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Exhibit 10.12
The Bank of Nova Scotia
[LOGO] Scotiabank
19 Bloor Street West at Yonge, Toronto, Ontario M4W 1A4
August 3, 2000
International Menu Solutions Inc.
c/o 620 Colby Drive
Waterloo, Ontario
Attention: M.A. Steele, President
Dear Sir:
We confirm that subject to acceptance by you, The Bank of Nova Scotia (the
"Bank") will make available to International Menu Solutions Inc. (the
"Borrower"), credit facilities on the terms and conditions set out in the
attached Terms and Conditions Sheet and Schedule "A".
If the arrangements set out in this letter, and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us by the close of business on August
10, 2000, after which date this offer will lapse.
This Commitment Letter replaces all previous commitments issued by the
Bank to the Borrower.
Yours very truly.
/s/ C.W. MacDonald /s/ D.R. MITCHELL
C.W. MacDonald D.R. MITCHELL
Senior Account Manager SENIOR MANAGER, CREDIT
Zenon A.G. Iwachiw
Asst. General Manager
& Centre Manager
The arrangements set out above and in the attached Terms and Conditions
Sheet and Schedule "A" (collectively the "Commitment Letter") are hereby
acknowledged and accepted by:
GUARANTORS
INTERNATIONAL MENU SOLUTIONS INC. PRIME FOODS PROCESSING INC.
------------------------------------ ------------------------------------
By: /s/ By: /s/
------------------------------------ ------------------------------------
Title: Title:
Date: Date:
------------------------------ ------------------------------
Date: Date:
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- 2 -
GUARANTORS (cont'd.)
TRANSCONTINENTAL GOURMET FOODS INC. TASTY SELECTIONS INC.
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Name Name
By: /s/ By: /s/
---------------------------------- ----------------------------------
Title: Title:
D.C. FOOD PROCESSING INC./
HUXTABLE'S KITCHENS INC. 1005549 ONTARIO LIMITED
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Name Name
By: /s/ By: /s/
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Title: Title:
Date: Date:
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THE ULTIMATE COOKIE CO. INC. INTERNATIONAL MENU SOLUTIONS CORP.
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Name Name
By: /s/ By: /s/
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Title: Title:
Date: Date:
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TERMS AND CONDITIONS
CREDIT NUMBER: 01 AUTHORIZED AMOUNT: $10,000,000
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TYPE
Operating
PURPOSE
General operating requirements
CURRENCY
Canadian-dollars and/or U.S. Dollar equivalent (maximum U.S. Dollar
availment $2,000,000 at any time).
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced by
Agreement re Operating Credit Line and/or Bankers' Acceptances in Canadian
dollars in multiples of $500,000 (subject to a minimum availment amount of
$500,000) and having terms of maturity of 30 to 180 days without grace
and/or Standby Letters of Credit (with each availment subject to
completion of an Application and Agreement for Irrevocable Standby Letter
of Credit in a form satisfactory to the Bank). Availment by way of Standby
Letters of Credit is not to exceed an aggregate of $300,000 CAD.
NOTE: during the period January 1st through July 31st, maximum aggregate
availment under this facility is limited to $7,500,000 CAD.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 1/2% per annum with
interest payable monthly.
The Bank's U.S. Dollar Base Rate in Canada, from time to time, plus 1/2%
per annum with interest payable monthly.
Bankers' Acceptance Fee of 2% per annum, subject to a minimum fee of $500
per availment, payable at time of acceptance.
REPAYMENT
Advances are repayable on demand.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Agreement re Operating Credit Line.
Bankers' Acceptance Agreement.
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SPECIFIC CONDITIONS
Until all debts and liabilities under the Credit have been discharged in
full, the following conditions will apply in respect of the Credit:
Operating loans, Bankers' Acceptances and Standby Letters of Credit
are not to exceed at any time the "Borrowing Base" which is defined
as the aggregate of 80% of good quality accounts receivable
(excluding accounts over 90 days, accounts due by employees, offsets
and inter-company accounts) less security interests or charges held
by other parties and specific payables which have or may have
priority over the Bank's security plus 30% of net inventory in
frozen category, less security interests or charges held by other
parties and specific payables which have or may have priority over
the Bank's security. Advances against inventory are limited to
$2,500,000. Net Inventory is defined as the sum of finished goods,
work-in-progress and raw materials valued at the lower of cost or
market.
CREDIT NUMBER: 02 AUTHORIZED AMOUNT: $3,500,000
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TYPE
364 Day Revolving Term
This facility may be drawn down up to and including 364 days from
acceptance hereof. The Borrower has the option, provided at least 60 days
written notice has been provided to request extension of the facility for
a further 364 days, with such extension subject to no event of default
having occurred and subject to Bank approval.
PURPOSE
To finance sundry equipment
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced by
Demand Promissory Notes.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 1 1/4% per annum
with interest payable monthly.
FEES
A Standby Fee of 1/2% per annum on the daily unused portion of the Credit
is payable monthly from August 1, 1999, with the proviso that if in any
given month the average utilization is $2,500,000 or more, no Standby Fee
will apply.
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DRAWDOWN
Advances are to be made in minimum multiples of $250,000.
REPAYMENT
Advances are repayable on demand.
PREPAYMENT
Prepayment is permitted without penalty at any time in whole or in part.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Schedule "A" to the General Security Agreement covering the
equipment purchased.
SPECIFIC CONDITION
Until all debts and liabilities under the Credit have been discharged in
full, the following condition will apply in respect of the Credit:
Prior to any drawdown, the Bank is to be satisfied with the quality,
value and eligibility of all assets to be financed.
OPTIONAL AVAILMENTS WITHIN CREDIT NO. 2 ABOVE
The Borrower has the following availment options under the Credit:
OPTION 1 - TERM PROMISSORY NOTES
At any time during the 364 day period, provided no event of default
exists, the Borrower may convert to a term facility the whole, or a
portion of outstandings as follows:
AMOUNT: Minimum of $250,000 per note amount
AVAILMENT: By Term Promissory Note
TERM: Up to 5 years
FLOATING RATE: The Bank's Prime Lending Rate from time to time plus 1
1/4% per annum with interest payable monthly.
FIXED RATE: The rate applicable to each advance will be set on the
date of conversion based upon the Bank's Base for Fixed
Rates plus 2 3/4% per annum, calculated and payable
monthly.
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REPAYMENT
Each advance is repayable in up to 60 equal monthly installments of
principal commencing within one month of each drawdown. The term of each
advance is not to exceed 5 years and the amortization is not to exceed 5
years.
PREPAYMENT
Floating Rate
Prepayment is permitted without penalty at any time in whole or in part.
Fixed Rate
Prepayment of the loan in whole or in part is permitted at any time on
payment of an amount equal to the greater of:
i) three months simple interest at the rate applicable to the loan on
the principal amount prepaid; and
ii) the amount, if any, by which interest at the rate applicable to the
loan exceeds interest at the prevailing rate at the time of
prepayment calculated on the amount of the principal prepayment for
the remaining term of the loan. The "prevailing rate at the time of
prepayment" is defined as that rate at which the Bank would then
lend to the Borrower, based on the same security, for the remaining
term of the loan.
OPTION 2 - NON-REVOLVING (SCOTIA LEASING)
AMOUNT
Minimum of $250,000 per Lease contract
AVAILMENT
The Borrower and the Alternate Borrowers as listed below may avail the
credit by Lease Agreements/Conditional Sales Contract with appropriate
supporting documentation:
Borrower Maximum Permitted
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International Menu Solutions Inc. $ 100,000
Prime Foods Processing Inc. 430,000
Transcontinental Gourmet Foods Inc. 1,020,000
Tasty Selections Inc. 1,030,000
D.C. Food Processing Inc. 830,000
The Ultimate Cookie Co. Inc. 90,000
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$3,500,000
==========
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INTEREST RATE
Floating Rate
The base payment applicable to each contract will be set on the
commencement date of the contract based upon the Bank's Prime Lending Rate
plus 1 1/4% per annum, calculated and payable monthly. The total periodic
payment will be adjusted monthly with changes in the Bank's Prime Lending
Rate.
Fixed Rate
The payment applicable to each contract will be set on the commencement
date of the contract based on the published Scotia Leasing's Base Rate
plus 2 3/4% per annum, calculated and payable monthly.
REPAYMENT
Leases and/or conditional sale contracts are repayable in accordance with
the terms and conditions of each respective lease or conditional sale
contract. The maximum term of any such lease or conditional sale contract
shall not exceed 60 months.
At the end of the term to option, the lessee shall elect one of the
following options:
a. purchase the equipment for not more than 20% of the original
cost;
b. allow a third party who has agreed with the Bank to purchase
the equipment for not more than 20% of the original cost;
c. rent the equipment for an additional term and revised rent
payment to be authorized by the Bank.
PREPAYMENT
Leases and/or conditional sale contracts are not cancellable, and no
prepayments of principal are permitted.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Lease Agreement(s)/Conditional Sale Contract(s) covering equipment
leased/financed, together with applicable supporting documentation.
Comprehensive General Liability insurance for a minimum of
$2,000,000 per occurrence with the Bank recorded as an additional
named insured. All risks insurance covering the replacement value of
the equipment with the Bank recorded as loss payee and additional
named insured.
Resolution of Directors authorizing leases.
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Progress Payment Agreement under which the Borrower may act on
behalf of the Bank in the ordering and acquisition of equipment to
be leased. The total cost of the equipment to be acquired under this
agreement shall not exceed the amount of this credit.
SPECIFIC CONDITION
Until all debts and liabilities under the Credit have been discharged in
full, the following condition will apply in respect of the Credit:
Prior to any drawdown, the Bank is to be satisfied with the quality,
value, and eligibility of all assets to be leased or financed.
NOTE: The aggregate of outstandings under the 364 Day Revolving Term and
Options 1 and 2 availed by the Borrower and/or the Alternate
Borrowers is not to exceed $3,500,000 at any time.
CREDIT NUMBER: 03 AUTHORIZED AMOUNT: $1,500,000
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TYPE
Non-Revolving
PURPOSE
To finance 70% of the cost sundry equipment (30% down payment required
up-front).
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced by
Demand Promissory Notes.
INTEREST RATE
Floating Rate
The Bank's Prime Lending Rate from time to time, plus 1 1/2% per annum
with interest payable monthly.
Fixed Rate
The Borrower has the option to fix the interest rate for the balance of
the term of the loan at any time until December 31, 2000, subject to
availability. Rates will be quoted upon request.
DRAWDOWN
Advances are to be made in minimum multiples of $100,000.
The loan is to be fully drawn down by December 31, 2000.
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REPAYMENT
Each advance is repayable in 60 equal instalments of principal commencing
within 30 days of each drawdown. The term of each advance is 5 years and
the amortization is 5 years.
PREPAYMENT
Floating Rate
Prepayment is permitted without penalty at any time in whole or in part.
Fixed Rate
Prepayment of the loan in whole or in part is permitted at any time on
payment of an amount equal to the greater of:
i) three months simple interest at the rate applicable to the loan on
the principal amount prepaid: and
ii) the amount, if any, by which interest at the rate applicable to the
loan exceeds interest at the prevailing rate at the time of
prepayment calculated on the amount of the principal prepayment for
the remaining term of the loan. The "prevailing rate at the time of
prepayment" is defined as that rate at which the Bank would then
lend to the Borrower, based on the same security, for the remaining
term of the loan.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Schedule "A" to the General Security Agreement covering the
equipment purchased.
SPECIFIC CONDITION
Until all debts and liabilities under the Credit have been discharged in
full, the following condition will apply in respect of the Credit:
Prior to any drawdown, the Bank is to be satisfied with the quality,
value and eligibility of all assets to be financed.
OPTIONAL AVAILMENTS WITHIN CREDIT NO. 3 ABOVE
The Borrower has the following availment option under the Credit:
OPTION 1 - NON-REVOLVING (SCOTIA LEASING)
AMOUNT
Minimum of $100,000 per Lease contract representing up to 70% of cost of
item leased with 30% lease deposit required up-front, and held until the
end of the lease term.
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AVAILMENT
Lease Agreements/Conditional Sales Contract with appropriate supporting
documentation.
INTEREST RATE
Floating Rate
The base payment applicable to each contract will be set on the
commencement date of the contract based upon the Bank's Prime Lending Rate
plus 1 1/2% per annum, calculated and payable monthly. The total periodic
payment will be adjusted monthly with changes in the Bank's Prime
Lending Rate.
Fixed Rate
The payment applicable to each contract will be set on the commencement
date of the contract based on the published Scotia Leasing's Base Rate
plus 3% per annum, calculated and payable monthly.
REPAYMENT
Leases and/or conditional sale contracts are repayable in accordance with
the terms and conditions of each respective lease or conditional sale
contract. The maximum term of any such lease or conditional sale Contract
shall not exceed 60 months.
At the end of the term to option, the lessee shall elect one of the
following options:
a. purchase the equipment for not more than 30% of the original cost;
b. allow a third party who has agreed with the Bank to purchase the
equipment for not more than 30% of the original cost;
c. rent the equipment for an additional term and revised rent payment
to be authorized by the Bank.
PREPAYMENT
Leases and/or conditional sale contracts are not cancellable, and no
prepayments of principal are permitted.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Lease Agreement(s)/Conditional Sale Contract(s) covering equipment
leased/financed, together with applicable supporting documentation.
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Comprehensive General Liability insurance for a minimum of
$2,000,000 per occurrence with the Bank recorded as an additional
named insured. All risks insurance covering the replacement value of
the equipment with the Bank recorded as loss payee and additional
named insured.
Resolution of Directors authorizing leases.
Progress Payment Agreement under which the Borrower may act on
behalf of the Bank in the ordering and acquisition of equipment to
be leased. The total cost of the equipment to be acquired under this
agreement shall not exceed the amount of this credit.
SPECIFIC CONDITION
Until all debts and liabilities under the Credit have been discharged in
full, the following condition will apply in respect of the Credit:
Prior to any drawdown, the Bank is to be satisfied with the quality,
value, and eligibility of all assets to be leased or financed.
NOTE: The aggregate of outstandings under advances payable on demand and
Option 1 is not to exceed $1,500,000 at any time.
ADDITIONAL FACILITY
Subject to availability and execution of mutually satisfactory
documentation, the Borrower may enter into Forward Exchange Contracts with
the Bank for maximum terms of up to one year.
Maximum aggregate Forward Exchange Contracts outstanding at any one time
are not to exceed $7,500,000 USD.
GENERAL FEES
A Commitment Fee of $150,000 is payable upon acceptance of this
commitment.
A Loan Administration Fee of $1,500 per month is payable by the Borrower.
OTHER FEES AND COMMISSIONS
In addition to, and not in substitution for the obligations of the
Borrower and the rights of the Bank upon the occurrence of an event of
default herein, the Borrower shall pay to the Bank Loan Administration
fees of:
a) $250 per month (or such higher amount as may be determined by the
Bank from time to time) for each month or part thereof during which
the Borrower is late in providing the Bank with financial or other
information required herein;
b) $250 per month (or such higher amount as may be determined by the
Bank from time to time) for each month or part thereof during which
loan payments of principal, interest or other amounts are past due;
and
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c) $1,000.00 per month (or such higher amount as may be determined by
the Bank from time to time) for each month or part thereof during
which the Borrower is in default of any other term or condition
contained in this Commitment Letter or in any other agreement to
which the Borrower and the Bank are parties.
The imposition or collection of fees does not constitute an expressed or
implied waiver by the Bank of any event of default or any of the terms or
conditions of the lending arrangements, security or rights arising from
any default. Fees may be charged to the Borrower's deposit account when
incurred.
CONDITIONS PRECEDENT
Continuation of existing credits and prior to any advances being made
under the new facility (No. 3), the Bank is to be provided with evidence
of injection of a minimum of $4,500,000 additional equity (to be increased
to $5,800,000 by October 31, 2000) by way of deeply subordinated debt
and/or convertible debentures and/or common shares, with documentation, as
appropriate, in form and substance satisfactory to the Bank.
GENERAL SECURITY, TERMS AND CONDITIONS APPLICABLE TO ALL CREDITS
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank providing for a first security interest on all assets and
undertakings of the company, except for specific permitted encumbrances to
be identified and agreed to by the Bank securing loans to other creditors,
registered or recorded as required by the Bank, is to be provided prior to
any advances or availment being made under the Credits:
General Assignment of Book Debts.
General Security Agreement over all present and future personal
property with appropriate insurance coverage, loss if any, payable
to the Bank.
Life Insurance in the face amount of $2,000,000 on the life of
Michael Steele assigned to the Bank.
Priority Agreement with Sub Debt/Debenture Lenders and Business
Development Corporation giving the Bank priority over all assets
except specific assets financed by other parties.
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Guarantees given by the following (with corporate seals and
resolutions as applicable) in the amounts shown:
NAME AMOUNT
---- ------
Prime Foods Processing Inc.* Unlimited
Transcontinental Gourmet Foods Inc.* Unlimited
Tasty Selections Inc. Unlimited
D.C. Food Processing Inc./*
1005549 Ontario Limited* Unlimited
Huxtable's Kitchens Inc.* Unlimited
International Menu Solutions Corp.* Unlimited
The Ultimate Cookie Co. Inc. Unlimited
1119984 Ontario Limited o/a Soups On Unlimited
To be secured by:
* General Security Agreement over all present and future
personal property with appropriate insurance coverage, loss if
any, payable to the Bank.
Guarantee by International Menu Solutions Inc., (with
Corporate Seal and Resolution as applicable) in an unlimited
amount to each alternate borrower as identified above under
Credit No. 02 - Option 2.
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the following conditions will apply in respect of the Credits:
"Consolidation" as it appears hereunder pertains to the Consolidated
Financial Statements of International Menu Solutions Corp.
The ratio of consolidated Debt (including deferred taxes) to
consolidated Tangible Net Worth (TNW) is not to exceed 2.5:1,
improving to 2:1 by October 31, 2000.
TNW is defined as the sum of share capital, earned and contributed
surplus, postponed funds, deeply subordinated debt having maturities
in excess of one year and convertible debentures (except up to
$4,500,000 in deeply subordinated loans/debentures now to be
provided, having a term of 9 months from date of closing, but on the
understanding any repayment/redemption is only permitted if all
conditions remain onside subsequent to such repayment/redemption)
less (i) amounts due from officers/affiliates. (ii) investments in
affiliates, and (iii) intangible assets as defined by the Bank.
The ratio of consolidated current assets to consolidated current
liabilities is to be maintained at all times at 1:1 or better,
improving to 1.25:1 by October 31, 2000.
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Without the Bank's prior written consent (which will not be
unreasonably withheld):
No dividends, withdrawals, bonuses, advances to shareholders,
management or affiliates are permitted.
No change in ownership is permitted.
No mergers, acquisitions or change in the Borrower's line of
business are permitted (other than acquisitions consummated as
at the date of this Commitment Letter).
Cumulative consolidated capital expenditures are not to exceed
$6,000,000 for the fiscal year ending December 31, 2000.
The Borrower will not grant or permit a Purchase Money
Security Interest to any supplier or creditor.
Guarantees or other contingent liabilities are not to be
entered into and assets are not to be further encumbered.
The Borrower shall permit the Bank, or its agents, access, at all
reasonable times, to all premises where the collateral covered by
the Bank's security may be located and the Bank or its agents may
inspect such collateral and all related documents and records.
For ongoing Credit Risk management purposes, all operating accounts
of the Borrower shall be maintained with the Bank as long as the
Borrower has any operating line facilities with the Bank.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the Borrower will provide the Bank with the following:
Annual Audited Consolidated Financial Statements of International
Menu Solutions Corp. within 120 days of its fiscal year end, duly
signed.
Annual Prepared Unconsolidated Financial Statements for all
subsidiaries, within 120 days of each fiscal year end, duly signed.
Monthly Consolidated statement of International Menu Solutions Corp.
and Unconsolidated Financial Statements of all subsidiaries within
60 days of period end.
A Consolidated Statement of Security monthly, to include information
on inventory, accounts receivable and accounts payable, within 20
days of period end.
Quarterly Aged Listing of Receivables within 20 days of period end.
Quarterly Aged Listing of Trade Accounts Payable within 20 days of
period end.
