of the Province of Ontario, Canada
Other than the Company's Subsidiaries (as defined in Section (e)), the Company
does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity; provided, that the
foregoing shall not be applicable to the investment of the net proceeds from the
sale of the Securities in short-term, low-risk investments as set forth under
"Use of Proceeds" in the Prospectus. The Company is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of its properties or the character of its operations
require such qualification or licensing, except where the failure to so register
or qualify does not have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company and the subsidiaries taken as a whole (a "Material Adverse Effect"). The
Company has all requisite power and authority (corporate and other), and has
obtained any and all necessary material applications, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the Company
is and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates, franchises and permits and all
material federal, state, local and foreign laws, rules and regulations; and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, would have a Material
Adverse Effect. The disclosures in the Registration Statement concerning the
effects of federal, state, local, and foreign laws, rules and regulations on the
Company's business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
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<PAGE>
(e) The Company's subsidiaries (collectively, the
"Subsidiaries") include Rosedale Wallcoverings & Fabrics, Inc. and Ontario Paint
& Wallpaper Ltd. Each Subsidiary is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not,
singly or in the aggregate, have a Material Adverse Effect; all of the
outstanding shares of capital stock of each of the Subsidiaries, have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned
by the Company directly, or indirectly through one of the other Subsidiaries,
free and clear of any lien, adverse claim, security interest, equity or other
encumbrance.
(f) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Securities, the Additional
Securities, Underwriters Shares, the Underwriter's Warrants, and the Warrant
Shares and all other securities issued or issuable by the Company conform or,
when issued and paid for, will conform in all material respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company, or similar contractual rights granted by the
Company. The Securities, the Additional Securities, the Underwriters' Shares,
and the Underwriter's Warrants to be issued and sold by the Company hereunder,
and the Warrant Shares issuable upon exercise of the Redeemable Warrants and the
Underwriter's Warrants and payment therefor, are not and will not be subject to
any preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the terms
hereof and thereof, will be validly issued, fully paid and non-assessable and
will conform in all material respects to the descriptions thereof contained in
the Prospectus; the holders thereof will not be subject to any liability solely
as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities, the Additional Securities, the
Underwriters' Shares, and the Underwriter's Warrants, and the Warrant Shares has
been duly and validly taken; and the certificates representing the Securities,
the Underwriter's Warrants, and the Warrant Shares will be in due and proper
form. Upon the issuance and delivery pursuant to the terms hereof of the
Securities to be sold by the Company hereunder, the Underwriters will acquire
good and marketable title to such Securities free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever.
(g) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved. There has been no material
adverse change or development involving a prospective change in the condition,
financial or otherwise, or in the earnings, business affairs,
4
<PAGE>
position, prospects, value, operation, properties, business, or results of
operation of the Company, whether or not arising in the ordinary course of
business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company,
conforms in all material respects to the descriptions thereof contained in the
Registration Statement and in the Prospectus.
(h) Schwartz Levitsky Feldman, Chartered Accountants, whose
report is filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act.
(i) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986 (the "Code"), (ii) has furnished all tax and information returns it
is required to furnish pursuant to the Code, and has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
knowledge of any tax deficiency or claims outstanding, proposed or assessed
against it (other than certain state or local tax returns, as to which the
failure to file, singly or in the aggregate, would not have a Material Adverse
Effect.)
(j) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts which it reasonably believes to be
necessary for its business, including, but not limited to, personal and product
liability insurance covering all personal and real property owned or leased by
the Company against fire, theft, damage and all risks customarily insured
against.
(k) There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending (to the knowledge of the Company) or threatened
against (or circumstances known to the Company that may give rise to the same),
or involving the properties or business of the Company which: (i) is required to
be disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects); or (ii) singly or in the aggregate would have a
Material Adverse Effect.
(l) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriters' Warrant and the Warrant Agreement
and to consummate the transactions provided for in such agreements; and this
Agreement, the Underwriters' Warrant and the Warrant Agreement have each been
duly and properly authorized, executed and delivered by the Company. Each of
this Agreement, the Underwriters' Warrant and the Warrant Agreement, constitutes
a legal, valid and binding agreement of the Company, subject to due
authorization, execution and delivery by the Representative and/or the
Underwriters, enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). Neither the
Company's execution or delivery of this Agreement, the Underwriters' Warrant,
and the Warrant Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, nor the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of the
terms or provisions of, or constitutes or will constitute a default
5
<PAGE>
under, or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest defect or other restriction or equity of
any kind whatsoever upon any property or assets (tangible or intangible) of the
Company pursuant to the terms of: (i) the Articles of Incorporation or By-Laws
of the Company; (ii) any material license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of its properties or assets
(tangible or intangible) is or may be subject, other than conflicts that, singly
or in the aggregate, will not have a Material Adverse Effect; or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the Company
of any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(m) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Securities to be sold by the Company hereunder; or (ii) the issuance and
delivery of the Underwriters' Warrant, the Underwriters' Shares, the
Underwriter's Warrants, the Redeemable Warrants or the Warrant Shares.
(n) All executed agreements or copies of executed agreements
filed as exhibits to the Registration Statement to which the Company is a party
or by which the Company may be bound or to which any of its assets, properties
or businesses may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute the legal, valid and binding agreements
of the Company, enforceable against it in accordance with its respective terms.
The descriptions contained in the Registration Statement of contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Act and the Rules
and Regulations and there are no material contracts or other documents which are
required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required, and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(o) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business,
material changes in or affecting the general affairs, management, financial
operations, stockholders equity or results of operations of the Company.
(p) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, no default exists in
the due performance and observance of any material term,
6
<PAGE>
covenant or condition of any license, contract, indenture, mortgage, installment
sales agreement, lease, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected.
(q) To the best knowledge of the Company, the Company has
generally enjoyed a satisfactory employer-employee relationship with its
employees and is in compliance in all material respects with all federal, state,
local, and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours.
(r) To the best knowledge of the Company, since its inception,
the Company has not incurred any liability arising under or as a result of the
application of the provisions of the Act.
(s) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multi-employer
plan" as such terms are defined in Sections 3(2), 3(l) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). The Company does not maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA.
(t) The Company is not in violation in any material respect of
any domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject, except to the extent that any such violation would not,
singly or in the aggregate, have a Material Adverse Effect.
(u) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
within twelve (12) months of the date hereof or to require the Company to file a
registration statement under the Act during such twelve (12) month period,
except such registration rights as have been waived or disclosed in the
Prospectus.
(v) Neither the Company, nor, to the Company's best knowledge,
any of its employees, directors, principal stockholders or affiliates (within
the meaning of the Rules and Regulations) has taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(w) Except as described in the Prospectus, to the best of the
Company's knowledge, none of the patents, patent applications, trademarks,
service marks, trade names and copyrights, or licenses and rights to the
foregoing presently owned or held by the Company is in dispute or are in any
conflict with the right of any other person or entity within the Company's
current area of operations nor has the Company received notice of any of the
foregoing. To the best of the Company's knowledge, the Company: (i) owns or has
the right to use, free and clear of all liens, charges, claims, encumbrances,
7
<PAGE>
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing; and (ii) except as set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(x) Except as described in the Prospectus, to the best of the
Company's knowledge, the Company owns and has the unrestricted right to use all
material trade secrets, trademarks, trade names, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "Intellectual
Property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company, or employees or agents, could have
developed trade secrets or items of technical information similar or identical
to those of the Company.
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, or other restrictions or equities of any
kind whatsoever, other than those referred to in the Prospectus and liens for
taxes or assessments not yet due and payable.
(z) The Company has obtained such duly executed legally
binding and enforceable agreements as required by the Representative pursuant to
which the Company's President and certain Directors and affiliates described in
the Prospectus, have agreed not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber any of their shares of Common Stock or other securities of
the Company (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein for certain periods of
up to 60 months subject to earlier release upon the Company's achievement of
certain performance thresholds, following the effective date of the Registration
Statement without the prior written consent of the Representative. The Company
will cause the Transfer Agent, as defined below, to mark an appropriate legend
on the face of stock certificates representing all of such shares of Common
Stock and other securities of the Company.
(aa) Except as disclosed in the Prospectus, the Company has
not incurred any liability and there are no arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the sale
of the Securities or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company or any of its officers,
directors, employees or affiliates that may adversely affect the Underwriters'
compensation, as determined by the NASD.
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(bb) The Securities have been approved for quotation on the
Nasdaq SmallCap Market of the Nasdaq Stock Market, Inc., subject to official
notice of issuance.
(cc) Neither the Company nor to the Company's best knowledge
any of its respective officers, employees, agents or any other person acting on
behalf of the Company, has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act 1977, as amended.
(dd) Except as set forth in the Prospectus, and to the best
knowledge of the Company, no officer, director or principal stockholder of the
Company, or any "affiliate" or "associate" (as these terms are defined in Rule
405 promulgated under the Rules and Regulations) of any such person or entity or
the Company, has or has had, either directly or indirectly, (i) an interest in
any person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services,
except with respect to the beneficial ownership of not more than 1% of the
outstanding shares of capital stock of any publicly-held entity; or (ii) a
beneficial interest in any contract or agreement to which the Company is a party
or by which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Relationships and Related Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, or principal stockholder of the Company, or
any affiliate or associate of any such person or entity, which is required to be
disclosed pursuant to Rule 404 of Regulation S-B.
(ee) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
(ff) The Company has entered into an employment agreements
with Alan Fine and Sidney Ackerman as described in the Prospectus. Unless waived
by the Representative, the Company shall use its reasonable efforts at
reasonable cost to obtain key-man life insurance policies in the amount of not
less than $1,000,000 on the life of Mr. Fine and Mr. Ackerman, which policies
shall be owned by the Company and shall name the Company as the sole beneficiary
thereunder.
(gg) No securities of the Company have been sold by the
Company since its date of incorporation, except as disclosed in Part II of the
Registration Statement.
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(hh) The minute books of the Company have been made available
to Underwriter's Counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Shareholders of the Company since the date
of its incorporation.
2. Purchase, Sale and Delivery of the Securities, Additional Securities
and Agreement to Issue Underwriters' Warrant.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agree to purchase from the Company at the price per
share and the price per warrant set forth below, that proportion of the number
of Common Stock and Redeemable Warrants set forth in Schedule I opposite the
name of such Underwriter that such number of Common Stock and Redeemable
Warrants bears to the total number of shares of Common Stock and Redeemable
Warrants, respectively, subject to such adjustment as the Underwriters in their
discretion shall make to eliminate any sales or purchases of fractional
Securities, plus any additional numbers of Securities which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional 150,000
Shares from the Company and 150,000 Redeemable Warrants at the prices set forth
below. The option granted hereby will expire 45 days after the date of this
Agreement, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Additional Securities upon notice by the
Representative to the Company setting forth the number of Additional Securities
as to which the Underwriters are then exercising the option and the time and
date of payment and delivery for such Additional Securities. Any such time and
date of delivery shall be determined by the Underwriters, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Date, as defined in paragraph (c) below, unless
otherwise agreed to between the Representative and the Company. In the event
such option is exercised, each of the Underwriters, acting severally and not
jointly, shall purchase such number of Additional Securities then being
purchased which shall have been allocated to such Underwriter by the
Representative, and which such Underwriter shall have agreed to purchase,
subject in each case to such adjustments as the Underwriters in their discretion
shall make to eliminate any sales or purchases of fractional Securities. Nothing
herein contained shall obligate the Underwriters to make any over-allotments. No
Additional Securities shall be delivered unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of counsel to
the Representative in Atlanta, Georgia, or at such other place as shall be
agreed upon by the Underwriters and the Company. Such delivery and payment shall
be made at 10:00 a.m. (New York City time) on ___________, 1998 or at such other
time and date as shall be designated by the Representative but not less than
three (3) nor more than five (5) business days after the effective date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event that any or all of
the Additional Securities are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates for such Additional Securities
shall be made at the above-mentioned office or at such other
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place and at such time (such time and date of payment and delivery being
hereinafter called "Option Closing Date") as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates for
the Firm Securities and the Additional Securities, if any, shall be made to the
Underwriters against payment by the Underwriters of the purchase price for the
Firm Securities and the Additional Securities, if any, to the order of the
Company as the case may be by certified check in New York Clearing House funds
or, at the election of the Representative, all or a portion of the funds may be
paid by Bank wire transfer of funds or by Representative's commercial check.
Certificates for the Firm Securities and the Additional Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates or the Depository Trust Corporation electronic notifications, as
the case may be, for the Securities and the Additional Securities, if any, shall
be made available to the Underwriters at the above-mentioned office or such
other place as the Underwriters may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Option Closing Date, as the case may be.
The purchase price of the Common Stock and Redeemable
Warrants to be paid by each of the Underwriters, severally and not jointly, to
the Company for the Securities purchased under Clauses (a) and (b) above will be
$______ per Share and $______ per Redeemable Warrant (which price is net of the
Underwriters' discount and commissions). The Company shall not be obligated to
sell any Securities hereunder unless all Firm Securities to be sold by the
Company are purchased hereunder. The Company agrees to issue and sell 1,000,000
shares of the Common Stock and the Company agrees to issue and sell 1,000,000
Redeemable Warrants to the Underwriters in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriters the Underwriters' Warrant at a purchase price of $100.00, which
warrant shall entitle the holders thereof to purchase an aggregate of 1,000,000
Shares and 1,000,000 Warrants. The Underwriters' Warrant shall be exercisable
for a period of four (4) years commencing one (1) year from the closing date of
the Registration Statement at an initial exercise price equal to one hundred
twenty percent (120%) of the initial public offering price of the Shares and
Redeemable Warrants. The Underwriter's Warrant shall be substantially in the
form filed as an Exhibit to the Registration Statement. Payment for the
Underwriters' Warrant shall be made on Closing Date. The Company has reserved
and shall continue to reserve a sufficient number of Shares for issuance upon
exercise of the Underwriters' Warrant.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Representative deems advisable, but in no
event more than three (3) business days after such effective date, the
Underwriters shall make a public offering of the securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Underwriters may allow such concessions and
discounts upon sales to other dealers as set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time,
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whether before or after the effective date of the Registration Statement, file
any amendment to the Registration Statement or supplement to the Prospectus or
file any document under the Exchange Act (i) before termination of the offering
of the Securities by the Underwriters, which the Underwriters shall not
previously have been advised and furnished with a copy, or (ii) to which the
Underwriters shall have objected or (iii) which is not in compliance with the
Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters and confirm by notice in
writing: (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriters) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Underwriters
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifth business day after the effective date of
the Registration Statement.
(d) The Company will give the Underwriters notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the Company proposes
for use by the Underwriters in connection with the offering of the Securities
which differs from the corresponding prospectus on file at the Commission at
the time the Registration Statement becomes effective, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b) of the
Rules and Regulations), will furnish the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Underwriters or Robert E. Altenbach, P.C. ("Underwriters' Counsel")
shall reasonably object.
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, and shall cooperate with the
Underwriters and Underwriters' Counsel in the making of such applications, and
filing such documents and shall furnish such information as may be required for
such purpose; provided, however, the Company shall not be
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<PAGE>
required to: (i) qualify as a foreign corporation or file a general consent to
service of process in any such jurisdiction; or (ii) qualify or "blue sky" in
any state which requires a lock-up of inside securities for a period greater
than five (5) years (or such earlier date if the Representative has exercised
the Underwriters' Warrant). In each jurisdiction where such qualification shall
be effected, the Company will, unless the Underwriters agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' Counsel, and the Company will furnish
to the Underwriters a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof
and provided that the Company is required to file reports with the Commission
under Section 12 of the Exchange Act, the Company will provide the
Representative's director Designee or Attendee, as defined herein, copies of the
below described documents prior to release where applicable and will furnish to
its stockholders and to the Underwriter as soon as practicable, annual reports
(including financial statements audited by independent public accountants):
(i) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
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<PAGE>
(iii) every press release and every material news
item or article of interest to the financial community in respect of the Company
and any future subsidiaries or their affairs which was released or prepared by
the Company;
(iv) any additional information of a public nature
concerning the Company and any future subsidiaries or their respective
businesses which the Underwriters may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or
13E-4 received or filed by the Company from time to time;
(vi) such other information as may be requested with
reference to the property, business, stockholders and affairs of the Company and
its subsidiaries.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) For as long as the Company is required to file reports
with the Commission under Section 12 of the Exchange Act, the Company will
maintain a Transfer Agent and a Warrant Agent, which may be the same entity,
and, if necessary under the jurisdiction of incorporation of the Company, a
Registrar (which may be the same entity as the Transfer and Warrant Agent) for
its Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Underwriters or pursuant
to the Underwriters' direction, without charge, at such place as the
Underwriters may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Underwriters may reasonably request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of
the Securities in substantially the manner, and subject to the provisions, set
forth under "Use of Proceeds" in the Prospectus. Except for the redemption of
the Company's outstanding Convertible Preferred Stock as disclosed in the
Prospectus, no portion of the net proceeds will be used directly or indirectly
to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
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<PAGE>
(n) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available internally prepared financial statements
of the Company.
(o) For a period of five (5) years from the Closing Date (or
such earlier date if the Representative has exercised the Underwriters'
Warrant), the Company shall furnish to the Underwriters at the Company's sole
expense, (i) daily consolidated transfer sheets relating to the Securities upon
the Representative's reasonable request; (ii) a list of holders of Securities
upon the Representative's reasonable request; (iii) a list of, if any, the
securities positions of participants in the Depository Trust Company upon the
Representative's reasonable request.
(p) For a period of five (5) years after the effective date of
the Registration Statement (or such earlier date if the Representative has
exercised the Underwriters' Warrant), the Company shall use its best efforts to
cause one (1) individual (the "Designee") selected by the Representative to be
elected to the Board of Directors of the Company (the "Board"), if requested by
the Representative. Alternatively, the Representative shall be entitled to
appoint an individual who shall be permitted to attend all meetings of the Board
(the "Advisor") and to receive all notices and other correspondence and
communications sent by the Company to members of the Board. Upon election to the
Board, the Designee shall be entitled to call special meetings of the Board and
to serve on the Audit and Compensation Committees. The Designee may be removed
by the Board only for "justifiable cause" as that term is defined in the
Employment Contracts between the Company and Alan Fine and Sidney Ackerman. The
Company shall reimburse the Representative's Designee or Advisor for his or her
out-of-pocket expenses reasonably incurred and authorized in advance by the
Company in connection with his or her attendance of the Board meetings and a fee
equal to the amount paid to the other outside directors of the Company. The
Designee or Advisor shall also be entitled to participate in any Stock Option
Plans of the Company for non-employees. To the extent permitted by law, the
Company agrees to indemnify and hold the Designee (as a director or Advisor) and
the Representative harmless against any and all claims, actions, awards and
judgements arising out of his or her service as a director or Advisor and in the
event the Company maintains a liability insurance policy affording coverage for
the action of its officer and directors, to include such Designee and the
Representative as an insured under such policy.
(q) For a period equal to the lesser of (i) five (5) years
from the date hereof, or (ii) the sale to the public of the Warrant Shares, the
Company will use its best efforts not to take any action or actions which may
prevent or disqualify the Company's use of Forms S-1 or, if applicable, S-2 and
S-3 (or other appropriate form) for the registration under the Act of the
Warrant Shares.
(r) For a period of five (5) years from the date hereof, the
Company shall use its best efforts at its cost and expense to maintain the
listing of the Securities on the Nasdaq SmallCap Market or NASDAQ National
Market System if the Company meets all of the requirements and qualifications
promulgated by the NASD.
(s) On or before the effective date of the Registration
Statement, the Company shall retain or make arrangements to retain a financial
public relations firm and a publicist reasonably satisfactory to the
Representative which shall be continuously engaged from such engagement date to
a date 24 months from the effective date of the Registration Statement. Upon the
expiration of such two (2) year period, such engagement shall continue until the
expiration of any lock-up period provided for
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<PAGE>
in the Lock-Up Agreement(s) with certain officers and directors of the Company
subject to the Company's right to terminate any such firm with the consent of
the Underwriter's director Designee. Further, the Company shall engage for a
period of two years at least three firms (one of which shall be the
Representative and one of which shall be Standard & Poor's Stock Reports
Professional Edition) which are reasonably acceptable to the Representative to
provide industry research and advice to the Company. Upon the expiration of such
two-year period, such engagement shall continue until the expiration of any
lock-up period provided hereunder, subject to the Company's right to terminate
any such firm with the consent of the Underwriters' director designee.
(t) The Company shall (i) file a Form 8-A with the Commission
providing for the registration under the Exchange Act of the Securities and (ii)
promptly take all necessary and appropriate actions to be included in Standard
and Poor's Corporation Descriptions and/or Moody's OTC Manual and to continue
such inclusion for a period of not less than five (5) years, as soon as
practicable, but in no event more than five (5) business days' after the
effective date of the Registration Statement.
(u) Following the Effective Date of the Registration Statement
and for a period of five (5) years thereafter (or such earlier date if the
Representative has exercised the Underwriters' Warrant), the Company shall, at
its sole cost and expense, prepare and file such blue sky trading applications
with such jurisdictions as the Representative may reasonably request after
consultation with the Company, and on the Representative's request, furnish the
Underwriters with a secondary trading survey prepared by securities counsel to
the Company.
(v) The Company shall not amend or alter any term of any
written employment agreement nor Lock-Up Agreement between the Company and any
executive officer, director or affiliate, during the term thereof, in a manner
more favorable to such employee or entity, without the express written consent
of the Representative until such time as the Underwriters' Warrant has been
exercised in full.
(w) Until the completion of the distribution of the
Securities, the Company shall not, without the prior written consent of the
Representative and Underwriters' Counsel, which consent shall not be
unreasonably withheld, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(x) Commencing one (1) year from the date hereof, upon the
exercise of any Warrant, the exercise of which was solicited by the Underwriters
in accordance with the applicable rules and regulations of the NASD prevailing
at the time of such solicitation, the Company shall pay to the soliciting
Underwriter a fee of 5% of the aggregate exercise price of such Warrant (the
"Warrant Solicitation Fee") within five (5) business days of such exercise, so
long as the Underwriters provided bona fide services in exchange for the Warrant
Solicitation Fee and the Underwriters have been specifically designated in
writing by the holders of the Warrants as the broker. The Company further agrees
that it will not solicit the exercise of any Warrant other than through the
Underwriters, unless either: (i) the Underwriters cannot legally solicit the
exercise of the Warrants at the time of such solicitation; (ii) the
Representative declines, in writing, to solicit the exercise of the Warrants
within five (5) business days of such a written request by the Company; or (iii)
the Representative consents to the solicitation of the exercise of the Warrants
by the Company or another entity.
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(y) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(z) For a period of twenty-four (24) months commencing on the
Effective Date (or such earlier date if the Representative has exercised the
Underwriters' Warrant), except with the written consent of the Underwriters,
which consent shall not be unreasonably withheld, the Company will not issue or
sell, directly or indirectly, any shares of its capital stock, or sell or grant
options, or warrants or rights to purchase any shares of its capital stock,
except pursuant to (i) this Agreement, (ii) the Underwriters' Warrants, (iii)
warrants and options of the Company heretofore issued and described in the
Prospectus, and (iv) the grant of options and the issuance of shares issued upon
exercise of options issued or to be issued under a stock option plan to be
adopted in the future by the Company with terms that are reasonable for a public
entity the size of the Company which is described in the Prospectus; except
that, during such period, the Company may issue up to ______ shares pursuant to
certain employee stock options as is described in the Prospectus, and issue
securities in connection with an acquisition, merger or similar transaction,
provided that such securities are not publicly registered or issued pursuant to
Regulation S of the Act, and the acquirer of the securities is not granted
registration rights with respect thereto which are effective prior to 24 months
after the Effective Date and until the Underwriters' Warrant is exercised, the
Underwriter grants its consent. Notwithstanding anything to the contrary set
forth in the prior sentence, the Company may not issue any class or series of
Preferred Stock for a period of 24 months from the Effective Date without the
unanimous vote or consent of all members of the Board of Directors of the
Company. Prior to the Effective Date, the Company will not issue any options or
warrants without the prior written consent of the Underwriters.
(aa) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the 12 months following the Closing
Date without the Underwriters' prior written consent.
(bb) Subsequent to the dates as of which information is given
in the Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any liabilities or
obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business; (ii) there shall not have been
any change in the capital stock, funded debt (other than regular repayments of
principal and interest on existing indebtedness) or other securities of the
Company, any adverse change in the condition (financial or other), business,
operations, income, net worth or properties, including any loss or damage to the
properties of the Company (whether or not such loss is insured against), which
could adversely affect the condition (financial or other), business, operations,
income, net worth or properties of the Company; and (iii) the Company shall not
pay or declare any dividend or other distribution on its Common Stock or its
other securities or redeem or repurchase any of its Common Stock or other
securities.
(cc) The Company, for a period of twenty-four (24) months
following the Effective Date (or such earlier date if the Representative has
exercised the Underwriters' Warrant), shall not redeem any of its securities,
except as disclosed in the Registration Statement, and shall not pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's current or retained earnings derived after
the Effective Date without obtaining the Underwriters' prior written consent,
which consent shall not be unreasonably withheld. The Underwriters shall either
approve or disapprove such contemplated redemption of securities or dividend
payment or distribution within five (5) business days from the date the
Underwriters receive written
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notice of the Company's proposal with respect thereto; a failure of the
Underwriters to respond within the five (5) business day period shall be deemed
approval of the transaction.
(dd) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences, and (v) all quarterly reports filed on
Form 10-Q shall be reviewed by the Company's accountant in accordance with SAS
71.
(ee) The Company, for a period of twenty-four (24) months
following the Effective Date (or such earlier date if the Representative has
exercised the Underwriters' Warrant), shall implement the following procedures:
(i) Thirty days prior to fiscal year end, the
President will present to the Board of Directors a business plan to be adopted
by the Board of Directors at fiscal year end. The business plan will include the
following:
a) quarterly projections - including balance
sheet, profit/loss statement and cash flow
statements with underlying assumptions
b) upon board approval, this document becomes
the annual budget
(ii) No later than the 20th day of each month, the
Company will provide the Board with comparative financial statements for the
previous month showing actual balance sheet, profit/loss and cash flow vs.
budget with written explanations for deviation in excess of $50,000 or 10% of
line item presented.
(iii) Monthly Board meetings (which may be by
telephone) by the 25th of each month to include discussion of the Monthly Report
and approval of any changes to the business plan based on change of
circumstances.
(iv) Implementation of a compensation committee,
which will be headed by an outside director and include one of the Underwriters'
Designee Directors, to make recommendations to the Board for compensation for
all outside consultants, officers and outside directors.
(v) Implementation of an audit committee which will
have as its members the Underwriter's Designee Director and one outside
Director.
If the Company fails to comply with or breaches any provisions
of this Section 4 of this Agreement, after 30 days written notice from the
Representative of such default or breach, the Underwriters may cause the Company
to retain one or more consultants, accountants or other professionals to assist
the Company in curing the breach or failure and the Company will reimburse such
third party directly for costs and expenses incurred.
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(ff) Financial Advisory Agreement. On the Closing Date, the
Company shall execute a Financial Advisory Agreement with you for services,
which shall include without limitation (i) advising the Company in connection
with possible acquisitions (ii) facilitating shareholder communications and
relations, including the preparation of the Company's annual report and (iii)
advising and assisting the Company with long-term financial planning, corporate
reorganization, expansion and capital structure and other financial matters.
Such agreement shall have a term of two years and provide for compensation of
$2,000 per month which amount shall be prepaid in full on the Closing Date. The
Financial Advisory Agreement shall further provide that during the term of such
agreement, in the event that you (i) introduce, negotiate or arrange on the
Company's behalf a non-public equity financing or (ii) arrange on the Company's
behalf a non-public debt financing or (iii) arrange for the purchase or sale of
assets, or for a merger acquisition or joint venture for the Company, then the
Company will compensate you (based on the Transaction Value, as defined below)
for such services in an amount equal to:
5% on the first $1,000,000 of the Transaction Value;
4% on the amount from $1,000,001 to $2,000,000;
3% on the amount from $2,000,001 to $3,000,000;
2% on the amount from $3,000,001 to $4,000,000;
1% on the amount from $4,000,001 to $5,000,000;
1% on the amount in excess of $5,000,000.
"Transaction Value" shall mean the aggregate value of
all cash, securities and other property (i) paid to the Company, its affiliates
or their shareholders in connection with any transaction referred to above
involving any investment in or acquisition of the Company or any affiliates (or
the assets of either), (ii) paid by the Company or any affiliate in any such
transaction involving an investment in or acquisition of another party or its
equity holdings by the Company or any affiliate, or (iii) paid or contributed by
the Company or any affiliate and by the other party or parties in the event of
any such transaction involving a merger, consolidation, joint venture or similar
joint enterprise or undertaking. The value of any such securities (whether debt
or equity) or other property shall be the fair market value thereof as
determined by mutual agreement of the Company and the Underwriters or by an
independent appraiser jointly selected by the Company and the Underwriters.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees and
expenses of accountants and counsel for the Company; (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing, filing,
delivery and mailing (including the payment of postage with respect thereto) of
the Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements, the Agreement Among Underwriters, Underwriters
Questionnaires, Powers of Attorney and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as hereinabove stated; (iii) the printing, engraving, issuance and
delivery of the Securities including any transfer or other taxes payable
thereon; (iv) disbursements and fees of Underwriters' Counsel in connection with
the qualification of the Securities under state or foreign securities or "Blue
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Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, which Underwriters' Counsel blue sky fees
(exclusive of filing fees and disbursements) shall be $1,000 for each state in
which application for registration or qualification is made up to an aggregate
of $15,000 for all states which Underwriter's Counsel files and inclusive of the
Blue Sky Memorandum described above; (v) fees and expenses of the transfer
agent; (vi) the fees payable to the NASD; (vii) the fees and expenses incurred
in connection with the listing of the Securities on the Nasdaq SmallCap Market
and any other fees for application and admission to a registered Stock Exchange
for which the Underwriter requires the Company to register its Securities;
(viii) fees and expenses for any tombstone advertisements reasonably requested
by the Representative; (ix) Closing Binders; and (x) Lucite cubes containing a
miniature definite Prospectus. All fees and expenses payable to the Underwriters
shall be payable at the Closing Date or Option Closing Date, as applicable.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company shall reimburse and indemnify the Underwriters for all of their
out-of-pocket expenses reasonably incurred in connection with the transactions
contemplated hereby.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriters a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Securities,
none of which has been paid to date to the Underwriters. The Company will pay
the remainder of the non-accountable expense allowance on the Closing Date by
direct payment to third parties for fees and expenses including, but not limited
to, fees and expenses of Underwriter's Counsel and the balance by deduction from
the proceeds of the offering contemplated herein. In the event the Underwriters
elect to exercise the over-allotment option described in Section 2(b) hereof,
the Company further agrees to pay to the Underwriters on the Option Closing Date
(by deduction from the proceeds of the offering) a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Additional Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of each of its covenants and obligations hereunder and to the
following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York City time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Underwriters,
and, at Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriter and Underwriters' Counsel. If the Company
has elected to rely upon Rule 430A of the Rules and Regulations, the price of
the Securities and any
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price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriters of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriters' opinion, is material or omits to
state a fact which, in the Underwriters' opinion, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriters' reasonable opinion, is material, or omits to
state a fact which, in the Underwriters' reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date and each Option Closing
Date, as the case may be, the Underwriters shall have received from
Underwriters' Counsel, such opinion or opinions with respect to the organization
of the Company the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as the Underwriters reasonably may request
and such counsel shall have received such papers and information as they request
to enable them to pass upon such matters.
(d) At the Closing Date and the Option Closing Date the
Underwriters shall have received an opinion of Sichenzia, Ross & Friedman, LLP,
counsel to the Company, dated the Closing Date, or Option Closing Date, as the
case may be, addressed to the Underwriter and in form and substance satisfactory
to Underwriters' Counsel, to the effect that:
(i) The Company: (A) has been duly organized and is
validly existing as a corporation in good standing under the laws of the
Province of Ontario, Canada with full corporate power and authority to own and
operate its properties and to carry on its business as set forth in the
Registration Statement and Prospectus; (B) to the best knowledge of such
counsel, the Company is duly registered or qualified as a foreign corporation in
all jurisdictions in which by reason of maintaining an office in such
jurisdiction or by owning or leasing real property in such jurisdiction it is
required to be so registered or qualified except where failure to register or
qualify does not have, singly or in the aggregate, a Material Adverse Effect;
and (C) to the best knowledge of such counsel, the Company has not received any
notice of proceedings relating to the revocation or modification of any such
registration or qualification.
(ii) The Registration Statement, each Preliminary
Prospectus that has been circulated and the Prospectus and any post-effective
amendments or supplements thereto (other than the financial statements,
schedules and other financial and statistical data included therein, as to which
no opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations and the conditions for use of a
registration statement on Form SB-2 have been satisfied by the Company. Such
counsel shall state that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriters at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and, although such counsel
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is not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, on the basis of the foregoing, no facts have come to
the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto at the time such Registration
Statement or amendment became effective or the Prospectus as of the date thereof
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or to make the statements therein in light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus or with respect to
statements or omissions made therein in reliance upon information furnished in
writing to the Company on behalf of any Underwriter expressly for use in the
Registration Statement or the Prospectus).
(iii) To the best of such counsel's knowledge, the
Company has a duly authorized, issued and outstanding capitalization as set
forth in the Prospectus as of the date indicated therein, under
"Capitalization." The Shares, Redeemable Warrants, the Underwriters' Warrants,
and the Warrant Shares conform in all material respects to all statements with
respect thereto contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders thereof, to
counsel's best knowledge, are not subject to personal liability by reason of
being such holders, and none of such securities were issued in violation of the
preemptive rights of any holder of any security of the Company.
(iv) The issuance of the Shares, Redeemable Warrants
and the Warrant Shares have been duly authorized and when issued and paid for in
accordance with this Agreement and the Warrant Agreement, respectively, will be
validly issued, fully paid and non-assessable securities of the Company. The
holders of the Securities when issued and paid for, will not be subject to
personal liability by reason of being such holders. To the best of such
counsel's knowledge, the Securities are not and will not be subject to the
preemptive or similar contractual rights of any shareholder of the Company. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. The certificates representing
the Shares and Redeemable Warrants are in due and proper form.
(v) Based solely on telephonic, verbal confirmation
provided to such counsel by the staff of the Commission, the Registration
Statement and all post-effective amendments, if any, have become effective under
the Act, and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and to the best of such counsel's knowledge, no
proceedings for that purpose have been instituted or are pending or threatened
or contemplated under the Act; and any required filing of the Prospectus
pursuant to Rule 424(b) has been made.
(vi) To the best of such counsel's knowledge, (A)
there are no material contracts or other documents required to be described in
the Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in
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all material respects and fairly represent the information required to be shown
by Form SB-2 and the Rules and Regulations.
(vii) This Agreement, the Underwriters' Warrant, the
Warrant Agreement, and the Financial Advisory Agreement have each been duly and
validly authorized, executed and delivered by the Company, and assuming that it
is a valid and binding agreement of the Underwriters, so as the case may be,
constitutes a legal, valid and binding agreement of the Company enforceable as
against the Company in accordance with its respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law or pursuant to public policy).
(viii) Neither the execution or delivery by the
Company of this Agreement, the Underwriters' Warrant, and the Warrant Agreement,
nor its performance hereunder or thereunder, nor its consummation of the
transactions contemplated herein or therein, nor the conduct of its business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, nor the issuance of the securities conflicts with or will
conflict with or results or will result in any breach or violation of any of the
terms or provisions of, or constitutes or will constitute a material default
under, or result in the creation or imposition of any material lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon any property or assets (tangible or
intangible) of the Company pursuant to the terms of (A) the Articles of
Incorporation of the Company, or (B) to the best knowledge of such counsel, and
except to the extent it would not have a Material Adverse Effect on the Company,
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body, having jurisdiction over the Company or any
of its respective activities or properties.
(ix) No consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other body,
(other than such as may be required under state securities laws, as to which no
opinion need be rendered) is required in connection with the issuance by the
Company of the Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement, the Underwriters' Warrant, the
Financial Advisory Agreement and the Warrant Agreement by the Company, and the
taking of any action by the Company contemplated hereby or thereby, which has
not been obtained.
(x) To the best of such counsel's knowledge, except
as described in the Prospectus, no person, corporation, trust, partnership,
association or other entity holding securities of the Company has the
contractual right to include and/or register any securities of the Company in
the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration statement
for twelve months from the date hereof.
(xi) After the public offering, the Securities will
be eligible for listing on the Nasdaq SmallCap Market.
In rendering such opinion such counsel may rely, (A) as to
matters involving the application of laws other than the laws of the United
States, the corporate laws of the Province of Ontario, Canada and jurisdictions
in which they are admitted, to the extent such counsel deems proper
23
<PAGE>
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and in substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws, and (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible officers
of the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company; provided, that copies of
any such statements or certificates shall be delivered to Underwriters' Counsel
if requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriters and they are justified in relying thereon.
(e) At each Option Closing Date, if any, the Underwriters
shall have received the an opinion of counsel to the Company, each dated the
Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel confirming as of Option Closing Date the
statements made by such firm, in their opinion, delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option
Closing Date, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained.
(g) Prior to the Closing Date and each Option Closing Date, if
any: (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects or the business activities of the Company, whether or not in the
ordinary course of business, from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus; (ii) there shall have
been no transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness; (iv)
no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of its
properties or businesses before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions
24
<PAGE>
contained in this Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Option Closing Date as the case may be, other
than in the ordinary course of its business, any material liabilities or
obligations, direct or contingent; (B) the Company has not paid or declared any
dividends or other distributions on its capital stock; (C) the Company has not
entered into any transactions not in the ordinary course of business; (D) there
has not been any change in the capital stock or any increase in long-term debt
or any increase in the short-term borrowings (other than any increase in the
short term borrowings in the ordinary course of business) of the Company; (E)
the Company has not sustained any material loss or damage to its property or
assets, whether or not insured; (F) there is no litigation which is pending or
threatened against the Company which is required to be set forth in an amended
or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the Company's securities to facilitate the sale or resale of the
Shares.
References to the Registration Statement and the Prospectus in
this subsection (i) are to such documents as amended and supplemented at the
date of such certificate.
(i) By the Closing Date, the Underwriters shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Representative
shall have received a letter, dated such date, addressed to the Representative
in form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters, from Schwartz Levitsky Feldman, Chartered Accountants:
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(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the
consolidated financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Underwriters may rely upon the opinion
of Schwartz Levitsky Feldman, Chartered Accountants with respect to the
financial statements and supporting schedules included in the Registration
Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date of the
latest available unaudited interim consolidated financial statements), a reading
of the latest available minutes of the stockholders and board of directors and
the various committees of the boards of directors of the Company, consultations
with officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
consolidated financial statements of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements of the Company included in the Registration
Statement, or (B) at a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there has been any change in the
capital stock, or any increase in total borrowings of the Company, or any
decrease in the stockholders' equity or working capital of the Company as
compared with amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from
_______________ to a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there was any decrease in revenue,
net earnings or increase in net income or earnings per common share of the
Company, in each case as compared with the corresponding period of the prior
year other than as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar
amounts, numbers of Securities, percentages of revenue and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures did not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(v) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriters may reasonably request.
(k) At the Closing Date and each Option Closing Date, the
Underwriters shall have received from Schwartz Levitsky Feldman, Chartered
Accountants, a letter, dated as of the Closing Date, or Option Closing Date, as
the case may be, to the effect that they reaffirm that statements made
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<PAGE>
in the letter furnished pursuant to Subsection (j) of this Section, except that
the specified date referred to shall be a date not more than five days prior to
the Closing Date and, if the Company has elected to rely on Rule 430A of the
Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (iii) of subsection (j) of this Section with
respect to certain amounts, percentages and financial information as specified
by the Underwriters and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (iii).
(l) On each of the Closing Date and the Option Closing Date,
if any, there shall have been duly tendered to the Underwriters for the several
Underwriters' accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Underwriters may terminate
this Agreement or, if the Underwriters so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters, including specifically each person who may be substituted for
an Underwriter as provided in Section 11 hereof and each person, if any, who
controls any Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or any other federal or state statutory
laws or regulations at common law or otherwise or under the laws of foreign
countries arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in any Preliminary Prospectus (except
that the indemnification contained in this paragraph with respect to any
preliminary prospectus shall not inure to the benefit of the Underwriter or to
the benefit of any person controlling the Underwriter on account of any loss,
claim, damage, liability or expense arising from the sale of the Securities by
the Underwriter to any person if a copy of the Prospectus, as amended or
supplemented, shall not have been delivered or sent to such person within the
time required by the Act, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, as amended and supplemented, and
such correction would have eliminated the loss, claim, damage, liability or
expense), the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Underwriters' Warrant; or
(iii) in any application or other document or written communication (in this
Section 8 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in
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order to qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, Nasdaq Stock Market,
Inc. or any other securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be, or (iv) any failure of the Company to comply
with any provision of this Underwriting Agreement resulting in a claim or loss
to the Underwriters.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of Section 20 of the
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to the Underwriters but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto in any post-effective amendment, new registration statement or
prospectus, or in any blue sky application or any other such application made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to any Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto or in any post-effective amendment,
new registration statement or prospectus, or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any such application, provided,
further, that the liability of each Underwriter to the Company shall be limited
to the amount of the net proceeds of the Offering received by the Company. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend and the last paragraph of the cover page in the Prospectus have been
furnished by the Underwriters expressly for use therein and any information
furnished by or on behalf of the Underwriter filed in any jurisdiction in order
to qualify the Securities under State Securities laws or filed with the
Commission, the NASD or any securities exchange constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in the
Prospectus and the Underwriters hereby confirm that such statements and
information are true and correct.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise avoided). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the
28
<PAGE>
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnifying party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party in lieu of indemnifying such
indemnified party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand from the offering of the Securities or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (A)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified on the other hand in connection with
the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company is the contributing party and the Underwriters are
the indemnified party the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities (before
deducting expenses) bear to the total underwriting discounts and commissions
received by the Underwriters hereunder, in each case as set forth in the table
on the Cover Page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions in
29
<PAGE>
respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriters shall
not be required to contribute any amount in excess of the amount of the net
proceeds of the Offering received by the Company. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters.
9. Effective Date. This Agreement shall become effective: (i) upon the
execution and delivery hereof by the parties hereto; or (ii) if, at any time
this Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, when notification of the effectiveness
of the Registration Statement or such post-effective amendment has been released
by the Commission and communicated to the Company and Representative. Until such
time as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company.
10. Termination.
(a) The Underwriters shall have the right to terminate this
Agreement (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market, or in the over-the-counter market shall
have been suspended or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required on
the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iii) if the United States
shall have become involved in a war or major hostilities; or (iv) if a banking
moratorium has been declared by a New York State
30
<PAGE>
or federal authority; or (v) if a moratorium in foreign exchange trading has
been declared; or (vi) if the Company shall have sustained a material adverse
loss, whether or not insured, by reason of fire, flood, accident or other
calamity that materially impairs the investment quality of the Securities; or
(vii) if there shall have been such material adverse change in the conditions or
prospects of the Company, involving a change not contemplated by the
Registration Statement.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters; or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Underwriters shall have the right to postpone
the Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Underwriters option, by notice from the Underwriters to the Company,
terminate the Underwriters' several obligations to purchase Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5 and Section 7 hereof. No action taken
pursuant to this Section shall relieve the Company from liability, if any, in
respect of such default.
31
<PAGE>
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at J.P. Turner & Company, L.L.C., 3340 Peachtree Road, Suite 450,
Atlanta, Georgia 30326, with a copy to Robert E. Altenbach, Esq., 225 Peachtree
Street, NE, Suite 2100, Atlanta Georgia 30303. Notices to the Company shall be
directed to the Company at the address on the signature page.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and their respective
heirs and legal representatives and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
ROSEDALE DECORATIVE PRODUCTS LTD.
731 Millway Avenue, Concord,
Ontario, Canada L4K 3S8
By: /s/ Sidney Ackerman
------------------------------
Sidney Ackerman, President
Confirmed and accepted as of the date first above written on behalf of
themselves and the other several underwritersnamed in Schedule I hereto:
J.P. Turner & Company, L.L.C., as
Representative of the Several Underwriters
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
32
<PAGE>
SCHEDULE I
Underwriter Number of Securities
- ----------- --------------------
J.P. Turner & Company, L.L.C. 1,000,000 Shares of Common Stock
1,000,000 Redeemable Common Stock
Purchase Warrants
33
<PAGE>
SCHEDULE II
Warrant Agent: Continental Stock Transfer & Trust Corporation
New York, NY
34
<PAGE>
Exhibit 1.2
1,000,000 Shares of Common Stock
and
1,000,000 Redeemable Common Stock Purchase Warrants
ROSEDALE DECORATIVE PRODUCTS LTD.
SELECTED DEALER AGREEMENT
_______________, 1998
Gentlemen:
We have agreed as the underwriter (the "Underwriter") named in the
enclosed prospectus (the "Prospectus"), subject to the terms and conditions of
an Underwriting Agreement dated_____________, 1998 (the "Underwriting
Agreement"), to purchase from Rosedale Decorative Products Ltd., a corporation
organized under the laws of the Province of Ontario, Canada (the "Company")
1,000,000 shares of Common Stock, no par value per share (the "Public Shares")
and 1,000,000 Redeemable Common Stock Purchase Warrants (the "Public Warrants").
We may also purchase as many as 150,000 additional shares of Common Stock and
150,000 Redeemable Common Stock Purchase Warrants (the "Option Securities") from
the Company pursuant to Section 2 (1)) of the Underwriting Agreement. The
Securities are more particularly described in the Prospectus, additional copies
of which will be supplied in reasonable quantities upon request.
We are offering a portion of the Public Shares and Warrants for sale to
selected dealers (the "Selected Dealers"), among whom we are pleased to include
you, at the public offering price, less a concession in the amount set forth in
the Prospectus under "Underwriting". This offering is made subject to delivery
of the Public Shares and Warrants and their acceptance by the Underwriter, to
the approval of all legal matters by our counsel, and to the terms and
conditions herein set forth, and may be made on the basis of the reservation of
the Public Shares and Warrants or an allotment against subscription.
We will advise you by telegram of the method and terms of the offering.
Acceptances should be sent to J.P. Turner & Company, L.L.C., 3340 Peachtree
Road, N.E., Suite 450, Atlanta, Georgia 30326, Attention: William L. Mello.
Subscription books may be closed by us at any time without notice, and we
reserve the right to reject any subscription in whole or in part, but
notification of allotments against and rejections of subscriptions will be made
as promptly as practicable.
<PAGE>
Any of the Public Shares and Warrants purchased by you hereunder are to
be promptly offered by you to the public at the public offering price, as set
forth in the Prospectus, except as herein otherwise provided and except that a
reallowance from any such public offering price not in excess of the amount set
forth in the Prospectus under "Underwriting" may be allowed to dealers who are
members in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"), or foreign dealers or institutions not eligible for membership in
said association who agree to abide by the conditions with respect to foreign
dealers and institutions set forth in your confirmation below. We may buy Public
Shares and Warrants from, or sell Public Shares and Warrants to, any Selected
Dealer, and any Selected Dealer may buy Public Shares and Warrants from, or sell
Public Shares and Warrants to, any other Selected Dealer at the public offering
price less all or any part of the concession set forth in the Prospectus; after
the Public Shares and Warrants are released for sale to the public, we are
authorized to vary the offering price of the Public Shares and Warrants and
other selling terms.
If, prior to the termination of this Agreement, we purchase or contract
to purchase any Public Shares and Warrants which were purchased by you from us
or any Selected Dealer at a concession from the public offering price (or any
Public Shares and Warrants which we believe have been substituted therefor) you
hereby agree that we may: (i) require you to pay us on demand an amount equal to
the concession on such Public Shares and Warrants; (ii) sell for your account
the Public Shares and Warrants so purchased and debit or credit your account
with the loss or profit resulting from such sale; or (iii) require you to
purchase such Public Shares and Warrants at a price equal to the total cost of
such purchase including commissions and transfer taxes (if any) on redelivery.
Public Shares and Warrants accepted or allotted hereunder shall be paid
for in full at the public offering price, at the office of J.P. Turner &
Company, L.L.C., 3340 Peachtree Road, N.E., Suite 450, Atlanta, Georgia 30326
(or such other place as you may be instructed) prior to 8:30 a.m., New York City
time, on such day after the public offering date as we may advise three (3) days
after the effective date, by certified or official bank check payable in New
York Clearing House funds to the order of J.P. Turner & Company, L.L.C. against
delivery of certificates. If Public Shares and Warrants are purchased and paid
for by you hereunder at the public offering price, the concession will be paid
to you after the termination of this Agreement.
We have been advised by the Company that a registration statement
(Registration No. 333- 44747) (the "Registration Statement") for the Public
Shares and Warrants, filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the benefit of the Company) you will comply
with the applicable requirements of the Act and of the Securities Exchange Act
of 1934, as amended, and the terms and conditions set forth in the Prospectus.
No person is authorized by the Company or the Underwriter to give or rely on any
information or to make any representations not contained in the Prospectus in
connection with the sale of Public Shares and Warrants. You are not authorized
to act as agent for the Company or the Underwriter in offering the Public Shares
and Warrants to the public or otherwise. Nothing contained herein shall
constitute or be construed to make the Selected Dealers partners with the
Underwriter or with one another.
2
<PAGE>
We shall not be under any liability (except for our own want of good
faith) for or in respect of the validity or value of, or title to, any Public
Shares and Warrants; the form or completeness of, or the statements contained
in, or the validity of, the Registration Statement, any preliminary prospectus,
the Prospectus, or any amendment or supplement thereto or any other letters or
instruments executed by or on behalf of the Company or others; the form or
validity of the agreement for the purchase of the Public Shares and Warrants or
this Agreement; the delivery of the Public Shares and Warrants; the performance
by the Company or others of any agreement on its or their part; or any matter in
connection with any of the foregoing; provided, however, that nothing in this
paragraph shall be deemed to relieve the Underwriter from any liability under
the Act.
You, by your confirmation below, represent that: (i) you are a member
in good standing of the NASD or are a foreign bank or dealer not eligible for
membership in the NASD which agrees to make no offers or sales of Public Shares
and Warrants within the United States, its territories or its possessions, or to
persons who are citizens thereof or residents therein, (ii) neither you nor any
of your directors, officers, partners or "persons associated with" you (as
defined in the By-Laws of the NASD) nor, to your knowledge, any "related person"
(as defined by the NASD in its Interpretation of Article III, Section I of its
Rules of Fair Practice, as amended) or any other broker-dealer, have
participated or intend to participate in any transaction or dealing as to which
documents or information are required to be filed with the NASD pursuant to such
Interpretation, and as to which such documents or information have not been so
filed as required.
You agree not to, at any time prior to the termination of this
Agreement, bid for, purchase, sell or attempt to induce others to purchase or
sell, directly or indirectly, any Public Shares and Warrants other than (a) as
provided for in this Agreement or the Underwriting Agreement relating to the
Public Shares and Warrants, or (1)) purchases or sales as broker on unsolicited
orders for the account of others. In making the sales of Public Shares and
Warrants, if you are a member of the NASD, you will comply with all applicable
rules of the NASD, including, without limitation, the NASD's Interpretation of
Article II, Section I of its Rules of Fair Practice with respect to Free-Riding
and Withholding and Section 24 of Article III of the NASD's Rules of Fair
Practice, or if you are a foreign bank or dealer, you agree to comply with such
Interpretation of Sections 8, 24 and 36 of such Article as though you were such
a member and Section 25 of such Article as it applies to a nonmember broker or
dealer in a foreign country. Further, pursuant to Securities Act Release No.
4968, you will distribute a Preliminary Prospectus to all persons reasonably
expected to be purchasers of shares from you at least 48 hours prior to the time
you expect to mail confirmation.
Upon written application to us, we will inform you as to the advice we
have received from counsel concerning the jurisdictions in which the Public
Shares and Warrants have been qualified for sale or are exempt under the
respective securities or blue sky laws of such jurisdictions, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell the Public Shares and Warrants in any jurisdiction.
3
<PAGE>
As Underwriter, we shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. We shall not be under any obligation to you except for
obligations expressly assumed by us in this Agreement.
You agree, upon our request, at any time or times prior to the
termination of this Agreement, to report to us the number of Public Shares and
Warrants purchased by you pursuant to the provisions hereof which then remain
unsold.
Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate at the close
of business on the 30th business day after the public offering of the Public
Shares and Warrants, but, in our discretion, may be extended by us for a further
period or periods not exceeding 30 business days in the aggregate and in our
discretion, whether or not extended, may be terminated at any earlier time.
Notwithstanding the termination of this Agreement, you shall remain liable for
your proportionate amount of any claim, demand or liability which may be
asserted against you alone, or against you together with other dealers
purchasing Public Shares and Warrants upon the terms hereof, or against us,
based upon the claim that the Selected Dealers, or any of them, constitute an
association, an unincorporated business or other entity.
This Agreement shall be construed in accordance with the laws of the
State of Georgia without giving effect to conflict of laws principles.
In the event that you agree to purchase Public Shares and Warrants in
accordance with the terms hereof, and of the aforementioned telegram, kindly
confirm such agreement by competing and signing the form provided for that
purpose on the enclosed duplicate hereof and returning it to us promptly.
All communications from you should be addressed to J.P. Turner &
Company, L.L.C., 3340 Peachtree Road, N.E., Suite 450, Atlanta, Georgia 30326,
Attention: William L. Mello. Any notice from us to you shall be deemed to have
been duly given if mailed or telegraphed to you at this address to which this
letter is mailed.
Very truly yours,
J.P. Turner & Company, L.L.C.
By:
-------------------------------------------
Name:
-------------------------------------------
Title:
-------------------------------------------
4
<PAGE>
____________, 1998
J.P. Turner & Company, L.L.C.
3340 Peachtree Road, N.E.
Suite 450
Atlanta, Georgia 30326
Attention: William L. Mello
Gentlemen:
We hereby confirm our agreement to purchase ________ shares of Public
Shares and _________ Warrants (as such term is defined in the Selected Dealer
Agreement), of Rosedale Decorative Products Ltd., a corporation organized under
the laws of the Province of Ontario, Canada, subject to the terms and conditions
of the foregoing Agreement and your telegram to us referred to herein. We hereby
acknowledge receipt of the definitive Prospectus relating to the Public Shares
and Warrants, and we confirm that in purchasing Public Shares and Warrants we
have relied upon no statements whatsoever, written or oral, other than the
statements in such Prospectus. We have made a record of our distribution of
preliminary prospectuses and, when furnished with copies of any revised
preliminary prospectus, we have, upon your request, promptly forwarded copies
thereof to each person to whom we had theretofore distributed preliminary
prospectuses. We confirm that we have complied and will comply with all of the
requirements of Rule 15c2-8 of the Securities Exchange Act of 1934.
We hereby represent that we are a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") or, if we are not
such a member, we are a foreign dealer or institution not eligible for
membership in said Association which agrees to make no sales within the United
States, its territories or its possessions or to persons who are citizens
thereof or residents therein. If we are a member of the NASD, we agree to comply
with all applicable rules of the NASD, including, without limitation, the
provisions of Section 24 of Article III of the Rules of Fair Practice of the
NASD, or, if we are such a foreign dealer or institution, we agree to comply
with all applicable rules of the NASD, including, without limitation, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Sections 8, 24
and 36 of such article as if we were such a
<PAGE>
member, and Section 25 of such Article as it applies to a non-member broker or
dealer in a foreign country.
Pursuant to your telegram, we hereby subscribe for an allotment of
_________ shares of Common Stock and _________ Redeemable Common Stock Purchase
Warrants, and acknowledge a concession of $____ from the $______ public offering
price of the Public Shares and a concession of $.00625 from the $.125 public
offering price of the Public Warrants.
- ------------------------------------ ------------------------------------
Corporate or Firm Name of (Signature of Authorized.
Selected Dealer Official or Partner)
- ------------------------------------ ------------------------------------
Address Date Accepted
- ------------------------------------ ------------------------------------
Telephone Tax I.D.#
2
<PAGE>
Exhibit 1.3
1,000,000 Shares of Common Stock, no par value per share
and
1,000,000 Redeemable Common Stock Purchase Warrants
of
ROSEDALE DECORATIVE PRODUCTS, LTD.
AGREEMENT AMONG UNDERWRITERS
April 28, 1998
J.P. Turner & Company, L.L.C.
3340 Peachtree Road, N.E.
Suite 450
Atlanta, Georgia 30326
Attention: William L. Mello
Gentlemen:
We understand that Rosedale Decorative Products, Ltd., a corporation
organized under the laws of the Province of Ontario, Canada (the "Company"),
desires to enter into an agreement, substantially in the form of Exhibit A
attached hereto (the "Underwriting Agreement") with you and the other
prospective Underwriters named in Schedule I to the Underwriting Agreement for
the sale by the Company of an aggregate of 1,000,000 shares of Common Stock, no
par value (the "Shares") and 1,000,000 Redeemable Common Stock Purchase Warrants
(the "Redeemable Warrants") of the Company (collectively, the "Firm
Securities"). In addition, the Company, pursuant to the Underwriting Agreement,
will grant to the Underwriters an option to purchase up to an additional 150,000
shares of Common stock and 150,000 Redeemable Common Stock Purchase Warrants
(the "Option Securities") for the purpose of covering over-allotments, if any,
in connection with the sale of the Firm Securities. The Firm Securities and any
Option Securities purchased pursuant to the Underwriting Agreement are herein
called the "Securities."
We understand that changes may be made in those who are to be
Underwriters and in the respective number of Securities to be purchased by them,
but that the number of Securities to be purchased by us as set forth in said
Schedule I will not be changed without our consent except as provided herein or
in the Underwriting Agreement. The parties on whose behalf you execute the
Underwriting Agreement are herein called the "Underwriters."
<PAGE>
We desire to confirm the agreement among you, the undersigned and the
other Underwriters with respect to the purchase of the Securities by the
Underwriters, severally and not jointly, from the Company. The aggregate number
of Securities which any Underwriter will be obligated to purchase pursuant to
the terms of the Underwriting Agreement is herein called the "Underwriting
Obligation" of that Underwriter.
1. Authority and Compensation of Representative. We hereby authorize
you, as our representative (the "Representative") and on our behalf, (a) to
enter into an agreement with the Company, in substantially the form attached
hereto as Exhibit A, but with such changes therein as in your judgment will not
be materially adverse to the Underwriters, providing for the purchase by us,
severally and not jointly, from the Company, at the purchase price per Security
determined as set forth in said Exhibit A, of the number of Firm Securities set
forth opposite our name in Schedule I to said Exhibit A, and our allotted share
of the Option Securities which you determine to be purchased, (b) to exercise
all the authority and discretion vested in the Underwriters and in you by the
provisions of the Underwriting Agreement, (c) to take all such action as you in
your discretion may deem necessary or advisable in order to carry out the
provisions of the Underwriting Agreement and of this Agreement, and the sale and
distribution of the Securities, and (d) to determine all matters relating to the
public advertisement of the Securities.
As your compensation for your services hereunder, we authorize
you to charge to our account on the Closing Date and on the closing date
referred to in the Underwriting Agreement $0 per Share as "representative"
concession, and we will receive $.25 per Share as our underwriter obligation fee
in respect to the aggregate number of Firm Securities and Option Securities,
respectively, which we shall agree to purchase pursuant to the Underwriting
Agreement. Further, we will receive $.25 per Share as "selling concession" for
that portion in which you allocate to us as our retention.
2. Public Offering of Securities. The sale of the Securities to the
public is to be made, as herein provided, as soon after the registration
statement relating to the Securities becomes effective as in your judgment is
advisable. The purchase price to be paid by the Underwriters for the Securities
and the initial public offering price are to be determined by agreement between
you and the Company. The Securities shall be first offered to the public at the
initial public offering prices as so determined (the "Initial Public Offering
Price"). You will advise us by telegraph or telephone when the Securities shall
be released for offering, when the registration statement relating to the
Securities shall become effective and the price at which the Securities are
initially to be offered. We agree not to sell any of the Securities until you
have released them for that purpose. We authorize you, after the initial public
offering, to change the public offering price, the concession and the
reallowance if, in your sole discretion, such action becomes desirable by reason
of changes in general market conditions or otherwise. As used herein, the terms
"Registration Statement," "Preliminary Prospectus" and "Prospectus" shall have
the meanings ascribed thereto in the Underwriting Agreement. The public offering
price at the time in effect is herein called the "Offering Price." After notice
from you that the Securities are released for public sale, we will offer to the
public in
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conformity with the provisions hereof and with the terms of offering set forth
in the Prospectus such shares of your Securities as you advise us are not
reserved.
3. Offering to Dealers and Retail Sales. We authorize you to reserve
for offering and sale, and on our behalf to sell, to retail purchasers (such
sales being herein called "Retail Sales") and to dealers selected by you (such
dealers, among whom any Underwriter may be included, being herein called
"Selected Dealers") all or any part of our Securities as you, in your sole
discretion, shall determine. Such sales, if any, shall be made (a) in the case
of Retail Sales, at the Offering Price, and (b) in the case of sales to Selected
Dealers, at the Offering Price less such concession or concessions as you, in
your sole discretion, shall determine. Except for such sales as are designated
by a purchaser to be for the account of a particular Underwriter or Selected
Dealer, any sales to Selected Dealers made for our account shall be as nearly as
practicable in the ratio that the Securities reserved for our account for
offering to Selected Dealers bears to the aggregate of all Securities of all
Underwriters so reserved.
You agree to notify us promptly on the date of the public
offering as to the number of shares and warrants, if any, of the Securities
which we may retain for direct sale by us. Prior to the termination of the
provisions referred to in Section 13 hereof, you may reserve for offering and
sale as hereinbefore provided any Securities theretofore retained by us
remaining unsold and we may, with your consent, retain any Securities
theretofore reserved by you remaining unsold.
We agree that, from time to time prior to the termination of
the provisions referred to in Section 13 hereof, we shall furnish to you such
information as you may request in order to determine the number of Securities
purchased by us under the Underwriting Agreement which then remain unsold, and
we shall upon your request sell to you for the account of any Underwriter as
many of such unsold Securities as you may designate at the Offering Price, less
all or any part of the concession to Selected Dealers as you, in your sole
discretion, shall determine. The provisions of Section 4 hereof shall not be
applicable in respect of any such sale.
We authorize you to determine the form and manner of any
communications or agreements with Selected Dealers. In the event that there
shall be any agreements with Selected Dealers, you are authorized to act as
manager thereunder and we agree, in such event, to be governed by the terms and
conditions of such agreements. The form of Selected Dealer Agreement attached
hereto as Exhibit B is satisfactory to us.
It is understood that any Selected Dealer to whom an offer may
be made as hereinbefore provided shall be actually engaged in the investment
banking or securities business and shall be either (i) a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") or (ii) a
dealer with its principal place of business located outside the United States,
its territories and its possessions and not registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), who
agrees not to make any sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents
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therein. Each Selected Dealer shall agree to comply with the provisions of
Section 24 of Article III of the Rules of Fair Practice of the NASD, and each
foreign Selected Dealer who is not a member of the NASD also shall agree to
comply with the NASD's interpretation with respect to free-riding and
withholding, to comply, as though it were a member of the NASD, with the
provisions of Sections 8 and 36 of Article III of such Rules of Fair Practice,
and to comply with Section 25 of Article III thereof as that Section applies to
a non-member foreign dealer. The several Underwriters may allow, and the
Selected Dealers, if any, may re-allow, such concession or concessions as you
may determine from time to time for sales of Securities to any qualified dealer,
all subject to the Rules of Fair Practice of the NASD.
You, and any of the several Underwriters with your prior
consent, may make purchases or sales of the Securities from or to any of the
other Underwriters, at the Offering Price less all or any part of the gross
spread, and from or to any of the Selected Dealers at the Offering Price less
all or any part of the concession to Selected Dealers.
Upon your request, we will advise you of the identity of any
dealer to whom we allow such a discount and any Underwriter or Selected Dealer
from whom we receive such a discount.
4. Repurchases in the Open Market. Any Securities sold by us (otherwise
than through you) which shall be contracted for or purchased in the open market
by you on behalf of any Underwriter or Underwriters shall be repurchased by us
on demand at a price equal to the cost of such purchase plus commissions and
taxes on redelivery. Any Securities delivered on such repurchase need not be the
identical shares originally sold by us. In lieu of delivery of such shares to
us, you may sell such shares in any manner for our account and charge us with
the amount of any loss or expense or credit us with the amount of any profit,
less any expense, resulting from such sale, or charge our account with an amount
not in excess of the concession to Selected Dealers.
5. Delivery and Payment. Upon your request, we shall deliver to you
payment for the Securities to be purchased by us under the Underwriting
Agreement in an amount equal to the Initial Public Offering Price for such
Securities. Such payment shall be made in such form and at such time and place
as may be specified in such request, and we authorize you to make payment for
such Securities against delivery thereof for our account hereunder. We
understand that certificates representing purchases by each Underwriter or
Selected Dealer will be registered in each Underwriter or Selected Dealer's name
and that you will maintain a list of certificate numbers for each Underwriter
and Selected Dealer.
You shall remit to us, as promptly as practicable, the amounts
received by you from Selected Dealers and retail purchasers as payment in
respect of Securities sold by you for our account pursuant to Section 3 hereof
for which payment has been received. Securities purchased by us under the
Underwriting Agreement and not reserved or sold by you for our account pursuant
to Section 3 hereof shall be delivered to us as promptly as practicable after
receipt by you subject to the foregoing paragraph. Any Securities purchased by
us and so reserved which remain unsold at any time prior
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to the settlement of accounts hereunder may, in your discretion, and shall, upon
your request, be delivered to us, but, until termination of the Selected Dealer
Agreements pursuant to their terms, such delivery shall be for carrying purposes
only. In case any Securities reserved for sale in Retail Sales or to Selected
Dealers shall not be purchased and paid for in due course as contemplated
hereby, we agree (a) to accept delivery when tendered by you of any securities
so reserved for our account and not so purchased and paid for, and (b) in case
we shall have received payment from you in respect of any such securities, to
reimburse you on demand for the full amount which you shall have paid us in
respect of such Securities.
In the event of our failure to tender payment for Securities
as provided in the Underwriting Agreement, you shall have the right under the
provisions thereof to arrange for other persons, who may include you and any
other Underwriter, to purchase such Securities which we had agreed to purchase
but without relieving us from liability for our default.
6. Authority to Borrow. We authorize you to advance your funds for our
account (charging current interest rates) and to arrange loans for our account
or the account of the Underwriters for the purpose of carrying out this
Agreement, and in connection therewith to execute and deliver any notes or other
instruments and to hold or pledge as security therefor all or any part of our
Securities purchased hereunder for our account. Any lender is hereby authorized
to accept your instructions in all matters relating to such loans. Any part of
our Securities so held by you may be delivered to us for carrying purposes and,
if so delivered, will be redelivered to you upon demand.
7. Allocation of Expenses and Liability. We authorize you in your
discretion either to charge our account with and we agree to pay (a) all
transfer taxes on sales made by you for our account, except as herein otherwise
provided, and (b) our proportionate share (based on our Underwriting Obligation)
of all expenses incurred by you in connection with the purchase, carrying, sale
and distribution of the Securities and all other expenses arising under the
terms of the Underwriting Agreement or this Agreement. Your determination of all
such expenses and your allocation thereof shall be final and conclusive. You may
at any time make partial distributions of credit balances or call for payment of
debit balances. Funds for our account at any time in your hands may be held in
your general funds without accountability for interest. As soon as practicable
after the termination of this Agreement, the net credit or debit balance in our
account, after proper charge and credit for all interim payments and receipt,
shall be paid to or paid by us, provided that you may establish such reserves as
you, in your sole discretion, shall deem advisable to cover possible additional
expenses chargeable to the several Underwriters. Notwithstanding any settlement,
we will remain liable for any taxes on transfers for our account and for our
proportionate share (based on our Underwriting Obligation) of all expenses and
liabilities that may be incurred for the accounts of the Underwriters.
8. Liability for Future Claims. Neither any statement by you of any
credit or debit balance in our account nor any reservation from distribution to
cover possible additional expenses relating to the Securities shall constitute
any representation by you as to the existence or
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non-existence of possible unforeseen expenses or liabilities of or charges
against the several Underwriters. Notwithstanding the distribution of any net
credit balance to us or the termination of this Agreement or both, we shall be
and remain liable for, and will pay on demand, (a) our proportionate share
(based on our Underwriting Obligation) of all expenses and liabilities which may
be incurred by or for the accounts of the Underwriters, or any of them, based on
the claim that the Underwriters constitute an association, unincorporated
business, partnership or any separate entity, and (b) any transfer taxes paid
after such settlement on account of any sale or transfer for our account.
9. Stabilization and Over-Allotment. We authorize you on our behalf and
for our account, during the term of this Agreement, in your discretion, and
without obligating you to do so, to buy and sell Securities in the open market
or otherwise for either long or short account, on such terms and at such prices
as you may determine and, in arranging for sales, to over-allot and cover such
over-allotments, provided that at no time shall the net commitment of any
Underwriter under authority of this Section, either for long or short account,
exceed an amount equivalent to 15% of the maximum number of Securities to be
purchased by such Underwriter under the Underwriting Agreement. During or after
the term of this Agreement you may cover any short position incurred under the
preceding sentence by purchase of Option Securities from the Company pursuant to
the option contained in Section 2 of the Underwriting Agreement or otherwise.
All purchases, sales and over-allotments under authority of this Section shall
be for the accounts of each of the several Underwriters as nearly as practicable
in proportion to their respective Underwriting Obligations. We agree to take up
at cost on demand any Securities so purchased for our account and to deliver on
demand any Securities so sold or over-allotted for our account. We also
authorize you to deliver our Securities pursuant to this Section 9, against
sales made by you for our account pursuant to any provisions of this Agreement.
Notwithstanding the foregoing limitations, in the event of default by one or
more Underwriters in respect of their obligations under this paragraph, each
non-defaulting Underwriter shall assume its proportionate share of the
obligations of such defaulting Underwriter without relieving such defaulting
Underwriter of its liability hereunder.
In the event that you effect any stabilizing purchases
pursuant to this Section 9, you will notify each Underwriter promptly of the
date and time when the first stabilizing purchase is effected and the date and
time when stabilizing is terminated. Each Underwriter agrees that if it effects
any stabilizing purchases, it will, not later than three business days following
the day on which any such stabilizing purchase is effected, notify you of the
price, date and time at which such stabilizing purchase was effected and will
promptly notify you of the date and time when stabilizing was terminated by such
Underwriter. Each Underwriter authorizes you to file with the Securities and
Exchange Commission (the "Commission") all notices and reports which may be
required as a result of any transactions made pursuant to this Section 9.
We agree to advise you, from time to time upon your request
during the term of this Agreement, of the number of Securities retained by us or
purchased by us from other Underwriters and Selected Dealers remaining unsold,
and will, upon your request, release to you for the accounts
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of one or more of the several Underwriters, such number of Securities as you may
designate at such price, not less than the net price to selected Dealers nor
more than the Initial Public Offering Price, as you may determine.
If, pursuant to the provisions of the first paragraph of this
Section 9 and prior to the termination of this Agreement (or such earlier date
as you may leave determined on notice to the Underwriters) you purchase or
contract to purchase any Securities which were retained by or released to us for
direct sale, which shares were theretofore not effectively placed for investment
by us, we authorize you in your discretion either to charge our account with an
amount equal to the concession to Selected Dealers with respect thereto or to
require us to repurchase such shares at a price equal to the total cost of such
purchase, including commissions, if any, and transfer tax on the redelivery.
Securities delivered on such repurchase need not be the identical shares
originally purchased by and delivered to us.
Upon the termination of this Agreement, you are authorized in
your discretion, in lieu of delivering to the several Underwriters any
Securities then held for their respective accounts pursuant to this Section 9,
to sell such shares for the accounts of each of the Underwriters at such price
or prices as you may determine and debit or credit our account for the loss or
profit resulting from such sale.
10. Open Market Transactions. We agree that we will not make bids or
offers, or make or induce purchases or sales for our own account or the accounts
of customers, in the open market or otherwise, either before or after the
purchase of the Securities and for either long or short accounts of any
Securities or any security of the same class or series, or any right to purchase
any such security except (i) as provided in this Agreement, the Underwriting
Agreement and the Selected Dealer Agreements or otherwise approved by you, (ii)
in brokerage transactions not involving solicitation of the customer's order and
(iii) in connection with option and option-related transactions that are
consistent with the "no-action" position set forth in Release No. 17609, as
amended in Release No. 19565, of the Commission under the 1934 Act. We further
agree that we will not lend, either before or after the purchase of the
Securities, to any customer, Underwriter, Selected Dealer or to any other
securities broker or dealer any Securities. Prior to the completion (as defined
in Rule 10b-6 under the 1934 Act) of our participation in the distribution, we
will otherwise comply with Rule 10b-6.
11. Blue Sky. Prior to the initial offering by the Underwriters, you
will inform us as to the states and other jurisdictions under the respective
securities or blue sky laws of which it is believed that the Securities have
been qualified for sale or are exempt from such qualification, but you do not
assume any responsibility or obligation as to the accuracy of such information
or as to the right of any Underwriter or dealer to offer or sell the Securities
in any state or other jurisdiction. You agree to file or cause to be filed, on
behalf of the Underwriters, a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York,
if necessary.
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12. Default by Underwriters. Default by one or more Underwriters in
respect of their obligations under the Underwriting Agreement shall not release
or in any way affect the liability of any defaulting Underwriter to the other
Underwriters for damages resulting from such default. In the event of such
default by one or more Underwriters, you are authorized to increase, pro rata
with the other non-defaulting Underwriters, the amount of Securities which we
shall be obligated to purchase from the Company; provided, however, that the
aggregate amount of all such increases for all non-defaulting Underwriters shall
not exceed 10% of the Securities and, if the aggregate amount of the Securities
not taken up by such defaulting Underwriters exceeds such 10%, you are further
authorized, but shall not be obligated, to arrange for the purchase by other
persons, who may include you and other non-defaulting Underwriters, of all or a
portion of the Securities not taken up by such Underwriters. In the event any
such increases or arrangements are made, the respective amounts of the
Securities to be purchased by the non-defaulting Underwriters and by any such
other person or persons shall be taken as the basis for the Underwriters'
obligations under this Agreement, but this shall not in any way affect the
liability of any defaulting Underwriter to the other Underwriters for damages
resulting from such default.
In the event of default by one or more Underwriters in respect
of their obligations under this Agreement to take up and pay for any Securities
purchased by you for their respective accounts pursuant to Section 9 hereof, or
to deliver any such Securities sold or over-allotted by you for their respective
accounts pursuant to any provision of this Agreement, and to the extent that
arrangements shall not have been made by you for other persons to assume the
obligations of such defaulting Underwriter or Underwriters, each non-defaulting
Underwriter shall assume its proportionate share of the aforesaid obligations of
each such defaulting Underwriter without relieving any such defaulting
Underwriter of its liability therefor.
13. Termination. Section 2, the second paragraph and the first sentence
of the third paragraph of Section 3, Section 4, the first sentence of Section 9
and Section 10 hereof will terminate at the close of business on the 30th
calendar day after the effective date of the Registration Statement, unless
extended or sooner terminated as hereinafter provided. You may extend such
provisions, or any of them, for a period not to exceed 30 additional calendar
days by notice to us to such effect. You may terminate any of such provisions at
any time by notice to us, and you may terminate all such provisions at any time
by notice to us to the effect that the offering provisions of this Agreement are
terminated.
14. General Position of the Representative. In taking action under this
Agreement, you shall act only as agent of the several Underwriters. Your
authority shall include the taking of such action as you may deem advisable in
respect of all matters from any of our obligations or in pertaining to any and
all offers and sales of the Securities, including the right to make any
modifications which you consider necessary or desirable in the arrangements with
Selected Dealers or others. You shall be under no liability for or in respect of
the value of the Securities or the validity or the form thereof, the
Registration Statement, the Prospectus or agreements or other instruments
executed by the Company or others; or for or in respect of the delivery of the
Securities;
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or for the performance by the Company or others of any agreement on its or their
part; nor shall you as Representative or otherwise be liable under any of the
provisions hereof or for any matters connected herewith, except for want of good
faith, and except for any liability arising under the Securities Act of 1933, as
amended (the "1933 Act"); and only obligations expressly assumed by you as
Representative herein shall be implied from this Agreement. In representing the
Underwriters hereunder, you shall act as the Representative of each of them
respectively. Nothing herein contained shall constitute the several Underwriters
partners with you or with each other, or render any Underwriter liable for the
commitments of any other Underwriter, except as otherwise provided in Section 12
hereof and in Section 11 of the Underwriting Agreement. If the Underwriters
shall be deemed to constitute a partnership for Federal income tax purposes, it
is the intent of each Underwriter to be excluded from the application of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as
amended. Each Underwriter elects to be so excluded and agrees not to take any
position inconsistent with such election. Each Underwriter authorizes you, in
your discretion, to execute and file on behalf of the Underwriters such evidence
of election as may be required by the Internal Revenue Service. The commitments
and liabilities of each of the several Underwriters are several in accordance
with their respective Underwriting Obligations and are not joint.
15. Acknowledgment of Receipt of Registration Statement etc. We hereby
confirm that we have examined the Registration Statement relating to the
Securities as heretofore filed by the Company with the Commission and each
amendment thereto, if any, filed through the date hereof, including any
documents filed under the 1934 Act through the date hereof and incorporated by
reference into the Prospectus, that we are willing to be named as an underwriter
therein and to accept the responsibilities of an underwriter thereunder, and
that we are willing to proceed as therein contemplated. We confirm that we have
authorized you to advise the Company on our behalf (a) as to the statements to
be included in any Preliminary Prospectus and in the Prospectus under the
heading "Underwriting" insofar as they relate to us, and (b) that there is no
other information about us required to be stated in the Registration Statement
or Prospectus. We understand that the aforementioned documents are subject to
further change and that we will be supplied with copies of any further
amendments or supplements to the Registration Statement, of any document filed
under the 1934 Act after the effective date of the Registration Statement and
before termination of the offering of the Securities by the Underwriters if such
document is deemed to be incorporated by reference into the Prospectus and of
any amended or supplemented Prospectus promptly, if and when received by you,
but the making of such changes, amendments and supplements shall not release us
or affect our obligations hereunder or under the Underwriting Agreement.
16. (a) Indemnity. We agree to indemnify and hold harmless each other
Underwriter and any person who controls any such Underwriter within the meaning
of Section 15 of the 1933 Act, to the extent that, and upon the terms on which,
we agree to indemnify and hold harmless the Company and other specified persons
as set forth in the Underwriting Agreement. Our indemnity agreement contained in
this Section 16 shall remain in full force and effect regardless of any
investigation made by or on behalf of such other Underwriter or controlling
person and shall survive
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the delivery of and payment for the Securities and the termination of this
Agreement and the similar agreements entered into with the other Underwriters.
(b) Claims Against Underwriters. Each Underwriter (including
you) will pay, upon your request, as contribution, its proportionate share,
based upon its Underwriting obligation, of any loss, claim, damage or liability,
joint or several, paid or incurred by any Underwriter (including you) to any
person other than an Underwriter, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any Preliminary Prospectus or any other selling or advertising material approved
by you for use by the Underwriters in connection with the sale of the
Securities, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (other than an untrue statement or alleged untrue statement or
omission or alleged omission made in conformity with written information
furnished to the Company through you by or on behalf of an Underwriter expressly
for use therein) or relating to any transaction contemplated by this Agreement;
and will pay such proportionate share of any legal or other expense reasonably
incurred by you or with your consent in connection with investigating or
defending against any such loss, claim, damage or liability, or any action in
respect thereof. In determining the amount of our obligation under this
paragraph, appropriate adjustment may be made by you to reflect any amounts
received by any one or more Underwriters in respect of such claim from the
Company pursuant to Section 8 of the Underwriting Agreement or otherwise. There
shall be credited against any amount paid or payable by us pursuant to this
paragraph any loss, claim, damage, liability or expense which is incurred by us
as a result of any such claim asserted against us, and if such loss, claim,
damage, liability or expense is incurred by us subsequent to any payment by us
pursuant to this paragraph, appropriate provision shall be made to effect such
credit, by refund or otherwise. If any such claim is asserted, you may take such
action in connection therewith as you deem necessary or desirable, including
retention of counsel for the Underwriters, and in your discretion separate
counsel for any particular Underwriter or group of Underwriters, and the fees
and disbursements of any counsel so retained by you shall be included in the
amounts payable pursuant to this paragraph. In determining amounts payable
pursuant to this paragraph, any loss, claim, damage, liability or expense
incurred by any person who controls any Underwriter within the meaning of
Section 15 of the 1933 Act which has been incurred by reason of such control
relationship shall be deemed to have been incurred by such Underwriter. Any
Underwriter may elect to retain, at its own expense, its own counsel. You may
settle or consent to the settlement of any such claim on advice of counsel
retained by you. Whenever you receive notice of the assertion of any claim to
which the provisions of this paragraph would be applicable, you will give prompt
notice thereof to each Underwriter. If any Underwriter or Underwriters defaults
in its or their obligation to make any payments under this paragraph, each
non-defaulting Underwriter shall be obligated to pay its proportionate share of
all defaulted payments, based upon the proportion such non-defaulting
Underwriter's Underwriting Obligation bears to the Underwriting Obligations of
all nondefaulting Underwriters. Nothing herein shall relieve a defaulting
Underwriter from liability for its default.
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17. Capital Requirements. We confirm that the incurrence by us of our
obligations under this Agreement and under the Underwriting Agreement will not
place us in violation of the net capital requirements of Rule 15c3-1 under the
1934 Act or of any applicable rules relating to capital requirements of any
securities exchange to which we are subject.
18. Undertaking to Mail Prospectuses. As contemplated by Rule 15c2-8
under the 1934 Act, you agree to mail a copy of the Prospectus mentioned in the
Underwriting Agreement to any person making a written request therefor during
the period referred to in said Rule, the mailing to be made to the address given
in the request. We confirm that we have delivered all Preliminary Prospectuses
and revised Preliminary Prospectuses, if any, required to be delivered under the
provisions of Rule 15c2-8 and agree to deliver all Prospectuses required to be
delivered thereunder. We acknowledge that the copies of the Preliminary
Prospectus furnished to us have been distributed to dealers who have been
notified of the foregoing requirements pertaining to the delivery of Preliminary
Prospectuses and Prospectuses. You have heretofore delivered to us such number
of copies of Preliminary Prospectuses as have been reasonably requested by us,
receipt of which is hereby acknowledged, and will deliver such number of copies
of Prospectuses as will be reasonably requested by us.
19. Miscellaneous. Any notice hereunder from you to us or from us to
you shall be deemed to have been duly given if sent by registered mail, telegram
or teletype, to us at our address as set forth in our Underwriters'
Questionnaire previously delivered to you, or to you at 3340 Peachtree Road,
N.E., Suite 450, Atlanta, Georgia 30326, Attention: William L. Mello.
We understand that you are a member in good standing of the
NASD. We hereby confirm that we are actually engaged in the investment banking
or securities business and are either (i) a member in good standing of the NASD
or (ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the 1934 Act who agrees not to make any sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein (except that we may participate in sales to
Selected Dealers and others under Section 3 of this Agreement). We hereby agree
to comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD, and, if we are a foreign dealer and not a member of the
NASD, we also hereby agree to comply with the NASD's interpretation with respect
to free-riding and withholding and to comply, as though we were a member of the
NASD, with the provisions of Sections 8 and 36 of Article III of such Rules of
Fair Practice, and to comply with Section 25 of Article III thereof as that
Section applies to a nonmember foreign dealer. In connection with sales and
offers to sell Securities made by us outside the United States, its territories
and possessions (i) we will either furnish to each person to whom any such sale
or offer is made a copy of the then current Preliminary Prospectus or the
Prospectus, as the case may be, or inform such person that such Preliminary
Prospectus or Prospectus will be available upon request, and (ii) we will
furnish to each person to whom any such sale or offer is made such prospectus,
advertisement or other offering document containing information relating to the
Securities or the Company as may be required under the law of the
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jurisdiction in which such sale or offer is made. Any prospectus, advertisement
or other offering document furnished by us to any person in accordance with the
preceding sentence and any such additional offering material as we may furnish
to any person (x) shall comply in all respects with the law of the jurisdiction
in which it is so furnished, (y) shall be prepared and so furnished at our sole
risk and expense and (z) shall not contain information relating to the
Securities or the Company which is inconsistent in any respect with the
information contained in the then current Preliminary Prospectus or in the
Prospectus, as the case may be.
This instrument may be signed by or on behalf of the Underwriters in
one or more counterparts each of which shall constitute an original and all of
which together shall constitute one and the same agreement among all the
Underwriters and shall become effective at such time as all the Underwriters
shall have signed or have had signed on their behalf such counterparts and you
shall have confirmed all such counterparts. You may confirm such counterparts by
facsimile signature.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia without giving effect to the choice of law or
conflicts of laws principles thereof.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
As Attorney-in-Fact for
each of the several
Underwriters named in
Schedule I to the
Underwriting Agreement.
Confirmed as of the date first above written:
J.P. TURNER & COMPANY, L.L.C.
As Representative of the Several Underwriters
By:___________________________________
Name: __________________________
Title: ___________________________
12
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby irrevocably
constitutes and appoints William L. Mello and Tim McAfee of J.P. Turner &
Company, L.L.C., 3340 Peachtree Road, NE, Suite 450, Atlanta, Georgia, 30326,
and each of them, the true and lawful agents and attorneys-in-fact of the
undersigned with the power and authority to execute and deliver as Agreement
Among Underwriters (which Agreement Among Underwriters grants to the
Representative of the Underwriters as named therein the authority to execute the
Underwriting Agreement) and to otherwise act as agents and attorneys-in-fact of
the undersigned with respect to all matters arising in connection with the
undersigned's acting as one of the Underwriters of a proposed offering of
1,000,000 Shares of Common Stock, no par value
and
1,000,000 Redeemable Common Stock Purchase Warrants
of
ROSEDALE DECORATIVE PRODUCTS, LTD.
with full power and authority to execute and deliver for and on behalf of the
undersigned all agreements, consents and documents in connection therewith as
said agents and attorneys-in-fact, or any of them, may deem advisable. The
undersigned hereby gives to said agents and attorneys-in-fact the power and
authority to appoint a substitute or substitutes to act hereunder with the same
power and authority as said agents and attorneys-in-fact, or any of them, would
have if personally acting. The undersigned hereby ratifies and confirms all that
said agents and attorneys-in-fact, or any of them, or any substitute or
substitutes, may do by virtue hereof.
Duly executed this _____ day of _____________, 19___.
______________________________________
Firm Name:
By: ___________________________
Its: ___________________________
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<PAGE>
(PARTNERSHIP ACKNOWLEDGMENT)
STATE OF
COUNTY OF
On this ___ day of ______________, ______, before me, a notary public
in and for said county and state, residing therein, duly commissioned and sworn,
personally appeared _________________________________, known to me to be one of
the general partners of the firm that executed the within instrument and
acknowledged to me that he executed, and was duly authorized to execute, the
same as for the act and deed of said firm.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the county and state aforesaid on the day and year first written above.
______________________________
Notary Public
My Commission Expires:
(CORPORATE ACKNOWLEDGMENT)
STATE OF
COUNTY OF
On this ___ day of ______________, ______, before me, a notary public
in and for said county and state, residing therein, duly commissioned and sworn,
personally appeared _________________________________, known to me to be
_____________ of the corporation that executed the within instrument and
acknowledged to me that he executed, and was duly authorized to execute, the
same on behalf of and in the name of such corporation pursuant to its bylaws or
a resolution of its directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the county and state aforesaid on the day and year first written above.
_________________________________
Notary Public
My Commission Expires:
14
<PAGE>
EXHIBIT A
UNDERWRITING AGREEMENT
<PAGE>
Exhibit 4.1
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (REGISTRATION NO. 333-44747).
HOWEVER, NEITHER THE OPTIONS NOR SUCH SECURITIES CAN BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii)
A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS OPTION IS
RESTRICTED AS DESCRIBED HEREIN.
ROSEDALE DECORATIVE PRODUCTS LTD.
UNDERWRITERS' PURCHASE OPTION
100,000 Shares of Common Stock
and 100,000 Underwriters' Common Stock Purchase Warrants
THIS CERTIFIES that, for receipt in hand of $100.00 and other value
received, J.P. Turner & Company, L.L.C., 3340 Peachtree Road, N.E., Suite
450, Atlanta, Georgia 30326 (hereinafter referred to as the "Holder" or
"Underwriter") is entitled to subscribe for and purchase from ROSEDALE
DECORATIVE PRODUCTS LTD., a corporation organized under the laws of the
Province of Ontario, Canada (the "Company"), upon the terms and conditions
set forth herein, at any time or from time to time after ____________, 1999
and before 5:00 P.M. on ______________, 2003, New York time (the "Exercise
Period"), 100,000 shares of the Company's Common Stock, no par value per
share (the "Shares") at a price of $_____ per share (the "Exercise Price per
Share"), and an Underwriters' Common Stock Purchase Warrant or Warrants
("Underwriters' Warrants") for the purchase of an additional 100,000 shares
of the Company's Common Stock (the "Warrant Shares") at a price of $_______
per Underwriters' Warrant. This Option may not be sold, transferred, assigned
or hypothecated, until _____________, 1999 except that it may be transferred
in whole or in part, to (i) either party who is a "Holder" or one or more
officers or partners of the Holder (or the officers or partners of any such
person); (ii) a successor to the Holder, or the officers or partners of such
successor; (iii) a purchaser of substantially all of the assets of the
Holder; or (iv) by operation of law. The term "Holder" as used herein shall
include any transferee to whom this Option has been transferred in accordance
with the above. As used herein the term "Option" shall mean and include this
Underwriters' Purchase Option and any option or options of like form and
tenor hereafter issued as a consequence of the exercise or transfer of this
Option in whole or part.
<PAGE>
Each Underwriters' Warrant shall entitle the holder thereof to purchase
Shares at $_____ per share. Each Underwriters' Warrant shall be in
the form attached hereto as "Exhibit A" and shall be identical in all material
respects to the warrants (the "Public Warrants"), issued pursuant to the Warrant
Agreement, dated ___________, 1998 (the "Warrant Agreement"), between the
Company and Continental Stock Transfer & Trust Company, as Warrant Agent.
The Underwriters' Warrants shall be subject to redemption by the Company
under the same terms and conditions as the Public Warrants pursuant to the
Warrant Agreement.
1. Term of Exercise.
(a) This Option may be exercised during the Exercise Period as
to the whole or any lesser number of Shares and Underwriters' Warrants, by the
surrender of an Underwriters' Option Certificate for this Option (with the
election at the end thereof duly executed) to the Company at its offices at 731
Millway Avenue, Concord, Ontario, Canada L4K 3S8 or such other place as is
designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
Exercise Price (per Share and per Warrant, respectively) multiplied by the
number of Shares and Underwriters' Warrants for which this Option is being
exercised.
(b) For purposes of this Option, the term "Current Market
Price" at any date shall be deemed to be: (i) the average of the daily closing
prices of the Common Stock or the Public Warrants, as the case may be, for the
20 consecutive trading days immediately preceding such date in reported sales
price, or (ii) in case no such reported sale takes place on such date, the last
sales price regular way in either case as reported on the principal national
securities exchange on which the Common Stock or the Public Warrants, as the
case may be, is listed or admitted to trading, or (iii) if the Common Stock or
the Public Warrants, as the case may be, is not listed or admitted to trading on
any national securities exchange, the average of the closing bid and asked
prices regular way for the Common Stock or the Public Warrants, as the case may
be, on the Nasdaq National Market System or Nasdaq SmallCap Market of the Nasdaq
Stock Market, Inc. (together referred to as "Nasdaq") or (iv) if the Common
Stock or the Public Warrants, as the case may be, is not listed or admitted for
trading on any national securities exchange and is not reported on NASDAQ or any
similar organization, the average of the closing bid and asked prices in the
over-the-counter market as furnished by the National Quotation Bureau, Inc. or
if no such quotation is available, the fair market value as determined by the
Board of Directors in good faith.
2. Delivery of Certificates to Registered Holder. Upon each exercise of
this Option, the Holder shall be deemed to be the holder of record of the Shares
and Underwriters' Warrants issuable
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<PAGE>
upon such exercise notwithstanding that the transfer books of the Company shall
then be closed or certificates representing such Shares or Underwriters'
Warrants shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Option, the Company shall issue and
deliver to the Holder a certificate or certificates for the Shares and a
certificate or certificates for the Underwriters' Warrants registered in the
name of the Holder or its designee. If this option should be exercised in part
only, the Company shall, upon surrender of an Underwriters' Option Certificate
for this Option for cancellation, execute and deliver a new Underwriters' Option
Certificate evidencing the right of the Holder to purchase the balance of the
Shares and Underwriters' Warrant (or portions thereof) subject to purchase
hereunder.
3. Option Register. Any Option issued upon the transfer or exercise in
part of this Option shall be numbered and shall be registered in an Option
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Option on the Option Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Option on the part of any other person, and
shall not be liable for any registration or transfer of Options which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or participation
therein amounts to bad faith. The Options shall be transferable only on the
books of the Company upon delivery of an Underwriters' Option Certificate duly
endorsed by the Holder or by its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer in all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence his or its
authority shall be produced. Upon any registration of transfer, the Company
shall deliver an Underwriters' Option Certificate to the Holder thereof, for
another Option, or other options of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Shares (or
portions thereof) and Underwriters' Warrants upon surrender to the Company or
its duly authorized agent. Notwithstanding the foregoing, the Company shall have
no obligation to cause this Option to be transferred on its books to any person
if, in the opinion of counsel to the Company, such transfer does not comply with
the provisions of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations thereunder.
4. Reservation of Common Stock. The Company shall at all times reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of this Option and the Underwriters'
Warrants, such number of shares of Common Stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Option and the Underwriters' Warrants when paid
for in accordance with the respective terms thereof, shall be validly issued,
fully paid and nonassessable by the Company.
5. Anti-Dilution; Adjustments to Exercise Price.
(a) Upon the occurrence of any event (an "Event") as a result
of which an adjustment is made to the exercise price (the "Public Exercise
Price") of any of the Public Warrants,
3
<PAGE>
the number of Shares issuable upon exercise of this Option shall be adjusted to
equal thereafter the number of Shares issuable prior to such Event multiplied by
a fraction, the numerator of which shall be the Public Exercise Price in effect
prior to such Event and the denominator of which shall be the Public Exercise
Price subsequent to such Event.
(b) Upon each adjustment of the number of Shares issuable upon
exercise of this Option pursuant to subparagraph 5(a) above, this Option shall
thereupon evidence the right to purchase such number of Shares at the Exercise
Price per Share obtained by (1) multiplying the Exercise Price per share in
effect immediately prior to the triggering Event by the number of shares then
purchasable upon exercise of this Option and (2) dividing the product so
obtained by the number of Shares purchasable upon exercise of this Warrant
subsequent to the triggering Event.
(c) Notwithstanding any other provision of this Option, any
adjustment of the exercise price, and/or the number of Warrant Shares
purchasable upon the exercise of the Underwriters' Warrants shall be determined
solely by the antidilution and other adjustment provisions contained in the
Warrant Agreement (which provisions are incorporated herein by reference) as if
such Underwriters' Warrants were and had been outstanding on and from
_____________, 1998.
(d) Whenever there shall be an adjustment as provided in this
paragraph 5, the Company shall promptly cause written notice thereof to be sent
by registered mail, postage prepaid, to the Holder, at its principal office,
which notice shall be accompanied by an officer's certificate setting forth the
number and Exercise Price per Share and per Warrant of the Shares and
Underwriters' Warrants issuable upon exercise of this Option and the exercise
price per Warrant Share and the number of Warrant Shares purchasable upon the
exercise of the Underwriters' Warrants after such adjustment and setting forth a
brief statement of the facts requiring such adjustment and the computation
thereof.
(e) All calculations under this paragraph 5 shall be made to
the nearest cent or to the nearest one-thousandth of a Share or Warrant, as the
case may be.
(f) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of Options. If any fraction of a share would be issuable on the exercise of any
Option (or specified portions thereof), the Company, in its sole discretion,
shall purchase such fraction for an amount in cash equal to the same fraction of
the Current Market Price of such share on the date of exercise of the Option.
6. Reorganization/Reclassification.
(a) In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, such successor, leasing or
4
<PAGE>
purchasing corporation, as the case may be, shall (i) execute with the Holder an
agreement providing that the Holder shall have the right thereafter to receive
upon exercise of this Option solely the kind and amount of shares of stock and
other securities, property, cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a Holder of the number of
shares of Common Stock and the Underwriters' Warrants for which this Option
might have been exercised immediately prior to such consolidation, merger, sale,
lease or conveyance, and (ii) make effective provision in order to effect such
agreement. Such agreement shall provide for adjustment which shall be as nearly
equivalent as practicable to the adjustments for which paragraph 5 provides.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Option (other than a change in par
value or from par value to no par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from par value to no par value, or as a result of
a subdivision or combination, but including any change in the shares into two or
more classes or series of shares), the Holder shall have the right thereafter to
receive upon exercise of this Option solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such reclassification, change, consolidation or merger by a holder of the
number of shares of Common Stock and the Underwriters' Warrants for which this
Option might have been exercised immediately prior to such reclassification,
change, consolidation or merger. Thereafter, appropriate provision shall be made
for adjustments which shall be as nearly equivalent as practicable to the
adjustments for which paragraph 5 provides.
(c) The above provisions of this paragraph 6 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases or conveyances similar to
those described in subparagraphs 6(a) and (b).
7. Notice of Dividends/Distributions. If, in case at any time the
Company shall propose:
(a) to pay any dividend or make any distribution of shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants or other securities to all
holders of Common Stock or Public Warrants entitling them to purchase any
additional shares of Common Stock or any other rights, warrants or other
securities; or
(c) to effect any reclassification or change or outstanding
shares of Common Stock, or any consolidation, merger, sale, lease or conveyance
of property, described in paragraph 6; or
5
<PAGE>
(d) to effect any liquidation, dissolution, or winding-up
of the Company; or
(e) to take any other action which would cause an adjustment
to the exercise price of the Public Warrants; then, on each such occasion, the
Company shall give written notice thereof, by registered mail, postage prepaid,
to the Holder at the Holder's address as it shall appear in the Option Register,
mailed at least 15 days prior to: (i) the date as of which the holders of record
of shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined; (ii)
the date on which any such reclassification, change of outstanding shares of
Common Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution, or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common Stock
or Public Warrants, as the case may be, shall be entitled to exchange their
shares or warrants for securities or other property, if any, deliverable upon
such reclassification, change of outstanding shares, consolidation, merger,
sale, lease, conveyance of property, liquidation, dissolution, or winding-up; or
(iii) the date of such action which would require an adjustment to the Public
Exercise Price.
8. Payment of Taxes. The issuance of any Shares or Underwriters'
Warrants or other securities upon the exercise of this Option, and the delivery
of certificates or other instruments representing such shares of Common Stock,
Warrants or other securities, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue thereof
shall have paid the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid or is not due and
payable.
9. Registration Rights. (a) If, at any time after _____________, 1999,
and before _____________, 2003, the Company shall file a registration statement
(other than on Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while Shares or Underwriters' Warrants are
available for purchase upon exercise of this Option or while any Shares,
Underwriters' Warrants or Warrant Shares (which have not been so registered) are
outstanding, the Company shall give the Holder and all the then registered
holders of such Shares, Underwriters' Warrants or Warrant Shares at least 30
days prior written notice of the filing of such registration statement. If
requested by the Holder or by any such holder in writing within 20 days after
receipt of any such notice, the Company shall, at the Company's sole expense
(other than the fees and disbursements of counsel for the Holder or such holder
and the underwriting discounts and commissions, if any, payable in respect of
the Warrants, Shares, Underwriters' Warrants and Warrant Shares sold by the
Holder or any such holder), use its best efforts to register or qualify the
Shares, Underwriters' Warrants and Warrant Shares (collectively, the
"Underwriters' Securities") of the Holder or any such holders who shall have
made such request concurrently with the registration covering such other
securities, all to the extent requisite to permit the public offering and sale
of the Underwriters' Securities through the facilities of all appropriate
securities exchanges and the over-the-counter market, and will use its best
efforts through its officers, directors, auditors and counsel
6
<PAGE>
to cause such registration statement to become effective as promptly as
practicable. Notwithstanding the foregoing, if the managing underwriter of any
such offering shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Underwriters' Securities requested to be
included in the registration concurrently with the securities being registered
by the Company would materially adversely affect the distribution of such
securities by the Company for its own account, the Underwriters' Securities
shall not be included in such registration statement or such registration
statement shall include only so many of the Underwriters' Securities as will not
have such an effect, provided that if any securities of the Company are included
in such registration statement for the account of any person other than the
Company and the Holder or any such holder, the securities included in such
registration statement for such other person shall have been reduced pro rata to
the reduction of the Underwriters' Securities which were requested to be
included in such registration.
(b) If at any time after ____________, 1999 and before
____________, 2003, the Company shall receive a written request from holders of
Underwriters' Securities who, in the aggregate, own (or upon exercise of the
Option and Underwriters' Warrants, will own) a majority of the total number of
shares of Common Stock issued or issuable upon exercise of the Option and the
Underwriters' Warrants, the Company shall, as promptly as practicable, prepare
and file with the Commission a registration statement sufficient to permit the
public offering and sale of the Underwriters' Securities through the facilities
of all appropriate securities exchanges and the over-the-counter market, and
will use its best efforts through its officers, directors, auditors and counsel
to cause such registration statement to become effective as promptly as
practicable; provided however, that the Company shall only be obligated to file
one such registration statement for which all expenses incurred in connection
with such registration (other than the fees and disbursements of counsel for the
Holder or such holders and underwriting discounts and commissions, if any,
payable in respect of the Underwriters' Securities sold by the Holder or any
such holder) shall be borne by the Company and one additional such registration
statement for which all such expenses shall be paid by the Holder and such
holders.
(c) In the event of a registration pursuant to the provisions
of this paragraph 9, the Company shall use its best efforts to cause the
Underwriters' Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; provided, however, that the Company shall
not be required to (i) qualify to do business in any state by reason of this
paragraph 9(c) in which it is not otherwise required to qualify to do business,
(ii) or register or qualify in any state which will impose material burdens on
the Company or its principals.
(d) The Company shall keep effective any registration or
qualification contemplated by this paragraph 9 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Holder or such holders to complete the
offer and sale of the Underwriters' Securities covered thereby. The Company
shall in no event be required to keep any such registration or qualification
effect for a period in excess of nine months from the date on which the Holder
and such holders are first free to sell such
7
<PAGE>
Underwriters' Securities; provided, however, that if the Company is required to
keep any such registration or qualification in effect with respect to securities
other than the Underwriters' Securities beyond such period, the Company shall
keep such registration or qualification in effect as it relates to the
Underwriters' Securities for so long as such registration or qualification
remains or is required to remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions
of this paragraph 9, the Company shall furnish to each of the five largest
holders of any Underwriters' Securities included therein such amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as the Holder or such holders
may reasonably request in order to facilitate the disposition of the
Underwriters' Securities included in such registration.
(f) In the event of a registration pursuant to the provisions
this paragraph 9, the Company shall furnish to each holder of any Underwriters'
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Holder) to the effect that (i) the registration statement has become
effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Commission or any state
securities authority instituted or threatened to institute any proceedings with
respect to such an order, (ii) the registration statement and each prospectus
forming a part thereof (including each preliminary prospectus), and any
amendment or supplement thereto, materially complies as to form with the Act and
the rules and regulations thereunder (except as to financial statements,
including schedules, and other accounting and financial data, as to which
counsel need express no opinion), and (iii) such counsel has no knowledge or
reason to know of any material misstatement or omission in such registration
statement or any prospectus, as amended or supplemented.
(g) The Company agrees that until all the Underwriters'
Securities have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Underwriters' Securities to sell such securities under Rule 144.
10. Indemnification.
(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Holder, any holder of any of the
Underwriters' Securities, their officers, directors, partners, employees, agents
and counsel, and each person, if any, who controls any such person within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), from and against any and all loss,
liability, charge, claim, damage and expense whatsoever (which shall include,
for all purposes of this paragraph 10,
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<PAGE>
but not be limited to, reasonable attorneys' fees and any and all expense
whatsoever reasonably incurred, and any and all amounts paid in settlement of
any claim or litigation), as and when incurred, arising out of, based upon, or
in connection with (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any registration statement, preliminary
prospectus or final prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, or (B) in any application or other
document or communication (in this paragraph 10 collectively called an
"application") executed by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Underwriters' Securities under the
securities or blue sky laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
the Holder or any holder of any of the Underwriters' Securities by or on behalf
of such Holder or Holders, or such other holder, exclusively for inclusion in
any such preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be, or (ii) any
breach of any representation, warranty, covenant or agreement of the Company to
indemnify, which shall be in addition to any liability the Company may otherwise
have, including liabilities arising under this Option.
If any action is brought against the Holder or any holder of
any of the Underwriters' Securities or any of its officers, directors, partners,
employees, agents or counsel, or any controlling persons of such person (an
"indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may have other than pursuant to this paragraph 10(a) except to the extent
that it has been harmed in any material respect by such failure) and the Company
shall promptly assume the defense of such action, including the employment of
counsel (reasonably satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party or parties shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party or parties unless
the employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action or the Company shall not
have promptly employed counsel reasonably satisfactory to such indemnified party
or parties to have charge of the defense of such action or such indemnified
party or parties shall have reasonably concluded that there may be one or more
legal defenses available to it or them or to other indemnified parties which are
different from or in addition to those available to the Company, if any, in
which events the reasonable fees and expenses of such counsel shall be borne by
the Company and the Company shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties. Anything in this
paragraph 10 (a) to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent.
(b) The Holder and any other holder of Underwriters'
Securities agree to indemnify and hold harmless the Company, each director of
the Company, each officer of the
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<PAGE>
Company who shall have signed any registration statement covering Underwriters'
Securities held by the Holder and such other holder and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Holder and such other holder in paragraph 10(a), but
only with respect to statements or omissions, if any, made in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
furnished to the Company with respect to the Holder or such other holder by or
on behalf of the Holder or such other holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant to
this paragraph 10(b), the Holder and such other holder shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified parties,
by the provisions of paragraph 10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph 10(a)
or 10(b) (subject to the limitations thereof) but is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, or (ii) any indemnified or indemnifying party seeks
contribution under the Act, the Exchange Act or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement and any controlling person of the Company), as one
entity, and the Holder and any holder of any of the Underwriters' Securities
included in such registration in the aggregate (including for this purpose any
contribution by or on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Holder or any
such holder in connection with the facts which resulted in such losses,
liabilities, claims, damages and expenses. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission, shall
be determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company, by
the Holder or by any holder of Underwriters' Securities included in such
registration, and the parties relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, alleged statement,
omission or alleged omission. The Company and the Holder agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Holder or any such other holder of the Underwriters' Securities for contribution
were determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this paragraph 10(c). No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled
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to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this paragraph 10(c), each person, if any,
who controls the Holder or any holder of any of the Underwriters' Securities
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent and counsel of each such
person, shall have the same rights to contribution as such person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent and counsel of each such person, shall have the same rights to
contribution as such person and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any such registration
statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
paragraph 10(c). Anything in this paragraph 10(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
paragraph 10(c) is intended to supersede any right to contribution under the
Act, the Exchange Act or otherwise.
(d) Th provisions of this paragraph 10 shall survive
regardless of the expiration, exercise or surrender of this Option.
11. Legend. The securities issued upon exercise of this Option shall be
subject to a stop transfer order and, when Company's counsel deem appropriate,
the certificate or certificates evidencing any such securities shall bear the
following legend:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, SUCH
SHARES [OR OTHER SECURITIES] CANNOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH
REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT
UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT."
12. Lost Certificates. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Option (and upon
surrender of any Option if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder thereof a new Option of like date, tenor and denomination.
13. No Rights as Shareholder. No Holder of any Option shall have,
solely on account of such status, any rights of a shareholder of the Company,
either at law or in equity, or to any notice
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of meetings of stockholders or of any other proceedings of the Company, except
as provided in this Option.
14. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered holder of this Option, to the
address of such holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Paragraph l(a) of this Option; or
(c) if to the Holder, to the address set forth on the first
page of this Option.
15. Governing Law. This Option shall be construed in accordance with
the laws of the State of Georgia, without giving effect to conflict of laws.
Dated: , 1998
----------------
ROSEDALE DECORATIVE PRODUCTS LTD.
By:
-----------------------------------
Name:
Title:
[Seal]
- ------------------------------
Secretary
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THESE SECURITIES MAY NOT BE PUBLICLY OFFERED OR SOLD UNLESS AT THE TIME OF SUCH
OFFER OR SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS
MEETING THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS
AMENDED, FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT
THERETO, WHICH IS EFFECTIVE UNDER SAID ACT, OR UNLESS IN THE OPINION OF COUNSEL
TO THE CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE APPLICABLE PROVISIONS
OF SECTION 5 OF SAID ACT.
UNDERWRITERS' COMMON STOCK PURCHASE WARRANT
For the Purchase of Shares of Common Stock, no par value,
of
ROSEDALE DECORATIVE PRODUCTS LTD.
Incorporated Under the Laws of the
Province of Ontario, Canada
Void After 5 P.M. New York, New York, time
on ______________, 2003
No. 001 Warrant to Purchase 100,000 Shares
THIS IS TO CERTIFY, that, for value received, J. P. Turner & Company,
L.L.C., a limited liability Georgia corporation (the "Underwriter"), or
registered assigns, is entitled, subject to the terms and conditions hereinafter
set forth, on or after ___________, 1999, and at any time prior to 5:00 P.M.,
New York, New York, time on _____________, 2003, but not thereafter, to purchase
the number of shares set forth above (the "Shares") of common stock, no par
value (the "Common Stock") of ROSEDALE DECORATIVE PRODUCTS, LTD., a corporation
organized under the laws of the Province of Ontario, Canada (the "Corporation"),
from the Corporation upon payment to the Corporation of $______ per share (the
"Purchase Price"), if and to the extent this Warrant is exercised, in whole or
in part, during the period this Warrant remains in force, subject in all cases
to adjustment as provided in Article II hereof, and to receive certificates
representing the Common Stock so purchased, upon presentation and surrender to
the Corporation of this Warrant, with the form of subscription attached hereto
duly executed, and accompanied by payment of the Purchase Price of each share of
Common Stock purchased as provided herein.
ARTICLE I -- TERMS OF THE WARRANT
Section 1.01 Subject to the provisions of Sections 1.05 and 3.01
hereof, this Warrant may be exercised at any time and from time to time after
9:00 A.M., New York, New York, time, on ____________, 1999 (the "Exercise
Commencement Date"), but no later than 5:00 P.M., New York, New York, time on
___________, 2003 (the "Expiration Time"). If __________, 2003 is a day on which
banking institutions are authorized by law to close, then the date on which this
Warrant shall expire shall be the next succeeding day which shall not be such a
day. If this Warrant is not exercised on or before the Expiration Time it shall
become void, and all rights hereunder shall thereupon cease.
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Section 1.02 (a) The holder of this Warrant (the "Holder") may
exercise this Warrant, in whole or in part, upon surrender of this Warrant
with the form of subscription attached hereto duly executed, to the
Corporation at its corporate office located at 731 Millway Avenue, Concord,
Ontario, Canada L4K3S8, together with the full Purchase Price for each share
of Common Stock to be purchased in lawful money of the United States, or by
check, bank draft or postal or express money order payable in United States
dollars to the order of the Corporation, and upon compliance with and subject
to the conditions set forth herein.
(b) Upon receipt of this Warrant with the form of
subscription duly executed and accompanied by payment of the aggregate Purchase
Price for the Shares for which this Warrant is then being exercised, together
with all taxes applicable upon such exercise, the Corporation shall cause to be
issued certificates for the total number of whole shares of Common Stock for
which this Warrant is being exercised in such denominations as are required for
delivery to the Holder, and the Corporation shall thereupon deliver such
certificates to the Holder or its nominee.
(c) In case the Holder shall exercise this Warrant with
respect to less than all of the shares of Common Stock that may be purchased
under this Warrant, the Corporation shall execute a new Warrant for the balance
of the shares of Common Stock that may be purchased upon exercise of this
Warrant and deliver such new Warrant to the Holder.
(d) The Corporation covenants and agrees that it will pay
when due and payable any and all taxes that may be payable in respect of the
issue of this Warrant, or the issue of any shares of Common Stock, upon the
exercise of this Warrant. The Corporation shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issuance
or delivery of this Warrant or of the shares of Common Stock, in a name other
than that of the Holder at the time of surrender, and until the payment of such
tax the Corporation shall not be required to issue such shares of Common Stock.
Section 1.03 This Warrant may be split-up, combined or exchanged for
another Warrant or Warrants of like tenor to purchase a like aggregate number of
shares. If the Holder desires to split-up, combine, or exchange this Warrant, he
shall make such request in writing delivered to the Corporation at its corporate
office and shall surrender this Warrant and any other Warrants to be so
split-up, combined or exchanged at such office. Upon any such surrender for a
split-up, combination or exchange, the Corporation shall execute and deliver to
the person entitled thereto a Warrant or Warrants, as the case may be, as so
requested. The Corporation shall not be required to effect any split-up,
combination or exchange that will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of the shares of Common Stock.
The Corporation may require the holder to pay a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any split-up,
combination or exchange of Warrants.
Section 1.04 Prior to due presentment for registration or transfer of
this Warrant, the Corporation may deem and treat the Holder, as registered on
the books of the Corporation maintained for that purpose, as the absolute owner
of this Warrant (notwithstanding any endorsement or notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes and the Corporation shall not be affected by any notice to the
contrary.
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Section 1.05 Prior to _________, 1999, this Warrant may not be sold,
hypothecated, exercised, assigned, or transferred, except to any member of the
National Association of Securities Dealers, Inc. participating in the offering
contemplated in Section 3.01 hereof and to individuals who are the bona fide
officers or partners of the Underwriter or such members, or any successor to
their respective businesses or pursuant to the laws of descent and distribution,
and thereafter and until its expiration shall be assignable and transferable in
accordance with and subject to the provisions of the Securities Act of 1933, as
amended (the "Act"), if this Warrant is exercised immediately upon assignment or
transfer. If this Warrant is not exercised immediately upon assignment or
transfer, this Warrant shall lapse.
Section 1.06 Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Corporation at its principal office with the
form of assignment attached hereto duly executed and funds sufficient to pay any
transfer tax. In such event, the Corporation shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants that carry the same rights upon
presentation thereof at the corporate office of the Corporation together with a
written notice signed by the Holder, specifying the names and denominations in
which such new Warrants are to be issued.
Section 1.07 Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Corporation. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
(i) the Corporation shall declare any dividend payable in
stock to the holders of its Common Stock or make any other distribution in
property other than cash to the holders of its Common Stock; or
(ii) the Corporation shall offer to the holders of its Common
Stock rights to subscribe for or purchase any shares of any class of stock or
any other purchase any shares of any class of stock or any other rights or
options or securities exchangeable for or convertible into shares of any class
of stock; or
(iii) the Corporation shall effect any reclassification of its
Common Stock (other than a reclassification involving merely the subdivision or
combination of outstanding shares of Common Stock) or any capital
reorganization, or any consolidation or merger (other than a merger in which no
distribution of securities or other property is made to holders of Common
Stock), or any sale, transfer or other disposition of its property, assets and
business substantially as an entirety, or the liquidation, dissolution or
winding up of the Corporation; or
(iv) except as set forth in the Corporation's Final Prospectus
dated ____________, 1998, the Corporation shall issue any shares of Common Stock
in exchange for shares of preferred stock or indebtedness of the Corporation,
other than upon conversion of such shares of preferred stock or indebtedness;
then, in each such case, the Corporation shall cause notice of such proposed
action to be mailed to the Holder. Such notice shall specify (i) the date on
which the books of the Corporation
15
<PAGE>
shall close, or a record be taken, for determining holders of Common Stock
entitled to receive such stock dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation,
dissolution, winding up or exchange shall take place or commence, as the case
may be, (ii) the date as of which it is expected that holders of record of
Common Stock shall be entitled to receive securities or other property
deliverable upon such action, if any such date has been fixed (on such date in
the event of a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the right to exercise this Warrant shall terminate), and
(iii) such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Purchase Price and the
kind and amount of the Common Stock and other securities and property
deliverable upon exercise of this Warrant. Such notice shall be mailed in the
case of any action covered by Subsection 1.07(a) and 1.07(b) above, at least ten
(10) days prior to the record date of determining holders of the Common Stock
for purposes of receiving such payment or offer, and in the case of any action
covered by Subsection 1.07(c) or 1.07(d) above, at least ten (10) days prior to
the earlier of the date upon which such action is to take place or any record
date to determine holders of Common Stock entitled to receive such securities or
other property.
Without limiting the obligation of the Corporation to
provide notice to the Holder of actions hereunder, it is agreed that failure of
the Corporation to give notice shall not invalidate such action of the
Corporation.
Section 1.08 If this Warrant is lost, stolen, mutilated or destroyed,
the Corporation shall, on such reasonable terms as to indemnity or otherwise as
it may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an independent contractual obligation of the
Corporation, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
Section 1.09 (a) The Corporation covenants and agrees that at all
times it shall reserve and kept available for the exercise of this Warrant
such number of authorized shares of Common Stock as are sufficient to permit
the exercise in full of this Warrant.
(b) Prior to this issuance of any shares of Common Stock
upon exercise of this Warrant, the Corporation shall secure the registration of
such shares and listing of such securities upon any securities exchange
including NASDAQ upon which the shares of the Corporation's Common Stock may at
the time be listed for trading, if any.
(c) The Corporation covenants that all shares of Common
Stock, when issued upon the exercise of this Warrant, will be validly issued,
fully paid, nonassessable and free of preemptive rights.
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<PAGE>
ARTICLE II -- ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES OF COMMON STOCK
PURCHASABLE UPON EXERCISE
Section 2.01 Subject to the provisions of this Article II, the
Purchase Price in effect from time to time as it relates to the shares of
Common Stock shall be subject to adjustment as follows:
(a) In the case the Corporation shall (i) declare a
dividend or make a distribution on the outstanding shares of its Common Stock in
shares of its Common Stock, (ii) subdivide the outstanding shares of its Common
Stock into a greater number of shares, (iii) combine the outstanding shares of
its Common Stock into a smaller number of shares, (iv) issue any shares of its
Common Stock shares, except as contemplated by the Final Prospectus dated
__________, 1998, (v) issue any shares of its Common Stock by reclassification
of the Common Stock, then in each case the Purchase Price in effect immediately
after the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such dividend,
distribution, subdivision, combination or reclassification, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Any shares of Common Stock of the Corporation issuable in
payment of a dividend shall be deemed to have been issued immediately prior to
the record date for such dividend.
(b) All calculations under this Section 2.01 shall be made
to the nearest whole cent.
Section 2.02 No adjustment in the Purchase Price in accordance with
the provisions of Subsection 2.01(a) hereof need be made if such adjustment
would amount to a change of less than 1% in such Purchase Price; provided
that the amount by which any adjustment is not made by reason of the
provisions of this Section 2.02 shall be carried forward and taken into
account at the time of any subsequent adjustment in the Purchase Price.
Section 2.03 Upon each adjustment of the Purchase Price pursuant to
Subsection 2.01(a) each Warrant shall thereupon evidence the right to purchase
shares of Common Stock comprised of the same number of Warrants and that number
of shares of Common Stock (calculated to the nearest whole share or Warrant, as
the case may be) obtained by multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment and dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment.
Section 2.04 In case of any capital reorganization, other than in the
cases referred to in Section 2.01 hereof, or the consolidation or merger of the
Corporation with or into another corporation (other than a merger or
consolidation in which the Corporation is the merger or consolidation in which
the Corporation is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the conversion of
the outstanding shares of Common Stock into shares of other stock or other
securities or property), or the sale of the property of the Corporation as an
entirety or substantially as an entirety, or the conversion, however effected,
of the Corporation
17
<PAGE>
into another form of entity (collectively such actions being hereinafter
referred to as "Reorganizations"), there shall thereafter be deliverable upon
exercise of any Warrant (as to the shares of Common Stock subject thereto and in
lieu of the number of shares of Common Stock theretofore deliverable) the number
of shares of stock or other securities or property to which a holder of the
number of shares of Common Stock that would otherwise have been deliverable upon
the exercise of such Warrant would have been entitled upon such Reorganization
if such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Corporation, shall be
made in the application of the provisions herein set forth with respect to the
rights and interests of Warrant holders so that the provisions set forth herein
shall thereafter be applicable, as nearly as possible, in relation to any shares
or other property thereafter deliverable upon exercise of Warrants. The
Corporation shall not effect any such Reorganization, unless upon or prior to
the consummation thereof the successor entity, or if the Corporation shall be
the surviving entity in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash or other property as the Holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of a sale or conveyance or other transfer of all or substantially all
of the assets of the Corporation as a part of a plan for liquidation of the
Corporation, all rights to exercise any Warrant shall terminate on the date such
sale or conveyance or other transfer is to be consummated.
Section 2.05 The Corporation may select a firm of independent
certified public accountants acceptable to the Holder hereof, which selection
may be changed from time to time, to verify the computations made in
accordance with this Article II. The certificate, report or other written
statement of any such firm shall be conclusive evidence of the correctness of
any computation made under this Article II.
Section 2.06 Irrespective of any adjustments pursuant to this Article
II, Warrants theretofore or thereafter issued need not be amended or replaced,
but certificates thereafter issued shall bear an appropriate legend or other
notice of any adjustments.
Section 2.07 The Corporation shall not be required upon the
exercise of any Warrant to issue fractional shares of Common Stock that may
result from adjustments in accordance with this Article II to the Purchase
Price or number of shares of Common Stock purchasable under each Warrant. If
more than one Warrant is exercised at one time by the same Holder, the number
of full shares of Common Stock that shall be deliverable shall be computed
based on the number of shares of Common Stock deliverable in exchange for the
aggregate number of Warrants exercised. With respect to any final fraction of
a share called for upon the exercise of any Warrant or Warrants, the
Corporation shall pay a cash adjustment in respect of such final fraction in
an amount equal to the same fraction of the market value of a share of Common
Stock on the business day next preceding the date of such exercise. The
Holder, by his acceptance of the Warrant, shall expressly waive any right to
receive any fractional share of Common Stock upon exercise of the Warrants.
For the purposes of this Section 2.07, the market price per share of Common
Stock or price per Warrant at any date shall mean the last reported sale
price regular way or, in case no such reported sale takes place on such date,
the average of the last reported bid and asked prices regular way, in either
case on the principal national securities exchange on which the Common Stock
are admitted to trading or listed if that is the principal market for the
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<PAGE>
Common Stock or if not listed or admitted to trading on any national securities
exchange or if such national security exchange is not the principal market for
the Common Stock, the closing bid price (or closing sales price, if reported) as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or its successor, if any. If the price of the Common Stock is
not so reported, then such market price shall mean the last known price paid per
share, by a purchaser of such stock in an arms' length transaction. All
calculations under this Section 2.07 shall be made to the nearest 1/100th of a
share.
Section 2.08 In no event shall the Purchase Price be adjusted below
the par value per share of the Common Stock.
ARTICLE III -- REGISTRATION UNDER THE SECURITIES ACT OF 1933
Section 3.01 The sale of the shares of Common Stock issuable upon
exercise of this Warrant have been registered under the Act in the Corporation's
Registration Statement on Form SB-2, SEC File No. 333-44747 (the "Registration
Statement").
Upon exercise, in part or in whole, of this Warrant, the
certificates representing the Common Stock shall bear the following legend:
"THE SHARES (OR WARRANTS, AS APPLICABLE) REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, SOLELY FOR SALE TO THE HOLDER OF A WARRANT TO PURCHASE, WHICH
HOLDER MAY BE DEEMED TO BE AN UNDERWRITER OF SUCH SHARES WITHIN THE
PROVISIONS AND FOR PURPOSES ONLY OF THE SECURITIES ACT OF 1933, AS
AMENDED. THE ISSUER OF THESE SHARES WILL AGREE TO A TRANSFER HEREOF
ONLY IF (1) AN AMENDED OR SUPPLEMENTED PROSPECTUS SETTING FORTH THE
TERMS OF THE OFFER HAS BEEN FILED AS PART OF A POST-EFFECTIVE AMENDMENT
TO THE REGISTRATION STATEMENT UNDER WHICH THESE SHARES ARE REGISTERED
OR AS PART OF A NEW REGISTRATION STATEMENT, IF THEN REQUIRED, AND SUCH
POST-EFFECTIVE AMENDMENT OR NEW REGISTRATION STATEMENT HAS BECOME
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) COUNSEL
TO THE ISSUER IS SATISFIED THAT NO SUCH POST-EFFECTIVE AMENDMENT OR NEW
REGISTRATION STATEMENT IS REQUIRED."
The Corporation agrees that it shall be satisfied that no
post-effective amendment or new registration statement is required for the
public sale of the shares of Common Stock if it shall be presented with a letter
from the Staff of the Securities and Exchange Commission (the "Commission")
stating in effect that, based upon stated facts that the Corporation shall have
no reason to believe are not true in any material respect, the Staff of the
Commission will not recommend any action to the Commission if such shares are
offered and sold without delivery of a prospectus, and that, therefore, no
post-effective amendment to the Registration Statement under which the sale of
such shares is registered or new registration statement is required to be filed.
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Section 3.02 The Corporation understands and agrees that if at any
time during the period referred to above it should file a registration
statement or offering statement pursuant to the Act for a public offering of
securities, the Corporation, at its own expense, will offer to the Holder the
opportunity to register or qualify the offering and sale of the shares of
Common Stock. Registration Rights set forth in Section 9 of the Underwriters'
Purchase Option Agreement are incorporated by reference and made a part
hereof. This paragraph is not applicable to a registration statement filed
with the Commission on Form S-4 or S-8, or any successor Forms.
Section 3.03 In connection with any registration under Section 3.02
hereof, the Corporation covenants and agrees as follows:
(a) The Corporation shall use its best efforts to have any
post-effective amendment or new registration statement declared effective at the
earliest possible time, and shall furnish such number of prospectuses as shall
reasonably be requested by the Holder selling Shares.
(b) The Corporation shall pay all costs, fees, and
expenses in connection with all post-effective amendments or new registration
statements under Section 3.02 hereof including, without limitation, the
Corporation's legal and accounting fees, printing expenses, blue sky fees and
expenses, except that the Corporation shall not pay any of the following costs,
fees or expenses: (i) underwriting discounts and commissions allocable to the
shares of Common Stock, (ii) state transfer taxes, (iii) brokerage commissions
and (iv) fees and expenses of counsel and accountants for the Holder of the
Warrant and/or Shares.
(c) The Corporation will take all necessary action to
qualify or register the Securities included in a post-effective amendment or new
registration statement for offering and sale under the securities or blue sky
laws of such states as are requested by the holders of such Securities, provided
that the Corporation shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the law of any such jurisdiction.
(d) The Holder shall be entitled to pay the Purchase Price
for the Securities purchasable upon the exercise of this Warrant out of the
proceeds of any sale of the Securities purchasable upon their exercise, provided
such exercise and sale occur simultaneously.
Section 3.04 (a) The Corporation shall indemnify and hold harmless
each person registering the sale of Securities pursuant to this Article III
(the "Seller") and each underwriter, within the meaning of the Act, who may
purchase from or sell for any Seller any of the Securities from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in any
post-effective amendment or new registration statement or any supplemented
prospectus under the Act included therein required to be filed or furnished
by reason of Section 3.02, or caused by any omission or alleged omission to
state therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by
any such untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in
writing to the Corporation by such Seller or underwriter expressly for use
therein, which indemnification shall include each person, if any, who
controls any such Seller or underwriter within the meaning of the Act;
provided, however, that the indemnity agreement by the Corporation set forth
in this Section 3.04 with respect to any prospectus
20
<PAGE>
that shall be subsequently amended or supplemented prior to the written
confirmation of the sale of any securities shall not inure to the benefit of any
Seller or underwriter from whom the person asserting such securities that are
the subject thereof (or to the benefit of any person controlling such Seller or
underwriter), if such Seller or underwriter failed to send or give a copy of the
prospectus as amended or supplemented to such person at or prior to written
confirmation of the sale of such securities to such person and if such amended
or supplemented prospectus did not contain any untrue statement or alleged
untrue statement or omission or alleged omission giving rise to such cause,
claim, damage or liability.
(b) Each Seller that avails itself of the procedures under
Article III shall indemnify, and secure the agreement of any underwriter which
the Seller employs to indemnify, the Corporation, its directors, each officer
signing the related post-effective amendment or registration statement and each
person, if any, who controls the Corporation within the meaning of the Act from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
post-effective amendment or registration statement or any prospectus required to
be filed or furnished by reason of Section 3.02, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
alleged untrue statement or omission or alleged omission based upon information
furnished in writing to the Corporation by any such Seller or underwriter
expressly for use therein.
Section 3.05 The agreements in this Article III shall continue in
effect regardless of the exercise and surrender of this Warrant.
ARTICLE IV -- OTHER MATTERS
Section 4.01 The Corporation will from time to time promptly pay,
subject to the provisions of paragraph (4) of Section 1.02 hereof, all taxes and
charges that may be imposed upon the Corporation in respect of the issuance or
delivery of this Warrant or the shares of Common Stock purchasable upon the
exercise of this Warrant.
Section 4.02 All the covenants and provisions of this Warrant by
or for the benefit of the Corporation shall bind and inure to the benefit of it
successors and assigns hereunder.
Section 4.03 Notices or demands pursuant to this Warrant to be
given or made by the Holder to or on the Corporation shall be sufficiently
given or made if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed, until another address is
designated in writing by the Corporation, as follows:
Rosedale Decorative Products, Ltd.
731 Millway Avenue
Concord, Ontario
Canada L4K 3S8
21
<PAGE>
Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Corporation if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at his last known
address as it shall appear on the books of the Corporation.
Section 4.04 The validity, interpretation and performance of this
Warrant shall be governed by the substantive laws of the State of Georgia.
Section 4.05 Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Corporation
and the Holder any right, remedy or claim under promise or agreement hereof, and
all covenants, conditions, stipulations, promises and agreements contained in
this Warrant shall be for the sole and exclusive benefit of the Corporation and
its successors and of the Holder, its successors and, if permitted, its
assignees.
Section 4.06 The headings herein are for convenience only and are not
part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this, Warrant has been duly executed by the
Corporation under its corporate seal as of the ___ day of __________, 1998.
ROSEDALE DECORATIVE PRODUCTS, LTD.
By: /s/ Sidney Ackerman
-------------------------------
Name: Sidney Ackerman
Title: President
Attest:
- ----------------------------------
, Secretary
- -----------------------
22
<PAGE>
ROSEDALE DECORATIVE PRODUCTS, LTD.
Subscription Form
(To be executed by the registered holder to exercise the right to purchase
Common Stock evidenced by the foregoing Warrant)
Rosedale Decorative Products, Ltd.
731 Millway Avenue
Concord, Ontario
Canada L4K 3S8
The undersigned hereby irrevocably subscribes for the purchase of _____
shares of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant No. ___, and herewith makes payment, covering the
purchase of such Shares. Certificates for the shares of Common Stock should be
delivered to the undersigned at the address stated below. If such number of
shares of Common Stock shall not be all of the Shares purchasable hereunder,
please deliver a new Warrant of like tenor for the balance of the remaining
Shares purchasable hereunder to the undersigned at the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such shares of Common Stock being purchased
hereunder unless either (a) a registration statement, or post-effective
amendment thereto, covering the sale of such shares of Common Stock has been
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), and such sale, transfer or other disposition is
accompanied by a prospectus meeting the requirements of Section 10 of the Act
forming a part of such registration statement, or post-effective amendment
thereto, which is in effect under the Act covering the sale of the shares of
Common Stock to be sold, transferred or otherwise disposed of, or (b) counsel
acceptable to Rosedale Decorative Products Ltd. and satisfactory to the
undersigned has rendered an opinion acceptable to the Company in writing and
addressed to the Company that such proposed offer, sale, transfer or other
disposition of the shares of Common Stock is exempt from the provisions of
Section 5 of the Act in view of the circumstances of such proposed offer, sale,
transfer or other disposition; (2) the Company may notify the transfer agent for
its Common Stock that the certificates for the Common Stock acquired by the
undersigned pursuant hereto are not to be transferred unless the transfer agent
receives advance from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.01 of this Warrant to the certificates for
shares of Common Stock hereby subscribed for and purchasable upon exercise of
the Warrants, if such legend is applicable.
Dated: Signed:
--------------------------- ----------------------
Signature guaranteed: Address:
----------------------
----------------------
----------------------
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Assignment Form
(To be executed by the registered holder to effect assignment of the foregoing
warrant)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns and
transfers unto _________________________________ the right to purchase _____
shares of Common Stock, no par value per share on the terms and conditions set
forth therein, and does hereby irrevocably constitute and appoint
______________________________________ and/or its transfer agent Attorney, to
transfer on the books of the Corporation Warrants representing such rights, with
full power of substitution.
Dated:
---------------------------
Signed:
----------------------------
Signature guaranteed:
- ---------------------------------
<PAGE>
THE UNDERWRITERS' PURCHASE OPTION REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITERS' OPTIONS REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITERS'
PURCHASE OPTION AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _____________, 2003
No. U.0.1 Underwriter's Options
Underwriter's Purchase Option Certificate
This Underwriter's Purchase Option Certificate certifies that J. P.
Turner & Company, LLC, or registered assigns (the "Holder" or "Holders"), is the
registered holder of options (the "Underwriter's Options") under an
Underwriters' Purchase Option Agreement (the "Underwriters' Purchase Option
Agreement") dated as of _____________, 1998 between Rosedale Decorative Products
Ltd. (the "Company") and the Holder to purchase initially, at any time from
____________, 1999 until 5:00 p.m. New York time on _____________, 2003
("Expiration Date"), up to 100,000 shares at a price of $______ (the "Exercise
Price Per Share") and 100,000 Underwriters' Warrants at a price of $_______ per
Warrant (the "Exercise Price Per Warrant") upon surrender of this Underwriter's
Option Certificate and payment of the aggregate amount of the Exercise Price Per
Share and Warrant (collectively, the "Exercise Price") at an office or agency of
the Company, but subject to the conditions set forth herein and in the
Underwriters' Purchase Option Agreement. Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company.
No Underwriter's Option may be exercised after 5:00 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Options evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Underwriter's Options evidenced by this Underwriter's Purchase
Option Certificate are part of a duly authorized issue of warrants pursuant to
the Underwriter's Purchase Option Agreement, which Underwriter's Purchase Option
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
Holder of the Underwriter's Options.
<PAGE>
The Underwriter's Purchase Option Agreement provides that upon the
occurrence of certain events the Exercise Price per share and number of shares
issuable upon execution thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the Holder, issue a
new Underwriter's Purchase Option Certificate evidencing the adjustment in the
exercise price and the number and/or type of securities issuable upon the
exercise of the Underwriter's Options; provided, however, that the failure of
the Company to issue such new Underwriter's Option Certificates shall not in any
way change, alter or otherwise impair, the rights of the holder as set forth in
the Underwriters Purchase Option Agreement.
Upon due presentment for registration of transfer of this Underwriter's
Purchase Option Certificate at an office or agency of the Company, a new
Underwriter's Purchase Option Certificate or Underwriter's Purchase Option
Certificates of like tenor and evidencing in the aggregate a like number of
Underwriter's Options shall be issued to the transferees in exchange for this
Underwriter's Purchase Option Certificate, subject to the limitations provided
herein and in the Underwriter's Purchase Option Agreement, without any charge
except for any tax or other governmental charge imposed in connection with such
transfer.
Upon the exercise of less than all of the Underwriter's Options
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Underwriter's Purchase Option Certificate representing such
numbered unexercised Underwriter's Options.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's Purchase Option Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
All defined terms used in this Underwriter's Purchase Option
Certificate shall have the meanings assigned to them herein or if not
differently defined herein, in the Underwriter's Purchase Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Underwriter's Purchase
Option Certificate to be duly executed under its corporate seal.
Dated as of _________________, 1998
ROSEDALE DECORATIVE PRODUCTS LTD.
[SEAL] By:
Attest: ------------------------------------
Name:
-------------------------------
Title:
-------------------------------
- ------------------------------
Secretary
2
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriter's Purchase Option Certificate, to purchase
_________ Shares and Underwriters' Warrants and herewith tenders in payment for
such securities a certified or official bank check payable in New York Clearing
House Funds to the order of Rosedale Decorative Products Ltd. in the amount of
$___________, all in accordance with the terms hereof. The undersigned requests
that a certificate for such securities be registered in the name of
______________________ whose address is________________________________________
and that such Certificate be delivered to _____________________________________
whose address is _____________________________________________________________.
Dated:__________________
-----------------------------------------
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Underwriter's
Purchase Option
Certificate.)
-----------------------------------------
Insert Social Security or
Other Identifying Number of Holder)
3
<PAGE>
Exhibit 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of_______________,1998 (and effective as of
______________, 1998) between Rosedale Decorative Products Ltd., a corporation
organized under the laws of the Province of Ontario, Canada (the "Company"), and
Continental Stock Transfer & Trust Company (the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell to the public in a
initial public offering (the "Initial Offering") 1,000,000 shares of the
Company's Common Stock at $6.00 per share, no par value (the "Shares"), and
1,000,000 Redeemable Common Stock Purchase Warrants (the "Public Warrants");
WHEREAS, the Company also proposes to issue and sell to J.P. Turner &
Company, L.L.C. ("J.P. Turner"), and each of the other underwriters named in
Schedule I hereto (collectively, the "Underwriters"), for whom J.P. Turner is
acting as representative (in such capacity, J.P. Turner shall hereinafter be
referred to as the "Representative") in the Initial Offering One Million
(1,000,000) shares (the "Shares") of the Company's common stock, no par value
(the "Common Stock"), and One Million (1,000,000) Redeemable Common Stock
Purchase Warrants (the "Redeemable Warrants") ("Firm Securities"), each of the
Redeemable Warrants entitles the holder thereof to purchase one share of Common
Stock at an exercise price of $______ per share pursuant to a warrant agreement
(the "Warrant Agreement") between the Company and the warrant agent, set forth
in Schedule II, and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, to purchase all or any part of
150,000 additional Shares and 150,000 Redeemable Warrants (the "Additional
Securities") for the purpose of covering over-allotments, if any. The aforesaid
Firm Securities together with all or any part of the Additional Securities are
hereinafter collectively referred to as the "Securities." The Company also
proposes to issue and sell to the Underwriters for an approximate price of
$100.00 ($0.001 per warrant), non-callable warrants entitling the Underwriters'
to purchase from the Company an Underwriters' Warrant (the "Underwriters'
Warrant") for the purchase of an aggregate of 1,000,000 Shares (the
"Underwriters' Shares") and 1,000,000 Redeemable Common Stock Purchase Warrants
(the "Underwriters' Warrants"). The shares of Common Stock issuable upon
exercise of the Redeemable Warrants and the Underwriters' Warrants are
hereinafter sometimes referred to as the "Warrant Shares."
WHEREAS, the Public Warrants shall be evidenced by certificates
substantially in the form of Exhibit A annexed hereto (the "Warrant
Certificate"), each Warrant entitling the holder thereof to purchase one share
of Common Stock;
WHEREAS, the Public Warrants will have an exercise price of
$___________ per share of Common Stock, subject to certain adjustments (the
"Public Warrant Price"), will be exercisable commencing on the first anniversary
of the date of the Final Prospectus dated__________, 1998 ("First Exercise
Date") until a date which is the fifth anniversary of the date of the Final
Prospectus
<PAGE>
dated __________, 1998 ("Last Exercise Date"), unless extended by the Company,
and, except for the Underwriter's Warrants, will be exercisable during any
period of time fixed for that Warrant's redemption in a Redemption Notice
(hereinafter defined in Section 2.03), which period of time will terminate on a
stated Redemption Date (hereinafter defined in Section 2.03);
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and replacement of the Warrant
Certificates and exercise of the Public Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Agreement the terms and conditions upon which the Warrant Certificates shall be
issued, transferred, exchanged and placed and the Public Warrants exercised, and
to provide for the rights of the holders of the Public Warrants;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and the respective undertakings herein below set forth, the
Company and the Warrant Agent agree as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
SECTION 1.01. The Company hereby appoints the Warrant Agent to act on
behalf of the Company in accordance with the terms and conditions herein set
forth, and the Warrant Agent hereby accepts such appointment and agrees to
perform the same in accordance with such provisions.
SECTION 1.02. The Warrant Certificates for the Public Warrants shall be
issued in registered form only. The text of the Warrant Certificate, including
the form of assignment and subscription printed on the reverse side thereof,
shall be substantially in the form of Exhibit A annexed hereto, which text is
hereby incorporated in this Agreement by reference as though fully set forth
herein and to whose terms and conditions the Company and the Warrant Agent
hereby agree. Each Warrant Certificate shall evidence the right, subject to the
provisions of this Agreement and of such Warrant Certificate, to purchase the
number of validly issued, fully paid and non-assessable shares of Common Stock,
as that term is defined in Section 1.05 of this Agreement, stated therein, free
of preemptive rights, subject to adjustment as provided in Article III of this
Agreement.
SECTION 1.03. Upon the written order of the Company, signed by the
President or any Vice President, and the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Company, the Warrant Agent shall issue
and register Public Warrants in the names and denominations specified in that
order, and will countersign and deliver Warrant Certificates evidencing the same
in accordance with that order. Each Warrant Certificate shall be dated the date
of its countersignature. Each Warrant Certificate shall be executed on behalf of
the Company by the manual or facsimile signature of the President of the
Company, under its corporate seal, affixed or
2
<PAGE>
facsimile, attested by the manual or facsimile signature of the Secretary of the
Company and shall be countersigned manually by the Warrant Agent. The Warrant
Certificates shall not be valid for any purpose unless so countersigned. In case
any officer whose facsimile signature has been placed upon any Warrant
Certificate shall have ceased to be such before such Warrant Certificate is
issued, it may be issued with the same effect as if such officer had not ceased
to be such on the date of issuance.
SECTION 1.04. Except as otherwise expressly stated herein, all terms
used in the Warrant Certificate have the meanings provided in this Agreement.
SECTION 1.05. As used herein, the term "Common Stock" shall mean the
aggregate number of shares that the Company, by its Certificate of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited by its Certificate of Incorporation to a fixed sum or percentage of
the book value in respect of the rights of the holders thereof to participate in
dividends or in distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding up the Company.
SECTION 1.06. The Warrant Agent understands and agrees that the Public
Warrants and shares of Common Stock are being sold separately in the Initial
Offering and that the Shares and the Public Warrants will be traded separately
immediately upon the closing of the Initial Offering.
ARTICLE II
PUBLIC WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS,
CALL OF WARRANTS AND TRADING OF WARRANTS
SECTION 2.01. (a) Each Public Warrant shall entitle the person in whose
name at the time the Public Warrant shall be registered upon the books to be
maintained by the Warrant Agent for that purpose (the "Warrant Holder"), subject
to the provisions of the Warrant Certificates and of this Agreement, to purchase
from the Company any time on or after the First Exercise Date but at or before
the Last Exercise Date, up to the number of shares of Common Stock stated
therein, as adjusted, at the Public Warrant Price in effect at such date,
payable in full at the time of purchase in the manner provided in Section 2.02
of this Agreement.
(b) Each Public Warrant shall be exercisable in accordance
with the terms herein and in the Warrant Certificate which, among other things,
contains certain terms as to the Public Warrant Price.
SECTION 2.02. (a) The Warrant Holder may exercise a Public Warrant, in
whole or in part, by surrender of the Warrant Certificate, with the form of
subscription thereon duly executed by the Warrant Agent at its corporate office,
together with the Public Warrant Price for each share of Common Stock to be
purchased in lawful money of the United States, or by certified
3
<PAGE>
check, bank draft, or postal or express money order payable in United States
Dollars to the order of the Company.
(b) Upon receipt of a Warrant Certificate with the form of
election to purchase thereon duly executed and accompanied by payment of the
aggregate Public Warrant Price for the shares of Common Stock for which the
Public Warrant is then being exercised, the Warrant Agent shall requisition from
the transfer agent certificates for the total number of the shares of Common
Stock for which the Public Warrant is being exercised in such names and
denominations as are required for delivery to the Warrant Holder, and the
Warrant Agent shall thereupon deliver such certificates to or in accordance with
the instructions of the Warrant Holder. The Company covenants and agrees that it
has duly authorized and directed its transfer agent (and will authorize and
direct all its future transfer agents) to comply with all such requests of the
Warrant Agent.
(c) In case any Warrant Holder shall exercise his Public
Warrant with respect to less than all of the shares of Common Stock that may be
purchased under the Public Warrant, a new Public Warrant Certificate for the
balance shall be countersigned and delivered to or upon the order of the Warrant
Holder.
(d) The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect to the issuance of
Warrants, or the issuance of any shares of Common Stock upon the exercise of
Warrants. However, neither the Company nor the Warrant Agent shall be required
to issue or deliver any Warrant Certificate or shares of Common Stock in a name
other than that of the Warrant Holder at the time of surrender if any tax is
payable in respect of such transfer until the person requesting the same has
paid to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid or shall not be due and payable. In the
event that any transfer tax is due and payable, the Warrant Agent shall be under
no obligation to issue or deliver any Warrant Certificate or shares of Common
Stock in a name other than that of the Warrant Holder until the Company has
notified the Warrant Agent that the transfer tax, if any, has been paid, or in
the alternative, that no transfer tax is due and payable by reason of an
exemption.
(e) The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently account to the Company for
all moneys received by the Warrant Agent for the purchase of shares of Common
Stock upon the exercise of Warrants.
(f) The Warrant Agent covenants and agrees that upon the
exercise of any of the Warrants, the Warrant Agent shall provide written notice
to the Company at 731 Millway Avenue, Concord, Ontario, Canada L4K 3S8, and to
the Underwriter at its office at 3340 Peachtree Street, NE, Suite 450, Atlanta,
Georgia 30326, the expense of which notice shall be borne by the Company. Each
notice shall contain the name of the exercising Warrant Holder, the number of
shares of Common Stock that the Warrant Holder has elected to purchase, the
purchase price paid on a per share basis and the cumulative number of Public
Warrants exercised by all of the Warrant Holders as of the date of the
transaction which is the subject of the aforesaid notice. Such notice shall be
4
<PAGE>
made on the date of the exercise of the Public Warrant. Nothing contained herein
shall be construed so as to prevent the Warrant Agent from providing the
information required in this Section 2.02 (f) in a consolidated or tabular form,
provided that all other provisions of this Section are complied with.
(g) The Warrant Agent covenants and agrees that it shall
provide a list of each and every holder of the Public Warrants to the Company
and the Underwriter at such time or from time to time as shall be required by
the Company or the Underwriter, but in no event shall such a list be provided
less frequently than once per annum at a date as shall be determined by the
Company.
SECTION 2.03. (a) Commencing on the first anniversary of the effective
date of the Initial Offering, the Company may, subject to the conditions set
forth herein, redeem all, but not less than all, the Public Warrants then
outstanding at a redemption price of $.001 per Public Warrant upon not less than
thirty (30) days prior written notice (the "Redemption Notice") to the holders
thereof provided that the average closing price of the Common Stock for the 20
consecutive trading days ending three (3) days prior to the date of the
Redemption Notice is at least $________per share, subject to adjustment for
stock dividends, stock splits and other anti-dilution provisions as provided for
under Article III herein. For purposes of this Section 2.03, "closing price" at
any date shall be deemed to be: (i) the last sale price regular way as reported
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or (ii) if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices regular way for the Common Stock as reported by the
Nasdaq National Market or Nasdaq Small Cap Market of the Nasdaq Stock Market,
Inc. ("NASDAQ") or (iii) if the Common Stock is not listed or admitted for
trading on any national securities exchange, and is not reported by NASDAQ, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by the National Quotation Bureau, Inc. or if no such quotation is
available, the fair market value of the Common Stock as determined in good faith
by the Board of Directors of the Company. The Redemption Notice shall be deemed
effective upon mailing and the time of mailing is the "Effective Date of the
Notice". The Redemption Notice shall state a redemption date not less than
thirty (30) days from the Effective Date of the Notice (the "Redemption Date") .
No Redemption Notice shall be mailed unless all funds necessary to pay for
redemption of all Warrants then outstanding shall have first been set aside by
the Company in trust with the Warrant Agent for the benefit of all Warrant
Holders so as to be and continue to be available therefor. The redemption price
to be paid to the Warrant Holders will be $0.01 for each share of the Common
Stock of the Company to which the Warrant Holder would then be entitled upon
exercise of the Public Warrant being redeemed, as adjusted from time to time as
provided herein (the "Redemption Price"). In the event the number of shares of
Common Stock issuable upon exercise of the Public Warrant being redeemed are
adjusted pursuant to Article III hereof, then upon each such adjustment the
Redemption Price will be adjusted by multiplying the Redemption Price in effect
immediately prior to such adjustment by a fraction, the numerator of which is
the number of shares of Common Stock issuable upon exercise of the Public
Warrant being redeemed immediately prior to such adjustment and the denominator
of which is the number of shares of Common Stock issuable upon exercise of such
Public Warrant being redeemed immediately after such adjustment. The Public
Warrants may only
5
<PAGE>
be redeemed if the Company has in effect a current Registration Statement or
post-effective amendment covering the shares underlying the Public Warrants. The
Warrant Holders may exercise their Public Warrants between the Effective Date of
the Notice and the Redemption Date, such exercise being effective if done in
accordance with Section 2.02 (a), and if the Warrant Certificate, with form of
election to purchase duly executed and the Public Warrant Price, as applicable
for such Public Warrant subject to redemption for each share of Common Stock to
be purchased is actually received by the Warrant Agent at its office located at
2 Broadway, New York, New York 10004, no later than 5:00 P.M. New York time on
the Redemption Date.
(b) If any Warrant Holder does not wish to exercise any
Warrant being redeemed, the Warrant Holder should mail such Public Warrant to
the Warrant Agent at its office located at 2 Broadway, New York, New York 10004,
after receiving the Redemption Notice required by this Section. If such
Redemption Notice shall have been so mailed, and if on or before the Effective
Date of the Notice all funds necessary to pay for redemption of all Public
Warrants then outstanding shall have been set aside by the Company in trust with
the Warrant Agent for the benefit of all Warrant Holders so as to be and
continue to be available therefor, then, on and after said Redemption Date,
notwithstanding that any Public Warrant subject to redemption shall not have
been surrendered for redemption, the obligation evidenced by all Public Warrants
not surrendered for redemption or effectively exercised shall be deemed no
longer outstanding, and all rights with respect thereto shall forthwith cease
and terminate, except only the right of the holder of each Public Warrant
subject to redemption to receive the Redemption Price for each share of Common
Stock to which he would be entitled if he exercised the Public Warrant upon
receiving the Redemption Notice of the Public Warrant subject to redemption held
by the Holder hereof.
(c) Notwithstanding anything contained in this Article II, the
Underwriter's Warrants shall not be eligible for redemption by the Company.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF PUBLIC WARRANT PRICE
SECTION 3.01. In case the Company shall at any time after the date of
this Agreement (i) declare a dividend on the outstanding Common Stock in shares
of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Public
Warrant Price, and the number and kind of shares of Common Stock receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Public Warrant exercised
after such time shall be entitled to receive the aggregate number and kind of
shares which if such Public Warrant had been exercised immediately prior to such
time, he would have owned upon such
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exercise and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
SECTION 3.02. In case the Company after the date hereof shall issue
rights, options, or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion
price per share, if a security convertible into or exchangeable for Common
Stock) less than the "current market price" (as defined in Section 3.04 hereof)
per share of Common Stock on the record date established for the issuance of
such rights, options or warrants, then, in such case, the Public Warrant Price
shall be adjusted by multiplying the Public Warrant Price in effect on the
record date of such issuance by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on the record date for such
issuance plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so to be issued (or the
aggregate initial conversion price of the convertible securities to be issued or
sold) would purchase at such "current market price" and of which the denominator
shall be the number of shares of Common Stock outstanding on the record date for
such issuance plus the number of additional shares of Common Stock to be issued
(or into which the convertible or exchangeable securities to be issued or sold
are initially convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record date; provided, however, that,
to the extent the shares of Common Stock (or securities convertible to or
exchangeable for shares of Common Stock) are not delivered, the Public Warrant
Price shall be readjusted after the expiration of such rights, options, or
warrants (but only with respect to Warrants exercised after such expiration), to
the Public Warrant Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock or securities convertible
into or exchangeable for shares of Common Stock actually issued. In case any
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
Notwithstanding the foregoing, no adjustment in the Public Warrant
Price or the number of shares of Common Stock issuable upon exercise of the
Public Warrants shall be made upon (i) the issuance of options (or upon exercise
thereof) by the Company pursuant to its Stock Option Plans, (ii) the issuance of
the Underwriter's Warrants, or (iii) any other options and warrants outstanding
as of the date hereof.
SECTION 3.03. In case the Company shall distribute to all holders of
Common Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends distributions and dividends payable in shares of Common Stock),
subscription rights, options, or warrants or convertible or exchangeable
securities
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containing the right to subscribe for or purchase shares of Common Stock
(excluding those referred to in Section 3.02 hereof), then, in each case, the
Public Warrant Price shall be adjusted by multiplying the Public Warrant Price
in effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction of which the
numerator shall be the "current market price" per share of Common Stock on such
record date, less the fair market value (as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or assets
so to be distributed, or of such subscription rights, options, or warrants,
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, applicable to the share, and of which the
denominator shall be such "current market price" per share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of such distribution retroactive to the record date
for the determination of stockholders entitled to receive such distribution.
SECTION 3.04. For the purpose of any computation under sections 3.02
and 3.03 hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days ending three (3) days prior to such date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price as furnished by NASDAQ. If on any such date the
Common Stock is not quoted on NASDAQ or any such organization, the closing price
shall be deemed to be the average of the closing bid and asked prices in the
over-the-counter market as reported by the National Quotation Bureau or if no
such quotation is available, the fair value of the Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error.
SECTION 3.05. No adjustment in the Public Warrant Price shall be
required if such adjustment is less than $0.01; provided, however, that any
adjustments which by reason of this Section 3.05 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Article III shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
SECTION 3.06. In any case in which this Article III shall require that
an adjustment in the Public Warrant Price be made effective as of a record date
for a specified event, the Company may elect to defer, until the occurrence of
such event, issuing to the holder of any Warrant exercised after such record
date, the shares, if any, issuable upon such exercise over and above the shares,
if any, issuable upon such exercise on the basis of the Public Warrant Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
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SECTION 3.07. Upon each adjustment of the Public Warrant Price as a
result of the calculations made in Section 3.01, 3.02, or 3.03 hereof, each
Warrant outstanding prior to the making of the adjustment in the Public Warrant
Price shall thereafter evidence the right to purchase, at the adjusted Public
Warrant Price, that number of shares (calculated to the nearest thousandth)
obtained by dividing (A) the product obtained by multiplying the number of
shares purchasable upon exercise of a Warrant prior to adjustment of the number
of shares by the Public Warrant Price in effect prior to adjustment of the
Public Warrant Price by (B) the Public Warrant Price in effect after such
adjustment of the Public Warrant Price.
SECTION 3.08. In case of any capital reorganization of the Company, or
of any reclassification of the Common Stock (other than a reclassification of
the Common Stock referred to in Section 3.01 hereof), or in the case of the
consolidation of the Company with or the merger of the Company into any other
corporation or of the sale, transfer, or lease of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation or
other entity, each Public Warrant shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger, sale, transfer, or
lease, be exercisable, on the same terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, assets, or
cash to which a holder of the number of shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock, consolidation, merger,
sale, transfer, or lease) upon exercise of such Public Warrant would have been
entitled upon such capital reorganization, reclassification of Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the holders of the Public Warrants shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock, other securities, assets, or cash thereafter deliverable
on the exercise of the Public Warrants. The subdivision or combination of shares
of Common Stock at any time outstanding into a greater or lesser number of
shares shall not be deemed to be a reclassification of the Common Stock for the
purposes of this subsection. The Company shall not effect any such
consolidation, merger, transfer, or lease, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the Corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall expressly assume, by written instrument in form satisfactory to
the Underwriter, the obligation to deliver to the holder of each Public Warrant
such shares of stock, securities, or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and to perform the other
obligations of the Company under this Agreement.
SECTION 3.09. The Company may make such reductions in the Public
Warrant Price, in addition to those required by this Article III, as it shall,
in it sole discretion, determine to be advisable.
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ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
WARRANT HOLDERS
SECTION 4.01. No Warrant Holder, as such, shall be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purposes, nor shall anything contained in any Warrant Certificate be construed
to confer upon any Warrant Holder, as such, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any action by
the Company, whether upon any recapitalization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise, receive dividends or
subscription rights, or otherwise, until in connection with the exercise of any
Public Warrant, such Public Warrant shall have been surrendered and the purchase
price or the shares of Common Stock for which such Public Warrant is being
exercised shall have been received by the Warrant Agent; provided, however, that
any such surrender and payment on any date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates for those shares of Common Stock are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open and the Public Warrant surrendered shall not be deemed to have been
exercised, in whole or in part, as the case maybe, until such next succeeding
day on which stock transfer books are open.
SECTION 4.02. The Company covenants and agrees that it shall
contemporaneously provide to all Warrant Holders of record any publication,
mailing or notice of an event which it shall provide to all of its shareholders
of record and which event shall result in the adjustment to the Public Warrant
Price as provided in Article III hereof. For purposes of this Section 4.02, the
Warrant Holders of record shall be those Warrant Holders who are of record on a
date even with the date chosen by the Company for the purpose of determining the
shareholders of record who shall be entitled to receive such publication,
mailing or notice.
SECTION 4.03. If any Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company and the Warrant Agent may, on such terms as to indemnity
or otherwise as they may in their discretion reasonably impose, which shall, in
the case of a mutilated Warrant Certificate, include the surrender thereof,
issue a new Warrant Certificate of like denomination and tenor as, and in
substitution for, the Warrant Certificate so lost, stolen mutilated or
destroyed.
SECTION 4.04. (a) The Company covenants and agrees that at all times it
shall reserve and keep available for the exercise of outstanding Warrants such
number of authorized shares of Common Stock and the aggregate number and kind of
any other securities which the Warrants are exercisable for, pursuant to the
provisions of Article III hereof, as are sufficient to permit the exercise in
full of such Warrants and that it will make available to the Warrant Agent from
time to time a number of duly executed certificates representing shares of
Common Stock and other securities, sufficient therefor.
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(b) The Company shall use its best efforts to secure the
listing, upon official notice of issuance, of the shares of Common Stock
issuable upon exercise of Warrants upon any securities exchange upon which the
Common Stock becomes listed.
(c) The Company covenants that all shares of Common Stock
issued on exercise of Warrants shall be validly issued, fully paid,
non-assessable and free of preemptive rights.
(d) The Company has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 (Registration No. 333-44747)
for the registration of, among other things, the sale of the Public Warrants and
the shares of Common Stock issuable upon exercise thereof under the Securities
Act of 1933, as amended (the "Act") which was declared effective by the
Securities and Exchange Commission at 5:15 p.m. Eastern Daylight Time
on______________, 199__. The "Effective Date" of the Registration Statement for
purposes of this Agreement is____________, 199__. The Company has undertaken to
register or qualify the Common Stock, Warrants and shares of Common Stock
underlying the Public Warrants under the laws of any states in which the sale of
the Warrants and shares of Common Stock was registered or qualified at the time
of the Initial Offering and shall use its reasonable good faith efforts to
register and qualify such Common Stock, Warrants and shares of Common Stock
underlying the Warrants in such additional states and jurisdictions as may be
appropriate. The Company further agrees to use its best efforts to maintain the
effectiveness of such Registration Statement and such state qualifications, as
aforesaid, by the filing of any and all amendments to the Registration Statement
and such state qualifications as may be required from time to time under the Act
or the laws of the various states until the expiration or termination of all the
Warrants in accordance herewith.
(e) The Company will furnish to the Warrant Agent, upon
request, an opinion of counsel satisfactory to the Warrant Agent to the effect
that (i) a Registration Statement under the Act is then in effect with respect
to the Warrants and shares of Common Stock issuable upon the exercise of the
Warrants and that the prospectus included therein complies as to form in all
material respects, (except as to financial statements, including schedules, and
other accounting and financial data, as to which such counsel need express no
opinion), with the requirements of the Act and the rules and regulations of the
Commission thereunder; or a Registration Statement under the Act with respect to
said Warrants and shares of Common Stock is not required. In the event that said
opinion states that such a Registration Statement is in effect, the Company will
from time to time furnish the Warrant Agent with current prospectuses meeting
the requirements of the Act and such rules and regulations in sufficient
quantity to permit the Warrant Agent to deliver a prospectus ("Prospectus") to
each Warrant Holder upon exercise thereof. The Company further agrees to pay all
fees, costs and expenses in connection with the preparation and delivery to the
Warrant Agent of the foregoing opinions and Prospectuses and the above mentioned
registrations and other actions, and to immediately notify the Warrant Agent in
the event that (i) the Commission shall have issued or threatened to issue any
order preventing or suspending the use of any Prospectus; (ii) at any time any
Prospectus shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) for
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any reason it shall be necessary to amend or supplement any Prospectus in order
to comply with the Act.
SECTION 4.05. If the number of shares purchasable upon the exercise of
each Public Warrant is adjusted pursuant to Section 3.07 hereof, the Company
shall not be required to issue fractions of shares upon exercise of the Public
Warrants or to distribute share certificates which evidence fractional shares.
In lieu of fractional shares, the Company, in its sole discretion, may pay to
the registered holders of Warrant Certificates at the time such Public Warrants
are exercised as herein provided an amount in cash equal to the same fraction of
the current market value of a share. For purposes of this Section 4.05, the
current market value of a share issuable upon the exercise of a Public Warrant
shall be the closing price of a share of Common Stock, as determined pursuant to
the second and third sentences of Section 3.04, for the trading day immediately
prior to the date of such exercise.
ARTICLE V
TREATMENT OF WARRANT HOLDERS
SECTION 5.01. Prior to due presentment for registration of transfer of
any Public Warrant, the Company and the Warrant Agent may deem and treat the
Warrant Holder as the absolute owner of such warrant, notwithstanding any
notation of ownership or other writing thereon, for the purpose of any exercise
thereof and for all other purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary.
ARTICLE VI
CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
SECTION 6.01. The Company will from time to time promptly pay, subject
to the provisions of Section 2.02 (d) of this Agreement, all taxes and charges
that may be imposed upon the Company or the Warrant Agent in respect of the
issuance or delivery of shares of Common Stock upon the exercise of Public
Warrants.
SECTION 6.02. (a) The Warrant Agent may resign and be discharged from
its duties under this Agreement upon sixty (60) days notice in writing, mailed
to the Company by registered or certified mail, and to each Warrant Holder. The
Company may remove the Warrant Agent or any successor warrant agent upon sixty
(60) days notice in writing, mailed to the Warrant Agent or successor Warrant
Agent, as the case may be, by registered or certified mail, and to each Warrant
Holder; provided, however, the Company shall appoint a new Warrant Agent as
hereinafter provided and such removal shall not become effective until a
successor Warrant Agent has been appointed and has accepted such appointment. If
the Warrant Agent shall resign or shall otherwise become capable of acting, the
Company shall appoint a successor to the Warrant Agent. If the
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Company shall fail to make such appointment within a period of sixty (60) days
after it has been notified in writing of such resignation or incapability by the
Warrant Agent by a Warrant Holder, who shall, with such notice, submit his
Warrant Certificate for inspection by the Company, then any Warrant Holder may
apply to any court of competent jurisdiction or the appointment of a successor
to the Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court shall be a registered transfer agent, bank or trust
company, subject to the terms and conditions of this Section 6.02, in good
standing and incorporated under the laws of any State of the United States,
having its principal office in the United States of America. After appointment,
the successor Warrant Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Warrant Agent without
further act or deed. The former Warrant Agent shall deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
(b) Any corporation into which the Warrant Agent may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case at the time such successor to the Warrant Agent shall succeed to the
agency created by this Agreement, any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent and deliver such
Warrant Certificates so countersigned, and in case at that time any of the
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificate in its own name or in the
name of the successor Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force provided in the Warrant Certificates and
this Agreement.
In case at any time the name of the Warrant Agent
shall be changed and at such time any of the Warrant Certificates shall have
been countersigned but not delivered, the Warrant Agent may adopt the
countersignature under this prior name and deliver Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been countersigned, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.
SECTION 6.03. The Company agrees to pay the Warrant Agent a reasonable
fee for all services rendered by it hereunder. The Company also agrees to
indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without gross negligence, willful misconduct or
bad faith on the part of the Warrant Agent, arising out of or in connection with
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the acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
SECTION 6.04. The Company covenants and agrees that it shall, at the
Company's expense, provide to the Warrant Agent copies of its current
prospectus, if any, in such quantity as to enable the Warrant Agent to deliver
one copy of such current prospectus to such Warrant Holder who shall exercise
his rights under a Warrant. Notwithstanding anything else contained in this
Section 6.04, the Company shall not be obligated to provide copies of its
current prospectus for the purpose of allowing the Warrant Agent to deliver such
copies to any Warrant Holder who delivers all of his redeemable warrants for
redemption pursuant to Section 2.03 or who shall notice the Company of his
intent to permit redemption of all of his Warrants pursuant to Section 2.03
herein or to any person who shall hold any Warrant subject to the terms of this
Agreement after the earlier of the Redemption Date or the Last Exercise Date of
the Warrants.
SECTION 6.05. The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrant certificates, by their acceptance
thereof, shall be bound:
(a) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, that fact or matter, unless other evidence in respect
thereof be herein specifically prescribed, may be deemed to be conclusively
proved and established by a certificate signed by the President or the Secretary
of the Company and delivered to the Warrant Agent. That certificate shall be
full authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon that
certificate.
(b) The Warrant Agent shall be liable hereunder only for its
own gross negligence, willful misconduct or bad faith.
(c) The Warrant Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Warrant Certificates, except its countersignature thereof, or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(d) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof,
except the due execution hereof by the Warrant Agent, or in respect of the
validity or execution of any Warrant Certificate, except its countersignature
thereof; nor shall it be responsible for any Warrant Certificate; nor shall it
be responsible for the adjustment of the Public Warrant Price or the making of
any change in the number of shares of Common Stock required under the provisions
of Article III of this Agreement or responsible for the manner, method or amount
of any such change or the ascertaining of the existence of facts that would
require any such adjustment or change except with respect to the
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exercise of Warrant Certificates after actual notice of any adjustment of the
Public Warrant Price; nor shall it by any act under this Agreement be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Common Stock to be issued pursuant to this Agreement or any
Warrant Certificate or as to whether any share of Common Stock will when issued
be validly issued, fully paid, non-assessable and free of preemptive rights.
(e) The Warrant Agent and any shareholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrant
Certificates or other securities of the Company to retain a pecuniary interest
in any transaction in which the Company may be interested or contract with or
lend money to or otherwise act as fully and freely as though it was not the
Warrant Agent or subject to this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
(f) The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any officer or assistant officer of the Company, and to apply to any such
officer or assistant officer for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered to be taken by
it in good faith in accordance with instructions of any such officer or
assistant officer.
(g) The Warrant Agent may consult with its counsel or other
counsel satisfactory to it, including counsel for the Company, and the opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, offered, or omitted by it hereunder in good faith
and in accordance with the opinion of such counsel.
(h) The Warrant Agent shall incur no liability to the Company
or to any holder of any Warrant for any action taken by it in reliance upon any
Warrant Certificate or certificate for Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, certified or
acknowledged, by the proper person or persons.
SECTION 6.06. The Warrant Agent may, without the consent or concurrence
of the Warrant Holders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that (i) it shall
have been advised by counsel, who may be counsel for the Company, are required
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error herein contained, or (ii) as
provided in Section 3.09, the Company deems necessary of advisable and which
shall not be inconsistent with the provisions of the Warrant Certificates,
provided such changes or corrections do not adversely affect the privileges or
immunities of the Warrant Holders.
SECTION 6.07. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
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SECTION 6.08. Forthwith upon the appointment after the date thereof of
any transfer agent for the Common Stock, or of any subsequent transfer agent for
the Common Stock, the Company will file with the Warrant Agent a statement
setting forth the name and address of such transfer agent.
SECTION 6.09. Notice or demand pursuant to this Agreement to be given
or made by the Warrant Agent or by any Warrant Holder to or on the Company shall
be sufficiently given or made and effective on the third business day after
posting thereof, unless otherwise provided in this Agreement, if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
Rosedale Decorative Products Ltd.
731 Millway Avenue
Concord, Ontario
Canada L4K 3S8
notice or demand pursuant to this Agreement to be given or made by the Company
or any Warrant Holder to or on the Warrant Agent shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Warrant
Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on the Underwriter shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Underwriter
with the Company) as follows:
J.P. Turner & Company, L.L.C.
3340 Peachtree Street, Suite 450
Atlanta, Georgia 30326
Attn: William L. Mello
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on any Warrant Holder shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed to such Warrant Holder at his last known address as it shall
appear in the records of the Company, if such notice shall be given by the
Company, or, if such notice shall be given by the Warrant Agent, as it shall
appear on the register maintained by the Warrant Agent.
16
<PAGE>
A copy of any Notice or demand given or made pursuant to this Agreement
on the Warrant Agent, Company or Underwriter shall be promptly forwarded by the
recipient thereof to each of the Company, Warrant Agent or Underwriter who shall
not have received or made such demand or Notice.
SECTION 6.10. The validity, interpretation and performance of this
Agreement and the Warrants shall be governed by the law of the State of Georgia.
SECTION 6.11. Nothing in this Agreement shall be construed to give to
any person or corporation other than the parties hereto and the Warrant Holders
any right, remedy or claim under promise or agreement hereof. All covenants,
conditions, stipulations, promises and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the Company and the Warrant Agent
and their successors and of the Warrant Holders, and their heirs,
representatives, successors, assigns and transferees.
SECTION 6.12. A copy of this Agreement shall be available for
inspection by any Warrant Holder during the regular business hours and at the
corporate office of the Warrant Agent in New York, New York, at which time the
Warrant Agent may require any Warrant Holder to submit his Warrant Certificate
for inspection by it.
SECTION 6.13. This Agreement shall terminate on the Last Exercise Date,
or such earlier date upon which all Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company pursuant to Section
2.02 (e) of this Agreement for all cash held by it. The provisions of Section
6.03 and 6.04 of this Agreement shall survive such termination.
SECTION 6.14. The Article headings in this Agreement are for
convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
SECTION 6.15. This Agreement may be executed in any number
counterparts, each of which is so executed shall be deemed to be an original,
and all such counterparts shall together constitute but one and the same
agreement.
ROSEDALE DECORATIVE PRODUCTS, LTD.
By: /s/ Sidney Ackerman
------------------------------
ATTEST: Sidney Ackerman, President
--------------------
Secretary
CONTINENTAL STOCK TRANSFER & TRUST CO.
By:
------------------------------
ATTEST: Name:
--------------------- ------------------------------
Secretary Title:
------------------------------
17
<PAGE>
EXHIBIT 4-3
Rosedale Decorative Products Ltd.
INCORPORATED UNDER THE LAWS OF THE PROVINCE OF ONTARIO
RD
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
CUSIP 777335 10 0
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR
VALUE, OF
Rosedale Decorative Products Ltd. (hereinafter called the
"Corporation"). The shares evidenced by this certificate are
transferable only on the stock transfer books of the Corporation by the
holder hereof, in person or by attorney, upon surrender of this
certificate properly endorsed. IN WITNESS WHEREOF the Corporation has
caused this certificate to be executed by the signatures of its duly
authorized officers and has caused its facsimile seal to be hereunto
affixed.
Dated:
Secretary
Chairman of the Board
Countersigned and Registered:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Transfer Agent
and Registrar
By
Authorized Signature
1
<PAGE>
EXHIBIT 4-3
Rosedale Decorative Products Ltd..
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with the right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT (Cust) Custodian (Minor)
under Uniform Gifts to Minors Act (State)
Additional abbreviations may also be used though not in the above list.
For Value received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE,
OF ASSIGNEE) Shares represented by the within Certificate,
and do hereby irrevocably constitute and appoint _________________
Attorney to transfer the said Shares on the books of the within
named Corporation with full power of substitution in the premises.
Dated:
In the presence of
Signature
Signature
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF
THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE
2
<PAGE>
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
3
<PAGE>
EXHIBIT 4-4 No. RDW Number of Warrants
VOID AFTER 4:00 P.M. ON , 2003
WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
Rosedale Decorative Products Ltd.
REDEEMABLE BY THE CORPORATION AT $.10 PER WARRANT COMMENCING AS
PROVIDED BELOW
CUSIP
This certifies that FOR VALUE RECEIVED or registered assigns
("Registered Holder") is the owner of the number of Redeemable Common
Stock Purchase Warrants ("Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant
Agreement (as hereinafter defined), one fully paid and non-assessable
share (subject to adjustment as hereinafter provided) of Common Stock,
no par value per share ("Common Stock"), of Rosedale Decorative
Products Ltd., a Province of Ontario corporation ("Company"), at any
time commencing, 1999 and before the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of Continental Stock Transfer & Trust
Company, as Warrant Agent, or its successor ("Warrant Agent"),
accompanied by payment of $6.00 ("Purchase Price"), subject to
adjustment as hereinafter provided, in lawful money of the United
States of America
1
<PAGE>
in cash or by official bank or certified check made payable to the
Company. This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement ("Warrant Agreement"),
dated as of , 1998, by and among the Company, the Warrant
Agent and J.R. Turner & Company, L.L.C., to all the terms and provisions
of which the Registered Holder, by acceptance of this Warrant Certificate,
hereby assents. In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price or the number of shares of Common
Stock subject to purchase upon the exercise of each Warrant represented
hereby are subject to modification or adjustment. Each Warrant
represented hereby is exercisable at the option of the Registered Holder.
The Company shall not be required on the exercise of the Warrants
represented hereby to issue any fraction of shares, but shall make an
adjustment therefore in cash on the basis of the market value of any such
fractional interest computed as provided in the Warrant Agreement. In the
case of the exercise of less than all the Warrants represented hereby,
the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor, which the Warrant Agent shall countersign,
for the balance of such Warrant. The term "Expiration Date" shall mean
4:00 p.m. (New York time) on , 2003, or such earlier date
as the Warrants shall be redeemed. If such date shall in the State of
New York be a holiday or a day on which the banks are authorized to close,
then the Expiration Date shall mean 4:00 p.m. (New York time) the next
following date which in the State of New York is not a holiday or a day
on which banks are
2
<PAGE>
authorized to close. The Company shall not be obligated to deliver any
securities pursuant to the exercise of any Warrants unless a
registration statement under the Securities Act of 1933, as amended,
with respect to such securities is effective. The Company has
covenanted and agreed that it will file a registration statement and
will use its best efforts to cause the same to become effective and to
keep such registration statement current while any of the Warrants are
outstanding. The Warrants represented hereby shall not be exercisable
by a Registered Holder in any state where such exercise would be
unlawful. This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant
Agent, for a new Warrant Certificate or Warrant Certificates of like
tenor representing an equal aggregate number of Warrants, each of such
new Warrant Certificates to represent such number of Warrants as shall
be designated by such Registered Holder at the time of such surrender.
Upon due presentment together with any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or
Warrant Certificates representing an equal aggregate number of Warrants
will be issued to the transferee in exchange therefore, subject to the
limitations provided in the Warrant Agreement. Prior to the exercise of
any Warrant represented hereby, the Registered Holder shall not be
entitled to any rights of a shareholder of the Company, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant
Agreement. The Warrants may be redeemed at the option of the Company,
in whole or in part one year from , 1998 and prior
to their expiration, by paying in cash, or certified or bank check,
therefore,
3
<PAGE>
$.10 per Warrant, upon at least thirty (30) days' written notice
mailed to the record holders at any time, if the average closing price
of the Common Stock was at least $ for the twenty (20) consecutive
trading days during a period ending on the third day prior to the date
redemption is declared. Each Warrant not redeemed on or before the date
called for in such notice shall become void, and all rights thereunder
shall terminate. Reference is made to the Warrant Agreement for a more
complete statement of the rights and limitation of the rights of the
Registered Holder hereof, the rights and duties of the Warrant Agent
and the rights and obligations of the Company thereunder. Copies of the
Warrant Agreement are on file at the corporate trust office of the
Warrant Agent. Prior to due presentment for registration of transfer
hereof, the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant
represented hereby (notwithstanding any notations of ownership or
writing hereon made by anyone other than a duly authorized officer of
the Company or the Warrant Agent) for all purposes and shall not be
affected by any notice to the contrary. The Company has agreed to pay a
fee of 5% of the Purchase Price upon certain conditions, as specified
in the Warrant Agreement upon the exercise of any Warrants represented
hereby. This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York. This Warrant
Certificate is not valid unless countersigned by the Warrant Agent. IN
WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.
Dated:
4
<PAGE>
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By:
Authorized Signature
Rosedale Decorative Products Ltd.
Attest:
By:
Secretary
Chairman of the Board
EXHIBIT 4-4
ELECTION TO PURCHASE
To: Rosedale Decorative Products Ltd.
c/o Continental Stock Transfer & Trust Company
2 Broadway, New York, N.Y. 10004
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for and to purchase
thereunder shares of Common Stock provided for therein
and tenders herewith payment of the purchase price in full to the order of
the Company in CASH, CERTIFIED CHECK OR BANK DRAFT in the amount of
$ and requests that certificates for such shares shall be
issued in the name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
(Please Print)
and be delivered to
(Name)
at
(Street Address)
(City) (State)
(Zip Code)
5
<PAGE>
and, if said number of shares shall not be all the shares purchasable
hereunder, that a new Warrant Certificate for the balance remaining of
the shares purchasable under the within Warrant Certificate be registered
in the name of, and delivered to, the undersigned at the address
stated below.
Name of Warrantholder
(Please Print)
Address
(Street Address)
(City)
(State) (Zip Code)
The undersigned represents that the exercise of this Warrant was
solicited by J.R. Turner & Company L.L.C. whose name appears in the
space below. If not solicited by J.R. Turner & Company L.L.C., please
write "unsolicited" in the space below. Unless otherwise indicated, it
will be assumed that the exercise was solicited by J.R. Turner &
Company L.L.C.
Dated:
(Write "unsolicited" on the above line if not solicited by J.R. Turner
& Company L.L.C.)
Signature
Note: The above signature must correspond with the name as written
upon the face of this Warrant or with the name of the assignee
appearing in the assignment form below in every particular, without
alteration or enlargement or any change whatever.
ASSIGNMENT
For value received
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address including zip code of
assignee)
the Warrant evidenced by the within Warrant Certificate, together with
6
<PAGE>
all right, title and interest therein, and do hereby irrevocably
constitute and appoint attorney to transfer said Warrants on the books
of the within named Company with full power of substitution in the
premises.
Dated:
Signature
Note: The above signature must correspond with the name as written upon the
face of this Warrant in every particular, without alteration or enlargement
or any change whatever. Signature(s) Guaranteed: THE SIGNATURE(S) SHOULD BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
7
<PAGE>
Exhibit 9.1
VOTING AGREEMENT
DATED the day of , 1998.
Voting Agreement made this day of , 1998 among Alan
Fine, Sidney Ackerman, The Ackerman Family Trust and 454590 Ontario Limited
(collectively, the "Shareholders") Rosedale Decorative Products Ltd. (the
"Corporation");
WHEREAS the Shareholders are the registered holders and beneficial owners
of issued and outstanding common shares in the capital of the Corporation (the
"Shares") hereto and have agreed to enter into this Agreement for the purpose of
assuring the continuity of the management and policies of the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for good and valuable
consideration, the receipt whereof is hereby acknowledged by each of the
signatories hereto, and the mutual covenants herein contained, it is agreed by
and between the parties hereto as follows:
1. The Shareholders agree to vote all of their Shares to the extent that they
wish to express their unanimous agreement and if they or any of them do not
so express unanimity or if any one of them abstains from voting, whether
required to abstain or not, in respect of any matter to be voted on at a
meeting of shareholders of the Corporation then the Shareholders agree to
vote all of their shares against such matter or withhold all of their votes
in respect of such matter as applicable and to so instruct their proxies.
2. The provisions of this Agreement shall apply to any shares in the capital
of the Corporation to which voting rights are attached which may be issued
to the Shareholders at any time during the currency of this Agreement and
any shares in the capital of the Corporation which are issued in
replacement of any Shares or after acquired shares and this Agreement does
apply to any shares that are sold or transferred to a Shareholder and does
not apply to any shares that are sold or transferred to an arm's length
third party.
3. This Agreement shall terminate upon the earlier of:
(a) Sidney or Alan are no longer employed by the Corporation or any of its
subsidiaries and affiliates as defined in the Securities Act of
Ontario.
(b) The date upon which any Shareholder will have divested itself or
himself of the last of the Shares to a party at arm's length for a
fair market consideration.
4. This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties hereto and there are no warranties,
representations or other agreements between the
<PAGE>
parties in connection with the subject matter hereof, except as
specifically set forth herein or in the schedule annexed hereto. No
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the parties to be bound thereby.
5. Except as otherwise provided, all of the terms and provisions in this
Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors and assigns, as the case may be.
6. Time shall be of the essence of this Agreement.
7. This Agreement shall be governed and construed in accordance with the laws
of the Province of Ontario.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
- ------------------------------------------------------------------
SIDNEY ACKERMAN ALAN FINE
- --------------------------
ROSALYN FINE
THE ACKERMAN FAMILY TRUST 454590 ONTARIO LIMITED
Per: Per:
- ------------------------------------------------------------------
Sheldon Shapiro Trustee Name:
Title:
Per:
- -------------------------------------------
Fred Stoppell Trustee
<PAGE>
Exhibit 10.1
FINANCIAL ADVISORY AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective , 1998
------------
between J.P. Turner & Company, L.L.C. ("Consultant") and Rosedale Decorative
Products Ltd. (hereinafter the "Company").
RECITALS
A. Company desires to be assured of the association and services of
Consultants in order to avail itself of Consultant's experience, skills and
abilities, and background and knowledge, to facilitate long range planning, and
to execute the Company's business and investment banking needs in an orderly and
efficient manner, and is therefore willing to engage Consultant upon the terms
and conditions herein contained.
B. Consultant agrees to be engaged and retained by the Company and upon
said terms and conditions.
NOW, THEREFORE, in consideration of the recitals, promises and
conditions in this Agreement, the Consultant and Company agree as follows:
1. Consulting Services. Company hereby retains Consultant to become the
investment banking consultant to the Company and to render such advice,
consultation and information to the Board of Directors and the officers of the
Company regarding general financial matters, including, but not limited to,
long-term financial planning, expansions, changes in capital structure,
shareholder relations, the raising of capital from public and private sources,
and investment banking transactions and services, as shall be requested in
writing by the President of the Company from time to time. Consultant agrees,
upon request, to make itself available to render such services as reasonably
requested by the President of the Company and within the scope of this
Agreement.
2. Term. Except as otherwise provided in Section 3(b) of this
Agreement, the term of this Agreement shall be for a period of two (2) years
commencing , 1998.
-------------
3. Compensation of Consultants.
a. Advisory Fee. In exchange for the services provided hereunder,
the Company hereby agrees to pay Consultant an advisory fee equal to $24,000
per year during the term of this Agreement. The Company shall pay $48,000
(representing prepayment in full of the fees for the two-year term of this
Agreement) to Consultant on the closing date of the Company's public offering
of 1,000,000 shares of the Company's common stock, no par value ("Common
Stock") and 1,000,000 redeemable warrants to purchase Common Stock,
underwritten by Consultant.
<PAGE>
b. Finder's Fees. In addition to the compensation and expenses
paid or payable to Consultant pursuant to Sections 3(a) and 4 hereof, the
Company agrees that, if a consultant, directly or indirectly, introduces the
Company, during the term of this Agreement, to any person or entity that
during the term hereof or within 18 months following the term hereof,
provides any investment capital, loan or any other equity or debt financing
to the Company or any affiliate thereof, or becomes a party to a merger,
acquisition, joint venture, private placement or other similar transaction
with the Company or any affiliate thereof, then the Company shall pay
Consultant a cash finder's fee. Each cash finder's fee payable to Consultant
under this Agreement shall be calculated as a percentage of the Transaction
Value (as defined herein) in accordance with the following scale:
5% on the first $1,000,000 of the Transaction Value;
4% on the amount from $1,000,001 to $2,000,000;
3% on the amount from $2,000,001 to $3,000,000;
2% on the amount from $3,000,001 to $4,000,000;
1% on the amount from $4,000,001 to $5,000,000;
1% on the amount in excess of $5,000,000.
"Transaction Value" shall mean the aggregate value of all
cash, securities and other property (i) paid to the Company, its affiliates or
their shareholders in connection with any transaction referred to above
involving any investment in or acquisition of the Company or any affiliates (or
the assets of either), (ii) paid by the Company or any affiliate in any such
transaction involving an investment in or acquisition of another party or its
equity holdings by the Company or any affiliate, or (iii) paid or contributed by
the Company or any affiliate and by the other party or parties in the event of
any such transaction involving a merger, consolidation, joint venture or similar
joint enterprise or undertaking. The value of any such securities (whether debt
or equity) or other property shall be the fair market value thereof as
determined by mutual agreement of the Company and the Consultants or by an
independent appraiser jointly selected by the Company and the Consultant.
4. Expenses. Company agrees to pay all reasonable business expenses
authorized in advance by Company in writing and incurred by Consultant in
furtherance of the business of Company, including travel, food, lodging and
entertainment expenses, upon presentation by Consultant of receipt in form
reasonably satisfactory to Company.
5. Relationship of Parties. This Agreement shall not constitute an
employer-employee relationship. It is the intention of each party that each
Consultant shall be an independent contractor and not an employee of the
Company. Consultant shall not have the authority to act as the agent of the
Company except when such authority as specifically delegated to Consultant by
the Company. Subject to the express provisions herein, the manner and means
utilized by Consultant in the performance of Consultant's services hereunder
shall be under the sole control of the Consultant.
6. Liability of Consultant. The Company acknowledges that all opinions
and advice, whether oral or written, given by Consultant to the Company in
connection with this Agreement are
2
<PAGE>
intended solely for the benefit and use of the Company in considering the
transaction to which they relate, and the Company agrees that no person or
entity other than the Company shall be entitled to make use of or rely upon the
advice of Consultants to be given hereunder, and no such opinion or advice shall
be used by the Company for any other purpose or reproduced, disseminated, quoted
or referred to by the Company in communications with third parties at any time,
in any manner or for any purpose, nor may the Company make any public reference
to Consultant or use Consultant's name in any annual report or any other report
or release of the Company without Consultant's prior written consent, except
that the Company may, without Consultant's further consent, disclose this
Agreement (but not the information provided to the Company by Consultant) in the
Company's filings with the Securities and Exchange Commission, if such
disclosure is required by law.
7. Notices. Any notice, request, demand or other communication required
or permitted hereunder shall be deemed to be properly given when personally
served in writing or when deposited in the United States mail, postage prepaid,
addressed to the other party at the address appearing at the end of this
Agreement. Either party may change its address by written notice make in
accordance with this Section.
8. Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives, administrators, executors, successors, subsidiaries and
affiliates.
9. Governing Law. This Agreement is made and shall be governed and
construed in accordance with the laws of the State of Georgia.
10. Assignment. Any attempt by either party to assign any rights,
duties or obligations which arise under this Agreement without the prior written
consent of the other party shall be void, and shall constitute a breach of the
terms of this Agreement.
11. Entire Agreement, Modifications. This Agreement constitutes the
entire agreement between the Company and the Consultant. No promises,
guarantees, inducements or agreements, oral or written, expressed or implied,
have been made other than as contained in this Agreement. This Agreement can
only be modified or changed in writing signed by the party or parties to be
charged.
12. Termination. This Agreement shall automatically terminate after the
initial two (2) year term. If terminated by the Company, such action shall not
alter Company's obligation to pay Consultant the agreed upon full compensation
described in this Agreement.
13. Litigation Expenses. If any action is brought by either party to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which it may be entitled.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date indicated at the beginning of this Agreement.
J.P. Turner & Company, L.L.C.
3340 Peachtree Road, NE, Suite 450
Atlanta, Georgia 30326
Dated:
------------ ----------------------------------
Name:
-----------------------------
Title:
----------------------------
Rosedale Decorative Products Ltd.
731 Millway Avenue
Concord, Ontario Canada L4K 3S8
Dated:
------------ ----------------------------------
Name:
-----------------------------
Title:
----------------------------
4
<PAGE>
Exhibit 10.2
ROSEDALE DECORATIVE PRODUCTS LTD.
1998 STOCK OPTION PLAN
ARTICLE ONE
PURPOSE AND INTERPRETATION
Section 1.01 Purpose. The purpose of the Plan is to advance the interests of
the Corporation by encouraging equity participation in the Corporation through
the acquisition of Common Shares of the Corporation by directors, officers and
employees of, and certain other persons who provide services to, the
Corporation.
Section 1.02 Definitions. In the Plan, the following capitalized words and
terms shall have the following meanings:
(a) "Act" means the Business Corporations Act (Ontario) or its successor, as
amended from time to time.
(b) "Affiliate" shall have the meaning ascribed thereto in the Securities Act
of Ontario.
(c) "Associate" shall have the meaning ascribed thereto in the Securities Act
of Ontario.
(d) "Board of Directors" means the board of directors of the Corporation as
constituted from time to time and any committee of the board of directors
which shall be comprised of at least two non-employed directors.
(e) "Common Shares" means the common shares of the Corporation as constituted
on the date hereof.
(f) "Competitor" means any person engaged in a business that the Board of
Directors determines competes or intends to compete with the business
carried on by the Corporation and its Affiliates from time to time.
(g) "Corporation" means Rosedale Decorative Products Ltd., a corporation
incorporated under the Act, and its successors from time to time.
(h) "Designated Affiliate" means the Affiliates of the Corporation designated
by the Board of Directors for purposes of the Plan from time to time.
(i) "Exchange" means, at any time, any stock exchange on which the Common
Shares are listed, posted and called for trading.
(j) "Holding Company" shall have the meaning specified in Section 2.02 hereof.
<PAGE>
2
(k) "Insider" shall have the meaning ascribed thereto in the Securities Act,
other than a person who is an insider solely by virtue of being a director
or senior officer of a subsidiary of the Corporation and any Associate of
an insider.
(l) "Key Contributors" means a person who is a director, officer, employee or
consultant engaged by the Corporation to assist the Corporation in the
conduct and growth of its business.
(m) "Issuer Bid" shall have the meaning ascribed thereto in the Securities Act
of Ontario.
(n) "Option Period" means the period of time an option may be exercised as
specified in Subsection 2.07(a) hereof.
(o) "Participant" means a participant under the Plan.
(p) "Plan" means the share option plan provided for herein.
(q) "RRSP" shall have the meaning specified in Section 2.02 hereof.
(r) "Securities Laws" means, collectively, the applicable securities laws,
regulations, schedules, prescribed forms, policy statements, notices,
blanket rulings and other similar instruments of each of the jurisdictions
in which the Corporation is or becomes a reporting issuer or equivalent and
also includes, as the context so requires, the by-laws, rules, regulations
and policies of any Exchange.
(s) "Securities Act" means the Securities Act of Ontario.
(t) "Share Compensation Arrangement" means a stock option, stock option plan,
employee stock purchase plan or any other compensation or incentive
mechanism involving the issuance or potential issuance of securities of the
Corporation to one or more of the following persons: (i) an employee or
insider of the Corporation or of any of its subsidiaries; and (ii) any
other person or company engaged to provide ongoing management or consulting
services for the listed company or for any entity controlled by the listed
company, including a share purchase from treasury which is financially
assisted by the Corporation by way of a loan, guarantee or otherwise.
(u) "Take-over Bid" shall have the meaning ascribed thereto in the Securities
Act of Ontario.
ARTICLE TWO
SHARE OPTION PLAN
<PAGE>
3
Section 2.01 The Plan. The Plan is hereby established for Key Contributors of
the Corporation and Designated Affiliates.
Section 2.02 Participants. Participants in the Plan shall be Key Contributors
of the Corporation or any of its Designated Affiliates (including officers
thereof, whether or not directors) who, by the nature of their positions are, in
the opinion of the Board of Directors, upon the recommendation of the Chairman
of Board and the President of the Corporation, in a position to contribute to
the success of the Corporation. At the request of any Participant, options
granted to such Participant may be issued to and registered in the name of a
personal holding company wholly-owned by such Participant ("Holding Company") or
to a registered retirement savings plan established by such Participant ("RRSP")
and, in such event, the provisions of this Plan shall apply to such options
mutatis mutandis as though they were issued to and registered in the name of the
Participant.
Section 2.03 Amount of Options. The determination regarding the aggregate
number of Common Shares subject to options in favour of any Participant will
take into consideration the Participant's present and potential contribution to
the success of the Corporation and shall be determined from time to time by the
Board of Directors. The aggregate number of Common Shares issuable upon the
exercise of options pursuant to this Plan and any other Share Compensation
Arrangements, subject to adjustment or increase of such number pursuant to
Section 2.10 hereof, shall be 750,000 Common Shares. The maximum number of
Common Shares reserved for issuance to any one Participant upon the exercise of
options shall not exceed 5% of the total number of Common Shares outstanding
immediately prior to such issuance.
Section 2.04 Limits with respect to Insiders
(a) The aggregate number of Common Shares issuable to Insiders as a group
pursuant to options granted under the Plan, together with Common Shares
issuable to Insiders under any other Share Compensation Arrangement of the
Corporation, shall not:
(i) exceed 10% of the number of Common Shares outstanding immediately
prior to the grant of any such option; or
(ii) result in the issuance to Insiders, within a one year period, of in
excess of 10% of the number of Common Shares outstanding immediately
prior to the grant of any such option.
(b) The number of Common Shares issuable to any one Insider and such Insider's
Associates pursuant to options granted under the Plan, together with Common
Shares issuable to such Insider or such Insider's Associates under any
other Share Compensation Arrangement of the Corporation shall not, within a
one year period, exceed 5% of the number of Common Shares outstanding
immediately prior to the grant of any such option.
<PAGE>
4
(c) Any Common Shares issuable pursuant to an option granted to a Participant
prior to the Participant becoming an Insider shall be excluded for the
purposes of the limits set out in Subsections 2.04(a) and 2.04(b) hereof.
Section 2.05 Price. The exercise price per Common Shares shall be determined by
the Board of Directors at the time the option is granted, but such price shall
not be less than such price as is required or permitted as the minimum exercise
price under the Securities Laws, including the requirements of any Exchange on
which the Common Shares are listed. The exercise price of all options granted
hereunder shall be at least the fair market value of the Common Shares on the
date of grant of the options as determined by the Board of Directors.
Section 2.06 Lapsed Options. In the event that options granted under the Plan
are surrendered, terminate or expire without being exercised in whole or in
part, the Common Shares reserved for issuance but not purchased under such
lapsed options shall be available for subsequent options to be granted under the
Plan.
Section 2.07 Consideration, Option Period and Payment
(a) The period during which options may be exercised shall be determined by the
Board of Directors, in its discretion, to a maximum of ten years from the
date the option is granted (the "Option Period"), except as the same may be
reduced with respect to any option as provided in Sections 2.08 and 2.09
hereof respecting termination of employment or death of the Participant.
(b) Subject to any other provision of this Plan, an option may be exercised
from time to time during the Option Period by delivery to the Corporation
at its registered office of a written notice of exercise addressed to the
Secretary of the Corporation specifying the number of Common Shares with
respect to which the option is being exercised and accompanied by payment
in full of the exercise price therefor. Certificates for such Common
Shares shall be issued and delivered to the Participant as soon as
practicable following receipt of such notice and payment. The Corporation
may, at its discretion, as determined by the Board of Directors or its
nominee administering the Plan, accept in lieu of cash payment of the
exercise price, the tender of Common Shares having a fair market value
equal to the exercise price, a personal recourse note secured by a pledge
against the Common Shares so issuable, an assignment to the Corporation of
sufficient proceeds from the sale of Common Shares acquired on the exercise
of the option consented to and acknowledged by a duly qualified investment
dealer and accompanied by an irrevocable direction of the Participant
exercising such option to such investment dealer to cause such payment to
be made to the direction of the Corporation, or any combination of the
foregoing.
<PAGE>
5
(c) Except as set forth in Sections 2.08 and 2.09 hereof, no option may be
exercised unless the Participant is, at the time of such exercise, a Key
Contributor of or in the employ of the Corporation or any of its Designated
Affiliates and shall have been continuously for a three year period a Key
Contributor since the grant of his or her option. Absence on leave with
the approval of the Corporation or a Designated Affiliate shall not be
considered an interruption of employment for purposes of the Plan.
(d) The exercise of any option will be contingent upon receipt by the
Corporation of cash payment of the full exercise price of the Common Shares
which are the subject of the exercised option or such other arrangements
for payment as are approved by the Board of Directors or its nominee under
(b) above. No Participant or his or her legal representatives, legacies or
distributees will be, or will be deemed to be, a holder of any Common
Shares with respect to which he or she was granted an option under the
Plan, unless and until certificates for such Common Shares are issued to
him or her under the terms of the Plan.
(c) Notwithstanding any other provision of this Plan or in any option granted
to a Participant, the Corporation's obligation to issue Common Shares to a
Participant pursuant to the exercise of an option shall be subject to:
(i) completion of such registration or other qualification of such Common
Shares or obtaining approval of such regulatory authorities as the
Corporation shall determine to be necessary or advisable in connection
with the authorization, issuance, or sale thereof;
(ii) the listing of such Common Shares on any Exchange, on which the Common
Shares are listed and posted for trading; and
(iii)the receipt from the Participant of such representations,
warranties, agreements and undertakings, including as to future
dealings in such Common Shares, as the Corporation or its counsel
determines to be necessary or advisable in order to ensure
compliance with all applicable securities laws.
(f) If there is a Take-over Bid or Issuer Bid made for all or any of the issued
and outstanding Common Shares, then the Board of Directors may, by
resolution, permit all options outstanding under the Plan to become
immediately exercisable in order to permit Common Shares issuable under
such options to be tendered to such bid.
Section 2.08 Termination of Employment. If a Participant shall:
(a) cease to be a Key Contributor of the Corporation or any of its Designated
Affiliates as determined by the Board of Directors; or
<PAGE>
6
(b) cease to be employed or engaged by the Corporation or any of its Designated
Affiliates (and is not or does not continue to be a director or senior
officer thereof) for any reason (other than death, disability or retirement
at or after age 60) or shall receive notice from the Corporation or any of
its Designated Affiliates of the termination of his or her employment or
engagement.
(collectively, "Termination ") he or she or it may, but only within three months
next succeeding such Termination, exercise his or her or its options to the
extent that he or she or it was entitled to exercise such options at the date of
such Termination; provided that in no event shall such right extend beyond the
Option Period. This section is subject to any agreement with any director or
senior officer of the Corporation or any of its Designated Affiliates with
respect to the rights of such director or senior officer upon Termination or
change in control of the Corporation. Notwithstanding the foregoing, if the
Termination is for cause for any reason or from the acceptance by the
participant of an offer of employment with a Competitor, or if such Participant
accepts employment with a Competitor following such Termination and prior to the
date that the options held by such Participant expire under this Section 2.08,
then unless otherwise determined by the Board of Directors, the entitlement of
the Participant to options previously granted under this Plan that remain
unexercised, whether or not previously vested, shall immediately terminate. For
purposes of this Plan, employment with a competitor shall include acting on
behalf of a Competitor in any capacity, whether as a shareholder, director,
officer, employee, advisor, consultant, partner, lender or in any other
capacity. In addition to the foregoing, notwithstanding any other provision of
this Plan, all Common Shares issued to Participants on their exercise of options
granted under the Plan shall remain subject to the right of the Corporation to
repurchase such Common Shares for cancellation following any Termination of the
employment of such Participant if such Participant accepts employment with a
Competitor during the period of 12 months following the effective date of such
Termination. Such right of repurchase may be exercised by the Corporation upon
refunding the option exercise price heretofore paid by the Participant, such
payment to be made by the Corporation to the Participant or any subsequent
holder of such Common Shares as of the date such right is exercised by the
Corporation. The Corporation shall cause notice of such right of repurchase to
be set forth on the certificates evidencing any Common Shares issued to a
Participant upon any exercise of options granted from time to time under the
Plan.
Section 2.09 Death, Disability or Retirement of Participant. In the event of
the death, permanent disability or retirement at or after age 60 of a
Participant who is a Key Contributor of the Corporation or any of its Designated
Affiliates or who is an employee having been continuously in the employ of the
Corporation or any of its Designated Affiliates for three years from and after
the date of the granting of his or her option, the option theretofore granted to
him or her shall be exercisable within the twelve months next succeeding such
death, disability or retirement (including the rights under Subsection 2.07(f))
and then, in the event of death, only:
(a) by the person or persons to whom the participant's rights under the option
shall pass by the Participant's will or the laws of descent and
distribution; and
<PAGE>
7
(b) to the extent that he or she was entitled to exercise the option at the
date of his or her death, provided that in no event shall such right extend
beyond the Option Period.
Section 2.10 Adjustment in Shares Subject to the Plan. In the event that:
(a) there is any change in the Common Shares of the Corporation through
subdivisions or consolidations of the share capital of the Corporation, or
otherwise;
(b) the Corporation declares a dividend on Common Shares payable in Common
Shares or securities convertible into or exchangeable for Common Shares; or
(c) the Corporation issues Common Shares, or securities convertible into or
exchangeable for Common Shares, in respect of, in lieu of, or in exchange
for, existing Common Shares;
the number of Common Shares available for option, the Common Shares subject to
any option, and the option price thereof, shall be adjusted appropriately by the
Board of Directors in its sole discretion and such adjustment shall be effective
and binding for all purposes of the Plan.
Section 2.11 Effecting Grants. Subject to Section 3.04, the grant of options
under the Plan shall be affected by the execution and delivery of a stock option
agreement in such form which is consistent with the provisions of this Plan as
may be approved by the Board of Directors from time to time.
Section 2.12 Record Keeping. The Corporation shall maintain a register in which
shall be recorded:
(a) the name and address of each Participant in the Plan; and
(b) the number of options granted to a Participant and the number of options
outstanding.
ARTICLE THREE
GENERAL
Section 3.01 Transferability. The benefits, rights and options accruing to any
Participant in accordance with the terms and conditions of the Plan shall not be
transferable by the Participant except (i) from the participant to his or her
Holding Company or RRSP or from a Holding Company or RRSP to the Participant
and, in either such event, the provisions of this Plan shall apply mutatis
mutandis as though they were originally issued to and registered in the name of
the Participant, or (ii) as otherwise specifically provided herein. During the
lifetime of a Participant, all benefits, rights and options shall only be
exercised by the Participant or by his or her guardian or legal representative.
<PAGE>
8
Section 3.02 Employment. Nothing contained in the Plan shall confer upon any
Participant any right with respect to employment or continuance of employment
with the Corporation or any Affiliate, or interfere in any way with the right of
the Corporation or any Affiliate to terminate the participant's employment at
any time. Participation in the Plan by a Participant shall be voluntary.
Section 3.03 Delegation to Compensation Committee. All of the powers
exercisable by the Board of Directors under the Plan may, to the extent
permitted by applicable law and authorized by resolution of the Board of
Directors of the Corporation, be exercised by a Compensation Committee appointed
by the Board of Directors. In addition, if determined appropriate by the Board
of Directors of the Corporation, the Board of Directors may delegate any or all
of the powers of the Board of Directors of the Corporation under the Plan to an
independent consultant.
Section 3.04 Administration of the Plan. The Plan shall be administered by the
Board of Directors of the Corporation. The Board of Directors shall be
authorized to interpret and construe the Plan and may, from time to time,
establish, amend or rescind rules and regulations required for carrying out the
proposed, provisions and administration of the Plan and determine the
participants to be granted options, the number of Common Shares covered thereby,
the exercise price therefor and the time or times when they may be exercised.
Any such interpretation or construction of the Plan shall be final and
conclusive. All administrative costs of the Plan shall be paid by the
Corporation. The senior officers of the Corporation are hereby authorized and
directed to do all things and execute and deliver all instruments, undertakings
and applications and writings as they, in their absolute discretion, consider
necessary for the implementation of the Plan and of the rules and regulations
established for administering the Plan.
Section 3.05 Amendment, Modification or Termination of the Plan. Subject to
Section 3.03 the Board of Directors reserves the right to amend, modify or
terminate the Plan at any time if and when it is advisable in the absolute
discretion of the Board of Directors. However, any amendment of the Plan which
would increase the number of Common Shares which may be issued under the Plan
shall be effective only upon the approval of the shareholders of the
Corporation. Any material amendment to any provision of the Plan shall be
subject to any necessary approvals by the Exchange, other quotation system or
any stock exchange or regulatory body having jurisdiction over the securities of
the Corporation. Notwithstanding the foregoing, the Plan will terminate 12
years from the date hereof.
Section 3.06 Application for Ruling under the Securities Act. The Corporation
is not a "private company" (as defined in the Securities Act and, accordingly,
is not entitled to the exemptions for such companies from the registration and
prospectus requirements of the Securities Act where they are not offered for
sale to the public. In order to ensure compliance with the Securities Act, the
grant of options under the Plan to Key Contributors other than officers and
employees of the Corporation and its Affiliates shall be subject to receipt of
such rulings or other relief as may be
<PAGE>
9
required under the Securities Act, that the granting and exercise of such
options shall not be subject to the prospectus and registration requirements of
the Securities Act, subject to such terms and conditions as the Board of
Directors may in its absolute discretion approve.
Section 3.07 Consolidation, Merger, etc. If there is a change in control, which
is defined as a consolidation, merger or statutory amalgamation or arrangement
of the Corporation with or into another corporation, a separation of the
business of the Corporation into two or more entities, a transfer of all or
substantially all of the assets of the Corporation to another entity, or the
change in the majority of the board or directors other than by election by the
shareholders pursuant to board solicitation or by vacancies filled by the board
caused by death or resignation of such person, upon the exercise of an option
under the Plan, the holder thereof shall be entitled to receive the securities,
property or cash which the holder would have received upon such consolidation,
merger, amalgamation, arrangement, separation or transfer if the holder had
exercised the option immediately prior to such event, unless the directors of
the Corporation otherwise determine the basis upon which such option shall be
exercisable.
Section 3.08 No Representation or Warranty. The Corporation makes no
representation or warranty as to the future market value of any Common Shares
issued in accordance with the provisions of the Plan.
Section 3.09 Interpretation. This Plan shall be governed by and construed in
accordance with the laws of the Province of Ontario.
Section 3.10 Approval and Effective Date. This Plan shall be effective as of
the date it is approved by the Board of Directors and any securities regulatory
body or stock exchange having jurisdiction over the securities of the
Corporation.
<PAGE>
Exhibit 10.31
ROSEDALE WALLCOVERINGS INC.
LEASE OF 214 COURTLAND AVENUE
<PAGE>
LEASE NET, FREE-STANDING.IND
INDEX
PART 1 - DEMISE AND INTERPRETATION
1.1 Demise
1.2 Schedules
1.3 Basic Principles
1.4 Interpretation
PART 2 - PREMISES
2.1 Zoning
PART 3 - NET RENT
3.1 Net Rent
3.2 Tenant to Pay Rent
3.3 INTENTIONALLY DELETED
3.4 Deposits
PART 4 - TENANT'S COVENANT TO PAY OPERATING
COSTS, TAXES AND UTILITIES
4.1.1 Business Taxes
4.1.2 Realty Taxes
4.1.3 Sales Taxes
4.1.4 Water Rates
4.1.5 Utilities
4.1.6 Insurance
4.1.7 Management Fee
PART 5 - TENANT'S OTHER COVENANTS
5.1.1 Rules
5.1.2 Use of Premises
5.1.3 Damage
5.1.4 Nuisance
5.1.5 Exhibiting Premises
5.1.6 Overholding
5.1.7 Heat
5.1.8 Invoices and Receipts
5.1.9 Compliance with Laws
PART 6 - TRANSFERS
6.1.1 Consent Required
6.1.2 Conditions
6.1.3 No Release
6.1.4 Processing Fee
PART 7 - LANDLORD'S COVENANTS
7.1.1 Quiet Enjoyment
7.1.2 Taxes
PART 8 - INSURANCE
8.1 Landlord's Insurance
8.2 Tenant's Insurance
8.3 Increase in Insurance Premiums
8.4 Cancellation of Insurance
8.5 Mutual Release
8.6 Mutual Indemnity
PART 9 - REPAIRS AND MAINTENANCE
9.1 Landlord's Repairs
9.2 Tenant's Repairs
9.3 Repair Where the Tenant is at Fault
9.4 Tenant Not to Overload Facilities
9.5 Entry by the Landlord
9.6 Preservation of Premises
.../2
<PAGE>
- 2 -
INDEX CONTINUED...
PART 10 - DAMAGE AND DESTRUCTION
10.1 Destruction of Building
PART 11 - TENANT'S ALTERATIONS
11.1 Alterations to Premises
11.2 Removal of Fixtures
11.3 Surrender of Premises
11.4 Signs
PART 12 - DEFAULTS
12.1 Landlord May Perform Tenant's Covenants
12.2 Default
12.3 Re-Entry
12.4 Remedies Generally
12.5 Distress
12.6 Default by Landlord
12.7 Effect of Termination
12.8 Accord and Satisfaction
PART 13 - LANDLORD'S TITLE
13.1 Condemnation
13.2 Expropriation
13.3 Assignment of Landlord's Interest
13.4 Priority of Lease
13.5 Liens
13.6 Registration
PART 14 - GENERAL
14.1 Non-Waiver
14.2 Force Majeure
14.3 Entire Agreement
14.4 Public Policies
14.5 Planning Act
14.6 Notice
14.7 Severability
14.8 Counterparts
14.9 Certificates
14.10 Amendments
14.11 No Offer
14.12 Joint and Several
14.13 Enurement
14.14 Authorization
14.15 Construction
PART 15 - INDEMNITY
15.1
SCHEDULES:
"A" - Optional
"B" - Definitions
"C" - Rules
"D" - Special Provisions
"E" - Fixturing Schedule
"E-l" - Landlord's Work
"F" - DELETED
"G" - Option to Extend
<PAGE>
KEY ITEM INDEX
1. BUILDING
214 Courtland Avenue, Vaughan, Ontario
2. TERM
Ten (10) years commencing on November 1, 1994 and ending on October 31,
2004.
3. SQUARE FOOTAGE OF THE BUILDING
47,104
4. USE
Warehousing and distribution of wallpapers and related office, studio and
distribution uses.
5. NET RENT
ANNUALLY MONTHLY
$3.75 per square foot per annum. $176,640.00 $14,700.00
5.1 MANAGEMENT FEE
$250.00 per month.
6. MANAGER AND MANAGER'S ADDRESS
MANAGER: Sorbara Services Inc.
ADDRESS: 3700 Steeles Avenue West
Suite 800
Woodbridge, Ontario
L4L 8M9
7. RENT DEPOSIT
$12,953.60
8. SECURITY DEPOSIT
N/A
9. TENANT' S ADDRESS FOR SERVICE PRIOR TO COMMENCEMENT DATE
c/o Torkin, Manes, Cohen & Arbus
Barristers and Solicitors
151 Yonge Street
Suite 1500
Toronto, Ontario
M5C 2W7
Attention: P. Christo
SCHEDULES:
"A" - Optional
"B" - Definitions
"C" - Rules
"D" - Special Provisions
"E" - Fixturing Schedule
"E-1" - Landlord's Work
"F" - DELETED
"G" - Option to Extend
<PAGE>
LEASE NET, FREE-STANDING. IND
THIS LEASE, made on the 6 day of July 1994
BETWEEN:
N.H.D. PROPERTIES LIMITED
(hereinafter called the "Landlord")
OF THE FIRST PART;
- and -
ROSEDALE WALLCOVERINGS INC.
(hereinafter called the "Tenant")
OF THE SECOND PART;
PART 1 - DEMISE AND INTERPRETATION
1.1 In consideration of the rents, covenants and agreements which the
Tenant has agreed to pay, observe and perform, the Landlord hereby
leases and demises the Premises to the Tenant for the Term at the
rent and upon the other terms and conditions of this Lease.
1.2 The Key Item Index and all Schedules to this Lease form part of this
Lease. In the event of any conflict between the terms of this Lease
and the terms of Schedule "D", the terms of Schedule "D" shall apply
to the extent of the conflict.
1.3 This Lease is a business agreement in respect of the leasing of real
property. Each party agrees to act in good faith and in a
commercially reasonable manner in accordance with this Lease in
enjoying and performing its rights and obligations in this Lease and
where the consent or approval by a party is required regarding any
matter, such approval shall not, unless otherwise specified herein,
be unreasonably withheld or delayed. It is agreed that this Lease
shall be an absolutely net lease for the Landlord and that Rent
shall be received by the Landlord free of any cost or obligation
concerning the Premises or the Building unless specified in this
Lease. Each provision of this Lease applicable to each party
although not expressed as a covenant, shall be construed to be a
covenant of such party for all purposes and each party covenants to
perform its covenants hereunder.
1.4 This Lease shall be construed in accordance with the laws of the
Province of Ontario. The parties attorn to the exclusive
jurisdiction of the courts of Ontario to deal with all actions in
respect of this Lease. The section headings of this Lease and the
Table of Contents, if any, have been inserted for convenience of
reference only and shall not be referred to in the interpretation of
this Lease. This Lease shall be read with all changes of gender and
number required by the context. Time shall be of the essence of this
Lease and each of the provisions hereof.
PART 2 - PREMISES
2.1 The Tenant has satisfied itself that the use permitted by this Lease
conforms to all existing Laws and agrees that its covenants and
obligations herein contained shall not be affected in the event it
is or hereafter becomes disentitled, in whole or in part, from
carrying on the aforesaid use in or upon the Premises.
PART 3 - NET RENT
3.1 From and after the Commencement Date, the Tenant shall pay to the
Landlord an annual net rent (hereinafter referred to as "Net Rent")
calculated at the rates set forth in paragraph 5 of the Key Item
Index.
Net Rent so calculated shall be payable in equal monthly instalments
in advance on the first day of each month. If the Commencement Date
is not the first day of a month, or the Term expires on a day which
is not the last day of a month, the first or last instalment of Net
Rent as the case may be shall be payable on the Commencement Date
for the broken portion of the month at the beginning of the Term, or
the first day of the month for the broken period at the end of the
Term, calculated at a per diem rate of 1/365th of the then annual
Net Rent.
3.2 The Tenant covenants to pay Rent without any deduction, abatement or
set of f except as specified in this Lease, without any prior demand
therefor. All Rent in arrears shall bear interest at the Prescribed
Interest Rate from the date on which the same became due until the
date of payment. All Rent shall be paid by the Tenant to the
Landlord at the address in Key Item 6 or to such other person or at
such other place in Canada as the Landlord or the Manager may
designate in writing from time to time.
3.3 INTENTIONALLY DELETED.
3.4 The parties acknowledge that the Tenant has deposited with the
Landlord a deposit in the amount set forth in Key Item 7 on account
of the first Rent to be due during the Term.
Free-Standing, Industrial - May, 1994
<PAGE>
-2-
PART 4 - TENANT'S COVENANT TO PAY OPERATING COSTS,
TAXES AND UTILITIES
4.1 The Tenant shall pay:
.1 on a timely basis to the appropriate municipality all Business Taxes
properly owing in respect of each and every business conducted at,
in, upon, through or from the Premises during the Term by the Tenant
or any other person;
.2 to the Landlord all Realty Taxes imposed or assessed against the
Premises or any part thereof, or against the Landlord on account of
the Premises, their use or occupation.
Prior to the commencement of each calendar year during the Term, the
Landlord will estimate the Realty Taxes for the next calendar year
and the Tenant will pay one-ninth of the estimated amount in nine
consecutive, monthly instalments, payable on the first day of each
of the first nine months of the ensuing calendar year.
Notwithstanding the foregoing, if on any such payment date the
Landlord has not received from the Tenant sufficient tax instalments
to pay the full amount of the Realty Taxes then owing, the Tenant
shall forthwith, upon demand, pay to the Landlord the amount of the
deficiency.
If the first and last years of the Term are not full calendar years,
the Tenant shall pay the Realty Taxes for those years (pro-rated
accordingly) as estimated by the Landlord, upon demand, provided
that no demand may be made unless the Realty Taxes demanded are
payable, paid or will not fall due until after the end of the Term.
Where Realty Taxes are estimated by the Landlord all necessary
adjustments will be made when the final tax bills for the year in
question have been received;
.3 any Sales Taxes upon demand. The Landlord shall, upon the request of
the Tenant, prepare and execute such forms as may be necessary to
establish the amount that the Tenant has paid to the Landlord under
this section;
.4 directly to the appropriate authorities when due all water rates
that may be levied, rated, charged or assessed against the Premises,
such amounts to be estimated by the Landlord and paid by the Tenant
to the Landlord monthly;
.5 directly to the appropriate authorities when due all charges for
Utilities used upon or in respect of the Premises and for fittings,
machines, apparatus, meters or other things leased in respect
thereof and for all work or services performed by any person in
connection with such Utilities or equipment; and
.6 to the Landlord on a monthly basis the cost of the insurance
maintained by the Landlord pursuant to Section 8.1 of this Lease,
which insurance the Landlord hereby warrants shall be competively
priced;
.7 to pay to the Landlord, on a monthly basis on the first day of the
month, a management fee at the rate specified in paragraph 5.1 of
the Key Item Index.
PART 5 - TENANT'S OTHER COVENANTS
5.1 The Tenant covenants with the Landlord that it shall:
.1 observe, and ensure that all of its Invitees observe, the Rules;
.2 use the Premises only for the purpose set out in paragraph 4 of the
Key Item Index and for no other purpose. The Tenant shall not use or
permit or suffer the use of the Premises or any part thereof to
generate, manufacture, refine, treat, transport, store, handle,
dispose of, transfer, produce or process any Hazardous Substances
except in strict compliance with all applicable federal, provincial
or municipal laws or regulations, including, without limitation,
environmental, land use, occupational, health and safety laws,
regulations, requirements or permits, and only if the use of such
Hazardous Substances are necessary for the conduct of the Tenant's
business in compliance with the use permitted in this section.
Without limiting the generality of the foregoing, the Tenant shall
not use the Premises as a waste disposal site or accept waste from
outside of the Premises for transfer, temporary storage or any other
reason whatsoever. The Tenant shall indemnify and save harmless the
Landlord from any liability arising from the existence of Hazardous
Substances in, or upon, the Premises;
.3 not do or allow any act of waste, damage or injury to the Building
or to the Premises or any fixtures, improvements, alterations,
additions or equipment in or upon the Building or the Premises and
that the Tenant shall not bring into the Premises any item that by
Free-Standing, Industrial - May, 1994
<PAGE>
-3-
reason of its weight, size or operation might damage any part of the
Premises;
.4 not do anything on the Premises that may be dangerous, offensive or
may be a nuisance to the Landlord. The use permitted by this Lease
shall not constitute a nuisance provided the Tenant complies with
all Laws and the rules and regulations of all utility authorities in
force from time to time in respect of the environment, the Tenant's
business and operations, the condition, equipment, maintenance, use,
environment or occupation of the Premises and the Tenant hereby
covenants to comply with all such Laws;
.5 permit the Landlord or its agents or servants to enter the Premises
from time to time during the last six (6) months of the Term at
reasonable hours to exhibit the Premises to prospective tenants;
.6 if it continues to occupy the Premises beyond the date on which the
Term expires, with or without the consent of the Landlord, and
without a further written agreement, become a monthly tenant and
shall be subject to the same terms and conditions of this Lease,
except as to the length of the Term, any inducements and the Net
Rent. The Tenant agrees to pay Net Rent in an amount equal to 150%
of the amount payable under this Lease for the last month of the
Term, but the acceptance of Rent by the Landlord shall not in any
way renew this Lease as a yearly tenancy; and
.7 heat the Building in a reasonable manner and at its own expense to a
sufficient temperature at all times so that the Building and its
installations shall not be damaged by frost or cold;
.8 deliver promptly to the Landlord if the Landlord makes a written
request therefor, copies of all invoices respecting any item which
it is the Tenant's obligation to pay pursuant to this Lease and
evidence of payment of same;
.9 at its sole cost and expense, comply with all Laws which relate to
the Premises or to the making of any repairs, replacements,
alterations, additions, changes, substitutions or improvements of or
to the Premises. The Tenant agrees that all such repairs,
replacements, alterations, additions, changes, substitutions or
improvements shall forthwith become the property of the Landlord and
the Tenant will comply with all police, fire and sanitary
regulations imposed by any governmental, provincial and municipal
authorities or made by any insurance underwriters and shall observe
and obey all governmental and municipal regulations and any other
requirements governing the conduct of any business in or upon the
Premises.
PART 6 - TRANSFERS
6.1.1 The Tenant acknowledges that the Landlord agreed to enter into this
Lease as a result of the business and personal characteristics of
the original Tenant and its acceptability to the Landlord. It is
agreed by the Tenant that if a Transfer is proposed, the Landlord is
entitled to determine if the proposed transferee and its use is
reasonably acceptable to the Landlord and the Tenant covenants that
no Transfer affecting the Tenant, this Lease, the Premises or the
business of the Tenant on the Premises shall be permitted or
effective until the Landlord's written consent to the Transfer is
delivered to the Tenant. The Tenant shall deliver to the Landlord
its written request for consent to a Transfer together with copies
of the proposed Transfer documents and shall provide the Landlord
with full particulars of the proposed Transfer and the business and
financial responsibility and standing of the proposed transferee;
.2 It shall be deemed reasonable for the Landlord to require as a
condition of its consent to a Transfer that the proposed transferee
agree with the Landlord to assume and perform each of the covenants,
obligations and agreements of the Tenant in this Lease by executing
a written agreement to do so in the form required by the Landlord.
The Landlord shall have a reasonable time to consider any request
for its approval of a Transfer, which in no event shall be less than
fifteen (15) days from the date upon which the Landlord has received
the last of the Tenant's request, all of the information it requires
to make its decision, and the processing fee referred to in section
6.1.4;
.3 No Transfer or other disposition by the Tenant of this Lease or of
any interest under this Lease, shall release the Tenant from the
performance of any of its covenants under this Lease and the Tenant
shall continue to be bound by this Lease. If this Lease is
disclaimed or terminated by any trustee in bankruptcy of any
transferee of this Lease, the original Tenant named in this Lease,
upon notice from the Landlord shall enter into a lease with the
Landlord upon the same terms and conditions as contained herein
except for the duration of the term which shall commence on the date
of such disclaimer or termination and which shall expire on the date
this Lease would have expired if such disclaimer or termination had
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not occurred. The liability of the Tenant in this Section 6.1.3
shall continue during the Term and during any period during which it
is extended pursuant to any right to extend granted to the Tenant
pursuant to this Lease; and
.4 Prior to the Landlord delivering any requested consent, the Tenant
shall pay to the Landlord by certified cheque a processing fee of
Five Hundred ($500.00) Dollars for each request by the Tenant for
consent to Transfer.
PART 7 - LANDLORD'S COVENANTS
7.1 The Landlord covenants with the Tenant as follows:
.1 the Landlord covenants with the Tenant for quiet enjoyment and that
the Landlord shall perform and observe all covenants in this Lease
required to be performed and observed by it; and
.2 that the Landlord will pay promptly when due all taxes, rates,
duties, levies and assessments properly charged against the Premises
or against the Landlord in respect of the Premises subject to the
Landlord's right to postpone, contest or appeal payment of any such
taxes, rates, duties, levies or assessments. This provision shall in
no way be interpreted so as to relieve the Tenant from its
obligations to pay Realty Taxes or any other taxes chargeable to the
Tenant under this Lease.
PART 8 - INSURANCE
8.1 The Landlord shall take out and maintain with respect to the
Premises and the Building:
.1 commercial general liability insurance;
.2 building insurance on the standard commercial building broad form
(commonly referred to as the "All-Risk" wording);
.3 boiler and machinery insurance on the standard comprehensive form on
its equipment, including roof-top equipment and electrical
installations; and
.4 loss of rental income insurance including amounts payable by the
Tenant to the Landlord as Additional Rent.
The Landlord, acting reasonably, shall determine all policy terms
including deductibles and shall be entitled to maintain such other
insurance as it considers advisable. Nothing contained herein shall
require the Landlord to maintain any insurance with respect to any
loss, injury or damage required to be insured against by the Tenant
or with respect to Tenant Property. The proceeds of the Landlord's
insurance shall belong to the Landlord although some portions of
same may be applied to reduce Operating Costs as provided in this
Lease.
8.2 The Tenant shall, at all times, maintain:
.1 commercial general liability insurance against personal and bodily
injury, including death, and property damage, with respect to the
Tenant's business and the Premises and the use and occupancy
thereof, on an occurrence basis to such limits as the Landlord,
acting reasonably, requires from time to time, but in any event not
less than Two Million ($2,000,000.00) Dollars for any one
occurrence;
.2 insurance with coverage on the standard commercial property broad
form and/or commercial building broad form (i.e. "all risk") fully
covering the Premises and the Tenant Property. The insurance
required by this section 8.2 shall be for 100% of the current
replacement cost and shall be subject only to deductibles and
exclusions as the Landlord, acting reasonably, may approve;
.3 business interruption insurance including loss of profits in an
amount sufficient to prevent co-insurance penalties for under-
insurance; and
.4 such other forms of insurance, including boiler and machinery
insurance and pollution liability insurance, as the Tenant or the
Landlord or any mortgagee of the Premises, acting reasonably,
requires from time to time in form, in amounts and for insurable
risks against which a prudent tenant would insure.
All insurance to be effected by the Tenant shall be in amounts and
upon terms which the Landlord shall from time to time, acting
reasonably, determine to be sufficient. Such insurance shall provide
that the Landlord is to be given at least thirty (30) days' written
notice of any cancellation or change in the terms of coverage and
shall include the Landlord as an additional named insured and
contain cross-liability and severability of interest
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provisions, as applicable. The Tenant shall, from time to time upon
demand by the Landlord, provide to the Landlord certificates or
other proof reasonably required by it to establish that the Tenant
has insurance in effect which complies with the terms of this
section 8.2. If the Tenant fails to insure, to file proof thereof,
or if the Landlord receives notice of any cancellation of the
Tenant's insurance, the Landlord may effect such insurance and the
Tenant shall pay to the Landlord on demand the amount of any
premiums paid therefor. If this Lease expires or is terminated at a
time when the Building or Leasehold Improvements are damaged or
destroyed as a result of a peril required to be insured against by
the Tenant, the Tenant shall pay to the Landlord free of any
encumbrance, an amount equal to the proceeds of insurance which it
receives or would have received if it had maintained the insurance
required hereunder with respect to such damage or destruction.
8.3 The Tenant shall not, by act or omission, permit anything to be
done, in or upon the Premises which could impair or invalidate any
policy of insurance on the Premises or the Building or any part
thereof or which could result in the premium for any such policy
being increased. In the event of a breach of this section 8.3 by the
Tenant, it shall promptly after the receipt of notice from the
Landlord specifying the nature of its default, at the option of the
Landlord, take such steps as are necessary to remedy the breach, pay
the full amount of any such increase, or both. In the event of the
cancellation or a threatened cancellation of any such policy, the
Landlord shall have the right to immediately enter upon the Premises
or any part thereof and take reasonable steps to remedy the breach
and recover the cost of doing so from the Tenant.
8.4 If the cause of any threatened cancellation of insurance referred to
in section 8.3 cannot be remedied in time to prevent the
non-renewal or cancellation of insurance the Landlord shall be
entitled to terminate this Lease effective upon written notice to
the Tenant.
8.5.1 The Landlord and the Tenant hereby remise, release, and forever
discharge the other from all actions, manner of actions, causes of
actions, claims, suits and obligations which it has, or may
hereafter have against the other for or concerning, or by reason of,
or in any way connected with or arising out of, or in consequence
of, an occurrence which the releasing party is insured against or
which it is required to be insured against pursuant to this Lease.
For greater certainty, it is hereby stipulated that the within
release shall apply whether or not the claim being released was a
result of the negligence of the released party or of any person for
whom it is responsible in law. Notwithstanding the foregoing, the
within release shall not apply to damage incurred by the Tenant as a
result of the Landlord's failure to maintain the roof of the
Premises in accordance with its obligations contained in this Lease.
.2 Notwithstanding anything else herein contained, the release referred
to in section 8.5.1 shall only apply to the extent that the
releasing party receives proceeds of insurance, or it would have
received proceeds of insurance if it had obtained the insurance
required to be obtained by it pursuant to this Lease, and the said
release shall have no application to the amount of the excess of any
claim above and beyond the proceeds of insurance which would have
been received by the releasing party if it had held all of the
insurance required to be obtained by it pursuant to this Lease. For
greater certainty, it is hereby stipulated that the release referred
to in section 8.5.1 shall apply to the deductible paid by the
releasing party pursuant to any policy of insurance held pursuant to
the terms of this Lease.
.3 For the purposes of this section 8.5 only, the Landlord shall
include the Manager.
8.6 To the extent not released under section 8.5, each party shall
indemnify and save harmless the other from all claims, demands,
causes of action, liabilities, damages, losses or expenses
(hereinafter in this section 8.6 to be collectively referred to as
the "Liabilities") arising out of or occasioned by:
.1 any breach by the indemnifying party of any covenant or condition,
or term of this Lease;
.2 any contract, lien on the Premises; and
.3 an act, default or the negligence of the indemnifying party, its
officers, agents, servants, employees, contractors, customers,
invitees or licensees.
For greater certainty, it is agreed by each of the parties that,
notwithstanding anything else contained in this Lease, the
obligations contained in this section 8.6 shall survive the
expiration or earlier termination of this Lease.
8.7 The Landlord shall, from time to time upon demand by the Tenant,
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provide to the Tenant certificates or other proof reasonably
satisfactory to it to establish that the Landlord has insurance in
effect which complies with the terms of Section 8.1.
PART 9 - REPAIRS AND MAINTENANCE
9.1 The Landlord will, subject to section 9.2 and Part 10, maintain and
repair, or cause to be maintained and repaired, as would a prudent
owner of a reasonably similar industrial building, the structure of
the Building, including, without limitation, the foundations,
exterior wall assemblies including weather walls, sub-floor, roof
structure, bearing walls, and structural columns and beams of the
Building.
9.2 The Tenant shall:
(a) be responsible for all routine and periodic maintenance and
replacement necessary to keep the Premises and their installations
in a good state of repair, reasonable wear and tear excepted, as
would a prudent owner including, without limitation, the following:
painting every three years; snow removal; landscaping; fencing;
lighting; roofing repairs (subject to the limitations in this
Lease); paving repairs; and any work required to be carried out by
any duly constituted government authority;
(b) replace any glass broken in the Building including outside windows
and doors on the perimeter of the Building;
(c) keep in force at times during the Term servicing contracts with
licensed contractors for the service and maintenance of heating
units, air-conditioning units, furnaces (hereinafter referred to
collectively as "HVAC Units"), electrical mains and any pressure
vessels in use by the Tenant in the Building such contracts to be on
industry standard terms and to provide the Landlord with copies
thereof upon demand. In the event that, during the Term any of the
HVAC Units require replacement, the Tenant shall install a new unit
at its own expense. Upon the expiration or other termination of this
Lease and prior to the return of the Security Deposit, the Tenant
shall deliver to the Landlord a certificate issued by a licensed
service contractor indicating that all HVAC Units are in a good
state of maintenance and repair and are suitable for operation in
accordance with all Laws and the rules and regulations of all
applicable utility authorities;
(d) notify the Landlord, in writing, of any defect or deficiency in,
malfunction of, or damage to, the Premises or any equipment or
Utilities therein or thereon immediately after same comes to the
attention of the Tenant;
9.3 Notwithstanding anything else contained herein, if the Premises or
any part therein or thereof, or any equipment, machinery, facilities
or improvements contained therein or made thereto, or the roof
structure or outside walls of the Building or any other structural
portions thereof require repair or replacement or become damaged or
destroyed through the use, occupation, negligence, carelessness or
misuse of the Tenant or its Invitees, or by such persons in any way
stopping up or damaging the HVAC Units, water pipes, drainage pipes
or other equipment or facilities or parts of the Building, the cost
of repair shall be paid by the Tenant to the Landlord as Additional
Rent within five (5) days after presentation of an account of such
costs incurred by the Landlord.
9.4 The Tenant will not install any equipment which will exceed or
overload the capacity of any utility, electrical or mechanical
facilities in the Building and the Tenant will not bring onto the
Premises or install any utility, electrical or mechanical facility
or service which the Landlord does not approve. The Tenant agrees
that if any equipment installed by the Tenant requires additional
utility, electrical or mechanical facilities, the Landlord may, in
its sole discretion, if they are available, elect to install them at
the Tenant's expense and in accordance with plans and specifications
to be approved in advance in writing by the Landlord.
9.5 The Landlord, its employees, contractors and agents shall be
entitled to enter the Premises and the Building for any purpose
permitted or contemplated by this Lease including, without
limitation, to effect any repair required or permitted to be made by
the Landlord, to effect any repair which is the responsibility of
the Tenant and which it fails to make when required, to calculate
the area of the Premises or any part thereof, to view the state of
repair and maintenance of the Premises or any part thereof, to
confirm that the Tenant is complying with its obligations hereunder
(including, without limitation, the Tenant's obligations respecting
Hazardous Substances and compliance with environmental laws and
regulations, in respect to which the Landlord shall be entitled to
conduct an environmental audit or any further testing required to
ensure such compliance) or to obtain information for plans, provided
that such entry is made upon reasonable notice to the Tenant. In
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exercising its rights under this section 9.5, the Landlord shall
take reasonable efforts to minimize the interference with the
conduct of the Tenant's business.
9.6 The Landlord shall have the right to do such work in or upon the
Premises as may be necessary to preserve or protect the Premises.
PART 10 - DAMAGE AND DESTRUCTION
10.1 (a) If the Building is destroyed or damaged (including, without
limitation, smoke and water damage) as a result of fire, the
elements, accident or other casualty required to be insured against
by the Landlord pursuant to this Lease or otherwise insured against
by the Landlord and not caused by the Tenant, and if as a result of
such occurrence:
(i) the Building is rendered wholly or partially untenantable,
this Lease will continue in full force and effect and the
Landlord shall, subject to subsections 10.1(b) and 10.2(a),
commence diligently to restore the Building to the Base
Standard (hereinafter in this Part 10 to be referred to as the
"Landlord's Restoration Work") and then only to the extent of
the insurance proceeds actually received by the Landlord, and
only Net Rent (but not Additional Rent) will abate entirely or
proportionately, as the case may be, to the portion of the
Building rendered untenantable from the date of the
destruction or damage until the Landlord has completed the
Landlord's Restoration Work;
(ii) the Building is not rendered untenantable in whole or in part,
the Lease will continue in full force and effect, the Rent
will not abate and the Landlord shall, subject to subsection
10.1(b), commence diligently to carry out the Landlord's
Restoration Work.
(b) Notwithstanding subsection 10.1(a), if the Building is damaged or
destroyed by any cause whatsoever, and if, in the opinion of a duly
licensed architect retained by the Landlord, acting reasonably, the
Building cannot be rebuilt or made fit for the use provided for in
this Lease within ninety (90) days of the damage or destruction, the
Landlord instead of carrying out the Landlord's Restoration Work
may, at its option, elect to terminate this Lease by notice in
writing to the Tenant. In the case of such election, the Term and
the tenancy hereby created will expire upon the thirtieth (30th) day
after such notice is given, without indemnity or penalty payable by,
or any other recourse against, the Landlord, and the Tenant shall,
within such thirty (30) day period, vacate and surrender the
Premises to the Landlord. Rent will be due and payable until the
date of termination in accordance with the provisions of section
10.1 of this Lease.
(c) Upon the Tenant being notified in writing by the Landlord that the
Landlord's Restoration Work has been substantially completed, the
Rent shall re-commence and the Tenant will forthwith complete the
work necessary to restore the Building to the condition existing
prior to the damage or destruction (the "Tenant's Restoration Work")
and all other work required to fully restore the Building for
business.
(d) Notwithstanding the foregoing, the Landlord shall be entitled to
change the specifications of the Base Standard as same existed prior
to such damage or destruction and restore according to plans,
specifications, and working drawings other than those used in the
original construction of the Building, provided that the Building,
as re-built, will have reasonably similar facilities and services
to those in the Building prior to the damage or destruction having
regard, however, to the age of the Building at such time.
PART 11 - TENANT'S ALTERATIONS
11.1 The Tenant may, at any time, and from time to time, at its expense,
paint or decorate the Building and appurtenances, and make such
changes, alterations, additions and improvements as will in the
judgment of the Tenant better adapt the Building for the purpose of
its business provided that:
(a) no structural changes, alterations, additions or improvements
shall be made without the written consent of the Landlord;
(b) all changes, alterations, additions and improvements shall
comply with all Laws;
(c) the Tenant shall pay to the Landlord, upon demand, the amount
of any increase in Realty Taxes or the cost of the insurance
maintained by the Landlord over the Building, to the extent
that such increases are attributable to an action by the
Tenant under this paragraph;
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(d) nothing herein shall entitle the Tenant to make any changes
to, or installations upon, the roof of the Building;
The Landlord shall be entitled, at any time and without notice to
the Tenant, to remove or to rectify, at the expense of the Tenant,
any item which was not erected in compliance with this section.
11.2 Leasehold Improvements shall become the property of the Landlord
upon installation. The Tenant shall not remove any Leasehold
Improvements whether at the expiration or sooner termination of the
Term, unless requested to do so by the Landlord in which case the
Tenant shall remove such Leasehold Improvements as are designated by
the Landlord and, if so requested by the Landlord, restore the
Premises to the Base Standard not later than the expiration or
sooner termination of the Term. For greater certainty, it is hereby
stipulated that the Tenant shall not be required to remove any
Leasehold Improvements that existed prior to the making of any
modifications to the Premises by the Tenant or by the Landlord on
behalf of the Tenant, or any Leasehold improvements made by the
Landlord pursuant to its obligations contained in this Lease. If not
in default, the Tenant may, on the expiration or sooner termination
of the Term, remove from the Premises all Tenant Property provided
that it repairs any damage to the Premises which may be caused by
installation or removal of the Tenant Property and leave the
Premises in a neat and tidy condition which the Tenant hereby
covenants to do. The Tenant shall lose its right (but not the
obligation) to remove and retain all Tenant Property, and all
fixtures, furnishings or equipment affixed in any manner to the
Premises not removed on the expiry or sooner termination of the
Term.
11.3 The Tenant shall surrender to the Landlord at the end of the Term
(whether the Term ends by expiry or other termination) the Premises
and all Leasehold Improvements not permitted or required to be
removed, all in good and substantial repair and condition in
accordance with this Lease. The Tenant shall, prior to the end of
the Term, at its cost, remove from the Premises any Hazardous
Substances which are or have been located, stored or incorporated in
or on any part of the Premises by the Tenant. This provision shall
survive the expiration or earlier termination of this Lease.
11.4 The Tenant shall have the right to erect signs on the Building
denoting its tenancy therein, provided that such signs conform with
all municipal by-laws governing such signs, and the Tenant has,
prior to erecting the signs, received the written approval of the
Landlord as to the type and placement of the signs to be erected.
PART 12 - DEFAULTS
12.1 If the Landlord provides to the Tenant written notice of a default
in its obligations contained in this Lease (other than a default
respecting the payment of Rent) and the Tenant does not rectify such
default within ten (10) days thereafter or during such longer period
as may be reasonably required in the circumstances to cure such
default, the Landlord shall be entitled to remedy such default and
the cost to the Landlord of doing so together with interest thereon
at the Prescribed Interest Rate from the date of default, shall be
paid by the Tenant to the Landlord forthwith upon demand theref or
by the Landlord. Nothing in this section 12.1 shall replace or
abrogate the Landlord's right to exercise any of its other rights
hereunder which rights are in addition to those contained in this
section. In the event of an emergency, the Landlord shall be
entitled to proceed to remedy a default without first providing
notice to the Tenant.
12.2 A default of this Lease shall have occurred if:
.1 the tenant defaults in the payment of any Rent (including, without
limitation, any regularly scheduled payment on account of Additional
Rent);
.2 the Tenant defaults in the payment of any Additional Rent which is
not a regularly scheduled payment of Additional Rent, and the
default continues for a period of five (5) days following notice
from the Landlord;
.3 the Tenant fails to cure a default under this Lease (other than a
default respecting the payment of Rent) within ten (10) days or such
longer period as may be reasonably required in the circumstances to
cure such default after receiving notice from the Landlord to do so;
.4 any property of the Tenant becomes subject to an execution which
remains outstanding for more than ten (10) days; a receiver of any
property of the Tenant is appointed; the Tenant or any guarantor or
indemnifier of this Lease makes an assignment for the benefit of
creditors or makes any assignment or has a receiving order made
against it under the Bankruptcy Act and Insolvency Act, or becoming
bankrupt or insolvent makes application for relief under the
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provisions of any statute now or hereafter in force concerning
bankrupt or insolvent debtors, or any action whatever, legislative
or otherwise, is taken with a view to the winding up, dissolution or
liquidation of the Tenant or any guarantor or indemnifier of this
Lease;
.5 any insurance policy is cancelled or not renewed by an insurer by
reason of the use or occupation of the Premises;
.6 the Tenant makes any bulk sale or removes any substantial part of
the Tenant Property from the Premises other than pursuant to a
permitted Transfer or by reason of same no longer being required for
the conduct of the Tenant's business provided that other Tenant
Property of equal or greater value and utility is contemporaneously
substituted therefor;
.7 re-entry is permitted under any other provision of this Lease or in
law.
12.3 In the event of the occurrence of a default as defined in section
12.2, the then current month's Rent together with the Rent for the
three (3) months next ensuing shall immediately become due and
payable, and at the option of the Landlord the Term shall become
forfeited and void, and the Landlord may without notice or any form
of legal process whatsoever forthwith re-enter the Premises,
anything contained in any statute or law to the contrary
notwithstanding, and may expel all persons and remove all property
from the Premises and such property may be removed and sold or
disposed of by the Landlord as it deems advisable or may be stored
in a public warehouse or elsewhere at the cost and for the account
of the Tenant without the Landlord being considered guilty of
trespass or conversion or becoming liable for any loss or damage
which may be occasioned thereby, provided, however, that such
forfeiture shall be wholly without prejudice to the right of the
Landlord to recover arrears of Rent and damages for any antecedent
default by the Tenant of its covenants under this Lease. Should the
Landlord at any time terminate this Lease by reason of any such
event, then, in addition to any other remedies it may have, it may
recover from the Tenant all damages it may incur as a result of such
termination.
12.4 The rights of the Landlord in this Lease are cumulative and not
alternatives and reference to any particular right, remedy or
remedies of the Landlord in respect of any default by the Tenant
shall not preclude the Landlord from exercising any and all of its
other rights and remedies in respect thereof, whether available at
law, in equity, by statute, or expressly provided for herein. No
right or remedy shall be exclusive or dependent upon any other right
or remedy, and the Landlord may from time to time exercise any one
or more of such rights and remedies generally or in combination. The
Landlord shall have the same rights and remedies for collection of
Additional Rent in arrears as it has for the collection of Net Rent
whether such rights exist by virtue of this Lease, statute, common
law or equity.
12.5 The Tenant waives the benefit of any law or statute limiting the
Landlord's right to distress and agrees that none of the Tenant's
goods, fixtures, chattels or other property shall be exempt from
distress for arrears of Rent.
12.6 The Tenant shall not have or exercise any right or remedy with
respect to a default by the Landlord unless it provides to the
Landlord written notice of the default and the Landlord fails to
cure the default within ten (10) days or such longer period as may
be reasonably required in the circumstances to cure such default.
12.7 The right of the Landlord to recover arrears of Rent and the right
of each party to recover damages for an antecedent default by the
other shall not be affected by the expiry or termination of this
Lease whether by elapse of time or by the exercise of any right of
either the Landlord or the Tenant pursuant to this Lease.
12.8 No payment by the Tenant or receipt by the Landlord of a lesser
amount than the Rent herein stipulated shall be deemed to be other
than on account of the earlier stipulated Rent, nor shall any
endorsement or statement on any cheque or any letter accompanying
any cheque or payment of Rent be deemed an accord and satisfaction,
and the Landlord may accept such cheque or payment without prejudice
to the Landlord's rights to recover the balance of such Rent or
pursue any other remedy provided in this Lease.
PART 13 - LANDLORD'S TITLE
13.1 If the Building or any part of the Building is condemned or declared
unfit for public use by any competent body, the Landlord shall be
entitled to terminate this Lease by notice in writing to the Tenant.
13.2 The Landlord and the Tenant agree to co-operate with the other in
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respect of any expropriation of all or any part of the Premises, so
that each may receive the maximum award in the case of any
expropriation to which they are respectively entitled at law.
13.3 The Landlord, at any time and from time to time, may sell, transfer,
lease, assign or otherwise dispose of the whole or any part of its
interest in the Premises or any part thereof or enter into a
mortgage of the whole or any part of its interest in the Premises
and upon any party acquiring the interest of the Landlord to the
Building, the Landlord shall thereupon be released from all of its
covenants under this Lease.
13.4 Provided that the Tenant receives a non-disturbance agreement on
terms reasonably satisfactory to it from each mortgagee of the
Premises, this Lease and all rights of the Tenant under this Lease
are subject and subordinate to all mortgages now or hereafter made
by the Landlord, except that the holder of any such mortgage may
subordinate and postpone such mortgage to this Lease at any time by
an instrument in writing to such effect registered against the title
to the Premises without any further consent or agreement of the
Tenant. The Tenant, if so requested, shall attorn to such mortgagee
when such mortgagee takes possession of the Premises and to any
purchaser of the Premises and shall recognize such mortgagee or
purchaser as the Landlord under this Lease.
13.5 The Tenant shall, at its own expense, immediately discharge or
vacate all construction, mechanics' or other liens or executions
that may be filed during the Term against this Lease, the Premises
or any part thereof with respect to any work or services performed
or goods or material furnished at the request of, for, or on behalf
of, the Tenant.
13.6 The Tenant shall not register this Lease or any part thereof but may
register, with the prior approval of the Landlord, a notice or
caveat in respect thereof, which notice or caveat shall disclose
only the existence and Term of this Lease and such other
non-financial terms as the Landlord may approve.
PART 14 - GENERAL
14.1 A waiver by either party of any breach or non-compliance by the
other party under any provision of this Lease and a waiver by either
party of any term or condition of this Lease shall not be a waiver
of any continuing or subsequent breach or failure of any other
provision, term or condition, and any forbearance or failure to seek
a remedy for any breach or failure shall not be a waiver of any
rights and remedies with respect to such or any subsequent breach or
failure.
14.2 In the event that either party shall, by reason of Force Majeure, be
unable to fulfil, or shall be delayed or restricted in the
fulfilment of, any obligation (other than the payment of any money)
under any provision of this Lease, such party shall, so long and to
the extent that any such impediment exists, be relieved from the
fulfilment of such obligation and shall be granted a reasonable
period of time to fulfil the obligation once the Force Majeure
ceases to exist and the other party shall not be entitled to
compensation for any resulting loss, damage, inconvenience, nuisance
or discomfort.
14.3 This Lease contains the whole agreement between the parties with
respect to the subject matter of this Lease. There is no promise,
inducement, representation, warranty, collateral agreement or
condition affecting the Premises or any part thereof, the business
to be conducted by the Tenant, or this Lease other than as expressed
in this Lease. All representations and inducements made by either
party or their representatives which are relied upon by the other
party are contained herein and each party disclaims reliance on any
other representation or inducements.
14.4 The terms and conditions of this Lease including those related to
the provisions of Utilities shall be automatically amended from time
to time to the extent necessary for the Landlord to comply with any
directive, policy or request of a governmental or
quasi-governmental authority acting in the fields of energy,
conservation, waste management and disposal, security or other area
of public interest.
14.5 Any notice provided for in this Lease shall be addressed to the
Landlord at the address at which Rent is to be paid pursuant to
section 3.2 or in default of such address having been determined at
3700 Steeles Avenue West, Suite 800, Woodbridge, Ontario, L4L 8M9
and to the Tenant or the Indemnifier at the Premises after the
Commencement Date and at the address set forth in paragraph 9 of the
Key Item Index prior to such date. Notices shall be in writing and
signed by the party giving the notice and shall be effectively given
by registered mail or by delivery to the said address. Any written
notice so given shall be deemed to have been given three (3) postal
delivery days after the day it was so mailed by registered mail or
Free-Standing, Industrial - May, 1994
<PAGE>
-11-
upon the day it was so delivered. Any party may, from time to time
by notice to the other(s), change its address for the purpose of any
subsequent notice. The Manager shall be entitled to sign a notice on
behalf of the Landlord.
14.6 To the extent that any provision of this Lease or the application
thereof to any person or circumstance is held to be invalid or
unenforceable by a court of competent jurisdiction, the remainder of
this Lease or the application of such provision to persons or
circumstances other than those to which it is held invalid or
unenforceable shall not be affected thereby and each provision of
this Lease shall be separately valid and enforceable to the fullest
extent permitted by law.
14.7 The Tenant hereby expressly waives the benefits of Section 35 of the
Landlord and Tenant Act and any amendments thereto and of any
present or future act of the Legislature of the Province of Ontario
permitting the Tenant to claim a Set-Off against the Rent to be paid
hereunder for any cause whatsoever.
14.8 Each party at any time and from time to time within ten (10) days
after notice from the other shall execute and deliver to the other a
written statement addressed to such persons as the party requesting
the certificate may require, certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating
the modifications and that the same is in full force and effect as
modified), the amount of the Rent then being paid under this Lease,
the dates to which the same, and the other sums provided in this
Lease to be paid by the Tenant, have been paid, the Commencement
Date and duration of the Term and stating whether or not there is
any existing default of which it has notice, and the particulars and
amount of insurance policies on the Premises.
14.9 Each party agrees that the following certificates shall be
conclusive and binding in respect of any question of fact or opinion
with respect to the following matters:
.1 a certificate procured by the Landlord from an architect,
professional engineer, land surveyor or other qualified individual
as to: the area of any part of the Premises or the Building; any
question of fact concerning the completion of any construction or
other work, either by the Landlord or the Tenant; the extent to
which the completion of any work or obligation has been delayed by
Force Majeure; the cause of any destruction or damage and the extent
and duration for which the Building or any part thereof will be
incapable of being used for its intended purposes by reason of any
destruction or damage; and
.2 a certificate procured by the Landlord from a licensed public
accountant including, without limitation, the Landlord's auditor,
respecting any question of fact or opinion concerning the
computation, determination or allocation of Additional Rent or the
proper amount of any payment to the Landlord or the Tenant under
this Lease.
Any certificate procured by the Landlord shall be prepared using
generally accepted practices and procedures appropriate to such
certificate.
14.10 This Lease may not be amended or altered except by an instrument in
writing signed by the Landlord and the Tenant and such alteration
shall be binding upon the Indemnifier whether or not it is executed
by the Indemnifier.
14.11 The submission by the Landlord to the Tenant of this Lease shall
have no binding force or effect, shall not constitute an option for
leasing the Premises, or confer any rights or impose any obligations
upon either party until the execution and delivery of this Lease by
the Tenant and the Landlord.
14.12 If two or more persons comprise the Tenant, the liability of each is
joint and several. If the Tenant is a partnership or other business
association, the members of which are subject to personal liability,
the liability of each member is joint and several.
14.13 This Lease shall enure to the benefit of and be binding upon the
parties hereto, and their permitted heirs, executors,
administrators, successors and assigns. No successor or assign of
the Tenant shall be entitled to claim any benefit or to enforce this
Lease unless the Transfer to it was made in full compliance with the
requirements of this Lease, or was subsequently ratified by the
Landlord in writing.
14.14 The Tenant covenants that it has all requisite power and possesses
all licenses, franchises, permits, consents, approvals and other
rights necessary to enable it to enter into this Lease and carry out
its obligations herein.
14.15 Notwithstanding any rule or maxim of construction to the contrary,
any ambiguity or uncertainty shall not be construed against any
party hereto by reason of the authorship of any of the provisions
hereof.
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<PAGE>
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PART 15 - INDEMNITY
15.1 INTENTIONALLY DELETED.
IN WITNESS WHEREOF the Parties hereto have executed this Lease.
SIGNED, SEALED AND DELIVERED Landlord:
in the presence of
N.H.D. PROPERTIES LIMITED
PER: /S/ [ILLEGIBLE]
---------------
Name: EDWARD K. SORBARA
Title: President
I have the authority to
bind the Corporation.
Tenant:
ROSEDALE WALLCOVERINGS INC.
PER: /S/ Alan Fine
-------------
Name:
Title: President
PER: /S/ Sidney Ackerman
-------------------
Name:
Title:
I/We have authority to bind the Corporation.
Free-Standing, Industrial - May, 1994
<PAGE>
SCHEDULE "B"
In this Lease the following expressions shall have the following meanings:
"Additional Rent" shall mean all amounts payable by the Tenant to the Landlord
or to any other person pursuant to this Lease (other than Net Rent);
"Base Standard" means the state of the Premises before the addition of any
modifications by the Tenant or by the Landlord on behalf of the Tenant other
than those which the Landlord has specifically agreed to make pursuant to this
Lease. Notwithstanding the foregoing, for the purpose of Part 10 of this Lease
"Base Standard" shall mean in respect of the building premises which are
finished with the standard building base systems in respect of electricity and
plumbing and which have installed therein all perimeter windows, and bare
concrete floors and walls, in compliance with the then applicable building
standards.
"Building" means the building described municipally in paragraph 1 of the Key
Item Index which contains approximately the number of square feet (as determined
in accordance with the applicable B.O.M.A. standards) set out in paragraph 3 of
the Key Item Index.
"Business Taxes" means business taxes or assessments or any other taxes,
assessments, rates and levies in respect of the existence of, or any use,
enjoyment, possession or occupancy of, or business carried on in or upon the
whole or any portion of the Premises imposed by any governmental authority
having jurisdiction, but does not include Realty Taxes.
"Change in Control" means, in the case of any corporation or partnership, the
transfer, by sale, assignment, operation of law, transmission on death,
mortgage, trust, issuance from treasury, cancellation or redemption, or
otherwise, of any shares, voting rights or interest, which will result in a
change of the identity of the person exercising, or who might exercise,
effective control of such corporation or partnership whether directly or
indirectly, unless such change occurs as the result of trading in shares listed
upon a recognized stock exchange.
"Commencement Date" means the first day of the Term.
"Design Specifications" has the meaning provided in the Fixturing Schedule, if
such a schedule is attached to this Lease.
"Fixturing Schedule" means the provisions set forth in Schedule "E" to this
Lease, if such a schedule is attached to this Lease.
"Force Majeure" means a fire, inclement weather, strike, lock-out or other
casualty or contingency beyond the reasonable control and not the fault of the
party thereby affected (including, without limitation, any delays caused by any
failure of a utility or other authority to approve any application of the
Landlord or take any action required by the Landlord to carry out its
obligations hereunder), where the effects of such casualty or contingency are
not avoidable by the exercise of reasonable effort or foresight by such party
(but does not include insolvency, lack of funds, or other financial casualty or
contingency).
"Hazardous Substances" means any contaminant, pollutant, dangerous substance,
potentially dangerous substance, noxious substance, toxic substance, hazardous
waste, flammable, explosive, radioactive material, urea formaldehyde foam
insulation, asbestos, PCBs and substances or any other materials now or
hereafter declared or defined to be hazardous, toxic, contaminants or pollutants
in or pursuant to any Laws.
"Invitees" when used in respect of the Tenant shall include its officers,
directors, employees, customers, suppliers, clients, contractors, agents,
invitees and other persons for whom it is responsible at law.
"Key Item Index" shall mean the index identified as such and attached to the
front of this Lease.
"Laws" shall mean the laws, by-laws, ordinances, orders, rules and regulations
of all county, municipal, regional, provincial or federal government or
governmental authority having jurisdiction over the Tenant or the Premises in
force during the Term;
"Leasehold Improvements" means all fixtures, improvements, installations,
alterations and additions from time to time made, constructed, erected or
installed in or to the Premises with the exception of the Tenant Property;
"Manager" means the party set forth in paragraph 6 of the Key Item Index being
the Landlord's authorized agent and manager for the Premises or such replacement
as the Landlord may appoint from time to time.
"Mortgage" includes a mortgage, pledge, charge, hypothec, privilege, encumbrance
or any other financing arrangement and "Mortgagee" means the holder of any of
the foregoing.
"person" means any individual, corporation, partnership, trust other legal
entity or other business association and includes a government or departmental
subdivision thereof.
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<PAGE>
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"Premises" shall mean the premises described in paragraph 1 of the Key Item
Index and which are identified on Schedule "A" and include the Building.
"Prescribed Interest Rate" means, with respect to any period, a rate of interest
which is three (3) percentage points per annum above the rate of interest per
annum established by the Landlord's Bank, as a reference rate of interest to
determine the interest rates such bank will charge for Canadian dollar
commercial loans to its customers in Canada and which such bank quotes or
publishes as its "prime rate".
"Realty Taxes" means all real property, municipal, school or local improvement
taxes, assessments or charges or any other taxes, assessments or charges imposed
upon or in respect of any real property from time to time by any governmental
authority, including any costs incurred by the Landlord in determining or
verifying the propriety or reasonableness of or contesting the same in good
faith, excluding Business Taxes and any income or profits taxes upon the income
of the Landlord, to the extent any such tax is not imposed in lieu of any tax,
assessment or charge upon or in respect of the Premises or upon the Landlord in
respect thereof. If any other taxes, assessments or charges are imposed by any
governmental or regulatory authority upon or in respect of all or any portion of
the Premises, the revenues therefrom or the Landlord, in substitution for or in
addition to any Realty Taxes from time to time imposed, then any such other tax,
assessment or charge shall be deemed to be a Realty Tax.
"Rent" means Net Rent and Additional Rent.
"Rules" means the rules, procedures and requirements as amended and supplemented
from time to time (initially as set forth in Schedule "C" to this Lease),
governing the manner in which the Tenant shall operate and conduct its business.
"Sales Taxes" shall mean any goods and services, sales, business transfer,
multistage sales, use, consumption, value-added or other similar taxes imposed
by the Government of Canada, or by any provincial or local government, upon the
Landlord or the Tenant on or in respect of this Lease, the payments made by the
Tenant hereunder or the goods and services provided by the Landlord, including
but not limited to, the rental of the Premises and provision of administrative
services to the Tenant or to others.
"Tenant Property" means the trade fixtures, chattels, merchandise, personal
effects and signs of the Tenant in or upon the Premises.
"Term" shall mean the period set forth in paragraph 2 of the Key Item Index and
any further period during which the Tenant is in possession of the Premises
pursuant to a validly exercised right to extend the Term granted pursuant to
this Lease;
"Transfer" means any assignment, sublease, Change in Control, or parting with
possession, or any other transaction or occurrence (including an expropriation,
amalgamation, receivership, seizure by execution or other legal process or the
granting by the Tenant of a pledge, Mortgage or other security interest) which
has or might have the effect of changing the identity of the Tenant or the
person controlling the Tenant, or, changing the identity of the person having
use, occupancy or possession of the whole or any part of the Premises, whether
such change is or might be immediate, deferred, conditional, exclusive,
non-exclusive, permanent or temporary.
"Utilities" means water, sewer, gas, fuel, electricity, telephone, waste
disposal and other utilities or services or any combination thereof.
Free-Standing, Industrial - May, 1994
<PAGE>
SCHEDULE "C"
RULES
1. The skylights and windows that reflect or admit light into passageways or
into any place in the Building shall not be covered or obstructed by the
Tenants, and no awnings shall be put up without the prior written consent
of the Landlord.
2. If any sign, advertisement or notice shall be inscribed, painted or
affixed by the Tenant on or to any part of the Premises or the Building
whatsoever, except with the written consent of the Landlord, then the
Landlord shall be at liberty to enter in or on the Premises or any part
thereof and pull down and take away and remove any such sign,
advertisement or notice, and the expense thereof shall be payable by the
Tenant.
3. The Tenant shall not bring in or take out, position, construct, install or
move any safe, business machine or other heavy office equipment without
first obtaining the consent in writing of the Landlord. In giving such
consent, the Landlord shall have the right in its sole discretion to
prescribe the weight permitted and the position thereof, and the use and
design of planks, skids or platforms to distribute the weight thereof. All
damage done to the Building by moving or using any such heavy equipment or
other office equipment or furniture shall be repaired at the expense of
the Tenant.
4. No public or private auction or other similar type of sale of any goods,
wares or merchandise shall be conducted in or from the Premises without
the written permission of the Landlord.
5. The toilets, urinals, sinks and other water apparatus shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown
therein. Any damage resulting by misuse shall be borne by the Tenant.
6. No showcases or other articles shall be put in front of or affixed to any
part of the exterior of the Building.
7. No space in the Building shall be used for any immoral or illegal purpose,
lodging, sleeping, or the storage of personal effects or articles other
than those required for business purposes.
8. If the Tenant desires telephone or other connections, the Landlord will
direct the installers/electricians as to where and how the wires are to be
introduced, and without such directions no boring or cutting for wires
will be permitted. No pipes or wires or conduits will be permitted which
have not been ordered or authorized in writing by the Landlord, and no
outside radio or television aerials shall be allowed on the Building
without authorization in writing by the Landlord. The Tenant shall not
mark, drill into, bore or cut or in any way damage the walls, ceilings or
floors of the Building without the Landlord's prior written approval. No
broadloom or carpeting shall be affixed to the Building by means of a
non-soluble adhesive or similar product.
9. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by the Tenant, nor shall any changes whatsoever be made
to existing locks or the mechanisms thereof except by the Landlord, at its
option. The Tenant shall not permit any duplicate keys to be made.
Additional keys as are reasonably required shall be supplied by the
Landlord when requested by the Tenant in writing and such keys shall be
paid for by the Tenant, and upon termination of the Tenant's Lease, the
Tenant shall surrender to the Landlord all keys to the Premises and the
Building.
10. Nothing shall be placed on the outside of window sills or projections of
the Building.
11. The Tenant shall not permit any commercial cooking in the Building without
the written consent of the Landlord.
12. All garbage and refuse shall be kept in the kind of containers specified
by the Landlord and shall not be burned in or about the Premises.
13. The Landlord shall have the right to make such other and further
reasonable rules as in its judgment may from time to time be helpful for
the safety, care, cleanliness and appearance of the Premises and the
Building, and for the preservation of good order therein, and the same
shall be kept and observed by the Tenant and its Invitees.
Free-Standing, Industrial - May, 1994
<PAGE>
SCHEDULE "D"
SPECIAL PROVISIONS
1. The Landlord represents and warrants that the building is structurally
sound and that all of the heating, air conditioning, electrical and
plumbing equipment (including sprinklers) (hereinafter to be referred to
as the "Equipment") shall be in good repair and operating condition at the
commencement of the Term and shall provide a certificate to that effect
for any equipment that is not new at the commencement of the Term.
2. The Landlord covenants to provide the Premises to the Tenant in a broom-
swept condition.
3. The Tenant hereby agrees that it shall have sole responsibility for the
cost of the annual maintenance of the sprinklers in the Premises and for
any upgrades or changes to the sprinklers required during the Term as a
result of the Tenant's use of the Premises. The Landlord agrees that in
the event that during the first year of the Term there is a malfunction of
the sprinklers which is not occasioned by an act or omission of the Tenant
or any of its Invitees, it shall, for a period of three years thereafter,
be resposible for any increase in the Tenant's insurance premiums for
contents insurance arising as a result of a claim resulting from such
malfunction.
4. The Landlord hereby agrees to remove any existing signs affixed to the
Premises at its sole cost and expense.
5. The Landlord hereby agrees that it shall be solely responsible for the
payment of any real estate commissions owing to the listing agents as a
result of the leasing of the Premises to the Tenant.
6. Building Area
It is understood and agreed that the rental of the Building is based upon
approximately 47,104 square feet of net rentable area. Within thirty (30)
days after the commencement of the Term, the Landlord shall provide an
architect's certificate determining the exact net rentable area, and that
any adjustments in the actual area of the Building shall result in a
corresponding adjustment in rent payable. Calculation of net rental area
shall be made in accordance with the applicable B.O.M.A. standards.
7. First Refusal to Purchase
(i) If at any time during the first three (3) years of the original term
of this Lease, the Landlord receives a bona fide offer to purchase
the Premises which the Landlord is willing to accept, the Landlord
shall give written notice of the offer to the Tenant by sending to
it a true copy of the offer and the Tenant shall have the right,
during the 72 hours after the giving of such notice, by written
notice to the Landlord, to elect to purchase the Premises for the
price and upon the terms and conditions contained in the offer.
(ii) If the Tenant does so elect, the notice given by it shall constitute
a binding agreement of purchase and sale. If the Tenant does not
elect, the Landlord shall be free to sell the Premises on the terms
and condtions set forth in the offer. If the Premises are not sold
pursuant to the offer, the Landlord shall be obliged to submit any
further offer to the Tenant by giving written notice of it to the
Tenant in the manner provided in sub-paragraph (i).
(iii) The rights of the Tenant set forth in sub-paragraphs (i) and (ii)
shall not be enforceable against any assignee of the freehold.
Free-Standing, Industrial - May, 1994
<PAGE>
SCHEDULE "E"
FIXTURING SCHEDULE
PART 1 - DEFINITIONS
1.1 In this Fixturing Schedule terms defined in the Landlord's Standard Form of
Lease are used with the meanings so defined and the following additional defined
terms have the meanings indicated:
"Design Specifications" means the standards and procedures specified by the
Landlord from time to time as applicable to any work or material to be done to
the Premises including, without limitation, the preparation and approval of
plans in the conduct and completion of Tenant's Work. Without limiting the
generality of the foregoing, the Design Specifications shall relate to the
architectural, mechanical, and Utilities standards and specifications required
by the Landlord.
"Landlord's Work" means all items of work specified in Part 3.
"Landlord's Work on Tenant's Behalf" means all the work described in this
Fixturing Schedule to be performed by or on behalf of the Landlord at the
Tenant's expense.
"Lease" means the offer, agreement or lease to which this Fixturing Schedule is
attached or incorporated by reference.
"Plans" means plans, specifications and drawings.
"Premises Outline" means the plans described as such in Section 2.1.
"Final Tenant Plans" means the final plans described in Part 2 as approved by
the Landlord.
"Tenant's Work" means all items of work described or referred to in Section 4.7
of this Schedule.
PART 2 - PLANS AND APPROVALS
2.1 Premises Outline
The Landlord may provide to the Tenant a Premises Outline consisting
of one or more plans which show the approximate dimensions of the Premises and
the approximate location of its boundary walls and which may show the
approximate location of mechanical equipment and Utilities serving the Premises.
2.2 Design Specifications
The Tenant agrees that all Tenant's Work and plans shall conform to
the Design Specifications.
2.3 Tenant's Plans
The Tenant shall submit to the Landlord preliminary and final Plans
and a completion schedule for the Tenant's Work in accordance with the
requirements and procedures set out in the Design Specifications. The approval
of Final Tenant Plans by the Landlord for all the Tenant's Work is required
prior to the commencement of any such work. The Landlord may require revisions
to such plans as a condition of its approval. The Landlord may remove or correct
at the expense of the Tenant, any Tenant's Work which is not done in accordance
with the plans, information and revisions delivered to and approved by the
Landlord or is not otherwise in accordance with the requirements of the Lease
and the Design Specifications and which has not been removed or corrected
forthwith after request by the Landlord. The Landlord's approval of plans shall
not constitute an assumption of any responsibility by the Landlord for their
accuracy or sufficiency, or their compliance with applicable Laws and the Tenant
shall be solely responsible for all such items.
2.4 Plan Review Charge
INTENTIONALLY DELETED.
PART 3 - LANDLORD'S WORK
3.1 Existing Premises
The Tenant accepts the Premises in an "as is" condition except for
completion of any further work which is specified in this Fixturing Schedule or
the Lease to be done by the Landlord at the Landlord's expense.
3.2 Floors
If the Tenant's use of the Premises requires any allowable live
floor load to be increased, the Landlord shall perform the upgrading work at the
Tenant's expense.
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<PAGE>
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3.3 Landlord's Work
The Landlord agrees that it shall, at its sole cost and expense,
prior to the commencement of the Term, carry out the work set forth on Schedule
"E-1" hereto.
PART 4 - CONDUCT OF TENANT'S WORK
General Rules Regarding Tenant's Work
4.1 Tenant's Contractors
The Tenant shall obtain the Landlord's approval of any general
contractor or subcontractor whom the Tenant proposes to involve in the
completion of the Tenant's Work prior to retaining same. The Tenant shall obtain
or cause its contractors to obtain commercial general liability insurance
against personal and bodily injury, including death, and property damage on an
occurrence basis and having limits of not less than Two Million ($2,000,000.00)
Dollars in respect of any one occurrence and such insurance shall be in force
prior to the Tenant or its contractors gaining access to the Premises, if
required by the Landlord.
4.2 Landlord's Access for Inspection
All Tenant's Work shall be subject to the inspection, supervision
and approval of the Landlord. The Landlord and its authorized employees and
agents shall have access to the Premises at all times for the purpose of
inspecting the Tenant's Work or conducting the Landlord's Work.
4.3 Accuracy of Landlord's Plans
The Landlord makes no representations in respect of the accuracy
(and is not responsible for any inaccuracy) of any dimensions shown on any
Plans.
The Tenant acknowledges it is its sole responsibility to confirm to
its satisfaction prior to commencing any of the Tenant's Work, that any and all
dimensions shown on the Premises Outline, Final Tenant Plans and any other plans
are accurate and conform to actual measurements and dimensions.
4.4 Structure
The Tenant shall not, without the prior written consent of the
Landlord, allow or cause any conduit, pipe sleeves, chases or duct equipment
opening in any floors, columns, walls or roofs of the Premises or the Building
to be cut or drilled or allow or cause to be imposed upon any floor area of the
Premises or the Building a greater working load than the maximum allowable live
load of such floor area, or cause to be suspended from the underside of the
roof, roof structure, or ceiling, any load other than normal ceiling and
lighting loads. The Landlord shall perform, at the Tenant's expense, any work
contemplated by the Final Tenant Plans which may affect the integrity of any
base building component.
4.5 Commencement of Tenant's Work
No Tenant's Work shall be commenced or undertaken until all
procedural and approval requirements contained in this Fixturing Schedule
(including the Design Specifications) have been satisfied by the Tenant.
4.6 On-Site Plans
The Tenant shall keep accessible within the Premises during the
conduct of any Tenant's Work, one set of Final Tenant Plans with the Landlord's
consent endorsed thereon.
4.7 Tenant's Work
The Tenant shall carry out and complete, promptly, and in a good and
workmanlike manner, all work necessary to prepare the Premises including
ceilings, plumbing, electrical, metering, fire-rating and any other work,
improvements or finishings necessary to prepare the Premises for its use
including the demolition and disposal of any existing improvements and fixtures
in the Premises, as well as any alterations to such items and the Premises
proposed to be done by the Tenant at any time during the Term. All such work
shall only be undertaken and carried out in compliance with the Final Tenant
Plans, the Design Specifications and this Fixturing Schedule.
PART 5 - PAYMENT SCHEDULE
5.1 Landlord's Work at Tenant's Expense
The Tenant shall upon receipt of an invoice therefor from the
Landlord pay the cost of all Landlord's Work at the Tenant's Expense and any
other work undertaken, performed or paid by the Landlord on the Tenant's behalf.
In the absence of an agreement between the Landlord and the Tenant to the
contrary, the cost of such work shall include the actual cost of all labour,
materials, taxes and architectural, engineering and contractors' fees, and an
administration fee equal to fifteen percent (15%) of the total of such costs.
Free-Standing, Industrial - May, 1994
<PAGE>
-3-
In the absence of actual cost figures the Landlord shall preparea reasonable
estimate of the cost and the Tenant shall make payments based on such estimate
in accordance with this section. Appropriate adjustments shall be made between
the parties when the work is completed and actual costs are known. This
paragraph shall not apply to the work referred to in paragraph 3.3 herein.
Free-Standing, Industrial - May, 1994
<PAGE>
SCHEDULE "E-1"
LANDLORD'S WORK
Ground Floor
Re-configure offices on ground floor in a lay-out to be agreed upon between
the Landlord and the Tenant (all to be done substantially similar to existing
construction)ith the Landlord's standard finishes , which will consist of the
following:
28 oz. broadloom complete with carpet base ($16.00/square yard allowance),
ceramic tile flooring only in office washrooms, 3 5/8" metal stud partition
complete with 1/2" drywall on both sides to underside of ceiling, 3 piece hollow
metal door frame complete with standard paint grade wood flush door, standard 2'
x 4' acoustical suspended T-bar ceiling system complete with 2' x 4' fluorescent
light fixtures to standard office foot candle rating, 2 coat latex paint finish
on walls (1 colour throughout).
Existing washrooms and other office areas which are not to be renovated, shall
be cleaned and/or repaired and painted as required.
Second Floor
Construct on second floor a studio area in a lay-out to be agreed upon,
finishings to be the same as for ground floor except where otherwise expressly
provided herein, including washrooms consisting of standard ceramic tile
flooring only, plumbing fixtures and/or vanities similar to existing, 3 5/8"
metal stud partition complete with sound insulation (washroom only) and 1/2"
drywall both sides to underside of ceiling, 2' x 4' suspended acoustical T-bar
ceiling complete with mechanical ventilation and 2 coats of semi-gloss paint
finish on walls. The Landlord shall construct stairs from the existing entrance
to the west of the existing office to the second floor which shall be used as
the main access point for this area.
Lunchroom to consist of the following:
vinyl tile floor complete with vinyl base, 1 stainless steel sink in a 6'-0"
long counter (melamine finish), 3 5/8" drywall partition complete with 1/2"
drywall on both sides, 2' x 4' suspended acoustical T-bar ceiling system and 2
coat semi-gloss latex paint finish on walls.
Warehouse Plant
Install two new truck-level overhead doors (high lift) at rear of Premises,
together with dock levellers (25,000 lbs. capacity, semi-automatic), bumpers,
neoprene door seals and related grading and paving.
Install additional heating equipment in plant area as necessary to meet local
building codes.
Free-Standing, Industrial - May, 1994
<PAGE>
SCHEDULE "G"
OPTION TO EXTEND
1.1 The Tenant may extend this Lease for 2 successive periods of 5 years (each
of which period is called an "Extension"), commencing on the day following the
date of expiration of the initial term of this Lease or the first such
Extension, as the Case may be, provided that the Tenant shall only be entitled
to extend this Lease in the event that it:
(a) has duly and regularly paid the Rent and has observed and performed
each and every one of the covenants and agreements herein to be
performed by the Tenant, on a timely basis, until the time that the
option is exercised and thereafter until the Extension in question
takes effect;
(b) the Tenant is the original tenant under this Lease and is itself in
possession of the whole, of the Premises;
(c) advises the Landlord in writing that it wishes to extend this Lease
not more than 12 months and not less than 6 months prior to the
expiration of the initial term of this lease or the then current
Extension, as the case may be, failing which this right of Extension
shall be rendered null and void.
1.2 If the Tenant exercises its right to extend in accordance with the
foregoing, this Lease shall be extended upon the same terms and conditions
herein contained, save and except as follows:
(a) the Tenant shall only be entitled to a total aggregate number of
Extensions equal to the number of successive periods referred to
above so that there will be no further right to extend following the
exercise of the 2nd right to extend. For greater certainty, it is
hereby stipulated that if the Tenant exercises all of the within
rights of Extension in accordance with this Lease, the Tenant shall
be entitled to lease the Premises for a total of 10 years following
the expiration of the initial term of this Lease, unless this Lease
is sooner terminated;
(b) the Landlord will not be required to perform the Landlord's Work, if
any, and the Tenant will not be required to perform the Tenant's
Work, if any, and the Tenant will not be entitled to any leasehold
improvement allowance, tenant inducement or rent free period;
(c) the Net Rent payable during each year of an Extension shall be the
greater of the current fair market rental value of the Premises at
the time the right of Extension is exercised and the Net Rent
payable in the immediately preceding Lease Year. In the event that
the Net Rent which shall be applicable during the Extension has not
been mutually agreed upon by the Landlord and the Tenant at least 3
months prior to the expiry of the initial term or the then current
Extension, as the case may be, by reason of the parties' inability
to agree upon the current fair market rental of the Premises, the
said fair market rental shall be determined by arbitration by a
single arbitrator chosen by the Landlord and the Tenant, and if they
cannot agree upon the arbitrator within 5
<PAGE>
days after a written request for arbitration by either party to the
other, either party may apply to a judge for the appointment of an
arbitrator in accordance with the provisions of the Arbitrations Act
(Ontario). The provisions of the Arbitrations Act shall govern the
arbitration and the decision of the arbitrator shall be final and
binding upon the parties and there shall be no appeal therefrom. The
arbitrator shall be instructed to render its decision no later than
15 days prior to the expiry of the initial term or the then current
Extension, as the case may be. All documents and proceedings with
respect to the arbitration are to be kept confidential by each of
the parties.
1.3 The exercise of the within rights of Extension are solely within the control
of the Tenant and nothing contained in this Lease, including, without
limitation, this Schedule, obligates or requires the Landlord to remind the
Tenant to exercise the within rights of Extension.
<PAGE>
Exhibit 10.32
THIS AGREEMENT made this 13th day of July, 1995
B E T W E E N:
N.H.D. PROPERTIES LIMITED
(hereinafter referred to as the "Landlord")
- and -
ONTARIO PAINT AND WALLPAPER LIMITED
(hereinafter referred to as the "Tenant")
WHEREAS by a Lease dated the 6th day of July, 1994 (the "Lease"),
the Landlord leased to the Tenant certain premises containing approximately
65,152 square feet consisting of the premises known municipally as 731 Millway
Avenue, Vaughan, Ontario for a period of ten (10) years commencing upon the
first day of November, 1994 and ending upon the last day of October, 2004;
AND WHEREAS the Landlord and the Tenant now wish to amend the Lease;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
sum of Ten ($10.00) Dollars now paid by each of the parties hereto to the other,
the mutual covenants and premises herein contained, and other good and valuable
consideration (the receipt and sufficiency of which is hereby irrevocably
acknowledged by the parties), the parties covenant and agree that the Lease
shall be amended to provide as follows:
2. During the period from August 1, 1995 until the end of the term of the Lease
(the "Term") the second floor of the Building consisting of 12,798 square feet
(the "Additional Space") shall be added to the Premises and the following
changes shall be made to the Lease:
(a) paragraph 3 of the Key Item Index shall be deleted and the following shall
be substituted therefor:
3. SQUARE FOOTAGE OF THE BUILDING
77,950
(b) paragraph 5 of the Key Item Index shall be deleted and the following shall
be substituted therefor:
5. NET RENT
ANNUALLY MONTHLY
-------- -------
$3.34 per square foot per annum. $260,027.00 $21,668.92
5.1 MAINTENANCE FEE
ANNUALLY MONTHLY
-------- -------
$0.20 per square foot per annum. $13,030.40 $1,085.87
5.2 MANAGEMENT FEE
$250.00 per month.
(c) paragraphs 3 and 4 of Schedule "D" of the Lease shall be deleted.
3. The Tenant shall provide to the Landlord a security deposit in the amount of
$2,662.25 to be held by the Landlord as security for the faithful performance of
the Tenant of all of its obligations contained in the Lease. The Landlord may,
at its option, in addition to any other rights and remedies which it may have,
use, apply or retain the whole or any part of the said deposit to the extent
required to rectify any default of the Tenant under the Lease and, in the event
that it does so, the Tenant shall replenish the same upon demand from the
Landlord. Upon expiry of the Term, the Landlord shall return to the Tenant the
balance of the security deposit remaining after application of the security
deposit towards rectification of any default by the Tenant of its obligations
contained in the Lease.
4. Except as otherwise herein provided, the terms of the Lease shall apply
during the period of the extension, with the necessary changes.
5. The recitals are accurate and true and together with any Schedules attached
hereto form part of this Agreement.
6. This Agreement shall enure to the benefit of, and shall be binding upon, the
parties and their respective heirs, executors, successors and permitted assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
SIGNED, SEALED AND DELIVERED ) N.H.D. PROPERTIES LIMITED
in the presence of )
)
) PER: /s/ EDWARD K. SORBARA
) --------------------------------
) EDWARD K. SORBARA
)
) I have authority to bind the
) Corporation.
)
) ONTARIO PAINT & WALLPAPER LIMITED
)
)
) PER: /s/ N.G. Maxwell
) --------------------------------
) Name: N.G. Maxwell
) Title: V.P. Finance
)
) I have authority to bind the
) Corporation.
<PAGE>
NET, FREE-STANDING-CAMPUS.IND
L E A S E
INDEX
PART 1 - DEMISE AND INTERPRETATION
1.1 Demise
1.2 Schedules
1.3 Basic Principles
1.4 Interpretation
PART 2 - PREMISES
2.1 Zoning
PART 3 - NET RENT
3.1 Net Rent
3.2 Tenant to Pay Rent
3.3 INTENTIONALLY DELETED
3.4 Deposits
PART 4 - TENANT'S COVENANT TO PAY OPERATING COSTS, TAXES AND UTILITIES
4.1.1 Business Taxes
4.1.2 Realty Taxes
4.1.3 Sales Taxes
4.1.4 Water Rates
4.1.5 Utilities
4.1.6 Insurance
4.1.7 Management Fee
PART 5 - TENANT'S OTHER COVENANTS
5.1.1 Rules
5.1.2 Use of Premises
5.1.3 Damage
5.1.4 Nuisance
5.1.5 Exhibiting Premises
5.1.6 Overholding
5.1.7 Heat
5.1.8 Invoices and Receipts
5.1.9 Compliance with Laws
PART 6 - TRANSFERS
6.1.1 Consent Required
6.1.2 Conditions
6.1.3 No Release
6.1.4 Processing Fee
PART 7 - LANDLORD'S COVENANTS
7.1.1 Quiet Enjoyment
7.1.2 Taxes
PART 8 - INSURANCE
8.1 Landlord's Insurance
8.2 Tenant's Insurance
8.3 Increase in Insurance Premiums
8.4 Cancellation of Insurance
8.5 Mutual Release
8.6 Mutual Indemnity
PART 9 - REPAIRS AND MAINTENANCE
9.1 Landlord's Repairs
9.2 Tenant's Repairs
9.3 Repair Where the Tenant is at Fault
9.4 Tenant Not to Overload Facilities
9.5 Entry by the Landlord
9.6 Preservation of Premises
<PAGE>
-2-
INDEX CONTINUED...
PART 10 - DAMAGE AND DESTRUCTION
10.1 Destruction of Premises
PART 11 - TENANT'S ALTERATIONS
11.1 Alterations to Premises
11.2 Removal of Fixtures
11.3 Surrender of Premises
11.4 Signs
PART 12 - DEFAULTS
12.1 Landlord May Perform Tenant's Covenants
12.2 Default
12.3 Re-Entry
12.4 Remedies Generally
12.5 Distress
12.6 Default by Landlord
12.7 Effect of Termination
12.8 Accord and Satisfaction
PART 13 - LANDLORD'S TITLE
13.1 Condemnation
13.2 Expropriation
13.3 Assignment of Landlord's Interest
13.4 Priority of Lease
13.5 Liens
13.6 Registration
PART 14 - GENERAL
14.1 Non-Waiver
14.2 Force Majeure
14.3 Entire Agreement
14.4 Public Policies
14.5 Planning Act
14.6 Notice
14.7 Severability
14.8 Counterparts
14.9 Certificates
14.10 Amendments
14.11 No Offer
14.12 Joint and Several
14.13 Enurement
14.14 Authorization
14.15 Construction
PART 15 - INDEMNITY
15.1
SCHEDULES
"A" - Optional
"B" - Definitions
"C" - Rules
"D" - Special Provisions
"E" - Fixturing Schedule
"F" - DELETED
<PAGE>
KEY ITEM INDEX
1. BUILDING
731 Millway Avenue, Vaughan, Ontario
2. TERM
Ten (10) years commencing on November 1, 1994 and ending on October 31,
2004.
3. SQUARE FOOTAGE OF THE BUILDING
65,152
4. USE
Warehousing and distribution of wallpapers and paint and related office
and distribution uses.
5. NET RENT
ANNUALLY MONTHLY
-------- -------
$3.50 per square foot per annum. $228,032.00 $19,002.67
5.1 MAINTENANCE FEE
ANNUALLY MONTHLY
-------- -------
$0.20 per square foot per annum. $13,030.40 $1,085.87
5.2 MANAGEMENT FEE
$250.00 per month.
6. MANAGER AND MANAGER'S ADDRESS
MANAGER: Sorbara Services Inc.
ADDRESS: 3700 Steeles Avenue West
Suite 800
Woodbridge, Ontario
L4L 8M9
7. RENT DEPOSIT
$16,288.00
8. SECURITY DEPOSIT
N/A
9. TENANT'S ADDRESS FOR SERVICE PRIOR TO COMMENCEMENT DATE
c/o Torkin, Manes, Cohen & Arbus
Barristers and Solicitors
151 Yonge Street
Suite 1500
Toronto, Ontario
M5C 2W7
Attention: P. Christo
SCHEDULES:
"A" - Optional
"B" - Definitions
"C" - Rules
"D" - Special Provisions
"E" - Fixturing Schedule
"F" - DELETED
<PAGE>
LEASE
THIS LEASE, made on the 6 day of July 1994
B E T W E E N:
N.H.D. PROPERTIES LIMITED
(hereinafter called the "Landlord")
OF THE FIRST PART;
- and -
ONTARIO PAINT & WALLPAPER LIMITED
(hereinafter called the "Tenant")
OF THE SECOND PART;
PART 1 - DEMISE AND INTERPRETATION
1.1 In consideration of the rents, covenants and agreements which the Tenant
has agreed to pay, observe and perform, the Landlord hereby leases and
demises the Premises to the Tenant for the Term at the rent and upon the
other terms and conditions of this Lease.
1.2 The Key Item Index and all Schedules to this Lease form part of this
Lease. In the event of any conflict between the terms of this Lease and
the terms of Schedule "D", the terms of Schedule "D" shall apply to the
extent of the conflict.
1.3 This Lease is a business agreement in respect of the leasing of real
property. Each party agrees to act in good faith and in a commercially
reasonable manner in accordance with this Lease in enjoying and performing
its rights and obligations in this Lease and where the consent or approval
by a party is required regarding any matter, such approval shall not,
unless otherwise specified herein, be unreasonably withheld or delayed. It
is agreed that this Lease shall be an absolutely net lease for the
Landlord and that Rent shall be received by the Landlord free of any cost
or obligation concerning the Premises unless specified in this Lease. Each
provision of this Lease applicable to each party although not expressed as
a covenant, shall be construed to be a covenant of such party for all
purposes and each party covenants to perform its covenants hereunder.
1.4 This Lease shall be construed in accordance with the laws of the Province
of Ontario. The parties attorn to the exclusive jurisdiction of the courts
of Ontario to deal with all actions in respect of this Lease. The section
headings of this Lease and the Table of Contents, if any, have been
inserted for convenience of reference only and shall not be referred to in
the interpretation of this Lease. This Lease shall be read with all
changes of gender and number required by the context. Time shall be of the
essence of this Lease and each of the provisions hereof.
PART 2 - PREMISES
2.1 The Tenant has satisfied itself that the use permitted by this Lease
conforms to all existing Laws and agrees that its covenants and
obligations herein contained shall not be affected in the event it is or
hereafter becomes disentitled, in whole or in part, from carrying on the
aforesaid use in or upon the Premises.
PART 3 - NET RENT
3.1 From and after the Commencement Date, the Tenant shall pay to the Landlord
an annual net rent (hereinafter referred to as "Net Rent") calculated at
the rate set forth in paragraph 5 of the Key Item Index.
Net Rent so calculated shall be payable in equal monthly instalments in
advance on the first day of each month. If the Commencement Date is not
the first day of a month, or the Term expires on a day which is not the
last day of a month, the first or last instalment of Net Rent as the case
may be shall be payable on the Commencement Date for the broken portion of
the month at the beginning of the Term, or the first day of the month for
the broken period at the end of the Term, calculated at a per diem rate of
1/365th of the then annual Net Rent.
3.2 The Tenant covenants to pay Rent without any deduction, abatement or set
off except as specified in this Lease, without any prior demand therefor.
All Rent in arrears shall bear interest at the Prescribed Interest Rate
from the date on which the same became due until the date of payment. All
Rent shall be paid by the Tenant to the Landlord at the address in Key
Item 6 or to such other person or at such other place in Canada as the
Landlord or the Manager may designate in writing from time to time.
3.3 INTENTIONALLY DELETED.
3.4 The parties acknowledge that the Tenant has deposited with the Landlord a
deposit in the amount set forth in Key Item 7 on account of the first Rent
to be due during the Term.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
- 2 -
PART 4 - TENANT'S COVENANT TO PAY OPERATING COSTS, TAXES AND UTILITIES
4.1 The Tenant shall pay:
.1 on a timely basis to the appropriate municipality all Business Taxes
properly owing in respect of each and every business conducted at,
in, upon, through or from the Premises during the Term by the Tenant
or any other person;
.2 to the Landlord all Realty Taxes imposed or assessed against the
Premises or any part thereof, or against the Landlord on account of
the Premises, their use or occupation.
Prior to the commencement of each calendar year during the Term, the
Landlord will estimate the Realty Taxes for the next calendar year
and the Tenant will pay one-ninth of the estimated amount in nine
consecutive, monthly instalments, payable on the first day of each
of the first nine months of the ensuing calendar year.
Notwithstanding the foregoing, if on any such payment date the
Landlord has not received from the Tenant sufficient tax instalments
to pay the full amount of the Realty Taxes then owing, the Tenant
shall forthwith, upon demand, pay to the Landlord the amount of the
deficiency.
If the first and last years of the Term are not full calendar years,
the Tenant shall pay the Realty Taxes for those years (pro-rated
accordingly) as estimated by the Landlord, upon demand, provided
that no demand may be made unless the Realty Taxes demanded are
payable, paid or will not fall due until after the end of the Term.
Where Realty Taxes are estimated by the Landlord all necessary
adjustments will be made when the final tax bills for the year in
question have been received;
.3 any Sales Taxes upon demand. The Landlord shall, upon the request of
the Tenant, prepare and execute such forms as may be necessary to
establish the amount that the Tenant has paid to the Landlord under
this section;
.4 directly to the appropriate authorities when due all water rates
that may be levied, rated, charged or assessed against the Premises,
such amounts to be estimated by the Landlord and paid by the Tenant
to the Landlord monthly;
.5 directly to the appropriate authorities when due all charges for
Utilities used upon or in respect of the Premises and for fittings,
machines, apparatus, meters or other things leased in respect
thereof and for all work or services performed by any person in
connection with such Utilities or equipment;
.6 to the Landlord on a monthly basis the cost of the insurance
maintained by the Landlord pursuant to Section 8.1 of this Lease,
which insurance the Landlord warrants will be competively priced;
.7 on a monthly basis on the first day of each month, a management fee
calculated at the rate set forth in paragraph 5.2 of the Key Item
Index; and
.8 pay to the Landlord, on a monthly basis, the Landlord's cost of
conducting exterior maintenance to the Premises including, without
limitation, the cost of painting every three years, snow removal,
landscaping, fencing, exterior lighting, non-structural roof
repairs, paving repairs and any work required to be carried out by
any duly constituted government authority not required as a result
of the Tenant's use and occupancy of the Premises. The Tenant agrees
that it shall pay to the Landlord, on a monthly basis on the first
day of the month, a maintenance fee at the rate set out in paragraph
5.1 of the Key Item Index in respect of such costs;
PART 5 - TENANT'S OTHER COVENANTS
5.1 The Tenant covenants with the Landlord that it shall:
.1 observe, and ensure that all of its Invitees observe, the Rules;
.2 use the Premises only for the purpose set out in paragraph 4 of the
Key Item Index and for no other purpose. The Tenant shall not use or
permit or suffer the use of the Premises or any part thereof to
generate, manufacture, refine, treat, transport, store, handle,
dispose of, transfer, produce or process any Hazardous Substances
except in strict compliance with all applicable federal, provincial
or municipal laws or regulations, including, without limitation,
environmental, land use, occupational, health and safety laws,
regulations, requirements or permits, and only if the use of such
Hazardous Substances are necessary for the conduct of the Tenant's
business in compliance with the use permitted in this section.
Without limiting the generality of the foregoing, the Tenant shall
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
- 2 -
PART 4 - TENANT'S COVENANT TO PAY OPERATING COSTS, TAXES AND UTILITIES
4.1 The Tenant shall pay:
.1 on a timely basis to the appropriate municipality all Business Taxes
properly owing in respect of each and every business conducted at,
in, upon, through or from the Premises during the Term by the Tenant
or any other person;
.2 to the Landlord all Realty Taxes imposed or assessed against the
Premises or any part thereof, or against the Landlord on account of
the Premises, their use or occupation.
Prior to the commencement of each calendar year during the Term, the
Landlord will estimate the Realty Taxes for the next calendar year
and the Tenant will pay one-ninth of the estimated amount in nine
consecutive, monthly instalments, payable on the first day of each
of the first nine months of the ensuing calendar year.
Notwithstanding the foregoing, if on any such payment date the
Landlord has not received from the Tenant sufficient tax instalments
to pay the full amount of the Realty Taxes then owing, the Tenant
shall forthwith, upon demand, pay to the Landlord the amount of the
deficiency.
If the first and last years of the Term are not full calendar years,
the Tenant shall pay the Realty Taxes for those years (pro-rated
accordingly) as estimated by the Landlord, upon demand, provided
that no demand may be made unless the Realty Taxes demanded are
payable, paid or will not fall due until after the end of the Term.
Where Realty Taxes are estimated by the Landlord all necessary
adjustments will be made when the final tax bills for the year in
question have been received;
.3 any Sales Taxes upon demand. The Landlord shall, upon the request of
the Tenant, prepare and execute such forms as may be necessary to
establish the amount that the Tenant has paid to the Landlord under
this section;
.4 directly to the appropriate authorities when due all water rates
that may be levied, rated, charged or assessed against the Premises,
such amounts to be estimated by the Landlord and paid by the Tenant
to the Landlord monthly;
.5 directly to the appropriate authorities when due all charges for
Utilities used upon or in respect of the Premises and for fittings,
machines, apparatus, meters or other things leased in respect
thereof and for all work or services performed by any person in
connection with such Utilities or equipment;
.6 to the Landlord on a monthly basis the cost of the insurance
maintained by the Landlord pursuant to Section 8.1 of this Lease,
which insurance the Landlord warrants will be competively priced;
.7 on a monthly basis on the first day of each month, a management fee
calculated at the rate set forth in paragraph 5.2 of the Key Item
Index; and
.8 pay to the Landlord, on a monthly basis, the Landlord's cost of
conducting exterior maintenance to the Premises including, without
limitation, the cost of painting every three years, snow removal,
landscaping, fencing, exterior lighting, non-structural roof
repairs, paving repairs and any work required to be carried out by
any duly constituted government authority not required as a result
of the Tenant's use and occupancy of the Premises. The Tenant agrees
that it shall pay to the Landlord, on a monthly basis on the first
day of the month, a maintenance fee at the rate set out in paragraph
5.1 of the Key Item Index in respect of such costs;
PART 5 - TENANT'S OTHER COVENANTS
5.1 The Tenant covenants with the Landlord that it shall:
.1 observe, and ensure that all of its Invitees observe, the Rules;
.2 use the Premises only for the purpose set out in paragraph 4 of the
Key Item Index and for no other purpose. The Tenant shall not use or
permit or suffer the use of the Premises or any part thereof to
generate, manufacture, refine, treat, transport, store, handle,
dispose of, transfer, produce or process any Hazardous Substances
except in strict compliance with all applicable federal, provincial
or municipal laws or regulations, including, without limitation,
environmental, land use, occupational, health and safety laws,
regulations, requirements or permits, and only if the use of such
Hazardous Substances are necessary for the conduct of the Tenant's
business in compliance with the use permitted in this section.
Without limiting the generality of the foregoing, the Tenant shall
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
- 4 -
performance of any of its covenants under this Lease and the Tenant
shall continue to be bound by this Lease. If this Lease is
disclaimed or terminated by any trustee in bankruptcy of any
transferee of this Lease, the original Tenant named in this Lease,
upon notice from the Landlord shall enter into a lease with the
Landlord upon the same terms and conditions as contained herein
except for the duration of the term which shall commence on the date
of such disclaimer or termination and which shall expire on the date
this Lease would have expired if such disclaimer or termination had
not occurred. The liability of the Tenant in this Section 6.1.3
shall continue during the Term and during any period during which it
is extended pursuant to any right to extend granted to the Tenant
pursuant to this Lease; and
.4 Prior to the Landlord delivering any requested consent, the Tenant
shall pay to the Landlord by certified cheque a processing fee of
Five Hundred ($500.00) Dollars for each request by the Tenant for
consent to Transfer.
PART 7 - LANDLORD'S COVENANTS
7.1 The Landlord covenants with the Tenant as follows:
.1 the Landlord covenants with the Tenant for quiet enjoyment, and that
the Landlord shall perform and observe all covenants in this Lease
required to be performed and observed by it; and
.2 that the Landlord will pay promptly when due all taxes, rates,
duties, levies and assessments properly charged against the Premises
or against the Landlord in respect of the Premises subject to the
Landlord's right to postpone, contest or appeal payment of any such
taxes, rates, duties, levies or assessments. This provision shall in
no way be interpreted so as to relieve the Tenant from its
obligations to pay Realty Taxes or any other taxes chargeable to the
Tenant under this Lease.
PART 8 - INSURANCE
8.1 The Landlord shall take out and maintain with respect to the
Premises:
.1 commercial general liability insurance;
.2 building insurance on the standard commercial building broad form
(commonly referred to as the "All-Risk" wording);
.3 boiler and machinery insurance on the standard comprehensive form on
its equipment, including roof-top equipment and electrical
installations; and
.4 loss of rental income insurance including amounts payable by the
Tenant to the Landlord as Additional Rent.
The Landlord, acting reasonably, shall determine all policy terms
including deductibles and shall be entitled to maintain such other
insurance as it considers advisable. Nothing contained herein shall
require the Landlord to maintain any insurance with respect to any
loss, injury or damage required to be insured against by the Tenant
or with respect to Tenant Property. The proceeds of the Landlord's
insurance shall belong to the Landlord although some portions of
same may be applied to reduce Operating Costs as provided in this
Lease.
8.2 The Tenant shall, at all times, maintain:
.1 commercial general liability insurance against personal and bodily
injury, including death, and property damage, with respect to the
Tenant's business and the Premises and the use and occupancy
thereof, on an occurrence basis to such limits as the Landlord,
acting reasonably, requires from time to time, but in any event not
less than Two Million ($2,000,000.00) Dollars for any one
occurrence;
.2 insurance with coverage on the standard commercial property broad
form and/or commercial building broad form (i.e. "all risk") fully
covering the Premises and the Tenant Property. The insurance
required by this section 8.2 shall be for 100% of the current
replacement cost and shall be subject only to deductibles and
exclusions as the Landlord, acting reasonably, may approve;
.3 business interruption insurance including loss of profits in an
amount sufficient to prevent co-insurance penalties for
under-insurance; and
.4 such other forms of insurance, including boiler and machinery
insurance and pollution liability insurance, as the Tenant or the
Landlord or any mortgagee of the Premises, acting reasonably,
requires from time to time in form, in amounts and for insurable
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risks against which a prudent tenant would insure.
All insurance to be effected by the Tenant shall be in amounts and
upon terms which the Landlord shall from time to time, acting
reasonably, determine to be sufficient. Such insurance shall provide
that the Landlord is to be given at least thirty (30) days' written
notice of any cancellation or change in the terms of coverage and
shall include the Landlord as an additional named insured and
contain cross-liability and severability of interest provisions, as
applicable. The Tenant shall, from time to time upon demand by the
Landlord, provide to the Landlord certificates or other proof
reasonably required by it to establish that the Tenant has insurance
in effect which complies with the terms of this section 8.2. If the
Tenant fails to insure, to file proof thereof, or if the Landlord
receives notice of any cancellation of the Tenant's insurance, the
Landlord may effect such insurance and the Tenant shall pay to the
Landlord on demand the amount of any premiums paid therefor. If this
Lease expires or is terminated at a time when the Premises or
Leasehold Improvements are damaged or destroyed as a result of a
peril required to be insured against by the Tenant, the Tenant shall
pay to the Landlord free of any encumbrance, an amount equal to the
proceeds of insurance which it receives or would have received if it
had maintained the insurance required hereunder with respect to such
damage or destruction.
8.3 The Tenant shall not, by act or omission, permit anything to be
done, in or upon the Premises which could impair or invalidate any
policy of insurance on the Premises or any part thereof or which
could result in the premium for any such policy being increased. In
the event of a breach of this section 8.3 by the Tenant, it shall
promptly after the receipt of notice from the Landlord specifying
the nature of its default, at the option of the Landlord, take such
steps as are necessary to remedy the breach, pay the full amount of
any such increase, or both. In the event of the cancellation or a
threatened cancellation of any such policy, the Landlord shall have
the right to immediately enter upon the Premises or any part thereof
and take reasonable steps to remedy the breach and recover the cost
of doing so from the Tenant.
8.4 If the cause of any threatened cancellation of insurance referred to
in section 8.3 cannot be remedied in time to prevent the non-renewal
or cancellation of insurance the Landlord shall be entitled to
terminate this Lease effective upon written notice to the Tenant.
8.5.1 The Landlord and the Tenant hereby remise, release, and forever
discharge the other from all actions, manner of actions, causes of
actions, claims, suits and obligations which it has, or may
hereafter have against the other for or concerning, or by reason of,
or in any way connected with or arising out of, or in consequence
of, an occurrence which the releasing party is insured against or
which it is required to be insured against pursuant to this Lease.
For greater certainty, it is hereby stipulated that the within
release shall apply whether or not the claim being released was a
result of the negligence of the released party or of any person for
whom it is responsible in law. Notwithstanding the foregoing, the
within release shall not apply to damage incurred by the Tenant as a
result of the Landlord's failure to maintain the roof of the
Premises in accordance with its obligations contained in this Lease.
.2 Notwithstanding anything else herein contained, the release referred
to in section 8.5.1 shall only apply to the extent that the
releasing party receives proceeds of insurance, or it would have
received proceeds of insurance if it had obtained the insurance
required to be obtained by it pursuant to this Lease, and the said
release shall have no application to the amount of the excess of any
claim above and beyond the proceeds of insurance which would have
been received by the releasing party if it had held all of the
insurance required to be obtained by it pursuant to this Lease. For
greater certainty, it is hereby stipulated that the release referred
to in section 8.5.1 shall apply to the deductible paid by the
releasing party pursuant to any policy of insurance held pursuant to
the terms of this Lease.
.3 For the purposes of this section 8.5 only, the Landlord shall
include the Manager.
8.6 To the extent not released under section 8.5, each party shall
indemnify and save harmless the other from all claims, demands,
causes of action, liabilities, damages, losses or expenses
(hereinafter in this section 8.6 to be collectively referred to as
the "Liabilities") arising out of or occasioned by:
.1 any breach by the indemnifying party of any covenant or condition,
or term of this Lease;
.2 any contract, lien on the Premises; and
.3 an act, default or the negligence of the indemnifying party, its
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officers, agents, servants, employees, contractors, customers,
invitees or licensees.
For greater certainty, it is agreed by each of the parties that,
notwithstanding anything else contained in this Lease, the
obligations contained in this section 8.6 shall survive the
expiration or earlier termination of this Lease.
8.7 The Landlord shall, from time to time upon demand by the Tenant,
provide to the Tenant certificates or other proof reasonably
satisfactory to it to establish that the Landlord has insurance in
effect which complies with the terms of Section 8.1.
PART 9 - REPAIRS AND MAINTENANCE
9.1 The Landlord will, subject to section 9.2 and Part 10, at its sole
cost and expense, maintain and repair, or cause to be maintained and
repaired, as would a prudent owner of a reasonably similar
industrial premises, the structure of the Premises, including,
without limitation, the foundations, exterior wall assemblies
including weather walls, sub-floor, roof structure, bearing walls,
and structural columns and beams of the building on the Premises,
and at the cost of the Tenant to carry out the maintenance in
respect of the items referred to in Section 4.1.8 herein.
9.2 The Tenant shall, subject to Section 4.1.8 herein:
(a) be responsible for all routine and periodic maintenance and
replacement necessary to keep the Premises and their installations
in a good state of repair, reasonable wear and tear excepted, as
would a prudent owner including, any work required to be carried out
by any duly constituted government authority;
(b) replace any glass broken in the Premises including outside windows
and doors on the perimeter of the Premises;
(c) keep in force at times during the Term servicing contracts with
licensed contractors for the service and maintenance of heating
units, air-conditioning units, furnaces (hereinafter referred to
collectively as "HVAC Units"), electrical mains and any pressure
vessels in use by the Tenant in the Premises such contracts to be on
industry standard terms and to provide the Landlord with copies
thereof upon demand. In the event that, during the Term any of the
HVAC Units require replacement, the Tenant shall install a new unit
at its own expense. Upon the expiration or other termination of this
Lease and prior to the return of the Security Deposit, the Tenant
shall deliver to the Landlord a certificate issued by a licensed
service contractor indicating that all HVAC Units are in a good
state of maintenance and repair and are suitable for operation in
accordance with all Laws and the rules and regulations of all
applicable utility authorities;
(d) notify the Landlord, in writing, of any defect or deficiency in,
malfunction of, or damage to, the Premises or any equipment or
Utilities therein or thereon immediately after same comes to the
attention of the Tenant;
9.3 Notwithstanding anything else contained herein, if the Premises or
any part therein or thereof, or any equipment, machinery, facilities
or improvements contained therein or made thereto, or the roof
structure or outside walls of the Premises or any other structural
portions thereof require repair or replacement or become damaged or
destroyed through the use, occupation, negligence, carelessness or
misuse of the Tenant or its Invitees, or by such persons in any way
stopping up or damaging the HVAC Units, water pipes, drainage pipes
or other equipment or facilities or parts of the Premises, the cost
of repair shall be paid by the Tenant to the Landlord as Additional
Rent within five (5) days after presentation of an account of such
costs incurred by the Landlord.
9.4 The Tenant will not install any equipment which will exceed or
overload the capacity of any utility, electrical or mechanical
facilities in the Premises and the Tenant will not bring onto the
Premises or install any utility, electrical or mechanical facility
or service which the Landlord does not approve. The Tenant agrees
that if any equipment installed by the Tenant requires additional
utility, electrical or mechanical facilities, the Landlord may, in
its sole discretion, if they are available, elect to install them at
the Tenant's expense and in accordance with plans and specifications
to be approved in advance in writing by the Landlord.
9.5 The Landlord, its employees, contractors and agents shall be
entitled to enter the Premises for any purpose permitted or
contemplated by this Lease including, without limitation, to effect
any repair required or permitted to be made by the Landlord, to
effect any repair which is the responsibility of the Tenant and
which it fails to make when required, to calculate the area of the
Premises or any part thereof, to view the state of repair and
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maintenance of the Premises or any part thereof, to confirm that the
Tenant is complying with its obligations hereunder (including,
without limitation, the Tenant's obligations respecting Hazardous
Substances and compliance with environmental laws and regulations,
in respect to which the Landlord shall be entitled to conduct an
environmental audit or any further testing required to ensure such
compliance) or to obtain information for plans, provided that such
entry is made upon reasonable notice to the Tenant. In exercising
its rights under this section 9.5, the Landlord shall take
reasonable efforts to minimize the interference with the conduct of
the Tenant's business.
9.6 The Landlord shall have the right to do such work in or upon the
Premises as may be necessary to preserve or protect the Premises.
PART 10 - DAMAGE AND DESTRUCTION
10.1(a) If the Premises are destroyed or damaged (including, without
limitation, smoke and water damage) as a result of fire, the
elements, accident or other casualty required to be insured against
by the Landlord pursuant to this Lease or otherwise insured against
by the Landlord and not caused by the Tenant, and if as a result of
such occurrence:
(i) the Premises are rendered wholly or partially untenantable,
this Lease will continue in full force and effect and the
Landlord shall, subject to subsections 10.1(b) and 10.2(a),
commence diligently to restore the Premises to the Base
Standard (hereinafter in this Part 10 to be referred to as the
"Landlord's Restoration Work") and then only to the extent of
the insurance proceeds actually received by the Landlord, and
only Net Rent (but not Additional Rent) will abate entirely or
proportionately, as the case may be, to the portion of the
Premises rendered untenantable from the date of the
destruction or damage until the Landlord has completed the
Landlord's Restoration Work;
(ii) the Premises are not rendered untenantable in whole or in
part, the Lease will continue in full force and effect, the
Rent will not abate and the Landlord shall, subject to
subsection 10.1(b), commence diligently to carry out the
Landlord's Restoration Work.
(b) Notwithstanding subsection 10.1(a), if the Premises are damaged or
destroyed by any cause whatsoever, and if, in the opinion of a duly
licensed architect retained by the Landlord, acting reasonably, the
Premises cannot be rebuilt or made fit for the use provided for in
this Lease within ninety (90) days of the damage or destruction, the
Landlord instead of carrying out the Landlord's Restoration Work
may, at its option, elect to terminate this Lease by notice in
writing to the Tenant. In the case of such election, the Term and
the tenancy hereby created will expire upon the thirtieth (30th) day
after such notice is given, without indemnity or penalty payable by,
or any other recourse against, the Landlord, and the Tenant shall,
within such thirty (30) day period, vacate and surrender the
Premises to the Landlord. Rent will be due and payable until the
date of termination in accordance with the provisions of section
10.1 of this Lease.
(c) Upon the Tenant being notified in writing by the Landlord that the
Landlord's Restoration Work has been substantially completed, the
Rent shall re-commence and the Tenant will forthwith complete the
work necessary to restore the Premises to the condition existing
prior to the damage or destruction (the "Tenant's Restoration Work")
and all other work required to fully restore the Premises for
business.
(d) Notwithstanding the foregoing, the Landlord shall be entitled to
change the specifications of the Base Standard as same existed prior
to such damage or destruction and restore according to plans,
specifications, and working drawings other than those used in the
original construction of the Premises, provided that the Premises,
as re-built, will have reasonably similar facilities and services to
those in the Premises prior to the damage or destruction having
regard, however, to the age of the Premises at such time.
PART 11 - TENANT'S ALTERATIONS
11.1 The Tenant may, at any time, and from time to time, at its expense,
paint or decorate the Premises and appurtenances, and make such
changes, alterations, additions and improvements as will in the
judgment of the Tenant better adapt the Premises for the purpose of
its business provided that:
(a) no structural changes, alterations, additions or improvements shall
be made without the written consent of the Landlord;
(b) all changes, alterations, additions and improvements shall
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comply with all Laws;
(c) the Tenant shall pay to the Landlord, upon demand, the amount of any
increase in Realty Taxes or the cost of the insurance maintained by
the Landlord over the Premises, to the extent that such increases
are attributable to an action by the Tenant under this paragraph;
(d) nothing herein shall entitle the Tenant to make any changes to, or
installations upon, the roof of the Premises;
The Landlord shall be entitled, at any time and without notice to the
Tenant, to remove or to rectify, at the expense of the Tenant, any item
which was not erected in compliance with this section.
11.2 Leasehold Improvements shall become the property of the Landlord
upon installation. The Tenant shall not remove any Leasehold
Improvements whether at the expiration or sooner termination of the
Term, unless requested to do so by the Landlord in which case the
Tenant shall remove such Leasehold Improvements as are designated by
the Landlord and, if so requested by the Landlord, restore the
Premises to the Base Standard not later than the expiration or
sooner termination of the Term. For greater certainty, it is hereby
stipulated that the Tenant shall not be required to remove any
Leasehold Improvements that existed prior to the making of any
modifications to the Premises by the Tenant or by the Landlord on
behalf of the Tenant, or any Leasehold improvements made by the
Landlord pursuant to its obligations contained in this Lease. If not
in default, the Tenant may, on the expiration or sooner termination
of the Term, remove from the Premises all Tenant Property provided
that it repairs any damage to the Premises which may be caused by
installation or removal of the Tenant Property and leave the
Premises in a neat and tidy condition which the Tenant hereby
covenants to do. The Tenant shall lose its right (but not the
obligation) to remove and retain all Tenant Property, and all
fixtures, furnishings or equipment affixed in any manner to the
Premises not removed on the expiry or sooner termination of the
Term.
11.3 The Tenant shall surrender to the Landlord at the end of the Term
(whether the Term ends by expiry or other termination) the Premises
and all Leasehold Improvements not permitted or required to be
removed, all in good and substantial repair and condition in
accordance with this Lease. The Tenant shall, prior to the end of
the Term, at its cost, remove from the Premises any Hazardous
Substances which are or have been located, stored or incorporated in
or on any part of the Premises by the Tenant. This provision shall
survive the expiration or earlier termination of this Lease.
11.4 The Tenant shall have the right to erect signs on the Premises
denoting its tenancy therein, provided that such signs conform with
all municipal by-laws governing such signs, and the Tenant has,
prior to erecting the signs, received the written approval of the
Landlord as to the type and placement of the signs to be erected.
PART 12 - DEFAULTS
12.1 If the Landlord provides to the Tenant written notice of a default
in its obligations contained in this Lease (other than a default
respecting the payment of Rent) and the Tenant does not rectify such
default within ten (10) days thereafter or during such longer period
as may be reasonably required in the circumstances to cure such
default, the Landlord shall be entitled to remedy such default and
the cost to the Landlord of doing so together with interest thereon
at the Prescribed Interest Rate from the date of default, shall be
paid by the Tenant to the Landlord forthwith upon demand therefor by
the Landlord. Nothing in this section 12.1 shall replace or abrogate
the Landlord's right to exercise any of its other rights hereunder
which rights are in addition to those contained in this section. In
the event of an emergency, the Landlord shall be entitled to proceed
to remedy a default without first providing notice to the Tenant.
12.2 A default of this Lease shall have occurred if:
.1 the tenant defaults in the payment of any Rent (including, without
limitation, any regularly scheduled payment on account of Additional
Rent);
.2 the Tenant defaults in the payment of any Additional Rent which is
not a regularly scheduled payment of Additional Rent, and the
default continues for a period of five (5) days following notice
from the Landlord;
.3 the Tenant fails to cure a default under this Lease (other than a
default respecting the payment of Rent) within ten (10) days or such
longer period as may be reasonably required in the circumstances to
cure such default after receiving notice from the Landlord to do so;
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.4 any property of the Tenant becomes subject to an execution which
remains outstanding for more than ten (10) days; a receiver of any
property of the Tenant is appointed; the Tenant or any guarantor or
indemnifier of this Lease makes an assignment for the benefit of
creditors or makes any assignment or has a receiving order made
against it under the Bankruptcy Act and Insolvency Act, or becoming
bankrupt or insolvent makes application for relief under the
provisions of any statute now or hereafter in force concerning
bankrupt or insolvent debtors, or any action whatever, legislative
or otherwise, is taken with a view to the winding up, dissolution or
liquidation of the Tenant or any guarantor or indemnifier of this
Lease;
.5 any insurance policy is cancelled or not renewed by an insurer by
reason of the use or occupation of the Premises;
.6 the Tenant makes any bulk sale or removes any substantial part of
the Tenant Property from the Premises other than pursuant to a
permitted Transfer or by reason of same no longer being required for
the conduct of the Tenant's business provided that other Tenant
Property of equal or greater value and utility is contemporaneously
substituted therefor;
.7 re-entry is permitted under any other provision of this Lease or in
law.
12.3 In the event of the occurrence of a default as defined in section
12.2, the then current month's Rent together with the Rent for the
three (3) months next ensuing shall immediately become due and
payable, and at the option of the Landlord the Term shall become
forfeited and void, and the Landlord may without notice or any form
of legal process whatsoever forthwith re-enter the Premises,
anything contained in any statute or law to the contrary
notwithstanding, and may expel all persons and remove all property
from the Premises and such property may be removed and sold or
disposed of by the Landlord as it deems advisable or may be stored
in a public warehouse or elsewhere at the cost and for the account
of the Tenant without the Landlord being considered guilty of
trespass or conversion or becoming liable for any loss or damage
which may be occasioned thereby, provided, however, that such
forfeiture shall be wholly without prejudice to the right of the
Landlord to recover arrears of Rent and damages for any antecedent
default by the Tenant of its covenants under this Lease. Should the
Landlord at any time terminate this Lease by reason of any such
event, then, in addition to any other remedies it may have, it may
recover from the Tenant all damages it may incur as a result of such
termination.
12.4 The rights of the Landlord in this Lease are cumulative and not
alternatives and reference to any particular right, remedy or
remedies of the Landlord in respect of any default by the Tenant
shall not preclude the Landlord from exercising any and all of its
other rights and remedies in respect thereof, whether available at
law, in equity, by statute, or expressly provided for herein. No
right or remedy shall be exclusive or dependent upon any other right
or remedy, and the Landlord may from time to time exercise any one
or more of such rights and remedies generally or in combination. The
Landlord shall have the same rights and remedies for collection of
Additional Rent in arrears as it has for the collection of Net Rent
whether such rights exist by virtue of this Lease, statute, common
law or equity.
12.5 The Tenant waives the benefit of any law or statute limiting the
Landlord's right to distress and agrees that none of the Tenant's
goods, fixtures, chattels or other property shall be exempt from
distress for arrears of Rent.
12.6 The Tenant shall not have or exercise any right or remedy with
respect to a default by the Landlord unless it provides to the
Landlord written notice of the default and the Landlord fails to
cure the default within ten (10) days or such longer period as may
be reasonably required in the circumstances to cure such default.
12.7 The right of the Landlord to recover arrears of Rent and the right
of each party to recover damages for an antecedent default by the
other shall not be affected by the expiry or termination of this
Lease whether by elapse of time or by the exercise of any right of
either the Landlord or the Tenant pursuant to this Lease.
12.8 No payment by the Tenant or receipt by the Landlord of a lesser
amount than the Rent herein stipulated shall be deemed to be other
than on account of the earlier stipulated Rent, nor shall any
endorsement or statement on any cheque or any letter accompanying
any cheque or payment of Rent be deemed an accord and satisfaction,
and the Landlord may accept such cheque or payment without prejudice
to the Landlord's rights to recover the balance of such Rent or
pursue any other remedy provided in this Lease.
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PART 13 - LANDLORD'S TITLE
13.1 If the Premises or any part thereof is condemned or declared unfit
for public use by any competent body, the Landlord shall be entitled
to terminate this Lease by notice in writing to the Tenant.
13.2 The Landlord and the Tenant agree to co-operate with the other in
respect of any expropriation of all or any part of the Premises, so
that each may receive the maximum award in the case of any
expropriation to which they are respectively entitled at law.
13.3 The Landlord, at any time and from time to time, may sell, transfer,
lease, assign or otherwise dispose of the whole or any part of its
interest in the Premises or any part thereof or enter into a
mortgage of the whole or any part of its interest in the Premises
and upon any party acquiring the interest of the Landlord to the
Premises, the Landlord shall thereupon be released from all of its
covenants under this Lease.
13.4 Provided that the Tenant receives a non-disturbance agreement on
terms reasonably satisfactory to it from each mortgagee of the
Premises, this Lease and all rights of the Tenant under this Lease
are subject and subordinate to all mortgages now or hereafter made
by the Landlord, except that the holder of any such mortgage may
subordinate and postpone such mortgage to this Lease at any time by
an instrument in writing to such effect registered against the title
to the Premises without any further consent or agreement of the
Tenant. The Tenant, if so requested, shall attorn to such mortgagee
when such mortgagee takes possession of the Premises and to any
purchaser of the Premises and shall recognize such mortgagee or
purchaser as the Landlord under this Lease.
13.5 The Tenant shall, at its own expense, immediately discharge or
vacate all construction, mechanics' or other liens or executions
that may be filed during the Term against this Lease, the Premises
or any part thereof with respect to any work or services performed
or goods or material furnished at the request of, for, or on behalf
of, the Tenant.
13.6 The Tenant shall not register this Lease or any part thereof but may
register, with the prior approval of the Landlord, a notice or
caveat in respect thereof, which notice or caveat shall disclose
only the existence and Term of this Lease and such other
non-financial terms as the Landlord may approve.
PART 14 - GENERAL
14.1 A waiver by either party of any breach or non-compliance by the
other party under any provision of this Lease and a waiver by either
party of any term or condition of this Lease shall not be a waiver
of any continuing or subsequent breach or failure of any other
provision, term or condition, and any forbearance or failure to seek
a remedy for any breach or failure shall not be a waiver of any
rights and remedies with respect to such or any subsequent breach or
failure.
14.2 In the event that either party shall, by reason of Force Majeure, be
unable to fulfil, or shall be delayed or restricted in the
fulfilment of, any obligation (other than the payment of any money)
under any provision of this Lease, such party shall, so long and to
the extent that any such impediment exists, be relieved from the
fulfilment of such obligation and shall be granted a reasonable
period of time to fulfil the obligation once the Force Majeure
ceases to exist and the other party shall not be entitled to
compensation for any resulting loss, damage, inconvenience, nuisance
or discomfort.
14.3 This Lease contains the whole agreement between the parties with
respect to the subject matter of this Lease. There is no promise,
inducement, representation, warranty, collateral agreement or
condition affecting the Premises or any part thereof, the business
to be conducted by the Tenant, or this Lease other than as expressed
in this Lease. All representations and inducements made by either
party or their representatives which are relied upon by the other
party are contained herein and each party disclaims reliance on any
other representation or inducements.
14.4 The terms and conditions of this Lease including those related to
the provisions of Utilities shall be automatically amended from time
to time to the extent necessary for the Landlord to comply with any
directive, policy or request of a governmental or quasi-governmental
authority acting in the fields of energy, conservation, waste
management and disposal, security or other area of public interest.
14.5 Any notice provided for in this Lease shall be addressed to the
Landlord at the address at which Rent is to be paid pursuant to
section 3.2 or in default of such address having been determined at
3700 Steeles Avenue West, Suite 800, Woodbridge, Ontario, L4L 8M9
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and to the Tenant or the Indemnifier at the Premises after the
Commencement Date and at the address set forth in paragraph 9 of the
Key Item Index prior to such date. Notices shall be in writing and
signed by the party giving the notice and shall be effectively given
by registered mail or by delivery to the said address. Any written
notice so given shall be deemed to have been given three (3) postal
delivery days after the day it was so mailed by registered mail or
upon the day it was so delivered. Any party may, from time to time
by notice to the other(s), change its address for the purpose of any
subsequent notice. The Manager shall be entitled to sign a notice on
behalf of the Landlord.
14.6 To the extent that any provision of this Lease or the application
thereof to any person or circumstance is held to be invalid or
unenforceable by a court of competent jurisdiction, the remainder of
this Lease or the application of such provision to persons or
circumstances other than those to which it is held invalid or
unenforceable shall not be affected thereby and each provision of
this Lease shall be separately valid and enforceable to the fullest
extent permitted by law.
14.7 The Tenant hereby expressly waives the benefits of Section 35 of the
Landlord and Tenant Act and any amendments thereto and of any
present or future act of the Legislature of the Province of Ontario
permitting the Tenant to claim a Set-Off against the Rent to be paid
hereunder for any cause whatsoever.
14.8 Each party at any time and from time to time within ten (10) days
after notice from the other shall execute and deliver to the other a
written statement addressed to such persons as the party requesting
the certificate may require, certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating
the modifications and that the same is in full force and effect as
modified), the amount of the Rent then being paid under this Lease,
the dates to which the same, and the other sums provided in this
Lease to be paid by the Tenant, have been paid, the Commencement
Date and duration of the Term and stating whether or not there is
any existing default of which it has notice, and the particulars and
amount of insurance policies on the Premises.
14.9 Each party agrees that the following certificates shall be
conclusive and binding in respect of any question of fact or opinion
with respect to the following matters:
.1 a certificate procured by the Landlord from an architect,
professional engineer, land surveyor or other qualified individual
as to: the area of any part of the Premises; any question of fact
concerning the completion of any construction or other work, either
by the Landlord or the Tenant; the extent to which the completion of
any work or obligation has been delayed by Force Majeure; the cause
of any destruction or damage and the extent and duration for which
the Premises or any part thereof will be incapable of being used for
its intended purposes by reason of any destruction or damage; and
.2 a certificate procured by the Landlord from a licensed public
accountant including, without limitation, the Landlord's auditor,
respecting any question of fact or opinion concerning the
computation, determination or allocation of Additional Rent or the
proper amount of any payment to the Landlord or the Tenant under
this Lease.
Any certificate procured by the Landlord shall be prepared using
generally accepted practices and procedures appropriate to such
certificate.
14.10 This Lease may not be amended or altered except by an instrument in
writing signed by the Landlord and the Tenant and such alteration
shall be binding upon the Indemnifier whether or not it is executed
by the Indemnifier.
14.11 The submission by the Landlord to the Tenant of this Lease shall
have no binding force or effect, shall not constitute an option for
leasing the Premises, or confer any rights or impose any obligations
upon either party until the execution and delivery of this Lease by
the Tenant and the Landlord.
14.12 If two or more persons comprise the Tenant, the liability of each is
joint and several. If the Tenant is a partnership or other business
association, the members of which are subject to personal liability,
the liability of each member is joint and several.
14.13 This Lease shall enure to the benefit of and be binding upon the
parties hereto, and their permitted heirs, executors,
administrators, successors and assigns. No successor or assign of
the Tenant shall be entitled to claim any benefit or to enforce this
Lease unless the Transfer to it was made in full compliance with the
requirements of this Lease, or was subsequently ratified by the
Landlord in writing.
14.14 The Tenant covenants that it has all requisite power and possesses
all licenses, franchises, permits, consents, approvals and other
rights necessary to enable it to enter into this Lease and carry out
its obligations herein.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
- 12 -
14.14 Notwithstanding any rule or maxim of construction to the contrary,
any ambiguity or uncertainty shall not be construed against any
party hereto by reason of the authorship of any of the provisions
hereof.
PART 15 - INDEMNITY
15.1 INTENTIONALLY DELETED.
IN WITNESS WHEREOF the parties hereto have executed this Lease.
SIGNED, SEALED AND DELIVERED ) Landlord:
in the presence of )
) N.H.D. PROPERTIES LIMITED
)
)
) PER:
) -----------------------------------------
) Name: EDWARD K. SORBARA
) Title: President
)
) I have authority to bind the Corporation.
)
) Tenant:
)
) ONTARIO PAINT & WALLPAPER LIMITED
)
)
) PER:
) -----------------------------------------
) Name:
) Title:
)
)
) PER:
) -----------------------------------------
) Name:
) Title:
) I/We have authority to bind the Corporation.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
SCHEDULE "B"
In this Lease the following expressions shall have the following meanings:
"Additional Rent" shall mean all amounts payable by the Tenant to the Landlord
or to any other person pursuant to this Lease (other than Net Rent);
"Base Standard" means the state of the Premises before the addition of any
modifications by the Tenant or by the Landlord on behalf of the Tenant other
than those which the Landlord has specifically agreed to make pursuant to this
Lease. Notwithstanding the foregoing, for the purpose of Part 10 of this Lease
"Base Standard" shall mean in respect of the building premises which are
finished with the standard building base systems in respect of electricity and
plumbing and which have installed therein all perimeter windows, and bare
concrete floors and walls, in compliance with the then applicable building
standards.
"Business Taxes" means business taxes or assessments or any other taxes,
assessments, rates and levies in respect of the existence of, or any use,
enjoyment, possession or occupancy of, or business carried on in or upon the
whole or any portion of the Premises imposed by any governmental authority
having jurisdiction, but does not include Realty Taxes.
"Change in Control" means, in the case of any corporation or partnership, the
transfer, by sale, assignment, operation of law, transmission on death,
mortgage, trust, issuance from treasury, cancellation or redemption, or
otherwise, of any shares, voting rights or interest, which will result in a
change of the identity of the person exercising, or who might exercise,
effective control of such corporation or partnership whether directly or
indirectly, unless such change occurs as the result of trading in shares listed
upon a recognized stock exchange.
"Commencement Date" means the first day of the Term.
"Design Specifications" has the meaning provided in the Fixturing Schedule, if
such a schedule is attached to this Lease.
"Fixturing Schedule" means the provisions set forth in Schedule "E" to this
Lease, if such a schedule is attached to this Lease.
"Force Majeure" means a fire, inclement weather, strike, lock-out or other
casualty or contingency beyond the reasonable control and not the fault of the
party thereby affected (including, without limitation, any delays caused by any
failure of a utility or other authority to approve any application of the
Landlord or take any action required by the Landlord to carry out its
obligations hereunder), where the effects of such casualty or contingency are
not avoidable by the exercise of reasonable effort or foresight by such party
(but does not include insolvency, lack of funds, or other financial casualty or
contingency).
"Hazardous Substances" means any contaminant, pollutant, dangerous substance,
potentially dangerous substance, noxious substance, toxic substance, hazardous
waste, flammable, explosive, radioactive material, urea formaldehyde foam
insulation, asbestos, PCBs and substances or any other materials now or
hereafter declared or defined to be hazardous, toxic, contaminants or pollutants
in or pursuant to any Laws.
"Invitees" when used in respect of the Tenant shall include its officers,
directors, employees, customers, suppliers, clients, contractors, agents,
invitees and other persons for whom it is responsible at law.
"Key Item Index" shall mean the index identified as such and attached to the
front of this Lease.
"Laws" shall mean the laws, by-laws, ordinances, orders, rules and regulations
of all county, municipal, regional, provincial or federal government or
governmental authority having jurisdiction over the Tenant or the Premises in
force during the Term;
"Leasehold Improvements" means all fixtures, improvements, installations,
alterations and additions from time to time made, constructed, erected or
installed in or to the Premises with the exception of the Tenant Property;
"Manager" means the party set forth in paragraph 6 of the Key Item Index being
the Landlord's authorized agent and manager for the Premises or such replacement
as the Landlord may appoint from time to time.
"Mortgage" includes a mortgage, pledge, charge, hypothec, privilege, encumbrance
or any other financing arrangement and "Mortgagee" means the holder of any of
the foregoing.
"person" means any individual, corporation, partnership, trust, other legal
entity or other business association and includes a government or departmental
subdivision thereof.
"Premises" means the building described municipally in paragraph 1 of the Key
Item Index which contains approximately the number of square feet (as determined
in accordance with the applicable B.O.M.A. standards) set out in paragraph 3 of
the Key Item Index.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
- 2 -
"Prescribed Interest Rate" means, with respect to any period, a rate of interest
which is three (3) percentage points per annum above the rate of interest per
annum established by the Landlord's Bank, as a reference rate of interest to
determine the interest rates such bank will charge for Canadian dollar
commercial loans to its customers in Canada and which such bank quotes or
publishes as its "prime rate".
"Realty Taxes" means all real property, municipal, school or local improvement
taxes, assessments or charges or any other taxes, assessments or charges imposed
upon or in respect of any real property from time to time by any governmental
authority, including any costs incurred by the Landlord in determining or
verifying the propriety or reasonableness of or contesting the same in good
faith, excluding Business Taxes and any income or profits taxes upon the income
of the Landlord, to the extent any such tax is not imposed in lieu of any tax,
assessment or charge upon or in respect of the Premises or upon the Landlord in
respect thereof. If any other taxes, assessments or charges are imposed by any
governmental or regulatory authority upon or in respect of all or any portion of
the Premises, the revenues therefrom or the Landlord, in substitution for or in
addition to any Realty Taxes from time to time imposed, then any such other tax,
assessment or charge shall be deemed to be a Realty Tax.
"Rent" means Net Rent and Additional Rent.
"Rules" means the rules, procedures and requirements as amended and supplemented
from time to time (initially as set forth in Schedule "C" to this Lease),
governing the manner in which the Tenant shall operate and conduct its business.
"Sales Taxes" shall mean any goods and services, sales, business transfer,
multi-stage sales, use, consumption, value-added or other similar taxes imposed
by the Government of Canada, or by any provincial or local government, upon the
Landlord or the Tenant on or in respect of this Lease, the payments made by the
Tenant hereunder or the goods and services provided by the Landlord, including
but not limited to, the rental of the Premises and provision of administrative
services to the Tenant or to others.
"Tenant Property" means the trade fixtures, chattels, merchandise, personal
effects and signs of the Tenant in or upon the Premises.
"Term" shall mean the period set forth in paragraph 2 of the Key Item Index and
any further period during which the Tenant is in possession of the Premises
pursuant to a validly exercised right to extend the Term granted pursuant to
this Lease;
"Transfer" means any assignment, sublease, Change in Control, or parting with
possession, or any other transaction or occurrence (including an expropriation,
amalgamation, receivership, seizure by execution or other legal process or the
granting by the Tenant of a pledge, Mortgage or other security interest) which
has or might have the effect of changing the identity of the Tenant or the
person controlling the Tenant, or, changing the identity of the person having
use, occupancy or possession of the whole or any part of the Premises, whether
such change is or might be immediate, deferred, conditional, exclusive,
non-exclusive, permanent or temporary.
"Utilities" means water, sewer, gas, fuel, electricity, telephone, waste
disposal and other utilities or services or any combination thereof.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
SCHEDULE "C"
RULES
1. The skylights and windows that reflect or admit light into passageways or
into any place in the Premises shall not be covered or obstructed by the
Tenants, and no awnings shall be put up without the prior written consent
of the Landlord.
2. If any sign, advertisement or notice shall be inscribed, painted or
affixed by the Tenant on or to any part of the Premises or the Premises
whatsoever, except with the written consent of the Landlord, then the
Landlord shall be at liberty to enter in or on the Premises or any part
thereof and pull down and take away and remove any such sign,
advertisement or notice, and the expense thereof shall be payable by the
Tenant.
3. The Tenant shall not bring in or take out, position, construct, install or
move any safe, business machine or other heavy office equipment without
first obtaining the consent in writing of the Landlord. In giving such
consent, the Landlord shall have the right in its sole discretion to
prescribe the weight permitted and the position thereof, and the use and
design of planks, skids or platforms to distribute the weight thereof. All
damage done to the Premises by moving or using any such heavy equipment or
other office equipment or furniture shall be repaired at the expense of
the Tenant.
4. No public or private auction or other similar type of sale of any goods,
wares or merchandise shall be conducted in or from the Premises without
the written permission of the Landlord.
5. The toilets, urinals, sinks and other water apparatus shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown
therein. Any damage resulting by misuse shall be borne by the Tenant.
6. No showcases or other articles shall be put in front of or affixed to any
part of the exterior of the Premises.
7. No space in the Premises shall be used for any immoral or illegal purpose,
lodging, sleeping, or the storage of personal effects or articles other
than those required for business purposes.
8. If the Tenant desires telephone or other connections, the Landlord will
direct the installers/electricians as to where and how the wires are to be
introduced, and without such directions no boring or cutting for wires
will be permitted. No pipes or wires or conduits will be permitted which
have not been ordered or authorized in writing by the Landlord, and no
outside radio or television aerials shall be allowed on the Premises
without authorization in writing by the Landlord. The Tenant shall not
mark, drill into, bore or cut or in any way damage the walls, ceilings or
floors of the Premises without the Landlord's prior written approval. No
broadloom or carpeting shall be affixed to the Premises by means of a
non-soluble adhesive or similar product.
9. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by the Tenant, nor shall any changes whatsoever be made
to existing locks or the mechanisms thereof except by the Landlord, at its
option. The Tenant shall not permit any duplicate keys to be made.
Additional keys as are reasonably required shall be supplied by the
Landlord when requested by the Tenant in writing and such keys shall be
paid for by the Tenant, and upon termination of the Tenant's Lease, the
Tenant shall surrender to the Landlord all keys to the Premises and the
Premises.
10. Nothing shall be placed on the outside of window sills or projections of
the Premises.
11. The Tenant shall not permit any commercial cooking in the Premises without
the written consent of the Landlord.
12. All garbage and refuse shall be kept in the kind of containers specified
by the Landlord and shall not be burned in or about the Premises.
13. The Landlord shall have the right to make such other and further
reasonable rules as in its judgment may from time to time be helpful for
the safety, care, cleanliness and appearance of the Premises and the
Premises, and for the preservation of good order therein, and the same
shall be kept and observed by the Tenant and its Invitees.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
SCHEDULE "D"
SPECIAL PROVISIONS
1. The Landlord represents and warrants that the Building is structurally
sound and that all of the heating, air-conditioning, electrical and
plumbing equipment (including sprinklers) (hereinafter to be referred to
as the "Equipment") shall be in good repair and operating condition at the
commencement of the Term and shall provide a certificate to that effect
for any equipment that is not new at the commencement of the Term.
2. The Landlord covenants to provide the Premises to the Tenant in a broom-
swept condition.
3. Mezzanine
The Tenant hereby acknowledges that it is not entitled to the use of the
mezzanine contained in the Premises, and that the Landlord, upon
installing a separate entrance to the mezzanine, shall be entitled to use
the mezzanine for its own purposes, or lease the mezzanine to another
party, provided that the mezzanine shall only be used for office purposes
or purposes appropriate given the existence of an office use on the first
floor.
4. The Landlord hereby represents and warrants to the Tenant that in setting
the maintenance fee to be payable by the Tenant it has considered that the
mezzanine does not constitute part of the Premises.
5. The Tenant hereby agrees that it shall have sole responsibility for the
cost of the annual maintenance of the sprinklers in the Premises and for
any upgrades or changes to the sprinklers required during the Term as a
result of the Tenant's use of the Premises. The Landlord agrees that in
the event that during the first year of the Term there is a malfunction of
the sprinklers which is not occasioned by an act or omission of the Tenant
or any of its Invitees, it shall, for a period of three years thereafter,
be responsible for any increase in the Tenant's insurance premiums for
contents insurance arising as a result of a claim resulting from such
malfunction.
6. The Landlord hereby agrees to remove any existing signs affixed to the
Premises at its sole cost and expense.
7. The Landlord hereby agrees that it shall be solely responsible for the
payment of any real estate commissions owing to the listing agents as a
result of the leasing of the Premises to the Tenant.
8. Building Area
It is understood and agreed that the rental of the Building is based upon
approximately 65,152 square feet of net rentable area. Within thirty (30)
days after the commencement of the Term, the Landlord shall provide an
architect's certificate determining the exact net rentable area, and that
any adjustments in the actual area of the Building shall result in a
corresponding adjustment in rent payable. Calculation of net rental area
shall be made in accordance with the applicable B.O.M.A. standards.
First Refusal to Purchase
(i) If at any time during the first three (3) years of the original term
of this Lease, the Landlord receives a bona fide offer to purchase
the Premises which the Landlord is willing to accept, the Landlord
shall give written notice of the offer to the Tenant by sending to
it a true copy of the offer and the Tenant shall have the right,
during the 72 hours after the giving of such notice, by written
notice to the Landlord, to elect to purchase the Premises for the
price and upon the terms and conditions contained in the offer.
(ii) If the Tenant does so elect, the notice given by it shall constitute
a binding agreement of purchase and sale. If the Tenant does not
elect, the Landlord shall be free to sell the Premises on the terms
and conditions set forth in the offer. If the Premises are not sold
pursuant to the offer, the Landlord shall be obliged to submit any
further offer to the Tenant by giving written notice of it to the
Tenant in the manner provided in sub-paragraph (i).
(iii) The rights of the Tenant set forth in sub-paragraphs (i) and (ii)
shall not be enforceable against any assignee of the freehold.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
SCHEDULE "E"
FIXTURING SCHEDULE
PART 1 - DEFINITIONS
1.1 In this Fixturing Schedule terms defined in the Landlord's Standard Form of
Lease are used with the meanings so defined and the following additional defined
terms have the meanings indicated:
"Design Specifications" means the standards and procedures specified by the
Landlord from time to time as applicable to any work or material to be done to
the Premises including, without limitation, the preparation and approval of
plans in the conduct and completion of Tenant's Work. Without limiting the
generality of the foregoing, the Design Specifications shall relate to the
architectural, mechanical, and Utilities standards and specifications required
by the Landlord.
"Landlord's Work" means all items of work specified in Part 3.
"Landlord's Work on Tenant's Behalf" means all the work described in this
Fixturing Schedule to be performed by or on behalf of the Landlord at the
Tenant's expense.
"Lease" means the offer, agreement or lease to which this Fixturing Schedule is
attached or incorporated by reference.
"Plans" means plans, specifications and drawings.
"Premises Outline" means the plans described as such in Section 2.1.
"Final Tenant Plans" means the final plans described in Part 2 as approved by
the Landlord.
"Tenant's Work" means all items of work described or referred to in Section 4.7
of this Schedule.
PART 2 - PLANS AND APPROVALS
2.1 Premises Outline
The Landlord may provide to the Tenant a Premises Outline consisting
of one or more plans which show the approximate dimensions of the Premises and
the approximate location of its boundary walls and which may show the
approximate location of mechanical equipment and Utilities serving the Premises.
2.2 Design Specifications
The Tenant agrees that all Tenant's Work and plans shall conform to
the Design Specifications.
2.3 Tenant's Plans
The Tenant shall submit to the Landlord preliminary and final Plans
and a completion schedule for the Tenant's Work in accordance with the
requirements and procedures set out in the Design Specifications. The approval
of Final Tenant Plans by the Landlord for all the Tenant's Work is required
prior to the commencement of any such work. The Landlord may require revisions
to such plans as a condition of its approval. The Landlord may remove or correct
at the expense of the Tenant, any Tenant's Work which is not done in accordance
with the plans, information and revisions delivered to and approved by the
Landlord or is not otherwise in accordance with the requirements of the Lease
and the Design Specifications and which has not been removed or corrected
forthwith after request by the Landlord. The Landlord's approval of plans shall
not constitute an assumption of any responsibility by the Landlord for their
accuracy or sufficiency, or their compliance with applicable Laws and the Tenant
shall be solely responsible for all such items.
2.4 Plan Review Charge
INTENTIONALLY DELETED.
PART 3 - LANDLORD' S WORK
3.1 Existing Premises
The Tenant accepts the Premises in an "as is" condition except for
completion of any further work which is specified in this Fixturing Schedule or
the Lease to be done by the Landlord at the Landlord's expense.
3.2 Floors
If the Tenant's use of the Premises requires any allowable live
floor load to be increased, the Landlord shall perform the upgrading work at the
Tenant's expense.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
- 2 -
3.3 Services
INTENTIONALLY DELETED.
PART 4 - CONDUCT OF TENANT'S WORK
General Rules Regarding Tenant's Work
4.1 Tenant's Contractors
The Tenant shall obtain the Landlord's approval of any general
contractor or subcontractor whom the Tenant proposes to involve in the
completion of the Tenant's Work prior to retaining same. The Tenant shall obtain
or cause its contractors to obtain commercial general liability insurance
against personal and bodily injury, including death, and property damage on an
occurrence basis and having limits of not less than Two Million ($2,000,000.00)
Dollars in respect of any one occurrence and such insurance shall be in force
prior to the Tenant or its contractors gaining access to the Premises, if
required by the Landlord.
4.2 Landlord's Access for Inspection
All Tenant's Work shall be subject to the inspection, supervision
and approval of the Landlord. The Landlord and its authorized employees and
agents shall have access to the Premises at all times for the purpose of
inspecting the Tenant's Work or conducting the Landlord's Work.
4.3 Accuracy of Landlord's Plans
The Landlord makes no representations in respect of the accuracy
(and is not responsible for any inaccuracy) of any dimensions shown on any
Plans.
The Tenant acknowledges it is its sole responsibility to confirm to
its satisfaction prior to commencing any of the Tenant's Work, that any and all
dimensions shown on the Premises Outline, Final Tenant Plans and any other plans
are accurate and conform to actual measurements and dimensions.
4.4 Structure
The Tenant shall not, without the prior written consent of the
Landlord, allow or cause any conduit, pipe sleeves, chases or duct equipment
opening in any floors, columns, walls or roofs of the Premises to be cut or
drilled or allow or cause to be imposed upon any floor area of the Premises a
greater working load than the maximum allowable live load of such floor area, or
cause to be suspended from the underside of the roof, roof structure, or
ceiling, any load other than normal ceiling and lighting loads. The Landlord
shall perform, at the Tenant's expense, any work contemplated by the Final
Tenant Plans which may affect the integrity of any base building component.
4.5 Commencement of Tenant's Work
No Tenant s Work shall be commenced or undertaken until all
procedural and approval requirements contained in this Fixturing Schedule
(including the Design Specifications) have been satisfied by the Tenant.
4.6 On-Site Plans
The Tenant shall keep accessible within the Premises during the
conduct of any Tenant's Work, one set of Final Tenant Plans with the Landlord's
consent endorsed thereon.
4.7 Tenant's Work
The Tenant shall carry out and complete, promptly, and in a good and
workmanlike manner, all work necessary to prepare the Premises including
ceilings, plumbing, electrical, metering, fire-rating and any other work,
improvements or finishings necessary to prepare the Premises for its use
including the demolition and disposal of any existing improvements and fixtures
in the Premises, as well as any alterations to such items and the Premises
proposed to be done by the Tenant at any time during the Term. All such work
shall only be undertaken and carried out in compliance with the Final Tenant
Plans, the Design Specifications and this Fixturing Schedule.
PART 5 - PAYMENT SCHEDULE
5.1 Landlord's Work at Tenant's Expense
The Tenant shall upon receipt of an invoice therefor from the
Landlord pay the cost of all Landlord's Work at the Tenant's Expense and any
other work undertaken, performed or paid by the Landlord on the Tenant's behalf.
In the absence of an agreement between the Landlord and the Tenant to the
contrary, the cost of such work shall include the actual cost of all labor,
materials, taxes and architectural, engineering and contractors' fees, and an
administration fee equal to fifteen percent (15%) of the total of such costs. In
the absence of actual cost figures the Landlord shall prepare a reasonable
estimate of the cost and the Tenant shall make payments based on such estimate
in accordance with this section. Appropriate adjustments shall be made between
the parties when the work is completed and actual costs are known.
Free-Standing-Campus, Industrial - May, 1994
<PAGE>
SCHEDULE "G"
OPTION TO EXTEND
1.1 The Tenant may extend this Lease for 2 successive periods of 5 years (each
of which period is called an "Extension"), commencing on the day following the
date of expiration of the initial term of this Lease or the first such
Extension, as the case may be, provided that the Tenant shall only be entitled
to extend this Lease in the event that it:
(a) has duly and regularly paid the Rent and has observed and performed
each and every one of the covenants and agreements herein to be
performed by the Tenant, on a timely basis, until the time that the
option is exercised and thereafter until the Extension in question
takes effect;
(b) the Tenant is the original tenant under this Lease and is itself in
possession of the whole of the Premises;
(c) advises the Landlord in writing that it wishes to extend this Lease
not more than 12 months and not less than 6 months prior to the
expiration of the initial term of this lease or the then current
Extension, as the case may be, failing which this right of Extension
shall be rendered null and void.
1.2 If the Tenant exercises its right to extend in accordance with the
foregoing, this Lease shall be extended upon the same terms and conditions
herein contained, save and except as follows:
(a) the Tenant shall only be entitled to a total aggregate number of
Extensions equal to the number of successive periods referred to
above so that there will be no further right to extend following the
exercise of the 2nd right to extend. For greater certainty, it is
hereby stipulated that if the Tenant exercises all of the within
rights of Extension in accordance with this Lease, the Tenant shall
be entitled to lease the Premises for a total of 10 years
following the expiration of the initial term of this Lease, unless
this Lease is sooner terminated;
(b) the Landlord will not be required to perform the Landlord's Work, if
any, and the Tenant will not be required to perform the Tenant's
Work, if any, and the Tenant will not be entitled to any leasehold
improvement allowance, tenant inducement or rent free period;
(c) the Net Rent payable during each year of an Extension shall be the
greater of the current fair market rental value of the Premises at
the time the right of Extension is exercised and the Net Rent
payable in the immediately preceding Lease Year. In the event that
the Net Rent which shall be applicable during the Extension has not
been mutually agreed upon by the Landlord and the Tenant at least 3
months prior to the expiry of the initial term or the then current
Extension, as the case may be, by reason of the parties' inability
to agree upon the current fair market rental of the Premises, the
said fair market rental shall be determined by arbitration by a
single arbitrator chosen by the Landlord and the Tenant, and if they
cannot agree upon the arbitrator within 5
<PAGE>
days after a written request for arbitration by either party to the
other, either party may apply to a judge for the appointment of an
arbitrator in accordance with the provisions of the Arbitrations
Act (Ontario). The provisions of the Arbitrations Act shall govern
the arbitration and the decision of the arbitrator shall be final
and binding upon the parties and there shall be no appeal therefrom.
The arbitrator shall be instructed to render its decision no later
than 15 days prior to the expiry of the initial term or the then
current Extension, as the case may be. All documents and proceedings
with respect to the arbitration are to be kept confidential by each
of the parties.
1.3 The exercise of the within rights of Extension are solely within the control
of the Tenant and nothing contained in this Lease, including, without
limitation, this Schedule, obligates or requires the Landlord to remind the
Tenant to exercise the within rights of Extension.
<PAGE>
Exhibit 10.33
THIS INDENTURE made this 19th day of May, 1995.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT
BETWEEN
966578 Ontario Inc.
Hereinafter called the "Landlord"
OF THE FIRST PART
- and -
Ontario Paint & Wallpaper Limited
Hereinafter called the "Tenant"
OF THE SECOND PART
PREMISES
Witnesses that in consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of the Tenant, to be paid,
observed and performed, the Landlord has demised and leased and hereby does
demise and lease to the Tenant.
ALL THOSE CERTAIN PREMISES excluding any part of the external walls or roof or
structural portions of the Building known and described as 273 Queen Street
East, in the City of Toronto.
TERM
TO HAVE AND TO HOLD the demised premises for and during the term of one (1)
years to be computed from the 19th day of May, 1995 and from thenceforth ensuing
and to be fully completed and ended on the 18th day of May, 1996. The Term shall
automatically be renewed from year to year unless terminated in writing by
either Landlord or Tenant on 30 days written notice.
RENTAL
YIELDING AND PAYING THEREFOR yearly and every year during the said term hereby
granted, to the Landlord, the sum of $24,000 DOLLARS per annum plus G.S.T.,
payable in equal monthly instalments of $2,000.00 DOLLARS plus G.S.T. each, in
advance on the 1st day of each and every month during the term, commencing on
the 1st day of June, 1995 and continuing on the 1st day of each and every month
for the term until and including the 1st day of May, 1996 and per diem
adjustment if necessary for the first and last month of the Term.
RENT
The Tenant covenants with the Landlord to pay rent.
Rent
Rent means the amounts payable by the Tenant to the Landlord as set out above.
Business Taxes
AND to pay all business taxes in respect of the business carried on by the
Tenant in and upon or by reason of their occupancy of the premises hereby
demised;
Repair
AND to repair the premises (reasonable wear and tear, and damage by fire,
lightning and tempest only excepted);
AND that the Landlord may enter and view state of repair;
<PAGE>
- Page 2 -
AND that the Tenant will repair according to notice in writing (reasonable wear
and tear and damage by fire, lightning and tempest excepted);
AND that they will leave the premises in good repair (reasonable wear and tear
and damage by fire, lightning and tempest only excepted);
Cleanliness
AND to keep the demised premises and every part thereof in a clean and tidy
condition and not to permit waste paper, garbage, ashes or waste or
objectionable material to accumulate thereon.
Comply With Statutes, By-Laws and Regulations
AND the Tenant will at its own cost and expense comply with the requirements of
every applicable by-law, statute, law or ordinance, and with every applicable
regulation or order with respect to the condition, equipment, maintenance, use
or occupation of the premises, as it relates to the use or occupancy of the
premises by the Tenant.
Assignment
AND the Tenant will not assign or sublet the whole or any part of the demised
premises without leave, which leave will not be unreasonably withheld or
delayed.
Business
The demised premises will not, during the term, be at any time used for any
other purpose than that of mixed use commercial/residential.
Fixtures
No fixtures, goods or chattels of any kind will, except in the ordinary course
of business, be removed from the demised premises during the term hereby demised
or at any time thereafter without the written consent of the Landlord, its
successors or assigns, being first had and obtained, until all rent in arrears
as well as all rent to become due during the remainder of the term hereby
granted shall have been full paid, or the payment thereof secured to the
satisfaction of the Landlord or its assigns.
Electric Power
The Tenant will not, during the said term or at any time prior to or subsequent
thereto, purchase, acquire or use any electric current for lighting or other
purposes except from the company or corporation which shall for the time supply
the Landlord with electric current for such purposes in the said building, the
intention being that without the written consent of the Landlord, there shall be
only one system of electric lighting in the building.
Alterations, Partitions, Etc.
If the Tenant shall during the term desire to affix or erect partitions,
counters or fixtures in any part of the walls, floors or ceilings of the demised
premises, it may do so at its own expense at any time and from time to time
provided that the Tenant's rights to make such alterations to the demised
premises shall be subject to the following conditions:
(i) that before undertaking any such alterations, the Tenant shall submit to
the Landlord a plan showing the proposed alterations and shall obtain the
approval and consent of the Landlord to the same;
(ii) that all such alterations shall conform to all building by-laws, if any,
then in force affecting the demised premises.
(iii) that such alterations will not be of such kind or extent as to in any
manner weaken the structure of the building after the alterations are
completed or reduce the value of the building.
(iv) that subject to fixtures which belong to the Tenant, any building,
erection or improvement placed or erected upon the premises shall become
part thereof and shall not be removed and shall be subject to all the
provisions of this lease.
Except as herein provided the Tenant will not erect or affix or remove or change
the location or style of any partitions or fixtures, without the written consent
of the Landlord being first had and obtained, such consent not to be
unreasonably withheld or delayed.
At the expiration of the term hereby granted, or any renewal thereof, all
fixtures belonging to the Tenant shall remain upon the demised premises until
taken down by the Landlord, and the Tenant shall forthwith, upon the same being
taken down, remove the same from the demised premises first paying to the
Landlord the expense of such taking down and making good all damage occasioned
to the demised premises by the taking down or removal thereof.
<PAGE>
- Page 3 -
Bankruptcy or Insolvency
If the term hereby granted or the goods and chattels of the Tenant or any
assignee or sub-tenant shall be at any time seized or taken in execution or
attachment, or if the Tenant or any such assignee or sub-tenant shall make an
assignment for the benefit of creditors or shall become bankrupt or insolvent,
or make a proposal to its creditors, or without the consent of the Landlord
being first obtained in writing, shall make a sale, under the Bulk Sales Act, in
respect of goods on the premises, or being a company shall become subject to any
legislative enactment relating to liquidation or winding up, either voluntary or
compulsory, at the Landlord's option, the term shall immediately become
forfeited and void, and an amount equivalent to the next ensuing three months'
rent shall be at once due and payable.
Rules and Regulations
The Tenant and its clerks, servants and agents will at all times during the
occupancy of the demised premises observe and conform to such reasonable rules
and regulations as shall be made by the Landlord from time to time including the
rules and regulations set forth in Schedule "A" hereto and of which the Tenant
shall be notified, such rules and regulations being deemed to be incorporated in
and form part of these presents.
Expropriation
If the demised premises be expropriated or condemned by any Department of the
Federal, Provincial or Municipal Governments, then the Landlord shall have the
right notwithstanding anything herein contained to terminate this lease upon
giving three months' notice in writing to the Tenant of his intention so to do
or by paying the Tenant a bonus of three months' rent, in which latter event,
the Tenant undertakes to vacate the premises at the expiration of thirty (30)
days from the delivery of such notice.
Distress
The Tenant covenants, promises and agrees with the Landlord that notwithstanding
any present or future Act of the Legislature of the Province of Ontario, none of
the goods or the chattels of the Tenant at any time during the continuance of
the term hereby created on the demised premises shall be exempt from levy by
distress for rent in arrears by the Tenant as provided for by the said Section
of such Act, and that upon any claim being made for such exemption by the Tenant
or on distress being made by the Landlord, this covenant and agreement may be
pleaded as an estoppel against the Tenant in any action brought to test the
right to the levying upon any such goods as are named exempted in the said
Section, the Tenant waiving as he hereby does all and every benefit that could
or might have accrued to him under and by virtue of the said section of the said
act but for the above covenant.
LANDLORD COVENANTS
The Landlord covenants with the Tenant as follows.
Quiet Enjoyment
For quiet enjoyment.
Taxes and Rates
To pay all taxes and rates, municipal, parliamentary or otherwise, including
electric and water rates for the normal supply of hot and cold water to the
premises, assessed against the demised premises of the Landlord or Tenant on
account thereof saving and excepting any business taxes and taxes upon personal
property or income of the Tenant, license fees, or other taxes imposed upon the
property, business or income of the Tenant;
Electric Power and Gas and Heat
To pay all charges for electricity and gas used by the Tenant in the premised
unless billed directly to sub-tenants.
And to heat the premises in each year in such manner as to keep the premises at
a reasonable temperature for the reasonable use of the Premises by the Tenant
except during the making of repairs. The Landlord shall further repair and
replace all heating equipment serving the premises as necessary at its own
expense and in a reasonable time; however, the Landlord shall not be liable for
indirect or consequential damages for personal discomfort or illness arising
from any default of the Landlord.
Access
To give the Tenant, its agents, clerks, servants and all persons transacting
business with the Tenant, in common with other persons, the right to enter the
premises by means of the main entrance to the building and all other means of
access in current use and free use of the stairway and passages from the parking
lot, streets and lanes to the premises at all reasonable times, subject to rules
and regulations in regard to the building as may be reasonably passed from time
to time.
<PAGE>
- Page 4 -
Property Maintenance
The Landlord shall maintain and repair the building and adjacent lands forming
part of the property in good condition including all alterations and additions
and improvements made thereto, and including all repairs and replacements to the
structure, roof, windows, doors and all systems located therein.
DEFAULT
Proviso for re-entry by the said Landlord on non-payment of rent or
non-performance of covenants.
VOIDANCE OF LEASE - VACANT OR IMPROPER USE
It is further declared and agreed that in case the premises or any part thereof
become and remain vacant and unoccupied for the period of fifteen days, or be
used by any other person or persons, or for any other purpose than as above
provided without the written consent of the Landlord, this lease shall, at the
option of the Landlord, cease and be void, and the term hereby created expire
and be at any end, anything hereinbefore to the contrary notwithstanding and the
proportionate part of the current rent shall thereupon become immediately due
and payable, and the Landlord may re-enter and take possession of the premises
as though the Tenant or other occupant or occupants of said premises were
holding over after the expiration of the term; or in such case instead of
determining this lease as aforesaid and re-entering upon the premises, the
Landlord may take possession of the premises, or any part or parts thereof, and
let and manage the same and grant any lease or leases thereof upon such terms as
to the Landlord or its assigns may appear to be reasonable, and demand, collect,
receive and distrain for all rental which shall become payable in respect
thereof, and apply the said rentals after deducting all expenses incurred in
connection with the premises and in the collection of the said rent including
reasonable commission for the collection thereof and the management of the
premises, upon the rent hereby reserved, and the Landlord and its assigns and
every such agent acting as aforesaid from time to time, shall in so acting be
the agents of the Tenant, who alone shall be responsible for their acts, and the
Landlord and its assigns shall not be accountable for any moneys except those
actually received, notwithstanding any act, neglect, omission or default or any
such agent acting as aforesaid.
WATER AND GAS DAMAGE
It is further declared and agreed that the Landlord shall not be liable for any
damage to any property at any time upon the premises arising from gas, steam,
water, rain or snow, which may leak into, issue or flow from any part of the
building, or from the gas, water, steam or drainage pipes or plumbing works of
the same or from any other place or quarter or for any damage caused by or
attributable to the condition or arrangement of any electric or other wires in
the building.
The Tenant shall be liable for any damage done by reason of water being left
running from the taps in the premises or from gas permitted to escape therein,
RISKS OF INJURY
The Landlord shall not be responsible for any personal injury which shall be
sustained by the Tenant or any employees, customer, or other person who may be
upon the premises or in the building or the entrances or appurtenances thereto.
All risks of any such injury are hereby assumed by the Tenant, who hereby holds
the Landlord harmless and indemnified therefrom.
INDEMNIFICATION
The Tenant covenants to indemnify the Landlord from any and all liabilities,
damages, costs, claims, suits or actions growing out of:
(i) any breach, violation, or non-performance of any covenant or proviso
hereof on the part of the Tenant;
(ii) any damages to property occasioned by the use and occupation of the
premises.
Such indemnification in respect of any such breach, violation or
non-performance, or damage to property occurring during the term of the lease
shall survive any termination of this lease, anything in this lease to the
contrary notwithstanding; PROVIDED, however, that such indemnification shall in
no event extend to the direct, primary and proximate results of the negligent,
reckless or willful conduct of the Landlord, its agents, employees or
representatives.
NOTICE OF ACCIDENT
The Tenant shall give the Landlord prompt written notice of any accident, or any
defect in the sprinkler system, water pipes, gas pipes or heating apparatus,
telephone, electric or other wires on any part of the premises.
<PAGE>
- Page 5 -
INSURANCE
The Tenant covenants that the Tenant's business to be carried on in the building
will not be of such a nature as to increase the insurance risk on the premises
or cause the Landlord to pay an increased rate of insurance premiums on the
premises by reason thereof, and it is distinctly understood that in case such
business is or becomes of such nature to increase the insurance risk or causes,
the Landlord and/or other occupants of the building to pay an increased rate of
insurance premiums, the Tenant will, from time to time, pay to the Landlord, the
increased amount of insurance premiums which the Landlord and other occupants of
the building have to pay in consequence thereof; provided that the Tenant
covenants that he will not carry on or permit to be carried on any business in
the building which may make void or voidable any insurance held by the Landlord
or the other occupants of the building.
BUSINESS NOT TO BE A NUISANCE
The Tenant will not do or permit anything to be done on the premises or permit
or keep anything therein which may be annoying to the Landlord or other
occupants of the building or which the Landlord may deem to be a nuisance and
that no machinery shall be used therein which shall cause any undue vibration in
or to the premises and that in case of the Landlord or any other occupants of
the building reasonably complaining that any machinery or operation or process
is a nuisance to it or them or which causes any undue vibration or noise in the
premises, that upon receiving notice thereof, the said Tenant will immediately
abate such nuisance. The Tenant covenants not to obstruct or interfere with the
rights of the Landlord or other occupants of the building or in any way injure
or annoy them or conflict with any of the rules and regulations of the Board of
Health or with any Statute or municipal by-law.
SIGN
No sign, advertisement or notice shall be inscribed, painted or affixed by the
Tenant on any part of the outside or inside of the building whatever, unless of
such manner, colour, size and style and in such places upon or in the building
as shall be first designated by the Landlord, and, furthermore, the Tenant, on
ceasing to be Tenant of the premises, will, before removing his goods and
fixtures from the premises, cause any sign as aforesaid to be removed or
obliterated at his own expense and in a workmanlike manner to the reasonable
satisfaction of the Landlord.
WATER
The Landlord agrees to pay for normal water consumed on the premises but in the
event of any abnormal consumption of water either by reason of the character of
the business carried on by the Tenant or by the use of mechanical or other
contrivances the Tenant consents to the installation of a water meter at his own
expense, if necessary, and further agrees to pay for the excess water consumed
on the premises.
PLATE GLASS
The Tenant agrees at his own expense to replace any plate glass or other glass
that has been broken or removed during the term of the within lease or of any
renewal thereof.
FIRE
If during the term herein or any renewal thereof the premises shall be destroyed
or damaged by fire or the elements, then the following provisions shall apply:
(i) If the premises shall be so badly injured as to be unfit for occupancy,
and as to be incapable of being repaired with reasonable diligence within
one hundred and twenty days of the happening of such injury, then the term
hereby granted shall cease and be at an end to all intents and purposes
from the date of such damage or destruction, and the Tenant shall
immediately surrender the same, and yield up possession of the premises to
the Landlord, and the rent from the time of such surrender shall be
apportioned;
(ii) If the premises shall be capable, with reasonable diligence, of being
repaired and rendered fit for occupancy within one hundred and twenty days
from the happening of such injury as aforesaid, but if the damage is such
as to render the premises wholly unfit for occupancy, then the rent hereby
reserved shall not run or accrue after such injury, or while the process
of repair is going on, and the Landlord shall repair the same with all
reasonable speed, and the rent shall recommence immediately after such
repairs shall be completed.
(iii) If the premises shall be repaired within one hundred and twenty days as
aforesaid, and if the damage is such that the said premises are capable of
being partially used, then until such damage shall have been repaired, the
rent shall abate in the proportion that the part of the premises rendered
unfit for occupancy bears to the whole of the premises.
NO ABATEMENT OF RENT
There shall be no abatement from or reduction of the rent due hereunder, nor
shall the Tenant be entitled to damages, losses, costs or disbursements from the
Landlord during the term hereby created on, caused by or on account of fire,
(except as above), water, sprinkler systems, partial or temporary failure or
stoppage of heat, light, elevator, live steam
<PAGE>
- Page 6 -
or plumbing service in or to the premises or building, whether due to acts of
God, strikes, accidents, the making of alterations, repairs, renewals,
improvements, structural changes to the said premises or buildings or the
equipment or systems supplying the said services, or from any cause whatsoever;
provided that the said failure or stoppage be remedied within a reasonable time.
RENT ARREARS
All arrears of rent and any monies payable by the Tenant hereunder shall bear
interest at the rate of the Landlord's Canadian Banker's prime rate of interest
plus two per cent (2%) per annum from the time such sums become due until they
are paid to the Landlord.
RIGHT TO SHOW PREMISES
The Tenant will permit the Landlord to exhibit the premises during the last
three months of the term to any prospective tenant and will permit all persons
having written authority therefor to view the premises at all reasonable hours,
upon reasonable notice, and so as to not unreasonably interfere with the
business of the Tenant.
NOTICES
Any notice which either of the parties is required or permitted to give pursuant
to any provision of this lease may, if intended for the Tenant, be given by a
writing left at the premises or mailed by registered mail addressed to the
Tenant at the premises, and if intended for the Landlord by a writing left at
the premises of the Landlord at 731 Millway Avenue, Concord, Ontario or mailed
by registered mail addressed to the Landlord at the Landlord's said premises,
and such notice shall be deemed to have been given at the time it was delivered
or mailed, as the case may be.
CONSENT OF TENANT
The Tenant shall, whenever reasonably so required by the Landlord, and at the
Landlord's expense, consent to and become a party to an instrument relating to
this lease which may be required by or on behalf of any purchaser, bank or
mortgagee from time to time of the premises provided always that the rights of
the Tenant as hereinbefore set out shall not be waived by the terms of such
instrument or document.
NON-WAIVER OF DEFAULT
The failure of the Landlord or the Tenant to insist upon a strict performance of
any of the covenants and provisos hereof shall not be deemed a waiver of any
rights or remedies that such party may have or a waiver of any subsequent breach
or default.
OVERHOLDING
It is hereby agreed that should the Tenant hold over after the expiration of
this lease and the Landlord thereafter accepts rent for the premises, the Tenant
shall hold the premises as a monthly tenant only of the Landlord but subject in
all other respects to the terms and conditions of this lease.
TENANT'S LIABILITY INSURANCE
The Tenant shall carry public liability insurance in such amounts as shall from
time to time be reasonable, in the name of both the Landlord and the Tenant, and
to pay the premiums for such insurance and to deposit certificates with respect
to such insurance with the Landlord. If the Tenant shall fail to insure and keep
insured, as herein provided, the Landlord shall be free to effect such insurance
at the cost and expense of the Tenant, and the sum so expended by the Landlord
shall be added to the rent due on the next succeeding payment date, and such
amount, in addition to the regular payment then due, shall constitute rent
hereunder.
INSURANCE PREMIUMS
If the Tenant fails to pay any insurance premiums or charges which it has herein
covenanted to pay, the Landlord may pay them and charge the sums paid to the
Tenant who shall pay them forthwith on demand; and the Landlord, in addition to
any other rights, shall have the same remedies and may take the same steps for
the recovery of all such sums as if they were rent in arrears.
SUBORDINATION AND POSTPONEMENT
This Lease and all the rights of the Tenant under this Lease are subject and
subordinate to any and all charges against the land, buildings or improvements
of which the Premises form part, whether the charge is in the nature of a
mortgage, trust deed, lien or any other form of charge arising from the
financing or re-financing, including extensions or renewals of the Landlord's
interest in the property.
<PAGE>
- Page 7 -
Upon the request of the Landlord, the Tenant will execute any form required to
subordinate this Lease and the Tenant's rights to any such charge, and will, if
required, attorn to the holder of the charge.
No subordination by the Tenant shall have the effect of permitting the holder of
any charge to disturb the occupation and possession of the Premises by the
Tenant as long as the Tenant performs his obligations under this Lease.
SEVERABILITY
The invalidity of any particular provision of this lease shall not affect any
other provision herein, but the lease shall be construed as if such invalid
provision were omitted.
GOVERNING LAW
This lease is governed by and is to be construed and enforced in accordance with
the internal laws of the Province of Ontario as those laws apply to contracts
made in Ontario.
HEADINGS
The headings included in this lease are for convenience only and are not to
affect the interpretation of the provisions herein.
BINDING EFFECT
The words importing the singular number only shall include the plural, and vice
versa, and words importing the masculine gender shall include the feminine
gender, and words importing persons shall include firms and corporations and
vice versa.
Unless the context otherwise required, the word "Landlord" and the word "Tenant"
wherever used herein shall be construed to include and shall mean the executors,
administrators, successors and/or assigns of the said Landlord and Tenant,
respectively, and when there are two or more Tenants bound by the same covenants
herein contained, their obligations shall be joint and several.
IN WITNESS WHEREOF the parties hereto have executed these presents.
SIGNED, SEALED AND DELIVERED
In the presence of ) 966578 ONTARIO INC. (Landlord)
)
) Per:
)
)
) /s/ Sidney Ackerman
) --------------------------------------
) Sidney Ackerman, President
)
) Per:
)
)
) /s/ Alan Fine
) --------------------------------------
) Alan Fine, Secretary
)
) ONTARIO PAINT & WALLPAPER
) LIMITED (Tenant)
)
)
) /s/ Sidney Ackerman
) --------------------------------------
) Sidney Ackerman, President
<PAGE>
Exhibit 10.4 January 1st, 1998
EMPLOYMENT AGREEMENT
B E T W E E N:
ROSEDALE DECORATIVE PRODUCTS LTD.
a company organized pursuant to the laws of
the Province of Ontario with head office at
214 Courtland Avenue
Concord, Ontario
L4K 4L3
(hereinafter referred to as "Rosedale" or the "Company")
OF THE FIRST PART;
- and -
ALAN FINE an individual residing
at 407 Woburn Avenue
Toronto, Ontario
M5M 1LY
(hereinafter referred to as the "Employee")
OF THE SECOND PART;
- and -
ROSEDALE WALLCOVERINGS & FABRICS INC. and
ONTARIO PAINT & WALLPAPER LIMITED
OF THE THIRD PART
WHEREAS:
1. Rosedale and the Employee are desirous of entering into an employment
relationship for their mutual benefit;
2. Rosedale and the Employee wish to reduce to writing certain
obligations and rights in respect of said employment relationship.
<PAGE>
2
IN CONSIDERATION of the above and in further consideration of the mutual
promises and covenants set forth and the sum of $1,000.00 paid by Rosedale to
the Employee, (the receipt and sufficiency of which is hereby acknowledged) this
agreement (the "Agreement") witnesses that the parties agree as follows:
1. Job Title
Rosedale hereby agrees to employ the Employee and to continue to employ the
Employee as Chairman of the Board and Chief Executive Officer of Rosedale,
subject to the terms in this Agreement, who shall perform such duties and
exercise such responsibilities as are assigned from time to time by the Board of
Directors. In carrying out these duties and responsibilities, the Employee
shall comply with all policies, procedures, rules and regulations, both written
and oral, as are announced by Rosedale from time to time and carry out said
duties and responsibilities in a diligent, faithful and honest manner.
2. Compensation
As compensation for all services provided for herein, Rosedale shall pay or
cause to be paid to the Employee, and the Employee shall accept:
a. A salary at an annual rate of $160,000 to be paid in regular
instalments in accordance with Rosedale's usual paying practices,
but not less frequently than monthly; and
b. A discretionary performance bonus, payable annually within six
(6) months of the end of each fiscal year end of Rosedale of
$10,000. The Employee shall qualify for such bonus beginning
with the fiscal year of Rosedale ending December 31, 1998. The
Bonus shall be based on achieving sales profitability and good
management (and other subjective criteria) as predetermined by
the Board of Directors or the Compensation Committee.
In the event that the Employee's employment is terminated for any reason,
the Employee's bonus entitlement shall be prorated and calculated as of the date
of termination whether by retirement, resignation, death or termination by
Rosedale or the Employee.
Salary and benefit payments hereunder shall be subject to such deductions
as Rosedale is from time to time required to make pursuant to law, government
regulations or by consent of the Employee.
The above annual salary shall be subject to an annual review with the Board
of Directors or the Compensation Committee but in no event shall the annual
salary be less than that paid in the previous fiscal year.
3. Participation in Stock Option Plan
<PAGE>
3
The Employee shall be entitled to be granted stock options, under the
Company Stock Option Plan, of up to 5% of the outstanding shares issued (as set
out in the said Plan) from time to time not to exceed 150,000 common shares.
4. Benefits
The Employee shall participate in all group benefit plans which are now or
may be established by Rosedale for its employees during the term of this
Agreement including without limitation:
a. Disability Insurance;
b. Life Insurance;
c. Medical Plan;
d. Hospitalization Plan;
e. Dental Plan; and
f. If, as and when Rosedale introduces a company pension plan, the
Employee shall be entitled to participate therein to the same extent
as all other senior employees of Rosedale.
5. Perquisites and Expenses
1) The Employees shall be reimbursed by Rosedale for all reasonable business
and promotional expenses incurred in connection with the employment of the
Employee provided for hereunder. Rosedale's obligation to so reimburse the
Employee for expenses shall be subject to the presentation to Rosedale by
the Employee of an itemized monthly account of such expenditures together
with supporting vouchers in accordance with Rosedale's policies as in
effect from time to time.
2) The Employee shall be reimbursed for air travel expense (Business Class) in
connection with Rosedale's business.
3) The Employee shall be entitled to the use of a cellular phone to be
acquired by Rosedale at no cost to the Employee.
4) The Employee shall receive $20,000.00 per year additional compensation
including car allowance, insurance and retirement savings matched
contributions by the Company and such other perquisites as the Board of
Directors or Compensation Committee may establish from time to time.
<PAGE>
4
6. Vacation
The Employee shall be entitled to four (4) weeks' vacation with pay during
each full year of employment and to a pro-rated portion should employment
terminate for any reason or cause before the completion of the year.
7. Term
The term of this Agreement shall extend for a period of five (5) years
terminating, subject to the provisions of Sections 8 and 9 hereof, on the fifth
anniversary of the date of this Agreement (the "Termination Date"). The Company
shall have the option of renewing this Agreement for additional five (5) year
periods (under the same terms and conditions as herein provided excepting the
provisions contained in Section 3 hereof), by advising the Employee in writing
of its intention to renew not later than one hundred and eighty (180) days prior
to the Termination Date and no later than 180 days prior to the end of the last
year of any five year renewal period. In the event that the Company does not
renew this Agreement, the Company will pay the Employee the equivalent of lump
sum 3 years' salary plus the equivalent in benefits.
8. Termination
This Agreement may be terminated in the following manner in the specified
circumstances:
a. By the Employee resigning on giving twelve weeks' notice in writing to
Rosedale which may waive the notice, in whole or in part. On
resignation, the Employee shall receive a lump sum resignation
allowance of three years' salary plus the equivalent in benefits.
b. On death, the Employee's Estate shall receive a lump sum death benefit
of three years' salary.
c. At any time by Rosedale with Just Cause (as hereafter defined),
without any notice and without any payment in lieu of notice and
without any further obligations or liability whatsoever except to the
extent that the Employee is entitled to any notice or payment in lieu
thereof pursuant to the Employment Standards Act of Ontario and at no
time will the Employee will be entitled to any notice of termination,
or termination or severance payments in excess of the notice and/or
payments that are prescribed by the Employment Standards Act of
Ontario as it is amended from time to time.
<PAGE>
5
d. Subject to Section 9 hereof, by Rosedale, in the event there is no
Just Cause by providing the Employee with a lump sum payment in lieu
of notice of the equivalent of five (5) year's salary plus the
equivalent in benefits which shall include such notice or termination
pay in lieu of notice to which the Employee may be entitled under the
Employment Standards Act. It is agreed that Rosedale has no
obligation to provide any common law notice or severance payments in
addition to the termination payments set out herein. In the event
that the Employee has not completed any full year of employment
payment in lieu of notice shall be apportioned accordingly.
e. "Just Cause" is defined to mean conduct of the Employee which
includes:
1) a material breach of the provisions of the Agreement.
9. Change of Control
1) Notwithstanding Section 8 hereof, in the event that a transaction or series
of transactions resulting in the de facto change in control of Rosedale
Decorative Products Ltd. (the "Parent") which occurs during the term of the
Agreement including, inter alia:
a. The acquisition by any person beneficially, either directly or
indirectly, of more than 50% of the voting shares of the Parent;
b. The amalgamation, consolidation or merger with another body corporate
resulting in at least 50% of the voting shares of the surviving body
corporate being controlled by a new acquirer; or
c. The sale, directly or otherwise, of substantially all of the assets of
the Parent to a third party in a non-distress situation;
then Rosedale shall be obliged to pay to the Employee within 30 days of the
closing of the above noted transaction, a lump sum payment equal to the sum
of (the "Pay-out"):
(i) one and one-half times the Employee's annual salary paid or payable to
the Employee in respect of the then most recently completed fiscal
year of Rosedale.
such obligations being expressly subject to the following conditions:
(ii) that the Employee is not an equity partner of the group or entity
acquiring control.
10. Retirement
<PAGE>
6
The employee shall have the option to retire upon reaching 60 years of age
to be exercised by a written notice to Rosedale at least 6 months before the
Employee's sixtieth birthday. On retirement the Employee shall receive a lump
sum retiring allowance of three years' salary plus the equivalent in benefits.
11. Confidentiality
The Employee acknowledges that while employed by Rosedale he will acquire
information about certain matters which are confidential in nature and which
are, and shall remain, the property of Rosedale. Such information includes, but
is not limited to, customer lists, customer information, training manuals,
business practices, marketing plans, pricing policies, technical proprietary and
non proprietary information, financial information, personnel matters and the
like. The Employee agrees to treat such information as confidential and agrees
not to directly or indirectly disclose it to any third party either during his
employment except to the extent necessary to perform his duties and without
exception following the termination of this Agreement unless it is otherwise in
the public domain.
12. Non-Competition and Non-Solicitation
Upon the termination of the Employee's employment without just cause with
Rosedale and for a period of three (3) years thereafter:
a. The Employee shall not engage in a similar business to that of
Rosedale within North America, either directly or indirectly as a
principal, agent, shareholder, partner or employee; and
b. The Employee further agrees that he shall not assist any person, firm,
corporation or other entity, either directly or indirectly, in
soliciting the customers of Rosedale following his termination from
Rosedale; and
c. The Employee also agrees that he will not, directly or indirectly,
hire or induce any employee of Rosedale to resign his or her
employment with Rosedale or to assist any other person in so doing;
If the Employee is terminated with Just Cause, Article 12 shall not be
applicable to the Employee.
13. Duties and Evaluation
1) The Employee's duties to Rosedale hereunder shall include, without
limitation, the management, direction and supervision of the operations of
Rosedale ensuring the effective carriage of its business. The Employee agrees
that he will at all times perform these duties faithfully, industriously and to
the best of his skill, ability, experience and talents. The Employee will
perform his duties in a manner which is in the best interests of Rosedale and in
accordance
<PAGE>
7
with Rosedale's current and long term objectives and procedures, as such may be
amended from time to time by the Board of Directors of Rosedale.
2) The Board of Directors of Rosedale and the Employee shall establish a
performance appraisal process which will establish the criteria against which
the Employee will be evaluated by the Board. Evaluations of the Employee shall
be conducted annually and the results of such evaluation shall be communicated
in writing or otherwise to the Employee.
14. Severability
In the event that any provision of the Agreement is determined to be void
or unenforceable in whole or in part, it shall not be deemed to affect or impair
the validity of any other provision of the Agreement.
15. Governing Law
This Agreement shall be governed by, and construed in accordance with, the
laws of the Province of Ontario.
16. Whole Agreement
The terms and conditions set out above represent the entire Agreement
between the parties. Any modification to this Agreement must be in writing and
signed by the parties hereto or it shall be void and of no effect.
17. Independent Legal Advice
The Employee acknowledges that he has obtained or has had an opportunity to
obtain independent legal advice in connection with this Agreement and further
acknowledges that he has read, understands and agrees to be bound by all of the
terms and conditions herein contained.
18. Notice
Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and may be delivered personally or by prepaid
registered mail, addressed to the appropriate party at the addresses above
noted.
19. Third Parties
The undersigned third parties jointly and severally agree to fund where and
when necessary all of the financial obligations of Rosedale hereunder to the
Employee.
<PAGE>
8
SIGNED, SEALED AND DELIVERED
in the presence of:
ROSEDALE DECORATIVE PRODUCTS LTD.
Per:
--------------------------------------------------
Authorized Signatory
Per:
- ---------------------------- --------------------------------------------------
Witness Alan Fine
ONTARIO PAINT & WALLPAPER ROSEDALE WALLCOVERINGS & FABRICS INC.
LIMITED
Per: Per:
- --------------------------- --------------------------------------------------
President President
Per: Per:
- --------------------------- --------------------------------------------------
Secretary Secretary
<PAGE>
Exhibit 10.5 January 1st, 1998
EMPLOYMENT AGREEMENT
B E T W E E N:
ROSEDALE DECORATIVE PRODUCTS LTD.
a company organized pursuant to the laws of
the Province of Ontario with head office at
214 Courtland Avenue
Concord, Ontario
L4K 4L3
(hereinafter referred to as "Rosedale" or the "Company")
OF THE FIRST PART;
- and -
SYDNEY ACKERMAN an individual residing
at 359 Lytton Blvd.
Toronto, Ontario
M5N 1R9
(hereinafter referred to as the "Employee")
OF THE SECOND PART;
- and -
ROSEDALE WALLCOVERINGS & FABRICS INC. and
ONTARIO PAINT & WALLPAPER LIMITED
OF THE THIRD PART
WHEREAS:
1. Rosedale and the Employee are desirous of entering into an employment
relationship for their mutual benefit;
2. Rosedale and the Employee wish to reduce to writing certain
obligations and rights in respect of said employment relationship.
<PAGE>
2
IN CONSIDERATION of the above and in further consideration of the mutual
promises and covenants set forth and the sum of $1,000.00 paid by Rosedale to
the Employee, (the receipt and sufficiency of which is hereby acknowledged) this
agreement (the "Agreement") witnesses that the parties agree as follows:
1. Job Title
Rosedale hereby agrees to employ the Employee and to continue to employ the
Employee as President of Rosedale, subject to the terms in this Agreement, who
shall perform such duties and exercise such responsibilities as are assigned
from time to time by the Board of Directors. In carrying out these duties and
responsibilities, the Employee shall comply with all policies, procedures, rules
and regulations, both written and oral, as are announced by Rosedale from time
to time and carry out said duties and responsibilities in a diligent, faithful
and honest manner.
2. Compensation
As compensation for all services provided for herein, Rosedale shall pay or
cause to be paid to the Employee, and the Employee shall accept:
a. A salary at an annual rate of $160,000 to be paid in regular
instalments in accordance with Rosedale's usual paying practices,
but not less frequently than monthly; and
b. A discretionary performance bonus, payable annually within six
(6) months of the end of each fiscal year end of Rosedale of
$10,000. The Employee shall qualify for such bonus beginning
with the fiscal year of Rosedale ending December 31, 1998. The
Bonus shall be based on achieving sales profitability and good
management (and other subjective criteria) as predetermined by
the Board of Directors or the Compensation Committee.
In the event that the Employee's employment is terminated for any reason,
the Employee's bonus entitlement shall be prorated and calculated as of the date
of termination whether by retirement, resignation, death or termination by
Rosedale or the Employee.
Salary and benefit payments hereunder shall be subject to such deductions
as Rosedale is from time to time required to make pursuant to law, government
regulations or by consent of the Employee.
The above annual salary shall be subject to an annual review with the Board
of Directors or the Compensation Committee but in no event shall the annual
salary be less than that paid in the previous fiscal year.
3. Participation in Stock Option Plan
<PAGE>
3
The Employee shall be entitled to be granted stock options, under the
Company Stock Option Plan, of up to 5% of the outstanding shares issued (as set
out in the said Plan) from time to time not to exceed 150,000 common shares.
4. Benefits
The Employee shall participate in all group benefit plans which are now or
may be established by Rosedale for its employees during the term of this
Agreement including without limitation:
a. Disability Insurance;
b. Life Insurance;
c. Medical Plan;
d. Hospitalization Plan;
e. Dental Plan; and
f. If, as and when Rosedale introduces a company pension plan, the
Employee shall be entitled to participate therein to the same extent
as all other senior employees of Rosedale.
5. Perquisites and Expenses
1) The Employees shall be reimbursed by Rosedale for all reasonable business
and promotional expenses incurred in connection with the employment of the
Employee provided for hereunder. Rosedale's obligation to so reimburse the
Employee for expenses shall be subject to the presentation to Rosedale by
the Employee of an itemized monthly account of such expenditures together
with supporting vouchers in accordance with Rosedale's policies as in
effect from time to time.
2) The Employee shall be reimbursed for air travel expense (Business Class) in
connection with Rosedale's business.
3) The Employee shall be entitled to the use of a cellular phone to be
acquired by Rosedale at no cost to the Employee.
4) The Employee shall receive $20,000.00 per year additional compensation
including car allowance, insurance and retirement savings matched
contributions by the Company and such other perquisites as the Board of
Directors or Compensation Committee may establish from time to time.
<PAGE>
4
6. Vacation
The Employee shall be entitled to four (4) weeks' vacation with pay during
each full year of employment and to a pro-rated portion should employment
terminate for any reason or cause before the completion of the year.
7. Term
The term of this Agreement shall extend for a period of five (5) years
terminating, subject to the provisions of Sections 8 and 9 hereof, on the fifth
anniversary of the date of this Agreement (the "Termination Date"). The Company
shall have the option of renewing this Agreement for additional five (5) year
periods (under the same terms and conditions as herein provided excepting the
provisions contained in Section 3 hereof), by advising the Employee in writing
of its intention to renew not later than one hundred and eighty (180) days prior
to the Termination Date and no later than 180 days prior to the end of the last
year of any five year renewal period. In the event that the Company does not
renew this Agreement, the Company will pay the Employee the equivalent of lump
sum 3 years' salary plus the equivalent in benefits.
8. Termination
This Agreement may be terminated in the following manner in the specified
circumstances:
a. By the Employee resigning on giving twelve weeks' notice in writing to
Rosedale which may waive the notice, in whole or in part. On
resignation, the Employee shall receive a lump sum resignation
allowance of three years' salary plus the equivalent in benefits.
b. On death, the Employee's Estate shall receive a lump sum death benefit
of three years' salary.
c. At any time by Rosedale with Just Cause (as hereafter defined),
without any notice and without any payment in lieu of notice and
without any further obligations or liability whatsoever except to the
extent that the Employee is entitled to any notice or payment in lieu
thereof pursuant to the Employment Standards Act of Ontario and at no
time will the Employee will be entitled to any notice of termination,
or termination or severance payments in excess of the notice and/or
payments that are prescribed by the Employment Standards Act of
Ontario as it is amended from time to time.
<PAGE>
5
d. Subject to Section 9 hereof, by Rosedale, in the event there is no
Just Cause by providing the Employee with a lump sum payment in lieu
of notice of the equivalent of five (5) year's salary plus the
equivalent in benefits which shall include such notice or termination
pay in lieu of notice to which the Employee may be entitled under the
Employment Standards Act. It is agreed that Rosedale has no
obligation to provide any common law notice or severance payments in
addition to the termination payments set out herein. In the event
that the Employee has not completed any full year of employment
payment in lieu of notice shall be apportioned accordingly.
e. "Just Cause" is defined to mean conduct of the Employee which
includes:
1) a material breach of the provisions of the Agreement.
9. Change of Control
1) Notwithstanding Section 8 hereof, in the event that a transaction or series
of transactions resulting in the de facto change in control of Rosedale
Decorative Products Ltd. (the "Parent") which occurs during the term of the
Agreement including, inter alia:
a. The acquisition by any person beneficially, either directly or
indirectly, of more than 50% of the voting shares of the Parent;
b. The amalgamation, consolidation or merger with another body corporate
resulting in at least 50% of the voting shares of the surviving body
corporate being controlled by a new acquirer; or
c. The sale, directly or otherwise, of substantially all of the assets of
the Parent to a third party in a non-distress situation;
then Rosedale shall be obliged to pay to the Employee within 30 days of the
closing of the above noted transaction, a lump sum payment equal to the sum
of (the "Pay-out"):
(i) one and one-half times the Employee's annual salary paid or payable to
the Employee in respect of the then most recently completed fiscal
year of Rosedale.
such obligations being expressly subject to the following conditions:
(ii) that the Employee is not an equity partner of the group or entity
acquiring control.
10. Retirement
<PAGE>
6
The employee shall have the option to retire upon reaching 60 years of age
to be exercised by a written notice to Rosedale at least 6 months before the
Employee's sixtieth birthday. On retirement the Employee shall receive a lump
sum retiring allowance of three years' salary plus the equivalent in benefits.
11. Confidentiality
The Employee acknowledges that while employed by Rosedale he will acquire
information about certain matters which are confidential in nature and which
are, and shall remain, the property of Rosedale. Such information includes, but
is not limited to, customer lists, customer information, training manuals,
business practices, marketing plans, pricing policies, technical proprietary and
non proprietary information, financial information, personnel matters and the
like. The Employee agrees to treat such information as confidential and agrees
not to directly or indirectly disclose it to any third party either during his
employment except to the extent necessary to perform his duties and without
exception following the termination of this Agreement unless it is otherwise in
the public domain.
12. Non-Competition and Non-Solicitation
Upon the termination of the Employee's employment without just cause with
Rosedale and for a period of three (3) years thereafter:
a. The Employee shall not engage in a similar business to that of
Rosedale within North America, either directly or indirectly as a
principal, agent, shareholder, partner or employee; and
b. The Employee further agrees that he shall not assist any person, firm,
corporation or other entity, either directly or indirectly, in
soliciting the customers of Rosedale following his termination from
Rosedale; and
c. The Employee also agrees that he will not, directly or indirectly,
hire or induce any employee of Rosedale to resign his or her
employment with Rosedale or to assist any other person in so doing;
If the Employee is terminated with Just Cause, Article 12 shall not be
applicable to the Employee.
13. Duties and Evaluation
1) The Employee's duties to Rosedale hereunder shall include, without
limitation, the management, direction and supervision of the operations of
Rosedale ensuring the effective carriage of its business. The Employee agrees
that he will at all times perform these duties faithfully, industriously and to
the best of his skill, ability, experience and talents. The Employee will
perform his duties in a manner which is in the best interests of Rosedale and in
accordance
<PAGE>
7
with Rosedale's current and long term objectives and procedures, as such may be
amended from time to time by the Board of Directors of Rosedale.
2) The Board of Directors of Rosedale and the Employee shall establish a
performance appraisal process which will establish the criteria against which
the Employee will be evaluated by the Board. Evaluations of the Employee shall
be conducted annually and the results of such evaluation shall be communicated
in writing or otherwise to the Employee.
14. Severability
In the event that any provision of the Agreement is determined to be void
or unenforceable in whole or in part, it shall not be deemed to affect or impair
the validity of any other provision of the Agreement.
15. Governing Law
This Agreement shall be governed by, and construed in accordance with, the
laws of the Province of Ontario.
16. Whole Agreement
The terms and conditions set out above represent the entire Agreement
between the parties. Any modification to this Agreement must be in writing and
signed by the parties hereto or it shall be void and of no effect.
17. Independent Legal Advice
The Employee acknowledges that he has obtained or has had an opportunity to
obtain independent legal advice in connection with this Agreement and further
acknowledges that he has read, understands and agrees to be bound by all of the
terms and conditions herein contained.
18. Notice
Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and may be delivered personally or by prepaid
registered mail, addressed to the appropriate party at the addresses above
noted.
19. Third Parties
The undersigned third parties jointly and severally agree to fund where and
when necessary all of the financial obligations of Rosedale hereunder to the
Employee.
<PAGE>
8
SIGNED, SEALED AND DELIVERED
in the presence of:
ROSEDALE DECORATIVE PRODUCTS LTD.
Per:
--------------------------------------------------
Authorized Signatory
Per:
- --------------------------- --------------------------------------------------
Witness Sidney Ackerman
ONTARIO PAINT & WALLPAPER ROSEDALE WALLCOVERINGS & FABRICS INC.
LIMITED
Per: Per:
- --------------------------- --------------------------------------------------
President President
Per: Per:
- --------------------------- --------------------------------------------------
Secretary Secretary
<PAGE>
Exhibit 10.6
Commercial Banking Centre
Central Ontario West Region
[LETTERHEAD OF NATIONAL BANK OF CANADA]
July 30, 1997
Rosedale Wallcoverings and Fabrics Inc.
214 Cortland Avenue
Concord, Ontario
L4K 4L3
ATTENTION: Mr. Alan Fine, President.
Dear Sirs:
We are pleased to advise you that the National Bank of Canada has authorized the
following credit facilities subject to the ensuing terms and conditions.
BORROWER: Rosedale Wallcoverings and Fabrics Inc. (the "Borrower").
LENDER: National Bank of Canada (the "Bank").
AMOUNT: A. $3,500,000 Cdn. by way of an Operating Loan and/or
Letters of Credit on a revolving demand loan agreement.
B. $250,000 Cdn. by way of an Operating Loan Bulge.
C. $1,750,000 Cdn. by way of a Foreign Exchange Forward
Contract limit with net risk of 10% on U.S. dollar
contracts. At any time total foreign exchange forward
contracts may not exceed the Cdn. equivalent of
$17,500,000 for U.S. dollar contracts.
D. $110,000 Cdn. by way of a Standby Letter of Credit.
E. $25,000 Cdn. by way of Business Mastercard.
PURPOSE: A. To finance day to day operations.
B. To assist with repayment of postponed Borden trade debt;
available for the period November 1, 1997 to January 3l,
1998.
C. To purchase U.S. dollar foreign exchange forward
contracts. Applicable terms will be from a minimum of 1
day to a maximum of 1 year.
D. To facilitate issuance of a standby letter of credit to
Laurentian Bank.
E. To facilitate issuance of business cards to management
personnel.
<PAGE>
2
INTEREST RATE: A. Prime Rate of National Bank of Canada plus 1.50%, that
is 6.55% as at July 30,1997, calculated daily and paid
monthly in arrears. Prime Rate is defined as the rate as
established from time to time by the Bank for Canadian
dollar loans in Canada.
The interest rate shall reduce to Prime plus 1.0% upon
the Borrower achieving a Debt to Equity ratio of 2.50:1
or better as evidenced by an audited year end financial
statement.
B. Prime Rate of National Bank of Canada plus 2.0%, that is
6.75% as at July 30, 1997, calculated daily and paid
monthly in arrears. Prime Rate is defined as the rate as
established from time to time by the Bank for Canadian
dollar loans in Canada.
C. As quoted by International Department, National Bank of
Canada at date of booking.
D. 1.50% per annum.
E. Standard Business Mastercard rates.
REPAYMENT: On demand.
A. To revolve in multiples of $50,000.
B. To revolve in multiples of $50,000; repayment in full by
January 31, 1998.
C. According to specified maturity dates.
D. In the event of drawdown by way of debit to the
Borrower's current account.
E. As stipulated in the cardholder agreement.
DEMAND NATURE OF
THE FACILITIES: The Borrower and the Guarantors acknowledge and agree that
notwithstanding anything contained herein to the contrary
these facilities constitute Demand Loans and as such, are due
and payable at any time at the sole discretion of the Bank.
MARGIN
AVAILABILITY: Operating advances (Facilities A and B) and Letters of Credit
(Facility D) shall be limited to the lesser of $3,860,000 or
the aggregate of the following:
(a) 75% of good quality wade accounts receivable (Cdn. and
U.S.) excluding contra accounts, and intercompany
accounts, doubtful accounts, and those aged 90 days past
invoice date and over; plus
(b) 75% of good quality accounts receivable relating to the
sale of sample books excluding those aged 120 days past
invoice date and over; plus
(c) 50% of trade accounts receivable due from Ontario Paint
& Wallpaper Limited excluding those aged 90 days past
invoice date and over capped at a maximum margin
availability of $400,000; plus
<PAGE>
3
(d) 50% of finished goods inventory located in Canada capped
at an overall maximum of $1,250,000; less
(e) all claims which rank prior to the Bank's security (i.e.
deductions at source, GST, etc).
SECURITY: All legal and other documentation to be in a form and content
satisfactory to the Bank and its solicitors and is to be
supported by all usual representations and opinions to confirm
its enforceability. To include but not limited to:
"In Place"
1. Assignment of Life Insurance in the amount of $1,000,000
on the life of Alan Fine.
2. Assignment of Life Insurance in the amount of $1,000,000
on the life of Sidney Ackerman.
3. General Assignment of Book Debts and UCC filings
registered in all applicable jurisdictions providing a
first charge over accounts and edict receivables.
4. Pledge of Inventory under Section 427 of the Bank Act
and UCC filings providing a first charge over inventory.
5. Assignment of sufficient fire insurance to protect the
Bank's interest.
6. General Security Agreement providing a free floating
charge over all assets of the Borrower.
7. $750,000 Guarantee from Alan Fine. The guarantee will be
reduced to $250,000 upon the Borrower achieving a Debt
to Equity ratio of 2.50:1 or better as evidenced by an
audited year end financial Maternal together with
compliance to all other terms, conditions and covenants
of the credit facility.
8. Subordination and Postponement of Claim from Alan Fine.
9. $750,000 Guarantee from Sidney Ackerman. The guarantee
will be reduced to $250,000 upon the Borrower achieving
a Debt to Equity ratio of 2.50:1 or better as evidenced
by an audited year end financial statement together with
compliance to all other terms, conditions and covenants
of the credit facility.
10. Subordination and Postponement of Claim from Sidney
Ackerman.
11. $750,000 Guarantee from Ontario Paint & Wallpaper
Limited. The guarantee will be eligible for release
beginning December 31, 1997. Release will be subject to
the Borrower achieving each of the following as
evidenced by an audited year end financial statement:
(i) Earnings before taxes and bonus (retained) of not
less than $300,000 for two consecutive fiscal
periods.
(ii) Debt to Equity ration of 2.50:1 or better.
<PAGE>
4
(iii) Compliance to all terms, conditions and covenants
of the credit facility.
12. $1,000,000 Guarantee from 521305 Ontario Inc.
13. Subordination and Postponement of Claim from 521305
Ontario Inc.
FINANCIAL
COVENANTS: The Borrower agrees to the following covenants which shall be
calculated as indicated below, maintained at all times and
tested monthly except where otherwise indicated:
1. Current Ratio: The ratio of Current Assets to Current
Liabilities will not be less than 1.10:1 at anytime.
Current Assets shall exclude any intercompany advances,
deferred costs, or any other assets of doubtful or
intangible nature.
2. Debt to Equity Ratio: The ratio of Debt to Equity will
not be more than 3.50:1 at any time. Furthermore, Debt
to Equity will not be more than 3.0:1 at December 31,
1997 and anytime thereafter. Debt shall be defined as
total liabilities less any loans postponed to the Bank,
less deferred income taxes. Equity shall be defined as
Share Capital plus Retained Earning plus any loans
postponed to the Bank, less any deferred expenditures,
loans to officers, directors, or shareholders, or
intercompany advances and any other assets of doubtful
value.
3. Capital Expenditures: The Borrower agrees that annual
capital expenditures shall not exceed Cash Flow from
Operating Activities. Cash Flow from Operating
Activities shall be defined as Income After Tax plus
deferred taxes; depreciation and amortization; and any
other non-cash expenses; less dividends and all debt
principal payments.
REPORTING
CONDITIONS: 1. Within 25 days of each month-end, the Borrower shall
provide the following information on Bank documents,
signed by the appropriate authorized officer of the
Borrower:
(a) monthly accounts payable listing classified
according to age;
(b) monthly accounts receivable listing classified
according to age;
(c) inventory declaration;
(d) prior claims declaration;
(e) internally prepared income statement and balance
sheet.
2. The Borrower agrees to submit to the Bank its annual
audited financial statements within 90 days of the end
of its fiscal year.
3. The Borrower agrees to submit to the Bank its annual
budget including budgeted monthly balance sheet, income
statement, and cashflow within 90 days of its fiscal
year end.
4. The Borrower agrees to submit to the Bank the annual
financial statements of 521305 Ontario Inc. and Ontario
Paint & Wallpaper Limited.
5. Updated personal net worth statements from each of Alan
Fine and Sidney Ackerman are to be provided annually.
<PAGE>
5
OTHER CONDITIONS: 1. The Borrower agrees to quarterly reviews of current
assets and internal financial reporting systems by the
Bank.
2. All legal and registration fees incurred to prepare,
execute and maintain legal documents will be assumed by
the Borrower.
3. The cost of all appraisals and environmental reports
requested by the Bank are the responsibility of the
Borrower.
4. The ownership structure of the company shall not be
altered without the Bank's prior written consent which
shall not be unreasonably withheld.
5. The nature of the Borrower's business shall not be
substantially changed without the Bank's prior written
consent which shall not be unreasonably withheld.
6. If a major change judged unfavorable by the Bank occurs
in the nature of the risk before the date the funds are
advanced, the Bank can retain that advance and cancel
this Offer to Finance.
FEES: 1. Renewal fee of $5,000.
2. $200 monthly management fee.
ENVIRONMENTAL
MATTERS: 1. The Borrower and the Guarantors represent and warrant
that the owner of the subject property has complied and
is complying in all respects with all applicable laws
relating to the environment, that no contaminants,
pollutants or other hazardous substances (including,
without limitation, asbestos, products containing urea
formaldehyde or polychlorinated biphenyl or any
radioactive substances) have been or are now stored or
located at the subject property, that no order,
approval, direction or other governmental or regulatory
notice relating to the environment has been threatened
against, is pending or has been issued with respect to
the subject property or the operations of the business
being conducted at the subject property, and that none
of them is aware of any pending or threatened action,
suit or proceedings relating to any actual or alleged
environmental violation from or at the subject property.
2. The Borrower and Guarantors agree to comply with and
respect any and all environmental laws and regulations.
3. The Borrower and Guarantors agree to indemnify the Bank
for all decontamination costs or for damages incurred by
the Bank or its agents as a result of such
contamination.
ACKNOWLEDGEMENT
OF NON MERGER: The terms and conditions contained in this Offer to Finance
shall not merge upon the execution and delivery of the
security documentation referred to herein but shall at all
times remain in full force and effect.
<PAGE>
6
CREDIT REPORTING: The Borrower and the Guarantors consent to the obtaining from
any credit reporting agency or from any person such
information as the Bank may require at any time, and consent
to the disclosure at any time of the information concerning
the Borrower and the Guarantor to any credit grantor with whom
the Borrower and the Guarantor have financial relations or to
any credit reporting agency.
REPRESENTATIONS
AND WARRANTIES: The Borrower and the Guarantor represent and warrant that the
information given in respect of applying for the credit
facilities is correct and complete, and acknowledge that the
Bank is relying on said representations and warranties.
ANNUAL REVIEW: To be reviewed at least annually, and in any event not later
than April 30, 1998.
OTHER: The Borrower agrees to keep the contents of this Letter
strictly confidential.
If these conditions are acceptable to you, please indicate your acceptance
thereof by signing and returning a copy of this letter to the Bank before August
11, 1997, after which time this offer is null and void.
Yours truly,
/s/ Steven L. Matheson /s/ R.A. Garrard
Steven L. Matheson R.A. Garrard
Senior Account Manager Senior Manager
ACCEPTANCE:
WE ACCEPT THE TERMS AND CONDITIONS OUTLINED HEREIN THIS 31 DAY OF JULY, 1997
ROSEDALE WALLCOVERINGS AND FABRIC INC. ("Borrower")
Per: /s/ Alan Fine
---------------------
Title: President
AS GUARANTORS:
/s/ Alan Fine
- ---------------------
Alan Fine
/s/ Sidney Ackerman
- ---------------------
Sidney Ackerman
ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Sidney Ackerman
---------------------
Title:
521305 ONTARIO INC.
Per: /s/ Alan Fine
---------------------
Title: President
<PAGE>
DOCUMENT INDEX
- --------------------------------------------------------------------------------
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NATIONAL BANK FINANCING
DOCUMENT INDEX
TAB DOCUMENT
- --- --------
1 Reporting Letter
2 Offer to Finance dated August 8, 1996
3 Acknowledgment of debt regarding
$3,500,000.00 revolving line of credit
4 General Security Agreement
5 General Assignment of Book Debts
6 Application for Credit and Promise to give
Security under the Bank Act
7 Notice of Intention to Give Security under
the Bank Act
8 Agreement Respecting Security under the
Bank Act
9 Bank Act Security
10 Security with Regard to General Accident
Insurance Policy CLD 3643532
11 Security with Regard to Prudential
Insurance Policy JR112754
12 Security with Regard to Prudential
Insurance Policy JR112753
13 Undertaking of Rosedale Wallcoverings &
Fabric Inc. re: assignment of proceeds of
life insurance policy JR112753
14 Priorities Agreement
15 Corporate Certificate of Rosedale
16 Guarantee of 521305 Ontario Inc. regarding
the indebtedness of Rosedale Wallcoverings
and Fabric Inc.
<PAGE>
DOCUMENT INDEX
- --------------------------------------------------------------------------------
17 Certified Copy of a Resolution of the Board
of Directors of 521305 Ontario Inc.
authorizing the Guarantee of the
indebtedness of Rosedale
18 Subordination Agreement executed by 521305
Ontario Inc.
19 Certified Copy of a Resolution of the Board
of Directors of 521305 Ontario Inc.
authorizing the Subordination Agreement
20 Certified Copy of a Resolution of the Board
of Directors of Rosedale Wallcoverings and
Fabrics Inc. authorizing the Subordination
Agreement of 521305 Ontario Inc.
21 Corporate Certificate of 521305 Ontario
Inc.
22 Guarantee of Ontario Paint & Wallpaper
Limited regarding the indebtedness of
Rosedale Wallcovering and Fabric Inc.
23 Certified Copy of a Resolution of the Board
of Directors of Ontario Paint & Wallpaper
Limited authorizing the Guarantee of the
indebtedness of Rosedale Wallcoverings and
Fabric Inc.
24 Guarantee of Sidney Ackerman regarding the
indebtedness of Rosedale Wallcovering and
Fabric Inc.
25 Subordination Agreement Executed by Sidney
Ackerman
26 Certified Copy of a Resolution of the Board
of Directors of Rosedale Wallcoverings and
Fabrics Inc. authorizing the Subordination
Agreement of Sidney Ackerman
27 Statutory Declaration of Sidney Ackerman
28 Guarantee of Alan Fine regarding the
indebtedness of Rosedale Wallcovering and
Fabric Inc.
29 Subordination Agreement Executed by Alan
Fine
30 Certified Copy of a Resolution of the Board
of Directors of Rosedale Wallcoverings and
Fabrics Inc. authorizing the Subordination
Agreement of Alan Fine
31 Statutory Declaration of Alan Fine
32 Acknowledgment of Alan Fine regarding
Receipt of PPSA Verification Statements
33 Acknowledgment of Sidney Ackerman regarding
Receipt of PPSA Verification Statements
<PAGE>
DOCUMENT INDEX
- --------------------------------------------------------------------------------
34 Acknowledgment of 521305 Ontario Inc.
regarding Receipt of PPSA Verification
Statements
35 Acknowledgment of Rosedale Wallcoverings &
Fabrics Inc. regarding Receipt of PPSA
Verification Statements
36 Solvency Certificate of Ontario Paint &
Wallpaper Limited
37 Direction re: funds
38 Authorization to insert dates
39 Legal Opinion of Torkin, Manes, Cohen &
Arbus re: National Bank loan to Rosedale
Wallcoverings & Fabric Inc.
40 Legal Opinion of Torkin, Manes, Cohen &
Arbus Guarantee of 521305 Ontario Inc. of
National Bank loan to Rosedale
Wallcoverings & Fabric Inc.
41 Legal Opinion of Torkin, Manes, Cohen &
Arbus re: Guarantee of Ontario Paint &
Wallpaper Limited regarding National Bank
loan to Rosedale Wallcoverings & Fabric
Inc.
<PAGE>
ROSEDALE WALLCOVERINGS
AND FABRICS INC.
NATIONAL BANK FINANCING
<PAGE>
ROSEDALE WALLCOVERINGS AND FABRICS INC.
NATIONAL BANK FINANCING
Torkin, Manes, Cohen & Arbus
151 Yonge Street
Toronto, Ontario
M5C 2W7
<PAGE>
[LETTERHEAD OF TORKIN, MANES, COHEN & ARBUS]
November 26, 1996
PERSONAL AND CONFIDENTIAL
Alan Fine
Rosedale Wallcoverings & Fabrics Inc.
214 Courtland Avenue
Concord, Ontario
L4K 4L3
Dear Sir:
Re: National Bank Financing
Most of the matters in connection with the above-noted transaction have now been
completed and we are pleased to be in a position to report to you in respect
thereof.
I OFFER TO FINANCE
Pursuant to the Offer to Finance dated August 8,1996, the National Bank of
Canada authorized the following credit facilities (the "National Bank
Financing") to Rosedale Wallcoverings & Fabric Inc. ("Rosedale"), subject to the
terms and conditions contained in the Offers to Finance:
o $3,500,000.00 by way of a revolving demand operating loan;
o $200,000.00 by way of Foreign Exchange Forward Contract; and
o $25,000.00 by way of a business Mastercard.
The interest rate for the Rosedale revolving demand operating loan is the Prime
Rate of the National Bank plus 1.5 %. For the Mastercard credit facility, the
interest rate is determined by the standard rate charged by National Bank
Business Mastercard. The financing is payable on demand, which means that the
Bank may demand repayment at any time, according to the Bank's discretion.
$3,5000,000.00 is the maximum amount available under the credit facility. The
actual amount that will be available to Rosedale at any one time is specified
according to a formula set out in the Offer to Finance. This formula is based on
the total of:
1. 75% of Rosedale's trade accounts receivable;
2. 75% of Rosedale's accounts receivable relating to the sale of sample books;
3. 50% of trade accounts due from Ontario Paint & Wallpaper ("OPW"); and
<PAGE>
Page 2
4. 50% of finished goods inventory located in Canada capped at an overall
maximum of $1,250,000.00.
LESS
5. all claims which rank in priority of the Bank's Security (i.e. deductions at
source, GST, etc.).
Rosedale has further agreed to provide to the Bank a detailed financial report
within 25 days of the end of each month. The required contents of these reports
are set out in the Offer to Finance. Rosedale is also required to submit to the
Bank its audited financial statements within 90 days of the end of its fiscal
year.
Please note that this is just a summary of the Offer to Finance, and you should
refer to the Offer itself for further details and qualifications relating to the
financing.
II. SECURITY
Pursuant to the Offer to Finance, the following security was given by Rosedale:
1. General Security Agreement ("GSA"):
As security for the financing, Rosedale executed a General Security Agreement in
favour of the National Bank, which was registered in the Ontario Personal
Property Security Act Register as File No. 824305932. Pursuant to the terms of
this Agreement, Rosedale granted as collateral for the credit facility its
accounts receivable, goods (including, but not limited to equipment, inventory,
furniture, fixtures, and machinery), contractual rights and interests in
copyrights and patents, securities and commercial paper, and the proceeds
therefrom. You should review the terms of the GSA carefully, and, in particular,
you should note that any default under the GSA will entitle the National Bank to
take possession of any of the property specifically referred to in the
agreement. As well, you should be aware that the collateral under the GSA also
includes goods and rights that Rosedale has not yet acquired, but will acquire
in the future.
2. Assignment of Book Debts ("Assignment"):
Rosedale executed an Assignment of Book Debts granting the National Bank the
right to any debts that are owed by any party to Rosedale for any reason,
including the right to sue debtors and the right to pursue any legal actions
that Rosedale may have against any party.
3. Bank Act Security:
In addition to the security set out above, Rosedale gave the National Bank a
security interest under s. 427 of the Bank Act. The documents relating to this
security are enclosed in the document book at tabs 6,7,8 and 9. This security
assigns to the National Bank goods, wares and merchandise belonging to Rosedale,
including, but not limited to, paint, wallcoverings, borders, fabric, sample
books, home decorating hardware, and accessories. Although this property would
fall under the definition of "collateral" under the GSA, the Bank Act security
was required by the Bank to protect the priority of the Bank's right to the
property of Rosedale if there is a conflict among creditors at a future date.
<PAGE>
Page 3
In the event of a default under the Offer to Finance, the Bank will have the
right to take possession of the property specified in the Bank Act Security in
priority to other creditors, including other secured creditors.
4. Security With Respect to Insurance Policies:
In order to protect its position as a creditor in the event of the death or
incapacity of Alan Fine or Sidney Ackerman, the National Bank required that it
was to be designated as the beneficiary of the following insurance policies:
1. Policy Number JR112754 on the life of Sidney Ackerman issued by the
Prudential Life Insurance Company (Canada); and
2. Policy Number JR112753 on the life of Alan Fine issued by the Prudential Life
Insurance Company (Canada);
Also assigned to the National Bank were the sums payable under the above
policies up to a maximum of $1,000,000.00 plus interest at the rate of interest
as set out therein.
The terms of these policies, including the amount and payment of premiums are
otherwise unchanged. You should refer to the policies themselves for further
details.
As part of the security respecting these insurance policies, Rosedale executed
an undertaking in relation to Policy No. JR112754. According to the terms of
this undertaking, Rosedale guarantees that a minimum of $2,000,000.00 of the
death benefit under the Policy will be available at all times in respect of
Rosedale's obligations to the Bank, and that the Bank will unconditionally
receive a death benefit of $1,000,000.00 on account of the assignment of
Rosedale's interest as a beneficiary under the Policy and an additional
$1,000,000.00 on account of the assignment of OPW's interest as a beneficiary
under the Policy.
III. GUARANTEES
On closing, the following guarantees were provided by the various parties to the
transaction:
1. The indebtedness of Rosedale under the credit facility was guaranteed by Alan
Fine personally up to $750,000.00. This guarantee will be reduced to $250,000.00
upon Rosedale achieving a debt to equity ratio of 2.5:1 or better as evidenced
by an audited year end financial statement;
2. Sidney Ackerman guaranteed the repayment of this debt up to $750,000.00 under
the same terms and conditions as the guarantee given by Alan Fine;
3. Repayment of the Rosedale debt was guaranteed by OPW up to a maximum of
$750,000.00. This guarantee will be eligible for release beginning December 31,
1997, provided that the earnings of Rosedale before taxes and retained bonuses
amount to not less than $300,000.00 for two consecutive fiscal periods and that
Rosedale achieves a debt to equity ratio of 2.5:1 or better as evidenced by an
audited year-end financial statement; and
<PAGE>
Page 4
4. 521305 Ontario Inc. guaranteed the Rosedale indebtedness up to $1,000,000.00.
You should review the terms of the guarantees carefully, as personal liability
for both yourself and Sydney Ackerman will be incurred should Rosedale default
on repayment of the National Bank credit facility. In the event that Rosedale
does default on the repayment of the loan, the Bank may call upon either one or
any combination of the guarantors to repay the outstanding balance owed up to
the maximum amount of the guarantee.
3. Subordination Agreements:
Alan Fine, Sidney Ackerman, and 523105 Ontario Inc. each signed agreements with
the National Bank to the effect that payment of any debts presently due, or that
become due in the future from Rosedale to these parties can only be made after
any amounts due to the Bank at the time have been paid.
IV. PRIORITIES AGREEMENT
Prior to the closing of this transaction, Laurentian Bank of Canada
("Laurentian") held prior-existing security against the assets of Rosedale. This
security relates to two loans made by the North American Trust Company (now
Laurentian Bank) in 1990 to both Rosedale and OPW, and a third loan made in 1995
to Rosedale only. These loans and the accompanying security were subsequently
assigned to Laurentian. The two Priorities Agreements, executed by Rosedale,
OPW, National Bank and Laurentian, define the priority of the rights of the
National Bank and Laurentian to the assets of Rosedale and OPW respectively.
According to the terms of these Agreements, the National Bank security will take
priority over the Laurentian security in all respects with the exception of
certain specified assets. Specifically, Laurentian will have priority over the
National Bank to the proceeds of the following life insurance policies:
1. Life Insurance Policy No. JR112753 on the life of Alan Fine issued by the
Prudential of America Life Insurance Company (Canada) in favour of Rosedale; and
2. Life Insurance Policy No. JR119547 on the life of Rosalyn T. Fine issued by
the Prudential of America Life Insurance Company (Canada) in favour of Rosedale.
V. CORPORATE RESOLUTIONS
The appropriate resolutions authorizing each of the transactions noted above
were passed by the boards of directors of each of the corporate entities
involved.
Specifically, the board of directors of 523105 Ontario Inc. authorized that
corporation to enter into the guarantee regarding the Rosedale debt, and to
enter into the subordination agreement signed on its behalf.
With respect to the credit facility established in favour of Ontario Paint by
National Bank, which is reported separately, Rosedale was authorized by its
board of directors to sign the guarantee of the debt of OPW to the National
Bank. The subordination agreement was also authorized by a specific
<PAGE>
Page 5
resolution of the board of directors of Rosedale.
VI. LEGAL OPINIONS
Torkin, Manes, Cohen & Arbus ("TMCA") provided its legal opinion to the National
Bank and its solicitors in this transaction, Pallett Valo relating to the
validity and enforceability of the loans to Rosedale. Briefly, the Rosedale
opinion states that Rosedale is a validly subsisting Ontario corporation, that
the company has the power to own and lease property in Ontario, that Rosedale
has the power to borrow as contemplated by the Offer to Finance, and that
Rosedale has the power and is authorized to enter into the security agreements
required and to execute all of the various secondary documents necessitated by
the transaction. The opinions do not certify that Rosedale owns the property
charged under the GSA or assignment of book debts, nor has TMCA confirmed the
rank or priority of any of the security instruments contained herein.
VII. OTHER CLOSING DOCUMENTS
In order to facilitate the closing of the transaction, several ancillary
documents were signed. These documents include:
1. Authorization to insert the dates into certain specified documents;
2. Solvency certificates for Rosedale;
3. Acknowledgments signed by each debtor and guarantor to the effect that each
debtor and guarantor has received a verification of the registration of the
securities involved in this transaction in the Personal Property Security
Register;
4. A direction re: funds signed on behalf of Rosedale directing the National
Bank to pay out of the proceeds of the loan the moneys owed by Rosedale to the
Hong Kong Bank of Canada and the legal fees of Pallett Valo.
CONCLUSION
We are enclosing copies of the documents referred to herein and wish to point
out that this reporting letter is merely a brief synopsis of some of the main
features of the documents referred to. In the event that any questions arise,
recourse should be made to the exact wording of the document in question.
If you have any questions, please do not hesitate to contact us. It has been a
pleasure acting for you in this transaction.
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
<PAGE>
[LETTERHEAD OF NATIONAL BANK OF CANADA]
Commercial Banking Centre
August 8, 1996
Rosedale Wallcoverings and Fabrics Inc.
214 Courtland Avenue
Concord, Ontario
L4K 4L3
ATTENTION: Mr. Alan Fine, President.
Dear Sirs:
OFFER TO FINANCE
We are pleased to advise you that the National Bank of Canada has authorized the
following credit facilities subject to the ensuing terms and conditions.
BORROWER: Rosedale Wallcoverings and Fabrics Inc. ("the
Borrower").
LENDER: National Bank of Canada (the "Bank").
AMOUNT: A. $3,500,000 Cdn. by way of an Operating Loan and/or
Letters of Credit on a revolving demand loan
agreement.
B. $200,000 Cdn. by way of Foreign Exchange Forward
Contract limit with net risk of 10% on U.S. dollar
contracts. At any time total foreign exchange
forward contracts may not exceed the Cdn.
equivalent of $2,000,000 for U.S. dollar
contracts,
C. $25,000 Cdn. by way of Business Mastercard.
PURPOSE: A. To finance day to day operations.
B. To purchase U.S. dollar foreign exchange forward
contracts. Applicable terms will be from a minimum
of 1 day to a maximum of 1 year.
C. To facilitate issuance of business cards to
management personnel.
INTEREST RATE: A. Prime Rate of National Bank of Canada plus 1.50%,
that is 7.75% as at August 8,1996, calculated
daily and paid monthly in arrears. Prime Rate is
defined as the rate as established from time to
time by the Bank for Canadian dollar loans in
Canada.
The interest rate shall reduce to Prime plus 1.0%
upon the Borrower achieving a Debt to Equity ratio
of 2.50:1 or better as evidenced by an audited
year end financial statement.
B. As quoted by International Department, National
Bank of Canada at date of booking.
<PAGE>
2
C. Standard Business Mastercard rates.
REPAYMENT: On demand.
A. To revolve in multiples of $50,000.
B. According to specified maturity dates.
C. As stipulated in the cardholder agreement.
DEMAND NATURE OF
THE FACILITIES: The Borrower and the Guarantors acknowledge and agree
that notwithstanding anything contained herein to the
contrary these facilities constitute Demand Loans and as
such, are due and payable at any time at the sole
discretion of the Bank.
MARGIN AVAILABILITY: Operating advances and Letters of Credit shall be
limited to the lesser of $3,500,000 or the aggregate of
the following:
(a) 75% of good quality trade accounts receivable
(Cdn. and U.S.) excluding contra accounts and
intercompany accounts, doubtful accounts, and
those aged 90 days past invoice date and over;
plus
(b) 75% of good quality accounts receivable relating
to the sale of sample books excluding those aged
120 days past invoice dare and over; plus
(c) 50% of trade accounts receivable due from Ontario
Paint & Wallpaper Limited excluding those aged 90
days past invoice date and over capped at a
maximum margin availability of $400,000: plus
(d) 50% of finished goods inventory located in Canada
capped at an overall maximum of $l,250,000; less;
(e) all claims which rank prior to the Bank's security
(i.e. deductions at source, GST, etc).
SECURITY: All legal and other documentation to be in a form and
content satisfactory to the Bank and its solicitors and
is to be supported by all usual representations and
opinions to confirm its enforceability. To include but
not limited to:
1. Assignment of Life Insurance in the amount of
$1,000,000 on the life of Alan Fine.
2. Assignment of Life Insurance in the amount of
$1,000,000 on the life of Sidney Ackerman.
3. General Assignment of Book Debts and UCC filings
registered in all applicable jurisdictions
providing a first charge over accounts and other
receivables.
4. Pledge of Inventory under Section 427 of the Bank
Act and UCC filings providing a first charge over
inventory.
5. Assignment of sufficient fire insurance to protect
the Bank's interest.
<PAGE>
3
6. General Security Agreement providing a first
floating charge over all assets of the Borrower.
7. $750,000 Guarantee from Alan Fine. The guarantee
will be reduced to $250,000 upon the Borrower
achieving a Debt to Equity ratio of 2.50:1 or
better as evidenced by an audited year end
financial statement together with compliance to
all other terms, conditions and covenants of the
credit facility.
8. Subordination and Postponement of Claim from Alan
Fine.
9. $750,000 Guarantee from Sidney Ackerman. The
guarantee will be reduced to $250,000 upon the
Borrower achieving a Debt to Equity ratio of
2.50:1 or better as evidenced by an audited year
end financial statement together with compliance
to all other terms, conditions and covenants of
the credit facility.
10. Subordination and Postponement of Claim from
Sidney Ackerman.
11. $750,000 Guarantee from Ontario Paint & Wallpaper
Limited. The guarantee will be eligible for
release beginning December 31, 1997. Release will
be subject to the Borrower achieving each of the
following as evidenced by an audited year end
financial statement:
(i) Earnings before taxes and bonus (retained)
of no less than $300,000 for two consecutive
fiscal periods.
(ii) Debt to Equity ratio of 2.50:1 or better.
(iii) Compliance to all terms, conditions and
covenants of the credit facility.
12. $1,000,000 Guarantee from 521305 Ontario Inc.
13. Subordination and Postponement of Claim from
521305 Ontario Inc.
CONDITIONS PRECEDENT: The following information/documentation satisfactory to
the Bank is to be provided prior to the advance of
funds:
1. Satisfactory report from the Bank's consultant
with respect to a review or current assets and the
internal financial reporting system. Consultants
cost is to the account of the Borrower, and is
estimated at $250.00.
2. Completion of the Bank's environmental
questionnaire evidencing satisfactory results.
3. Personal financial statements from each of Sid
Ackerman and Alan Fine on the Bank's standard
form. Evidence of all material assets is to be
provided.
4. A copy of the Laurentian Bank loan agreement re:
$5,000,000 loan to purchase life insurance policy,
5. All legal and security documents to be in a form
and content satisfactory to
<PAGE>
4
the Bank and its solicitors and is to be
supported by all usual representations and
opinions to confirm its enforceability.
6. Any other important information.
FINANCIAL CONVEYANTS: The Borrower agrees to the following covenants which
shall be calculated as indicated below, maintained at
all times and tested monthly except where otherwise
indicated:
1. Current Ratio: The ratio of Current Assets to
Current Liabilities will not be less than 1.10:1
at anytime. Current Assets shall exclude any
intercompany advances, deferred costs, or any
other assets of doubtful or intangible nature.
2. Debt to Equity Ratio: The ratio of Debt to Equity
will not be note than 3.50:1 at any time.
Furthermore, Debt to Equity will not be more than
3.0:1 at December 3 1, 1997 and anytime
thereafter, Debt shall be defined as total
liabilities less any loans postponed to the Bank,
less deferred income taxes. Equity shall be
defined as Share Capital plus Retained Earnings
plus any loans postponed to the Bank, less any
deferred expenditures, loans to officers,
directors, or shareholders, or intercompany
advances and any other assets of doubtful value.
3. Capital Expenditures: The Borrower agrees that
annual capital expenditures shall not exceed Cash
Flow from Operating Activities. Cash Flow from
Operating Activities shall be defined as Income
After Tax plus deferred taxes; depreciation and
amortization; and any other non-cash expenses;
less dividends and all debt principal payments,
REPORTING CONDITIONS: 1. Within 25 days of each month-end, the Borrower
shall provide the following information on Bank
documents, signed by the appropriate authorized
officer of the Borrower:
(a) monthly accounts payable listing classified
according to age;
(b) monthly accounts receivable listing
classified according to age;
(c) inventory declaration;
(d) prior claims declaration;
(e) internally prepared income statement and
balance sheet.
2. The Borrower agrees to submit to the Bank its
annual audited financial statements within 90 days
of the end of its fiscal year.
3. The Borrower agrees to submit to the Bank its
annual budget including budgeted monthly balance
sheet, income statement, and cashflow within 90
days of its fiscal year end.
4. The Borrower agrees to submit to the Bank the
annual financial statements of 521305 Ontario Inc.
and Ontario Paint & Wallpaper Limited.
<PAGE>
5
5. Updated personal net worth statements from each of
Alan Fine and Sidney Ackerman are to be provided
annually.
OTHER CONDITIONS: 1. The Borrower agrees to quarterly reviews of
current assets and internal financial reporting
systems by the Bank.
2. All legal and registration fees incurred to
prepare, execute and maintain legal documents will
be assumed by the Borrower.
3. The cost of all appraisals and environmental
reports requested by time Bank are the
responsibility of the Borrower.
4. The ownership structure of the company shall not
be altered without the Bank's prior written
consent which shall not be unreasonably withheld.
5. The nature of time Borrower's business shall not
be substantially changed without the Bank's prior
written consent which shall not be unreasonably
withheld.
6. If a major change judged unfavourable by the Bank
occurs in the nature of the risk before the date
the funds are advanced, the Bank can retain that
advance and cancel this Offer to Finance.
FEES: 1. Transaction fee of $5,000 of which:
(a) $2,500 has been paid and;
(b) $2,500 payback upon acceptance of this Offer
to Finance. If the Borrower does not proceed
with financing any fees paid to the Bank
shall be retained.
2. $200 monthly management fee.
ENVIRONMENTAL
MATTERS: 1. The Borrower and the Guarantors represent and
warrant that the owner of the subject property has
complied and is complying in all respects with all
applicable laws relating to the environment, that
no contaminants, pollutants or other hazardous
substances (including, without limitation,
asbestos, products containing urea formaldehyde or
polychlorinated biphenyl or any radioactive
substances) have been or are now stored or located
at the subject property, that no order, approval,
direction or ocher governmental or regulatory
notice relating to the environment has been
threatened against, is pending or has been issued
with respect to the subject property or the
operations of the business being conducted at the
subject property, and that none of them is aware
of any pending or threatened action, suit or
proceedings relating to any actual or alleged
environmental violation from or at the subject
property.
2. The Borrower and Guarantors agree to comply with
and respect any and all environmental laws and
regulations.
3. The Borrower and Guarantors agree to indemnify the
Bank for all decontamination costs or for damages
incurred by the Bank or its agents us a result of
such contamination.
<PAGE>
6
ACKNOWLEDGMENT
OF NON MERGER: The terms and conditions contained in this Offer to
Finance shall not merge upon the execution and delivery
of the security documentation referred to herein but
shall at all times remain in full force and effect.
CREDIT REPORTING: The Borrower and the Guarantors consent to the obtaining
from any credit reporting agency or from any person such
information as the Bank may require at any time, and
consent to the disclosure at any time of the information
concerning the Borrower and the Guarantor to any credit
grantor with whom the Borrower and the Guarantor have
financial relations or to any credit reporting agency.
REPRESENTATIONS AND
WARRANTIES: The Borrower and the Guarantors represent and warrant
that the information given in respect of applying for
the credit facilities is correct and complete, and
acknowledge that the Bank is relying on said
representations and warranties.
ANNUAL REVIEW: To be reviewed at least annually and in any event not
later than April 30, 1997.
OTHER: The Borrower agrees to keep the contents of this Letter
strictly confidential.
If these conditions are acceptable to you, please indicate your acceptance
thereof by signing and returning a copy of this letter to the Bank before August
15, 1996, after which time this offer is null and void.
Yours truly
/s/ Steven L Matheson
Steven L Matheson
Senior Account Manager
/s/ J.A. Marshall
J.A. Marshall
Regional Manager
ACCEPTANCE:
WE ACCEPT THE TERMS AND CONDITIONS OUTLINED HEREIN THIS 12 DAY OF AUGUST, 1996
ROSEDALE WALLCOVERINGS AND FABRIC INC. ("Borrower")
Per: /s/ [ILLEGIBLE]
--------------------------------------------
Title: President
AS GUARANTORS:
/s/ Alan Fine
- ------------------------------------------------
Alan Fine
/s/ Sidney Ackerman
- ------------------------------------------------
Sidney Ackerman
ONTARIO PAINT AND WALLPAPER LIMITED
Per: /s/ Sidney Ackerman
--------------------------------------------
Title: President
521305 ONTARIO INC.
Per: /s/ Alan Fine
--------------------------------------------
Title: President
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[LOGO] NATIONAL BANK OF CANADA
ACKNOWLEDGEMENT OF DEBT
REVOLVING DEMAND CREDIT
In consideration of the National Bank of Canada (hereinafter called the "Bank")
providing the undersigned (hereinafter called the "Customer") with a revolving
demand loan facility (hereinafter called the "Loan Facility") in the aggregate
principal amount not exceeding $3,500,000.00, THREE MILLION AND FIVE HUNDRED
THOUSAND dollars (|X| CDN; |_| CDN or US equivalent; |_| US) the Customer agrees
with the Bank as follows:
1. TERM OF CREDIT
The Customer promises to pay to the Bank, on demand, all amounts
outstanding under this Loan Facility including, without limitation,
principal, interest, fees and accessories.
2. INTEREST RATE
|X| 2.1 Advances In CDN$
Advances in CDN$ shall bear interest, until payment in full, at the
Canadian Prime Rate of the Bank plus One and One-half (1.50%) per cent,
calculated daily and payable monthly, with a minimum charge of $10.00. At
the date hereof the Canadian Prime Rate of the Bank is 5.00 per cent per
annum.
|_| 2.2 Advances in US$
Advances in US$ shall bear interest, until payment in full, at the US Base
Rate of the Bank plus per cent, calculated daily and payable monthly, with
a minimum charge of $ _____________________________________________ . At
the date hereof the US Base Rate of the Bank is _______________ per cent
per annum.
3. FINANCING CONDITIONS
3.1 The Customer authorizes the Bank, but the Bank is not obliged, to
debit from time to time his Account with the amount of interest
accrued and unpaid by the Customer.
3.2 Provided that the Bank has not demanded payment of any amount
outstanding under this Loan Facility, or has not terminated this
Agreement, the Customer may, at the Bank's discretion, borrow, repay
and reborrow up to the amount available under this Loan Facility at
any time and from time to time in the following manner:
3.2.1 The Customer authorizes the Bank, daily or otherwise as and
when determined by the Bank from time to time, to ascertain
the position or net position (as the case may be) between the
Customer and the Bank in respect to the deposit account or, if
more than one, the deposit accounts maintained by the Customer
with the Bank (herein called the "Account") and that
3.2.1.1 if such position or net position is a credit in favour
of the Customer, the Bank may apply the amount of such
credit or any part thereof, rounded to the nearest
$50,000.00 as a repayment of the Loan Facility, and
the Bank will debit the Account with the amount of
such repayment; and
3.2.1.2 if such position or net position is a debit in favour
of the Bank, the Bank will make an advance under the
Loan Facility of such amount, rounded to the nearest
50,000.00 as is required to place the Account in such
credit or net credit position as has been agreed
between the Customer and the Bank from time to time,
and the Bank may increase the unpaid balance owing
under the Loan Facility, and credit the Account with
the amount of such advance; provided that at no time
shall the balance owing exceed the amount of the Loan
Facility.
3.3 The Customer agrees to maintain an average monthly minimum credit
balance in the Account, which may include compensating balances to
cover service charges, reserves and debit float. Such balance shall
be the amount agreed to in writing between the Customer and the Bank
from time to time.
3.4 The Bank shall maintain on the books of its unit of account,
accounts and records evidencing the outstanding principal amount of
the loan of the Bank to the Customer under this Loan Facility
together with any interest in respect thereof. The Bank shall
maintain a record or computerized data of the amount of the balance,
each advance, and each payment of principal and interest on account
of the loan. The Bank's accounts and records constitute in the
absence of manifest error prima facie evidence of the indebtedness
of the Customer to the Bank under this Loan Facility.
4. CONSOLIDATION
Both dates must be the same
4.1 The Customer acknowledges that the outstanding principal balance owing to
the Bank under existing credit facilities which will be replaced by this Loan
Facility is $_______________________, __________________________________________
(figures) (words)
dollars, as at the close of business on _____________________________ 19__. The
initial outstanding principal balance under this Loan Facility will be adjusted
to reflect transactions under the existing credit facility occurring between
________________________________ 19__ and the date of execution of this
agreement. The Customer acknowledges and declares that the security previously
granted to the Bank by the Customer remains in full force and effect, the Bank
hereby reserving all of its right, title and interest to and in the rights,
hypothecs and privileges granted to the Bank under the terms of the said
security.
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5. SECTION 427 OF THE BANK ACT
5.1 This Agreement is given pursuant to the application for credit and
promise to give security made by the undersigned to the Bank and
dated the 10th day of October, 1996, and any supplemental
application for credit and promise to give security. The Customer
promises to give the Bank from time to time warehouse receipts
and/or bills of lading covering the property described in such
application(s) for credit and promise(s) to give security or any
part thereof which is now or may hereafter be covered by warehouse
receipts or bills of lading, as security for this Loan Facility. No
such security shall be merged in any subsequent security or be taken
to be substituted for any security previously acquired. This section
applies only to loans granted under the provisions of the Bank Act.
6. INTERPRETATION
6.1 Definitions
For the purposes hereof, the following words and phrases shall have
the following meaning:
"Canadian Dollars" "CDN$": means lawful money of Canada.
"Canadian Prime Rate": means the annual variable rate of interest
announced from time to time by the Bank and used to determine the
interest rates on Canadian dollar commercial loans granted by the
Bank in Canada.
"Debt", "indebtedness" or "total indebtedness": means the aggregate
amount of principal, interest and accessories due by the Customer
hereunder.
"Floating Rate": means the interest rate applicable to floating rate
advances made hereunder in Canadian or U.S. dollars, as the case may
be.
"U.S. Base Rate": means the annual variable rate of interest
announced from time to time by the Bank and used to determine the
interest rates on U.S. dollar commercial loans granted by the Bank
in Canada.
"U.S. Dollars" "US$": means lawful money of the United States of
America.
6.2 Conversion to U.S. or Canadian dollars
Each time an amount in Canadian dollars must be converted or
expressed in U.S. dollars, or the equivalent in U.S. dollars (or
inversely) must be determined, such calculation shall be made, on
the appropriate date, in accordance with the cash purchase rate of
the Bank at about 10:30 a.m.
6.3 Other Agreements
The Customer acknowledges that the terms of this agreement are in
addition to and not in substitution for any terms and conditions of
any other agreements between the Customer and the Bank.
7. GENERAL TERMS AND CONDITIONS OF REPAYMENT
7.1 Currency and place of payment
All amounts due by the Customer under the terms hereof shall be paid
by the Customer to the Bank in Canadian dollars in the case of a
financing granted in Canadian dollars, or in U.S. dollars in the
case of a financing granted in U.S. dollars.
Should the amount of principal of the debt owing to the Bank exceed
the credit limit effectively granted hereunder, the Customer shall
reimburse the Bank, on demand, an amount equal to such excess
amount.
7.2 Judgment rendered in a currency other than the currency in which the
financing granted was due.
Should a judgment be obtained against the Customer for an amount
owed by it, in a currency other than the one in which the said
amount was owing hereunder, the Customer shall pay the Bank, as
applicable, on the judgment payment date, such additional amount as
is equal to the excess of the amount that was due hereunder and
converted into the other currency, on the judgment payment date,
with respect to the judgment amount. The exchange rate applicable
for the purposes of obtaining the judgment and for calculating said
conversion shall be the rate at which the Bank is able, on the
appropriate date, in Montreal to sell the currency applicable to
this agreement to purchase the other currency.
Any additional amount owing under this clause shall be due as a
separate debt from that which gave rise to the judgment, which
judgment shall not constitute res judicata.
8. LANGUAGE
(For Quebec only)
The Customer has expressly requested that this document be drawn up and
executed in the English language. Le client a expressement demande que ce
document soit redige et signe en langue anglaise.
EXECUTED AT Mississauga THIS 30th DAY OF October 1996
NATIONAL BANK OF CANADA
Per: /s/ Steven Matheson
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Signature (Bank)
ROSEDALE WALLCOVERINGS & FABRICS INC.
Per: /s/ Alan Fine c/s
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Signature (Customer) ALAN FINE - President
Per: /s/ Sidney Ackerman
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SIGNATURE (Customer) SIDNEY ACKERMAN - Secretary
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GENERAL SECURITY AGREEMENT
TO: NATIONAL BANK OF CANADA
350 Burnhamthorpe Road West, Mississauga, Ont. L5B 3J1 hereinafter called
the "BANK",
(BRANCH ADDRESS)
GRANTED BY: ROSEDALE WALLCOVERINGS & FABRICS INC.
(FULL NAME)
214 Courtland Avenue, Concord, Ontario, L4K 4L3 hereinafter called the
"DEBTOR".
(ADDRESS)
1. GRANT OF SECURITY INTEREST
As a general and continuing Security for the payment of all
obligations, indebtedness and liabilities of the Debtor to the Bank whether
incurred prior to, at the time of or subsequent to the execution hereof,
including extensions or renewals, and all other present and future liabilities
of the Debtor to the Bank, direct or indirect, wheresoever and howsoever
incurred and any ultimate unpaid balance thereof, including, without restricting
the generality of the foregoing, advances to the Debtor under fixed or revolving
credits established from time to time; letters of credit, whether or not drawn
upon, issued by the Bank with respect to the Debtor; and the obligation and
liability of the Debtor under any contract of guarantee now or hereafter in
existence whereby the Debtor guarantees payment of the debts, liabilities and
obligations of a third party to the Bank; (herein called "Obligations") the
Debtor hereby grants to the Bank a continuing security interest in, and
mortgages, charges and assigns to the Bank as and by way of a fixed and specific
mortgage and charge, all of the Debtor's present and after-acquired property,
assets, and undertaking described in paragraph 2 hereof (hereinafter
collectively called the "Collateral").
2. DESCRIPTION OF COLLATERAL
(a) Accounts Receivable or Accounts
All debts, Accounts, claims, moneys and choses in action which now
are or which may at any time hereafter be due or owing to or owned
by the Debtor and also all securities, mortgages, bills, notes and
other documents now held or owned or which may be hereafter taken,
held or owned by or on behalf of the Debtor in respect of the said
debts, Accounts, claims, moneys and choses in action, or any part
thereof, and also all books, documents and papers recording,
evidencing or relating to the said debts, Accounts, claims, moneys
and choses in action, or any part thereof. All of which are
hereinafter called "Accounts Receivable" or "Accounts".
(b) Goods
All Goods (including all parts, accessories, attachments, additions
and accessions thereto) now owned or hereafter owned or acquired by
the Debtor including, without limitation, all equipment, inventory,
machinery, tools, apparatus, plant, furniture, fixtures, and Serial
Numbered Goods now owned or hereafter acquired by the Debtor. All of
which are hereinafter called "Goods".
(c) Intangibles
All Intangibles now owned or hereafter acquired by the Debtor and
which are not included in sub-paragraph (a) above, including,
without limitation, all contractual rights, goodwill, patents, trade
marks, trade names, copyrights, permits and quotas, and other
industrial property now owned or hereafter acquired by the Debtor
and the undertaking of the Debtor. All of which are hereinafter
called "Intangibles".
(d) Other Personal Property
All Securities (including without limitation shares, stocks,
warrants, bonds and debentures), Instruments (including without
limitation cheques, notes, bills of exchange, letters of credit and
advices of credit), Chattel Paper (including without limitation
chattel mortgages, conditional sale contracts, lease-option
agreements and leases), Documents of Title (including without
limitation warehouse receipts and bills of lading) and Money now
owned or hereafter acquired by the Debtor. All of which are
hereinafter respectively called "Securities", "Instruments",
"Chattel Paper", "Documents of Title" and "Money".
(e) Leaseholds, Real and Immovable Property
All real and immovable property, both freehold and leasehold, and
any interests therein, now owned or hereafter acquired by the
Debtor, together with all buildings, erections, improvements and
fixtures situate thereupon or used in connection therewith and
including the property set forth and described in Schedule "A" which
forms part hereof, including any lease, verbal or written or any
agreement therefor, provided, however, the last day of any term of
any such lease, verbal or written, or any agreement therefor, is
excepted out of the property charged by this security agreement, but
the Debtor shall stand possessed of any such reversion upon trust to
assign and dispose thereof as the Bank may direct.
(f) Proceeds
All property in any form derived directly or indirectly from any
dealing with the aforementioned undertaking and property of the
Debtor or proceeds, including property that indemnities or
compensates for property destroyed or damaged. All of which property
is hereinafter called "Proceeds".
Unless otherwise limited herein, the terms "Goods", "Accounts",
"Chattel Paper", "Documents of Title", "Instruments", "Money", "Securities",
"Proceeds" and "Accession" whenever used herein shall be interpreted pursuant to
their respective meanings when used in the Personal Property Security Act of the
province referred to in paragraph 24, as amended or replaced from time to time,
which Act including amendments thereto and any Act substituted therefor and
amendments thereto is herein referred to as the "PPSA". Any reference herein to
"Collateral" shall, unless the context otherwise requires, be deemed a reference
to "Collateral or any part thereof", PROVIDED THAT the Collateral will not
include any "Consumer Goods" of the Debtor as that term is defined in the PPSA.
"Serial Numbered Goods" means motor vehicles, trailers, mobile homes, aircraft,
boats and outboard motors.
Time of Attachment - The Debtor acknowledges that value has been given and
that the parties have not agreed to postpone the time for attachment of the
mortgages, charges, assignments and security interests provided for in this
security agreement.
3. SECURITIES
If the Collateral at any time includes Securities, the Debtor
authorizes the Bank to transfer the same or any part thereof into its own name
or that of its nominee(s) so that the Bank or its nominee(s) may appear of
record as the sole owner thereof; provided that, until default, the Bank shall
deliver promptly to the Debtor all notices or other communications received by
it or its nominee(s) as such registered owner and, upon demand and receipt of
payment of any necessary expenses thereof, shall issue to the Debtor or its
order a proxy to vote and take all action with respect to such Securities. After
default, the Debtor waives all rights to receive any notices or communications
received by the Bank or its nominee(s) as such registered owner and agrees that
no proxy issued by the Bank to the Debtor or its order as aforesaid shall
thereafter be effective.
4. SERIAL NUMBERED GOODS
The Debtor confirms and warrants that all Serial Numbered Goods
owned by the Debtor and used as equipment are fully and accurately described in
Schedule "A", and the Debtor covenants to advise the Bank promptly, in writing,
of the acquisition by the Debtor of any further Serial Numbered Goods that are
not inventory or the commencement by the Debtor to use any Serial Numbered Goods
in its inventory for non-inventory purposes and to provide the Bank with full
and complete descriptions of such Serial Numbered Goods, setting forth each
make, model, year of manufacture and serial number.
5. GENERAL WARRANTIES AND COVENANTS OF THE DEBTOR
The Debtor hereby warrants and covenants with the Bank that it:
(a) owns the Collateral free of all security interests or other
encumbrances except for the permitted encumbrances described in
paragraph 30 hereof or hereafter approved in writing by the Bank
prior to their creation or assumption and that none of the Goods
which are subject to the security interest hereof have been affixed
to real property or to other Goods except as has been disclosed to
the Bank in writing;
(b) shall pay all costs and expenses (including legal fees on a
solicitor and his own client basis) of the Bank incurred with
respect to the preparation, execution and filing of or in respect of
this security agreement and the taking, recovering or possessing of
the Collateral and in any other proceedings taken for the purpose of
enforcing the remedies provided herein, or otherwise in relation to
the Collateral, including the Bank's costs of complying with any
provision of the PPSA or by reason of non-payment of the Obligations
hereby secured;
(c) shall keep the Collateral in good order, condition and repair, and
shall not use the Collateral in violation of the provisions of this
security agreement and shall prevent the Collateral from being or
becoming affixed to real property without the prior written consent
of the Bank;
(d) shall pay all rents, taxes, rates, levies, assessments and other
charges of every nature which may be lawfully levied, assessed or
imposed against or in respect of the Debtor or Collateral as and
when the same shall become due and payable;
(e) shall notify the Bank promptly of:
(i) any change in the information contained herein or in the
Schedule hereto relating to Debtor, Debtor's business or
Collateral;
(ii) the details of any significant acquisition of Collateral;
(iii) the details of any claims or litigation affecting the Debtor
or Collateral;
(iv) any loss of or damage to Collateral;
(v) any default by any Account Debtor (as defined in the PPSA) in
payment or other performance of his obligations with respect
to the Collateral; and
(vi) the return to or repossession by Debtor of Collateral;
(f) shall observe and perform all its obligations under all leases,
licenses and other agreements to which it is a party in order to
preserve and protect the Collateral and shall comply with all of its
other covenants and agreements with the Bank (e.g.those set forth in
a commitment letter);
(g) shall permit a representative of the Bank at any time to inspect its
plant, machinery, equipment, inventory, stock-in-trade and
operations and for that purpose to enter the Debtor's premises and
any other location where the Collateral may be situated and shall
pay the expenses of the Bank incurred thereby including, without
limitation, the reasonable remuneration and expenses of any person
engaged by the Bank for such purpose;
(h) shall keep proper books of account and records covering all its
business and affairs on a current basis; shall permit a
representative of the Bank at any time to inspect the Debtor's books
of account, records and documents, to make copies and summaries
thereof and to make enquiries and tests for the purpose of
verification thereof, and shall pay the expenses of the Bank
incurred thereby including, without limitation, the reasonable
remuneration and expenses of any person engaged by the Bank for such
purposes; and
(i) shall deliver to the Bank from time to time promptly upon request:
(i) any Documents of Title, Instruments, Securities and Chattel
Paper constituting, representing or relating to Collateral;
(ii) all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists and
other writings relating to Collateral for the purpose of
inspecting, auditing or copying the same;
(iii) all financial statements prepared by or for Debtor regarding
Debtor's business;
(iv) all policies and certificates of insurance relating to
Collateral; and
(v) such information concerning Collateral, the Debtor, and
Debtor's business and affairs as the Bank may reasonably
request.
6. CONTINUING SECURITY
This security agreement and the security afforded hereby is in
addition to and not in substitution for any other security now or hereafter held
by the Bank, and is intended to be a continuing security agreement and shall
remain in full force and effect until the Manager or Acting Manager from time to
time of the abovementioned branch of the Bank shall actually receive written
notice of its discontinuance, and, notwithstanding such notice, shall remain in
full force and effect thereafter until all Obligations contracted for or created
before the receipt of such notice by the Bank, and any extensions or renewals
thereof (whether made before or after receipt of such notice) together with
interest accruing thereon after such notice, shall be paid and satisfied in
full. It is contemplated that balances owing from time to time by the Debtor may
be reduced or paid in full and that further advances may be made to the Debtor
on the basis of this security agreement.
7. RESTRICTIONS ON SALE OR DISPOSAL OF COLLATERAL
(a) Except as hereinafter provided, the Debtor shall not, without the
written consent of the Bank:
(i) sell, lease or otherwise dispose of the Collateral or any part
thereof;
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(ii) release, surrender or abandon possession of the Collateral or
any part thereof; or
(iii) move or transfer the Collateral or any part thereof from its
present location.
(b) Until the Debtor receives notice from the Bank to the contrary, the
Debtor may:
(i) dispose of Inventory and collect Accounts by any method of
disposition or collection that is in the ordinary course of
the Debtor's business and for the purpose of carrying on the
same; and
(ii) at any time, apply for the prior written consent of the Bank,
before selling or otherwise disposing of such part of its
equipment which is not necessary to or useful in connection
with its business and undertaking or which has become worn out
or damaged or otherwise unsuitable for its purposes PROVIDED
THAT the Bank shall have an unfettered discretion in approving
or disapproving of such applications and, as a matter of
principle, will not approve of any application unless the
Debtor substitutes for the equipment being disposed of, and
subjects to the charge of this security agreement, free from
liens or charges, equipment of at least equal value so that
the security of the Bank hereunder shall not thereby be in any
way reduced or impaired. The Debtor shall provide the Bank
from time to time with such further assurances and written
evidence of the extension of the charges of this security
agreement to all such substitute equipment as the Bank may
reasonably require.
(c) The Bank may, at its discretion, at any time release from the charge
contained herein any part or parts of the Collateral, or any other
security or surety for the Obligations either with or without
sufficient consideration therefor, without responsibility therefor,
and without thereby releasing any other part of the Collateral or
any person from this security agreement or from any of the covenants
herein contained. Every part of the Collateral into which the
Collateral is or may hereafter be divided does and shall stand
charged with payment of the Obligations and no person shall have the
right to require the Obligations to be apportioned. The Bank shall
not be accountable to the Debtor for the value of any property or
security released except for any moneys actually received by the
Bank.
8. NEGATIVE COVENANTS
The Debtor shall not, without the prior written consent of the Bank:
(a) create, permit, assume, have outstanding or suffer to exist, any
security interest in or any charge or encumbrance on the Collateral,
or any part thereof, ranking or purporting to rank prior to or pari
passu with the security interest created by this security agreement,
other than permitted encumbrances as described in paragraph 30
hereof, and Purchase-Money Security Interests permitted under
paragraph 8(d);
(b) permit any subsidiary to mortgage, charge or otherwise encumber any
of its property or assets or issue any bonds, debentures, shares or
other securities except to the Debtor or the Bank;
(c) issue any trust deeds or similar instruments which would permit the
Debtor to file for protection under the Companies' Creditors
Arrangement Act;
(d) create any Purchase-Money Security Interest ("PMSI") in favour of
any person; provided however, that the Debtor may create a PMSI in
favour of any vendor of equipment, up to 75% of the purchase price;
nor
(e) amend or terminate, or accept any prepayment in respect of, any
Account, Intangible, Instrument or Chattel Paper except in good
faith in the ordinary course of business.
9. FAILURE TO PERFORM COVENANTS
If the Debtor shall fail to perform any covenant on its part herein
contained, the Bank may, in its absolute discretion, but without being bound to
do so, perform any such covenant capable of being performed by it. If any such
covenant requires the payment of money or if the Collateral shall become subject
to any lien or charge ranking in whole or in part in priority to the charge
created by this security agreement, the Bank may make such payment or pay or
discharge the said lien or charge, but shall be under no obligation to do so.
All sums so paid by the Bank shall immediately be payable by the Debtor to the
Bank, shall bear interest at the highest rate borne by any of the Obligations
until paid, and shall be secured by this security agreement. No such performance
or payment shall relieve the Debtor from any default under this security
agreement or any consequences of such default.
10. INSURANCE
(a) The Debtor shall insure and keep insured the Collateral against loss
or damage by fire and such other risks, as the Bank may reasonably
require, in the amount of not less than the full insurable value of
the Collateral in lawful money of Canada with insurance companies
authorized to do business in Canada.
(b) The Debtor shall insure itself against public liability for a
reasonable amount considering the nature of the business carried on
by the Debtor.
(c) The loss under all policies of insurance, other than public
liability, shall be payable to the Bank and the Debtor shall arrange
to have the entitlement of the Bank to the loss payable recorded on
each policy of insurance. In any event, the production of this
security agreement shall be sufficient authority for, and the
insurer is hereby directed thereupon, to pay the loss to the Bank.
All policies of insurance, including renewals, shall be lodged with
the Bank and the Debtor shall pay all premiums as the same become
payable in respect of such insurance.
(d) In the event of loss, the Bank, at its option, may apply the
insurance proceeds against the balance owing by the Debtor, release
the said proceeds to the Debtor, or arrange for the said proceeds,
or any part thereof, to be used to repair, replace or rebuild the
damaged property, or any combination of such applications. Where the
insurance proceeds are released to the Debtor, or used for the
purpose of repairing, replacing, or rebuilding the damaged property,
the receipt of the insurance proceeds shall not operate as payment
or novation or in any way affect the security herein or any other
security for the Obligations.
11. EVENTS OF DEFAULT
The happening of any of the following events or conditions shall
constitute default hereunder and thereupon the security hereby constituted shall
become enforceable:
(a) The non-payment when due, whether by acceleration or otherwise, of
any principal or interest forming part of the Obligations or the
failure of the Debtor to perform any term, condition, obligation, or
covenant in favour of the Bank, whether or not contained herein,
including default in making any payment referred to herein, or if
any of the warranties contained herein are, or shall become,
materially untrue;
(b) The Debtor, if an individual, dies or is declared incompetent by a
Court of competent jurisdiction or the Debtor, if a partnership, is
dissolved or wound up, or the Debtor, if a corporation, enters into
any reconstruction, reorganization, amalgamation, merger or any
other similar arrangement;
(c) If any order shall be made or a resolution passed for the winding-up
of the Debtor (if the Debtor is a corporation), or if a petition
shall be filed under the Bankruptcy and Insolvency Act by or against
the Debtor or an authorized assignment made by it or a receiver or
agent appointed under the Bankruptcy and Insolvency Act or by or on
behalf of a secured creditor of the Debtor or an application made
under the companies' Creditors Arrangement Act (if the Debtor is a
corporation) or any other relief is sought under any similar
legislation in any jurisdiction or a proposal is made by the Debtor
to its creditors under the Bankruptcy and Insolvency Act or the
Debtor files a Notice of Intention to file such a proposal;
(d) The institution by or against the Debtor of any formal or informal
proceeding for the dissolution or liquidation of, settlement of
claims against or winding up of affairs of the Debtor;
(e) If an encumbrancer, whether permitted or otherwise, shall take
possession of any part of the Collateral, or if any process of a
Court, execution, or distress becomes enforceable or is enforced
against any of the Collateral;
(f) If the Debtor ceases or threatens to cease to carry on business,
makes or agrees to make a bulk sale of assets without complying with
applicable law or commits an act of bankruptcy, or otherwise
acknowledges its insolvency;
(g) If any execution, sequestration, extent or other process of any
court become enforceable against the Debtor or if a distress or
analogous process is levied upon the Collateral or any part thereof;
(h) If any certificate, statement, representation, warranty or audit
report heretofore or hereafter furnished by or on behalf of the
Debtor pursuant to or in connection with this security agreement, or
otherwise (including, without limitation, the representations and
warranties contained herein) or as an inducement to the Bank to
extend any credit to or to enter into this or any other agreement
with the Debtor, proves to have been false in any material respect
at the time as of which the facts therein set forth were stated or
certified, or proves to have omitted any substantial contingent or
unliquidated liability or claim against the Debtor; or if upon the
date of execution of this security agreement, there shall have been
any material adverse change in any of the facts disclosed by any
such certificate, representation, statement, warranty or audit
report, which change shalt not have been disclosed to the Bank at or
prior to the time of such execution;
(i) If the Bank in good faith believes, and has commercially reasonable
grounds for believing, that the prospect of payment or performance
of the Obligations is or is about to be impaired or that the
Collateral is or is about to be placed in jeopardy;
(j) If the Debtor or any guarantor or affiliate defaults under any
agreement with respect to any indebtedness or other obligation to
any person other than the Bank if such default has resulted in, or
may result, with notice or lapse of time or both, in the
acceleration of any such indebtedness or obligation or the right of
such person to realize upon any Collateral; or
(k) If any of the property of the Debtor, or any guarantor, is seized by
or on behalf of a creditor pursuant to security or otherwise.
12. REMEDIES UPON DEFAULT
At any time after the happening of any default, the Bank may declare
any or all of the Obligations not payable on demand to become immediately due
and payable and the security hereby constituted will immediately become
enforceable. To enforce and realize on the security hereby constituted, the Bank
may exercise any one or more of the following rights and powers:
(a) to enter upon any premises of the Debtor and to take possession of
all or any part of the Collateral with power to exclude the Debtor,
its agents and servants therefrom;
(b) to preserve and maintain the Collateral and make such replacements
thereof and additions thereto as it shall deem advisable;
(c) to enjoy and exercise all powers necessary to the performance of all
functions provided for in this security agreement, including,
without limitation, the power to purchase on credit, the power to
borrow in the Debtor's name or in its own name and to advance its
own money to the Debtor at such rates of interest as it may deem
reasonable;
(d) to sell, lease or otherwise dispose of all or any part of the
Collateral whether by public or private sale or lease or otherwise
in such manner and on such terms (including as to deferred payment)
as to it may seem commercially reasonable, provided always that it
shall not be incumbent on the Bank to sell, lease or dispose of the
Collateral but that it shall be lawful for the Bank peaceably and
quietly to take, hold, use, occupy, possess and enjoy the Collateral
in the manner and to the extent it shall deem advisable without
molestation, eviction, hindrance, or interruption of the Debtor, or
any other person or persons whomsoever, and to convey, transfer and
assign to a purchaser or purchasers the title to any of the
Collateral sold; and
(e) to appoint by instrument in writing a receiver, receiver-manager, or
receiver and manager (herein called the "Receiver") of the
Collateral, with or without bond, and may from time to time remove
the Receiver and appoint another in his stead.
13. RECEIVER
A Receiver appointed by the Bank as aforesaid will be deemed to be
the agent of the Debtor and not of the Bank, and the Debtor shall be solely
responsible for the Receiver's acts or defaults and the Bank shall not be in any
way responsible therefor, and the Bank shall not be liable to the Receiver for
his remuneration, costs. charges or expenses. It is further specifically
understood and agreed that the Receiver appointed pursuant to the provisions of
this security agreement by the Bank shall have, subject to any limitations in
the instrument in writing or any order of a court of competent jurisdiction
appointing him, all of the rights and powers of the Bank hereunder and the
following additional rights and powers:
(a) to carry on or concur in carrying on all or any part of the business
of the Debtor; and
(b) to borrow money, upon the security of the whole or any part of the
Collateral for the purpose of carrying on all or any part of the
business of the Debtor and for the preservation and realization of
the Collateral, or to maintain the whole or any part of the
Collateral in a manner that will be sufficient to obtain the amounts
from time to time required in the opinion of the Receiver, and in so
doing the Receiver may issue certificates (each herein called a
"Receiver's Certificate") that may be payable as the Receiver
considers expedient and bear interest as stated therein, and the
amounts from time to time payable under any Receiver's Certificate
shall charge the Collateral in priority to this security agreement
and the Debtor hereby charges the Collateral with debts, if any,
owing from time to lime under any Receiver's Certificate.
In exercising his powers hereunder, any Receiver will be free to
deal with the Collateral and any assets of the Debtor related thereto in such
order or manner as he may be directed by the Bank, any rule of law or equity to
the contrary notwithstanding, including, without limitation, the equitable
principle or doctrine of marshalling.
14. ADDITIONAL POWERS UPON DEFAULT
In addition to the foregoing rights and powers, the Bank, any
authorized agent of the Bank, and the Receiver shall each have all the rights
and remedies of a secured party or mortgagee under the PPSA, or otherwise at law
or in equity, and for greater certainty, shall each have the following rights
and powers if the security hereby constituted becomes enforceable:
(a) dispose of any of the Collateral in the condition in which it was at
the date possession of it was taken, or after any commercially
reasonable repair, processing or preparation for disposition;
<PAGE>
(b) sell, lease or otherwise dispose of any part of the Collateral
without giving any notice whatever except as may be required by
applicable statute law;
(c) at its option, provided notice is given to the Debtor in the manner
required by the PPSA, the Bank may elect to retain all or any part
of the Collateral in satisfaction of the Obligations to it of the
Debtor;
(d) the Bank may terminate any outstanding credit facilities granted to
the Debtor, immediately or without any prior notice and in addition,
without limitation, may dishonour cheques and apply the Debtor's
credit balances against the Obligations;
(e) the Bank may demand, sue for and receive any Accounts Receivable,
Chattel Paper, Instruments or Securities, give effectual receipts
and discharges therefor, compromise any such Collateral which may
seem bad or doubtful to the Bank and give time for payment thereof
with or without security;
(f) pay any or all debts and liabilities in connection with the
Collateral;
(g) make any arrangements or compromises which the Receiver considers
expedient; and
(h) institute and prosecute all suits, proceedings and actions which it
considers necessary or advisable for the purpose of protecting,
seizing collecting, realizing or obtaining possession or payment of
any part of the Collateral, and defend all suits, proceedings and
actions against the Debtor, the Bank or the Receiver, appear in and
conduct the prosecution and defence of any suit, proceeding or
action then pending or thereafter instituted, and appeal any suit,
proceeding or action.
The Bank, any authorized agent of the Bank, and the Receiver may
realize on various securities and any part thereof in any order that the Bank
may consider advisable and any realization, whether by foreclosure or sale, on
any security or securities shall not bar realization on any other security or
securities. Each remedy of the Bank, any authorized agent of the Bank, and the
Receiver may be enforced before or concurrently with or subsequent to any other
remedy or remedies of the Bank, its agent or the Receiver.
15. APPLICATION OF PROCEEDS OF DISPOSITION OF COLLATERAL
The net revenue received from the Collateral and the net proceeds of
sale of the Collateral or any part thereof shall be applied by the Receiver,
subject to the claims of creditors, if any, ranking in priority to this security
agreement, as follows:
(a) firstly, in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver and the exercise by
him of all or any of the powers aforesaid including the reasonable
remuneration of the Receiver and all amounts properly payable to
him;
(b) secondly, in payment to the Bank of all costs and charges owing
hereunder and interest and arrears of interest remaining unpaid
hereunder;
(c) thirdly, in payment to the Bank of the Obligations owing hereunder;
and
(d) fourthly, subject to the rights of any other creditors, any surplus
shall be paid to the Debtor;
PROVIDED THAT in the event any party claims a charge against all or
a portion of the surplus, the Receiver shall make such disposition
of all or any portion of the surplus as the Receiver deems
appropriate in the circumstances.
16. APPOINTMENT OF CONSULTANT
The Debtor hereby agrees that at all times the Bank shall be
entitled to appoint a Consultant to provide such services and advice as the Bank
may determine in its sole discretion, with power to enter the Debtor's premises,
to inspect and evaluate the Collateral, to make copies of the Debtor's records
at the Debtor's expense, to review the Debtor's business plans and projections,
to assess the viability of the Debtor's business, to monitor the conduct of the
Debtor's affairs, to prepare written reports on the Debtor s affairs and to
distribute such reports to the Bank or to other such persons as the Bank may
direct.
The Debtor acknowledges that the Consultant is an agent for the Bank
and owes no duty to the Debtor. The Consultant is to have no managerial or
advisory capacity and will have no decision making responsibility. The Debtor
authorizes the Bank to provide confidential information to the Consultant. All
fees in connection with the engagement of a Consultant are for the account of
the Debtor and are payable on demand by the Bank.
17. PROCEEDS HELD IN TRUST; APPLICATION OF MONIES
All proceeds collected or received by the Debtor from the
disposition of Collateral or otherwise shalt be received in trust for the Bank
and shall upon request be forthwith paid to the Bank. Subject to applicable law,
any and all payments made in respect of the Obligations from time to time, and
monies realized from any security held therefor (including monies collected in
accordance with or realized on any enforcement of this security agreement), may
be applied to such parts of the Obligations as the Bank may from time to time
see fit or, at the option of the Bank, such payments and monies may be held
unappropriated in a collateral account or released to the Debtor, all without
prejudice to the liability of the Debtor or to the rights of the Bank hereunder.
The Bank may also hold as additional security any increases or profits
(including dividends) in respect of Collateral.
I8. WAIVER BY THE BANK
Any breach by the Debtor of any of the provisions contained in this
security agreement and any default by the Debtor in the observance or
performanceof any covenant or condition required to be observed or performed by
the Debtor hereunder, may only be waived by the Bank in writing, provided that
no such waiver by the Bank shall extend to or be taken in any manner to affect
any subsequent breach or default or the rights resulting therefrom.
19. BANK NOT RESPONSIBLE
The Bank shall not be liable or accountable for any failure to
seize, collect, realize, sell or obtain payment of the Collateral or any part
thereof and shall not be bound to institute proceedings for the purpose of
seizing, collecting, realizing or obtaining possession or payment of the same or
the purpose of preserving any rights of the Bank, the Debtor or any other party
in respect of the same.
The Bank may grant extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges,
release any part of the Collateral to third parties, and otherwise deal with the
Debtor, debtors of the Debtor, sureties and others and with the Collateral and
other securities as the Bank may see fit without prejudice to the Obligations or
the Bank's right to hold and realize the Collateral.
The Bank will not be responsible for any debts contracted by it, for
damages to persons or property, or for salaries or non-fulfilment of contracts,
during an period when the Bank manages Collateral upon entry, as herein
provided; nor will the Bank be responsible for any misconduct, negligence or
non-feasance on the part of any Receiver or the agents or employees thereof; nor
will the Bank or any Receiver be liable to account as a mortgagee in possession
or for any loss on realization or for any default or omission for which a
mortgagee in possession may be liable; nor will the Bank be obligated to keep
Collateral identifiable; nor will the Bank be obligated to take necessary steps
to preserve rights against other Persons with respect to Securities, Instruments
or Chattel Paper included in the Collateral; nor will the Bank be obligated to
inquire into the right of any Person purporting to be entitled under the PPSA to
information and materials from the Bank by making a demand upon the Bank for
such information and materials, and the Bank will entitled to comply with any
such demand, and will not be liable for having so complied, notwithstanding that
such person may in fact not be entitled to make such demand.
20. RESTRICTION ON DEBTOR
Upon the Debtor receiving notice from the Bank of the Bank taking
possession of the Collateral or the appointment of a Receiver, all the powers,
functions, rights and privileges of the Debtor and of each officer, director,
servant, and agent of the Debtor with respect to the Collateral, shall be
suspended unless specifically :ontinued by the written consent of the Bank.
21. BANK APPOINTED ATTORNEY
The Debtor hereby irrevocably appoints the Bank to be the attorney
of the Debtor for and in the name of the Debtor to execute and do any deeds,
documents, transfers, demands, assignments, assurances, consents and things
which the Debtor is obliged to sign, execute or do hereunder and generally to
use the name of the Debtor in the exercise of all or any of the powers hereby
conferred on the Bank and any Receiver appointed.
22. COSTS; DEFICIENCY
The Debtor shall pay to the Bank on demand any and all costs,
charges and expenses, including without limitation legal costs on a solicitor
and his own client basis, incurred or paid by the Bank in protecting or
enforcing its rights upon or under Collateral. After the payment of the expenses
of retaking and disposing of the Collateral, the Debtor shall remain liable to
the Bank for any deficiency remaining to be paid on moneys owing under this
security agreement after the application of the proceeds of disposition of the
Collateral.
23. NO OBLIGATION TO ADVANCE
Neither execution nor delivery of this security agreement shall
obligate the Bank to advance any moneys to the Debtor. None of the preparation,
execution, perfection or registration of this security agreement nor the making
of any advance will bind the Bank to grant, continue, extend time for payment
of, or accept anything, which constitutes or would constitute an Obligation.
24. GOVERNING LAW; SEVERABILITY
This security agreement shall be governed by and construed in
accordance with the law of the jurisdiction where the Bank has the branch
referred to on the first page hereof, as the same may from time to time be in
effect, including, where applicable, the Personal Property Security Act, as
amended or replaced from time to time. Any provision hereof prohibited by such
law shall be ineffective to the extent of such prohibition without invalidating
the remaining provisions hereof.
25. NOTICE
Any demand or notice to the Debtor in connection with this security
agreement shall be deemed to be made or given if either:
(a) mailed by prepaid post addressed to the Debtor at its last known
address, in which case it shall be conclusively deemed to have been
received by the Debtor on the third (3rd) business day following the
date of such mailing; or
(b) personally served upon, or dispatched by facsimile transmission to,
the Debtor, or any director, officer, servant, employee or partner
of the Debtor, in which case it shall be deemed to have been made
and given to the Debtor at the time of such service or dispatch.
26. WAIVER BY DEBTOR
Where any provision or remedy contained or referred to in this
security agreement is prohibited, modified or altered by the laws of any
Province or Territory of Canada which governs that aspect of the security
agreement and the provision or remedies may be waived or excluded by the Debtor
in whole or in part, the Debtor hereby waives and/or excludes such provision to
the extent permissible by law. Without limiting the generality of the foregoing,
the Debtor agrees to waive those provisions of the PPSA which are contrary to
any provision of this security agreement and which may be waived under the PPSA.
27. NON-APPLICABLE LAW
To the fullest extent permitted by law, the Debtor waives all of the
rights, benefits and protections given by the provisions of any existing or
future statute which imposes limitations upon the powers, rights or remedies of
a secured party or upon the methods of realization of security, including any
seize or sue or anti-deficiency statute or any similar provisions of any other
statute. In particular, the Debtor (if a corporation) agrees that the
Limitation of Civil Rights Act of the Province of Saskatchewan shall not apply
to this security agreement or any of the rights, remedies or powers of the Bank
or any Receiver hereunder.
28. FURTHER ASSURANCES
The Debtor shall from time to time forthwith on the Bank's request
do, make and execute all such Financing Statements, Financing Change Statements,
further assignments, documents, acts, matters and things as may be required by
the Bank of or with respect to the Collateral or any part thereof or as may be
required to give effect to these presents.
29. BINDING EFFECT
This security agreement and all its provisions shall enure to the
benefit of the Bank, its successors and assigns, and shall be binding upon the
Debtor, its heirs, executors, administrators, successors and assigns.
30. DESCRIPTION OF PERMITTED ENCUMBRANCES
For the purposes of this security agreement, "Permitted
Encumbrances" means any of the following:-
(a) liens for taxes, assessments, governmental charges or levies which
are not overdue;
(b) rights reserved to or vested in any municipality or government or
other public authority by the terms of any lease, licence,
franchise, grant or permit, or by any statutory provision, to
terminate the same or to require annual or periodic payments as a
condition to the continuance thereof;
(c) any lien or encumbrance, the validity of which is contested by the
Debtor in good faith, in respect of which there shall have been
deposited with the Bank cash in an amount sufficient to satisfy the
same, or the Bank shall otherwise be satisfied that its interests
are not prejudiced thereby; or
(d) any security given by the Debtor to the Bank.
31. HAZARDOUS MATERIALS
The Debtor's operations and places of business are and will be kept
in compliance with all Hazardous Materials Laws (as defined below). No Hazardous
Materials (as defined below) have at any time been transported to or from the
Debtor's places of business, or used, generated, manufactured or disposed of on,
under or about the Debtor's places of business, and the Debtor will not permit
any such activity except in compliance with all Hazardous Materials Laws. For
the purposes of this paragraph: Hazardous Materials" means any oil, flammable
substances, explosives, radioactive materials, hazardous wastes or substances,
asbestos which is or could become friable, urea formaldehyde foam insulation,
toxic wastes or substances, or other wastes, materials or pollutants which pose
a hazard to the Debtor's operations or places of business or which cause the
same to be in violation of any Hazardous Materials Laws; and "Hazardous
Materials Laws" means any federal, provincial or local laws, bylaws, rules,
ordinances, regulations, notices, approvals, orders, standards, guidelines or
policies relating to the environment, health, safety, or any "Hazardous
Materials".
<PAGE>
32. CURRENCY
All sums of money payable under this security agreement shall be paid in
Canadian dollars. If, for the purposes of obtaining or enforcing judgement in
any Court in any jurisdiction, it becomes necessary to convert into the currency
of the country giving such judgement (the "Judgement Currency") an amount due
hereunder in Canadian dollars (the "Agreed Currency"), then the date on which
the rate of exchange for conversion is selected by that Court is referred to
herein as the "Conversion Date". If there is a change in the rate of exchange
between the Judgement Currency and the Agreed Currency between the Conversion
Date and the actual receipt by the Bank of the amount due hereunder or under
such judgement, the Debtor will, notwithstanding such judgement, pay all such
additional amounts as may be necessary to ensure that the amount received by the
Bank in the Judgement Currency, when converted at the rate of exchange
prevailing on the date of receipt, will produce the amount due in the Agreed
Currency. The Debtor's liability hereunder constitutes a separate and
independent liability which shall not merge with any judgement or any partial
payment or enforcement of payment of sums due herein. The term "rate of
exchange", as used herein, includes any premiums or costs payable in connection
with the currency conversion then being effected.
33. ENTIRE AGREEMENT IN WRITING
This security agreement and all schedules hereto represent the entire
agreement between the parties with respect to the granting of the security
interest herein contained and all prior negotiations relating to it are
suspended. There are no collateral understandings between the parties relating
to this security agreement and the rights of the parties hereunder. This
agreement may only be amended by a document signed by the party against whom
enforcement of the amendment is sought.
34. DISCHARGE
The Debtor will be entitled to a discharge of this agreement upon written
request by the Debtor and full payment, performance and satisfaction of the
Obligations, or the securing of the Obligations to the satisfaction of the Bank.
No discharge will be effective unless in writing and executed by the Bank.
35. JOINT AND SEVERAL
If more than one person executes this agreement as the Debtor, all
representations and agreements of the Debtor will be joint and several, the
Obligations will include those of all such persons or any one or more of them
and the Collateral will include Collateral of all such persons or any one or
more of them.
36. INCLUDED WORDS
Where the context requires, the singular will be read as if the plural
were expressed and vice versa, and the provisions hereof will be read with all
necessary grammatical changes dependent upon the person referred to being a
male, female or artificial body.
37. HEADINGS
All headings have been inserted for convenience of reference only and are
not to affect the interpretation of the agreement.
38. RECEIPT OF COPY OF SECURITY AGREEMENT
The Debtor hereby acknowledges having received a copy of this security
agreement and waives all rights to receive from the Bank a copy of any Financing
Statement, Financing Change Statement, or Verification Statement, filed or
issued at any time in respect of this security agreement.
39. LANGUAGE
The Debtor and the Bank have expressly required that this security
agreement and all documents and notices relating hereto be drafted in English.
Les parties aux presentes ont expressement exige que la presente convention de
surete et tous les documents et avis qui y sont afferents soient rediges en
anglais.
40. NAME ETC. OF DEBTOR
The full, true and correct legal name and address of the Debtor and, where
applicable, birth date and sex of the Debtor is hereby declared by the Debtor to
be as follows:
INDIVIDUAL DEBTOR
Surname (Last Name) First Name Second Name Birth Date Y M D Sex
|_| M |_| F
- --------------------------------------------------------------------
Address City Province Postal Code
- --------------------------------------------------------------------------------
Surname (Last Name) First Name Second Name Birth Date Y M D Sex
|_| M |_| F
- --------------------------------------------------------------------
Address City Province Postal Code
- --------------------------------------------------------------------------------
BUSINESS DEBTOR
Name
ROSEDALE WALLCOVERINGS & FABRICS INC.
- --------------------------------------------------------------------------------
Address City Province Postal Code
214 Courtland Avenue, Concord, Ontario L4K4L3
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address City Province Postal Code
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF the undersigned Debtor has executed this security
agreement this 20th day of September 1996.
-----------------------------------------------------
(Signature of debtor(s)s, if individual)
-----------------------------------------------------
ROSEDALE WALLCOVERINGS & FABRICS INC.
-----------------------------------------------------
(Name of Debtor, If Corporation or Partnership)
By: /s/ Alan Fine c/s
-------------------------------------------------
ALAN FINE - President
By: /s/ Sidney Ackerman
-------------------------------------------------
(If Corporation have signed by authorized officers(s)
if Owner or Partner, state which)
SIDNEY ACKERMAN -- Secretary
SCHEDULE "A"
1) LOCATIONS OF COLLATERAL AND RECORDS RELATING TO COLLATERAL:
214 Courtland Avenue, Concord, Ontario.
- --------------------------------------------------------------------------------
(Street) (Town/City) (Province)
2) DESCRIPTION OF SERIAL NUMBERED GOODS
QUANTITY DESCRIPTION SERIAL NUMBER
CORPORATE AUTHORIZING RESOLUTION
"WHEREAS it is in the interests of the Corporation to enter into a General
Security Agreement with National Bank of Canada (the "Bank") as security for the
Corporation's present and future obligations to the Bank and therein to
mortgage, charge, assign and otherwise transfer and encumber and grant security
interests in all its present and future property and assets;
NOW THEREFORE BE IT RESOLVED THAT:
1. The Corporation mortgage, charge, assign and otherwise transfer and
encumber and grant security interests in all its present and future undertaking,
property and assets as security for its present and future obligations to the
Bank, all as provided in the General Security Agreement.
2. Any two officers or directors be and are hereby authorized for and on
behalf of the Corporation to execute and deliver to the Bank a General Security
Agreement substantially in the form of the General Security Agreement presented
to the directors, with such alterations, amendments, deletions or additions as
may be approved by the persons executing the same, and execution accordingly
shall be conclusive evidence of such approval and the General Security Agreement
so executed is the General Security Agreement authorized by this resolution.
3. Any officer or director be and is hereby authorized to execute and
deliver on behalf of the Corporation all such other documents and writings and
to do such other acts and things as may be necessary or desirable for fulfilling
the Corporations obligations under the General Security Agreement."
The undersigned Secretary of ROSEDALE WALLCOVERINGS & FABRICS INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
DOES HEREBY CERTIFY THAT:
1. the foregoing is a true copy of a resolution duly and properly passed or
consented to by the board of directors of the Corporation on the 20th day of
September 1996 ; and
2. the attached General Security Agreement is the General Security Agreement
referred to in the resolution and has been duty and properly executed by the
proper officers of the Corporation.
/s/ Sidney Ackerman
----------------------------
SIDNEY ACKERMAN -- Secretary
<PAGE>
GENERAL ASSIGNMENT OF BOOK DEBTS
1. FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the
undersigned Debtor
ROSEDALE WALLCOVERINGS & FABRICS INC.
--------------------------------------------------------------------------
(Full name of Assignor)
of 214 Courtland Avenue, Concord,
-----------------------------------------------------------------------
(Full address of Assignor)
in the Province of Ontario, hereby assign(s) transfer(s) and grant(s) to
NATIONAL BANK OF CANADA, a Chartered Bank having its Head Office at the
City of Montreal in the Province of Quebec and having a branch office at
350 Burnhamthorpe Road West, Mississauga, in the Province of Ontario,
(hereinafter called the "Bank") a continuing and specific security
interest in all debts proceeds, accounts, claims, money and choses in
action which now are or which may at any time hereafter be due or owing to
or owned by the undersigned and also all deeds, documents, writings,
papers and books relating to or being records of goods or their proceeds,
or by which goods or their proceeds are or may hereafter be secured,
evidenced, acknowledged or made payable including Documents of Title, (and
remaining debt instruments) Chattel Paper, Securities and Instruments, and
all contractual rights and insurance claims relating to collateral
(hereinafter called the "Collateral")
2. The undersigned agrees that the Collateral shall be held by the Bank as a
general and continuing collateral security for the payment of all
obligations, indebtedness and liabilities, present or future, direct or
indirect, absolute or contingent, matured or not, of the undersigned to
the Bank, wheresoever and howsoever incurred, and any ultimate unpaid
balance thereof, and as a first and prior claim upon the Collateral.
3. The undersigned covenants at all times to notify the Bank in writing
promptly of any change in the information contained herein relating to the
undersigned (including the name and location of the chief executive
office, sole place of business or residence, as the case may be, of the
undersigned aforesaid) and of any material default by any person in
payment or other performance of obligations to the undersigned with
respect to any of the Collateral,
4. So long as this assignment remains in effect, the undersigned covenants
not to sell, or further assign or encumber the Collateral without the
prior written consent of the Bank. The undersigned represents and warrants
that the Collateral is genuine and owned by the undersigned free of all
security interests or other encumbrances.
5. The Bank may collect, realize, sell or otherwise deal with the Collateral
or any part thereof in such manner, upon such terms and conditions and at
such time or times, whether before or after default, as may seem to it
advisable and without notice to the undersigned. All moneys collected or
received by the undersigned in respect of the Collateral shall be received
as trustee for the Bank, and shall be forthwith paid over to the Bank by
the undersigned.
6. The Bank shall not be bound to do, observe or perform or see to the
observance or performance by the undersigned of any obligations or
covenants imposed upon the undersigned nor shall the Bank be obliged to
preserve rights against other persons in respect of any Securities or
Records in its possession.
7. The Bank may apply the amounts collected or received by it on account of
such parts of the indebtedness and liabilities of the undersigned to the
Bank as to the Bank seems best or hold the same in a separate collateral
account for such time as it may see fit and then apply the same as
aforesaid, the whole without prejudice to its claim for any deficiency.
8. The Bank may compound, compromise, grant extensions of time and other
indulgences, take and give up securities, accept compositions, grant
releases and discharges and otherwise deal with the debtors of the
undersigned, the undersigned and others, and with the Collateral and other
securities as the Bank may see fit, without prejudice to the liability of
the undersigned or the Bank's right to hold and realize this security.
9. The Bank shall not be liable or accountable for any failure to collect,
realize or obtain payment of the Collateral or any part thereof and the
Bank shall not be bound to institute proceedings for the purpose of
collecting, realizing or obtaining payment of the same or for the purpose
of preserving any rights of the Bank, the undersigned or any other person,
firm or corporation in respect of the same, and the Bank shall not be
responsible for any loss or damage which may occur in consequence of the
negligence of any officer, agent or solicitor employed in the collection
or realization thereof.
10. The Bank may charge on its own behalf and also pay to others reasonable
sums for expenses incurred and for services rendered (expressly including
legal advices and services) in or in connection with collecting, realizing
and/or obtaining payment of the Collateral or any part thereof and may add
the amount of such sums to the indebtedness of the undersigned.
11. So long as this assignment remains in effect, the undersigned covenants
and agrees to deliver to the Bank from time to time promptly upon request
any Documents of Title (and remaining debt instruments), Instruments,
Securities and Chattel Papers constituting, representing or relating to
the Collateral; all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists and other writings
relating to the Collateral for the purpose of inspecting, auditing or
copying the same; all financial statements prepared by or for the
undersigned regarding the undersigned's business; all policies and
certificates of insurance relating to the Collateral, and such information
concerning the Collateral, the undersigned, the undersigned's business and
affairs as the Bank may reasonably request.
10530 E. (Rev 01-91) (All Provinces except Quebec)
<PAGE>
12. The undersigned shall from time to time forthwith on the Bank's request
do, make and execute all such financing statements, further assignments,
documents acts, matters and things as may be required by the Bank of or
with respect to the Collateral or any part thereof or as may be required
to give effect to these presents, and the undersigned hereby constitutes
and appoints the Manager or Acting Manager for the time being of the above
mentioned branch of the Bank the true and lawful attorney of the
undersigned irrevocable with full power of substitution to do, make and
execute all such statements, assignments, documents, acts, matters or
things with the right to use the name of the undersigned whenever and
wherever it may be deemed necessary or expedient.
13. This agreement shall be a continuing agreement in every respect, and shall
be binding upon the heirs, executors, administrators successors and
assigns of the parties hereto. No remedy for the enforcement of the rights
of the Bank hereunder shall be exclusive of or dependent on any other such
remedy, but any one or more of such remedies may from time to time be
exercised independently or in combination. The security interest created
or provided for by this agreement is intended to attach when this
agreement is signed by the undersigned and delivered to the Bank. The
undersigned acknowledges and confirms that there has been no agreement
between the Bank and the undersigned to postpone the time for attachment
of the security interest hereby attached.
14. Nothing in this assignment contained shall or shall be deemed to restrict
the rights and remedies at law or in equity or under any applicable
personal property security legislation or otherwise, of the Bank against
the undersigned and the Collateral, it being hereby agreed by the
undersigned that the Bank has and shall have all such rights and remedies
as if the same were herein at length set forth and by this reference the
same are incorporated in and form a part hereof.
15. Should the undersigned be entitled to a release or discharge or amendment
to any financing statement registered by the Bank relating to this
assignment, then the undersigned will pay to the Bank all costs, charges,
expenses and lawyer's fees and disbursements (as between a solicitor and
his own client on a full indemnity basis) incurred by the Bank in
connection with such release, discharge or amendment.
16. For greater certainty it is declared that any and all future loans,
advances or other value which the Bank may in its discretion make or
extend to or for the account of the undersigned shall be secured by this
agreement. If more than one person executes this agreement their
obligations hereunder shall be joint and several.
17. This assignment shall be governed by and construed in accordance with the
law of the jurisdiction where it has been executed by the undersigned, as
the same may from time to time be in effect, including, where applicable,
the Personal Property Security Act.
18. The undersigned hereby acknowledges receiving a copy of this assignment
and waives all rights to receive from the Bank a copy of any financing
statement, financing change statement or verification statement filed or
issued at any time in respect of this assignment.
19. NAME, ETC. OF DEBTOR
The full, true and correct legal name and address of Debtor and, where
applicable, birth date and sex of Debtor is hereby declared by Debtor to
be as follows:
INDIVIDUAL DEBTOR
SURNAME (LAST NAME) FIRST NAME SECOND NAME BIRTH DATE Y M D SEX
|_| M |_| F
- --------------------------------------------------------------------
ADDRESS CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
SURNAME (LAST NAME) FIRST NAME SECOND NAME BIRTH DATE Y M D SEX
|_| M |_| F
- --------------------------------------------------------------------
ADDRESS CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
BUSINESS DEBTOR
NAME OF BUSINESS DEBTOR
ROSEDALE WALLCOVERINGS & FABRICS INC.
- --------------------------------------------------------------------------------
ADDRESS OF BUSINESS DEBTOR CITY PROVINCE POSTAL CODE
214 Courtland Avenue, Concord, Ontario L4K4L3
- --------------------------------------------------------------------------------
NAME
- --------------------------------------------------------------------------------
ADDRESS CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
<PAGE>
IN WITNESS WHEREOF, the undersigned Debtor has executed this Assignment this
20th day of September 1996.
----------------------------------------------------
(Signature of Debtor(s) if individual)
ROSEDALE WALLCOVERINGS & FABRICS INC.
----------------------------------------------------
(Name of Debtor if Corporation or Partnership)
BY /s/ Alan Fine c/s
-------------------------------------------------
TITLE ALAN FINE - President
----------------------------------------------
(If corporation have signed by authorized officer(s)
If Owner or Partner state which)
BY /s/ Sidney Ackerman
-------------------------------------------------
SIDNEY ACKERMAN - Secretary
AFFIDAVIT OF BONA FIDES
(To be completed when assignment to be registered in Atlantic Provinces)
CANADA I,
---------------------------------------------
of the of
------------------- ------------------
Province of in the Province of an employee
------------------- ----------------
County of at
--------------------- ---------------------------------------------
of the National Bank of Canada the Assignee
named in the Assignment of Book Debts
TO WIT: hereto annexed make oath and say:
1. That I am an employee of the NATIONAL BANK OF CANADA at
----------------
in the Province of
-------------------------------------------------.
2. That I am aware of the circumstances connected with the said Assignment
of Book Debts and have a personal knowledge of the facts herein deposed to.
3. That the said Assignment of Book Debts hereto annexed was executed in
good faith and for valuable consideration and not for the mere purpose of
protecting the book debts therein mentioned against the creditors of
- --------------------------------------------------------------------------------
the Assignor, or for the purpose of preventing such creditors from recovering
any claims which they have against the said Assignor.
SWORN before me at the
--------------------------
of in the Province
-------------------------------
of this
--------------------- ---------------------
day of A.D. 19 .
---------------------- -- -----------------------------
- ------------------------------------------------
A commissioner, etc., or a Notary Public.
(When assignment to be registered in New Brunswick,
affidavit on next page to be completed in case of
Incorporated Companies.)
<PAGE>
AFFIDAVIT OF EXECUTION BY INDIVIDUAL OR PARTNERSHIP
(To be completed when assignment to be registered in Atlantic Provinces)
CANADA I,
--------------------------------------------
Province of of the
--------------------- ----------------------------------------
County of in the Province of
----------------------- ----------------------------
TO WIT: by occupation , make oath and say:
-------------
+ Insert "one" or
"two" or as the
case requires)
1. That I was personally present and did see the Assignment of Book Debts
hereto annexed duly signed, sealed and delivered by + of the parties
----------
thereto and that the name
-------------------------------------------------------
set and subscribed as a witness to the execution thereof is of the proper
handwriting of me this deponent and that the same was executed
at the of in the Province
----------------------------- ----------------------------
of on the day of 19 .
------------------------- ----- --------------------------- ------
2. That I know the said and he is in my
-----------------------------------
opinion of the full age of years.
--------------------
SWORN before me at the
------------------
of in the Province)
-----------------------
of this
----------------- -----------------
day of A.D. 19 .
----------------------- ---- -------------------------------------
- ----------------------------------------
A Commissioner, etc., or a Notary Public.
AFFIDAVIT BY OFFICER OF INCORPORATED COMPANY
(To be completed when assignment to be registered in New Brunswick)
CANADA I,
--------------------------------------------
Province of of the
--------------------- ----------------------------------------
County of in the Province of
----------------------- ----------------------------
TO WIT: by occupation , make oath and say:
-------------
1. That the paper-writing hereunto annexed is the Assignment of Book
Accounts and of every schedule or inventory thereto annexed, or therein referred
to, and of every attestation of the execution thereof, as made, given and
executed by the
-----------------------------------------------------------------
(Name of incorporated company)
hereinafter referred to as the Assignor.
2. That the Assignment of Book Accounts was made and given by the said
Assignor on the day of 19 .
---------------------- ------------- ----
3. That I as
---------------------------- -----------------------------------
(Full name) (Name of office)
of the said Assignor being duly authorized so to do did affix the seal of the
said Assignor to the said Assignment of Book Accounts, did sign the said
Assignment of Book Accounts as of the said Assignor
------------------------------
(Name of office)
and did duly deliver the said Assignment of Book Accounts as the act and deed of
the said Assignor on the day of 19 .
------------------- ---------------------- ------
4. That the head office or chief place of business of the said Assignor in
New Brunswick is the situated at
------------------------------------------------
(Number, street and name of place)
in the said Province
SUBSCRIBED to and sworn before me at the
- -------------------------------------------
of in the
-----------------------------------
Province of
-------------------------------- ---------------------------------
this day of
-------------- -------------------
A.D. 19 .
----
- -------------------------------------------
A commissioner, etc., or a Notary Public.
<PAGE>
NATIONAL
[LOGO] BANK APPLICATION FOR CREDIT AND PROMISE
OF CANADA TO GIVE SECURITY UNDER THE BANK ACT
- --------------------------------------------------------------------------------
The NATIONAL BANK OF CANADA, hereinafter called the "Bank", is hereby requested
to lend money and make advances to the undersigned on the security of property
which the undersigned now owns or may hereafter own.
In order to secure payment to the Bank of the amounts which shall become due and
payable to it under such loans and advances, the undersigned promises to give
the Bank security on said property pursuant to section 427 of the Bank Act.
For the same purposes and as security for any other obligation of the
undersigned to the Bank, the undersigned further promises to assign to the Bank
bills of lading and warehouse receipts covering such property.
Unless otherwise agreed between the Bank and the undersigned, all loans and
advances to be made by the Bank to the undersigned shall be deemed to have been
made pursuant to this promise.
Any security granted to the Bank pursuant to this promise shall be in addition
to and not in substitution for, any other security held by the Bank.
For the purposes hereof and any security granted to the Bank under the Bank Act,
the Bank is deemed to be lending money or making an advance if it accepts any
bill of exchange not payable on demand or if it pays any such bill of exchange,
provides funds for the payment of same, issues a guarantee or promises in any
other manner to effect a payment.
Dated at , this day of ,1996.
--------------- ---------- -------------
ROSEDALE WALLCOVERINGS &
FABRICS INC.
Witness Signature
Per: /s/ Alan Fine c/s
- ----------------------------- -----------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
-------------------------------
SIDNEY ACKERMAN -- Secretary
10014 E. (Rev. 11-93)
<PAGE>
[LOGO] NATIONAL BANK OF CANADA 03241 - 006
----- ---
Transit
Notice of intention to give security under section 427 of the Bank Act.
To whom it may concern:
ROSEDALE WALLCOVERINGS & FABRICS INC.
214 Courtland Avenue, Concord, Ontario, L4K 4L3
- --------------------------------------------------------------------------------
(Name of Person, Firm or Company) (P.O. Address)
hereby gives notice that it is my/our intention to give security under Section
427 of the Bank Act, to the NATIONAL BANK OF CANADA.
Dated at Toronto the 20th day of September, 1996
ROSEDALE WALLCOVERINGS & FABRICS INC.
Per: /s/ Alan Fine c/s
---------------------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
----------------------------------------
SIDNEY ACKERMAN -- Secretary
10029 E. (Rev. 06-92)
<PAGE>
NATIONAL
[LOGO] BANK AGREEMENT RESPECTING SECURITY
OF CANADA GIVEN BY THE CUSTOMER
- --------------------------------------------------------------------------------
1. Scope of Agreement. The undersigned ROSEDALE WALLCOVERINGS & FABRICS INC.
(the "Customer") hereby agrees with National Bank of Canada (the "Bank")
that the following provisions shall apply to the security given or to be
given to the Bank by the Customer under the Bank Act, and to the extent
permitted by applicable law, to any other security which the Customer has
given or may hereafter give to the Bank.
2. Remedies of the Bank. If the Customer fails to pay any sum when due by him
to the Bank, if he is otherwise in default to the Bank or if he becomes
insolvent, the Bank is authorized, but not bound, to realize on all or any
part of the security given by the Customer, to take possession of all or
any part of the property covered by such security (the "Property") and to
sell same. The sale may be carried out as, and when, and where the Bank
shall deem appropriate, without any notice to the Customer other than that
required by law, if any, without any formality and without advertisement
or without having to sell at a public auction, The Bank shall have the
choice of how the proceeds from the realization of the security shall be
applied and it may deduct, from such proceeds, the expenses related to the
realization of the security.
3. Proceeds from the Sale of Property. In the event of the sale of the
Property in whole or in part by the Customer, the proceeds of any such
sale, including the negotiable instruments, instruments of payment, bank
notes and evidences of indebtedness delivered as consideration, as well as
the claims against any purchaser shall be the property of the Bank and
shall be paid or delivered to the Bank, and until so paid or delivered,
shall be held by the Customer as trustee and depositary for the Bank.
Execution by the Customer of an assignment or hypothecation of debts shall
be deemed to be in execution of this Agreement and shall not constitute an
acknowledgement by the Bank of any rights of the Customer to such proceeds
and claims.
4. Trust. If the Bank delivers to the Customer any of the security it holds
for the purpose of enabling the Customer to obtain possession of the
Property, the Customer shall receive possession of such security and the
Property thereby covered as trustee and depositary for the Bank.
5. Insurance. The Customer shall cause the Property to be insured for its
full insurable value against fire, theft and all other risks against which
a prudent administrator would insure it. The Bank is hereby designated as
the beneficiary of the indemnities payable under the policies in respect
of the Property and the Customer shall cause such designation to be
inscribed in the policies; the Customer may not revoke such designation
without the prior written consent of the Bank. The Customer shall deliver
a copy of each policy to the Bank and at least fifteen (15) days prior to
the expiry date of a policy, the Customer shall deliver to the Bank an
evidence of the renewal thereof. Should the Customer fail to comply with
the above, the Bank may cause the Property to be insured for such amount
as it sees fit, without however being bound to do so, and in such case the
premiums paid by the Bank shall be deemed to be an advance made to the
Customer and shall be repayable on demand with interest at the Bank's
prime rate plus three percent (3%).
6. Prior Claims. The Customer shall pay and discharge at maturity any debt
which could confer rights to the Property ranking prior to the Bank's
rights and shall provide an evidence thereof to the Bank. From time to
time, the Bank may inspect the Property and the Customer's books of
account and invoices at the Customer's expense, and the Customer shall
therefore give the Bank access to the premises where the Property as well
as such books of account and invoices are located. At the Bank's request,
the Customer shall deliver to the Bank each month a Statement of the value
of the Property and provide the Bank with any other information it may
request regarding the Property.
7. Powers of the Bank. In order to realize on the security given by the
Customer, the Bank may, without any notice or demand, enter into the
premises occupied by the Customer in connection with the Property; it may
occupy them to the exclusion of others, including the Customer, and use
them free of charge until it has disposed of the Property. It may appoint
a receiver or an agent to exercise the rights granted to the Bank
hereunder. Such receiver or agent shall further be entitled to act on the
Customer's behalf and at the Customer's expense to complete the processing
of the Property, to ship some and to do all things which may be necessary
therefor.
<PAGE>
8. Mandate. The Customer shall sign or endorse any document, which in the
Bank's opinion, should be signed or endorsed in order to perform this
Agreement or perfect the Bank's title to the Property or the proceeds
therefrom. For such purpose, the Customer constitutes and appoints the
Bank his attorney, with power of substitution, in order to sign or endorse
any such documents in his name. Such power of attorney shall remain in
effect notwithstanding the death or a change in the capacity of the
Customer and it may not be terminated as long as the Customer remains
indebted to the Bank.
9. Settlement. The Bank may compromise, deal with or grant discharges in
respect of the security, the Property or the proceeds therefrom.
10. Expenses. The words "expenses related to the realization of the security"
used herein include all charges, expenses and fees paid or incurred by the
Bank to take possession of the Property, to do an inventory thereof, to
protect and preserve it, to complete the processing thereof and sell it,
as well as to collect the proceeds or claims resulting from the sale of
such Property; such expenses shall be deemed to be an advance made by the
Bank to the Customer and shall be repayable on demand with interest at the
Bank's prime rate plus three percent (3%).
11. Scope of the Bank's Rights. The rights granted to the Bank hereunder shall
be in addition to its legal rights and its rights under any other
agreement. Such rights shall enure to the benefit of any successor of the
Bank, including any entity which has become the successor of the Bank as
a result of amalgamation or otherwise.
12. Notice. Any notice to the Customer may be given by regular mail sent to
his address last known to the Bank.
EXECUTED at , this day of ,19 .
------------------------- ----- ------------------- ---
Witness Customer
ROSEDALE WALLCOVERINGS &
FABRICS INC.
Per: /s/ Alan Fine c/s
- ---------------------------------- ----------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
-----------------------------
SIDNEY ACKERMAN -- Secretary
<PAGE>
NATIONAL
[LOGO] BANK SECURITY UNDER SECTION 427
OF CANADA OF THE BANK ACT
- --------------------------------------------------------------------------------
FOR GOOD AND VALUABLE CONSIDERATION, the undersigned hereby assigns to the
NATIONAL BANK OF CANADA (hereinafter called the "Bank") as continuing security
for the payment of all loans and advances that have been or may be made by the
Bank to the undersigned and any renewals thereof or substitutions therefor, as
well as the interest thereon, the following property of which the undersigned is
now or may hereafter become the owner, namely:
DESCRIPTION OF PROPERTY (1)
All products of agriculture, products of aquaculture, products of the
- --------------------------------------------------------------------------------
forest, products of the quarry and mine, or products of the sea, lakes and
- --------------------------------------------------------------------------------
rivers and all goods, wares and merchandise which, without limiting the
- --------------------------------------------------------------------------------
generality of the foregoing, include: wallcoverings, borders, fabrics,
- --------------------------------------------------------------------------------
sample books, and the goods, wares and merchandise used in or procured for
- --------------------------------------------------------------------------------
the packing of such products or goods, wares and merchandise;
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and that is now or may hereafter be in the place or places hereinafter
designated, namely:
DESCRIPTION OF PLACE OR PLACES (2)
214 Courtland Avenue, Concord, Ontario,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
or at any other place or in transit.
This security is given under section 427 of the Bank Act and pursuant to the
promise to give security delivered by the undersigned to the Bank on the
day of , 19 .
- ---------------------------------------- ---------------------- ----
(Indicate date of the F.10014 relating to this security)
as well as any other promise of the same nature made by the undersigned to
the Bank.
The property now owned by the undersigned and hereby assigned is free from any
mortgage, lien or charge thereon, other than the previous assignments, if any,
to the Bank, and the undersigned warrants that the property that may hereafter
be acquired by the undersigned and which is hereby assigned shall be free from
any mortgage, lien or charge thereon, other than the previous assignments, if
any, to the Bank.
Dated at ,this day of 19 ,
---------------------------- ------ ---------- -----
ROSEDALE WALLCOVERINGS & FABRICS, INC.
Per: /s/ Alan Fine c/s
----------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
----------------------------------
SIDNEY ACKERMAN - Secretary
(1) If more space is needed, indicate "Continued overleaf" and continue the
Description of Property on the back of the form.
(2) If more space is needed, indicate "Continued overleaf" and continue the
Description of Place or Places on the back of the form.
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SECURITY WITH RESPECT TO AN INSURANCE POLICY
- --------------------------------------------------------------------------------
1. Designation of Beneficiary. The undersigned hereby designates National Bank
of Canada (the "Bank") as the beneficiary of Insurance Policy No. CLD 3643532
issued, by General Accident in respect of the assets of the undersigned and
further designates the Bank as the beneficiary of any and all renewals thereof
or substitutions therefor (such policies and the amendments thereto are
hereinafter collectively called the "Policies"). The undersigned may not revoke
the beneficiary hereby designated without the Bank's written consent.
This limit
applies to
Quebec
only.
2. Hypothec and Assignment. The undersigned also hypothecates and assigns to the
Bank the sums payable under the Policies up to the amount of $ *,
----------------
together with interest as of the date hereof at the rate of twenty-five percent
(25%) per annum.
3. Obligations Secured. The security constituted hereunder shall secure:
3.1 all the obligations of ROSEDALE WALWOVERINGS & FABRICS INC. (the "Customer")
to the Bank arising from the following credit facility or guarantee and all
amendments thereto, renewals thereof or substitutions therefor: loans and credit
facilities extended by the Bank to the Customer pursuant to an Offer of Finance
dated August 8, 1996;
3.2 and all other present and future, direct and indirect obligations of the
Customer to the Bank.
4. Possession of Policies. The undersigned shall deliver the Policies to the
Bank and inform it of any and all events which could result in payment of the
sums payable thereunder.
5. Premiums. The undersigned shall pay the premiums for the Policies at least
ten (10) days before the expiry date thereof and shall deliver to the Bank
evidence of such payment. If the undersigned fails to pay such premiums, the
Bank may pay them for the undersigned, without however being bound to do so.
6. Rights of the Bank. The Bank may, without however being bound to do so,
collect any and all sums payable under the Policies and exercise all rights
arising from the Policies, including any right to cancel the Policies and to
cash the surrender value thereof. All sums collected by the Bank may, at its
discretion, be remitted to the undersigned, or they may be held by the Bank as
security for the obligations referred to in section 3, or applied to the payment
of such obligations, whether or not due. The Bank shall have the choice of how
any such sums collected shall be applied.
7. Remedies of the Bank. The Bank may exercise its rights and recourses without
being required to exercise same against the undersigned or any other person, or
to realize on any other security.
8. Expenses. The undersigned shall pay all the expenses incurred by the Bank in
connection herewith as well as the expenses arising from the exercise of the
Bank's rights, including any premiums which the Bank may pay. The designation of
the beneficiary, and the security granted herein shall also secure the payment
of such expenses.
<PAGE>
9. Mandate. The undersigned constitutes and appoints the Bank its irrevocable
attorney, with power of substitution, in order to perform all acts and to sign
all documents necessary or expedient for the exercise of the rights conferred on
the Bank hereunder, including to endorse all cheques or payment orders made to
the order of the undersigned.
10. Liability of the Bank. The Bank shall only be required to exercise
reasonable care in the exercise of its rights and the performance of its
obligations, and it shall be liable only for its intentional fault or gross
negligence.
11. Additional Security. The rights conferred on the Bank hereunder shall be in
addition to and not in substitution for any other security held by the Bank. The
Bank may, however, waive any other security without affecting its rights
hereunder.
12. Successor of the Bank. This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Undersigned
ROSEDALE WALLCOVERINGS & FABRICS INC.
Per: /s/ Alan Fine c/s
--------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
--------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SECURITY WITH RESPECT TO AN INSURANCE POLICY
- --------------------------------------------------------------------------------
1. Designation of Beneficiary. The undersigned hereby designates National Bank
of Canada (the "Bank") as the beneficiary of Insurance Policy No. JR112754
issued, by THE PRUDENTIAL OF AMERICA LIFE INSURANCE COMPANY (CANADA) in respect
of life insurance for SIDNEY A. ACKERMAN and further designates the Bank as the
beneficiary of any and all renewals thereof or substitutions therefor (such
policies and the amendments thereto are hereinafter collectively called the
"Policies"). The undersigned may not revoke the beneficiary hereby designated
without the Bank's written consent.
2. Hypothec and Assignment. The undersigned also hypothecates and assigns to the
Bank the sums payable under the Policies up to the amount of $ 1,000,000.00 (ONE
MILLION DOLLARS)*, together with interest as of the date hereof at the rate of
twenty-five percent (25%) per annum.
3. Obligations Secured. The security constituted hereunder shall secure:
3.1 all the obligations of ROSEDALE WALLCOVERINGS & FABRICS INC. (the
"Customer") to the Bank arising from the following credit facility or
guarantee and all amendments thereto, renewals thereof or substitutions
therefor: loans and credit facilities extended by the Bank to the Customer
pursuant to an Offer of Finance dated August 8, 1996;
3.2 and all other present and future, direct and indirect obligations of the
Customer to the Bank.
4. Possession of Policies. The undersigned shall deliver the Policies to the
Bank and inform it of any and all events which could result in payment of the
sums payable thereunder.
5. Premiums. The undersigned shall pay the premiums for the Policies at least
ten (10) days before the expiry date thereof and shall deliver to the Bank
evidence of such payment. If the undersigned fails to pay such premiums, the
Bank may pay them for the undersigned, without however being bound to do so.
6. Rights of the Bank. The Bank may, without however being bound to do so,
collect any and all sums payable under the Policies and exercise all rights
arising from the Policies, including any right to cancel the Policies and to
cash the surrender value thereof. All sums collected by the Bank may, at its
discretion, be remitted to the undersigned, or they may be held by the Bank as
security for the obligations referred to in section 3, or applied to the payment
of such obligations, whether or not due. The Bank shall have the choice of how
any such sums collected shall be applied.
7. Remedies of the Bank. The Bank may exercise its rights and recourses without
being required to exercise same against the undersigned or any other person, or
to realize on any other security.
8. Expenses. The undersigned shall pay all the expenses incurred by the Bank in
connection herewith as well as the expenses arising from the exercise of the
Bank's rights, including any premiums which the Bank may pay. The designation of
the beneficiary, and the security granted herein shall also secure the payment
of such expenses.
<PAGE>
9. Mandate. The undersigned constitutes and appoints the Bank its irrevocable
attorney, with power of substitution, in order to perform all acts and to sign
all documents necessary or expedient for the exercise of the rights conferred on
the Bank hereunder, including to endorse all cheques or payment orders made to
the order of the undersigned.
10. Liability of the Bank. The Bank shall only be required to exercise
reasonable care in the exercise of its rights and the performance of its
obligations, and it shall be liable only for its intentional fault or gross
negligence.
11. Additional Security. The rights conferred on the Bank hereunder shall be in
addition to and not in substitution for any other security held by the Bank. The
Bank may, however, waive any other security without affecting its rights
hereunder.
12. Successor of the Bank. This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto this 20th day of September, 1996.
Undersigned:
/s/ Sara Fay Sulley /s/ Sidney Ackerman
- ------------------------------------- -------------------------------------
Name of witness: SIDNEY A. ACKERMAN
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Alan Fine c/s Per: /s/ Sidney Ackerman
--------------------------------- ---------------------------------
ALAN FINE - President SIDNEY ACKERMAN - Secretary
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine c/s
--------------------------------- ---------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - President
CONSENT OF BENEFICIARIES
We, the undersigned ROSEDALE WALLCOVERINGS & FABRICS INC. and ONTARIO PAINT &
WALLPAPER LIMITED, being the beneficiaries of the policy described above, hereby
consent and agree to the designation of beneficiary, hypothec and assignment
contained above in favour of the Bank, and we acknowledge that the rights of the
Bank shall have priority over our rights.
DATED at Toronto this 20th day of September, 1996.
Beneficiaries:
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Alan Fine c/s Per: /s/ Sidney Ackerman
--------------------------------- ---------------------------------
ALAN FINE - President SIDNEY ACKERMAN - Secretary
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine c/s
--------------------------------- ---------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - President
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SECURITY WITH RESPECT TO AN INSURANCE POLICY
- --------------------------------------------------------------------------------
1. Designation of Beneficiary. The undersigned hereby designates National Bank
of Canada (the "Bank") as the beneficiary of Insurance Policy No. JR112753
issued, by THE PRUDENTIAL OF AMERICA LIFE INSURANCE COMPANY (CANADA) in respect
of life insurance for ALAN I. FINE and further designates the Bank as the
beneficiary of any and all renewals thereof or substitutions therefor (such
policies and the amendments thereto are hereinafter collectively called the
"Policies"). The undersigned may not revoke the beneficiary hereby designated
without the Bank's written consent.
2. Hypothec and Assignment. The undersigned also hypothecates and assigns to the
Bank the sums payable under the Policies up to the amount of $ 1,000,000.00 (ONE
MILLION DOLLARS), together with interest as of the date hereof at the rate of
twenty-five percent (25%) per annum.
3. Obligations Secured. The security constituted hereunder shall secure:
3.1 all the obligations of ROSEDALE WALLCOVERINGS & FABRICS INC. (the
"Customer") to the Bank arising from the following credit facility or
guarantee and all amendments thereto, renewals thereof or substitutions
therefor: loans and credit facilities extended by the Bank to the Customer
pursuant to an Offer of Finance dated August 8, 1996;
3.2 and all other present and future, direct and indirect obligations of the
Customer to the Bank.
4. Possession of Policies. The undersigned shall deliver the Policies to the
Bank and inform it of any and all events which could result in payment of the
sums payable thereunder.
5. Premiums. The undersigned shall pay the premiums for the Policies at least
ten (10) days before the expiry date thereof and shall deliver to the Bank
evidence of such payment. If the undersigned fails to pay such premiums, the
Bank may pay them for the undersigned, without however being bound to do so.
6. Rights of the Bank. The Bank may, without however being bound to do so,
collect any and all sums payable under the Policies and exercise all rights
arising from the Policies, including any right to cancel the Policies and to
cash the surrender value thereof. All sums collected by the Bank may, at its
discretion, be remitted to the undersigned, or they may be held by the Bank as
security for the obligations referred to in section 3, or applied to the payment
of such obligations, whether or not due. The Bank shall have the choice of how
any such sums collected shall be applied.
7. Remedies of the Bank. The Bank may exercise its rights and recourses without
being required to exercise same against the undersigned or any other person, or
to realize on any other security.
8. Expenses. The undersigned shall pay all the expenses incurred by the Bank in
connection herewith as well as the expenses arising from the exercise of the
Bank's rights, including any premiums which the Bank may pay. The designation of
the beneficiary, and the security granted herein shall also secure the payment
of such expenses.
<PAGE>
9. Mandate. The undersigned constitutes and appoints the Bank its irrevocable
attorney, with power of substitution, in order to perform all acts and to sign
all documents necessary or expedient for the exercise of the rights conferred on
the Bank hereunder, including to endorse all cheques or payment orders made to
the order of the undersigned.
10. Liability of the Bank. The Bank shall only be required to exercise
reasonable care in the exercise of its rights and the performance of its
obligations, and it shall be liable only for its intentional fault or gross
negligence.
11. Additional Security. The rights conferred on the Bank hereunder shall be in
addition to and not in substitution for any other security held by the Bank. The
Bank may, however, waive any other security without affecting its rights
hereunder.
12. Successor of the Bank. This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Undersigned:
/s/ Sara Fay Sulley /s/ Alan Fine
- ------------------------------------- -------------------------------------
Name of witness: ALAN FINE
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Alan Fine c/s Per: /s/ Sidney Ackerman
--------------------------------- ---------------------------------
ALAN FINE - President SIDNEY ACKERMAN - Secretary
Per: /s/ Sidney Ackerman Per:
--------------------------------- ---------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - President
CONSENT OF BENEFICIARIES
We, the undersigned ROSEDALE WALLCOVERINGS & FABRICS INC. and ONTARIO PAINT &
WALLPAPER LIMITED, being the beneficiaries of the policy described above, hereby
consent and agree to the designation of beneficiary, hypothec and assignment
contained above in favour of the Bank, and we acknowledge that the rights of the
Bank shall have priority over our rights.
DATED at Toronto this 20th day of September, 1996.
Beneficiaries:
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Alan Fine c/s Per: /s/ Sidney Ackerman
--------------------------------- ---------------------------------
ALAN FINE - President SIDNEY ACKERMAN - Secretary
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine c/s
--------------------------------- ---------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - President
<PAGE>
UNDERTAKING
TO: NATIONAL BANK OF CANADA (the "Bank")
RE: Credit facilities to Rosedale Wallcoverings & Fabrics Inc. ("Rosedale")
and Ontario Paint & Wallpaper Limited ("Ontario Paint")
- and -
Life Insurance Policy No. JR112753 issued by The Prudential of America
Life Insurance Company (Canada) to Rosedale on the life of Alan I. Fine
(the "Insured") in the initial face amount of $10,000,000.00 (the
"Policy")
- --------------------------------------------------------------------------------
WHEREAS Rosedale has assigned the proceeds of the Policy to Laurentian
Bank of Canada ("Laurentian") as security for its indebtedness to Laurentian;
AND WHEREAS Rosedale has assigned to the Bank $1,000,000.00 of the death
benefit under the Policy pursuant to Security with Respect to an Insurance
Policy dated September 20, 1996, as partial security for the indebtedness of
Rosedale to the Bank (the "Rosedale Assignment");
AND WHEREAS Rosedale has assigned to the Bank a further $1,000,000.00 of
the death benefit under the Policy pursuant to Security with Respect to an
Insurance Policy dated September 20, 1996, as partial security for the
indebtedness of Ontario Paint to the Bank (the "Ontario Assignment");
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Rosedale undertakes, covenants and
agrees as follows:
1. Rosedale shall take all actions necessary to ensure that not less than an
aggregate $2,000,000.00 of the death benefit under the Policy is available
at all times in respect of Rosedale's obligations to the Bank under the
Rosedale Assignment and the Ontario Assignment, such that, in the event of
the death of the Insured, the Bank will unconditionally receive a death
benefit equal to not less than $1,000,000.00 on account of the Rosedale
Assignment and a second death benefit equal to not less than $1,000,000.00
on account of the Ontario Assignment. In particular, and without limiting
the generality of the foregoing, Rosedale shall take all actions necessary
to ensure that, at all times, the death benefit payable under the Policy
exceeds the total indebtedness of Rosedale to Laurentian by not less than
$2,000,000.00;
2. on an annual basis, Rosedale shall provide to the Bank such documentary
evidence as the Bank may in its sole discretion require, confirming and
verifying that the requirements of paragraph 1 of this Undertaking have
been satisfied; and
<PAGE>
2
3. If Rosedale defaults in the performance of its undertakings and agreements
pursuant to either paragraph 1 or 2 of this Undertaking, Rosedale shall
immediately arrange for and obtain a new policy of life insurance on the
life of the Insured, in an amount of not less than $2,000,000.00 and
containing such terms and conditions as may be satisfactory to the Bank in
its sole discretion, and shall immediately assign such new policy to the
Bank, in substitution for the Policy, the Rosedale Assignment and the
Ontario Assignment; and
4. In the event that paragraph 3 of this Undertaking becomes applicable, the
Insured undertakes and agrees to sign such documents, attend for such
medical examinations and provide such information and co-operations as may
be required in connection with the placing or maintaining of the insurance
referred to in paragraph 3.
DATED: October 29th, 1996.
ROSEDALE WALLCOVERINGS &
FABRICS INC.
Per: /s/ Alan I. Fine c/s
-------------------------------
Alan I. Fine - President
Per: /s/ Sidney A. Ackerman
-------------------------------
Sidney A. Ackerman - Secretary
SIGNED, SEALED and DELIVERED )
in the presence of: )
)
)
/s/ [Illegible] ) /s/ Alan I. Fine
- ---------------------------- ) ------------------------------------
ALAN I. FINE
<PAGE>
PRIORITIES AGREEMENT
National Bank of Canada
loan to Rosedale Wallcoverings & Fabrics Inc.
THIS AGREEMENT made the 29th day of October, 1996.
AMONG:
LAURENTIAN BANK OF CANADA
("Laurentian")
- and -
NATIONAL BANK OF CANADA
("National")
- and -
ROSEDALE WALLCOVERINGS & FABRICS INC.
("Rosedale")
- and -
ONTARIO PAINT & WALLPAPER LIMITED
("Ontario Paint")
WHEREAS:
A. Rosedale, the former name of which was "Rosedale Wallcoverings Inc.",
is or will be indebted or liable to each of Laurentian and National;
B. Rosedale has provided or will provide certain security to each of
Laurentian and National to secure its respective liabilities to Laurentian and
National;
C. Laurentian and National have agreed to enter into this Agreement to
establish the
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-2-
relative rights and priorities of their respective security and the indebtedness
secured thereby and Rosedale and Ontario Paint agreed to enter into this
Agreement to consent to the priority and other arrangements set forth in this
Agreement.
NOW THEREFORE for valuable consideration, the receipt and sufficiency of which
are acknowledged by each of the parties to the Agreement, the parties to this
Agreement agree as follows:
1. Definitions
The following terms set out herein with initial capital letters shall have
the meanings assigned below:
"Demand" means the action whereby one of Laurentian or National either
demands payment of the Laurentian Indebtedness or the National
Indebtedness, as the case may be, or takes any steps to enforce its rights
pursuant to the Laurentian Security of the National Security, as the case
may be, whether directly or indirectly, whether by way of realization of
the Laurentian Security of the National Security, as the case may be, or
otherwise.
"Laurentian Indebtedness" means all debts, liabilities and obligations of
Rosedale to Laurentian from time to time outstanding whether direct or
indirect and wheresoever or howsoever incurred including, without
limitation, all debts, liabilities and obligations arising under and/or
pursuant to the Laurentian Offer of Finance.
"Laurentian Offer of Finance" means the offers of finance issued by North
American in favour of Rosedale, one dated November 30, 1994 and the other
dated January 27, 1995, and subsequently assigned to Laurentian, as
amended, restated and replaced from time to time.
"Laurentian Priority Assets" means the Life Insurance Policy and the
proceeds thereof.
"Laurentian Security" means all security documents granted by Rosedale to
North American and assigned to Laurentian, and all security documents
granted by Rosedale to Laurentian, to secure payment and/or performance of
all debts, liabilities and obligations of Rosedale to Laurentian together
with any and all security hereafter granted by Rosedale to Laurentian,
including, without limitation, the Agreements Re Assignment of Life
Insurance Policies, one dated December 5, 1994 and the other dated March
28, 1995, and made among Rosedale, North American, Ontario Paint and
Rosedale, as beneficiaries, and The Prudential of America Life Insurance
Company (Canada);
"Lenders" means National and Laurentian and "Lender" means either one of
them.
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-3-
"Life Insurance Policy" means both of (i) life insurance policy number
JR112753 on the life of Alan Fine issued by The Prudential of America Life
Insurance Company (Canada) in favour of Rosedale, as owner, and under
which policy Rosedale and Ontario Paint have been designated
beneficiaries; and (ii) life insurance policy number JR119547 on the life
of Rosalyn T. Fine issued by The Prudential of America Life Insurance
Company (Canada) in favour of Rosedale, as owner, and under which policy
Rosedale and Ontario Paint have been designated beneficiaries.
"National Indebtedness" means all debts, liabilities and obligations of
Rosedale to National from time to time outstanding, whether direct or
indirect and wheresoever or howsoever incurred including, without
limitation, all debts, liabilities and obligations arising under and/or
pursuant to the National Offer of Finance.
"National Offer of Finance" means the offer of finance issued by National
in favour of Rosedale dated August 8, 1996, as amended, restated and
replaced from time to time.
"National Priority Assets" means all assets, property and undertaking of
Rosedale and the proceeds of all such assets, property and undertaking,
but excluding the Laurentian Priority Assets.
"National Security" means all security documents granted by Rosedale to
National to secure payment and/or performance of all debts, liabilities
and obligations of Rosedale to National together with any and all security
hereafter granted by Rosedale to National.
"North American" means North American Trust Company.
"Realization Proceeds" shall have the meaning ascribed to such term in
section 10 hereof.
"Security" means the National Security or the Laurentian Security, as the
context requires.
2. Consent
Notwithstanding any other term or provision in the National Security,
National consents to the creation, execution, delivery, registration, filing
and/or perfection of the Laurentian Security. Notwithstanding any other term or
provision of the Laurentian Security, Laurentian consents to the creation,
execution, delivery, registration, filing and/or perfection of the National
Security.
3. Assets over which Laurentian has Priority
Subject to section 10 of this Agreement, the Laurentian Security and the
mortgages, charges and security interests created thereby shall, with respect to
the Laurentian Priority Assets, rank and
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-4-
be enforceable in all respects and for all purposes in priority to the National
Security and the mortgages, charges and security interests created thereby.
4. Assets over which National has Priority
Subject to section 10 of this Agreement, the National Security and the
mortgages, charges and security interests created thereby shall, with respect to
the National Priority Assets, rank and be enforceable in all respects and for
all purposes in priority to the Laurentian Security and the mortgages, charges
and security interests created thereby.
5. Mutual Subordination and Postponement
Each of Laurentian and National hereby postpones and subordinates its
Security to and in favour of the other Lender's Security to the extent necessary
to give effect to the priorities referred to in this Agreement.
6. No Effect on Priority
The respective priorities of the National Security and the Laurentian
Security established hereby, and all other rights established in, altered by or
specified in this Agreement are applicable, irrespective of:
(a) the time or order of creation, execution, delivery, attachment or
perfection of the Laurentian Security of the National Security;
(b) the method of perfection of the National Security or the Laurentian
Security;
(c) the time or order of registration or filing of financing statements,
real estate charges or other recording of the National Security or
the Laurentian Security;
(d) the date or dates of any existing or future loan or any existing or
future advance or advances made by either of Laurentian or National
to Rosedale;
(e) the date or dates of any default by Rosedale under the National
Security or the Laurentian Security;
(f) the date of crystallization of any floating charge contained in the
National Security or the Laurentian Security; or
(g) the date of commencement of enforcement proceedings under the
National Security or the Laurentian Security.
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-5-
7. Limitation on Rights to Proceed
Nothing in this Agreement shall be construed so as to entitle a Lender to
receive any proceeds of realization upon any assets of Rosedale in respect of
which such Lender does not have Security or in respect of which such Lender's
Security is invalid, ineffective or unenforceable against third parties
including, without limitation, Rosedale. Laurentian and National agree that they
shall not challenge the other Lender's Security on the ground that it is
invalid, ineffective or unenforceable.
8. Notice of Enforcement by National
National shall provide to Laurentian a copy of any written demand for
payment of or any notice of the acceleration of the National Indebtedness or the
National Security, forthwith after delivery of such demand or notice to
Rosedale, provided that any failure to give the notice required hereby shall not
affect the priorities established by this Agreement or give rise to any
liability on the part of National.
9. Notice of Enforcement by Laurentian
Laurentian shall provide to National a copy of any written demand for
payment of or any notice of the acceleration of the Laurentian Indebtedness or
the Laurentian Security, forthwith after delivery of such demand or notice to
Rosedale, provided that any failure to give the notice required hereby shall not
affect the priorities established by this Agreement or give rise to any
liability on the part of Laurentian.
10. Proceeds of Realization
Notwithstanding any provision of the National Security or the Laurentian
Security to the contrary, all payments, proceeds and amounts received by either
the Lenders from Rosedale after one of the Lenders has made a Demand or upon the
liquidation of the assets of Rosedale due to the bankruptcy or insolvency of
Rosedale or otherwise (collectively, "Realization Proceeds") shall be applied
and distributed as follows:
(a) Realization Proceeds in respect of the National Priority Assets
shall be applied:
(i) firstly, on account of the costs and expenses of the sale,
collection and realization of the National Security including
the costs and expenses incurred by agents of National or any
receiver or receiver and manager appointed by National or of
National itself and including any legal fees and disbursements
incurred by National or any agent or receiver or receiver and
manager appointed by National;
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-6-
(ii) secondly, on account of the principal, interest and other
amounts due to National in respect of the National
Indebtedness to the extent of the National Indebtedness;
(iii) thirdly, on account of the principal, interest and other
amounts due to Laurentian in respect of the Laurentian
Indebtedness, to the extent of the Laurentian Indebtedness;
and
(iv) fourthly, to Rosedale.
(b) Realization Proceeds in respect of the Laurentian Priority Assets
shall be applied:
(i) firstly, on account of the costs and expenses of the sale,
collection and realization of the Laurentian Security
including the costs and expenses incurred by agents of
Laurentian or any receiver or receiver and manager appointed
by Laurentian or of Laurentian itself and including any legal
fees and disbursements incurred by Laurentian or any agent or
receiver and manager appointed by Laurentian;
(ii) secondly, on account of the principal, interest and other
amounts due to Laurentian in respect of the Laurentian
Indebtedness to the extent of the Laurentian Indebtedness;
(iii) thirdly, on account of the principal, interest and other
amounts due to National in respect of the National
Indebtedness, to the extent of the National Indebtedness; and
(iv) fourthly, to Rosedale.
11. Proceeds of Insurance and Disposition
If any of the assets of Rosedale are disposed of, dealt with, lost or
damaged so as to give rise to proceeds (including amounts payable under
insurance policies), such proceeds shall be deemed to be Realization Proceeds
for the purposes of the Agreement and the priority of claims of the Lenders
against such proceeds shall be determined in accordance with section 10.
12. Trust Funds
Subject to sections 13 and 14 hereof, Laurentian and National agree that
to the extent that they receive Realization Proceeds which are payable to the
other Lender pursuant to the terms and provisions of this Agreement, the amount
of such Realization Proceeds shall be deemed to be
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-7-
received or held by it in trust for the other Lender and shall be paid over to
the other Lender pursuant to the terms and provisions of this Agreement
forthwith after determination of the Lenders' respective entitlements thereto.
13. Payments to Laurentian
Nothing in this Agreement shall prevent Laurentian from receiving any
payments of principal or interest or any other payment provided for in the
Laurentian Offer of Finance on account of the Laurentian Indebtedness at any
time prior to Demand or prior to receipt of notice by National given pursuant to
section 9 hereof or prior to delivery by National of written notice pursuant to
section 8 hereof.
14. Payments to National
Nothing in this Agreement shall prevent National from receiving any
payments of principal or interest or any other payment provided for in the
National Offer of Finance on account of the National Indebtedness at any time
prior to Demand or prior to receipt of notice by Laurentian given pursuant to
section 8 hereof or prior to delivery by Laurentian of written notice pursuant
to section 9 hereof.
15. Rights of Rosedale
Nothing in this Agreement shall be construed so as to:
(a) entitle any party not listed as a signatory to this Agreement, other
than a permitted assignee of either of Laurentian or National, to
receive any Realization Proceeds of any of the assets of Rosedale;
or
(b) confer any rights upon Rosedale or any person not a party to this
Agreement.
If any person other than Laurentian or National shall have any valid claim to
the proceeds of realization of the assets of Rosedale in priority to or in
parity with either of Laurentian or National then this Agreement shall not apply
so as to diminish the rights (as such rights would have been but for this
Agreement) of Laurentian or National to the Realization Proceeds of such
property or assets.
16. Compulsory Enforcement
Nothing in this Agreement shall require or obligate any of the Lenders to
enforce its Security or realize upon the assets of Rosedale.
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-10-
or such other address as the party to whom such notice is given shall have
previously, by notice in writing given in the manner aforesaid, provided to the
remaining parties any such notice given hereunder shall be deemed to have been
given and to become effective on the day of delivery if delivered or, in the
case of notice by mail, on the fourth business day following its deposit in a
government post office, provided that if the party giving the notice becomes
aware of an actual or threatened postal disruption, notice shall be given only
by personal delivery.
22. Termination
This Agreement shall continue in full force and effect until the earlier
of (i) the date on which it is terminated by the mutual consent of the Lenders
and (ii) the date on which payment in full is made of either of the Laurentian
Indebtedness or the National Indebtedness, provided that the obligations of the
Lenders to distribute Realization Proceeds in accordance with section 10 hereof
shall not terminate until such time as the Realization Proceeds are distributed
in accordance with the provisions of section 10 hereof.
23. Entire Agreement
This Agreement constitutes the entire agreement among the parties hereto
in respect of its subject matter and supersedes any prior agreements,
undertakings, declarations or representations, written or oral, in respect
thereof. The parties hereto acknowledge that certain additional documents may be
required to register notice of this Agreement where required. To the extent that
there is any inconsistency in the provisions of this Agreement and the
provisions of any such supplementary documents, the provisions of this Agreement
shall be paramount and prevail.
24. Enurement
This Agreement shall be binding upon and enure to the benefit of all
parties hereto and their respective successors and assigns. Neither Laurentian
nor National shall assign all or any part of their respective Security without
providing the assignee thereof with notice of this Agreement and a copy of this
Agreement. Immediately following any such assignment, the assignor of its
Security shall provide written notice of such assignment to the remaining
Lender.
25. Counterparts
This Agreement may be executed in any number of counterparts or by
facsimile, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument, and it
shall not be necessary in making proof of the Agreement to produce or account
for more than once such counterpart.
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-11-
26. Exchange of Information
From time to time upon request therefor, each of the Lenders shall advise
the other Lender in writing of particulars of the indebtedness and liability of
Rosedale to such lender and of all Security provided by Rosedale with respect
thereto. Rosedale consents to the disclosure of information contemplated hereby.
27. Receipt of Copy by Rosedale
Rosedale acknowledges receipt of an executed copy of this Agreement and
agrees to the terms thereof and agrees that it shall stand possessed of its
assets and undertaking for Laurentian and National in accordance with the
priorities set out above.
28. Receipt of Copy by Ontario Paint
Ontario Paint acknowledges receipt of an executed copy of the Agreement
and agrees to the terms thereof and agrees that it shall stand possessed of the
Life Insurance Policy for Laurentian and National in accordance with the
priorities set out above.
29. Governing Law
This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
Nevertheless, it is acknowledged and agreed that the provisions of the Agreement
shall apply to all property and assets of Rosedale wherever situate or located.
IN WITNESS WHEREOF the parties have executed this Agreement on the day,
month and year first above written.
LAURENTIAN BANK OF CANADA
Per: /s/ Giles H. le Riche
------------------------------
Name: Giles H. le Riche
Title: Manager, Commercial Banking
Per: /s/ W. A. Galbraith
------------------------------
Name: W. A. Galbraith
Title: A.V.P., Commercial Banking
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
-12-
NATIONAL BANK OF CANADA
Per: /s/ GLEN McLEOD
------------------------------------
Name: GLEN McLEOD
Title: Manager, Credit
Per: /s/ STEVEN L. MATHESON
------------------------------------
Name: STEVEN L. MATHESON
Title: SENIOR ACCOUNT MANAGER
COMMERCIAL BANKING
ROSEDALE WALLCOVERINGS & FABRICS
INC.
Per: /s/ ALAN FINE /s/ SIDNEY ACKERMAN
------------------------------------
ALAN FINE SIDNEY ACKERMAN
President Secretary
[SEAL]
ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ SIDNEY ACKERMAN /s/ ALAN FINE
------------------------------------
SIDNEY ACKERMAN ALAN FINE
President Secretary
[SEAL]
Laurentian / National Bank
Rosedale & Ontario Paint
Priorities Agmt
<PAGE>
CORPORATE CERTIFICATE
TO: NATIONAL BANK OF CANADA (the "Lender")
RE: Loan to Rosedale Wallcoverings & Fabrics Inc. (the "Corporation") pursuant
to Offer of Finance dated August 8, 1996
I, A DULY APPOINTED OFFICER of the Corporation, do hereby certify for and
on behalf of the Corporation, as follows:
1. The Corporation was incorporated under the laws of the Province of
Ontario. Attached hereto as Schedule A is a true copy of all of the
articles of the Corporation. No proceedings have been taken or are pending
to amend, surrender or cancel the said articles.
2. The central billing office of the Corporation is at: 214 Courtland Avenue,
Concord, Ontario.
3. The financial year end of the Corporation is on December 31 of each
calendar year.
4. The following persons are duly elected or appointed as qualified officers
and directors of the Corporation and hold the offices indicated opposite
their respective names and the signatures appearing opposite their names
are the signatures of those persons:
Officers:
NAME TITLE SIGNATURE
Alan Fine President /s/ Alan Fine
-------------------------------
Secretary-
Sidney Ackerman Treasurer /s/ Sidney Ackerman
-------------------------------
Directors:
Alan Fine
Sidney Ackerman
Rosedale Wallcoverings & Fabrics Inc.
corporate cert
<PAGE>
-2-
5. The following are the holders of all of the issued and outstanding shares
of the Corporation and the number and class of shares which they hold:
Name of Shareholder No. & Class of Shares Held
------------------- --------------------------
521305 Ontario Inc. 200 common
6. There are no provisions in the articles of the Corporation or any
amendments thereto, the bylaws of the Corporation or in any unanimous
shareholder agreement which would restrict, limit or regulate in any way
the powers of the Corporation or of its directors, to borrow money upon
the credit of the Corporation, to give a guarantee on behalf of the
Corporation to secure the performance of an obligation of any person, to
issue, reissue, sell or pledge debt obligations of the Corporation, or to
mortgage, hypothecate, pledge or otherwise create a security interest in
all or any of the property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation, or to delegate any
of the said powers to a director, officer or committee of directors.
7. Attached hereto as Schedule B is a true copy of a resolution of the board
of directors of the Corporation authorizing the execution and delivery of
the security documents relating to the above-noted matter, which
resolution was duly passed on September 20, 1996, and remains in full
force and effect, unamended and unrescinded, at the date hereof.
8. The by-laws of the Corporation permit the board of directors of the
Corporation from time to time to direct the manner in which the person or
persons by whom any particular instrument or class of instruments may or
shall be signed.
THIS CERTIFICATE shall remain in full force and effect and be
binding upon the Corporation and may be acted upon by Lender until notice to the
contrary or of any change in this Certificate has been given in writing to the
Lender.
DATED this 20th day of September, 1996.
/s/ SIDNEY ACKERMAN c/s
---------------------------------------
SIDNEY ACKERMAN
Secretary
Rosedale Wallcoverings & Fabrics Inc.
corporate cert
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred to as
the "Bank") dealing with ROSEDALE WALLCOVERINGS & FABRICS INC. (hereinafter
referred to as the "Customer"), the undersigned and each of them, if more than
one, hereby jointly and severally guarantee payment to the Bank of all present
and future debts and liabilities (direct or indirect, absolute or contingent,
matured or otherwise), now or at any time and from time to time hereafter due or
owing to the Bank whether incurred by the Customer alone or jointly with any
corporation, person or persons, or otherwise howsoever, including all costs and
disbursements incurred by the Bank in view of recovering or attempting to
recover said debts and liabilities. Provided, however, that the liability of the
undersigned, and of each of the undersigned herein, is limited to ONE MILLION
00/100 Dollars ($1,000,000.00), with interest thereon from the date of demand
of payment, at the rate agreed upon, between the Bank and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and if
there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution of
capacity of the Customer or of the Guarantor or by any change in the name of the
Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained from
the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and shall
cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs, successors,
executors, administrators, legal representatives and assigns until termination
thereof by notice in writing to the manager of the branch of the Bank at which
the account of the Customer is kept, but such termination by any of the
guarantors or their respective heirs, successors, executors, administrators,
legal representatives or assigns shall not prevent the continuance of the
liability hereunder of any other guarantor. Such termination shall apply only to
those debts or liabilities of the Customer incurred or arising after reception
of the notice by the Bank, but not in respect of any prior debts or liabilities,
matured or not. The notice of termination shall have no effect on those debts or
liabilities incurred after reception of said notice which will result from
express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act on
the part of the Bank which would prevent subrogation from operating in favour of
the Guarantor. It is further agreed that the Bank, without exonerating in whole
or in part the Guarantor, may grant time, renewals, extensions, indulgences,
releases and discharges to, may take security from, and give up or release any
or part of the security held, may abstain from taking, perfecting, registering
or renewing security or from realizing on security, may accept compositions and
otherwise deal with the Customer and with any other person or persons, including
any of the guarantors, and dispose of any security held by the Bank as it may
see fit, and that all dividends and monies received by the Bank from the
Customer or from any other person, capable of being applied by the Bank in
reduction of the debts and liabilities hereby guaranteed, shall be considered
for all purposes as payment in gross which the Bank shall have the right to
apply as it may see fit, not being bound by the law of imputation, and the Bank
shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim against
the estate of the Customer and to value its security, it will be entitled to
place such valuation as the Bank may in its discretion see fit, and the filing
of such claim and the valuation of its security shall in no way prejudice or
restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the Customer
or other persons or the security it may hold before being entitled to payment
from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to the
Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and also
upon the heirs, executors, administrators and successors of the Guarantor and
will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day of
September 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
521305 ONTARIO INC.
- ------------------------------ ------------------------------------
(Please print)
Per: /s/ ALAN FINE c/s
- ------------------------------ ------------------------------------
(Please print) ALAN FINE - President
- ------------------------------ ------------------------------------
(Please print)
Per: /s/ SIDNEY ACKERMAN
- ------------------------------ ------------------------------------
(Please print) SIDNEY ACKERMAN - Secretary
- ------------------------------ ------------------------------------
(Please print)
- ------------------------------ ------------------------------------
(Please print)
- ------------------------------ ------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
521305 ONTARIO INC.
- ------------------------------------
Per: /s/ ALAN FINE
- ------------------------------------
ALAN FINE - President
- ------------------------------------
Per: /s/ SIDNEY ACKERMAN
- ------------------------------------
SIDNEY ACKERMAN - Secretary
- ------------------------------------
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] NATIONAL
BANK RESOLUTION RE: GUARANTEE
OF CANADA
- --------------------------------------------------------------------------------
RESOLUTION
OF THE BOARD OF DIRECTORS OF
521305 ONTARIO INC.
--------------------------
(Name of Corporation)
In consideration of the loans and advances of money granted or
which may be granted by National Bank of Canada (the "Bank") to its Customer,
ROSEDALE WALLCOVERINGS & FABRICS INC., for the purpose of its business, and
generally, in consideration of the business relations between the Bank and its
Customer as well as the business relations between the said Customer and this
Corporation, and whereas the financial assistance provided to the said Customer
in the manner hereinafter referred to is in the best interests of this
Corporation;
Now therefore be it resolved:
That this Corporation be and is hereby authorized to guarantee the
payment of all sums of money, which ROSEDALE WALLCOVERINGS & FABRICS INC., the
Customer owes or in the future may owe to the Bank up to a principal amount of
ONE MILLION DOLLARS ($1,000,000.00) together with interest, costs and
accessories. Such guarantee shall bind this Corporation jointly and severally
with the Customer and shall be subject to all the terms and conditions set out
on the form used at the Bank, entitled "Letter of Guarantee", a copy of which is
attached hereto after having been submitted to the Directors and that Mr. Alan
Fine and Mr. Sidney Ackerman, respectively the President and the Secretary, be
authorized and instructed to jointly sign and execute the said guarantee for and
on behalf and in the name of the Corporation and that the financial assistance
provided by this Corporation to the said Customer in the said guarantee and any
security required from time to time by the Bank in connection with the said
guarantee is in the best interests of this Corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of 521305 ONTARIO INC. duly passed on the 20th day of
September, 1996, which remains in full force and effect.
DATED at Toronto this 20th day of September, 1996.
/s/ SIDNEY ACKERMAN c/s
---------------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred to as
the "Bank") dealing with ROSEDALE WALLCOVERINGS & FABRICS INC. (hereinafter
referred to as the "Customer"), the undersigned and each of them, if more than
one, hereby jointly and severally guarantee payment to the Bank of all present
and future debts and liabilities (direct or indirect, absolute or contingent,
matured or otherwise), now or at any time and from time to time hereafter due or
owing to the Bank whether incurred by the Customer alone or jointly with any
corporation, person or persons, or otherwise howsoever, including all costs and
disbursements incurred by the Bank in view of recovering or attempting to
recover said debts and liabilities. Provided, however, that the liability of the
undersigned, and of each of the undersigned herein, is limited to ONE MILLION
00/100 Dollars ($1,000,000.00), with interest thereon from the date of demand
of payment, at the rate agreed upon, between the Bank and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and if
there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution of
capacity of the Customer or of the Guarantor or by any change in the name of the
Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained from
the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and shall
cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs, successors,
executors, administrators, legal representatives and assigns until termination
thereof by notice in writing to the manager of the branch of the Bank at which
the account of the Customer is kept, but such termination by any of the
guarantors or their respective heirs, successors, executors, administrators,
legal representatives or assigns shall not prevent the continuance of the
liability hereunder of any other guarantor. Such termination shall apply only to
those debts or liabilities of the Customer incurred or arising after reception
of the notice by the Bank, but not in respect of any prior debts or liabilities,
matured or not. The notice of termination shall have no effect on those debts or
liabilities incurred after reception of said notice which will result from
express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act on
the part of the Bank which would prevent subrogation from operating in favour of
the Guarantor. It is further agreed that the Bank, without exonerating in whole
or in part the Guarantor, may grant time, renewals, extensions, indulgences,
releases and discharges to, may take security from, and give up or release any
or part of the security held, may abstain from taking, perfecting, registering
or renewing security or from realizing on security, may accept compositions and
otherwise deal with the Customer and with any other person or persons, including
any of the guarantors, and dispose of any security held by the Bank as it may
see fit, and that all dividends and monies received by the Bank from the
Customer or from any other person, capable of being applied by the Bank in
reduction of the debts and liabilities hereby guaranteed, shall be considered
for all purposes as payment in gross which the Bank shall have the right to
apply as it may see fit, not being bound by the law of imputation, and the Bank
shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim against
the estate of the Customer and to value its security, it will be entitled to
place such valuation as the Bank may in its discretion see fit, and the filing
of such claim and the valuation of its security shall in no way prejudice or
restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the Customer
or other persons or the security it may hold before being entitled to payment
from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to the
Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and also
upon the heirs, executors, administrators and successors of the Guarantor and
will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at ________________________
this ______________ day of _______________________________________________ 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
521305 ONTARIO INC.
- ------------------------------ ------------------------------------
(Please print)
Per: c/s
- ------------------------------ ------------------------------------
(Please print) ALAN FINE - President
- ------------------------------ ------------------------------------
(Please print)
Per:
- ------------------------------ ------------------------------------
(Please print) SIDNEY ACKERMAN - Secretary
- ------------------------------ ------------------------------------
(Please print)
- ------------------------------ ------------------------------------
(Please print)
- ------------------------------ ------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
521305 ONTARIO INC.
- ------------------------------------
Per:
- ------------------------------------
ALAN FINE - President
- ------------------------------------
Per:
- ------------------------------------
SIDNEY ACKERMAN - Secretary
- ------------------------------------
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] NATIONAL
BANK SUBORDINATION AGREEMENT
OF CANADA
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS INC. (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
Called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums
of money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
521305 ONTARIO INC.
- ------------------------------ --------------------------------------
Per: /s/ ALAN FINE c/s
--------------------------------------
ALAN FINE - President
--------------------------------------
Per: /s/ SIDNEY ACKERMAN
--------------------------------------
SIDNEY ACKERMAN - Secretary
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees
to comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS, INC.
- ------------------------------ --------------------------------------
Per: /s/ ALAN FINE c/s
--------------------------------------
ALAN FINE - President
--------------------------------------
Per: /s/ SIDNEY ACKERMAN
--------------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
(RESOLUTION OF CREDITOR CORPORATION
RE SUBORDINATION AGREEMENT)
RESOLUTION
OF THE BOARD OF DIRECTORS OF
521305 ONTARIO INC.
In consideration of leases, loans and advances made or to be made
by National Bank of Canada to ROSEDALE WALLCOVERINGS & FABRICS INC. (hereinafter
called the "Customer"), and in consideration of business dealings between the
said Bank and the Customer as well as business dealings between the said
Customer and the corporation.
Now therefore be it resolved
That the payment of all debts, demands and choses in action which
are now due or which may hereafter become due to the corporation by the Customer
be postponed to payment in full of all present and future indebtedness and other
liabilities of the Customer towards the National Bank of Canada, and this in
conformity with and subject to all the clauses and conditions appearing in the
form in use by the said Bank and entitled "Subordination Agreement" No. 11221, a
copy of which is annexed to the present resolution after having been submitted
to the directors, and that Alan Fine and Sidney Ackerman, respectively the
President and the Secretary, be and are hereby authorized and instructed to
jointly sign and execute the aforesaid subordination agreement for and on behalf
and in the name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of 521305 ONTARIO INC. duly adopted on the 20th day of
September, 1996.
Dated at Toronto this 20th day of September, 1996.
/s/ SIDNEY ACKERMAN c/s
-------------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] NATIONAL
BANK SUBORDINATION AGREEMENT
OF CANADA
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS INC. (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
Called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums
of money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at __________________________, this _______ day of _____________, 1996.
Witness Signature(s)
521305 ONTARIO INC.
- ------------------------------ --------------------------------------
Per: c/s
--------------------------------------
ALAN FINE - President
--------------------------------------
Per:
--------------------------------------
SIDNEY ACKERMAN - Secretary
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees
to comply therewith.
Executed at __________________________, this _______ day of _____________, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS, INC.
- ------------------------------ --------------------------------------
Per: c/s
--------------------------------------
ALAN FINE - President
--------------------------------------
Per:
--------------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
RESOLUTION OF DEBTOR CORPORATION
RE SUBORDINATION AGREEMENT
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ROSEDALE WALLCOVERINGS & FABRICS INC.
In consideration of loans and advances made or to be made by
National Bank of Canada to the corporation and generally in consideration of
business dealings between the said Bank and the corporation as well as business
dealings between the corporation and 521305 ONTARIO INC.,
Now therefore be it resolved
That the corporation acknowledge receipt of the notice of the
subordination agreement made on form No. 11221 a copy of which is annexed to the
present resolution after having been submitted to the directors and that the
corporation accept the assignment and transfer in favour of National Bank of
Canada included in the said agreement and that Mr. Alan Fine, President of the
corporation, and Mr. Sidney Ackerman, Secretary of the corporation, be and are
hereby authorized and instructed to jointly sign the acknowledgment and
acceptance on the aforesaid subordination agreement for and on behalf and in the
name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of ROSEDALE WALLCOVERINGS & FABRICS INC. duly adopted on the
20th day of September, 1996.
Dated at Toronto this 20th day of September, 1996.
/s/ SIDNEY ACKERMAN c/s
-------------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] NATIONAL
BANK SUBORDINATION AGREEMENT
OF CANADA
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS INC. (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
Called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums
of money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at __________________________, this _______ day of _____________, 1996.
Witness Signature(s)
521305 ONTARIO INC.
- ------------------------------ --------------------------------------
Per: c/s
--------------------------------------
ALAN FINE - President
--------------------------------------
Per:
--------------------------------------
SIDNEY ACKERMAN - Secretary
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees
to comply therewith.
Executed at __________________________, this _______ day of _____________, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS, INC.
- ------------------------------ --------------------------------------
Per: c/s
--------------------------------------
ALAN FINE - President
--------------------------------------
Per:
--------------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
CORPORATE CERTIFICATE
TO: NATIONAL BANK OF CANADA (the "Lender")
RE: National Bank of Canada credit facilities to Rosedale Wallcoverings &
Fabrics Inc. - Guarantee and Subordination by 521305 Ontario Inc. (the
"Corporation")
- --------------------------------------------------------------------------------
I, A DULY APPOINTED OFFICER of the Corporation, do hereby certify
for and on behalf of the Corporation, as follows:
1. The Corporation was incorporated under the laws of the Province of
Ontario. Attached hereto as Schedule A is a true copy of all of the
articles of the Corporation. No proceedings have been taken or are pending
to amend, surrender or cancel the said articles.
2. The following persons are duly elected or appointed as qualified officers
and directors of the Corporation and hold the offices indicated opposite
their respective names and the signatures appearing opposite their names
are the signatures of those persons:
Officers:
NAME TITLE SIGNATURE
Alan Fine President /s/ Alan Fine
---------------------------
Sidney Ackerman Secretary /s/ Sidney Ackerman
---------------------------
Directors:
Alan Fine
Sidney Ackerman
3. There are no provisions in the articles of the Corporation or any
amendments thereto, the bylaws of the Corporation or in any unanimous
shareholder agreement which would restrict, limit or regulate in any way
the powers of the Corporation or of its directors, to borrow money upon
the credit of the Corporation, to give a guarantee on behalf of the
Corporation to secure the performance of an obligation of any person, to
issue, reissue, sell or pledge debt
<PAGE>
-2-
obligations of the Corporation, or to mortgage, hypothecate, pledge or
otherwise create a security interest in all or any of the property of the
Corporation, owned or subsequently acquired, to secure any obligation of
the Corporation, or to delegate any of the said powers to a director,
officer or committee of directors.
4. Attached hereto as Schedule B is a true copy of a resolution of the board
of directors of the Corporation authorizing the execution and delivery of
the security documents relating to the above-noted matter, which
resolution was duly passed on September 20, 1996, and remains in full
force and effect, unamended and unrescinded, at the date hereof.
5. The by-laws of the Corporation permit the board of directors of the
Corporation from time to time to direct the manner in which the person or
persons by whom any particular instrument or class of instruments may or
shall be signed.
6. I have read the provisions of section 20 of the Business Corporations Act
(Ontario) and have had the said provisions explained to me by legal
counsel. The execution and delivery of the guarantee by the Corporation to
the Lender and the performance by the Corporation of its obligations
pursuant to the guarantee do not contravene the said section 20 for the
following reason:
The Corporation is a holding body corporate of the corporation the
debts of which are guaranteed pursuant to the guarantee.
I have made such investigations and inquiries as I have deemed necessary
for the purpose of making the foregoing statements.
THIS CERTIFICATE shall remain in full force and effect and be
binding upon the Corporation and may be acted upon by the Lender until notice to
the contrary or of any change in this certificate has been given in writing to
the Lender.
DATED this 20th day of September, 1996.
/s/ SIDNEY ACKERMAN c/s
-------------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred to as
the "Bank") dealing with ROSEDALE WALLCOVERINGS & FABRICS INC. (hereinafter
referred to as the "Customer"), the undersigned and each of them, if more than
one, hereby jointly and severally guarantee payment to the Bank of all present
and future debts and liabilities (direct or indirect, absolute or contingent,
matured or otherwise), now or at any time and from time to time hereafter due or
owing to the Bank whether incurred by the Customer alone or jointly with any
corporation, person or persons, or otherwise howsoever, including all costs and
disbursements incurred by the Bank in view of recovering or attempting to
recover said debts and liabilities. Provided, however, that the liability of the
undersigned, and of each of the undersigned herein, is limited to SEVEN HUNDRED
AND FIFTY THOUSAND 00/100 Dollars ($ 750,000.00 ), with interest thereon from
the date of demand of payment, at the rate agreed upon, between the Bank and the
Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and if
there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution of
capacity of the Customer or of the Guarantor or by any change in the name of the
Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained from
the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and shall
cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs, successors,
executors, administrators, legal representatives and assigns until termination
thereof by notice in writing to the manager of the branch of the Bank at which
the account of the Customer is kept, but such termination by any of the
guarantors or their respective heirs, successors, executors, administrators,
legal representatives or assigns shall not prevent the continuance of the
liability hereunder of any other guarantor. Such termination shall apply only to
those debts or liabilities of the Customer incurred or arising after reception
of the notice by the Bank, but not in respect of any prior debts or liabilities,
matured or not. The notice of termination shall have no effect on those debts or
liabilities incurred after reception of said notice which will result from
express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act on
the part of the Bank which would prevent subrogation from operating in favour of
the Guarantor. It is further agreed that the Bank, without exonerating in whole
or in part the Guarantor, may grant time, renewals, extensions, indulgences,
releases and discharges to, may take security from, and give up or release any
or part of the security held, may abstain from taking, perfecting, registering
or renewing security or from realizing on security, may accept compositions and
otherwise deal with the Customer and with any other person or persons, including
any of the guarantors, and dispose of any security held by the Bank as it may
see fit, and that all dividends and monies received by the Bank from the
Customer or from any other person, capable of being applied by the Bank in
reduction of the debts and liabilities hereby guaranteed, shall be considered
for all purposes as payment in gross which the Bank shall have the right to
apply as it may see fit, not being bound by the law of imputation, and the Bank
shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim against
the estate of the Customer and to value its security, it will be entitled to
place such valuation as the Bank may in its discretion see fit, and the filing
of such claim and the valuation of its security shall in no way prejudice or
restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the Customer
or other persons or the security it may hold before being entitled to payment
from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to the
Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and also
upon the heirs, executors, administrators and successors of the Guarantor and
will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day of
September, 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
ONTARIO PAINT & WALLPAPER LIMITED
- ------------------------------ ------------------------------------
(Please print)
Per: /s/ SIDNEY ACKERMAN c/s
- ------------------------------ ------------------------------------
(Please print) SIDNEY ACKERMAN - President
- ------------------------------ ------------------------------------
(Please print)
Per: /s/ ALAN FINE
- ------------------------------ ------------------------------------
(Please print) ALAN FINE - Secretary
- ------------------------------ ------------------------------------
(Please print)
- ------------------------------ ------------------------------------
(Please print)
- ------------------------------ ------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
ONTARIO PAINT & WALLPAPER LIMITED
- ------------------------------------
Per: /s/ SIDNEY ACKERMAN
- ------------------------------------
SIDNEY ACKERMAN - President
- ------------------------------------
Per: /s/ ALAN FINE
- ------------------------------------
ALAN FINE - Secretary
- ------------------------------------
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] NATIONAL
BANK RESOLUTION RE: GUARANTEE
OF CANADA
- --------------------------------------------------------------------------------
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ONTARIO PAINT & WALLPAPER LIMITED
------------------------
(Name of Corporation)
In consideration of the loans and advances of money granted or
which may be granted by National Bank of Canada (the "Bank") to its Customer,
ROSEDALE WALLCOVERINGS & FABRICS INC., for the purpose of its business, and
generally, in consideration of the business relations between the Bank and its
Customer as well as the business relations between the said Customer and this
Corporation, and whereas the financial assistance provided to the said Customer
in the manner hereinafter referred to is in the best interests of this
Corporation;
Now therefore be it resolved:
That this Corporation be and is hereby authorized to guarantee the
payment of all sums of money, which ROSEDALE WALLCOVERINGS & FABRICS INC., the
Customer owes or in the future may owe to the Bank up to a principal amount of
[amount crossed through on original] together with interest, costs and
accessories. Such guarantee shall bind this Corporation jointly and severally
with the Customer and shall be subject to all the terms and conditions set out
on the form used at the Bank, entitled "Letter of Guarantee", a copy of which is
attached hereto after having been submitted to the Directors and that Mr. Sidney
Ackerman and Mr. Alan Fine, respectively the President and the Secretary, be
authorized and instructed to jointly sign and execute the said guarantee for and
on behalf and in the name of the Corporation and that the financial assistance
provided by this Corporation to the said Customer in the said guarantee and any
security required from time to time by the Bank in connection with the said
guarantee is in the best interests of this Corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of ONTARIO PAINT & WALLPAPER LIMITED duly passed on the 20th
day of September 1996, which remains in full force and effect.
Dated at Toronto this 20th day of September, 1996.
/s/ ALAN FINE c/s
----------------------------------------
ALAN FINE
Secretary
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred to as
the "Bank") dealing with ROSEDALE WALLCOVERINGS & FABRICS INC. (hereinafter
referred to as the "Customer"), the undersigned and each of them, if more than
one, hereby jointly and severally guarantee payment to the Bank of all present
and future debts and liabilities (direct or indirect, absolute or contingent,
matured or otherwise), now or at any time and from time to time hereafter due or
owing to the Bank whether incurred by the Customer alone or jointly with any
corporation, person or persons, or otherwise howsoever, including all costs and
disbursements incurred by the Bank in view of recovering or attempting to
recover said debts and liabilities. Provided, however, that the liability of the
undersigned, and of each of the undersigned herein, is limited to SEVEN HUNDRED
AND FIFTY THOUSAND 00/100 Dollars ($750,000.00), with interest thereon from the
date of demand of payment, at the rate agreed upon, between the Bank and the
Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and if
there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution of
capacity of the Customer or of the Guarantor or by any change in the name of the
Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained from
the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and shall
cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs, successors,
executors, administrators, legal representatives and assigns until termination
thereof by notice in writing to the manager of the branch of the Bank at which
the account of the Customer is kept, but such termination by any of the
guarantors or their respective heirs, successors, executors, administrators,
legal representatives or assigns shall not prevent the continuance of the
liability hereunder of any other guarantor. Such termination shall apply only to
those debts or liabilities of the Customer incurred or arising after reception
of the notice by the Bank, but not in respect of any prior debts or liabilities,
matured or not. The notice of termination shall have no effect on those debts or
liabilities incurred after reception of said notice which will result from
express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act on
the part of the Bank which would prevent subrogation from operating in favour of
the Guarantor. It is further agreed that the Bank, without exonerating in whole
or in part the Guarantor, may grant time, renewals, extensions, indulgences,
releases and discharges to, may take security from, and give up or release any
or part of the security held, may abstain from taking, perfecting, registering
or renewing security or from realizing on security, may accept compositions and
otherwise deal with the Customer and with any other person or persons, including
any of the guarantors, and dispose of any security held by the Bank as it may
see fit, and that all dividends and monies received by the Bank from the
Customer or from any other person, capable of being applied by the Bank in
reduction of the debts and liabilities hereby guaranteed, shall be considered
for all purposes as payment in gross which the Bank shall have the right to
apply as it may see fit, not being bound by the law of imputation, and the Bank
shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim against
the estate of the Customer and to value its security, it will be entitled to
place such valuation as the Bank may in its discretion see fit, and the filing
of such claim and the valuation of its security shall in no way prejudice or
restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the Customer
or other persons or the security it may hold before being entitled to payment
from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to the
Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and also
upon the heirs, executors, administrators and successors of the Guarantor and
will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day of
September 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
/s/ Sara Fay Sulley /s/ Sidney Ackerman
- -------------------------------- -------------------------------
(Please print) SIDNEY ACKERMAN
Name:
Address:
- -------------------------------- -------------------------------
(Please print)
- -------------------------------- -------------------------------
(Please print)
- -------------------------------- -------------------------------
(Please print)
- -------------------------------- -------------------------------
(Please print)
- -------------------------------- -------------------------------
(Please print)
- -------------------------------- -------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
/s/ Sidney Ackerman
- -------------------------------
SIDNEY ACKERMAN
- -------------------------------
- -------------------------------
- -------------------------------
- -------------------------------
- -------------------------------
<PAGE>
[LOGO]
NATIONAL SUBORDINATION AGREEMENT
BANK
OF CANADA
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS INC.
------------------------------------------
(the "Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
/s/ Sidney Ackerman
- ------------------------------ -----------------------------
Name: SIDNEY ACKERMAN
Address:
-----------------------------
-----------------------------
-----------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS INC.
- ------------------------------ -----------------------------
Per: /s/ Alan Fine c/s
-----------------------------
ALAN FINE - President
-----------------------------
Per: /s/ Sidney Ackerman
-----------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
RESOLUTION OF DEBTOR CORPORATION
RE SUBORDINATION AGREEMENT
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ROSEDALE WALLCOVERINGS & FABRICS INC.
In consideration of loans and advances made or to be made by
National Bank of Canada to the corporation and generally in consideration of
business dealings between the said Bank and the corporation as well as business
dealings between the corporation and SIDNEY ACKERMAN;
Now therefore be it resolved
That the corporation acknowledge receipt of the notice of the
subordination agreement made on form No. 11221 a copy of which is annexed to the
present resolution after having been submitted to the directors and that the
corporation accept the assignment and transfer in favour of National Bank of
Canada included in the said agreement and that Mr. Alan Fine, President of the
corporation, and Mr. Sidney Ackerman, Secretary of the corporation, be and are
hereby authorized and instructed to jointly sign the acknowledgment and
acceptance on the aforesaid subordination agreement for and on behalf and in the
name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of ROSEDALE WALLCOVERINGS & FABRICS INC. duly adopted on the
20th day of September, 1996.
Dated at Toronto this 20th day of September, 1996.
/s/ Sidney Ackerman c/s
---------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
[LOGO]
NATIONAL SUBORDINATION AGREEMENT
BANK
OF CANADA
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS INC.
------------------------------------------
(the "Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
/s/ Sidney Ackerman
- ------------------------------ -----------------------------
Name: SIDNEY ACKERMAN
Address:
-----------------------------
-----------------------------
-----------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS INC.
- ------------------------------ -----------------------------
Per: /s/ Alan Fine c/s
-----------------------------
ALAN FINE - President
-----------------------------
Per: /s/ Sidney Ackerman
-----------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
STATUTORY DECLARATION
CANADA ) IN THE MATTER OF a guarantee and a
) subordination agreement given by
PROVINCE OF ONTARIO ) Sidney Ackerman to National Bank of
) Canada (the "Bank") in support of
TO WIT: ) loans and credit facilities given
) by the Bank to Rosedale Wallcoverings
) & Fabrics Inc.;
)
) AND IN THE MATTER OF a registration
) under the Personal Property Security Act.
I, SIDNEY ALVIN ACKERMAN, of the City of Toronto, in the
Municipality of Metropolitan Toronto, Province of Ontario, SOLEMNLY DECLARE
THAT:
1. My legal name is Sidney Alvin Ackerman. I am not, and have not been,
known by any other name or names;
2. I am not in the process of obtaining a change of all or part of my name
pursuant to the Change of Name Act (Ontario);
3. My date of birth is August 2, 1945;
4. My residence address is 359 Lytton Boulevard, Toronto, Ontario, M5N 1R9;
5. A true copy of each of my Canadian citizenship certificate and my Ontario
drivers licence are attached to this declaration as Exhibits "A" and "B"
respectively, to evidence my name, date of birth and residence address.
AND I MAKE THIS SOLEMN DECLARATION conscientiously, believing it to
be true and knowing that it is of the same force and effect as if made under
oath.
DECLARED BEFORE ME at )
the City of Toronto )
in the Municipality )
of Metropo1itan Toronto ) /s/ Sidney Ackerman
this 20th day of September, ) ----------------------------------
1996. ) SIDNEY ALVIN ACKERMAN
/S/ S F Sulley
A Commissioner, etc.
<PAGE>
This is Exhibit "A" referred to in the Statutory
Declaration of Sidney Alvin Ackerman, sworn
before me, this 20th day of September, 1996.
/s/ S F Sulley
...............................................
A Commissioner for Taking Affidavits
- --------------------------------------------------------------------------------
3 No TD535269
- --------------------------------------------------------------------------------
ENDORSEMENTS AND LIMITATIONS MENTIONS ET RESTRICTIONS
This passport is valid for all Ce passeport est vaiable pour tous les pays,
countries unless otherwise souf indication contraire. (Le titulaire doit
endorsed (subject to any visa egalament se conformer suz formalites d'entree
or other entry regulations of des pays ou il a l'intention de se rendre.)
countries to be visited.)
- --------------------------------------------------------------------------------
> /s/ Sidney Ackerman
- ----------------------------------------------------
(Signature of bearer - Signature du titulaire)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED - PASSPORT]
<PAGE>
This is Exhibit "B" referred to in the
Statutory Declaration of Sidney Alvin
Ackerman, sworn before me, this 20th day of
September, 1996.
/s/ S F Sulley
......................................
A Commissioner for Taking Affidavits
[GRAPHIC OMITTED - ONTARIO DRIVER'S LICENSE]
|2| See reverse side for instructions about changes to your Drivers Licence
Voir au verso les instructions concernant les changements apportes a votre
permis de conduire
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred to as
the "Bank") dealing with ROSEDALE WALLCOVERINGS & FABRICS INC. (hereinafter
referred to as the "Customer"), the undersigned and each of them, if more than
one, hereby jointly and severally guarantee payment to the Bank of all present
and future debts and liabilities (direct or indirect, absolute or contingent,
matured or otherwise), now or at any time and from time to time hereafter due or
owing to the Bank whether incurred by the Customer alone or jointly with any
corporation, person or persons, or otherwise howsoever, including all costs and
disbursements incurred by the Bank in view of recovering or attempting to
recover said debts and liabilities. Provided, however, that the liability of the
undersigned, and of each of the undersigned herein, is limited to SEVEN HUNDRED
AND FIFTY THOUSAND 00/100 Dollars ($750,000.00 )with interest thereon from the
date of demand of payment, at the rate agreed upon, between the Bank and
Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and if
there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution of
capacity of the Customer or of the Guarantor or by any change in the name of the
Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained from
the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and shall
cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs, successors,
executors, administrators, legal representatives and assigns until termination
thereof by notice in writing to the manager of the branch of the Bank at which
the account of the Customer is kept, but such termination by any of the
guarantors or their respective heirs, successors, executors, administrators,
legal representatives or assigns shall not prevent the continuance of the
liability hereunder of any other guarantor. Such termination shall apply only to
those debts or liabilities of the Customer incurred or arising after reception
of the notice by the Bank, but not in respect of any prior debts or liabilities,
matured or not. The notice of termination shall have no effect on those debts or
liabilities incurred after reception of said notice which will result from
express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act on
the part of the Bank which would prevent subrogation from operating in favour of
the Guarantor. It is further agreed that the Bank, without exonerating in whole
or in part the Guarantor, may grant time, renewals, extensions, indulgences,
releases and discharges to, may take security from, and give up or release any
or part of the security held, may abstain from taking, perfecting, registering
or renewing security or from realizing on security, may accept compositions and
otherwise deal with the Customer and with any other person or persons, including
any of the guarantors, and dispose of any security held by the Bank as it may
see fit, and that all dividends and monies received by the Bank from the
Customer or from any other person, capable of being applied by the Bank in
reduction of the debts and liabilities hereby guaranteed, shall be considered
for all purposes as payment in gross which the Bank shall have the right to
apply as it may see fit, not being bound by the law of imputation, and the Bank
shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim against
the estate of the Customer and to value its security, it will be entitled to
place such valuation as the Bank may in its discretion see fit, and the filing
of such claim and the valuation of its security shall in no way prejudice or
restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the Customer
or other persons or the security it may hold before being entitled to payment
from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to the
Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and also
upon the heirs, executors, administrators and successors of the Guarantor and
will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day
of September 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
/s/ Sara Fay Sulley /s/ Alan Fine
- ----------------------------- -------------------------------
(Please print) ALAN FINE
Name:
Address:
- ----------------------------- -------------------------------
(Please print)
- ----------------------------- -------------------------------
(Please print)
- ----------------------------- -------------------------------
(Please print)
- ----------------------------- -------------------------------
(Please print)
- ----------------------------- -------------------------------
(Please print)
- ----------------------------- -------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
/s/ Alan Fine
- ----------------------------
ALAN FINE
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
<PAGE>
[LOGO]
NATIONAL
BANK
OF CANADA SUBORDINATION AGREEMENT
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS, INC. (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
/s/ Alan Fine
- --------------------------------- -------------------------------
Name: ALAN FINE
Address
-------------------------------
-------------------------------
-------------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS INC.
- ----------------------------------- ---------------------------------------
Per: /s/ Alan Fine c/s
---------------------------------------
ALAN FINE - President
---------------------------------------
Per: Sidney Ackerman
---------------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
RESOLUTION OF DEBTOR CORPORATION
RE SUBORDINATION AGREEMENT
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ROSEDALE WALLCOVERINGS & FABRICS INC.
In consideration of loans and advances made or to be made by
National Bank of Canada to the corporation and generally in consideration of
business dealings between the said Bank and the corporation as well as business
dealings between the corporation and ALAN FINE;
Now therefore be it resolved
That the corporation acknowledge receipt of the notice of the
subordination agreement made on form No. 11221 a copy of which is annexed to the
present resolution after having been submitted to the directors and that the
corporation accept the assignment and transfer in favour of National Bank of
Canada included in the said agreement and that Mr. Alan Fine, President of the
corporation, and Mr. Sidney Ackerman, Secretary of the corporation, be and are
hereby authorized and instructed to jointly sign the acknowledgment and
acceptance on the aforesaid subordination agreement for and on behalf and in the
name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of ROSEDALE WALLCOVERINGS & FABRICS INC. duly adopted on the
20th day of September, 1996.
Dated at Toronto, this 20th day of September 1996.
/s/ Sidney Ackerman c/s
----------------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
[LOGO]
NATIONAL
BANK
OF CANADA SUBORDINATION AGREEMENT
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ROSEDALE WALLCOVERINGS & FABRICS, INC. (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
/s/ Alan Fine
- --------------------------------- -------------------------------
Name: ALAN FINE
Address
-------------------------------
-------------------------------
-------------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ROSEDALE WALLCOVERINGS & FABRICS INC.
- ----------------------------------- ---------------------------------------
Per: /s/ Alan Fine c/s
---------------------------------------
ALAN FINE - President
---------------------------------------
Per: Sidney Ackerman
---------------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
STATUTORY DECLARATION
CANADA ) IN THE MATTER OF a guarantee and a
) subordination agreement given by Alan
PROVINCE OF ONTARIO ) Fine to National Bank of Canada (the
) "Bank") in support of loans and credit
TO WIT: ) facilities given by the Bank to Rosedale
) Wallcoverings & Fabrics Inc.;
)
) AND IN THE MATTER OF a registration
) under the Personal Property Security Act.
I, ALAN IRVING FINE, of the City of North York, in the Municipality
of Metropolitan Toronto, Province of Ontario, SOLEMNLY DECLARE THAT:
1. My legal name is Alan Irving Fine. I am not, and have not been, known by
any other name or names;
2. I am not in the process of obtaining a change of all or part of my name
pursuant to the Change of Name Act (Ontario);
3. My date of birth is April 12, 1945;
4. My residence address is 407 Woburn Avenue, North York, Ontario, M5M 1L4;
5. A true copy of each of my birth certificate and my Ontario driver's licence
are attached to this declaration as Exhibits "A" and "B" respectively, to
evidence my name, date of birth and residence address.
AND I MAKE THIS SOLEMN DECLARATION conscientiously, believing it to be true
and knowing that it is of the same force and effect as if made under oath.
DECLARED BEFORE ME at )
the City of Toronto )
0n the Municipality ) /s/ Alan Fine
of Metropolitan Toronto ) ----------------------------------
this 20th day of September, 1996. ) ALAN IRVING FINE
)
/s/ S F Sulley
A Commissioner, etc.
<PAGE>
This is Exhibit "A" referred to in the Statutory Declaration
of Alan Irving Fine, sworn before me, this 20th day of
September, 1996.
/s/ S F Sulley
............................................
A Commissioner for Taking Affidavits
[GRAPHIC OMITTED]
<PAGE>
This is Exhibit "B" referred to in the Statutory Declaration
of Alan Irving Fine, sworn before me, this 20th day of
September, 1996.
/s/ S F Sulley
............................................
A Commissioner for Taking Affidavits
[GRAPHIC OMITTED]
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
FROM: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Rosedale
Wallcoverings & Fabrics Inc. - Guarantee and Subordination Agreement
by Alan Fine - Registration under the Personal Property Security Act
(Ontario)
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of each of the
verification statements noted below:
PPSA File No. Registration No.
------------- ----------------
824429412 960823 1922 1529 4144
080538678 960826 1932 1529 6311
DATED this 20th day of September, 1996.
/s/ Alan Fine
-----------------------------------
ALAN FINE
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG
Personal Property Security Act
REG NUM/NO ENREGIST
960823192215294144
REG PERIOD/PERIODE
5
REF FILE NUM/NO DE REFERENCE
824429412
CAUTION FILING/AVERTIS
[ ]
EXPIRY DATE/DATE D'EXPIRATION
23 AUG 2001
DEBTORS/DEBITEUR
- --------------------------------------------------------------------------------
DATE OF BIRTH/DATE DE NAISSANCE
Alan I. Fine 12 APR 45
407 Woburn Avenue
North York ON M5M 1L4
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
50 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL / BIENS GREVES
- --------------------------------------------------------------------------------
[illegible]ONS GOODS/BIENS CONS
[ ]
INVTRY/STOCK
[ ]
EQUIP/MATER
[ ]
ACCTS/COMPT
[ ]
OTHER/AUTRE
[ ]
MV INCL/VA INCLUS
[ ]
AMOUNT/MONTANT
DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG
Personal Property Security Act
REG NUM/NO ENREGIST
960826193215296311
CHANGE/MODIF
[illegible]-Other Change
EXPIRY DATE/DATE D'EXPIRATION
29 NOV 2005
REF FILE NUM/NO DE REFERENCE
080538678
REN YEARS/REN ANNEES
CAUTION FILING/AVERTIS
[ ]
CORR PER/PER EXAC
DEBTOR NAME (AS RECORDED) /NOM DU DEBITEUR (TEL QU'INSCRIT)
- --------------------------------------------------------------------------------
Rosedale Wallcoverings & Fabrics Inc.
OTHER CHANGE DESCRIPTION/DESCRIPTION DE L'AUTRE MODIFICATION
- --------------------------------------------------------------------------------
SPECIFY OTHER CHANGE/PRECISER L'AUTRE MODIFICATION
Subordination
Subordination by Alan Fine of reference File No. 080538678 to and in favour of
National Bank of Canada's reference File No. 824305932.
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Rosedale
Wallcoverings & Fabrics Inc. - Guarantee and Subordination Agreement by
Sidney Ackerman - Registration under the Personal Property Security Act
(Ontario)
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of each of the
verification statements noted below:
PPSA File No. Registration No.
------------- ----------------
824429421 960823 1922 1529 4145
080538696 960826 1932 1529 6313
DATED this 20th day of September, 1996
/s/ Sidney Ackerman
-------------------------
SIDNEY ACKERMAN
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG
Personal Property Security Act
REG NUM/NO ENREGIST
960823192215294145
REG PERIOD/PERIODE
5
REF FILE NUM/NO DE REFERENCE
824429421
CAUTION FILING/AVERTIS
[ ]
EXPIRY DATE/DATE D'EXPIRATION
23 AUG 2001
DEBTORS / DEBITEUR
- --------------------------------------------------------------------------------
DATE OF BIRTH/DATE DE NAISSANCE
Sidney A. Ackerman 2 AUG 45
359 Lytton Boulevard
Toronto ON M5N 1R9
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
350 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL / BIENS GREVES
- --------------------------------------------------------------------------------
[illegible]ONS GOODS/BIENS CONS
[ ]
INVTRY/STOCK
[ ]
EQUIP/MATER
[ ]
ACCTS/COMPT
[ ]
OTHER/AUTRE
[ ]
MV INCL/VA INCLUS
[ ]
AMOUNT/MONTANT
DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG
Personal Property Security Act
REG NUM/NO ENREGIST
960826193215296313
CHANGE/MODIF
[illegible]-Other Change
EXPIRY DATE/DATE D'EXPIRATION
29 NOV 2005
REF FILE NUM/NO DE REFERENCE
080538696
REN YEARS/REN ANNEES
CAUTION FILING/AVERTIS
[ ]
CORR PER/PER EXAC
DEBTOR NAME (AS RECORDED) /NOM DU DEBITEUR (TEL QU'INSCRIT)
- --------------------------------------------------------------------------------
Rosedale Wallcoverings & Fabrics Inc.
OTHER CHANGE DESCRIPTION/DESCRIPTION DE L'AUTRE MODIFICATION
- --------------------------------------------------------------------------------
SPECIFY OTHER CHANGE/PRECISER L'AUTRE MODIFICATION
Subordination
Subordination by Sidney Ackerman of reference File No. 080538696 to and in
favour of National Bank of Canada's reference File No. 24305932.
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 303
* * * * * END OF VERIFICATION STATEMENT * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Rosedale
Wallcoverings & Fabrics Inc. - Guarantee and Subordination Agreement
by 521305 Ontario Inc. - Registration under the Personal Property
Security Act (Ontario)
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of each of the
verification statements noted below:
PPSA File No. Registration No.
------------- ----------------
824305941 960819 1846 1529 6725
080538687 960826 1932 1529 6312
DATED this 20th day of September, 1996.
521305 ONTARIO INC.
c/s
Per: /s/ Alan Fine
----------------------------
ALAN FINE
President
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG REG PERIOD/PERIODE CAUTION FILING/
AVERTIS
Personal Property 5 |_|
Security Act
REG NUM/NO ENREGIST REF FILE NUM/NO EXPIRY DATE/DATE
DE REFERENCE D' EXPIRATION
960819184615296725 824305941 19 AUG 2001
DEBTORS/DEBITEUR
- --------------------------------------------------------------------------------
CORPORATION NUMBER
[Illegible]21305 Ontario Inc.
[Illegible]14 Courtland Avenue
Concord ON L4K 4L3
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada 350 BURNHAMTHORPE ROAD WEST, SUITE 216 Mississauga ON
L5B 3J1
COLLATERAL/BIENS GREVES
- --------------------------------------------------------------------------------
CONS GOODS/BIENS CONS INVTRY/STOCK EQUIP/MATER ACCTS/COMPT
[_] [_] [_] [X]
OTHER/AUTRE MV INCL/VA INCLUS
[_] [_]
MOUNT/MONTANT DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
350 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG EXPIRY DATE/DATE D'EXPIRATION CAUTION FILING/AVERTIS
Personal Property 29 NOV 2005 [_]
Security Act
REG NUM/NO ENREGIST REF FILE NUM/NO DE REFERENCE
960826193215296312 080538687
CHANGE/MODIF REN YEARS/REN ANNEES CORR PER/PER EXAC
J-other Change
DEBTOR NAME (AS RECORDED) /NOM DU DEBITEUR (TEL QU'INSCRIT)
- --------------------------------------------------------------------------------
Rosedale Wallcoverings & Fabrics Inc.
OTHER CHANGE DESCRIPTION/DESCRIPTION DE L'AUTRE MODIFICATION
- --------------------------------------------------------------------------------
SPECIFY OTHER CHANGE/PRECISER L'AUTRE MODIFICATION
Subordination
Subordination by 521305 Ontario Inc. of reference File No. 080538687 to and in
favour of National Bank of Canada's reference File No. 824305932.
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Rosedale
Wallcoverings & Fabrics Inc. - Registration under the Personal
Property Security Act (Ontario) in respect of Security Interests
granted to the Bank
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of the verification
statement noted below on which the undersigned is named as the debtor, and a
copy of which is attached hereto:
PPSA File No. Registration No.
------------- ----------------
824305932 960819 1846 1529 6724
DATED this 20th day of September, 1996.
ROSEDALE WALLCOVERINGS & FABRICS
INC.
c/s
Per: /s/ Alan Fine
-----------------------
ALAN FINE
President
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG REG PERIOD/PERIODE CAUTION FILING/
AVERTIS
Personal Property 5 |_|
Security Act
REG NUM/NO ENREGIST REF FILE NUN/NO EXPIRY DATE/DATE
DE REFERENCE D' EXPIRATION
960819184615296725 824305932 19 AUG 2001
DEBTORS/DEBITEUR
- --------------------------------------------------------------------------------
CORPORATION NUMBER
Rosedale Wallcoverings & Fabrics Inc.
214 Courtland Avenue
Concord ON L4K 4L3
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
350 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL/BIENS GREVES
- --------------------------------------------------------------------------------
CONS GOODS/BIENS CONS INVTRY/STOCK EQUIP/MATER ACCTS/COMPT
[_] [X] [X] [X]
OTHER/AUTRE MV INCL/VA INCLUS
[X] [X]
MOUNT/MONTANT DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification Statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
CERTIFICATE OF SOLVENCY
with respect to Section 20 of the
Business Corporations Act (Ontario)
TO: NATIONAL BANK OF CANADA
RE: National Bank of Canada loan to Rosedale Wallcoverings & Fabrics
Inc. (the "Borrower") - Guaranteed by Ontario Paint & Wallpaper
Limited (the "Corporation")
THE undersigned, a duly appointed officer of the Corporation, refers
to the guarantee (the "Guarantee") dated September 20 , 1996, given by the
Corporation to you in respect of the debts and liabilities of the Borrower and
hereby certifies that there are no reasonable grounds for believing that:
(i) the Corporation is or, after giving the Guarantee, would be unable
to pay its liabilities as they become due; or
(ii) the realizable value of the Corporation's assets, excluding the
amount of any financial assistance in the form of a loan and in the
form of any secured guarantee, after giving the Guarantee, would be
less than the aggregate of the Corporation's liabilities and stated
capital of all classes.
DATED this 20th day of September , 1996.
c/s
/s/ Sidney Ackerman
-----------------------------------
SIDNEY ACKERMAN
President
<PAGE>
DIRECTION RE: FUNDS
TO: NATIONAL BANK OF CANADA
RE: National Bank of Canada credit facilities to Rosedale Wallcoverings
& Fabrics Inc. pursuant to Offer of Finance dated August 8, 1996
- --------------------------------------------------------------------------------
YOU ARE HEREBY authorized and directed to pay the proceeds of the
above loan and/or withdraw funds from our account to:
(i) pay the balance of moneys owing by us to HONGKONG BANK OF CANADA pursuant
to a payout statement to be obtained from that bank on the day of payout;
and
(ii) pay the legal fees and disbursements of Pallett Valo in connection with
this transaction upon presentation of their invoice;
AND FOR SO DOING, this shall be your full, sufficient and irrevocable authority.
DATED this 20th day of September , 1996.
ROSEDALE WALLCOVERINGS & FABRICS
INC.
c/s
Per: /s/ Alan Fine
---------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
---------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
AUTHORIZATION TO INSERT DATES, ETC.
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Lender") loan to Rosedale
Wallcoverings & Fabrics Inc. pursuant to Offer of Finance dated
August 8, 1996
- --------------------------------------------------------------------------------
YOU ARE HEREBY irrevocably authorized and directed to do the
following:
1. to date the Acknowledgment of Debt Revolving Demand Credit in the
principal amount of $3,500,000.00 the date of funding, and to insert the
applicable prime rate on that date;
2. to date the Bank Act documents, namely, Application for Credit and Promise
to Give Security Under the Bank Act [Form 10014], Security Under Section
427 of the Bank Act [Form] 10015 and Agreement Respecting Security Given
By the Customer [Form 10115], a date that is at least one clear day
subsequent to the registration date of the Notice of Intention to give
security under Section 427 of the Bank Act, and to insert all other dates
as necessary.
DATED this 20th day of September, 1996.
ROSEDALE WALLCOVERINGS & FABRICS
INC.
c/s
Per: /s/ Alan Fine
---------------------------------
ALAN FINE - President
Per: /s/ Sidney Ackerman
---------------------------------
SIDNEY ACKERMAN - Secretary
<PAGE>
[Letterhead of Torkin, Manes, Cohen & Arbus]
October 29, 1996
National Bank of Canada
350 Burnhamthorpe Road West
Suite 216
Mississauga, Ontario L5B 3J1
- - and -
Pallett Valo
Barristers and Solicitors
90 Burnhamthorpe Road West
Suite 1600
Mississauga, Ontario L5B 3C3
Dear Sirs:
Re: National Bank of Canada (the "Lender") Loan to Rosedale Wallcoverings &
Fabrics Inc. (the "Borrower") pursuant to Offer of Finance dated August 8,
1996 (the "Offer of Finance")
- --------------------------------------------------------------------------------
We are the corporate solicitors for the Borrower and have acted for the Borrower
in connection with the granting by the Borrower to the lender of the security
referred to below to secure credit facilities offered by the Lender to the
Borrower pursuant to the Offer of Finance.
In connection with the foregoing, we have reviewed the Offer of Finance and the
following documents, among others:
1. An acknowledgment of debt revolving demand credit limited to the principal
amount of $3,500,000.00 Canadian, to be dated the date of funding;
2. A general security agreement dated September 20, 1996;
3. A general assignment of book debts, dated September 20, 1996;
4. A Notice of Intention to give security under Section 427 of the Bank Act,
dated September 20, 1996;
5. An application for credit and promise to give security under the Bank Act,
dated October 10, 1996;
6. An agreement respecting security given by the customer, dated October 10,
1996;
<PAGE>
Page 2
7. An agreement regarding security under Section 427 of the Bank Act, dated
October 10, 1996;
8. Security with respect to an insurance policy, on commercial insurance of
the Borrower, dated September 20, 1996;
9. Security with respect to an insurance policy, on insurance on the life of
Sidney A. Ackerman, dated September 20, 1996;
10. Security with respect to an insurance policy, on insurance on the life of
Alan I. Fine, dated September 20, 1996;
11. Undertaking with respect to life insurance for Alan I. Fine dated October
29, 1996;
12. Priorities Agreement among the Lender, Laurentian Bank of Canada, Ontario
Paint & Wallpaper and the Borrower dated October 29, 1996;
(the Offer of Finance and all of the foregoing documents being hereinafter
collectively referred to as the "Security Documents").
We have also reviewed such constating documents, corporate records, public
documents and certificates of officers of the Borrower and of public officials
as we have considered necessary as the basis for the opinions hereinafter
expressed.
In such examinations we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic (or
similarly reproduced) copies, and the authenticity of all of the originals of
such documents.
In addition, we have considered such questions of law and have examined such
legislation and regulations thereto as we have considered necessary as a basis
for the opinions hereinafter set forth.
We have relied solely on the Corporate Certificate dated September 20, 1996 as
to the matters of fact set out therein.
Based and relying upon and subject to the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
1. The Borrower is a corporation duly incorporated and organized under the
laws of the Province of Ontario, and has not been dissolved;
<PAGE>
Page 3
2. The Borrower has the power to own and lease its property and to carry on
its business in the Province of Ontario;
3. The Borrower has all necessary power and capacity to borrow money in the
manner and on the terms and conditions set out in the Offer of Finance and
such borrowing of money has been authorized by all necessary action on the
part of the Borrower;
4. The Borrower has all necessary power and capacity to execute and deliver
the Security Documents and to perform and observe its obligations
thereunder;
5. The Security Documents have been duly authorized, executed and delivered
by the Borrower and constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their terms;
6. The borrowing of money on the terms set out in the Offer of Finance, the
execution and delivery by the Borrower of the Security Documents, and the
performance by the Borrower of its obligations under the Security
Documents will not conflict with or result in a violation of the terms,
conditions and provisions of the constating documents or bylaws of the
Borrower, or of any provision of law, or of any agreement, indenture or
other document to which the Borrower is a party or by which it may be
bound and of which we have knowledge;
7. We have no knowledge of any actions or proceedings, pending or threatened,
before any court or before any governmental or administrative body or
agency, which may result in any material adverse change in the operations,
business, property or assets of the Borrower or in the condition
(financial or otherwise) of the Borrower's ability to perform its
obligations under the Security Documents.
The foregoing opinions as to the enforceability of the obligations of the
Borrower are subject to the following qualifications:
1. Specific performance and injunctions, being equitable remedies, may be
granted only in the discretion of a Court of competent jurisdiction;
2. Enforceability may be limited by bankruptcy, insolvency, liquidation,
moratorium, reorganization, reconstruction and other similar laws
affecting the enforceability of creditors' rights generally;
3. The enforceability of security agreements which are subject to the
Personal Property Security Act (Ontario) (the "PPSA") may be limited or
affected by the terms of the PPSA; and
4. In respect of security agreements which are subject to the PPSA, a filing
under the PPSA
<PAGE>
Page 4
in respect of the security interests perfected thereby must be renewed
prior to the expiry date of the initial filing thereunder and such filing
must be amended in certain circumstances specified in the PPSA in order to
preserve the security created by such instruments in respect of property
to which the PPSA applies.
5. We were not requested nor have we been involved in the registration of any
of the security agreements under the PPSA or the Bank Act;
6. We express no opinion as to the title to or ownership of the personal
property charged by the security agreements;
7. We express no opinion as to the priority of the Lender's security
interests in the assets charged pursuant to the security agreements or
whether the security agreements contain provisions that would effectively
subordinate the Lender's interests to that of third parties;
8. To the extent that the security interests created under the security
agreements purport to encumber or assign the rights of the Borrower under
any agreement with any third party or any license, permit or approval, the
security interests created thereunder may be effective only if such third
party provides its consent; and
9. Interest on amounts payable by the Borrower under the security agreements
may be limited to five percent (5%) per annum if the rate of interest
payable on such amounts in the security agreements is determined not to
satisfy the disclosure requirements of Section 4 of the Interest Act
(Canada), which provides that a borrower must be able to determine the
annual rate of interest being charged by a lender;
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
Per:
/s/ Torkin, Manes, Cohen & Arbus
<PAGE>
[Letterhead of Torkin, Manes, Cohen & Arbus]
October 29, 1996
National Bank of Canada
350 Burnhamthorpe Road West
Suite 216
Mississauga, Ontario
L5B 3J1
- - and -
Pallett Valo
Barristers and Solicitors
90 Burnhamthorpe Road West
Suite 1600
Mississauga, Ontario
L5B 3C3
Dear Sirs:
Re: National Bank of Canada (the "Lender") Loan to Rosedale Wallcoverings &
Fabrics Inc. (the "Borrower") pursuant to Offer of Finance dated August 8,
1996 (the "Offer of Finance") - Guaranteed by 521305 Ontario Inc. (the
"Guarantor")
- --------------------------------------------------------------------------------
We are the corporate solicitors for the Guarantor and have acted for the
Guarantor in connection with the granting by the Guarantor to the lender of the
security referred to below to secure credit facilities offered by the Lender to
the Borrower pursuant to the Offer of Finance.
In connection with the foregoing, we have reviewed the Offer of Finance and the
following documents, among others:
1. a guarantee of indebtedness of the Borrower, limited to $1,000,000.00 plus
interest and dated September 20, 1996 (the "Guarantee"); and
2. a subordination agreement, dated September 20, 1996;
(the Offer of Finance and the foregoing documents being hereinafter collectively
referred to as
<PAGE>
Page 2
the "Security Documents").
We have also reviewed such constating documents, corporate records, public
documents and certificates of officers of the Guarantor and of public officials
as we have considered necessary as the basis for the opinions hereinafter
expressed.
In such examinations we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic (or
similarly reproduced) copies, and the authenticity of all of the originals of
such documents.
In addition, we have considered such questions of law and have examined such
legislation and regulations thereto as we have considered necessary as a basis
for the opinions hereinafter set forth and, in particular, we have considered
the application of section 20 of the Business Corporations Act (Ontario) to the
Guarantee.
We have relied solely on the Corporate Certificate dated September 20, 1996 and
the Solvency Certificate dated September 20, 1996 as to the matters of fact set
out therein.
Based and relying upon and subject to the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
1. The Guarantor is a corporation duly incorporated and organized under the
laws of the Province of Ontario and has not been dissolved;
2. The execution, delivery and performance of the Security Documents by the
Guarantor does not contravene section 20(1) of the Business Corporations
Act (Ontario);
3. The Guarantor has all necessary power and capacity to execute and deliver
the Security Documents and to perform and observe its obligations
thereunder;
4. The Security Documents have been duly authorized, executed and delivered
by the Guarantor and now constitute legal, valid and binding obligations
of the Guarantor enforceable against the Guarantor in accordance with
their terms;
5. The execution and delivery of the Security Documents by the Guarantor and
the performance by the Guarantor of its obligations under the Security
Documents will not conflict with or result in a violation of the terms,
conditions and provisions of the constating documents or bylaws of the
Guarantor or of any provision of law, or of any agreement, indenture or
other document to which it is a party or by which it may be bound and of
which we have knowledge; and
6. We have no knowledge of any litigation or proceedings, pending or
threatened, before any
<PAGE>
Page 3
court or before any governmental or administrative body or agency, which
may result in any material adverse change in the operations, business,
property or assets of the Guarantor or in the condition (financial or
otherwise) of the Guarantor's ability to perform its obligations under the
Security Documents.
The foregoing opinions as to the enforceability of the obligations of the
Guarantor are subject to the following qualifications:
1. Specific performance and injunctions, being equitable remedies, may be
granted only in the discretion of a Court of competent jurisdiction; and
2. Enforceability may be limited by bankruptcy, insolvency, liquidation,
moratorium, reorganization, reconstruction and other similar laws
affecting the enforceability of creditors' rights generally.
3. The enforceability of security agreements which are subject to the
Personal Property Security Act (Ontario) (the "PPSA") may be limited or
affected by the terms of the PPSA;
4. In respect of security agreements which are subject to the PPSA, a filing
under the PPSA in respect of the security interests perfected thereby must
be renewed prior to the expiry date of the initial filing thereunder and
such filing must be amended in certain circumstances specified in the PPSA
in order to preserve the security created by such instruments in respect
of property to which the PPSA applies;
5. We were not requested nor have we been involved in the registration of any
of the security agreements under the PPSA or the Bank Act;
6. We express no opinion as to the title to or ownership of the personal
property charged by the security agreements;
7. We express no opinion as to the priority of the Lender's security
interests in the assets charged pursuant to the security agreements or
whether the security agreements contain provisions that would effectively
subordinate the Lender's interests to that of third parties;
8. To the extent that the security interests created under the security
agreements purport to encumber or assign the rights of the Borrower under
any agreement with any third party or any license, permit or approval, the
security interests created thereunder may be effective only if such third
party provides its consent; and
<PAGE>
Page 4
9. Interest on amounts payable by the Borrower under the security agreements
may be limited to five percent (5%) per annum if the rate of interest
payable on such amounts in the security agreements is determined not to
satisfy the disclosure requirements of Section 4 of the Interest Act
(Canada), which provides that a borrower must be able to determine the
annual rate of interest being charged by a lender;
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
Per:
/s/ Torkin, Manes, Cohen & Arbus
<PAGE>
[Letterhead of Torkin, Manes, Cohen & Arbus]
October 29, 1996
National Bank of Canada
350 Burnhamthorpe Road West
Suite 216
Mississauga, Ontario
L5B 3J1
- - and -
Pallett Valo
Barristers and Solicitors
90 Burnhamthorpe Road West
Suite 1600
Mississauga, Ontario
L5B 3C3
Dear Sirs:
Re: National Bank of Canada (the "Lender") Loan to Rosedale Wallcoverings &
Fabrics Inc. (the "Borrower") pursuant to Offer of Finance dated August 8,
1996 (the "Offer of Finance") - Guaranteed by Ontario Paint & Wallpaper
Limited (the "Guarantor")
- --------------------------------------------------------------------------------
We are the corporate solicitors for the Guarantor and have acted for the
Guarantor in connection with the granting by the Guarantor to the lender of the
security referred to below to secure credit facilities offered by the Lender to
the Borrower pursuant to the Offer of Finance.
In connection with the foregoing, we have reviewed, among other documents, the
Offer of Finance and a guarantee given by the Guarantor guaranteeing the
indebtedness of the Borrower, limited to $750,000.00 plus interest and dated
September 20, 1996 (the "Guarantee"). (The Offer of Finance and the Guarantee
are hereinafter collectively referred to as the "Security Documents").
We have also reviewed such constating documents, corporate records, public
documents and certificates of officers of the Guarantor and of public officials
as we have considered necessary as the basis for the opinions hereinafter
expressed.
In such examinations we have assumed the genuineness of all signatures, the
authenticity of all
<PAGE>
Page 2
documents submitted to us as originals, the conformity to original documents of
documents submitted to us as certified or photostatic (or similarly reproduced)
copies, and the authenticity of all of the originals of such documents.
In addition, we have considered such questions of law and have examined such
legislation and regulations thereto as we have considered necessary as a basis
for the opinions hereinafter set forth and, in particular, we have considered
the application of section 20 of the Business Corporations Act (Ontario) to the
Guarantee.
We have relied solely on the Corporate Certificate dated September 20, 1996 and
the Solvency Certificate dated September 20, 1996 as to the matters of fact set
out therein.
Based and relying upon and subject to the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
1. The Guarantor is a corporation duly incorporated and organized under the
laws of the Province of Ontario and has not been dissolved;
2. The execution, delivery and performance of the Security Documents by the
Guarantor does not contravene section 20(1) of the Business Corporations
Act (Ontario);
3. The Guarantor has all necessary power and capacity to execute and deliver
the Security Documents and to perform and observe its obligations
thereunder;
4. The Security Documents have been duly authorized, executed and delivered
by the Guarantor and now constitute legal, valid and binding obligations
of the Guarantor enforceable against the Guarantor in accordance with
their terms;
5. The execution and delivery of the Security Documents by the Guarantor and
the performance by the Guarantor of its obligations under the Security
Documents will not conflict with or result in a violation of the terms,
conditions and provisions of the constating documents or bylaws of the
Guarantor or of any provision of law, or of any agreement, indenture or
other document to which it is a party or by which it may be bound and of
which we have knowledge; and
6. We have no knowledge of any litigation or proceedings, pending or
threatened, before any court or before any governmental or administrative
body or agency, which may result in any material adverse change in the
operations, business, property or assets of the Guarantor or in the
condition (financial or otherwise) of the Guarantor's ability to perform
its obligations under the Security Documents.
The foregoing opinions as to the enforceability of the obligations of the
Guarantor are subject to the following qualifications:
<PAGE>
Page 3
1. Specific performance and injunctions, being equitable remedies, may be
granted only in the discretion of a Court of competent jurisdiction; and
2. Enforceability may be limited by bankruptcy, insolvency, liquidation,
moratorium, reorganization, reconstruction and other similar laws
affecting the enforceability of creditors' rights generally.
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
Per:
/s/ Torkin, Manes, Cohen & Arbus
<PAGE>
Exhibit 10.7
[LETTERHEAD OF NATIONAL BANK OF CANADA]
July 30, 1997
Ontario Paint & Wallpaper Limited
731 Millway Avenue
Concord, Ontario
L4K 3S8
ATTENTION: Mr. Sid Ackerman, President
Dear Sirs:
We are pleased to advise you that the National Bank of Canada has authorized the
following credit facilities subject to the ensuing terms and conditions:
BORROWER: Ontario Paint & Wallpaper Limited (the "Borrower")
LENDER: National Bank of Canada (the "Bank").
AMOUNT: A. $2,750,000 Cdn. by way of an Operating Loan and/or
Letters of Credit on a revolving demand loan agreement.
B. $1,250,000 Cdn. by way of an Operating Line on a
revolving demand loan agreement.
C. $25,000 Cdn. by way of Business Mastercard.
PURPOSE: A. To finance day to day operations.
B. To assist with possible future acquisitions and/or new
product launches.
C. To facilitate issuance of business cards to management
personnel.
INTEREST RATE: A. On borrowings up to $1,500,000 - Prime Rate of National
Bank of Canada plus
0.50%.
On borrowings over $1,500,000 - Prime Rate of National
Bank of Canada plus
0.75%.
B. Prime Rate of National Bank of Canada plus 1.0%.
C. Standard Business Mastercard rates.
STANDBY FEE: A. 1/8 of 1% on the unused balance over the first
$1,500,000.
B. 1/5 of 1% on the unused amount of the entire facility.
REPAYMENT: On demand.
A. & B. To revolve in multiples of $25,000.
C. As stipulated in the cardholder agreement.
<PAGE>
2
DEMAND NATURE OF
THE FACILITIES: The Borrower and the Guarantors acknowledge and agree that
notwithstanding anything contained herein to the contrary
these facilities constitute Demand Loans and as such, are due
and payable at any time at the sole discretion of the Bank.
MARGIN
AVAILABILITY: Facility A and B:
Operating advances and Letters of Credit shall be limited to
the lesser of $2,500,000 for Facility A and $1,250,000
Facility B or the aggregate of the following:
(a) 75% of good quality wade accounts receivable (Cdn. and
U.S.) excluding contra accounts and intercompany
accounts, doubtful accounts, and those aged 90 days and
over; plus
(b) 50% of finished goods inventory located in Canada capped
at an overall maximum of $1,150,000 (increasing to
$1,550,000 upon utilization of Facility B); less
(c) all claims which rank prior to the Bank's security (i.e.
deductions at source, GST, etc).
SECURITY: All legal and other documentation to be in a form and content
satisfactory to the Bank and its solicitors and is to be
supported by all usual representations and opinions to confirm
its enforceability. To include but not limited to:
"In Place"
1. Assignment of Life Insurance in the amount of $1,000,000
on the life of Alan Fine.
2 Assignment of Life Insurance in the amount of $1,000,000
on the life of Sidney Ackerman.
3. General Assignment of Book Debts and UCC filings
registered in all applicable jurisdictions providing a
first charge over accounts and other receivables.
4. Pledge of Inventory under Section 427 of the Bank Act
and UCC filings providing a first charge over inventory.
5. Assignment of sufficient fire insurance to protect the
Banks interest.
6. General Security Agreement providing a first floating
charge over all assets of the Borrower.
7. $250,000 Guarantee from Alan Fine.
8. Subordination and Postponement of Claim from Alan Fine.
9. $250,000 Guarantee from Sidney Ackerman.
10. Subordination and Postponement of Claim from Sidney
Ackerman.
11. $500,000 Guarantee from Rosedale Wallcoverings and
Fabrics Inc.
<PAGE>
3
12. $450,000 Guarantee from 1216748 Ontario Inc. supported
by a $450,000 First Collateral Mortgage over the
property located at 267,269 Queen Street East, Toronto.
13. $400,000 Guarantee from 1217576 Ontario Inc. supported
by a $400,000 First Collateral Mortgage over the
property located at 263,265 Queen Street East, Toronto.
14. $1,000,000 Guarantee from 1010037 Ontario Inc.
15. Subordination and Postponement of Claim from 1010037
Ontario Inc.
CONDITIONS
PRECEDENT: The following information/documentation satisfactory to the
Bank is to be provided prior to the advance of funds under
Facility B:
1. Formal business plan specific to the proposed
acquisition and/or new product launch.
2. Revised projections which take into account the proposed
transaction.
3. Follow up visit by the Bank's internal consultant if
deemed necessary by the Bank.
4. Perfection of all additional/amended security (if any)
in the event of an acquisition.
5. Compliance of all existing terms and conditions and
covenants to be evident including margin availability.
FINANCIAL
COVENANTS: The Borrower agrees to the following covenants which shall be
calculated as indicated below, maintained at all times and
tested monthly except where otherwise indicated.
1. Current Ratio: The ratio of Current Assets to Current
Liabilities will not be less than 1.25:1 at anytime.
Current Assets shall exclude any intercompany advances
not subject to right of set off, deferred costs, or any
other assets of doubtful or intangible nature.
2. Debt to Equity Ratio: The ratio of Debt to Equity will
not be more than 2.50:1 at any time prior to drawdown of
Facility B after which time Debt to Equity will not be
more than 2.75:1 at any time. Debt shall be defined as
total liabilities less any loans postponed to the Bank,
less deferred income taxes. Equity shall be defined as
Share Capital plus Retained Earnings plus any
Shareholders' loans postponed to the Bank, less any
deferred expenditures, loans to officers, directors, or
shareholders, or intercompany advances and any other
assets of doubtful value including 50% of the book value
of Mortgages Receivable relating to 263,265 and 267,269
Queen St., Toronto, Ontario.
<PAGE>
4
3. Capital Expenditures: The Borrower agrees that annual
capital expenditures shall not exceed Cash Flow from
Operating Activities. Cash Flow from Operating
Activities shall be defined as Income After Tax plus
deferred taxes, depreciation and amortization, and any
other non-cash expenses; less dividends and all debt
principal payments.
REPORTING
CONDITIONS: 1. Within 25 days of each month-end, the Borrower shall
provide the following information on Bank documents,
signed by the appropriate authorized officer of the
Borrower:
(a) monthly accounts payable listing classified
according to age;
(b) monthly accounts receivable listing classified
according to age;
(c) inventory declaration;
(d) prior claims declaration;
(e) internally prepared income statement and balance
sheet (to be provided quarterly unless the
Borrower makes an acquisition, after which time
the information will be provided monthly).
2. The Borrower agrees to submit to the Bank its annual
audited financial statements within 90 days of the end
of its fiscal year.
3. The Borrower agrees to submit to the Bank its annual
budget including budgeted monthly balance sheet, income
statement, and cashflow within 90 days of its fiscal
year end.
4. Updated personal net worth statements from each of Alan
Fine and Sidney Ackerman are to be provided annually.
OTHER CONDITIONS 1. The Borrower agrees to quarterly reviews of current
assets and internal financial reporting systems by the
Bank.
2. All legal and registration fees incurred to prepare,
execute and maintain legal documents will be assumed by
the Borrower.
3. The cost of all appraisals and environmental reports
requested by the Bank are the responsibility of the
Borrower.
4. The ownership structure of the company shall not be
altered without the Bank's prior written consent which
shall not be unreasonably withheld.
5. The nature of the Borrower's business shall not be
substantially changed without the Banks prior written
consent which shall not be unreasonably withheld.
6. If a major change judged unfavourable by the Bank occurs
in the nature of the risk before the date the funds are
advanced, the Bank can retain that advance and cancel
this Offer to Finance.
<PAGE>
5
FEES: 1. Renewal Fee of $3,500.
2. $150 monthly management fee.
ENVIRONMENTAL
MATTERS: 1. The Borrower and the Guarantors represent and warrant
that the owner of the subject property has complied and
is complying in all respects with all applicable laws
relating to the environment, that no contaminants,
pollutants or other hazardous substances (including,
without limitation, asbestos, products containing urea
formaldehyde or polychlorinated biphenyl or any
radioactive substances) have been or are now stored or
located at the subject property, that no order,
approval, direction or other governmental or regulatory
notice relating to the environment has been threatened
against, is pending or has been issued with respect to
the subject property or the operations of the business
being conducted at the subject property, and that none
of them is aware of any pending or threatened action,
suit or proceedings relating to any actual or alleged
environmental violation from or at the subject property.
2. The Borrower and Guarantors agree to comply with and
respect any and all environmental laws and regulations.
3. The Borrower and Guarantors agree to indemnify the Bank
for all decontamination costs or for damages incurred by
the Bank or its agents as a result of such
contamination.
ACKNOWLEDGEMENT
OF NON MERGER: The terms and conditions contained in this Offer to Finance
shall not merge upon the execution and delivery of the
security documentation referred to herein but shall at all
times remain in full force and effect.
CREDIT REPORTING: The Borrower and the Guarantors consent to the obtaining from
any credit reporting agency or from any person such
information as the Bank may require at any time, and consent
to the disclosure at any time of the information concerning
the Borrower and the Guarantor to any credit grantor with whom
the Borrower and the Guarantor have financial relations or to
any credit reporting agency.
REPRESENTATIONS
AND WARRANTIES: The Borrower and the Guarantors represent and warrant that the
information given in respect of applying for the credit
facilities is correct and complete, and acknowledge that the
Bank is relying on said representations and warranties.
ANNUAL REVIEW: To be reviewed at least annually, ad in any event not later
than April 30, 1998.
OTHER: The Borrower agrees to keep the contents of this Letter
strictly confidential.
<PAGE>
6
If these conditions are acceptable to you, please indicate your acceptance
thereof by signing and returning a copy of this letter to the Bank before August
11, 1997, after which time this offer is null and void.
Yours truly,
/s/ Steven Matheson /s/ R.A. Garfard
Steven L. Matheson R.A. Garfard
Senior Account Manager Senior Manager
ACCEPTANCE:
WE ACCEPT THE TERMS AND CONDITIONS OUTLINED HEREIN THIS 31 DAY OF JULY, 1997
ONTARIO PAINT & WALLPAPER LIMITED ("Borrower")
Per: /s/ Sidney Ackerman
---------------------
Title:
AS GUARANTORS:
/s/ Alan Fine
- --------------------------
Alan Fine
/s/ Sidney Ackerman
- --------------------------
Sidney Ackerman
ROSEDALE WALLCOVERINGS AND FABRIC, INC.
Per: /s/ Alan Fine
---------------------
Title: President
1010037 ONTARIO INC.
Per: /s/ Sidney Ackerman
---------------------
Title:
<PAGE>
ONTARIO PAINT &
WALLPAPER LIMITED
NATIONAL BANK FINANCING
<PAGE>
ONTARIO PAINT & WALLPAPER LIMITED
NATIONAL BANK FINANCING
Torkin, Manes, Cohen & Arbus
151 Yonge Street
Toronto, Ontario
M5C 2W7
<PAGE>
DOCUMENT INDEX
- --------------------------------------------------------------------------------
ONTARIO PAINT & WALLPAPER LIMITED
NATIONAL BANK FINANCING
DOCUMENT INDEX
TAB DOCUMENT
- --- --------
1 Reporting letter
2 Offer to Finance dated August 8, 1996
3 Acknowledgment of debt regarding $2,500,000.00 revolving
line of credit
4 Acknowledgment of debt regarding $1,250,000.00 revolving
line of credit
5 General Security Agreement
6 General Assignment of Book Debts
7 Application for Credit and Promise to give Security
under the Bank Act
8 Notice of Intention to Give Security under the Bank Act
9 Agreement Respecting Security under the Bank Act
10 Bank Act Security
11 Security with Regard to General Accident Insurance
Policy CLD 3624390
12 Security with Regard to Prudential Insurance Policy
JR112754
13 Security with Regard to Prudential Insurance Policy
JR112753
14 Undertaking of Ontario Paint & Wallpaper Limited re:
assignment of proceeds of life insurance policy JR112754
15 Priorities Agreement
16 Corporate Certificate of Ontario Paint & Wallpaper
Limited
17 Guarantee of 1010037 Ontario Inc. regarding the
<PAGE>
DOCUMENT INDEX
- --------------------------------------------------------------------------------
indebtedness of Rosedale Wallcoverings and Fabric Inc.
18 Certified Copy of a Resolution of the Board of Directors
of 1010037 Ontario Inc. authorizing the Guarantee of the
indebtedness of Rosedale
19 Subordination Agreement executed by 1010037 Ontario Inc.
20 Certified Copy of a Resolution of the Board of Directors
of 1010037 Ontario Inc. authorizing the Subordination
Agreement
21 Certified Copy of a Resolution of the Board of Directors
of Ontario Paint & Wallpaper Limited authorizing the
Subordination Agreement of 1010037 Ontario Inc.
22 Corporate Certificate of 1010037 Ontario Inc.
23 Guarantee of Rosedale Wallcovering and Fabric Inc.
regarding the indebtedness of Ontario Paint &
Wallpaper Limited
24 Certified Copy of a Resolution of the Board of Directors
of Rosedale Wallcoverings and Fabric Inc. authorizing
the Guarantee of the indebtedness of Ontario Paint &
Wallpaper Limited
25 Guarantee of Sidney Ackerman regarding the indebtedness
of Ontario Paint & Wallpaper Limited
26 Subordination Agreement Executed by Sidney Ackerman
27 Certified Copy of a Resolution of the Board of Directors
of Ontario Paint & Wallpaper Limited authorizing the
Subordination Agreement of Sidney Ackerman
28 Statutory Declaration of Sidney Ackerman
29 Guarantee of Alan Fine regarding the indebtedness of
Ontario Paint & Wallpaper Limited
30 Subordination Agreement Executed by Alan Fine
31 Certified Copy of a Resolution of the Board of Directors
of Ontario Paint & Wallpaper Limited authorizing the
Subordination Agreement of Alan Fine
32 Statutory Declaration of Alan Fine
33 Acknowledgment of Alan Fine regarding Receipt of PPSA
Verification Statements
<PAGE>
DOCUMENT INDEX
- --------------------------------------------------------------------------------
34 Acknowledgment of Sidney Ackerman regarding Receipt of
PPSA Verification Statements
35 Acknowledgment of 1010037 Ontario Inc. regarding Receipt
of PPSA Verification Statements
36 Acknowledgment of Ontario Paint & Wallpaper Limited
regarding Receipt of PPSA Verification Statements
37 Solvency Certificate of Rosedale Wallcoverings & Fabric
Inc.
38 Direction re: funds
39 Authorization to insert dates
40 Legal Opinion of Torkin, Manes, Cohen & Arbus re:
National Bank loan to Ontario Paint & Wallpaper Limited
41 Legal Opinion of Torkin, Manes, Cohen & Arbus re:
Guarantee of 1010037 Ontario Inc. of National Bank loan
to Ontario Paint & Wallpaper Limited
42 Legal Opinion of Torkin, Manes, Cohen & Arbus re:
Guarantee of Rosedale Wallcoverings & Fabrics Inc.
regarding National Bank loan to Ontario Paint &
Wallpaper Limited
<PAGE>
[LETTERHEAD OF Torkin, Manes, Cohen & Arbus]
November 26, 1996
PERSONAL AND CONFIDENTIAL
Sidney Ackerman
Ontario Paint & Wallpaper Limited
731 Millway Avenue
Concord, Ontario
L4K 3S8
Dear Sir:
Re: National Bank Financing
Most of the matters in connection with the above-noted transaction have now been
completed and we are pleased to be in a position to report to you in respect
thereof.
I. OFFER TO FINANCE
Pursuant to the Offers to Finance dated August 8, 1996, the National Bank of
Canada authorized the following credit facilities (the "National Bank
Financing") to Ontario Paint & Wallpaper Limited ("Ontario Paint"), subject to
the terms and conditions contained in the Offers to Finance:
o $2,500,000.00 by way of a revolving demand operating loan;
o $1,250,000.00 by way of a line of credit; and
o $25,000.00 by way of a business Mastercard.
You should note that the interest rate for the Ontario Paint revolving demand
operating loan is the Prime Rate plus .5% for the first $1,500,000.00 borrowed
and Prime plus .75% for amounts borrowed over $1,500,000.00. For the Mastercard
credit facility, the interest rate is determined by the standard rate charged by
National Bank Business Mastercard. The $1,250,000.00 operating line of credit is
at the Prime Rate of the National Bank plus 1%. The financing is payable on
demand, which means that the Bank may demand repayment at any time, according to
the Bank's discretion.
$2,500,000.00 and $1,250,000.00 are the maximum amounts available under the
operating loan and the line of credit respectively. The actual amount that will
be available to Ontario Paint at
<PAGE>
Page 2
any one time is specified according to a formula set out in the Offer to
Finance. This formula is based on the total of:
1. 75% of Ontario Paint's trade accounts receivable; and
2. 50% of finished goods inventory located in Canada capped at an overall
maximum of $1,150,000.00 (increasing to $1,550,000.00 upon utilization of
the line of credit).
LESS
3. all claims which rank in priority of the Bank's Security (i.e. deductions
at source, GST, etc.).
Ontario Paint has further agreed to provide to the Bank a detailed financial
report within 25 days of the end of each month. The required contents of these
reports are set out in the Offer to Finance. Ontario Paint is also required to
submit to the Bank its audited financial statements within 90 days of the end of
its fiscal year.
Please note that this is just a summary of the Offer to Finance, and you should
refer to the Offer itself for further details and qualifications relating to the
financing.
II. SECURITY
Pursuant to the Offer to Finance, the following security was given by Ontario
Paint:
1. General Security Agreement ("GSA"):
As security for the financing, Ontario Paint executed a General Security
Agreement in favour of the National Bank, which was registered in the Ontario
Personal Property Security Act Register as File Nos. 824305914. Pursuant to the
terms of this Agreement, Ontario Paint granted as collateral for the credit
facilities its accounts receivable, goods (including, but not limited to
equipment, inventory, furniture, fixtures, and machinery), contractual rights
and interests in copyrights and patents, securities and commercial paper, and
the proceeds therefrom. You should review the terms of the GSA carefully, and,
in particular, you should note that any default under the GSA will entitle the
National Bank to take possession of any of the property specifically referred to
in the agreement. As well, you should be aware that the collateral under the GSA
also includes goods and rights that Ontario Paint has not yet acquired, but will
acquire in the future.
2. Assignment of Book Debts ("Assignment"):
Ontario Paint executed an Assignments of Book Debts granting the National Bank
the rights to any debts that are owed by any party to Ontario Paint for any
reason, including the right to sue debtors and the right to pursue any legal
actions that Ontario Paint may have against any party.
<PAGE>
Page 3
3. Bank Act Security:
In addition to the security set out above, Ontario Paint gave the National Bank
a security interest under s. 427 of the Bank Act. The documents relating to this
security are enclosed in the documents book included herewith at tabs 6, 7, 8
and 9. This security assigns to the National Bank goods, wares and merchandise
belonging to Ontario Paint, including, but not limited to, paint, wallcoverings,
borders, fabric, sample books, home decorating hardware, and accessories.
Although this property would fall under the definition of "collateral" under the
GSA, the Bank Act security was required by the Bank to protect the priority of
the Bank's rights in the property of Ontario Paint if there is a conflict among
creditors at a future date. In the event of a default under the Offers to
Finance, the Bank will have the right to take possession of the property
specified in the Bank Act Security in priority to other creditors, including
other secured creditors.
4. Security With Respect to Insurance Policies:
In order to protect its position as a creditor in the event of the death or
incapacity of Alan Fine or Sidney Ackerman, the National Bank required that it
was to be designated as the beneficiary of the following insurance policies:
1. Policy Number JR112754 on the life of Sidney Ackerman issued by the
Prudential Life Insurance Company (Canada); and
2. Policy Number JR112753 on the life of Alan Fine issued by the Prudential Life
Insurance Company (Canada);
Also assigned to the National Bank were the sums payable under the above
policies up to a maximum of $1,000,000.00 plus interest at the rate set therein.
The terms of these policies, including the amount and payment of premiums are
otherwise unchanged. You should refer to the policies themselves for further
details.
As part of the security respecting these insurance policies, Ontario Paint and
Rosedale Wallcoverings & Fabrics Inc. ("Rosedale") executed undertakings in
relation to Policy No. JR112754. According to the terms of this undertaking,
Ontario Paint guarantees that a minimum of $2,000,000.00 of the death benefit
under the Policy will be available at all times in respect of the obligations of
Ontario Paint to the Bank, and that the Bank will unconditionally receive a
death benefit of $1,000,000.00 on account of the assignment of Rosedale's
interest as a beneficiary under the Policy and an additional $1,000,000.00 on
account of the assignment of Ontario Paint's interest as a beneficiary under the
Policy.
III. GUARANTEES
<PAGE>
Page 4
On closing, the following guarantees were provided by the various parties to the
transaction.
1. Alan Fine and Sidney Ackerman each executed separate guarantees for the
indebtedness of Ontario Paint for amounts not exceeding $250,000.00;
2. Rosedale guaranteed the Ontario Paint debt up to $500,000.00, and 1010037
Ontario Inc. issued a separate guarantee for $1,000,000.00 of this debt.
You should review the terms of the guarantees carefully, as personal liability
for both yourself and Alan Fine will be incurred should Rosedale default on
repayment of the National Bank credit facility. In the event that Rosedale does
default on the repayment of the loan, the Bank may call upon either one or any
combination of the guarantors to repay the outstanding balance owed up to the
maximum amount of the guarantee.
3. Subordination Agreements:
Subordination agreements were signed by Alan Fine, Sidney Ackerman, and 1010037
Ontario Inc. respectively relating to the indebtedness of Ontario Paint. These
agreements provide that payment of any debts presently due, or that become due
in the future from Ontario Paint to these parties can only be made after any
amounts due to the Bank at the time have been paid.
IV. PRIORITIES AGREEMENT
Prior to the closing of this transaction, Laurentian Bank of Canada
("Laurentian") held prior-existing security against the assets of both Rosedale
and Ontario Paint. This security relates to two loans made by the North American
Trust Company (now Laurentian Bank) in 1990 to both Rosedale and Ontario Paint,
and a third loan made in 1995 to Rosedale only. These loans and the accompanying
security were subsequently assigned to Laurentian. The Priorities Agreement,
executed by Rosedale, Ontario Paint, National Bank and Laurentian, defines the
priority of the respective rights of the National Bank and Laurentian to the
assets of Ontario Paint.
According to the terms of these Agreements, the National Bank security will take
priority over the Laurentian security in all respects with the exception of
certain specified assets. Specifically, Laurentian will have priority over the
National Bank to the proceeds of Life Insurance Policy No. JR112754 on the life
of Sydney Ackerman issued by the Prudential of America Life Insurance Company
(Canada) in favour of Ontario Paint.
V. CORPORATE RESOLUTIONS
The appropriate resolutions authorizing each of the transactions noted above
were passed by the boards of directors of each of the corporate entities
involved.
Specifically, the board of directors of 1010037 Ontario Inc. authorized that
corporation to enter
<PAGE>
Page 5
into the guarantee relating to the Ontario Paint financing, and authorizing the
company to enter into the subordination agreement signed on its behalf.
With repsect to the credit facility established in favour of Rosedale by the
National Bank, which is reported separately, Ontario Paint was authorized by its
board of directors to sign the guarantee of the Rosedale debt. The subordination
agreement were also authorized by a specific resolutions of Ontario Paint's
board of directors.
VI. LEGAL OPINIONS
Torkin, Manes, Cohen & Arbus ("TMCA") provided its legal opinion to the National
Bank and its solicitors in this transaction, Pallett Valo relating to the
validity and enforceability of the loans to Ontario Paint. Briefly, the Ontario
Paint opinion state that Ontario Paint is a validly subsisting Ontario
corporation, that the company has the power to own and lease property in
Ontario, that Ontario Paint has the power to borrow the money as contemplated by
the Offer to Finance, and that Ontario Paint has the power and is authorized to
enter into the security agreement required and to execute all of the various
secondary documents necessitated by the transaction. The opinions do not certify
that Ontario Paint owns the property charged under the GSA or assignment of book
debts, nor has TMCA confirmed the rank or priority of any of the security
instruments contained herein.
VII. OTHER CLOSING DOCUMENTS
In order to facilitate the closing of the transaction, several ancillary
documents were signed. These documents include:
1. Authorization to insert the dates into certain specified documents;
2. Solvency certificate of Ontario Paint;
3. Acknowledgments signed by each debtor and guarantor to the effect that each
debtor and guarantor has received a verification of the registration of the
securities involved in this transaction in the Personal Property Security
Register;
4. A direction re: funds signed by the duly authorized representative of Ontario
Paint directing the National Bank to pay out of the proceeds of the loan the
moneys owed by Ontario Paint to the Hong Kong Bank of Canada and the legal fees
of Pallett Valo.
CONCLUSION
We are enclosing copies of the documents referred to herein and wish to point
out that this reporting letter is merely a brief synopsis of some of the main
features of the documents referred to. In the event that any questions arise,
recourse should be made to the exact wording of the
<PAGE>
Page 6
document in question.
If you have any questions, please do not hesitate to contact us.
It has been a pleasure acting for you in this transaction.
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
/s/ Torkin, Manes, Cohen & Arbus
<PAGE>
[LETTERHEAD OF NATIONAL BANK OF CANADA]
August 8, 1996
Ontario Paint & Wallpaper Limited
731 Millway Avenue
Concord, Ontario
L4K 3S8
ATTENTION: Mr. Sid Ackerman, President
Dear Sirs:
OFFER TO FINANCE
We are pleased to advise you that the National Bank of Canada has authorized the
following credit facilities subject to the ensuing terms and conditions:
BORROWER: Ontario Paint & Wallpaper Limited (the "Borrower")
LENDER: National Bank of Canada (the "Bank").
AMOUNT: A. $2,750,000 Cdn. by way of an Operating Loan and/or
Letters of Credit on a revolving demand loan agreement.
B. $1,250,000 Cdn. by way of an Operating Line on a
revolving demand loan agreement.
C. $25,000 Cdn. by way of Business Mastercard.
PURPOSE: A. To finance day to day operations.
B. To assist with possible future acquisitions and/or new
product launches.
C. To facilitate issuance of business cards to management
personnel.
INTEREST RATE: A. On borrowings up to $1,500,000 - Prime Rate of National
Bank of Canada plus
0.50%.
On borrowings over $1,500,000 - Prime Rate of National
Bank of Canada plus
0.75%.
B. Prime Rate of National Bank of Canada plus 1.0%.
C. Standard Business Mastercard rates.
STANDBY FEE: A. 1/8 of 1% on the unused balance over the first
$1,500,000.
B. 1/5 of 1% on the unused amount of the entire facility.
<PAGE>
2
REPAYMENT: On demand.
A. & B. To revolve in multiples of $25,000.
C. As stipulated in the cardholder agreement.
DEMAND NATURE OF
THE FACILITIES: The Borrower and the Guarantors acknowledge and agree that
notwithstanding anything contained herein to the contrary
these facilities constitute Demand Loans and as such, are due
and payable at any time at the sole discretion of the Bank.
MARGIN
AVAILABILITY: Facility A and B:
Opening advances and Letters of Credit shall be limited to the
lesser of $2,500,000 for Facility A and $1,250,000 Facility B
or the aggregate of the following:
(a) 75% of good quality trade accounts receivable (Cdn. and
U.S.) excluding contra accounts and intercompany
accounts, doubtful accounts, and those aged 90 days and
over; plus
(b) 50% of finished goods inventory located in Canada capped
at an overall maximum of $1,150,000 (increasing to
$1,550,000 upon utilization of Facility B); less
(c) all claims which rank prior to the Bank's security (i.e.
deductions at source, GST, etc).
SECURITY: All legal and other documentation to be in a form and content
satisfactory to the Bank and its solicitors and is to be
supported by all usual representations and opinions to confirm
its enforceability. To include but not limited to:
1. Assignment of Life Insurance in the amount of $1,000,000
on the life of Alan Fine.
2 Assignment of Life Insurance in the amount of $1,000,000
on the life of Sidney Ackerman.
3. General Assignment of Book Debts and UCC filings
registered in all applicable jurisdictions providing a
first charge over amounts and other receivables.
4. Pledge of Inventory under Section 427 of the Bank Act
and UCC filings providing a first charge over inventory.
5. Assignment of sufficient fire insurance to protect the
Banks interest.
6. General Security Agreement providing a first floating
charge over all assets of the Borrower.
7. $250,000 Guarantee from Alan Fine.
8. Subordination and Postponement of Claim from Alan Fine.
<PAGE>
3
9. $250,000 Guarantee from Sidney Ackerman.
10. Subordination and Postponement of Claim from Sidney
Ackerman.
11. $500,000 Guarantee from Rosedale Wallcoverings and
Fabrics Inc.
12. $1,000,000 Guarantee from 1010037 Ontario Inc.
13. Subordination and Postponement of Claim from 1010037
Ontario Inc.
CONDITIONS
PRECEDENT: The following information/documentation satisfactory to the
Bank is to be provided prior to the advance of funds:
1. Satisfactory report from the Bank's consultant with
respect to a review of current assets and the internal
financial reporting system. Consultant's cost is to the
account of the Borrower, and is estimated at $250.00.
2. Completion of the Bank's environmental questionnaire
evidencing satisfactory results.
3. Personal financial statements from each of Sid Ackerman
and Alan Fine on the Bank's standard form. Evidence of
all material assets is to be provided.
4. A copy of the Laurentian Bank loan agreement re:
$5,000,000 loan to purchase life insurance policy.
5. All legal and security documents to be in a form and
content satisfactory to the Bank and its solicitors and
is to be supported by all usual representations and
opinions to confirm its enforceability.
6. Any other important information.
Facility B:
Prior to the Bank making the facility available to the
Borrower the following must be received and reviewed to the
satisfaction of the Bank.
1. Formal business plan specific to the proposed
acquisition and/or new product launch.
2. Revised projections which take into account the proposed
transaction.
3. Follow up visit by the Bank's internal consultant if
deemed necessary by the Bank.
4. Perfection of all additional/amended security (if any)
in the event of an acquisition.
5. Compliance of all existing terms and conditions and
covenants to be evident including margin availability.
<PAGE>
4
FINANCIAL
COVENANTS: The Borrower agrees to the following covenants which shall be
calculated as indicated below, maintained at all times and
tested monthly except where otherwise indicated:
1. Current Ratio: The ratio of Current Assets to Current
Liabilities will not be less than 1.25:1 at anytime.
Current Assets shall exclude any intercompany advances
not subject to right of set off, deferred costs, or any
other assets of doubtful or intangible nature.
2. Debt to Equity Ratio: The ratio of Debt to Equity will
not be more than 2.50:1 at any time prior to drawdown of
Facility B after which time Debt to Equity will not be
more than 2.75:1 at any time. Debt shall be defined as
total liabilities less any loans postponed to the Bank,
less deferred income taxes. Equity shall be defined as
Share Capital plus Retained Earnings plus any
Shareholders' loans postponed to the Bank, less any
deferred expenditures, loans to officers, directors, or
shareholders, or intercompany advances and any other
assets of doubtful value.
3. Capital Expenditures: The Borrower agrees that annual
capital expenditures shall not exceed Cash Flow from
Operating Activities. Cash Flow from Operating
Activities shall be defined as Income After Tax plus
deferred taxes; depreciation and amortization; and any
other non-cash expenses; less dividends and all debt
principal payments.
REPORTING
CONDITIONS: 1. Within 25 days of each month-end, the Borrower shall
provide the following information on Bank documents,
signed by the appropriate authorized officer of the
Borrower:
(a) monthly accounts payable listing classified
according to age;
(b) monthly accounts receivable listing classified
according to age;
(c) inventory declaration;
(d) prior claims declaration;
(e) internally prepared income statement and balance
sheet (to be provided quarterly unless the
Borrower makes an acquisition, after which time
the information will be provided monthly).
2. The Borrower agrees to submit to the Bank its annual
audited financial statements within 90 days of the end
of its fiscal year.
3. The Borrower agrees to submit to the Bank its annual
budget including budgeted monthly balance sheet, income
statement, and cashflow within 90 days of its fiscal
year end.
4. Updated personal net worth statements from each of Alan
Fine and Sidney Ackerman are to be provided annually.
OTHER CONDITIONS: 1. The Borrower agrees to quarterly reviews of current
assets and internal financial reporting systems by the
Bank.
<PAGE>
5
2. All legal and registration fees incurred to prepare,
execute and maintain legal documents will be assumed by
the Borrower.
3. The cost of all appraisals and environmental reports
requested by the Bank are the responsibility of the
Borrower.
4. The ownership structure of the company shall not be
altered without the Bank's prior written consent which
shall not be unreasonably withheld.
5. The nature of the Borrower's business shall not be
substantially changed without the Bank's prior written
consent which shall not be unreasonably withheld.
6. If a major change judged unfavourable by the Bank occurs
in the nature of the risk before the date the funds are
advanced, the Bank can retain that advance and cancel
this Offer to Finance.
FEES: 1. Transaction fee of $5,000 of which:
(a) $2,500 has been paid; and
(b) $2,500 is payable upon acceptance of this Offer to
Finance. If the Borrower does not proceed with
financing any fees paid to the Bank shall be
retained.
2. $150 monthly management fee.
ENVIRONMENTAL
MATTERS: 1. The Borrower and the Guarantors represent and warrant
that the owner of the subject property has complied and
is complying in all respects with all applicable laws
relating to the environment, that no contaminants,
pollutants or other hazardous substances (including,
without limitation, asbestos, products containing urea
formaldehyde or polychlorinated biphenyl or any
radioactive substances) have been or are now stored or
located at the subject property, that no order,
approval, direction or other governmental or regulatory
notice relating to the environment has been threatened
against, is pending or has been issued with respect to
the subject property or the operations of the business
being conducted at the subject property, and that none
of them is aware of any pending or threatened action,
suit or proceedings relating to any actual or alleged
environmental violation from or at the subject property.
2. The Borrower and Guarantors agree to comply with and
respect any and all environmental laws and regulations.
3. The Borrower and Guarantors agree to indemnify the Bank
for all decontamination costs or for damages incurred by
the Bank or its agents as a result of such
contamination.
ACKNOWLEDGEMENT
OF NON MERGER: The terms and conditions contained in this Offer to Finance
shall not merge upon the execution and delivery of the
security documentation referred to herein but shall at all
times remain in full force and effect.
<PAGE>
6
CREDIT REPORTING: The Borrower and the Guarantors consent to the obtaining from
any credit reporting agency or from any person such
information as the Bank may require at any time, and consent
to the disclosure at any time of the information concerning
the Borrower and the Guarantor to any credit grantor with whom
the Borrower and the Guarantor have financial relations or to
any credit reporting agency.
REPRESENTATIONS AND
WARRANTIES: The Borrower and the Guarantors represent and warrant that the
information given in respect of applying for the credit
facilities is correct and complete, and acknowledge that the
Bank is relying on said representations and warranties.
ANNUAL REVIEW: To be reviewed at least annually, and in any event not later
than April 30, 1997.
OTHER: The Borrower agrees to keep the contents of this Letter
strictly confidential.
If these conditions are acceptable to you, please indicate your acceptance
thereof by signing and returning a copy of this letter to the Bank before August
15, 1996, after which time this offer is null and void.
Yours truly,
/s/ Steven Matheson /s/ J.A. Marshall
Steven L. Matheson J.A. Marshall
Senior Account Manager Regional Manager
ACCEPTANCE:
WE ACCEPT THE TERMS AND CONDITIONS OUTLINED HEREIN THIS 12TH DAY OF AUGUST, 1996
ONTARIO PAINT & WALLPAPER LIMITED ("Borrower")
Per: /s/ Sidney Ackerman
---------------------
Title: President
AS GUARANTORS:
/s/ Alan Fine
- --------------------------
Alan Fine
/s/ Sidney Ackerman
- --------------------------
Sidney Ackerman
ROSEDALE WALLCOVERINGS AND FABRIC, INC.
Per: /s/ Alan Fine
---------------------
Title: President
1010037 ONTARIO INC.
Per: /s/ Sidney Ackerman
---------------------
Title: President
<PAGE>
[LOGO] NATIONAL BANK OF CANADA
ACKNOWLEDGEMENT OF DEBT
REVOLVING DEMAND CREDIT
In consideration of the National Bank of Canada (hereinafter called the "Bank")
providing the undersigned (hereinafter called the "Customer") with a revolving
demand loan facility (hereinafter called the "Loan Facility") in the aggregate
principal amount not exceeding $2,500,000.00, TWO MILLION AND FIVE HUNDRED
THOUSAND dollars (|X| CDN; |_| CDN or US equivalent; |_| US) the Customer agrees
with the Bank as follows:
1. TERM OF CREDIT
The Customer promises to pay to the Bank, on demand, all amounts
outstanding under this Loan Facility including, without limitation,
principal, interest, fees and accessories.
2. INTEREST RATE
|X| 2.1 Advances In CDN$
Advances in CDN$ shall bear interest at the rates set out as follows until
payment in full: (a) for advances below the aggregate amount of
$1,500,000.00, at the Canadian Prime Rate of the Bank plus One-half of One
per cent (0.50%); and (b) for advances above the aggregate amount of
$1,500,000.00, at the Canadian Prime Rate of the Bank plus Three-quarters
of One per cent (0.75%); in each case calculated daily and payable
monthly, with a minimum charge of $10.00. At the date hereof the Canadian
Prime Rate of the Bank is 5.00 per cent per annum.
|_| 2.2 Advances In US$
Advances in US$ shall bear interest, until payment in full, at the US Base
Rate of the Bank plus _______________________ per cent, calculated daily
and payable monthly, with a minimum charge of $_____________________. At
the date hereof the US Base Rate of the Bank is _______________ per cent
per annum.
3. FINANCING CONDITIONS
3.1 The Customer authorizes the Bank, but the Bank is not obliged, to
debit from time to time his Account with the amount of interest
accrued and unpaid by the Customer.
3.2 Provided that the Bank has not demanded payment of any amount
outstanding under this Loan Facility, or has not terminated this
Agreement, the Customer may, at the Bank's discretion, borrow, repay
and reborrow up to the amount available under this Loan Facility at
any time and from time to time in the following manner:
3.2.1 The Customer authorizes the Bank, daily or otherwise as and
when determined by the Bank from time to time, to ascertain
the position or net position (as the case may be) between the
Customer and the Bank in respect to the deposit account or, if
more than one, the deposit accounts maintained by the Customer
with the Bank (herein called the "Account") and that
3.2.1.1 if such position or net position is a credit in
favour of the Customer, the Bank may apply the
amount of such credit or any part thereof, rounded
to the nearest $25,000.00 as a repayment of the
Loan Facility, and the Bank will debit the Account
with the amount of such repayment; and
3.2.1.2 if such position or net position is a debit in
favour of the Bank, the Bank will make an advance
under the Loan Facility of such amount, rounded to
the nearest $25,000.00 as is required to place
the Account in such credit or net credit position
as has been agreed between the Customer and the
Bank from time to time, and the Bank may increase
the unpaid balance owing under the Loan Facility,
and credit the Account with the amount of such
advance;
provided that at no time shall the balance owing exceed the amount
of the Loan Facility.
3.3 The Customer agrees to maintain an average monthly minimum credit
balance in the Account, which may include compensating balances to
cover service charges, reserves and debit float. Such balance shall
be the amount agreed to in writing between the Customer and the Bank
from time to time.
3.4 The Bank shall maintain on the books of its unit of account,
accounts and records evidencing the outstanding principal amount of
the loan of the Bank to the Customer under this Loan Facility
together with any interest in respect thereof. The Bank shall
maintain a record or computerized data of the amount of the balance,
each advance, and each payment of principal and interest on account
of the loan. The Bank's accounts and records constitute in the
absence of manifest error prima facie evidence of the indebtedness
of the Customer to the Bank under this Loan Facility.
4. CONSOLIDATION
4.1 The Customer acknowledges that the outstanding principal balance
owing to the Bank under existing credit facilities which will be
replaced by this Loan Facility is $______________________ (figures),
___________________________ (words) dollars, as at the close of
business on _____________________________ 19__. The initial
outstanding principal balance under this Loan Facility will be
adjusted to reflect transactions under the existing credit facility
occurring between __________________________________ 19___ and the
date of execution of this agreement. The Customer acknowledges and
declares that the security previously granted to the Bank by the
Customer remains in full force and effect, the Bank hereby reserving
all of its right, title and interest to and in the rights, hypothecs
and privileges granted to the Bank under the terms of the said
security.
Both dates
must be
the same
[SEAL]
<PAGE>
5. SECTION 427 OF THE BANK ACT
5.1 This Agreement is given pursuant to the application for credit and
promise to give security made by the undersigned to the Bank and
dated the 1Oth day of October, 1996, and any supplemental
application for credit and promise to give security. The Customer
promises to give the Bank from time to time warehouse receipts
and/or bills of lading covering the property described in such
application(s) for credit and promise(s) to give security or any
part thereof which is now or may hereafter be covered by warehouse
receipts or bills of lading, as security for this Loan Facility. No
such security shall be merged in any subsequent security or be taken
to be substituted for any security previously acquired. This section
applies only to loans granted under the provisions of the Bank Act.
6. INTERPRETATION
6.1 Definitions
For the purposes hereof, the following words and phrases shall have
the following meaning:
"Canadian Dollars" "CDN$": means lawful money of Canada.
"Canadian Prime Rate": means the annual variable rate of interest
announced from time to time by the Bank and used to determine the
interest rates on Canadian dollar commercial loans granted by the
Bank in Canada.
"Debt", "Indebtedness" or "total indebtedness": means the aggregate
amount of principal, interest and accessories due by the Customer
hereunder.
"Floating Rate": means the interest rate applicable to floating rate
advances made hereunder in Canadian or U.S. dollars, as the case may
be.
"U.S. Base Rate": means the annual variable rate of interest
announced from time to time by the Bank and used to determine the
interest rates on U.S. dollar commercial loans granted by the Bank
in Canada.
"U.S. Dollars" "US$": means lawful money of the United States of
America.
6.2 Conversion to U.S. or Canadian dollars
Each time an amount in Canadian dollars must be converted or
expressed in U.S. dollars, or the equivalent in U.S. dollars (or
inversely) must be determined, such calculation shall be made, on
the appropriate date, in accordance with the cash purchase rate of
the Bank at about 10:30 a.m.
6.3 Other Agreements
The Customer acknowledges that the terms of this agreement are in
addition to and not in substitution for any terms and conditions of
any other agreements between the Customer and the Bank.
7. GENERAL TERMS AND CONDITIONS OF REPAYMENT
7.1 Currency and place of payment
All amounts due by the Customer under the terms hereof shall be paid
by the Customer to the Bank in Canadian dollars in the case of a
financing granted in Canadian dollars, or in U.S. dollars in the
case of a financing granted in U.S. dollars.
Should the amount of principal of the debt owing to the Bank exceed
the credit limit effectively granted hereunder, the Customer shall
reimburse the Bank, on demand, an amount equal to such excess
amount.
7.2 Judgment rendered in a currency other than the currency in which the
financing granted was due
Should a judgment be obtained against the Customer for an amount
owed by it, in a currency other than the one in which the said
amount was owing hereunder, the Customer shall pay the Bank, as
applicable, on the judgment payment date, such additional amount as
is equal to the excess of the amount that was due hereunder and
converted into the other currency, on the judgment payment date,
with respect to the judgment amount. The exchange rate applicable
for the purposes of obtaining the judgment and for calculating said
conversion shall be the rate at which the Bank is able, on the
appropriate date, in Montreal to sell the currency applicable to
this agreement to purchase the other currency.
Any additional amount owing under this clause shall be due as a
separate debt from that which gave rise to the judgment, which
judgment shall not constitute res judicata.
8. LANGUAGE
(For Quebec only)
The Customer has expressly requested that this document be drawn up and
executed in the English language.
Le client a expressement demande que ce document soit redige et signe en
langue anglaise.
EXECUTED AT Mississauga THIS 30th DAY OF October 1996
NATIONAL BANK OF CANADA ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Steven Matheson Per: /s/ Sidney Ackerman c/s
------------------------- -------------------------
SIGNATURE (Bank) SIGNATURE (Customer)
SIDNEY ACKERMAN - President
Per: /s/ Alan Fine
-------------------------
SIGNATURE (Customer)
ALAN FINE - Secretary
<PAGE>
[LOGO] NATIONAL BANK OF CANADA
ACKNOWLEDGEMENT OF DEBT
REVOLVING DEMAND CREDIT
In consideration of the National Bank of Canada (hereinafter called the "Bank")
providing the undersigned (hereinafter called the "Customer") with a revolving
demand loan facility (hereinafter called the "Loan Facility") in the aggregate
principal amount not exceeding $1,250,000.00, ONE MILLION AND TWO HUNDRED
AND FIFTY THOUSAND dollars (|X| CDN; |_| CDN or US equivalent; |_| US) the
Customer agrees with the Bank as follows:
1. TERM OF CREDIT
The Customer promises to pay to the Bank, on demand, all amounts
outstanding under this Loan Facility including, without limitation,
principal, interest, fees and accessories.
2. INTEREST RATE
|X| 2.1 Advances In CDN$
Advances in CDN$ shall bear interest, until payment in full, at the
Canadian Prime Rate of the Bank plus One (1.00%) per cent, calculated
daily and payable monthly, with a minimum charge of $10.00. At the date
hereof the Canadian Prime Rate of the Bank is 5.00 per cent per annum.
|_| 2.2 Advances In US$
Advances in US$ shall bear interest, until payment in full, at the US Base
Rate of the Bank plus _______________________ per cent, calculated daily
and payable monthly, with a minimum charge of $_________________________.
At the date hereof the US Base Rate of the Bank is _______________ per
cent per annum.
3. FINANCING CONDITIONS
3.1 The Customer authorizes the Bank, but the Bank is not obliged, to
debit from time to time his Account with the amount of interest
accrued and unpaid by the Customer.
3.2 Provided that the Bank has not demanded payment of any amount
outstanding under this Loan Facility, or has not terminated this
Agreement, the Customer may, at the Bank's discretion, borrow, repay
and reborrow up to the amount available under this Loan Facility at
any time and from time to time in the following manner:
3.2.1 The Customer authorizes the Bank, daily or otherwise as and
when determined by the Bank from time to time, to ascertain
the position or net position (as the case may be) between the
Customer and the Bank in respect to the deposit account or, if
more than one, the deposit accounts maintained by the Customer
with the Bank (herein called the "Account") and that
3.2.1.1 if such position or net position is a credit in
favour of the Customer, the Bank may apply the
amount of such credit or any part thereof, rounded
to the nearest $25,000.00 as a repayment of the
Loan Facility, and the Bank will debit the Account
with the amount of such repayment; and
3.2.1.2 if such position or net position is a debit in
favour of the Bank, the Bank will make an advance
under the Loan Facility of such amount, rounded to
the nearest $25,000.00 as is required to place
the Account in such credit or net credit position
as has been agreed between the Customer and the
Bank from time to time, and the Bank may increase
the unpaid balance owing under the Loan Facility,
and credit the Account with the amount of such
advance;
provided that at no time shall the balance owing exceed the amount
of the Loan Facility.
3.3 The Customer agrees to maintain an average monthly minimum credit
balance in the Account, which may include compensating balances to
cover service charges, reserves and debit float. Such balance shall
be the amount agreed to in writing between the Customer and the Bank
from time to time.
3.4 The Bank shall maintain on the books of its unit of account,
accounts and records evidencing the outstanding principal amount of
the loan of the Bank to the Customer under this Loan Facility
together with any interest in respect thereof. The Bank shall
maintain a record or computerized data of the amount of the balance,
each advance, and each payment of principal and interest on account
of the loan. The Bank's accounts and records constitute in the
absence of manifest error prima facie evidence of the indebtedness
of the Customer to the Bank under this Loan Facility.
4. CONSOLIDATION
4.1 The Customer acknowledges that the outstanding principal balance
owing to the Bank under existing credit facilities which will be
replaced by this Loan Facility is $______________________ (figures),
____________________________ (words) dollars, as at the close of
business on _____________________________ 19__. The initial
outstanding principal balance under this Loan Facility will be
adjusted to reflect transactions under the existing credit facility
occurring between __________________________________ 19___ and the
date of execution of this agreement. The Customer acknowledges and
declares that the security previously granted to the Bank by the
Customer remains in full force and effect, the Bank hereby reserving
all of its right, title and interest to and in the rights, hypothecs
and privileges granted to the Bank under the terms of the said
security.
Both dates
must be
the same
[SEAL]
<PAGE>
5. SECTION 427 OF THE BANK ACT
5.1 This Agreement is given pursuant to the application for credit and
promise to give security made by the undersigned to the Bank and
dated the 1Oth day of October, 1996, and any supplemental
application for credit and promise to give security. The Customer
promises to give the Bank from time to time warehouse receipts
and/or bills of lading covering the property described in such
application(s) for credit and promise(s) to give security or any
part thereof which is now or may hereafter be covered by warehouse
receipts or bills of lading, as security for this Loan Facility. No
such security shall be merged in any subsequent security or be taken
to be substituted for any security previously acquired. This section
applies only to loans granted under the provisions of the Bank Act.
6. INTERPRETATION
6.1 Definitions
For the purposes hereof, the following words and phrases shall have
the following meaning:
"Canadian Dollars" "CDN$": means lawful money of Canada.
"Canadian Prime Rate": means the annual variable rate of interest
announced from time to time by the Bank and used to determine the
interest rates on Canadian dollar commercial loans granted by the
Bank in Canada.
"Debt", "Indebtedness" or "total indebtedness": means the aggregate
amount of principal, interest and accessories due by the Customer
hereunder.
"Floating Rate": means the interest rate applicable to floating rate
advances made hereunder in Canadian or U.S. dollars, as the case may
be.
"U.S. Base Rate": means the annual variable rate of interest
announced from time to time by the Bank and used to determine the
interest rates on U.S. dollar commercial loans granted by the Bank
in Canada.
"U.S. Dollars" "US$": means lawful money of the United States of
America.
6.2 Conversion to U.S. or Canadian dollars
Each time an amount in Canadian dollars must be converted or
expressed in U.S. dollars, or the equivalent in U.S. dollars (or
inversely) must be determined, such calculation shall be made, on
the appropriate date, in accordance with the cash purchase rate of
the Bank at about 10:30 a.m.
6.3 Other Agreements
The Customer acknowledges that the terms of this agreement are in
addition to and not in substitution for any terms and conditions of
any other agreements between the Customer and the Bank.
7. GENERAL TERMS AND CONDITIONS OF REPAYMENT
7.1 Currency and place of payment
All amounts due by the Customer under the terms hereof shall be paid
by the Customer to the Bank in Canadian dollars in the case of a
financing granted in Canadian dollars, or in U.S. dollars in the
case of a financing granted in U.S. dollars.
Should the amount of principal of the debt owing to the Bank exceed
the credit limit effectively granted hereunder, the Customer shall
reimburse the Bank, on demand, an amount equal to such excess
amount.
7.2 Judgment rendered in a currency other than the currency in which the
financing granted was due
Should a judgment be obtained against the Customer for an amount
owed by it, in a currency other than the one in which the said
amount was owing hereunder, the Customer shall pay the Bank, as
applicable, on the judgment payment date, such additional amount as
is equal to the excess of the amount that was due hereunder and
converted into the other currency, on the judgment payment date,
with respect to the judgment amount. The exchange rate applicable
for the purposes of obtaining the judgment and for calculating said
conversion shall be the rate at which the Bank is able, on the
appropriate date, in Montreal to sell the currency applicable to
this agreement to purchase the other currency.
Any additional amount owing under this clause shall be due as a
separate debt from that which gave rise to the judgment, which
judgment shall not constitute res judicata.
8. LANGUAGE
(For Quebec only)
The Customer has expressly requested that this document be drawn up and
executed in the English language.
Le client a expressement demande que ce document soit redige et signe en
langue anglaise.
EXECUTED AT Mississauga THIS 30th DAY OF October 1996
NATIONAL BANK OF CANADA ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Steven Matheson Per: /s/ Sidney Ackerman c/s
------------------------- -------------------------
SIGNATURE (Bank) SIGNATURE (Customer)
SIDNEY ACKERMAN - President
Per: /s/ Alan Fine
-------------------------
SIGNATURE (Customer)
ALAN FINE - Secretary
<PAGE>
GENERAL SECURITY AGREEMENT
TO: [LOGO] NATIONAL BANK OF CANADA
350 Burnhamthorpe Road West, Mississauga, Ont. L5B 3J1 hereinafter
------------------------------------------------------
(BRANCH ADDRESS)
called the "BANK",
GRANTED BY: ONTARIO PAINT & WALLPAPER LIMITED
--------------------------------------------------------------------
(FULL NAME)
731 Millway Avenue, Concord, Ontario, L4K 3S8 hereinafter called the
---------------------------------------------
(ADDRESS)
"DEBTOR".
1. GRANT OF SECURITY INTEREST
As a general and continuing security for the payment of all
obligations, indebtedness and liabilities of the Debtor to the Bank whether
incurred prior to, at the time of or subsequent to the execution hereof,
including extensions or renewals, and all other present and future liabilities
of the Debtor to the Bank, direct or indirect, wheresoever and howsoever
incurred and any ultimate unpaid balance thereof, including, without restricting
the generality of the foregoing, advances to the Debtor under fixed or revolving
credits established from time to time; letters of credit, whether or not drawn
upon, issued by the Bank with respect to the Debtor; and the obligation and
liability of the Debtor under any contract of guarantee now or hereafter in
existence whereby the Debtor guarantees payment of the debts, liabilities and
obligations of a third party to the Bank; (herein called "Obligations") the
Debtor hereby grants to the Bank a continuing security interest in, and
mortgages, charges and assigns to the Bank as and by way of a fixed and specific
mortgage and charge, all of the Debtor's present and after-acquired property,
assets, and undertaking described in paragraph 2 hereof (hereinafter
collectively called the "Collateral").
2. DESCRIPTION OF COLLATERAL
(a) Accounts Receivable or Accounts
All debts, Accounts, claims, moneys and choses in action which now
are or which may at any time hereafter be due or owing to or owned
by the Debtor and also all securities, mortgages, bills, notes and
other documents now held or owned or which may be hereafter taken,
held or owned by or on behalf of the Debtor in respect of the said
debts, Accounts, claims, moneys and choses in action, or any part
thereof, and also all books, documents and papers recording,
evidencing or relating to the said debts, Accounts, claims, moneys
and choses in action, or any part thereof. All of which are
hereinafter called "Accounts Receivable" or "Accounts".
(b) Goods
All Goods (including all parts, accessories, attachments, additions
and accessions thereto) now owned or hereafter owned or acquired by
the Debtor including, without limitation, all equipment, inventory,
machinery, tools, apparatus, plant, furniture, fixtures, and Serial
Numbered Goods now owned or hereafter acquired by the Debtor. All of
which are hereinafter called "Goods".
(c) Intangibles
All Intangibles now owned or hereafter acquired by the Debtor and
which are not included in sub-paragraph (a) above, including,
without limitation, all contractual rights, goodwill, patents, trade
marks, trade names, copyrights, permits and quotas, and other
industrial property now owned or hereafter acquired by the Debtor
and the undertaking of the Debtor. All of which are hereinafter
called "Intangibles".
(d) Other Personal Property
All Securities (including without limitation shares, stocks,
warrants, bonds and debentures), Instruments (including without
limitation cheques, notes, bills of exchange, letters of credit and
advices of credit), Chattel Paper (including without limitation
Chattel mortgages, conditional sale contracts, lease-option
agreements and leases), Documents of Title (including without
limitation warehouse receipts and bills of lading) and Money now
owned or hereafter acquired by the Debtor. All of which are
hereinafter respectively called "Securities", "Instruments",
"Chattel Paper", "Documents of Title" and "Money".
(e) Leaseholds, Real and Immovable Property
All real and immovable property, both freehold and leasehold, and
any interests therein, now owned or hereafter acquired by the
Debtor, together with all buildings, erections, improvements and
fixtures situate thereupon or used in connection therewith and
including the property set forth and described in Schedule "A" which
forms part hereof, including any lease, verbal or written or any
agreement therefor, provided, however, the last day of any term of
any such lease, verbal or written, or any agreement therefor, is
excepted out of the property charged by this security agreement, but
the Debtor shall stand possessed of any such reversion upon trust to
assign and dispose thereof as the Bank may direct.
(f) Proceeds
All property in any form derived directly or indirectly from any
dealing with the aforementioned undertaking and property of the
Debtor or proceeds, including property that indemnities or
compensates for property destroyed or damaged. All of which property
is hereinafter called "Proceeds".
Unless otherwise limited herein, the terms "Goods", "Accounts",
"Chattel Paper", "Documents of Title", "Instruments", "Money", "Securities",
"Proceeds" and "Accession" whenever used herein shall be interpreted pursuant to
their respective meanings when used in the Personal Property Security Act of the
province referred to in paragraph 24, as amended or replaced from time to time,
which Act including amendments thereto and any Act substituted therefor and
amendments thereto is herein referred to as the "PPSA". Any reference herein to
"Collateral" shall, unless the context otherwise requires, be deemed a reference
to "Collateral any part thereof", PROVIDED THAT the Collateral will not include
any "Consumer Goods" of the Debtor as that term is defined in the PPSA. "Serial
Numbered Goods" means motor vehicles, trailers, mobile homes, aircraft, boats
and outboard motors.
Time of Attachment - The Debtor acknowledges that value has been given and that
the parties have not agreed to postpone the time for attachment of the
mortgages, charges, assignments and security interests provided for in this
security agreement.
3. SECURITIES
If the Collateral at any time includes Securities, the Debtor
authorizes the Bank to transfer the same or any part thereof into its own name
or that of its nominee(s) so that the Bank or its nominee(s) may appear of
record as the sole owner thereof; provided that, until default, the Bank shall
deliver promptly to the Debtor all notices or other communications received by
it or its nominee(s) as such registered owner and, upon demand and receipt of
payment of any necessary expenses thereof, shall issue to the Debtor or its
order a proxy to vote and take all action with respect to such Securities. After
default, the Debtor waives all rights to receive any notices or communications
received by the Bank or its nominee(s) as such registered owner and agrees that
no proxy issued by the Bank to the Debtor or its order as aforesaid shall
thereafter be effective.
4. SERIAL NUMBERED GOODS
The Debtor confirms and warrants that all Serial Numbered Goods
owned by the Debtor and used as equipment are fully and accurately described in
Schedule "A", and the Debtor covenants to advise the Bank promptly, in writing,
of the acquisition by the Debtor of any further Serial Numbered Goods that are
not inventory or the commencement by the Debtor to use any Serial Numbered Goods
in its inventory for non-inventory purposes and to provide the Bank with full
and complete descriptions of such Serial Numbered Goods, setting forth each
make, model, year of manufacture and serial number.
5. GENERAL WARRANTIES AND COVENANTS OF THE DEBTOR
The Debtor hereby warrants and covenants with the Bank that it:
(a) owns the Collateral free of all security interests or other
encumbrances except for the permitted encumbrances described in
paragraph 30 hereof or hereafter approved in writing by the Bank
prior to their creation or assumption and that none of the Goods
which are subject to the security interest hereof have been affixed
to real property or to other Goods except as has been disclosed to
the Bank in writing;
(b) shall pay all costs and expenses (including legal fees on a
solicitor and his own client basis) of the Bank incurred with
respect to the preparation, execution and filing of or in respect of
this security agreement and the taking, recovering or possessing of
the Collateral and in any other proceedings taken for the purpose of
enforcing the remedies provided herein, or otherwise in relation to
the Collateral, including the Bank's costs of complying with any
provision of the PPSA or by reason of non-payment of the Obligations
hereby secured;
(c) shall keep the Collateral in good order, condition and repair, and
shall not use the Collateral in violation of the provisions of this
security agreement and shall prevent the Collateral from being or
becoming affixed to real property without the prior written consent
of the Bank;
(d) shall pay all rents, taxes, rates, levies, assessments and other
charges of every nature which may be lawfully levied, assessed or
imposed against or in respect of the Debtor or Collateral as and
when the same shall become due and payable;
(e) shall notify the Bank promptly of:
(i) any change in the information contained herein or in the
Schedule hereto relating to Debtor, Debtor's business or
Collateral;
(ii) the details of any significant acquisition of Collateral;
(iii) the details of any claims or litigation affecting the Debtor
or Collateral;
(iv) any loss of or damage to Collateral;
(v) any default by any Account Debtor (as defined in the PPSA) in
payment or other performance of his obligations with respect
to the Collateral; and
(vi) the return to or repossession by Debtor of Collateral;
(f) shall observe and perform all its obligations under all leases,
licenses and other agreements to which it is a party in order to
preserve and protect the Collateral and shall comply with all of its
other covenants and agreements with the Bank (e.g. those set forth
in a commitment letter);
(g) shall permit a representative of the Bank at any time to inspect its
plant, machinery, equipment, inventory, stock-in-trade and
operations and for that purpose to enter the Debtor's premises and
any other location where the Collateral may be situated and shall
pay the expenses of the Bank incurred thereby including, without
limitation, the reasonable remuneration and expenses of any person
engaged by the Bank for such purpose;
(h) shall keep proper books of account and records covering all its
business and affairs on a current basis; shall permit a
representative of the Bank at any time to inspect the Debtor's books
of account, records and documents, to make copies and summaries
thereof and to make enquiries and tests for the purpose of
verification thereof, and shall pay the expenses of the Bank
incurred thereby including, without limitation, the reasonable
remuneration and expenses of any person engaged by the Bank for such
purposes; and
(i) shall deliver to the Bank from time to time promptly upon request:
(i) any Documents of Title, Instruments, Securities and Chattel
Paper constituting, representing or relating to Collateral;
(ii) all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists and
other writings relating to Collateral for the purpose of
inspecting, auditing or copying the same;
(iii) all financial statements prepared by or for Debtor regarding
Debtor's business;
(iv) all policies and certificates of insurance relating to
Collateral; and
(v) such information concerning Collateral, the Debtor, and
Debtor's business and affairs as the Bank may reasonably
request.
6. CONTINUING SECURITY
This security agreement and the security afforded hereby is in
addition to and not in substitution for any other security now or hereafter held
by the Bank, and is intended to be a continuing security agreement and shall
remain in full force and effect until the Manager or Acting Manager from time to
time of the abovementioned branch of the Bank shall actually receive written
notice of its discontinuance, and, notwithstanding such notice, shall remain in
full force and effect thereafter until all Obligations contracted for or created
before the receipt of such notice by the Bank, and any extensions or renewals
thereof (whether made before or after receipt of such notice) together with
interest accruing thereon after such notice, shall be paid and satisfied in
full. It is contemplated that balances owing from time to time by the Debtor may
be reduced or paid in full and that further advances may be made to the Debtor
on the basis of this security agreement.
7. RESTRICTIONS ON SALE OR DISPOSAL OF COLLATERAL
(a) Except as hereinafter provided, the Debtor shall not, without the
written consent of the Bank:
(i) sell, lease or otherwise dispose of the Collateral or any part
thereof;
<PAGE>
(ii) release, surrender or abandon possession of the Collateral or
any part thereof; or
(iii) move or transfer the Collateral or any part thereof from its
present location.
(b) Until the Debtor receives notice from the Bank to the contrary, the
Debtor may:
(i) dispose of Inventory and collect Accounts by any method of
disposition or collection that is in the ordinary course of
the Debtor's business and for the purpose of carrying on the
same; and
(ii) at any time, apply for the prior written consent of the Bank,
before selling or otherwise disposing of such part of its
equipment which is not necessary to or useful in connection
with its business and undertaking or which has become worn out
or damaged or otherwise unsuitable for its purposes PROVIDED
THAT the Bank shall have an unfettered discretion in approving
or disapproving of such applications and, as a matter of
principle, will not approve of any application unless the
Debtor substitutes for the equipment being disposed of, and
subjects to the charge of this security agreement, free from
liens or charges, equipment of at least equal value so that
the security of the Bank hereunder shall not thereby be in any
way reduced or impaired. The Debtor shall provide the Bank
from time to time with such further assurances and written
evidence of the extension of the charges of this security
agreement to all such substitute equipment as the Bank may
reasonably require.
(c) The Bank may, at its discretion, at any time release from the charge
contained herein any part or parts of the Collateral, or any other
security or surety for the Obligations either with or without
sufficient consideration therefor, without responsibility therefor,
and without thereby releasing any other part of the Collateral or
any person from this security agreement or from any of the covenants
herein contained. Every part of the Collateral into which the
Collateral is or may hereafter be divided does and shall stand
charged with payment of the Obligations and no person shall have the
right to require the Obligations to be apportioned. The Bank shall
not be accountable to the Debtor for the value of any property or
security released except for any moneys actually received by the
Bank.
8. NEGATIVE COVENANTS
The Debtor shall not, without the prior written consent of the Bank:
(a) create, permit, assume, have outstanding or suffer to exist, any
security interest in or any charge or encumbrance on the Collateral,
or any part thereof, ranking or purporting to rank prior to or pari
passu with the security interest created by this security agreement,
other than permitted encumbrances as described in paragraph 30
hereof, and Purchase-Money Security Interests permitted under
paragraph 8(d);
(b) permit any subsidiary to mortgage, charge or otherwise encumber any
of its property or assets or issue any bonds, debentures, shares or
other securities except to the Debtor or the Bank;
(c) issue any trust deeds or similar instruments which would permit the
Debtor to file for protection under the Companies' Creditors
Arrangement Act;
(d) create any Purchase-Money Security Interest ("PMSI") in favour of
any person; provided however, that the Debtor may create a PMSI in
favour of any vendor of equipment, up to 75% of the purchase price;
nor
(e) amend or terminate, or accept any prepayment in respect of, any
Account, Intangible, Instrument or Chattel Paper except in good
faith in the ordinary course of business,
9. FAILURE TO PERFORM COVENANTS
If the Debtor shall fail to perform any covenant on its part herein
contained, the Bank may, in its absolute discretion, but without being bound to
do so, perform any such covenant capable of being performed by it. If any such
covenant requires the payment of money or if the Collateral shall become subject
to any lien or charge ranking in whole or in part in priority to the charge
created by this security agreement, the Bank may make such payment or pay or
discharge the said lien or charge, it shall be under no obligation to do so. All
sums so paid by the Bank shall immediately be payable by the Debtor to the Bank,
shall bear interest at the highest rate borne by any of the Obligations until
paid, and shall be secured by this security agreement. No such performance or
payment shall relieve the Debtor from any default under this security agreement
or any consequences of such default.
10. INSURANCE
(a) The Debtor shall insure and keep insured the Collateral against loss
or damage by fire and such other risks, as the Bank may reasonably
require, in the amount of not less than the full insurable value of
the Collateral in lawful money of Canada with insurance companies
authorized to do business in Canada.
(b) The Debtor shall insure itself against public liability for a
reasonable amount considering the nature of the business carried on
by the Debtor.
(c) The loss under all policies of insurance, other than public
liability, shall be payable to the Bank and the Debtor shall arrange
to have the entitlement of the Bank to the loss payable recorded on
each policy of insurance. In any event, the production of this
security agreement shall be sufficient authority for, and the
insurer is hereby directed thereupon, to pay the loss to the Bank.
All policies of insurance, including renewals, shall be lodged with
the Bank and the Debtor shall pay all premiums as the same become
payable in respect of such insurance.
(d) In the event of loss, the Bank, at its option, may apply the
insurance proceeds against the balance owing by the Debtor, release
the said proceeds to the Debtor, or arrange for the said proceeds,
or any part thereof, to be used to repair, replace or rebuild the
damaged property, or any combination of such applications. Where the
insurance proceeds are released to the Debtor, or used for the
purpose of repairing, replacing, or rebuilding the damaged property,
the receipt of the insurance proceeds shall not operate as payment
or novation or in any way affect the security herein or any other
security for the Obligations.
11. EVENTS OF DEFAULT
The happening of any of the following events or conditions shall
constitute default hereunder and thereupon the security hereby constituted shall
become enforceable:
(a) The non-payment when due, whether by acceleration or otherwise, of
any principal or interest forming part of the Obligations or the
failure of the Debtor to perform any term, condition, obligation, or
covenant in favour of the Bank, whether or not contained herein,
including default in making any payment referred to herein, or if
any of the warranties contained herein are, or shall become,
materially untrue;
(b) The Debtor, if an individual, dies or is declared incompetent by a
Court of competent jurisdiction or the Debtor, if a partnership, is
dissolved or wound up, or the Debtor, if a corporation, enters into
any reconstruction, reorganization, amalgamation, merger or any
other similar arrangement;
(c) If any order shall be made or a resolution passed for the winding-up
of the Debtor (if the Debtor is a corporation), or if a petition
shall be filed under the Bankruptcy and Insolvency Act by or against
the Debtor or an authorized assignment made by it or a receiver or
agent appointed under the Bankruptcy and Insolvency Act or by or on
behalf of a secured creditor of the Debtor or an application made
under the Companies' Creditors Arrangement Act (if the Debtor is a
corporation) or any other relief is sought under any similar
legislation in any jurisdiction or a proposal is made by the Debtor
to its creditors under the Bankruptcy and Insolvency Act or the
Debtor files a Notice of Intention to file such a proposal;
(d) The institution by or against the Debtor of any formal or informal
proceeding for the dissolution or liquidation of, settlement of
claims against or winding up of affairs of the Debtor;
(e) If an encumbrancer, whether permitted or otherwise, shall take
possession of any part of the Collateral, or if any process of a
Court, execution, or distress becomes enforceable or is enforced
against any of the Collateral;
(f) If the Debtor ceases or threatens to cease to carry on business,
makes or agrees to make a bulk sale of assets without complying with
applicable law or commits an act of bankruptcy, or otherwise
acknowledges its insolvency;
(g) If any execution, sequestration, extent or other process of any
court become enforceable against the Debtor or if a distress or
analogous process is levied upon the Collateral or any part thereof;
(h) If any certificate, statement, representation, warranty or audit
report heretofore or hereafter furnished by or on behalf of the
Debtor pursuant to or in connection with this security agreement, or
otherwise (including, without limitation, the representations and
warranties contained herein) or as an inducement to the Bank to
extend any credit to or to enter into this or any other agreement
with the Debtor, proves to have been false in any material respect
at the time as of which the facts therein set forth were stated or
certified, or proves to have omitted any substantial contingent or
unliquidated liability or claim against the Debtor; or if upon the
date of execution of this security agreement, there shall have been
any material adverse change in any of the facts disclosed by any
such certificate, representation, statement, warranty or audit
report, which change shall not have been disclosed to the Bank at or
prior to the time of such execution;
(i) If the Bank in good faith believes, and has commercially reasonable
grounds for believing, that the prospect of payment or performance
of the Obligations is or is about to be impaired or that the
Collateral is or is about to be placed in jeopardy;
(j) If the Debtor or any guarantor or affiliate defaults under any
agreement with respect to any indebtedness or other obligation to
any person other than the Bank if such default has resulted in, or
may result, with notice or lapse of time or both, in the
acceleration of any such indebtedness or obligation or the right of
such person to realize upon any Collateral; or
(k) If any of the property of the Debtor, or any guarantor, is seized by
or on behalf of a creditor pursuant to security or otherwise.
12. REMEDIES UPON DEFAULT
At any time after the happening of any default, the Bank may declare
any or all of the Obligations not payable on demand to become immediately due
and payable and the security hereby constituted will immediately become
enforceable. To enforce and realize on the security hereby constituted, the Bank
may exercise any one or more of the following rights and powers:
(a) to enter upon any premises of the Debtor and to take possession of
all or any part of the Collateral with power to exclude the Debtor,
its agents and servants therefrom;
(b) to preserve and maintain the Collateral and make such replacements
thereof and additions thereto as it shall deem advisable;
(c) to enjoy and exercise all powers necessary to the performance of all
functions provided for in this security agreement, including,
without limitation, the power to purchase on credit, the power to
borrow in the Debtor's name or in its own name and to advance its
own money to the Debtor at such rates of interest as it may deem
reasonable;
(d) to sell, lease or otherwise dispose of all or any part of the
Collateral whether by public or private sale or lease or otherwise
in such manner and on such terms (including as to deferred payment)
as to it may seem commercially reasonable, provided always that it
shall not be incumbent on the Bank to sell, lease or dispose of the
Collateral but that it shall be lawful for the Bank peaceably and
quietly to take, hold, use, occupy, possess and enjoy the Collateral
in the manner and to the extent it shall deem advisable without
molestation, eviction, hindrance, or interruption of the Debtor, or
any other person or persons whomsoever, and to convey, transfer and
assign to a purchaser or purchasers the title to any of the
Collateral sold; and
(e) to appoint by instrument in writing a receiver, receiver-manager, or
receiver and manager (herein called the "Receiver") of the
Collateral, with or without bond, and may from time to time remove
the Receiver and appoint another in his stead.
13. RECEIVER
A Receiver appointed by the Bank as aforesaid will be deemed to be
the agent of the Debtor and not of the Bank, and the Debtor shall be solely
responsible for the Receiver's acts or defaults and the Bank shall not be in any
way responsible therefor, and the Bank shall not be liable to the Receiver for
his remuneration, costs, charges or expenses. It is further specifically
understood and agreed that the Receiver appointed pursuant to the provisions of
this security agreement by the Bank shall have, subject to any limitations in
the instrument in writing or any order of a court of competent jurisdiction
appointing him, all of the rights and powers of the Bank hereunder and the
following additional rights and powers:
(a) to carry on or concur in carrying on all or any part of the business
of the Debtor; and
(b) to borrow money, upon the security of the whole or any part of the
Collateral for the purpose of carrying on all or any part of the
business of the Debtor and for the preservation and realization of
the Collateral, or to maintain the whole or any part of the
Collateral in a manner that will be sufficient to obtain the amounts
from time to time required in the opinion of the Receiver, and in so
doing the Receiver may issue certificates (each herein called a
"Receiver's Certificate") that may be payable as the Receiver
considers expedient and bear interest as stated therein, and the
amounts from time to time payable under any Receiver's Certificate
shall charge the Collateral in priority to this security agreement
and the Debtor hereby charges the Collateral with debts, if any,
owing from time to time under any Receiver's Certificate.
In exercising his powers hereunder, any Receiver will be free to
deal with the Collateral and any assets of the Debtor related thereto in such
order or manner as he may be directed by the Bank, any rule of law or equity to
the contrary notwithstanding, including, without limitation, the equitable
principle or doctrine of marshalling.
14. ADDITIONAL POWERS UPON DEFAULT
In addition to the foregoing rights and powers, the Bank, any
authorized agent of the Bank, and the Receiver shall each have all the rights
and remedies of a secured party or mortgagee under the PPSA, or otherwise at law
or in equity, and for greater certainty, shall each have the following rights
and powers if the security hereby constituted becomes enforceable:
(a) dispose of any of the Collateral in the condition in which it was at
the date possession of it was taken, or after any commercially
reasonable repair, processing or preparation for disposition;
<PAGE>
(b) sell, lease or otherwise dispose of any part of the Collateral
without giving any notice whatever except as may be required by
applicable statute law;
(c) at its option, provided notice is given to the Debtor in the manner
required by the PPSA, the Bank may elect to retain all or any part
of the Collateral in satisfaction of the Obligations to it of the
Debtor;
(d) the Bank may terminate any outstanding credit facilities granted to
the Debtor, immediately or without any prior notice and in addition,
without limitation, may dishonour cheques and apply the Debtor's
credit balances against the Obligations;
(e) the Bank may demand, sue for and receive any Accounts Receivable,
Chattel Paper, Instruments or Securities, give effectual receipts
and discharges therefor, compromise any such Collateral which may
seem bad or doubtful to the Bank and give time for payment thereof
with or without security;
(f) pay any or all debts and liabilities in connection with the
Collateral;
(g) make any arrangements or compromises which the Receiver considers
expedient; and
(h) institute and prosecute all suits, proceedings and actions which it
considers necessary or advisable for the purpose of protecting,
seizing collecting, realizing or obtaining possession or payment of
any part of the Collateral, and defend all suits, proceedings and
actions against the Debtor, the Bank or the Receiver, appear in and
conduct the prosecution and defence of any suit, proceeding or
action then pending or thereafter instituted, and appeal any suit,
proceeding or action.
The Bank, any authorized agent of the Bank, and the Receiver may
realize on various securities and any part thereof in any order that the Bank
may consider advisable and any realization, whether by foreclosure or sale, on
any security or securities shall not bar realization on any other security or
securities. Each remedy of the Bank, any authorized agent of the Bank, and the
Receiver may be enforced before or concurrently with or subsequent to any other
remedy or remedies of the Bank, its agent or the Receiver.
15. APPLICATION OF PROCEEDS OF DISPOSITION OF COLLATERAL
The net revenue received from the Collateral and the net proceeds of
sale of the Collateral or any part thereof shall be applied by the Receiver,
subject to the claims of creditors, if any, ranking in priority to this security
agreement, as follows:-
(a) firstly, in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver and the exercise by
him of all or any of the powers aforesaid including the reasonable
remuneration of the Receiver and all amounts properly payable to
him;
(b) secondly, in payment to the Bank of all costs and charges owing
hereunder and interest and arrears of interest remaining unpaid
hereunder;
(c) thirdly, in payment to the Bank of the Obligations owing hereunder;
and
(d) fourthly, subject to the rights of any other creditors, any surplus
shall be paid to the Debtor;
PROVIDED THAT in the event any party claims a charge against all or
a portion of the surplus, the Receiver shall make such disposition of all or any
portion of the surplus as the Receiver deems appropriate in the circumstances.
16. APPOINTMENT OF CONSULTANT
The Debtor hereby agrees that at all times the Bank shall be
entitled to appoint a Consultant to provide such services and advice as the Bank
may determine in its sole discretion, with power to enter the Debtor's premises,
to inspect and evaluate the Collateral, to make copies of the Debtor's records
at the Debtor's expense, to review the Debtor's business plans and projections,
to assess the viability of the Debtor's business, to monitor the conduct of the
Debtor's affairs, to prepare written reports on the Debtor's affairs and to
distribute such reports to the Bank or to other such persons as the Bank may
direct.
The Debtor acknowledges that the Consultant is an agent for the Bank
and owes no duty to the Debtor. The Consultant is to have no managerial or
advisory capacity and will have no decision making responsibility. The Debtor
authorizes the Bank to provide confidential information to the Consultant. All
fees in connection with the engagement of a Consultant are for the account of
the Debtor and are payable on demand by the Bank.
17. PROCEEDS HELD IN TRUST; APPLICATION OF MONIES
All proceeds collected or received by the Debtor from the
disposition of Collateral or otherwise shall be received in trust for the Bank
and shall upon request be forthwith paid to the Bank. Subject to applicable law,
any and all payments made in respect of the Obligations from time to time, and
monies realized from any security held therefor (including monies collected in
accordance with or realized on any enforcement of this security agreement), may
be applied to such parts of the Obligations as the Bank may from time to time
see fit or, at the option of the Bank, such payments and monies may be held
unappropriated in a collateral account or released to the Debtor, all without
prejudice to the liability of the Debtor or to the rights of the Bank hereunder.
The Bank may also hold as additional security any increases or profits
(including dividends) in respect of Collateral.
18. WAIVER BY THE BANK
Any breach by the Debtor of any of the provisions contained in this
security agreement and any default by the Debtor in the observance or
performance of any covenant or condition required to be observed or performed by
the Debtor hereunder, may only be waived by the Bank in writing, provided that
no such waiver by the Bank shall extend to or be taken in any manner to affect
any subsequent breach or default or the rights resulting therefrom.
19. BANK NOT RESPONSIBLE
The Bank shall not be liable or accountable for any failure to
seize, collect, realize, sell or obtain payment of the Collateral or any part
thereof and shall not be bound to institute proceedings for the purpose of
seizing, collecting, realizing or obtaining possession or payment of the same or
the purpose of preserving any rights of the Bank, the Debtor or any other party
in respect of the same.
The Bank may grant extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges,
release any part of the Collateral to third parties, and otherwise deal with the
Debtor, debtors of the Debtor, sureties and others and with the Collateral and
other securities as the Bank may see fit without prejudice to the Obligations or
the Bank's right to hold and realize the Collateral.
The Bank will not be responsible for any debts contracted by it, for
damages to persons or property, or for salaries or non-fulfilment of contracts,
during any period when the Bank manages Collateral upon entry, as herein
provided; nor will the Bank be responsible for any misconduct, negligence or
non-feasance on the part of any Receiver or the agents or employees thereof; nor
will the Bank or any Receiver be liable to account as a mortgagee in possession
or for any loss on realization or for any default or omission for which a
mortgagee in possession may be liable; nor will the Bank be obligated to keep
Collateral identifiable; nor will the Bank be obligated to take necessary steps
to preserve rights against other Persons with respect to Securities, Instruments
or Chattel Paper included in the Collateral; nor will the Bank be obligated to
inquire into the right of any Person purporting to be entitled under the PPSA to
information and materials from the Bank by making a demand upon the Bank for
such information and materials, and the Bank will be entitled to comply with any
such demand, and will not be liable for having so complied, notwithstanding that
such person may in fact not be entitled to make such demand.
20. RESTRICTION ON DEBTOR
Upon the Debtor receiving notice from the Bank of the Bank taking
possession of the Collateral or the appointment of a Receiver, all the powers,
functions, rights and privileges of the Debtor and of each officer, director,
servant, and agent of the Debtor with respect to the Collateral, shall be
suspended unless specifically continued by the written consent of the Bank.
21. BANK APPOINTED ATTORNEY
The Debtor hereby irrevocably appoints the Bank to be the attorney
of the Debtor for and in the name of the Debtor to execute and do any deeds,
documents, transfers, demands, assignments, assurances, consents and things
which the Debtor is obliged to sign, execute or do hereunder and generally to
use the name of the Debtor in the exercise of all or any of the powers hereby
conferred on the Bank and any Receiver appointed.
22. COSTS; DEFICIENCY
The Debtor shall pay to the Bank on demand any and all costs,
charges and expenses, including without limitation legal costs on a solicitor
and his own client basis, incurred or paid by the Bank in protecting or
enforcing its rights upon or under Collateral. After the payment of the expenses
of retaking and disposing of the Collateral, the Debtor shall remain liable to
the Bank for any deficiency remaining to be paid on moneys owing under this
security agreement after the application of the proceeds of disposition of the
Collateral.
23. NO OBLIGATION TO ADVANCE
Neither execution nor delivery of this security agreement shall
obligate the Bank to advance any moneys to the Debtor. None of the preparation,
execution, perfection or registration of this security agreement nor the making
of any advance will bind the Bank to grant, continue, extend time for payment
of, or accept anything, which constitutes or would constitute an Obligation.
24. GOVERNING LAW; SEVERABILITY
This security agreement shall be governed by and construed in
accordance with the law of the jurisdiction where the Bank has the branch
referred to on the first page hereof, as the same may from time to time be in
effect, including, where applicable, the Personal Property Security Act, as
amended or replaced from time to time. Any provision hereof prohibited by such
law shall be ineffective to the extent of such prohibition without invalidating
the remaining provisions hereof.
25. NOTICE
Any demand or notice to the Debtor in connection with this security
agreement shall be deemed to be made or given if either:
(a) mailed by prepaid post addressed to the Debtor at its last known
address, in which case it shall be conclusively deemed to have been
received by the Debtor on the third (3rd) business day following the
date of such mailing; or
(b) personally served upon, or dispatched by facsimile transmission to,
the Debtor, or any director, officer, servant, employee or partner
of the Debtor, in which case it shall be deemed to have been made
and given to the Debtor at the time of such service or dispatch.
26. WAIVER BY DEBTOR
Where any provision or remedy contained or referred to in this
security agreement is prohibited, modified or altered by the laws of any
Province or Territory of Canada which governs that aspect of the security
agreement and the provision or remedies may be waived or excluded by the Debtor
in whole or in part, the Debtor hereby waives and/or excludes such provision to
the extent permissible by law. Without limiting the generality of the foregoing,
the Debtor agrees to waive those provisions of the PPSA which are contrary to
any provision of this security agreement and which may be waived under the PPSA.
27. NON-APPLICABLE LAW
To the fullest extent permitted by law, the Debtor waives all of the
rights, benefits and protections given by the provisions of any existing or
future statute which imposes limitations upon the powers, rights or remedies of
a secured party or upon the methods of realization of security, including any
seize or sue or anti-deficiency statute or any similar provisions of any other
statute. In particular, the Debtor (if a corporation) agrees that the Limitation
of Civil Rights Act of the Province of Saskatchewan shall not apply to this
security agreement or any of the rights, remedies or powers of the Bank or any
Receiver hereunder.
28. FURTHER ASSURANCES
The Debtor shall from time to time forthwith on the Bank's request
do, make and execute all such Financing Statements, Financing Change Statements,
further assignments, documents, acts, matters and things as may be required by
the Bank of or with respect to the Collateral or any part thereof or as may be
required to give effect to these presents.
29. BINDING EFFECT
This security agreement and all its provisions shall enure to the
benefit of the Bank, its successors and assigns, and shall be binding upon the
Debtor, its heirs, executors, administrators, successors and assigns.
30. DESCRIPTION OF PERMITTED ENCUMBRANCES
For the purposes of this security agreement, "Permitted
Encumbrances" means any of the following:-
(a) liens for taxes, assessments, governmental charges or levies which
are not overdue;
(b) rights reserved to or vested in any municipality or government or
other public authority by the terms of any lease, licence,
franchise, grant or permit, or by any statutory provision, to
terminate the same or to require annual or periodic payments as a
condition to the continuance thereof;
(c) any lien or encumbrance, the validity of which is contested by the
Debtor in good faith, in respect of which there shall have been
deposited with the Bank cash in an amount sufficient to satisfy the
same, or the Bank shall otherwise be satisfied that its interests
are not prejudiced thereby; or
(d) any security given by the Debtor to the Bank.
31. HAZARDOUS MATERIALS
The Debtor's operations and places of business are and will be kept
in compliance with all Hazardous Materials Laws (as defined below). No Hazardous
Materials (as defined below) have at any time been transported to or from the
Debtor's places of business, or used, generated, manufactured or disposed of on,
under or about the Debtor's places of business, and the Debtor will not permit
any such activity except in compliance with all Hazardous Materials Laws. For
the purposes of this paragraph: "Hazardous Materials" means any oil, flammable
substances, explosives, radioactive materials, hazardous wastes or substances,
asbestos which is or could become friable, urea formaldehyde foam insulation,
toxic wastes or substances, or other wastes, materials or pollutants which pose
a hazard to the Debtor's operations or places of business or which cause the
same to be in violation of any Hazardous Materials Laws; and "Hazardous
Materials Laws" means any federal, provincial or local laws, bylaws, rules,
ordinances, regulations, notices, approvals, orders, standards, guidelines or
policies relating to the environment, health, safety, or any "Hazardous
Materials".
<PAGE>
32. CURRENCY
All sums of money payable under this security agreement shall be
paid in Canadian dollars. If, for the purposes of obtaining or enforcing
judgement in any Court in any jurisdiction, it becomes necessary to convert into
the currency of the country giving such judgement (the "Judgement Currency") an
amount due hereunder in Canadian dollars (the "Agreed Currency"), then the date
on which the rate of exchange for conversion is selected by that Court is
referred to herein as the "Conversion Date". If there is a change in the rate of
exchange between the Judgement Currency and the Agreed Currency between the
Conversion Date and the actual receipt by the Bank of the amount due hereunder
or under such judgement, the Debtor will, notwithstanding such judgement, pay
all such additional amounts as may be necessary to ensure that the amount
received by the Bank in the Judgement Currency, when converted at the rate of
exchange prevailing on the date of receipt, will produce the amount due in the
Agreed Currency. The Debtor's liability hereunder constitutes a separate and
independent liability which shall not merge with any judgement or any partial
payment or enforcement of payment of sums due herein. The term "rate of
exchange", as used herein, includes any premiums or costs payable in connection
with the currency conversion then being effected.
33. ENTIRE AGREEMENT IN WRITING
This security agreement and all schedules hereto represent the
entire agreement between the parties with respect to the granting of the
security interest herein contained and all prior negotiations relating to it are
suspended. There are no collateral understandings between the parties relating
to this security agreement and the rights of the parties hereunder. This
agreement may only be amended by a document signed by the party against whom
enforcement of the amendment is sought.
34. DISCHARGE
The Debtor will be entitled to a discharge of this agreement upon
written request by the Debtor and full payment, performance and satisfaction of
the Obligations, or the securing of the Obligations to the satisfaction of the
Bank. No discharge will be effective unless in writing and executed by the Bank.
35. JOINT AND SEVERAL
If more than one person executes this agreement as the Debtor, all
representations and agreements of the Debtor will be joint and several, the
Obligations will include those of all such persons or any one or more of them,
and the Collateral will include Collateral of all such persons or any one or
more of them.
36. INCLUDED WORDS
Where the context requires, the singular will be read as if the
plural were expressed and vice versa, and the provisions hereof will be read
with all necessary grammatical changes dependent upon the person referred to
being a male, female or artificial body.
37. HEADINGS
All headings have been inserted for convenience of reference only
and are not to affect the interpretation of the agreement.
38. RECEIPT OF COPY OF SECURITY AGREEMENT
The Debtor hereby acknowledges having received a copy of this
security agreement and waives all rights to receive from the Bank a copy of any
Financing Statement, Financing Change Statement, or Verification Statement,
filed or issued at any time in respect of this security agreement.
39. LANGUAGE
The Debtor and the Bank have expressly required that this security
agreement and all documents and notices relating hereto be drafted in English.
Les parties aux prisentes ont expressement exige que la presente convention de
surete et tous les documents et avis qui y sont afferents soient rediges en
anglais.
40. NAME ETC. OF DEBTOR
The full, true and correct legal name and address of the Debtor and,
where applicable, birth date and sex of the Debtor is hereby declared by the
Debtor to be as follows:
INDIVIDUAL DEBTOR
- --------------------------------------------------------------------------------
Surname (Last Name) First Name Second Name Birth Date Y M D Sex
|_| M |_| F
- --------------------------------------------------------------------------------
Address City Province Postal Code
- --------------------------------------------------------------------------------
Surname (Last Name) First Name Second Name Birth Date Y M D Sex
|_| M |_| F
- --------------------------------------------------------------------------------
Address City Province Postal Code
- --------------------------------------------------------------------------------
BUSINESS DEBTOR
- --------------------------------------------------------------------------------
Name
ONTARIO PAINT & WALLPAPER LIMITED
- --------------------------------------------------------------------------------
Address City Province Postal Code
731 Millway Avenue, Concord, Ontario L 4 K 3 S 8
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address City Province Postal Code
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF the undersigned Debtor has executed this security
agreement this 20th day of September 1996.
--------------------------------------------------------
(Signature of Debtor(s), it individual)
ONTARIO PAINT & WALLPAPER LIMITED
--------------------------------------------------------
(Name of Debtor, if Corporation or Partnership)
By: /s/ Sidney Ackerman c/s
----------------------------------------------------
SIDNEY ACKERMAN - President
By: /s/ Alan Fine
----------------------------------------------------
(If corporation have signed by authorized officer(s)
If Owner or Partner, state which)
ALAN FINE - Secretary
SCHEDULE "A"
1) LOCATIONS OF COLLATERAL AND RECORDS RELATING TO COLLATERAL:
(a) 731 Millway Avenue, Concord, Ontario
(b) 275 Queen Street East, Toronto, Ontario
- --------------------------------------------------------------------------------
(Street) (Town/City) (Province)
2) DESCRIPTION OF SERIAL NUMBERED GOODS
QUANTITY DESCRIPTION SERIAL NUMBER
CORPORATE AUTHORIZING RESOLUTION
"WHEREAS it is in the interests of the Corporation to enter into a
General Security Agreement with National Bank of Canada (the "Bank") as for the
Corporation's present and future obligations to the Bank and therein to
mortgage, charge, assign and otherwise transfer and encumber and security
interests in all its present and future property and assets;
NOW THEREFORE BE IT RESOLVED THAT:
1. The Corporation mortgage, charge, assign and otherwise transfer and encumber
and grant security interests in all its present and future undertaking, property
and assets as security for its present and future obligations to the Bank, all
as provided in the General Security Agreement.
2. Any two officers or directors be and are hereby authorized for and on behalf
of the Corporation to execute and deliver to the Bank a General Security
Agreement substantially in the form of the General Security Agreement presented
to the directors, with such alterations, amendments, deletions or additions as
may be approved by the persons executing the same, and execution accordingly
shall be conclusive evidence of such approval and the General Security Agreement
so executed is the General Security Agreement authorized by this resolution.
3. Any officer or director be and is hereby authorized to execute and deliver on
behalf of the Corporation all such other documents and writings and to do such
other acts and things as may be necessary or desirable for fulfilling the
Corporation's obligations under the General Security Agreement."
The undersigned Secretary of ONTARIO PAINT & WALLPAPER LIMITED DOES
---------------------------------
(Name of Corporation)
HEREBY CERTIFY THAT:
1. the foregoing is a true copy of a resolution duly and properly passed or
consented to by the board of directors of the Corporation on the 20th day of
September 1966 and;
2. the attached General Security Agreement is the General Security Agreement
referred to in the resolution and has been duly and property executed by the
proper officers of the Corporation.
By: /s/ Alan Fine
----------------------------------------------------
ALAN FINE - Secretary
<PAGE>
GENERAL ASSIGNMENT OF BOOK DEBTS
1. FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the
undersigned Debtor
ONTARIO PAINT & WALLPAPER LIMITED
--------------------------------------------------------------------------
(Full name of Assignor)
of 731 Millway Avenue, Concord
------------------------------------------------------------------------
(Full address of Assignor)
in the Province of Ontario, hereby assign(s) transfer(s) and grant(s) to
NATIONAL BANK OF CANADA, a Chartered Bank having its Head Office at the
City of Montreal in the Province of Quebec, and having a branch office at
350 Burnhamthorpe Road West, Mississauga, in the Province of Ontario,
(hereinafter called the "Bank") a continuing and specific security
interest in all debts, proceeds, accounts, claims, money and choses in
action which now are or which may at any time hereafter be due or owing to
or owned by the undersigned and also all deeds, documents, writings,
papers and books relating to or being records of goods or their proceeds,
or by which goods or their proceeds are or may hereafter be secured,
evidenced, acknowledged or made payable including Documents of Title, (and
remaining debt instruments) Chattel Paper, Securities and Instruments, and
all contractual rights and insurance claims relating to collateral
(hereinafter called the "Collateral").
2. The undersigned agrees that the Collateral shall be held by the Bank as a
general and continuing collateral security for the payment of all
obligations, indebtedness and liabilities, present or future, direct or
indirect, absolute or contingent, matured or not, of the undersigned to
the Bank, wheresoever and howsoever incurred, and any ultimate unpaid
balance thereof, and as a first and prior claim upon the Collateral.
3. The undersigned covenants at all times to notify the Bank in writing
promptly of any change in the information contained herein relating to the
undersigned (including the name and location of the chief executive
office, sole place of business or residence, as the case may be, of the
undersigned aforesaid) and of any material default by any person in
payment or other performance of obligations to the undersigned with
respect to any of the Collateral.
4. So long as this assignment remains in effect, the undersigned covenants
not to sell, or further assign or encumber the Collateral without the
prior written consent of the Bank. The undersigned represents and warrants
that the Collateral is genuine and owned by the undersigned free of all
security interests or other encumbrances.
5. The Bank may collect, realize, sell or otherwise deal with the Collateral
or any part thereof in such manner, upon such terms and conditions and at
such time or times, whether before or after default, as may seem to it
advisable and without notice to the undersigned. All moneys collected or
received by the undersigned in respect of the Collateral shall be received
as trustee for the Bank, and shall be forthwith paid over to the Bank by
the undersigned.
6. The Bank shall not be bound to do, observe or perform or see to the
observance or performance by the undersigned of any obligations or
covenants imposed upon the undersigned nor shall the Bank be obliged to
preserve rights against other persons in respect of any Securities or
Records in its possession.
7. The Bank may apply the amounts collected or received by it on account of
such parts of the indebtedness and liabilities of the undersigned to the
Bank as to the Bank seems best or hold the same in a separate collateral
account for such time as it may see fit and then apply the same as
aforesaid, the whole without prejudice to its claim for any deficiency.
8. The Bank may compound, compromise, grant extensions of time and other
indulgences, take and give up securities, accept compositions, grant
releases and discharges and otherwise deal with the debtors of the
undersigned, the undersigned and others, and with the Collateral and other
securities as the Bank may see fit, without prejudice to the liability of
the undersigned or the Bank's right to hold and realize this security.
9. The Bank shall not be liable or accountable for any failure to collect,
realize or obtain payment of the Collateral or any part thereof and the
Bank shall not be bound to institute proceedings for the purpose of
collecting, realizing or obtaining payment of the same or for the purpose
of preserving any rights of the Bank, the undersigned or any other person,
firm or corporation in respect of the same, and the Bank shall not be
responsible for any loss or damage which may occur in consequence of the
negligence of any officer, agent or solicitor employed in the collection
or realization thereof.
10. The Bank may charge on its own behalf and also pay to others reasonable
sums for expenses incurred and for services rendered (expressly including
legal advices and services) in or in connection with collecting, realizing
and/or obtaining payment of the Collateral or any part thereof and may add
the amount of such sums to the indebtedness of the undersigned.
11. So long as this assignment remains in effect, the undersigned covenants
and agrees to deliver to the Bank from time to time promptly upon request
any Documents of Title (and remaining debt instruments), Instruments,
Securities and Chattel Papers constituting, representing or relating to
the Collateral; all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists and other writings
relating to the Collateral for the purpose of inspecting, auditing or
copying the same; all financial statements prepared by or for the
undersigned regarding the undersigned's business; all policies and
certificates of insurance relating to the Collateral, and such information
concerning the Collateral, the undersigned, the undersigned's business and
affairs as the Bank may reasonably request.
<PAGE>
12. The undersigned shall from time to time forthwith on the Bank's request
do, make and execute all such financing statements, further assignments,
documents, acts, matters and things as may be required by the Bank of or
with respect to the Collateral or any part thereof or as may be required
to give effect to these presents, and the undersigned hereby constitutes
and appoints the Manager or Acting Manager for the time being of the above
mentioned branch of the Bank the true and lawful attorney of the
undersigned irrevocable with full power of substitution to do, make and
execute all such statements, assignments, documents, acts, matters or
things with the right to use the name of the undersigned whenever and
wherever it may be deemed necessary or expedient.
13. This agreement shall be a continuing agreement in every respect, and shall
be binding upon the heirs, executors, administrators, successors and
assigns of the parties hereto. No remedy for the enforcement of the rights
of the Bank hereunder shall be exclusive of or dependent on any other such
remedy, but any one or more of such remedies may from time to time be
exercised independently or in combination. The security interest created
or provided for by this agreement is intended to attach when this
agreement is signed by the undersigned and delivered to the Bank. The
undersigned acknowledges and confirms that there has been no agreement
between the Bank and the undersigned to postpone the time for attachment
of the security interest hereby attached.
14. Nothing in this assignment contained shall or shall be deemed to restrict
the rights and remedies at law or in equity or under any applicable
personal property security legislation or otherwise, of the Bank against
the undersigned and the Collateral, it being hereby agreed by the
undersigned that the Bank has and shall have all such rights and remedies
as if the same were herein at length set forth and by this reference the
same are incorporated in and form a part hereof.
15. Should the undersigned be entitled to a release or discharge or amendment
to any financing statement registered by the Bank relating to this
assignment, then the undersigned will pay to the Bank all costs, charges,
expenses and lawyer's fees and disbursements (as between a solicitor and
his own client on a full indemnity basis) incurred by the Bank in
connection with such release, discharge or amendment.
16. For greater certainty it is declared that any and all future loans,
advances or other value which the Bank may in its discretion make or
extend to or for the account of the undersigned shall be secured by this
agreement. If more than one person executes this agreement their
obligations hereunder shall be joint and several.
17. This assignment shall be governed by and construed in accordance with the
law of the jurisdiction where it has been executed by the undersigned, as
the same may from time to time be in effect, including, where applicable,
the Personal Property Security Act.
18. The undersigned hereby acknowledges receiving a copy of this assignment
and waives all rights to receive from the Bank a copy of any financing
statement, financing change statement or verification statement filed or
issued at any time in respect of this assignment.
19. NAME, ETC. OF DEBTOR
The full, true and correct legal name and address of Debtor and, where
applicable, birth date and sex of Debtor is hereby declared by Debtor to
be as follows:
INDIVIDUAL DEBTOR
- --------------------------------------------------------------------------------
SURNAME (LAST NAME) FIRST NAME SECOND NAME BIRTH DATE SEX
YEAR MONTH DAY M/F
- --------------------------------------------------------------------------------
ADDRESS OF INDIVIDUAL DEBTOR CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SURNAME (LAST NAME) FIRST NAME SECOND NAME BIRTH DATE SEX
YEAR MONTH DAY M/F
- --------------------------------------------------------------------------------
ADDRESS OF INDIVIDUAL DEBTOR CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
BUSINESS DEBTOR
- --------------------------------------------------------------------------------
NAME OF BUSINESS DEBTOR
ONTARIO PAINT & WALLPAPER LIMITED
- --------------------------------------------------------------------------------
ADDRESS OF BUSINESS DEBTOR CITY PROVINCE POSTAL CODE
731 Millway Avenue Concord Ontario L 4 K 3 S 8
- --------------------------------------------------------------------------------
NAME OF BUSINESS DEBTOR
- --------------------------------------------------------------------------------
ADDRESS OF BUSINESS DEBTOR CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
<PAGE>
IN WITNESS WHEREOF, the undersigned Debtor has executed this Assignment this
20th day of September 1996.
----------------------------------------------------
(Signature of Debtor(s) if individual)
ONTARIO PAINT & WALLPAPER LIMITED
----------------------------------------------------
(Name of Debtor if Corporation or Partnership)
BY /s/ Sidney Ackerman c/s
-------------------------------------------------
SIDNEY ACKERMAN - President
TITLE
----------------------------------------------
(If corporation have signed by authorized officer(s)
If Owner or Partner state which)
BY /s/ Alan Fine
-------------------------------------------------
ALAN FINE - SECRETARY
AFFIDAVIT OF BONA FIDES
(To be completed when assignment to be registered in Atlantic Provinces)
CANADA { I, _______________________________________________
{ of the __________________of ______________________
Province of ____________ { in the Province of ___________________ an employee
{ at _______________________________________________
County of ______________ { of the National Bank of Canada the Assignee named
{ in the Assignment of Book Debts hereto annexed,
TO WIT: { make oath and say:
1. That I am an employee of the NATIONAL BANK OF CANADA at _______________
in the Province of ____________________________.
2. That I am aware of the circumstances connected with the said Assignment
of Book Debts and have a personal knowledge of the facts herein deposed to.
3. That the said Assignment of Book Debts hereto annexed was executed in
good faith and for valuable consideration, and not for the mere purpose of
protecting the book debts therein mentioned against the creditors of ___________
___________________________________________, the Assignor, or for the purpose of
preventing such creditors from recovering any claims which they have against the
said Assignor.
SWORN before me at the ___________________ }
of _______________________ in the Province }
of __________________ this _______________ }
day of _________________________A.D. 19__. } __________________________________
}
}
__________________________________________ }
A Commissioner, etc., or a Notary Public.
(When assignment to
be registered in New
Brunswick, affidavit
on nest page to be
completed in case of
incorporated
companies.)
<PAGE>
AFFIDAVIT OF EXECUTION BY INDIVIDUAL OR PARTNERSHIP
(To be completed when assignment to be registered in Atlantic Provinces)
CANADA { I, _______________________________________________
{ of the __________________of ______________________
Province of ____________ { in the Province of _______________________________
County of ______________ { by occupation _________________ make oath and say:
TO WIT: {
1. That I was personally present and did see the Assignment of Book Debts
hereto annexed duly signed, sealed and delivered by +_________ of the parties
thereto and that the name ______________________________________________________
set and subscribed as a witness to the execution thereof is of the proper
handwriting of me this deponent and that the same was executed at the __________
__________________________________of ___________________________ in the Province
of ___________________________________ on the ____________ day of ________ 19__.
(+ Insert "one or
"two" or as the
case requires)
2. That I know the said __________________________________ and he is in my
opinion of the full age of ________________ years.
SWORN before me at the ___________________ }
of _______________________ in the Province }
of __________________ this _______________ }
day of _________________________A.D. 19__. } __________________________________
}
}
__________________________________________ }
A Commissioner, etc., or a Notary Public.
AFFIDAVIT BY OFFICER OF INCORPORATED COMPANY
(To be completed when assignment to be registered in New Brunswick)
CANADA { I, _______________________________________________
{ of the __________________of ______________________
Province of ____________ { in the Province of _______________________________
County of ______________ { by occupation _________________ make oath and say:
TO WIT: {
1. That the paper-writing hereunto annexed is the Assignment of Book
Accounts and of every schedule or inventory thereto annexed, or therein referred
to, and of every attestation of the execution thereof, as made, given and
executed by the
_______________________________________ hereinafter referred to as the Assignor.
(Name of incorporated company)
2. That the Assignment of Book Accounts was made and given by the said
Assignor on the ___________________ day of _________________ 19__.
3. That I ____________________________ as ________________________________
(Full name) (Name of office)
of the said Assignor being duly authorized so to do did affix the seat of the
said Assignor to the said Assignment of Book Accounts, did sign the said
Assignment of Book Accounts as _________________________________ of the said
(name of office)
Assignor and did duly deliver the said Assignment of Book Accounts as the act
and deed of the said Assignor on the ______________ day of _____________ 19__.
4. That the head office or chief place of business of the said Assignor in
New Brunswick is the situated at
___________________________________________________________ in the said Province
(Number, street and name of place)
SUBSCRIBED to and sworn before me at the }
________________________________________ }
}
of ______________________________ in the }
}
Province of ____________________________ } ___________________________________
}
this _________ day of __________________ }
}
A.D. 19__. }
_________________________________________
A Commissioner, etc., or a Notary Public.
<PAGE>
[LOGO NATIONAL APPLICATION FOR CREDIT AND PROMISE
BANK TO GIVE SECURITY UNDER THE BANK ACT
OF CANADA
- --------------------------------------------------------------------------------
The NATIONAL BANK OF CANADA, hereinafter Called the "Bank", is hereby requested
to lend money and make advances to the undersigned on the security of property
which the undersigned now owns or may hereafter own.
In order to secure payment to the Bank of the amounts which shall become due and
payable to it under such loans and advances, the undersigned promises to give
the Bank security on said property pursuant to section 427 of the Bank Act.
For the same purposes and as security for any other obligation of the
undersigned to the Bank, the undersigned further promises to assign to the Bank
bills of lading and warehouse receipts covering such property.
Unless otherwise agreed between the Bank and the undersigned, all loans and
advances to be made by the Bank to the undersigned shall be deemed to have been
made pursuant to this promise.
Any security granted to the Bank pursuant to this promise shall be in addition
to and not in substitution for, any other security held by the Bank.
For the purposes hereof and any security granted to the Bank under the Bank Act,
the Bank is deemed to be lending money or making an advance if it accepts any
bill of exchange not payable on demand or if it pays any such bill of exchange,
provides funds for the payment of same, issues a guarantee or promises in any
other manner to effect a payment.
Dated at ___________________________, this _______ day of ___________, 19__.
ONTARIO PAINT & WALLPAPER LIMITED
Witness Signature
________________________________ Per: /s/ Sidney Ackerman c/s
-----------------------------
SIDNEY ACKERMAN - President
Per: /s/ Alan Fine
-----------------------------
ALAN FINE - Secretary
<PAGE>
[LOGO] NATIONAL BANK OF CANADA O 3 2 4 1 - 0 0 6
Transit
Notice of intention to give security under section 427 of the Bank Act.
To whom it may concern:
ONTARIO PAINT & WALLPAPER LIMITED
731 Millway Avenue, Concord, Ontario, L4K 3S8
- --------------------------------------------------------------------------------
(Name of Person, Firm or Company) (P.O. Address)
hereby gives notice that it is my/our intention to give security under section
427 of the Bank Act, to the NATIONAL BANK OF CANADA.
Dated at Toronto the 20th day of September 1996
ONTARIO PAINT & WALLPAPER LIMITED
per: /s/ Sidney Ackerman c/s/
-----------------------------
SIDNEY ACKERMAN - President
per: /s/ Alan Fine
-----------------------------
ALAN FINE - Secretary
<PAGE>
[LOGO] NATIONAL AGREEMENT RESPECTING SECURITY
BANK GIVEN BY THE CUSTOMER
OF CANADA
- --------------------------------------------------------------------------------
1. Scope of Agreement. The undersigned ONTARIO PAINT & WALLPAPER LIMITED (the
"Customer") hereby agrees with National Bank of Canada (the "Bank") that
the following provisions shall apply to the Security given or to be given
to the Bank by the Customer under the Bank Act, and to the extent
permitted by applicable law, to any other security which the Customer has
given or may hereafter give to the Bank.
2. Remedies of the Bank. If the Customer fails to pay any sum when due by him
to the Bank, if he is otherwise in default to the Bank or if he becomes
insolvent, the Bank is authorized, but not bound, to realize on all or any
part of the Security given by the Customer, to take possession of all or
any part of the property covered by such security (the "Property") and to
sell same. The sale may be carried out as, and when, and where the Bank
shall deem appropriate, without any notice to the Customer other than that
required by law, if any, without any formality and without advertisement
or without having to sell at a public auction. The Bank shall have the
choice of how the proceeds from the realization of the security shall be
applied and it may deduct, from such proceeds, the expenses related to the
realization of the Security.
3. Proceeds from the Sale of Property. In the event of the sale of the
Property in whole or in part by the Customer, the proceeds of any such
sale, including the negotiable instruments, instruments of payment, bank
notes and evidences of indebtedness delivered as consideration, as well as
the claims against any purchaser shall be the property of the Bank and
shall be paid or delivered to the Bank, and until so paid or delivered,
shall be held by the Customer as trustee and depositary for the Bank.
Execution by the Customer of an assignment or hypothecation of debts shall
be deemed to be in execution of this Agreement and shall not constitute an
acknowledgement by the Bank of any rights of the Customer to such proceeds
and claims.
4. Trust. If the Bank delivers to the Customer any of the security it holds
for the purpose of enabling the Customer to obtain possession of the
Property, the Customer shall receive possession of such security and the
Property thereby covered as trustee and depositary for the Bank.
5. Insurance. The Customer shall cause the Property to be insured for its
full insurable value against fire, theft and all other risks against which
a prudent administrator would insure it. The Bank is hereby designated as
the beneficiary of the indemnities payable under the policies in respect
of the Property and the Customer shall cause such designation to be
inscribed in the policies; the Customer may not revoke such designation
without the prior written consent of the Bank. The Customer shall deliver
a copy of each policy to the Bank and at least fifteen (15) days prior to
the expiry date of a policy, the Customer shall deliver to the Bank an
evidence of the renewal thereof. Should the Customer fail to comply with
the above, the Bank may cause the Property to be insured for such amount
as it sees fit, without however being bound to do so, and in such case the
premiums paid by the Bank shall be deemed to be an advance made to the
Customer and shall be repayable on demand with interest at the Bank's
prime rate plus three percent (3%).
6. Prior Claims. The Customer shall pay and discharge at maturity any debt
which could confer rights to the Property ranking prior to the Bank's
rights and shall provide an evidence thereof to the Bank. From time to
time, the Bank may inspect the Property and the Customer's books of
account and invoices at the Customer's expense, and the Customer shall
therefore give the Bank access to the premises where the Property as well
as such books of account and invoices are located. At the Bank's request,
the Customer shall deliver to the Bank each month a statement of the value
of the Property and provide the Bank with any other information it may
request regarding the Property.
7. Powers of the Bank. In order to realize on the security given by the
Customer, the Bank may, without any notice or demand, enter into the
premises occupied by the Customer in connection with the Property; it may
occupy them to the exclusion of others, including the Customer, and use
them free of charge until it has disposed of the Property. It may appoint
a receiver or an agent to exercise the rights granted to the Bank
hereunder. Such receiver or agent shall further be entitled to act on the
Customer's behalf and at the Customer's expense to complete the processing
of the Property, to ship some and to do all things which may be necessary
therefor.
<PAGE>
8. Mandate. The Customer shall sign or endorse any document, which in the
Bank's opinion, should be signed or endorsed in order to perform this
Agreement or perfect the Bank's title to the Property or the proceeds
therefrom. For such purpose, the Customer constitutes and appoints the
Bank his attorney, with power of substitution, in order to sign or endorse
any such documents in his name. Such power of attorney shall remain in
effect notwithstanding the death or a change in the capacity of the
Customer and it may not be terminated as long as the Customer remains
indebted to the Bank.
9. Settlement. The Bank may compromise, deal with or grant discharges in
respect of the security, the Property or the proceeds therefrom.
10. Expenses. The words "expenses related to the realization of the security"
used herein include all charges, expenses and fees paid or incurred by the
Bank to take possession of the Property, to do an inventory thereof, to
protect and preserve it, to complete the processing thereof and sell it,
as well as to collect the proceeds or claims resulting from the sale of
such Property; such expenses shall be deemed to be an advance made by the
Bank to the Customer and shall be repayable on demand with interest at the
Bank's prime rate plus three percent (3%).
11. Scope of the Bank's Rights. The rights granted to the Bank hereunder shall
be in addition to its legal rights and its rights under any other
agreement. Such rights shall enure to the benefit of any successor of the
Bank, including any entity which has become the successor of the Bank as a
result of amalgamation or otherwise.
12. Notice. Any notice to the Customer may be given by regular mail sent to
his address last known to the Bank.
EXECUTED at _____________________________, this ___________ day of ______, 19__.
ONTARIO PAINT & WALLPAPER LIMITED
Witness Customer
___________________________________ Per: /s/ Sidney Ackerman c/s
------------------------------
SIDNEY ACKERMAN - President
Per: /s/ Alan Fine
------------------------------
ALAN FINE - Secretary
<PAGE>
[LOGO] NATIONAL SECURITY UNDER SECTION 427
BANK OF THE BANK ACT
OF CANADA (REF.: Permanent Instructions 230-20)
- --------------------------------------------------------------------------------
FOR GOOD AND VALUABLE CONSIDERATION, the undersigned hereby assigns to the
NATIONAL BANK OF CANADA (hereinafter called the "Bank") as continuing security
for the payment of all loans and advances that have been or may be made by the
Bank to the undersigned and any renewals thereof or substitutions therefor, as
well as the interest thereon, the following property of which the undersigned is
now or may hereafter become the owner, namely:
DESCRIPTION OF PROPERTY(1)
All products of agriculture, products of aguaculture, products of the forest,
products of the quarry and mine, or products of the sea, lakes and rivers and
all goods, wares and merchandise which, without limiting the generality of the
foregoing, include: paint, wallcoverings, borders, fabric, sample books, home
decorating hardware and accessories, and the goods, wares and merchandise used
in or procured for the packing of such products or goods, wares and merchandise;
and that is now or may hereafter be in the place or places hereinafter
designated, namely:
DESCRIPTION OF PLACE OR PLACES(2)
(1) 731 Millway Avenue, Concord, Ontario;
(2) 275 Queen Street East, Toronto, Ontario;
or at any other place or in transit.
This security is given under section 427 of the Bank Act and pursuant to the
promise to give security delivered by the undersigned to the Bank on
the___________________________ day of ________________________________, 19____,
(Indicate date of the F 10014 relating to this security)
as well as any other promise of the same nature made by the undersigned to the
Bank.
The property now owned by the undersigned and hereby assigned is free from any
mortgage, lien or charge thereon, other than the previous assignments, if any,
to the Bank, and the undersigned warrants that the property that may hereafter
be acquired by the undersigned and which is hereby assigned shall be free from
any mortgage, lien or charge thereon, other than the previous assignments, if
any, to the Bank.
Dated at ________________, this _________ day of_____________19 ____.
ONTARIO PAINT & WALLPAPER LIMITED
c/s
Per: /s/ Sidney Ackerman
----------------------------
SIDNEY ACKERMAN - President
Per: /s/ Alan Fine
----------------------------
ALAN FINE - Secretary
(1) If more space is needed, indicate "Continued overleaf" and continue the
Description of Property on the back of the form.
(2) If more space is needed, indicate "Continued overleaf" and continue the
Description of Place or Places on the back of the form.
<PAGE>
[LOGO] NATIONAL
BANK
OF CANADA SECURITY WITH RESPECT TO AN INSURANCE POLICY
- --------------------------------------------------------------------------------
1. Designation of Beneficiary. The undersigned hereby designates National Bank
of Canada (the "Bank") as the beneficiary of Insurance Policy No. CLD 3624390
issued, by General Accident in respect of the assets of the undersigned and
further designates the Bank as the beneficiary of any and all renewals thereof
or substitutions therefor (such policies and the amendments thereto are
hereinafter collectively called the "Policies"). The undersigned may not revoke
the beneficiary hereby designated without the Bank's written consent.
2. Hypothec and Assignment. The undersigned also hypothecates and assigns to the
Bank the sums payable under the Policies up to the amount of $________________*,
together with interest as of the date hereof at the rate of twenty-five percent
(25%) per annum.
*This limit applies to Quebec only.
3. Obligations Secured. The security constituted hereunder shall secure:
3.1 all the obligations of ONTARIO PAINT & WALLPAPER LIMITED (the "Customer")
to the Bank arising from the following credit facility or guarantee and
all amendments thereto, renewals thereof or substitutions therefor: loans
and credit facilities extended by the Bank to the undersigned pursuant to
an Offer of Finance dated August 8, 1996;
3.2 and all other present and future, direct and indirect obligations of the
Customer to the Bank.
4. Possession of Policies. The undersigned shall deliver the Policies to the
Bank and inform it of any and all events which could result in payment of the
sums payable thereunder.
5. Premiums. The undersigned shall pay the premiums for the Policies at least
ten (10) days before the expiry date thereof and shall deliver to the Bank
evidence of such payment. If the undersigned fails to pay such premiums, the
Bank may pay them for the undersigned, without however being bound to do so.
6. Rights of the Bank. The Bank may, without however being bound to do so,
collect any and all sums payable under the Policies and exercise all rights
arising from the Policies, including any right to cancel the Policies and to
cash the surrender value thereof. All sums collected by the Bank may, at its
discretion, be remitted to the undersigned, or they may be held by the Bank as
security for the obligations referred to in section 3, or applied to the payment
of such obligations, whether or not due. The Bank shall have the choice of how
any such sums collected shall be applied.
7. Remedies of the Bank. The Bank may exercise its rights and recourses without
being required to exercise same against the undersigned or any other person, or
to realize on any other security.
8. Expenses. The undersigned shall pay all the expenses incurred by the Bank in
connection herewith as well as the expenses arising from the exercise of the
Bank's rights, including any premiums which the Bank may pay. The designation of
the beneficiary, and the security granted herein shall also secure the payment
of such expenses.
<PAGE>
9. Mandate. The undersigned constitutes and appoints the Bank its irrevocable
attorney, with power of substitution, in order to perform all acts and to sign
all documents necessary or expedient for the exercise of the rights conferred on
the Bank hereunder, including to endorse all cheques or payment orders made to
the order of the undersigned.
10. Liability of the Bank. The Bank shall only be required to exercise
reasonable care in the exercise of its rights and the performance of its
obligations, and it shall be liable only for its intentional fault or gross
negligence.
11. Additional Security. The rights conferred on the Bank hereunder shall be in
addition to and not in substitution for any other security held by the Bank. The
Bank may, however, waive any other security without affecting its rights
hereunder.
12. Successor of the Bank. This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
ONTARIO PAINT & WALLPAPER LIMITED
Undersigned
Per: /s/ Sidney Ackerman c/s
-----------------------------
SIDNEY ACKERMAN - President
Per: /s/ Alan Fine
-----------------------------
ALAN FINE - Secretary
<PAGE>
[LOGO] NATIONAL
BANK
OF CANADA SECURITY WITH RESPECT TO AN INSURANCE POLICY
- --------------------------------------------------------------------------------
1. Designation of Beneficiary. The undersigned hereby designates National Bank
of Canada (the "Bank") as the beneficiary of Insurance Policy No. JR112754
issued, by THE PRUDENTIAL OF AMERICA LIFE INSURANCE COMPANY (CANADA) in respect
of life insurance for SIDNEY A. ACKERMAN and further designates the Bank as the
beneficiary of any and all renewals thereof or substitutions therefor (such
policies and the amendments thereto are hereinafter collectively called the
"Policies"). The undersigned may not revoke the beneficiary hereby designated
without the Bank's written consent.
2. Hypothec and Assignment. The undersigned also hypothecates and assigns to the
Bank the sums payable under the Policies up to the amount of $1,000,000.00 (ONE
MILLION DOLLARS), together with interest as of the date hereof at the rate of
twenty-five percent (25%) per annum.
3. Obligations Secured. The security constituted hereunder shall secure:
3.1 all the obligations of ONTARIO PAINT & WALLPAPER LIMITED (the "Customer")
to the Bank arising from the following credit facility or guarantee and
all amendments thereto, renewals thereof or substitutions therefor: loans
and credit facilities extended by the Bank to the Customer pursuant to an
Offer of Finance dated August 8, 1996;
3.2 and all other present and future, direct and indirect obligations of the
Customer to the Bank.
4. Possession of Policies. The undersigned shall deliver the Policies to the
Bank and inform it of any and all events which could result in payment of the
sums payable thereunder.
5. Premiums. The undersigned shall pay the premiums for the Policies at least
ten (10) days before the expiry date thereof and shall deliver to the Bank
evidence of such payment. If the undersigned fails to pay such premiums, the
Bank may pay them for the undersigned, without however being bound to do so.
6. Rights of the Bank. The Bank may, without however being bound to do so,
collect any and all sums payable under the Policies and exercise all rights
arising from the Policies, including any right to cancel the Policies and to
cash the surrender value thereof. All sums collected by the Bank may, at its
discretion, be remitted to the undersigned, or they may be held by the Bank as
security for the obligations referred to in section 3, or applied to the payment
of such obligations, whether or not due. The Bank shall have the choice of how
any such sums collected shall be applied.
7. Remedies of the Bank. The Bank may exercise its rights and recourses without
being required to exercise same against the undersigned or any other person, or
to realize on any other security.
8. Expenses. The undersigned shall pay all the expenses incurred by the Bank in
connection herewith as well as the expenses arising from the exercise of the
Bank's rights, including any premiums which the Bank may pay. The designation of
the beneficiary, and the security granted herein shall also secure the payment
of such expenses.
<PAGE>
9. Mandate. The undersigned constitutes and appoints the Bank its irrevocable
attorney, with power of substitution, in order to perform all acts and to sign
all documents necessary or expedient for the exercise of the rights conferred on
the Bank hereunder, including to endorse all cheques or payment orders made to
the order of the undersigned.
10. Liability of the Bank. The Bank shall only be required to exercise
reasonable care in the exercise of its rights and the performance of its
obligations, and it shall be liable only for its intentional fault or gross
negligence.
11. Additional Security. The rights conferred on the Bank hereunder shall be in
addition to and not in substitution for any other security held by the Bank. The
Bank may, however, waive any other security without affecting its rights
hereunder.
12. Successor of the Bank. This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Undersigned:
/s/ Sara Fay Sulley /s/ Sidney Ackerman
- ------------------------------------- ------------------------------------
Name of witness: SIDNEY A. ACKERMAN
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Alan Fine c/s Per: /s/ Sidney Ackerman c/s
-------------------------------- -------------------------------
ALAN FINE - President SIDNEY ACKERMAN - President
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine
-------------------------------- -------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - Secretary
CONSENT OF BENEFICIARIES
We, the undersigned ROSEDALE WALLCOVERINGS & FABRICS INC. and ONTARIO PAINT &
WALLPAPER LIMITED, being the beneficiaries of the policy described above, hereby
consent and agree to the designation of beneficiary, hypothec and assignment
contained above in favour of the Bank, and we acknowledge that the rights of the
Bank shall have priority over our rights.
DATED at Toronto this 20th day of September, 1996.
Beneficiaries:
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
c/s c/s
Per: /s/ Alan Fine Per: /s/ Sidney Ackerman
-------------------------------- -------------------------------
ALAN FINE - President SIDNEY ACKERMAN - President
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine
-------------------------------- -------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - Secretary
<PAGE>
[LOGO] NATIONAL
BANK
OF CANADA SECURITY WITH RESPECT TO AN INSURANCE POLICY
- --------------------------------------------------------------------------------
1. Designation of Beneficiary. The undersigned hereby designates National Bank
of Canada (the "Bank") as the beneficiary of Insurance Policy No. JR112753
issued, by THE PRUDENTIAL OF AMERICA LIFE INSURANCE COMPANY (CANADA) in respect
of life insurance for ALAN I. FINE and further designates the Bank as the
beneficiary of any and all renewals thereof or substitutions therefor (such
policies and the amendments thereto are hereinafter collectively called the
"Policies"). The undersigned may not revoke the beneficiary hereby designated
without the Bank's written consent.
2. Hypothec and Assignment. The undersigned also hypothecates and assigns to the
Bank the sums payable under the Policies up to the amount of $1,000,000.00 (ONE
MILLION DOLLARS), together with interest as of the date hereof at the rate of
twenty-five percent (25%) per annum.
3. Obligations Secured. The security constituted hereunder shall secure:
3.1 all the obligations of ONTARIO PAINT & WALLPAPER LIMITED (the "Customer")
to the Bank arising from the following credit facility or guarantee and
all amendments thereto, renewals thereof or substitutions therefor: loans
and credit facilities extended by the Bank to the Customer pursuant to an
Offer of Finance dated August 8, 1996;
3.2 and all other present and future, direct and indirect obligations of the
Customer to the Bank.
4. Possession of Policies. The undersigned shall deliver the Policies to the
Bank and inform it of any and all events which could result in payment of the
sums payable thereunder.
5. Premiums. The undersigned shall pay the premiums for the Policies at least
ten (10) days before the expiry date thereof and shall deliver to the Bank
evidence of such payment. If the undersigned fails to pay such premiums, the
Bank may pay them for the undersigned, without however being bound to do so.
6. Rights of the Bank. The Bank may, without however being bound to do so,
collect any and all sums payable under the Policies and exercise all rights
arising from the Policies, including any right to cancel the Policies and to
cash the surrender value thereof. All sums collected by the Bank may, at its
discretion, be remitted to the undersigned, or they may be held by the Bank as
security for the obligations referred to in section 3, or applied to the payment
of such obligations, whether or not due. The Bank shall have the choice of how
any such sums collected shall be applied.
7. Remedies of the Bank. The Bank may exercise its rights and recourses without
being required to exercise same against the undersigned or any other person, or
to realize on any other security.
8. Expenses. The undersigned shall pay all the expenses incurred by the Bank in
connection herewith as well as the expenses arising from the exercise of the
Bank's rights, including any premiums which the Bank may pay. The designation of
the beneficiary, and the security granted herein shall also secure the payment
of such expenses.
<PAGE>
9. Mandate. The undersigned constitutes and appoints the Bank its irrevocable
attorney, with power of substitution, in order to perform all acts and to sign
all documents necessary or expedient for the exercise of the rights conferred on
the Bank hereunder, including to endorse all cheques or payment orders made to
the order of the undersigned.
10. Liability of the Bank. The Bank shall only be required to exercise
reasonable care in the exercise of its rights and the performance of its
obligations, and it shall be liable only for its intentional fault or gross
negligence.
11. Additional Security. The rights conferred on the Bank hereunder shall be in
addition to and not in substitution for any other security held by the Bank. The
Bank may, however, waive any other security without affecting its rights
hereunder.
12. Successor of the Bank. This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Undersigned:
/s/ Sara Fay Sulley /s/ Alan Fine
- ------------------------------------- ------------------------------------
Name of witness: ALAN I. FINE
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Alan Fine c/s Per: /s/ Sidney Ackerman c/s
-------------------------------- -------------------------------
ALAN FINE - President SIDNEY ACKERMAN - President
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine
-------------------------------- -------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - Secretary
CONSENT OF BENEFICIARIES
We, the undersigned ROSEDALE WALLCOVERINGS & FABRICS INC. and ONTARIO PAINT &
WALLPAPER LIMITED, being the beneficiaries of the policy described above, hereby
consent and agree to the designation of beneficiary, hypothec and assignment
contained above in favour of the Bank, and we acknowledge that the rights of the
Bank shall have priority over our rights.
DATED at Toronto this 20th day of September, 1996.
Beneficiaries:
ROSEDALE WALLCOVERINGS & FABRICS INC. ONTARIO PAINT & WALLPAPER LIMITED
c/s c/s
Per: /s/ Alan Fine Per: /s/ Sidney Ackerman
-------------------------------- -------------------------------
ALAN FINE - President SIDNEY ACKERMAN - President
Per: /s/ Sidney Ackerman Per: /s/ Alan Fine
-------------------------------- -------------------------------
SIDNEY ACKERMAN - Secretary ALAN FINE - Secretary
<PAGE>
UNDERTAKING
TO: NATIONAL BANK OF CANADA (the "Bank")
RE: Credit facilities to Ontario Paint & Wallpaper Limited ("Ontario Paint")
and Rosedale Wallcoverings & Fabrics Inc. ("Rosedale")
- and -
Life Insurance Policy No. JR112754 issued by The Prudential of America
Life Insurance Company (Canada) to Ontario Paint on the life of Sidney A.
Ackerman (the "Insured") in the initial face amount of $15,000,000.00 (the
"Policy")
- --------------------------------------------------------------------------------
WHEREAS Ontario Canada Paint has assigned the proceeds of the Policy to
Laurentian Bank of Canada ("Laurentian") as security for its indebtedness to
Laurentian;
AND WHEREAS Ontario Paint has assigned to the Bank $1,000,000.00 of the
death benefit under the Policy pursuant to Security with Respect to an Insurance
Policy dated September 20, 1996, as partial security for the indebtedness of
Ontario Paint to the Bank (the "Ontario Assignment");
AND WHEREAS Ontario Paint has assigned to the Bank a further $1,000,000.00
of the death benefit under the Policy pursuant to Security with Respect to an
Insurance Policy dated September 20, 1996, as partial security for the
indebtedness of Rosedale to the Bank (the "Rosedale Assignment");
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Ontario Paint undertakes,
covenants and agrees as follows:
1. Ontario Paint shall take all actions necessary to ensure that not less
than an aggregate $2,000,000.00 of the death benefit under the Policy is
available at all times in respect of Ontario Paint's obligations to the
Bank under the Ontario Assignment and the Rosedale Assignment, such that,
in the event of the death of the Insured, the Bank will unconditionally
receive a death benefit equal to not less than $1,000,000.00 on account of
the Ontario Assignment and a second death benefit equal to not less than
$1,000,000.00 on account of the Rosedale Assignment. In particular, and
without limiting the generality of the foregoing, Ontario Paint shall take
all actions necessary to ensure that, at all times, the death benefit
payable under the Policy exceeds the total indebtedness of Ontario Paint
to Laurentian by not less than $2,000,000.00.
<PAGE>
2
2. On an annual basis, Ontario Paint shall provide to the Bank such
documentary evidence as the Bank may in its sole discretion require,
confirming and verifying that the requirements of paragraph 1 of this
Undertaking have been satisfied;
3. If Ontario Paint defaults in the performance of its undertakings and
agreements pursuant to either paragraph 1 or 2 of this Undertaking,
Ontario Paint shall immediately arrange for and obtain a new policy of
life insurance on the life of the Insured, in an amount of not less than
$2,000,000.00 and containing such terms and conditions as may be
satisfactory to the Bank in its sole discretion, and shall immediately
assign such new policy to the Bank, in substitution for the Policy, the
Ontario Assignment and the Rosedale Assignment; and
4. In the event that paragraph 3 of this Undertaking becomes applicable, the
Insured undertakes and agrees to sign such documents, attend for such
medical examinations and provide such information and cooperation as may
be required in connection with the placing or maintaining of the insurance
referred to in paragraph 3.
DATED: October 29th, 1996.
ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Sidney Ackerman
------------------------------
SIDNEY ACKERMAN - President
c/s
Per: /s/ Alan Fine
------------------------------
ALAN FINE - Secretary
SIGNED, SEALED and DELIVERED )
In the presence of: )
)
) /s/ Sidney Ackerman
/s/ [ILLEGIBLE] ) ---------------------------
- -------------------- ) SIDNEY A. ACKERMAN
<PAGE>
PRIORITIES AGREEMENT
National Bank of Canada
loans to Ontario Paint & Wallpaper Limited
THIS AGREEMENT made the 29th day of October, 1996.
AMONG:
LAURENTIAN BANK OF CANADA
("Laurentian")
- and -
NATIONAL BANK OF CANADA
("National")
- and -
ONTARIO PAINT & WALLPAPER LIMITED
("Ontario Paint")
- and -
ROSEDALE WALLCOVERINGS & FABRICS INC.
("Rosedale")
WHEREAS:
A. Ontario Paint is or will be indebted or liable to each of Laurentian and
National;
B. Ontario Paint has provided or will provide certain security to each of
Laurentian and National to secure its respective liabilities to Laurentian and
National;
C. Laurentian and National have agreed to enter into this Agreement to establish
the relative rights and priorities of their respective security and the
indebtedness secured thereby and Ontario Paint and Rosedale agreed to enter into
this Agreement to consent to the priority and other
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-2-
arrangements set forth in this Agreement.
NOW THEREFORE for valuable consideration, the receipt and sufficiency of which
are acknowledged by each of the parties to the Agreement, the parties to this
Agreement agree as follows:
1. Definitions
The following terms set out herein with initial capital letters shall have
the meanings assigned below:
"Demand" means the action whereby one of Laurentian or National either
demands payment of the Laurentian Indebtedness or the National
Indebtedness, as the case may be, or takes any steps to enforce its rights
pursuant to the Laurentian Security of the National Security, as the case
may be, whether directly or indirectly, whether by way of realization of
the Laurentian Security of the National Security, as the case may be, or
otherwise.
"Laurentian Indebtedness" means all debts, liabilities and obligations of
Ontario Paint to Laurentian from time to time outstanding whether direct
or indirect and wheresoever or howsoever incurred including, without
limitation, all debts, liabilities and obligations arising under and/or
pursuant to the Laurentian Offer of Finance.
"Laurentian Offer of Finance" means the offer of finance issued by North
American in favour of Ontario Paint dated November 30, 1994, and
subsequently assigned to Laurentian, as amended, restated and replaced
from time to time.
"Laurentian Priority Assets" means the Life Insurance Policy and the
proceeds thereof.
"Laurentian Security" means all security documents granted by Ontario
Paint to North American and assigned to Laurentian, and all security
documents granted by Ontario Paint to Laurentian, to secure payment and/or
performance of all debts, liabilities and obligations of Ontario Paint to
Laurentian together with any and all security hereafter granted by Ontario
Paint to Laurentian, including, without limitation, the Agreement Re
Assignment of Life Insurance Policies dated December 5, 1994, and made
among Ontario Paint, North American, Ontario Paint and Rosedale, as
beneficiaries, and The Prudential of America Life Insurance Company
(Canada).
"Lenders" means National and Laurentian and "Lender" means either one of
them.
"Life Insurance Policy" means life insurance policy number JR112754 on the
life of Sidney A. Ackerman issued by The Prudential of America Life
Insurance Company (Canada) in
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-3-
favour of Ontario Paint, as owner, and under which policy Ontario Paint
and Rosedale have been designated beneficiaries.
"National Indebtedness" means all debts, liabilities and obligations of
Ontario Paint to National from time to time outstanding, whether direct or
indirect and wheresoever or howsoever incurred including, without
limitation, all debts, liabilities and obligations arising under and/or
pursuant to the National Offer of Finance.
"National Offer of Finance" means the offer of finance issued by National
in favour of Ontario Paint dated August 8, 1996, as amended, restated and
replaced from time to time.
"National Priority Assets" means all assets, property and undertaking of
Ontario Paint and the proceeds of all such assets, property and
undertaking, but excluding the Laurentian Priority Assets.
"National Security" means all security documents granted by Ontario Paint
to National to secure payment and/or performance of all debts, liabilities
and obligations of Ontario Paint to National together with any and all
security hereafter granted by Ontario Paint to National.
"North American" means North American Trust Company.
"Realization Proceeds" shall have the meaning ascribed to such term in
section 10 hereof.
"Security" means the National Security or the Laurentian Security, as the
context requires.
2. Consent
Notwithstanding any other term or provision in the National Security,
National consents to the creation, execution, delivery, registration, filing
and/or perfection of the Laurentian Security. Notwithstanding any other term or
provision of the Laurentian Security, Laurentian consents to the creation,
execution, delivery, registration, filing and/or perfection of the National
Security.
3. Assets over which Laurentian has Priority
Subject to section 10 of this Agreement, the Laurentian Security and the
mortgages, charges and security interests created thereby shall, with respect to
the Laurentian Priority Assets, rank and be enforceable in all respects and for
all purposes in priority to the National Security and the mortgages, charges and
security interests created thereby.
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-4-
4. Assets over which National has Priority
Subject to section 10 of this Agreement, the National Security and the
mortgages, charges and security interests created thereby shall, with respect to
the National Priority Assets, rank and be enforceable in all respects and for
all purposes in priority to the Laurentian Security and the mortgages, charges
and security interests created thereby.
5. Mutual Subordination and Postponement
Each of Laurentian and National hereby postpones and subordinates its
Security to and in favour of the other Lender's Security to the extent necessary
to give effect to the priorities referred to in this Agreement.
6. No Effect on Priority
The respective priorities of the National Security and the Laurentian
Security established hereby, and all other rights established in, altered by or
specified in this Agreement are applicable, irrespective of:
(a) the time or order of creation, execution, delivery, attachment or
perfection of the Laurentian Security of the National Security;
(b) the method of perfection of the National Security or the Laurentian
Security;
(c) the time or order of registration or filing of financing statements,
real estate charges or other recording of the National Security or
the Laurentian Security;
(d) the date or dates of any existing or future loan or any existing or
future advance or advances made by either of Laurentian or National
to Ontario Paint;
(e) the date or dates of any default by Ontario Paint under the National
Security or the Laurentian Security;
(f) the date of crystallization of any floating charge contained in the
National Security or the Laurentian Security; or
(g) the date of commencement of enforcement proceedings under the
National Security or the Laurentian Security.
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-5-
7. Limitation on Rights to Proceed
Nothing in this Agreement shall be construed so as to entitle a Lender to
receive any proceeds of realization upon any assets of Ontario Paint in respect
of which such Lender does not have Security or in respect of which such Lender's
Security is invalid, ineffective or unenforceable against third parties
including, without limitation, Ontario Paint. Laurentian and National agree that
they shall not challenge the other Lender's Security on the ground that it is
invalid, ineffective or unenforceable.
8. Notice of Enforcement by National
National shall provide to Laurentian a copy of any written demand for
payment of or any notice of the acceleration of the National Indebtedness or the
National Security, forthwith after delivery of such demand or notice to Ontario
Paint, provided that any failure to give the notice required hereby shall not
affect the priorities established by this Agreement or give rise to any
liability on the part of National.
9. Notice of Enforcement by Laurentian
Laurentian shall provide to National a copy of any written demand for
payment of or any notice of the acceleration of the Laurentian Indebtedness or
the Laurentian Security, forthwith after delivery of such demand or notice to
Ontario Paint, provided that any failure to give the notice required hereby
shall not affect the priorities established by this Agreement or give rise to
any liability on the part of Laurentian.
10. Proceeds of Realization
Notwithstanding any provision of the National Security or the Laurentian
Security to the contrary, all payments, proceeds and amounts received by either
the Lenders from Ontario Paint after one of the Lenders has made a Demand or
upon the liquidation of the assets of Ontario Paint due to the bankruptcy or
insolvency of Ontario Paint or otherwise (collectively, "Realization Proceeds")
shall be applied and distributed as follows:
(a) Realization Proceeds in respect of the National Priority Assets
shall be applied:
(i) firstly, on account of the costs and expenses of the sale,
collection and realization of the National Security including
the costs and expenses incurred by agents of National or any
receiver or receiver and manager appointed by National or of
National itself and including any legal fees and disbursements
incurred by National or any agent or receiver or receiver and
manager appointed by National;
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-6-
(ii) secondly, on account of the principal, interest and other
amounts due to National in respect of the National
Indebtedness to the extent of the National Indebtedness;
(iii) thirdly, on account of the principal, interest and other
amounts due to Laurentian in respect of the Laurentian
Indebtedness, to the extent of the Laurentian Indebtedness;
and
(iv) fourthly, to Ontario Paint.
(b) Realization Proceeds in respect of the Laurentian Priority Assets
shall be applied:
(i) firstly, on account of the costs and expenses of the sale,
collection and realization of the Laurentian Security
including the costs and expenses incurred by agents of
Laurentian or any receiver or receiver and manager appointed
by Laurentian or of Laurentian itself and including any legal
fees and disbursements incurred by Laurentian or any agent or
receiver and manager appointed by Laurentian;
(ii) secondly, on account of the principal, interest and other
amounts due to Laurentian in respect of the Laurentian
Indebtedness to the extent of the Laurentian Indebtedness;
(iii) thirdly, on account of the principal, interest and other
amounts due to National in respect of the National
Indebtedness, to the extent of the National Indebtedness; and
(iv) fourthly, to Ontario Paint.
11. Proceeds of Insurance and Disposition
If any of the assets of Ontario Paint are disposed of, dealt with, lost or
damaged so as to give rise to proceeds (including amounts payable under
insurance policies), such proceeds shall be deemed to be Realization Proceeds
for the purposes of the Agreement and the priority of claims of the Lenders
against such proceeds shall be determined in accordance with section 10.
12. Trust Funds
Subject to sections 13 and 14 hereof, Laurentian and National agree that
to the extent that
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-7-
they receive Realization Proceeds which are payable to the other Lender pursuant
to the terms and provisions of this Agreement, the amount of such Realization
Proceeds shall be deemed to be received or held by it in trust for the other
Lender and shall be paid over to the other Lender pursuant to the terms and
provisions of this Agreement forthwith after determination of the Lenders'
respective entitlements thereto.
13. Payments to Laurentian
Nothing in this Agreement shall prevent Laurentian from receiving any
payments of principal or interest or any other payment provided for in the
Laurentian Offer of Finance on account of the Laurentian Indebtedness at any
time prior to Demand or prior to receipt of notice by National given pursuant to
section 9 hereof or prior to delivery by National of written notice pursuant to
section 8 hereof.
14. Payments to National
Nothing in this Agreement shall prevent National from receiving any
payments of principal or interest or any other payment provided for in the
National Offer of Finance on account of the National Indebtedness at any time
prior to Demand or prior to receipt of notice by Laurentian given pursuant to
section 8 hereof or prior to delivery by Laurentian of written notice pursuant
to section 9 hereof.
15. Rights of Ontario Paint
Nothing in this Agreement shall be construed so as to:
(a) entitle any party not listed as a signatory to this Agreement, other
than a permitted assignee of either of Laurentian or National, to
receive any Realization Proceeds of any of the assets of Ontario
Paint; or
(b) confer any rights upon Ontario Paint or any person not a party to
this Agreement.
If any person other than Laurentian or National shall have any valid claim to
the proceeds of realization of the assets of Ontario Paint in priority to or in
parity with either of Laurentian or National then this Agreement shall not apply
so as to diminish the rights (as such rights would have been but for this
Agreement) of Laurentian or National to the Realization Proceeds of such
property or assets.
16. Compulsory Enforcement
Nothing in this Agreement shall require or obligate any of the Lenders to
enforce its Security or realize upon the assets of Ontario Paint.
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-8-
17. Further Assurances
The parties agree that they shall at all times, do, execute, acknowledge
and deliver all such acts, deeds and agreements as may be reasonably necessary
or desirable to give effect to the terms and provisions of the Agreement
including any and all acts, deeds or agreements as may be necessary for the
purpose of registering or filing notice of the terms and provisions of this
Agreement.
18. Non-Waiver of Rights
Nothing contained in this Agreement is intended to or shall impair the
obligation of Ontario Paint to pay to Laurentian the Laurentian Indebtedness or
to National the National Indebtedness including, without limitation, the
principal thereof and the interest thereon as and when the same shall become due
and payable in accordance with their respective terms not shall anything
contained herein prevent Laurentian or National from exercising any or all
remedies otherwise permitted by applicable law upon default under the terms of
any of the Security, subject only to the priorities created by this Agreement.
19. Acknowledgement by Ontario Paint
Ontario Paint acknowledges and consents to the interests of the Lenders
set forth in this Agreement and undertakes to maintain and deal with all of its
assets and undertaking in accordance with the terms of this Agreement.
20. Acknowledgement by Rosedale
Rosedale acknowledges and consents to the interests of the Lenders set
forth in this Agreement and, in its capacity as a beneficiary under the Life
Insurance Policy, undertakes to maintain and deal with the Life Insurance Policy
in accordance with the terms of this Agreement.
21. Notices
Any notice required or permitted to be given pursuant to this Agreement
shall be properly given if in writing and delivered by courier, personally
delivered or mailed by prepaid registered mail addressed or delivered to the
parties hereto as follows:
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-9-
(a) if delivered to Laurentian:
Laurentian Bank of Canada
130 Adelaide Street West
Toronto, Ontario
M5H 3P5
Attention: Mr. Giles le Riche,
Manager, Commercial Banking
(b) if delivered to National:
National Bank of Canada
350 Burnhamthorpe Road West
Mississauga, Ontario
L5B 3J1
Attention: Mr. Steven L. Matheson,
Senior Account Manager
(c) if delivered to Ontario Paint:
Ontario Paint & Wallpaper Limited
731 Millway Avenue
Concord, Ontario
L4K 3S8
Attention: Mr. Sidney Ackerman,
President
(d) if delivered to Rosedale:
Rosedale Wallcoverings & Fabrics Inc.
214 Courtland Avenue
Concord, Ontario
L4K 4L3
Attention: Mr. Alan Fine,
President
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-10-
or such other address as the party to whom such notice is given shall have
previously, by notice in writing given in the manner aforesaid, provided to the
remaining parties any such notice given hereunder shall be deemed to have been
given and to become effective on the day of delivery if delivered or, in the
case of notice by mail, on the fourth business day following its deposit in a
government post office, provided that if the party giving the notice becomes
aware of an actual or threatened postal disruption, notice shall be given only
by personal delivery.
22. Termination
This Agreement shall continue in full force and effect until the earlier
of (i) the date on which it is terminated by the mutual consent of the Lenders
and (ii) the date on which payment in full is made of either of the Laurentian
Indebtedness or the National Indebtedness, provided that the obligations of the
Lenders to distribute Realization Proceeds in accordance with section 10 hereof
shall not terminate until such time as the Realization Proceeds are distributed
in accordance with the provisions of section 10 hereof.
23. Entire Agreement
This Agreement constitutes the entire agreement among the parties hereto
in respect of its subject matter and supersedes any prior agreements,
undertakings, declarations or representations, written or oral, in respect
thereof. The parties hereto acknowledge that certain additional documents may be
required to register notice of this Agreement where required. To the extent that
there is any inconsistency in the provisions of this Agreement and the
provisions of any such supplementary documents, the provisions of this Agreement
shall be paramount and prevail.
24. Enurement
This Agreement shall be binding upon and enure to the benefit of all
parties hereto and their respective successors and assigns. Neither Laurentian
nor National shall assign all or any part of their respective Security without
providing the assignee thereof with notice of this Agreement and a copy of this
Agreement. Immediately following any such assignment, the assignor of its
Security shall provide written notice of such assignment to the remaining
Lender.
25. Counterparts
This Agreement may be executed in any number of counterparts or by
facsimile, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument, and it
shall not be necessary in making proof of the Agreement to produce or account
for more than once such counterpart.
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-11-
26. Exchange of Information
From time to time upon request therefor, each of the Lenders shall advise
the other Lender in writing of particulars of the indebtedness and liability of
Ontario Paint to such lender and of all Security provided by Ontario Paint with
respect thereto. Ontario Paint consents to the disclosure of information
contemplated hereby.
27. Receipt of Copy by Ontario Paint
Ontario Paint acknowledges receipt of an executed copy of this Agreement
and agrees to the terms thereof and agrees that it shall stand possessed of its
assets and undertaking for Laurentian and National in accordance with the
priorities set out above.
28. Receipt of Copy by Rosedale
Rosedale acknowledges receipt of an executed copy of the Agreement and
agrees to the terms thereof and agrees that it shall stand possessed of the Life
Insurance Policy for Laurentian and National in accordance with the priorities
set out above.
29. Governing Law
This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
Nevertheless, it is acknowledged and agreed that the provisions of the Agreement
shall apply to all property and assets of Ontario Paint wherever situate or
located.
IN WITNESS WHEREOF the parties have executed this Agreement on the day,
month and year first above written.
LAURENTIAN BANK OF CANADA
Per: /s/ Giles H. le Riche
-------------------------------
Name: Giles H. le Riche
Title: Manager, Commercial Banking
Per: /s/ W.A. Galbraith
-------------------------------
Name: W.A. Galbraith
Title: A.V.P., Commercial Banking
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
-12-
NATIONAL BANK OF CANADA
Per: /s/ Glen McLeod
-------------------------------
Name: GLEN McLEOD
Title: Manager, Credit
Per: /s/ Steven L. Matheson
-------------------------------
Name: Steven L. Matheson
Title: SENIOR ACCOUNT MANAGER
COMMERCIAL BANKING
ONTARIO PAINT & WALLPAPER LIMITED
[SEAL]
Per: /s/ Sidney Ackerman /s/ Alan Fine
----------------------------------
SIDNEY ACKERMAN ALAN FINE
President Secretary
ROSEDALE WALLCOVERINGS & FABRICS
INC.
Per: /s/ Alan Fine /s/ Sidney Ackerman
----------------------------------
ALAN FINE SIDNEY ACKERMAN
President Secretary
Laurentian / National Bank
Ontario Paint & Rosedale
Priorities Agmt
<PAGE>
CORPORATE CERTIFICATE
TO: NATIONAL BANK OF CANADA (the "Lender")
RE: Loan to Ontario Paint & Wallpaper Limited (the "Corporation")
pursuant to Offer of Finance dated August 8, 1996
- --------------------------------------------------------------------------------
I, A DULY APPOINTED OFFICER of the Corporation, do hereby certify
for and on behalf of the Corporation, as follows:
1. The Corporation was incorporated under the laws of the Province of
Ontario. Attached hereto as Schedule A is a true copy of all of the
articles of the Corporation. No proceedings have been taken or are
pending to amend, surrender or cancel the said articles.
2. The central billing office of the Corporation is at: 731 Millway Avenue,
Concord, Ontario, L4K 3S8.
3. The financial year end of the Corporation is on December 31 of each
calendar year.
4. The following persons are duly elected or appointed as qualified officers
and directors of the Corporation and hold the offices indicated opposite
their respective names and the signatures appearing opposite their names
are the signatures of those persons:
Officers:
NAME TITLE SIGNATURE
---- ----- ---------
President &
Sidney Ackerman Treasurer /s/ Sidney Ackerman
-------------------
Alan Fine Secretary /s/ Alan Fine
-------------------
Directors: Sidney Ackerman
Alan Fine
<PAGE>
2
5. The following are the holders of all of the issued and outstanding shares
of the Corporation and the number and class of shares which they hold:
Name of Shareholder No. & Class of Shares Held
------------------- --------------------------
1010037 Ontario Inc. 20 common and
20 Class "A" Special
6. There are no provisions in the articles of the Corporation or any
amendments thereto, the bylaws of the Corporation or in any unanimous
shareholder agreement which would restrict, limit or regulate in any way
the powers of the Corporation or of its directors, to borrow money upon
the credit of the Corporation, to give a guarantee on behalf of the
Corporation to secure the performance of an obligation of any person, to
issue, reissue, sell or pledge debt obligations of the Corporation, or to
mortgage, hypothecate, pledge or otherwise create a security interest in
all or any of the property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation, or to delegate any
of the said powers to a director, officer or committee of directors.
7. Attached hereto as Schedule B is a true copy of a resolution of the board
of directors of the Corporation authorizing the execution and delivery of
the security documents relating to the above-noted matter, which
resolution was duly passed on September 20 1996, and remains in full
force and effect, unamended and unrescinded, at the date hereof.
8. The by-laws of the Corporation permit the board of directors of the
Corporation from time to time to direct the manner in which the person or
persons by whom any particular instrument or class of instruments may or
shall be signed.
THIS CERTIFICATE shall remain in full force and effect and be
binding upon the Corporation and may be acted upon by Lender until notice to the
contrary or of any change in this Certificate has been given in writing to the
Lender.
DATED this 20th day of September, 1996.
c/s
/s/ Alan Fine
-----------------------------
ALAN FINE
Secretary
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred to as
the "Bank") dealing with ONTARIO PAINT & WALLPAPER LIMITED (hereinafter referred
to as the "Customer"), the undersigned and each of them, if more than one,
hereby jointly and severally guarantee payment to the Bank of all present and
future debts and liabilities (direct or indirect, absolute or contingent,
matured or otherwise), now or at any time and from time to time hereafter due or
owing to the Bank whether incurred by the Customer alone or jointly with any
corporation, person or persons, or otherwise howsoever, including all costs and
disbursements incurred by the Bank in view of recovering or attempting to
recover said debts and liabilities. Provided, however, that the liability of the
undersigned, and of each of the undersigned herein, is limited to ONE MILLION
00/100 Dollars($1,000,000.00), with interest thereon from the date of demand of
payment, at the rate agreed upon, between the Bank and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and if
there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution of
capacity of the Customer or of the Guarantor or by any change in the name of the
Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained from
the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and shall
cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs, successors,
executors, administrators, legal representatives and assigns until termination
thereof by notice in writing to the manager of the branch of the Bank at which
the account of the Customer is kept, but such termination by any of the
guarantors or their respective heirs, successors, executors, administrators,
legal representatives or assigns shall not prevent the continuance of the
liability hereunder of any other guarantor. Such termination shall apply only to
those debts or liabilities of the Customer incurred or arising after reception
of the notice by the Bank, but not in respect of any prior debts or liabilities,
matured or not. The notice of termination shall have no effect on those debts or
liabilities incurred after reception of said notice which will result from
express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act on
the part of the Bank which would prevent subrogation from operating in favour of
the Guarantor. It is further agreed that the Bank, without exonerating in whole
or in part the Guarantor, may grant time, renewals, extensions, indulgences,
releases and discharges to, may take security from, and give up or release any
or part of the security held, may abstain from taking, perfecting, registering
or renewing security or from realizing on security, may accept compositions and
otherwise deal with the Customer and with any other person or persons, including
any of the guarantors, and dispose of any security held by the Bank as it may
see fit, and that all dividends and monies received by the Bank from the
Customer or from any other person, capable of being applied by the Bank in
reduction of the debts and liabilities hereby guaranteed, shall be considered
for all purposes as payment in gross which the Bank shall have the right to
apply as it may see fit, not being bound by the law of imputation, and the Bank
shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim against
the estate of the Customer and to value its security, it will be entitled to
place such Valuation as the Bank may in its discretion see fit, and the filing
of such claim and the valuation of its security shall in no way prejudice or
restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the Customer
or other persons or the security it may hold before being entitled to payment
from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to the
Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and also
upon the heirs, executors, administrators and successors of the Guarantor and
will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day
of September 1996
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF
Signature
1010037 ONTARIO INC.
- ------------------------------------- --------------------------------------
(Please print) Per: /s/ Sidney Ackerman
- ------------------------------------- --------------------------------------
(Please print) SIDNEY ACKERMAN - President
- ------------------------------------- --------------------------------------
(Please print) Per: /s/ Alan Fine
- ------------------------------------- --------------------------------------
(Please print) ALAN FINE - Secretary
- ------------------------------------- --------------------------------------
(Please print)
- ------------------------------------- --------------------------------------
(Please print)
- ------------------------------------- --------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
1010037 ONTARIO INC.
- -------------------------------------
Per: /s/ Sidney Ackerman
- -------------------------------------
SIDNEY ACKERMAN - President
- -------------------------------------
Per: /s/ Alan Fine
- -------------------------------------
ALAN FINE - Secretary
- -------------------------------------
- -------------------------------------
<PAGE>
[LOGO] NATIONAL RESOLUTION RE: GUARANTEE
BANK (REF.: Permanent
OF CANADA Instructions 230-01)
- --------------------------------------------------------------------------------
RESOLUTION
OF THE BOARD OF DIRECTORS OF
1010037 ONTARIO INC.
----------------------------
(Name of Corporation)
In consideration of the loans and advances of money granted or
which may be granted by National Bank of Canada (the "Bank") to its Customer,
ONTARIO PAINT & WALLPAPER LIMITED, for the purpose of its business, and
generally, in consideration of the business relations between the Bank and its
Customer as well as the business relations between the said Customer and this
Corporation, and whereas the financial assistance provided to the said Customer
in the manner hereinafter referred to is in the best interests of this
Corporation;
Now therefore be it resolved:
That this Corporation be and is hereby authorized to guarantee the
payment of all sums of money, which ONTARIO PAINT & WALLPAPER LIMITED, the
Customer owes or in the future may owe to the Bank up to a principal amount of
ONE MILLION DOLLARS ($1,000,000.00) together with interest, costs and
accessories. Such guarantee shall bind this Corporation jointly and severally
with the Customer and shall be subject to all the terms and conditions set out
on the form used at the Bank, entitled "Letter of Guarantee", a copy of which is
attached hereto after having been submitted to the Directors and that Mr. Sidney
Ackerman and Mr. Alan Fine, respectively the President and the Secretary, be
authorized and instructed to jointly sign and execute the said guarantee for and
on behalf and in the name of the Corporation and that the financial assistance
provided by this Corporation to the said Customer in the said guarantee and any
security required from time to time by the Bank in connection with the said
guarantee is in the best interests of this Corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of 1010037 ONTARIO INC. duly passed on the 20th day of
September, 1996, which remains in full force and effect.
DATED at Toronto this 20th day of September, 1996.
c/s
/s/ Alan Fine
--------------------------------
ALAN FINE
Secretary
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT & WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
1010037 ONTARIO INC.
- ----------------------------------- -------------------------------------
Per: /s/ Sidney Ackerman c/s
-------------------------------------
SIDNEY ACKERMAN -- President
-------------------------------------
Per: /s/ Alan Fine
-------------------------------------
ALAN FINE -- Secretary
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ----------------------------------- -------------------------------------
Per: /s/ Sidney Ackerman c/s
-------------------------------------
SIDNEY ACKERMAN -- President
-------------------------------------
Per: /s/ Alan Fine
-------------------------------------
ALAN FINE -- Secretary
<PAGE>
(RESOLUTION OF CREDITOR CORPORATION
RE SUBORDINATION AGREEMENT)
RESOLUTION
OF THE BOARD OF DIRECTORS OF
1010037 ONTARIO INC.
--------------------
In consideration of leases, loans and advances made or to be made by
National Bank of Canada to ONTARIO PAINT & WALLPAPER LIMITED (hereinafter called
the "Customer"), and in consideration of business dealings between the said Bank
and the Customer as well as business dealings between the said Customer and the
corporation.
Now therefore be it resolved
That the payment of all debts, demands and choses in action which are now
due or which may hereafter become due to the corporation by the Customer be
postponed to payment in full of all present and future indebtedness and other
liabilities of the Customer towards the National Bank of Canada, and this in
conformity with and subject to all the clauses and conditions appearing in the
form in use by the said Bank and entitled "Subordination Agreement" No. 11221, a
copy of which is annexed to the present resolution after having been submitted
to the directors, and that Sidney Ackerman and Alan Fine, respectively the
President and the Secretary, be and are hereby authorized and instructed to
jointly sign and execute the aforesaid subordination agreement for and on behalf
and in the name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the Board
of Directors of 1010037 ONTARIO INC. duly adopted on the 20th day of
September, 1996.
Dated at Toronto this 20th day of September, 1996.
/s/ Alan Fine c/s
----------------------------------
ALAN FINE
Secretary
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT AND WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at , this day of , 1996.
---------------------------- ----- --------------
Witness Signature(s)
1010037 ONTARIO INC.
- ----------------------------------- -------------------------------------
Per: c/s
-------------------------------------
SIDNEY ACKERMAN -- President
-------------------------------------
Per:
-------------------------------------
ALAN FINE -- Secretary
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at , this day of , 1996.
---------------------------- ----- --------------
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ----------------------------------- -------------------------------------
Per: c/s
-------------------------------------
SIDNEY ACKERMAN -- President
-------------------------------------
Per:
-------------------------------------
ALAN FINE -- Secretary
<PAGE>
RESOLUTION OF DEBTOR CORPORATION
RE SUBORDINATION AGREEMENT
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ONTARIO PAINT & WALLPAPER LIMITED
---------------------
In consideration of loans and advances made or to be made by National Bank
of Canada to the corporation and generally in consideration of business dealings
between the said Bank and the corporation as well as business dealings between
the corporation and 1010037 ONTARIO INC.,
Now therefore be it resolved
That the corporation acknowledge receipt of the notice of the
subordination agreement made on form No. 11221 a copy of which is annexed to the
present resolution after having been submitted to the directors and that the
corporation accept the assignment and transfer in favour of National Bank of
Canada included in the said agreement and that Mr. Sidney Ackerman, President of
the corporation, and Mr. Alan Fine, Secretary of the corporation, be and are
hereby authorized and instructed to jointly sign the acknowledgment and
acceptance on the aforesaid subordination agreement for and on behalf and in the
name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the Board
of Directors of ONTARIO PAINT & WALLPAPER LIMITED duly adopted on the 20th day
of September, 1996.
Dated at Toronto this 20th day of September, 1996.
/s/ Alan Fine c/s
---------------------------------
ALAN FINE
Secretary
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT AND WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7.Successor of the Bank This agreement shall be binding upon the undersigned and
enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at , this day of , 1996.
---------------------------- ----- --------------
Witness Signature(s)
1010037 ONTARIO INC.
- ----------------------------------- -------------------------------------
Per: c/s
-------------------------------------
SIDNEY ACKERMAN -- President
-------------------------------------
Per:
-------------------------------------
ALAN FINE -- Secretary
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at , this day of , 1996.
---------------------------- ----- --------------
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ----------------------------------- -------------------------------------
Per: c/s
-------------------------------------
SIDNEY ACKERMAN -- President
-------------------------------------
Per:
-------------------------------------
ALAN FINE -- Secretary
<PAGE>
CORPORATE CERTIFICATE
TO: NATIONAL BANK OF CANADA (the "Lender")
RE: National Bank of Canada credit facilities to Ontario Paint & Wallpaper
Limited - Guarantee and Subordination by 1010037 Ontario Inc. (the
"Corporation")
- --------------------------------------------------------------------------------
I, A DULY APPOINTED OFFICER of the Corporation, do hereby certify
for and on behalf of the Corporation, as follows:
1. The Corporation was incorporated under the laws of the Province of
Ontario. Attached hereto as Schedule A is a true copy of all of the
articles of the Corporation. No proceedings have been taken or are pending
to amend, surrender or cancel the said articles.
2. The following persons are duly elected or appointed as qualified officers
and directors of the Corporation and hold the offices indicated opposite
their respective names and the signatures appearing opposite their names
are the signatures of those persons:
Officers:
NAME TITLE SIGNATURE
---- ----- ---------
Sidney Ackerman President /s/ Sidney Ackerman
--------------------------
Alan Fine Secretary /s/ Alan Fine
--------------------------
Directors:
Sidney Ackerman
Alan Fine
3. There are no provisions in the articles of the Corporation or any
amendments thereto, the bylaws of the Corporation or in any unanimous
shareholder agreement which would restrict, limit or regulate in any way
the powers of the Corporation or of its directors, to borrow money upon
the credit of the Corporation, to give a guarantee on behalf of the
Corporation to secure the performance of an obligation of any person, to
issue, reissue, sell or pledge debt obligations of the Corporation, or to
mortgage, hypothecate, pledge or otherwise create a security interest in
all or any of the property of the Corporation, owned or subsequently
<PAGE>
-2-
acquired, to secure any obligation of the Corporation, or to delegate any
of the said powers to a director, officer or committee of directors.
4. Attached hereto as Schedule B is a true copy of a resolution of the board
of directors of the Corporation authorizing the execution and delivery of
the security documents relating to the above-noted matter, which
resolution was duly passed on September 20, 1996, and remains in full
force and effect, unamended and unrescinded, at the date hereof.
5. The by-laws of the Corporation permit the board of directors of the
Corporation from time to time to direct the manner in which the person or
persons by whom any particular instrument or class of instruments may or
shall be signed.
6. I have read the provisions of section 20 of the Business Corporations Act
(Ontario) and have had the said provisions explained to me by legal
counsel. The execution and delivery of the guarantee by the Corporation to
the Lender and the performance by the Corporation of its obligations
pursuant to the guarantee do not contravene the said section 20 for the
following reason:
The Corporation is a holding body corporate of the corporation the
debts of which are guaranteed pursuant to the guarantee.
I have made such investigations and inquiries as I have deemed necessary
for the purpose of making the foregoing statements.
THIS CERTIFICATE shall remain in full force and effect and be
binding upon the Corporation and may be acted upon by the Lender until notice to
the contrary or of any change in this certificate has been given in writing to
the Lender.
DATED this 20th day of September, 1996.
/s/ Alan Fine c/s
-----------------------------------
ALAN FINE
Secretary
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred
to as the "Bank") dealing with
ONTARIO PAINT & WALLPAPER LIMITED
(hereinafter referred to as the "Customer"), the undersigned and each of them,
if more than one, hereby jointly and severally guarantee payment to the Bank of
all present and future debts and liabilities (direct or indirect, absolute or
contingent, matured or otherwise), now or at any time and from time to time
hereafter due or owing to the Bank whether incurred by the Customer alone or
jointly with any corporation, person or persons, or otherwise howsoever,
including all costs and disbursements incurred by the Bank in view of recovering
or attempting to recover said debts and liabilities. Provided, however, that the
liability of the undersigned, and of each of the undersigned herein, is limited
to FIVE HUNDRED THOUSAND 00/100 Dollars ($ 500,000.00) with interest thereon
from the date of demand of payment, at the rate agreed upon, between the Bank
and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and
if there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution
of capacity of the Customer or of the Guarantor or by any change in the name of
the Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained
from the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and
shall cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs,
successors, executors, administrators, legal representatives and assigns until
termination thereof by notice in writing to the manager of the branch of the
Bank at which the account of the Customer is kept, but such termination by any
of the guarantors or their respective heirs, successors, executors,
administrators, legal representatives or assigns shall not prevent the
continuance of the liability hereunder of any other guarantor. Such termination
shall apply only to those debts or liabilities of the Customer incurred or
arising after reception of the notice by the Bank, but not in respect of any
prior debts or liabilities, matured or not. The notice of termination shall have
no effect on those debts or liabilities incurred after reception of said notice
which will result from express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act
on the part of the Bank which would prevent subrogation from operating in favour
of the Guarantor. It is further agreed that the Bank, without exonerating in
whole or in part the Guarantor, may grant time, renewals, extensions,
indulgences, releases and discharges to, may take security from, and give up or
release any or part of the security held, may abstain from taking, perfecting,
registering or renewing security or from realizing on security, may accept
compositions and otherwise deal with the Customer and with any other person or
persons, including any of the guarantors, and dispose of any security held by
the Bank as it may see fit, and that all dividends and monies received by the
Bank from the Customer or from any other person, capable of being applied by the
Bank in reduction of the debts and liabilities hereby guaranteed, shall be
considered for all purposes as payment in gross which the Bank shall have the
right to apply as it may see fit, not being bound by the law of imputation, and
the Bank shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim
against the estate of the Customer and to value its security, it will be
entitled to place such valuation as the Bank may in its discretion see fit, and
the filing of such claim and the valuation of its security shall in no way
prejudice or restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the
Customer or other persons or the security it may hold before being entitled to
payment from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to
the Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank
and the Customer and, if no such account has been so settled any account stated
by the Bank shall be accepted by the Guarantor as conclusive evidence of the
amount which at the date of the account so stated is due by the Customer to the
Bank.
14. The Guarantor shall make payment to the Bank of the amount of his
liability forthwith after demand therefor is made in writing. Such demand shall
be deemed to have been effectually made when an envelope containing it addressed
to the Guarantor at his last address known to the Bank is deposited postage
prepaid in the Post Office. The liability of the Guarantor shall bear interest
from the date of such demand at the rate or rates then applicable to the debts
and liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them,
if more than one, jointly and severally between them and with the Customer and
also upon the heirs, executors, administrators and successors of the Guarantor
and will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the
present Letter or Guarantee before signing it and declares that he understands
perfectly the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the
laws of the Province of Ontario and the Guarantor agrees that any legal suit,
action or proceeding arising out of or relating to this Letter of Guarantee may
be instituted in the courts of such province, and the Guarantor hereby accepts
and irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day of
September 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
ROSEDALE WALLCOVERINGS & FABRICS
INC.
- ----------------------------------- --------------------------------------
(Please print)
Per: /s/ Alan Fine
- ----------------------------------- --------------------------------------
(Please print) ALAN FINE - President
- ----------------------------------- --------------------------------------
(Please print)
Per: /s/ Sidney Ackerman
- ----------------------------------- --------------------------------------
(Please print) SIDNEY ACKERMAN -- Secretary
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
ROSEDALE WALLCOVERINGS & FABRICS
INC.
- -----------------------------------
Per: /s/ Alan Fine
- -----------------------------------
ALAN FINE - President
- -----------------------------------
- -----------------------------------
Per: /s/ Sidney Ackerman
- -----------------------------------
SIDNEY ACKERMAN -- Secretary
- -----------------------------------
- -----------------------------------
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA RESOLUTION RE: GUARANTEE
- --------------------------------------------------------------------------------
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ROSEDALE WALLCOVERINGS & FABRICS INC.
-------------------------------
(Name of Corporation)
In consideration of the loans and advances of money granted or which may
be granted by National Bank of Canada (the "Bank") to its Customer, ONTARIO
PAINT & WALLPAPER LIMITED, for the purpose of its business, and generally, in
consideration of the business relations between the Bank and its Customer as
well as the business relations between the said Customer and this Corporation,
and whereas the financial assistance provided to the said Customer in the manner
hereinafter referred to is in the best interests of this Corporation;
Now therefore be it resolved:
That this Corporation be and is hereby authorized to guarantee the payment
of all sums of money, which ONTARIO PAINT & WALLPAPER LIMITED, the Customer owes
or in the future may owe to the Bank up to a principal amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00) together with interest, costs and accessories.
Such guarantee shall bind this Corporation jointly and severally with the
Customer and shall be subject to all the terms and conditions set out on the
form used at the Bank, entitled "Letter of Guarantee", a copy of which is
attached hereto after having been submitted to the Directors and that Mr. Sidney
Ackerman and Mr. Alan Fine, respectively the President and the Secretary, be
authorized and instructed to jointly sign and execute the said guarantee for and
on behalf and in the name of the Corporation and that the financial assistance
provided by this Corporation to the said Customer in the said guarantee and any
security required from time to time by the Bank in connection with the said
guarantee is in the best interests of this Corporation.
The foregoing is certified to be a true copy of a Resolution of the Board
of Directors of ROSEDALE WALLCOVERINGS & FABRICS INC. duly passed on the 20th
day of September 1996, which remains in full force and effect.
DATED at Toronto this 20th day of September, 1996.
c/s
/s/ Sidney Ackerman
--------------------------------------
SIDNEY ACKERMAN
Secretary
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred
to as the "Bank") dealing with
ONTARIO PAINT & WALLPAPER LIMITED
(hereinafter referred to as the "Customer"), the undersigned and each of them,
if more than one, hereby jointly and severally guarantee payment to the Bank of
all present and future debts and liabilities (direct or indirect, absolute or
contingent, matured or otherwise), now or at any time and from time to time
hereafter due or owing to the Bank whether incurred by the Customer alone or
jointly with any corporation, person or persons, or otherwise howsoever,
including all costs and disbursements incurred by the Bank in view of recovering
or attempting to recover said debts and liabilities. Provided, however, that the
liability of the undersigned, and of each of the undersigned herein, is limited
to FIVE HUNDRED THOUSAND 00/100 Dollars ($500.000.00). with interest thereon
from the date of demand of payment, at the rate agreed upon, between the Bank
and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and
if there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution
of capacity of the Customer or of the Guarantor or by any change in the name of
the Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained
from the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and
shall cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs,
successors, executors, administrators, legal representatives and assigns until
termination thereof by notice in writing to the manager of the branch of the
Bank at which the account of the Customer is kept, but such termination by any
of the guarantors or their respective heirs, successors, executors,
administrators, legal representatives or assigns shall not prevent the
continuance of the liability hereunder of any other guarantor. Such termination
shall apply only to those debts or liabilities of the Customer incurred or
arising after reception of the notice by the Bank, but not in respect of any
prior debts or liabilities, matured or not. The notice of termination shall have
no effect on those debts or liabilities incurred after reception of said notice
which will result from express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act
on the part of the Bank which would prevent subrogation from operating in favour
of the Guarantor. It is further agreed that the Bank, without exonerating in
whole or in part the Guarantor, may grant time, renewals, extensions,
indulgences, releases and discharges to, may take security from, and give up or
release any or part of the security held, may abstain from taking, perfecting,
registering or renewing security or from realizing on security, may accept
compositions and otherwise deal with the Customer and with any other person or
persons, including any of the guarantors, and dispose of any security held by
the Bank as it may see fit, and that all dividends and monies received by the
Bank from the Customer or from any other person, capable of being applied by the
Bank in reduction of the debts and liabilities hereby guaranteed, shall be
considered for all purposes as payment in gross which the Bank shall have the
right to apply as it may see fit, not being bound by the law of imputation, and
the Bank shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim
against the estate of the Customer and to value its security, it will be
entitled to place such valuation as the Bank may in its discretion see fit, and
the filing of such claim and the valuation of its security shall in no way
prejudice or restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the
Customer or other persons or the security it may hold before being entitled to
payment from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to
the Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank
and the Customer and, if no such account has been so settled any account stated
by the Bank shall be accepted by the Guarantor as conclusive evidence of the
amount which at the date of the account so stated is due by the Customer to the
Bank.
14. The Guarantor shall make payment to the Bank 01 the amount of his
liability forthwith after demand therefor is made in writing. Such demand shall
be deemed to have been effectually made when an envelope containing it addressed
to the Guarantor at his last address known to the Bank is deposited postage
prepaid in the Post Office. The liability of the Guarantor shall bear interest
from the date of such demand at the rate or rates then applicable to the debts
and liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them,
if more than one, jointly and severally between them and with the Customer and
also upon the heirs, executors, administrators and successors of the Guarantor
and will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the
present Letter or Guarantee before signing it and declares that he understands
perfectly the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the
laws of the Province of Ontario and the Guarantor agrees that any legal suit,
action or proceeding arising out of or relating to this Letter of Guarantee may
be instituted in the courts of such province, and the Guarantor hereby accepts
and irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at
-------------------------
this day of 1996.
------------------------ ----------------------- --
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
ROSEDALE WALLCOVERINGS & FABRICS
INC.
- ----------------------------------- --------------------------------------
(Please print)
Per: c/s
- ----------------------------------- --------------------------------------
(Please print) ALAN FINE - President
- ----------------------------------- --------------------------------------
(Please print)
Per:
- ----------------------------------- --------------------------------------
(Please print) SIDNEY ACKERMAN -- Secretary
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
ROSEDALE WALLCOVERINGS & FABRICS
INC.
- -----------------------------------
Per:
- -----------------------------------
ALAN FINE - President
- -----------------------------------
- -----------------------------------
Per:
- -----------------------------------
SIDNEY ACKERMAN -- Secretary
- -----------------------------------
- -----------------------------------
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred
to as the "Bank") dealing with
ONTARIO PAINT & WALLPAPER LIMITED
(hereinafter referred to as the "Customer"), the undersigned and each of them,
if more than one, hereby jointly and severally guarantee payment to the Bank of
all present and future debts and liabilities (direct or indirect, absolute or
contingent, matured or otherwise), now or at any time and from time to time
hereafter due or owing to the Bank whether incurred by the Customer alone or
jointly with any corporation, person or persons, or otherwise howsoever,
including all costs and disbursements incurred by the Bank in view of recovering
or attempting to recover said debts and liabilities. Provided, however, that the
liability of the undersigned, and of each of the undersigned herein, is limited
to TWO HUNDRED AND FIFTY THOUSAND 00/100 Dollars ($ 250,000.00). with interest
thereon from the date of demand of payment, at the rate agreed upon, between the
Bank and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and
if there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution
of capacity of the Customer or of the Guarantor or by any Change in the name of
the Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or Corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained
from the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and
shall cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs,
successors, executors, administrators, legal representatives and assigns until
termination thereof by notice in writing to the manager of the branch of the
Bank at which the account of the Customer is kept, but such termination by any
of the guarantors or their respective heirs, successors, executors,
administrators, legal representatives or assigns shall not prevent the
continuance of the liability hereunder of any other guarantor. Such termination
shall apply only to those debts or liabilities of the Customer incurred or
arising after reception of the notice by the Bank, but not in respect of any
prior debts or liabilities, matured or not. The notice of termination shall have
no effect on those debts or liabilities incurred after reception of said notice
which will result from express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act
on the part of the Bank which would prevent subrogation from operating in favour
of the Guarantor. It is further agreed that the Bank, without exonerating in
whole or in part the Guarantor, may grant time, renewals, extensions,
indulgences, releases and discharges to, may take security from, and give up or
release any or part of the security held, may abstain from taking, perfecting,
registering or renewing security or from realizing on security, may accept
compositions and otherwise deal with the Customer and with any other person or
persons, including any of the guarantors, and dispose of any security held by
the Bank as it may see fit, and that all dividends and monies received by the
Bank from the Customer or from any other person, capable of being applied by the
Bank in reduction of the debts and liabilities hereby guaranteed, shall be
considered for all purposes as payment in gross which the Bank shall have the
right to apply as it may see fit, not being bound by the law of imputation, and
the Bank shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim
against the estate of the Customer and to value its security, it will be
entitled to place such valuation as the Bank may in its discretion see fit, and
the filing of such claim and the valuation of its security shall in no way
prejudice or restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the
Customer or other persons or the security it may hold before being entitled to
payment from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to
the Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank
and the Customer and, if no such account has been so settled any account stated
by the Bank shall be accepted by the Guarantor as conclusive evidence of the
amount which at the date of the account so stated is due by the Customer to the
Bank.
14. The Guarantor shall make payment to the Bank of the amount of his
liability forthwith after demand therefor is made in writing. Such demand shall
be deemed to have been effectually made when an envelope containing it addressed
to the Guarantor at his last address known to the Bank is deposited postage
prepaid in the Post Office. The liability of the Guarantor shall bear interest
from the date of such demand at the rate or rates then applicable to the debts
and liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them,
if more than one, jointly and severally between them and with the Customer and
also upon the heirs, executors, administrators and successors of the Guarantor
and will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the
present Letter or Guarantee before signing it and declares that he understands
perfectly the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the
laws of the Province of Ontario and the Guarantor agrees that any legal suit,
action or proceeding arising out of or relating to this Letter of Guarantee may
be instituted in the courts of such province, and the Guarantor hereby accepts
and irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day
of September, 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
/s/ Sara Fay Sulley /s/ Sidney Ackerman
- ----------------------------------- --------------------------------------
(Please print) SIDNEY ACKERMAN
Name:
Address:
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
- ----------------------------------- --------------------------------------
(Please print)
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
/s/ Sidney Ackerman
- -----------------------------------
SIDNEY ACKERMAN
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT & WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
/s/ Sara Fay Sulley /s/ Sidney Ackerman
- ----------------------------------- --------------------------------------
Name: SIDNEY ACKERMAN
Address: --------------------------------------
--------------------------------------
--------------------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ----------------------------------- --------------------------------------
Per: /s/ Sidney Ackerman c/s
--------------------------------------
SIDNEY ACKERMAN -- President
Per: /s/ Alan Fine
--------------------------------------
ALAN FINE - Secretary
<PAGE>
RESOLUTION OF DEBTOR CORPORATION
RE SUBORDINATION AGREEMENT
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ONTARIO PAINT & WALLPAPER LIMITED
-------------------
In consideration of loans and advances made or to be made by National Bank
of Canada to the corporation and generally in consideration of business dealings
between the said Bank and the corporation as well as business dealings between
the corporation and SIDNEY ACKERMAN,
Now therefore be it resolved
That the corporation acknowledge receipt of the notice of the
subordination agreement made on form No. 11221 a copy of which is annexed to the
present resolution after having been submitted to the directors and that the
corporation accept the assignment and transfer in favour of National Bank of
Canada included in the said agreement and that Mr. Sidney Ackerman, President of
the corporation, and Mr. Alan Fine, Secretary of the corporation, be and are
hereby authorized and instructed to jointly sign the acknowledgment and
acceptance on the aforesaid subordination agreement for and on behalf and in the
name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the Board
of Directors of ONTARIO PAINT & WALLPAPER LIMITED duly adopted on the 20th day
of September, 1996.
Dated at Toronto this 20th day of September 1996.
/s/ Alan Fine c/s
----------------------------------
ALAN FINE
Secretary
<PAGE>
NATIONAL
[LOGO] BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT AND WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for the Customer's obligations to the Bank or
may be applied to the payment of such obligations, whether or not due. The Bank
shall have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at , this day of , 1996.
-------- ------ ----------
Witness Signature(s)
- ----------------------------------- --------------------------------------
Name: SIDNEY ACKERMAN
Address: --------------------------------------
--------------------------------------
--------------------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at , this day of , 1996.
-------- ------ ----------
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ----------------------------------- --------------------------------------
Per: c/s
--------------------------------------
SIDNEY ACKERMAN -- President
Per:
--------------------------------------
ALAN FINE - Secretary
<PAGE>
STATUTORY DECLARATTON
CANADA ) IN THE MATTER OF a guarantee and a
) subordination agreement given by Sidney
PROVINCE OF ONTARIO ) Ackerman to National Bank of Canada (the
) "Bank") in support of loans and credit
TO WIT: ) facilities given by the Bank to Ontario Paint
) & Wallpaper Limited;
)
) AND IN THE MATTER OF a registration
) under the Personal Property Security Act.
I, SIDNEY ALVIN ACKERMAN, of the City of Toronto, in the Municipality of
Metropolitan Toronto, Province of Ontario, SOLEMNLY DECLARE THAT:
1. My legal name is Sidney Alvin Ackerman. I am not, and have not been, known
by any other name or names;
2. I am not in the process of obtaining a change of all or part of my name
pursuant to the Change of Name Act (Ontario);
3. My date of birth is August 2, 1945;
4. My residence address is 359 Lytton Boulevard, Toronto, Ontario, M5N 1R9;
5. A true copy of each of my Canadian citizenship certificate and my Ontario
driver's licence are attached to this declaration as Exhibits "A" and "B"
respectively, to evidence my name, date of birth and residence address.
AND I MAKE THIS SOLEMN DECLARATION conscientiously, believing it to be
true and knowing that it is of the same force and effect as if made under oath.
DECLARED BEFORE ME at )
the City of Toronto )
in the Municipality )
of Metropolitan Toronto )
this 20th day of September, ) /s/ Sidney Ackerman
1996. ) -------------------------------------
) SIDNEY ACKERMAN
/s/ S. F. Sulley )
A Commissioner, etc. )
<PAGE>
This is Exhibit "A" referred to in the
Statutory Declaration of Sidney Alvin Ackerman,
sworn before me, this 20th day of
September, 1996.
/s/ S. F. Sulley
...............................................
A Commissioner for Taking Affidavits
[PHOTOCOPY OF CANADIAN PASSPORT OF SIDNEY ALVIN ACKERMAN]
<PAGE>
This is Exhibit "B" referred to in the Statutory
Declaration of Sidney Alvin Ackerman, sworn before
me, this 20th day of September, 1996.
/s/ S. F. Sulley
...............................................
A Commissioner for Taking Affidavits
[PHOTOCOPY OF ONTARIO DRIVERS'S LICENSE CARD OF SIDNEY ALVIN ACKERMAN]
<PAGE>
LETTER OF GUARANTEE
TO: NATIONAL BANK OF CANADA
1. In consideration of the National Bank of Canada (hereinafter referred
to as the "Bank") dealing with
ONTARIO PAINT & WALLPAPER LIMITED
(hereinafter referred to as the "Customer"), the undersigned and each of them,
if more than one, hereby jointly and severally guarantee payment to the Bank of
all present and future debts and liabilities (direct or indirect, absolute or
contingent, matured or otherwise), now or at any time and from time to time
hereafter due or owing to the Bank whether incurred by the Customer alone or
jointly with any corporation, person or persons, or otherwise howsoever,
including all costs and disbursements incurred by the Bank in view of recovering
or attempting to recover said debts and liabilities. Provided, however, that the
liability of the undersigned, and of each of the undersigned herein, is limited
to TWO HUNDRED AND FIFTY THOUSAND 00 /100 Dollars ($ 250,000.00) with interest
thereon from the date of demand of payment, at the rate agreed upon, between the
Bank and the Customer.
2. In this guarantee, the word "Guarantor" shall mean the undersigned and
if there is more than one, it shall mean each of them.
3. This guarantee shall not be affected by the death or loss or diminution
of capacity of the Customer or of the Guarantor or by any change in the name of
the Customer in the membership of the firm of the Customer through the death or
retirement of one or more partners or the introduction of one or more other
partners or otherwise, or by the acquisition of the business of the Customer by
a corporation, firm or person, or by any change whatsoever in the objects,
capital structure or constitution of the Customer, or by the Customer or the
business of the Customer being amalgamated with a firm or corporation but shall,
notwithstanding the happening of any such event, continue to exist and apply to
the full extent as if such event has not happened. The Guarantor agrees to
monitor changes in the financial position of the Customer and hereby releases
the Bank from any liability resulting therefrom.
4. All monies, advances renewals and credits in fact borrowed or obtained
from the Bank shall be deemed to form part of the debts and liabilities,
notwithstanding any lack or limitation of status or of power, incapacity or
disability of the Customer or of the directors, partners or agents thereof, or
that the Customer may not be a legal or suable entity, or any irregularity,
defect or informality in the borrowing or obtaining of such monies, advances,
renewals or credits, the whole whether known to the Bank or not; and any sum
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as sole and principal debtor in respect
thereof and shall be paid to the Bank on demand with interest and accessories as
herein provided.
5. This guarantee shall continue and be enforceable notwithstanding any
amalgamation of the Bank with any other bank(s), financial institution(s) or
other corporation(s), and any further amalgamation, in which event this
guarantee shall also extend to all debts and liabilities then or thereafter owed
by the Customer to the amalgamated bank. Furthermore, all security, real or
personal, moveable or immoveable, which have been or will be given by the
Guarantor for the said debts and liabilities shall be valid in the hands of the
Bank, as well as its successors and assigns.
6. It is further agreed that this shall be a continuing guarantee, and
shall cover and secure any ultimate balance owing to the Bank.
7. This guarantee shall bind the Guarantor together with his heirs,
successors, executors, administrators, legal representatives and assigns until
termination thereof by notice in writing to the manager of the branch of the
Bank at which the account of the Customer is kept, but such termination by any
of the guarantors or their respective heirs, successors, executors,
administrators, legal representatives or assigns shall not prevent the
continuance of the liability hereunder of any other guarantor. Such termination
shall apply only to those debts or liabilities of the Customer incurred or
arising after reception of the notice by the Bank, but not in respect of any
prior debts or liabilities, matured or not. The notice of termination shall have
no effect on those debts or liabilities incurred after reception of said notice
which will result from express or implied commitments made prior to reception.
8. This guarantee will not be diminished or modified on account of any act
on the part of the Bank which would prevent subrogation from operating in favour
of the Guarantor, It is further agreed that the Bank, without exonerating in
whole or in part the Guarantor, may grant time, renewals, extensions,
indulgences, releases and discharges to, may take security from, and give up or
release any or part of the security held, may abstain from taking, perfecting,
registering or renewing security or from realizing on security, may accept
compositions and otherwise deal with the Customer and with any other person or
persons, including any of the guarantors, and dispose of any security held by
the Bank as it may see fit, and that all dividends and monies received by the
Bank from the Customer or from any other person, capable of being applied by the
Bank in reduction of the debts and liabilities hereby guaranteed, shall be
considered for all purposes as payment in gross which the Bank shall have the
right to apply as it may see fit, not being bound by the law of imputation, and
the Bank shall be entitled to prove against the estate of the Customer upon any
insolvency or winding up, in respect of the whole said debts and liabilities.
The Guarantor shall have no right to be subrogated to the Bank until the Bank
shall have received payment in full of its claims against the Customer with
interest and costs.
9. If any circumstances arise necessitating the Bank to file its claim
against the estate of the Customer and to value its security, it will be
entitled to place such valuation as the Bank may in its discretion see fit, and
the filing of such claim and the valuation of its security shall in no way
prejudice or restrict its rights against the Guarantor.
10. The Bank shall not be obliged to exhaust its recourse against the
Customer or other persons or the security it may hold before being entitled to
payment from the Guarantor of each and every of the debts and liabilities hereby
guaranteed and it shall not be obliged to offer or deliver its security before
its whole claim has been paid. The Guarantor waives all benefits of discussion
and division.
11. All indebtedness and liability, present and future of the Customer to
the Guarantor are hereby assigned to the Bank and postponed to the present and
future debts and liabilities of the Customer to the Bank. All monies received
from the Customer or on his behalf by the Guarantor shall be held as in his
capacity as agent, mandatary and trustee for the Bank and shall be paid over to
the Bank forthwith. This provision will remain in full force and effect,
notwithstanding the termination of the guarantee pursuant to the provisions of
paragraph 7 in which event it will terminate when the debts and liabilities of
the Customer to the Bank covered by this guarantee pursuant to paragraph 7
hereof have been paid in full.
<PAGE>
12. This guarantee is in addition to and not in substitution for any other
guarantee, by whomsoever given, at any time held by the Bank, and without
prejudice to any other security by whomsoever given held at any time by the Bank
and the Bank shall be under no obligation to marshall in favour of the Guarantor
any such security or any of the funds or assets the Bank may be entitled to
receive or have a claim upon.
13. The Guarantor shall be bound by any account settled between the Bank and the
Customer and, if no such account has been so settled any account stated by the
Bank shall be accepted by the Guarantor as conclusive evidence of the amount
which at the date of the account so stated is due by the Customer to the Bank.
14. The Guarantor shall make payment to the Bank of the amount of his liability
forthwith after demand therefor is made in writing. Such demand shall be deemed
to have been effectually made when an envelope containing it addressed to the
Guarantor at his last address known to the Bank is deposited postage prepaid in
the Post Office. The liability of the Guarantor shall bear interest from the
date of such demand at the rate or rates then applicable to the debts and
liabilities of the Customer to the Bank.
15. This guarantee and agreement shall be operative and binding upon every
signatory thereof notwithstanding the non-execution thereof by any other
proposed signatory or signatories, and possession of this instrument by the Bank
shall be conclusive evidence against the Guarantor that this instrument was not
delivered in escrow or pursuant to any agreement that it should not be effective
until any condition has been complied with. None of the parties shall be bound
by any representation or promise made by any person relative thereto which is
not embodied herein. The liability of the Guarantor hereunder begins on the date
of his signature on this letter of guarantee.
16. This guarantee shall be binding upon the undersigned and any of them, if
more than one, jointly and severally between them and with the Customer and
also upon the heirs, executors, administrators and successors of the Guarantor
and will extend to and enure to the benefit of the successors and assigns of the
Bank. Each and every provision hereof is severable and should any provision
hereof be illegal or not enforceable for any reason whatsoever, such illegality
or invalidity shall not affect the other provisions hereof which shall remain in
force and be binding on the parties hereto.
17. The Guarantor acknowledges having read and taken cognizance of the present
Letter or Guarantee before signing it and declares that he understands perfectly
the terms, conditions and undertakings contained therein.
18. This Letter of Guarantee shall be construed in accordance with the laws of
the Province of Ontario and the Guarantor agrees that any legal suit, action or
proceeding arising out of or relating to this Letter of Guarantee may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of the said courts, and acknowledges
their competence and agrees to be bound by any judgment thereof, provided that
nothing herein shall limit the Bank's right to bring proceedings against the
Guarantor elsewhere.
AS WITNESS the hand and seal of the Guarantor, at Toronto this 20th day of
September 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF Signature
/s/ Sara Fay Sulley /s/ Alan Fine
- --------------------------- ---------------------------------
(Please print) ALAN FINE
Name:
Address:
- --------------------------- ---------------------------------
(Please print)
- --------------------------- ---------------------------------
(Please print)
- --------------------------- ---------------------------------
(Please print)
- --------------------------- ---------------------------------
(Please print)
- --------------------------- ---------------------------------
(Please print)
- --------------------------- ---------------------------------
(Please print)
- --------------------------- ---------------------------------
I (we) hereby acknowledge that a copy of this Letter of Guarantee was handed
over to me (us) on the date hereof.
Signature of Guarantor(s).
/s/ Alan Fine
- ---------------------------------
ALAN FINE
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
<PAGE>
[LOGO] NATIONAL
BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT & WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for customer's obligations to the Bank or may be
applied to the payment of such obligations, whether or not due. The Bank shall
have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
/s/ Sara Fay Sulley /s/ Alan Fine
- --------------------------- ---------------------------------
Name: ALAN FINE
Address:
---------------------------------
---------------------------------
---------------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at Toronto, this 20th day of September, 1996.
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ---------------------------- ----------------------------------
Per: /s/ Sydney Ackerman c/s
-----------------------------
SIDNEY ACKERMAN President
-----------------------------
Per: /s/ Alan Fine
-----------------------------
ALAN FINE -- Secretary
<PAGE>
RESOLUTION OF DEBTOR CORPORATION
RE SUBORDINATION AGREEMENT
RESOLUTION
OF THE BOARD OF DIRECTORS OF
ONTARIO PAINT & WALLPAPER LIMITED
------------------
In consideration of loans and advances made or to be made by
National Bank of Canada to the corporation and generally in consideration of
business dealings between the said Bank and the corporation as well as business
dealings between the corporation and ALAN FINE,
Now therefore be it resolved
That the corporation acknowledge receipt of the notice of the
subordination agreement made on form No. 11221 a copy of which is annexed to the
present resolution after having been submitted to the directors and that the
corporation accept the assignment and transfer in favour of National Bank of
Canada included in the said agreement and that Mr. Sidney Ackerman, President of
the corporation, and Mr. Alan Fine, Secretary of the corporation, be and are
hereby authorized and instructed to jointly sign the acknowledgment and
acceptance on the aforesaid subordination agreement for and on behalf and in the
name of the corporation.
The foregoing is certified to be a true copy of a Resolution of the
Board of Directors of ONTARIO PAINT & WALLPAPER LIMITED duly adopted on the 20th
day of September, 1996.
Dated at Toronto this 20th day of September, 1996.
/s/ Alan Fine c/s
-----------------------------
ALAN FINE
Secretary
<PAGE>
[LOGO] NATIONAL
BANK
OF CANADA SUBORDINATION AGREEMENT
- --------------------------------------------------------------------------------
1. Subordination For good and valuable consideration, the undersigned hereby
agrees that the payment of any and all debts and sums of money which now are or
may hereafter become due or owing by ONTARIO PAINT & WALLPAPER LIMITED (the
"Customer") shall be subordinated in all respects to the payment of the
Customer's obligations to National Bank of Canada (the "Bank"); the debts and
sums of money due or owing to the undersigned by the Customer are hereinafter
called the "Subordinated Debts".
2. Effects of Subordination As a result of such subordination, the undersigned
agrees that payment of the Subordinated Debts shall become due and payable and
shall be made only after the payment of any and all obligations of the Customer
to the Bank. Any security securing the Subordinated Debts shall rank after the
rights of the Bank against the Customer, even if the Bank were not to have
security on the Customer's property.
3. Delivery of Sums Collected Should the undersigned nonetheless receive sums of
money in payment of the Subordinated Debts, he shall hold such sums as a
depositary and trustee for the Bank, and shall deliver the same to the Bank
without delay.
4. Assignment As additional security for the payment of the Customer's
obligations to the Bank, the undersigned hereby assigns the Subordinated Debts
to the Bank.
5. Rights of the Bank All sums which the Bank may receive hereunder may, at its
discretion, be held as security for customer's obligations to the Bank or may be
applied to the payment of such obligations, whether or not due. The Bank shall
have the choice of how any such sums collected shall be applied.
6. Interpretation The Customer's obligations to the Bank referred to hereunder
shall be any and all direct and indirect, present and future indebtedness and
obligations of the Customer to the Bank.
7. Successor of the Bank This agreement shall be binding upon the undersigned
and enure to the benefit of the Bank and any of its successors, by way of
amalgamation or otherwise.
Executed at _______________, this ________ day of ____________________, 1996.
Witness Signature(s)
- --------------------------- ---------------------------------
Name: ALAN FINE
Address:
---------------------------------
---------------------------------
---------------------------------
ACCEPTANCE
The Customer named in the Subordination Agreement hereinabove acknowledges
having received a copy and having taken cognizance thereof and further agrees to
comply therewith.
Executed at _______________, this ________ day of ____________________, 1996.
Witness Signature(s)
ONTARIO PAINT & WALLPAPER LIMITED
- ---------------------------- ----------------------------------
Per: c/s
----------------------------------
SIDNEY ACKERMAN - President
----------------------------------
Per:
----------------------------------
ALAN FINE -- Secretary
<PAGE>
STATUTORY DECLARATION
CANADA ) IN THE MATTER OF a guarantee and a
) subordination agreement given by Alan Fine
PROVINCE OF ONTARIO ) to National Bank of Canada (the "Bank") in
) support of loans and credit facilities given by
TO WIT: ) the Bank to Ontario Paint & Wallpaper Limited;
)
) AND IN THE MATTER OF a registration
) under the Personal Property Security Act.
I, ALAN IRVING FINE, of the City of North York, in the Municipality
of Metropolitan Toronto, Province of Ontario, SOLEMNLY DECLARE THAT:
1. My legal name is Alan Irving Fine. I am not, and have not been, known by
any other name or names;
2. I am not in the process of obtaining a change of all or part of my name
pursuant to the Change of Name Act (Ontario);
3. My date of birth is April 12, 1945;
4. My residence address is 407 Woburn Avenue, North York, Ontario, M5M 1L4;
5. A true copy of each of my birth certificate and my Ontario driver's
licence are attached to this declaration as Exhibits "A" and "B"
respectively, to evidence my name, date of birth and residence address.
AND I MAKE THIS SOLEMN DECLARATION conscientiously, believing it to
be true and knowing that it is of the same force and effect as if made under
oath.
DECLARED BEFORE ME at )
the City of Toronto )
in the Municipality )
of Metropolitan Toronto )
this 2Oth day of September, 1996. ) /s/ Alan I. Fine
) ------------------------------
) ALAN IRVING FINE
A Commissioner, etc.
/s/ Sara Fay Sulley
<PAGE>
This is Exhibit "A" referred to in the Statutory
Declaration of Alan Irving Fine, sworn before me,
this 20th day of September, 1996.
/s/ S.F. Sulley
----------------------------
A Commissioner for Taking Affidavits
[PHOTOCOPY OF CANADIAN IDENTIFICATION OF ALAN FINE]
<PAGE>
This is Exhibit "B" referred to in the Statutory
Declaration of Alan Irving Fine, sworn before
me, this 20th day of September, 1996.
/s/ S.F. Sulley
----------------------------
A Commissioner for Taking Affidavits
[PHOTOCOPY OF CANADIAN DRIVER'S LICENSE OF ALAN FINE]
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Ontario Paint
& Wallpaper Limited - Guarantee and Subordination Agreement by Alan Fine
- Registration under the Personal Property Security Act (Ontario)
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of each of the
verification statements noted below:
PPSA File No. Registration No.
------------- ----------------
824429403 960823 1922 1529 4143
080538714 960826 1932 1529 6310
DATED this 20th day of September, 1996.
/s/ Alan Fine
-----------------------------
ALAN FINE
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG REG PERIOO/PERIODE CAUTION FILING/AVERTIS
Personal Property Security Act 5 |_|
REG NUN/NO ENREGIST REF FILE NUN/NO DE EXPIRY DATE/DATE
REFERENCE D'EXPIRATION
960823l92215294l43 824429403 23 AUG 2001
DEBTORS / DEBITEUR
- --------------------------------------------------------------------------------
DATE OF BIRTH/DATE DE NAISSANCE
Alan I. Fine 12 APR 45
407 Woburn Avenue
North York ON M5M 1L4
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
350 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL/BIENS GREVES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONS GOODS/BIENS CONS INVTRY/STOCK EQUIP/MATER ACCTS/COMPT OTHER/AUTRE MV INCL/VA INCLUS
|_| |_| |_| |X| |_| |_|
</TABLE>
AMOUNT/MONTANT DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG EXPIRY DATE/DATE CAUTION FILING/AVERTIS
Personal Property Security Act D'EXPIRATION |_|
29 NOV 2005
REG NUM/NO ENREGIST REF FILE NUM/NO DE REFERENCE
9608261932l529631O 080538714
CHAGE/MOD IF REN YEARS/REN ANEES CORR PER/PER EXAC
J-Other Change
DEBTOR NAME (AS RECORDED) /NOM DU DEBITEUR (TEL QU'INSCRIT)
- --------------------------------------------------------------------------------
Ontario Paint & Wallpaper Limited
OTHER CHANGE DESCRIPTION/DESCRIPTION DE L'AUTRE MODIFICATION
- --------------------------------------------------------------------------------
SPECIFY OTHER CHANGE/PRECISER L'AUTRE M0DIFICATION
Subordination
Subordination by Alan Fine of reference File No. 080538714 to and in favour of
National Bank of Canada's reference File No. 824305914.
AGENT /AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Ontario Paint
& Wallpaper Limited - Guarantee and Subordination Agreement by Sidney
Ackerman - Registration under the Personal Property Security Act
(Ontario)
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of each of the
verification statements noted below:
PPSA File No. Registration No.
------------- ----------------
824429394 960823 1922 1529 4142
080538543 960826 1932 1529 6309
DATED this 20th day of September, 1996.
/s/ Sidney Ackerman
-----------------------------
SIDNEY ACKERMAN
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG REG PERIOD/PERIODE CAUTION FILING/AVERTIS
Personal Property Security Act 5 |_|
REG NUN/NO ENREGIST REF FILE NUN/NO DE EXPIRY DATE/DATE
REFERENCE D'EXPIRATION
960823l92215294l42 824429394 23 AUG 2001
DEBTORS / DEBITEUR
- --------------------------------------------------------------------------------
DATE OF BIRTH/DATE DE NAISSANCE
Sidney A. Ackerman 2 AUG 45
359 Lytton Boulevard
Toronto ON M5N 1R9
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
350 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL/BIENS GREVES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONS GOODS/BIENS CONS INVTRY/STOCK EQUIP/MATER ACCTS/COMPT OTHER/AUTRE MV INCL/VA INCLUS
|_| |_| |_| |X| |_| |_|
</TABLE>
AMOUNT/MONTANT DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG EXPIRY DATE/DATE CAUTION FILING/AVERTIS
Personal Property Security Act D'EXPIRATION |_|
29 NOV 2005
REG NUN/NO ENREGIST REF FILE NUM/NO DE REFERENCE
9608261932l5296309 080538543
CHANGE/MODIF REN YEARS/REN AMNEES CORR PER/PER EXAC
J-Other Change
DEBTOR NAME (AS RECORDED) /NOM DU DEBITEUR (TEL QU'INSCRIT)
- --------------------------------------------------------------------------------
Ontario Paint & Wallpaper Limited
OTHER CHANGE DESCRIPTION/DESCRIPTION DE L'AUTRE MODIFICATION
- --------------------------------------------------------------------------------
SPECIFY OTHER CHANGE/PRECISER L'AUTRE M0DIFICATION
Subordination
Subordination by Sidney Ackerman of reference file No. 080538543 to and in
favour of National Bank of Canada's reference file No. 824305914.
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Ontario Paint
& Wallpaper Limited - Guarantee and Subordination Agreement by 1010037
Ontario Inc - Registration under the Personal Property Security Act
(Ontario)
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of the verification
statement noted below on which the undersigned is named as the debtor, and a
copy of which is attached hereto:
PPSA File No. Registration No.
------------- ----------------
824305923 960819 1846 1529 6723
DATED this 20th day of September, 1996.
1010037 ONTARIO INC.
Per: /s/ Sidney Ackerman c/s
-----------------------------
SIDNEY ACKERMAN
President
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG REG PERIOO/PERIODE CAUTION FILINO/AVERTIS
Personal Property Security Act 5 |_|
REG NUN/NO ENREGIST REF FILE NUN/NO DE EXPIRY DATE/DATE
REFERENCE D'EXPIRATION
960819184615296723 824305923 19 AUG 2001
DEBTORS / DEBITEUR
- --------------------------------------------------------------------------------
CORPORATION NUMBER
L010037 Ontario Inc
731 Millway Avenue
Concord ON L4K 3S8
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
350 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL/BIENS GREVES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONS GOCOS/BIENS CONS INVTRY/STOCK EQUIP/MATER ACCTS/CONPT OTHER/AUTRE MV INCL/VA INCLUS
|_| |_| |_| |X| |_| |_|
</TABLE>
AMOUNT/MONTANT DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
ACKNOWLEDGMENT OF RECEIPT
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Bank") Credit Facilities to Ontario Paint
& Wallpaper Limited - Registration under the Personal Property Security
Act (Ontario) in respect of Security Interests granted to the Bank
- --------------------------------------------------------------------------------
THE UNDERSIGNED acknowledges receipt of a copy of the verification
statement noted below on which the undersigned is named as the debtor, and a
copy of which is attached hereto:
PPSA File No. Registration No.
------------- ----------------
824305914 960819 1846 1529 6722
DATED this 20th day of September, 1996.
ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Sidney Ackerman c/s
------------------------------
SIDNEY ACKERMAN
President
<PAGE>
- --------------------------------------------------------------------------------
VERIFICATION STATEMENT/ETAT DE VERIFICATION
- --------------------------------------------------------------------------------
REG UNDER/T. ENREG REG PERIOD/PERIODE CAUTION FILINO/AVERTIS
Personal Property Security Act 5 |_|
REG NUM/NO ENREGIST REF FILE NUM/NO DE EXPIRY DATE/DATE
REFERENCE D'EXPIRATION
960819184615296722 824305914 19 AUG 2001
DEBTORS / DEBITEUR
- --------------------------------------------------------------------------------
CORPORATION NUMBER
Ontario Paint & Wallpaper Limited
731 Millway Avenue
Concord ON L4K 3S8
CORPORATION NUMBER
Ontario Wallcoverings
731 Millway Avenue
Concord ON L4K 3S8
CORPORATION NUMBER
Concord Wallcoverings
731 Millway Avenue
Concord ON L4K 3S8
SECURED PARTIES/CREANCIER GARANTI
- --------------------------------------------------------------------------------
National Bank Of Canada
350 BURNHAMTHORPE ROAD WEST, SUITE 216
Mississauga ON L5B 3J1
COLLATERAL/BIENS GREVES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONS GOODS/BIENS CONS INVTRY/STOCK EQUIP/MATER ACCTS/COMPT OTHER/AUTRE MV INCL/VA INCLUS
|_| |X| |X| |X| |X| |X|
</TABLE>
AMOUNT/MONTANT DATE OF MATURITY/DATE ECHEANCE
AGENT/AGENT
- --------------------------------------------------------------------------------
Pallett Valo
90 Burnhamthorpe Road West Ste 1600
Mississauga, ON L5B 3C3
* * * * * END OF VERIFICATION STATEMENT * * * * *
* * * * * FIN DE L'ETAT DE VERIFICATION * * * * *
- --------------------------------------------------------------------------------
Verification statement Last Page . . .
Etat De Verification Derniere Page . . . Page 1
<PAGE>
CERTIFICATE OF SOLVENCY
with respect to Section 20 of the
Business Corporations Act (Ontario)
TO: NATIONAL BANK OF CANADA
RE: National Bank of Canada Loan to Ontario Paint & Wallpaper Limited (the
"Borrower") - Guaranteed by Rosedale Wailcoverings & Fabrics Inc. (the
"Corporation")
- --------------------------------------------------------------------------------
THE undersigned, a duly appointed officer of the Corporation, refers
to the guarantee (the "Guarantee") dated September 20, 1996, given by the
Corporation to you in respect of the debts and liabilities of the Borrower and
hereby certifies that there are no reasonable grounds for believing that:
(i) the Corporation is or, after giving the Guarantee, would be unable
to pay its liabilities as they become due; or
(ii) the realizable value of the Corporation's assets, excluding the
amount of any financial assistance in the form of a loan and in the
form of any secured guarantee, after giving the Guarantee, would be
less than the aggregate of the Corporation's liabilities and stated
capital of all classes.
DATED this 20th day of September 1996.
c/s
/s/ Alan Fine
-----------------------------
ALAN FINE
President
<PAGE>
DIRECTION RE: FUNDS
TO: NATIONAL BANK OF CANADA
RE: National Bank of Canada credit facilities to Ontario Paint & Wallpaper
Limited pursuant to Offer of Finance dated August 8, 1996
- --------------------------------------------------------------------------------
YOU ARE HEREBY authorized and directed to pay the proceeds of the above loan
and/or withdraw funds from our account to:
(i) pay the balance of moneys owing by us to HONGKONG BANK OF CANADA
pursuant to a payout statement to be obtained from that bank on the
day of payout; and
(ii) pay the legal fees and disbursements of Pallett Valo in connection
with this transaction upon presentation of their invoice;
AND FOR SO DOING, this shall be your full, sufficient and irrevocable authority.
DATED this 20th day of September, 1996.
ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Sydney Ackerman c/s
-----------------------------
SIDNEY ACKERMAN President
Per: /s/ Alan Fine
-----------------------------
ALAN FINE -- Secretary
<PAGE>
AUTHORIZATION TO INSERT DATES. ETC.
TO: NATIONAL BANK OF CANADA
AND TO: PALLETT VALO
RE: National Bank of Canada (the "Lender") loan to Ontario Paint
& Wallpaper Limited pursuant to Offer of Finance dated August 8, 1996
YOU ARE HEREBY irrevocably authorized and directed to do the
following:
1. to date the Acknowledgment of Debt Revolving Demand Credit in the
principal amount of $2,500,000.00 the date of funding, and to insert the
applicable prime rate on that date;
2. to date the Acknowledgment of Debt Revolving Demand Credit in the
principal amount of $1,250,000.00 the date of funding, and to insert the
applicable prime rate on that date;
3. to date the Bank Act documents, namely, Application for Credit and Promise
to Give Security Under the Bank Act [Form 10014], Security Under Section
427 of the Bank Act [Form 10015] and Agreement Respecting Security Given
By the Customer [Form 10115], a date that is at least one clear day
subsequent to the registration date of the Notice of Intention to give
security under Section 427 of the Bank Act, and to insert all other dates
as necessary.
DATED this 20th day of September, 1996.
ONTARIO PAINT & WALLPAPER LIMITED
Per: /s/ Sydney Ackerman c/s
-----------------------------
SIDNEY ACKERMAN President
-----------------------------
Per: /s/ Alan Fine
-----------------------------
ALAN FINE -- Secretary
<PAGE>
[LETTERHEAD OF TORKIN, MANES, COHEN & ARBUS]
October 29, 1996
National Bank of Canada
350 Burnhamthorpe Road West
Suite 216
Mississauga, Ontario
5B 3J1
- - and -
Pallett Valo
Barristers and Solicitors
90 Burnhamthorpe Road West
Suite 1600
Mississauga, Ontario
L5B 3C3
Dear Sirs:
Re: National Bank of Canada (the "Lender") Loan to Ontario Paint & Wallpaper
Limited (the "Borrower") pursuant to Offer of Finance dated August 8, 1996
(the "Offer of Finance") - Guaranteed by 1010037 Ontario Inc. (the
"Guarantor")
We are the corporate solicitors for the Guarantor and have acted for the
Guarantor in connection with the granting by the Guarantor to the lender of the
security referred to below to secure credit facilities offered by the Lender to
the Borrower pursuant to the Offer of Finance.
In connection with the foregoing, we have reviewed the Offer of Finance and the
following documents, among others:
1. a guarantee of indebtedness of the Borrower, limited to $1,000,000.00 plus
interest and dated September 20, 1996 (the "Guarantee"); and
2. a subordination agreement, dated September 20, 1996;
(the Offer of Finance and the foregoing documents being hereinafter collectively
referred to as the "Security Documents").
We have also reviewed such constating documents, corporate records, public
documents and
<PAGE>
Page 2
certificates of officers of the Guarantor and of public officials as we have
considered necessary as the basis for the opinions hereinafter expressed.
In such examinations we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic (or
similarly reproduced) copies, and the authenticity of all of the originals of
such documents.
In addition, we have considered such questions of law and have examined such
legislation and regulations thereto as we have considered necessary as a basis
for the opinions hereinafter set forth and, in particular, we have considered
the application of section 20 of the Business Corporations Act (Ontario) to the
Guarantee.
We have relied solely on the Corporate Certificate dated September 20, 1996 and
the Solvency Certificate dated September 20, 1996 as to the matters of fact set
out therein.
Based and relying upon and subject to the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
1. The Guarantor is a corporation duly incorporated and organized under the
laws of the Province of Ontario and has not been dissolved;
2. The execution, delivery and performance of the Security Documents by the
Guarantor does not contravene section 20(1) of the Business Corporations
Act (Ontario);
3. The Guarantor has all necessary power and capacity to execute and deliver
the Security Documents and to perform and observe its obligations
thereunder;
4. The Security Documents have been duly authorized, executed and delivered
by the Guarantor and now constitute legal, valid and binding obligations
of the Guarantor enforceable against the Guarantor in accordance with
their terms;
5. The execution and delivery of the Security Documents by the Guarantor and
the performance by the Guarantor of its obligations under the Security
Documents will not conflict with or result in a violation of the terms,
conditions and provisions of the constating documents or by-laws of the
Guarantor or of any provision of law, or of any agreement, indenture or
other document to which it is a party or by which it may be bound and of
which we have knowledge; and
6. We have no knowledge of any litigation or proceedings, pending or
threatened, before any court or before any governmental or administrative
body or agency, which may result in any material adverse change in the
operations, business, property or assets of the Guarantor or in the
condition (financial or otherwise) of the Guarantor's ability to
<PAGE>
Page 3
perform its obligations under the Security Documents.
The foregoing opinions as to the enforceability of the obligations of the
Guarantor are subject to the following qualifications:
1. Specific performance and injunctions, being equitable remedies, may be
granted only in the discretion of a Court of competent jurisdiction; and
2. Enforceability may be limited by bankruptcy, insolvency, liquidation,
moratorium, reorganization, reconstruction and other similar laws
affecting the enforceability of creditors' rights generally.
3. The enforceability of security agreements which are subject to the
Personal Property Security Act (Ontario) (the "PPSA") may be limited or
affected by the terms of the PPSA;
4. In respect of security agreements which are subject to the PPSA, a filing
under the PPSA in respect of the security interests perfected thereby must
be renewed prior to the expiry date of the initial filing thereunder and
such filing must be amended in certain circumstances specified in the PPSA
in order to preserve the security created by such instruments in respect
of property to which the PPSA applies.
5. We were not requested nor have we been involved in the registration of any
of the security agreements under the PPSA or the Bank Act;
6. We express no opinion as to the title to or ownership of the personal
property charged by the security agreements;
7. We express no opinion as to the priority of the Lender's security
interests in the assets charged pursuant to the security agreements or
whether the security agreements contain provisions that would effectively
subordinate the Lender's interests to that of third parties;
8. To the extent that the security interests created under the security
agreements purport to encumber or assign the rights of the Borrower under
any agreement with any third party or any license, permit or approval, the
security interests created thereunder may be effective only if such third
party provides its consent; and
<PAGE>
Page 4
9. Interest on amounts payable by the Borrower under the security agreements
may be limited to five percent (5%) per annum if the rate of interest
payable on such amounts in the security agreements is determined not to
satisfy the disclosure requirements of Section 4 of the Interest Act
(Canada), which provides that a borrower must be able to determine the
annual rate of interest being charged by a lender;
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
Per:
/s/ TORKIN, MANES, COHEN & ARBUS
<PAGE>
[LETTERHEAD OF TORKIN, MANES, COHEN & ARBUS]
October 29, 1996
National Bank of Canada
350 Burnhamthorpe Road West
Suite 216
Mississauga, Ontario L5B 3J1
- and -
Pallett Valo
Barristers and Solicitors
90 Burnhamthorpe Road West
Suite 1600
Mississauga, Ontario LSB 3C3
Dear Sirs:
Re: National Bank of Canada (the "Lender) Loan to Ontario Paint & Wallpaper
Limited (the "Borrower") pursuant to Offer of Finance dated August 8, 1996
(the "Offer of Finance")
We are the corporate solicitors for the Borrower and have acted for the
Borrower in connection with the granting by the Borrower to the lender of the
security referred to below to secure credit facilities offered by the Lender
to the Borrower pursuant to the Offer of Finance.
In connection with the foregoing, we have reviewed the Offer of Finance and
the following documents, among others:
1. An acknowledgment of debt revolving demand credit limited to the principal
amount of $2,500,000.00 Canadian, to be dated the date of funding;
2. An acknowledgment of debt revolving demand credit limited to the principal
amount of $1,250,000.00 Canadian, to be dated the date of funding;
3. A general security agreement dated September 20, 1996;
4. A general assignment of book debts, dated September 20, 1996;
5. A Notice of Intention to give security under Section 427 of the Bank Act,
dated September 20, 1996;
6. An application for credit and promise to give security under the Bank Act,
dated October
<PAGE>
Page 2
10, 1996;
7. An agreement respecting security given by the customer, dated October 10,
1996;
8. An agreement regarding security under Section 427 of the Bank Act, dated
October 10, 1996;
9. Security with respect to an insurance policy, on commercial insurance of
the Borrower, dated September 20, 1996;
10. Security with respect to an insurance policy, on insurance on the life of
Sidney A. Ackerman, dated September 20, 1996;
11. Security with respect to an insurance policy, on insurance on the life of
Alan I. Fine, dated September 20, 1996;
12. Undertaking with respect to life insurance for Sidney A. Ackerman, dated
October 29, 1996;
13. Priorities Agreement among the Lender, Laurentian Bank of Canada, Rosedale
Wallcoverings & Fabrics Inc. and the Borrower, dated October 29, 1996;
(the Offer of Finance and all of the foregoing documents being hereinafter
collectively referred to as the "Security Documents").
We have also reviewed such constating documents, corporate records, public
documents and certificates of officers of the Borrower and of public officials
as we have considered necessary as the basis for the opinions hereinafter
expressed.
In such examinations we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic (or
similarly reproduced) copies, and the authenticity of all of the originals of
such documents.
In addition, we have considered such questions of law and have examined such
legislation and regulations thereto as we have considered necessary as a basis
for the opinions hereinafter set forth.
We have relied solely on the Corporate Certificate dated September 20, 1996 as
to the matters of fact set out therein.
Based and relying upon and subject to the foregoing, and subject to the
qualifications hereinafter
<PAGE>
Page 3
expressed, we are of the opinion that:
1. The Borrower is a corporation duly incorporated and organized under the
laws of the Province of Ontario, and has not been dissolved;
2. The Borrower has the power to own and lease its property and to carry on
its business in the Province of Ontario;
3. The Borrower has all necessary power and capacity to borrow money in the
manner and on the terms and conditions set out in the Offer of Finance and
such borrowing of money has been authorized by all necessary action on the
part of the Borrower;
4. The Borrower has all necessary power and capacity to executed and deliver
the Security Documents and to perform and observe its obligations
thereunder;
5. The Security Documents have been duly authorized, executed and delivered
by the Borrower and constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their terms;
6. The borrowing of money on the terms set out in the Offer of Finance, the
execution and delivery by the Borrower of the Security Documents, and the
performance by the Borrower of its obligations under the Security
Documents will not conflict with or result in a violation of the terms,
conditions and provisions of the constating documents or bylaws of the
Borrower, or of any provision of law, or of any agreement, indenture or
other document to which the Borrower is a party or by which it may be
bound and of which we have knowledge; and
7. We have no knowledge of any actions or proceedings, pending or threatened,
before any court or before any governmental or administrative body or
agency, which may result in any material adverse change in the operations,
business, property or assets of the Borrower or in the condition
(financial or otherwise) of the Borrower's ability to perform its
obligations under the Security Documents.
The foregoing opinions as to the enforceability of the obligations of the
Borrower are subject to the following qualifications:
1. Specific performance and injunctions, being equitable remedies, may be
granted only in the discretion of a Court of competent jurisdiction;
2. Enforceability may be limited by bankruptcy, insolvency, liquidation,
moratorium, reorganization, reconstruction and other similar laws
affecting the enforceability of creditors' rights generally;
<PAGE>
Page 4
3. The enforceability of security agreements which are subject to the
Personal Property Security Act (Ontario) (the "PPSA") may be limited or
affected by the terms of the PPSA;
4. In respect of security agreements which are subject to the PPSA, a filing
under the PPSA in respect of the security interests perfected thereby must
be renewed prior to the expiry date of the initial filing thereunder and
such filing must be amended in certain circumstances specified in the PPSA
in order to preserve the security created by such instruments in respect
of property to which the PPSA applies;
5. We were not requested nor have we been involved in the registration of any
of the security agreements under the PPSA or the Bank Act;
6. We express no opinion as to the title to or ownership of the personal
property charged by the security agreements;
7. We express no opinion as to the priority of the Lender's security
interests in the assets charged pursuant to the security agreements or
whether the security agreements contain provisions that would effectively
subordinate the Lender's interests to that of third parties;
8. To the extent that the security interests created under the security
agreements purport to encumber or assign the rights of the Borrower under
any agreement with any third party or any license, permit or approval, the
security interests created thereunder may be effective only if such third
party provides its consent; and
9. Interest on amounts payable by the Borrower under the security agreements
may be limited to five percent (5%) per annum if the rate of interest
payable on such amounts in the security agreements is determined not to
satisfy the disclosure requirements of Section 4 of the Interest Act
(Canada), which provides that a borrower must be able to determine the
annual rate of interest being charged by a lender;
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
Per:
/s/ TORKIN, MANES, COHEN & ARBUS
<PAGE>
[LETTERHEAD OF TORKIN, MANES, COHEN & ARBUS]
October 29, 1996
National Bank of Canada
350 Burnhamthorpe Road West
Suite 216
Mississauga, Ontario
L5B 3J1
- - and -
Pallett Valo
Barristers and Solicitors
90 Burnhamthorpe Road West
Suite 1600
Mississauga, Ontario
L5B 3C3
Dear Sirs:
Re: National Bank of Canada (the "Lender") Loan to Ontario Paint & Wallpaper
Limited (the "Borrower") pursuant to Offer of Finance dated August 8, 1996
(the "Offer of Finance") - Guaranteed by Rosedale Wallcoverings & Fabrics
Inc. (the "Guarantor)
We are the corporate solicitors for the Guarantor and have acted for the
Guarantor in connection with the granting by the Guarantor to the lender of the
security referred to below to secure credit facilities offered by the Lender to
the Borrower pursuant to the Offer of Finance.
In connection with the foregoing, we have reviewed, among other documents, the
Offer of Finance and a guarantee given by the Guarantor guaranteeing the
indebtedness of the Borrower, limited to $500,000.00 plus interest and dated
September 20, 1996 (the "Guarantee"). (The Offer of Finance and the Guarantee
are hereinafter collectively referred to as the "Security Documents").
We have also reviewed such constating documents, corporate records, public
documents and certificates of officers of the Guarantor and of public officials
as we have considered necessary as the basis for the opinions hereinafter
expressed.
In such examinations we have assumed the genuineness of all signatures, the
authenticity of all
<PAGE>
Page 2
documents submitted to us as originals, the conformity to original documents of
documents submitted to us as certified or photostatic (or similarly reproduced)
copies, and the authenticity of all of the originals of such documents.
In addition, we have considered such questions of law and have examined such
legislation and regulations thereto as we have considered necessary as a basis
for the opinions hereinafter set forth and, in particular, we have considered
the application of section 20 of the Business Corporations Act (Ontario) to the
Guarantee.
We have relied solely on the Corporate Certificate dated September 20, 1996 and
the Solvency Certificate dated September 20, 1996 as to the matters of fact set
out therein.
Based and relying upon and subject to the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
1. The Guarantor is a corporation duly incorporated and organized under the
laws of the Province of Ontario and has not been dissolved;
2. The execution, delivery and performance of the Security Documents by the
Guarantor does not contravene section 20(1) of the Business Corporations
Act (Ontario);
3. The Guarantor has all necessary power and capacity to execute and deliver
the Security Documents and to perform and observe its obligations
thereunder;
4. The Security Documents have been duly authorized, executed and delivered
by the Guarantor and now constitute legal, valid and binding obligations
of the Guarantor enforceable against the Guarantor in accordance with
their terms;
5. The execution and delivery of the Security Documents by the Guarantor and
the performance by the Guarantor of its obligations under the Security
Documents will not conflict with or result in a violation of the terms,
conditions and provisions of the constating documents or by-laws of the
Guarantor or of any provision of law, or of any agreement, indenture or
other document to which it is a party or by which it may be bound and of
which we have knowledge; and
6. We have no knowledge of any litigation or proceedings, pending or
threatened, before any court or before any governmental or administrative
body or agency, which may result in any material adverse change in the
operations, business, property or assets of the Guarantor or in the
condition (financial or otherwise) of the Guarantor's ability to perform
its obligations under the Security Documents.
The foregoing opinions as to the enforceability of the obligations of the
Guarantor are subject to the following qualifications:
<PAGE>
Page 3
1. Specific performance and injunctions, being equitable remedies, may be
granted only in the discretion of a Court of competent jurisdiction; and
2. Enforceability may be limited by bankruptcy, insolvency, liquidation,
moratorium, reorganization, reconstruction and other similar laws
affecting the enforceability of creditors' rights generally.
Yours very truly,
TORKIN, MANES, COHEN & ARBUS
Per:
/s/ TORKIN, MANES, COHEN & ARBUS
<PAGE>
Exhibit 21.1
List of Subsidiaries of Registrant
Registrant: Rosedale Decorative Products Ltd.
Subsidiaries: 521305 Ontario Inc.
Rosedale Wallcoverings & Fabrics Inc.
1010037 Ontario Inc.
Ontario Paint & Wallpaper Limited
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated April 16, 1998 in the Registration Statement on Form
SB-2 and related prospectus of Rosedale Decorative Products Ltd. for the
registration of 1,000,000 shares of common stock and 1,000,000 warrants.
Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ontario, Canada
May 20, 1998
