EXHIBIT 10.6
SPECIMEN CONVERTIBLE DEBENTURE
THIS DEBENTURE IS OFFERED ONLY IN THOSE JURISDICTIONS AND TO THOSE PERSONS WHERE
AND TO WHOM THEY MAY BE LAWFULLY OFFERED FOR SALE. THIS IS NOT, AND IN NO
CIRCUMSTANCES IS TO BE CONSTRUED AS, A PUBLIC OFFERING OF THIS DEBENTURE. NO
SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA OR IN ANY OTHER
JURISDICTION HAS REVIEWED THIS DEBENTURE OR IN ANY WAY PASSED UPON THE MERITS OF
IT AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE. PERSONS WHO WILL BE
ACQUIRING THIS DEBENTURE WILL NOT HAVE THE BENEFIT OF THE REVIEW OF THIS
MATERIAL BY ANY SECURITIES COMMISSION OR SIMILAR AUTHORITY. THIS DEBENTURE HAS
NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND, SUBJECT TO CERTAIN
EXEMPTIONS, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OF AMERICA.
TRIPLE-C-INC.
(An Ontario Corporation)
______________% SUBORDINATED CONVERTIBLE DEBENTURE DUE __________________, 2001
Debenture No. ___________________
____________, 2000
$___________ CDN Hamilton, Ontario
TRIPLE-C-INC., an Ontario corporation (the "Company"), for value
received, hereby promises to pay to ("Holder"), the principal sum of ___________
Dollars and _____________ cents CDN., together with interest at the rate of
_______percent (____%) per annum (computed on the basis of actual days elapsed
and a year of three hundred sixty five (365) days) accrued on such principal sum
both before and after maturity, default or judgement until all obligations under
this Debenture have been satisfied. For purposes of the Interest Act (Canada),
annual interest may be calculated for any year by multiplying _______% by a
fraction, the numerator of which is the number of days in the year and the
denominator of which is 365. Interest provided for herein shall begin to accrue
as and from the date of issuance of this Debenture set forth above and shall be
paid once in respect of each fiscal quarter of the Company ending after the date
of the issuance of this Debenture, on the first business day of the next fiscal
quarter. The principal sum and all accrued and unpaid interest thereon shall be
paid in full on ________________, 2001 ("Maturity Date"). Payment of the
principal sum and interest accrued on this Debenture shall be made at the
principal offices of the Company, or such other place as the Holder and the
Company may agree, by regular cheque of the Company payable in Canadian dollars.
This Debenture is subject to the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Debenture, the following terms, where
used with an initial capital letter, have the following meanings:
"Business Day" means a day other than a Saturday, Sunday or any day
which is a statutory holiday in the Province of Ontario.
"Common Shares" means common shares without par value in the capital of
the Company, whether issued or unissued, as constituted at the date
hereof; provided that in the event of a change, reclassification,
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subdivision, redivision, reduction, combination or consolidation
thereof, "Common Shares" shall thereafter mean the shares resulting
from such change, reclassification, subdivision, redivision, reduction,
combination or consolidation.
"Company" means Triple-C-Inc., an Ontario corporation, and shall also
include its successors and assigns.
"Exercise Date" means the date upon which the Holder exercises its
Conversion Rights in accordance with the terms of paragraph (c) of
Appendix A.
"Holder" means the registered Holder of this Debenture. The Company
shall not be obliged to give effect to or recognize any trust
obligation of any registered holder.
"IPO" or "Initial Public Offering" means the issue of Common Shares (or
securities convertible into or exchangeable for Common Shares of the
Company) by the Company pursuant to a final prospectus for which a
receipt is issued by a securities commission or similar regulatory body
in Canada and/or pursuant to an effective registration statement filed
with the United States Securities and Exchange Commission to enable the
sale of Common Shares to members of the public, or the issue of any
shares to the shareholders of the Company by a corporation which is a
reporting issuer in a Province of Canada or public company in any
jurisdiction, pursuant to a reverse take-over bid, statutory
amalgamation, statutory arrangement or similar transaction involving
the Company.
"Senior Debt" means any debt or liability of any nature and kind which
is a secured obligation of the Company including, without limiting the
generality of the foregoing, any indebtedness pursuant to a finance
lease or title relation agreement, and all indebtedness, liabilities
and obligations, present or future, direct or indirect absolute or
contingent, matured or not, and whether or not secured, in favour of
any third party lending institution ("Senior Lender") whether on
account of a term loan, operating line or any other type of credit
facility.
1.2 Expressions. The expressions "herein", "hereto", "hereunder", "hereof"
and similar expressions mean or refer to this Debenture and to any
particular section, clause, subclause or portion hereof.
1.3 Appendices. Each of Appendix A forms an integral part of this
Debenture.
ARTICLE II
SUBORDINATION
2.1 Payment. Payment of the principal sum of and interest of the
indebtedness evidenced by this Debenture shall be subordinate, and
subject in the right of payment, to the prior payment of the Senior
Debt. In this regard the Holder shall execute and deliver the form of
Subordination and Postponement Agreement annexed hereto as Exhibit I or
such other form as may be reasonably required by Senior Lender from
time to time. In the event of liquidation of the Company or during the
continuation of any default in respect of any Senior Debt continuing
beyond the period of grace specified in respect of such Senior Debt,
then unless and until such default is cured or waived, no payment or
distribution of assets of the Company of any character, whether cash,
securities, or other property, will be paid or delivered with respect
to the principal sum of and interest accrued on this Debenture until
the Senior Debt has been paid in full. This Debenture is an unsecured
obligation of the Company that shall rank in parity with all other
unsecured debt of the Company other than the Senior Debt which shall
rank in priority regardless of whether all or any portion of the Senior
Debt is unsecured.
2.2 Nonimpairment of Company's Obligations. Nothing contained in this
Article II is intended to, or will:
(i) impair, as between the Company, its creditors, and the Holder,
the obligation of the Company, which is absolute and
unconditional, to pay to the Holder the principal sum of, and
interest accrued on this Debenture, as and when the same
become due and payable in accordance with its terms; or
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(ii) affect the relative rights of the Holder and other creditors
or the Company other than the holders of Senior Debt.
Nothing contained in this Debenture will prevent the holder from exercising all
remedies otherwise permitted by applicable law upon any default under this
Debenture, subject to the rights of the holders of the Senior Debt.
ARTICLE III
PREPAYMENT
3.1 Right of Prepayment. Subject to the provisions contained in Article II
hereof, the Company may, at its sole option, at any time prior to
maturity, prepay all or any part of the principal sum of this Debenture
(the "Prepayment"), upon notice given to the Holder as provided in
section 3.2 below, by paying to the Holder such payment of principal
sum together with interest then accrued on the principal sum of this
Debenture to the date fixed for such payment (the "Prepayment Amount").
Notwithstanding the foregoing, the Company shall not be entitled to
make a prepayment after the closing of the IPO up to and including the
Time of Expiry (as defined in paragraph (j) of Appendix A) at which
time the Company shall thereafter be entitled to make a Prepayment.
3.2 Notice of Prepayment. Notice of Prepayment shall be given to the Holder
by registered or certified mail, a notice of such Prepayment not less
than fifteen (15) days before the date fixed for prepayment, to the
Holder's last address as shown on the register of Debentureholders.
Such notice will specify (i) the date fixed for payment, (ii) the
amount of principal sum of the Debenture to be prepaid, (iii) the
amount of interest accrued on the principal sum of the Debenture to the
date fixed for prepayment, and (iv) the place of payment of the
Prepayment Amount.
3.3 Payment. Provided notice has been given as required in section 3.2
above, the Prepayment Amount specified in such notice shall become due
and payable on the date and place stated in such notice upon
presentation and surrender of this Debenture, or the part of this
Debenture specified in such notice.
ARTICLE IV
CONVERSION RIGHT
4.1 Conversion of Debenture. The Holder may, at his/her/its option, convert
the unpaid principal sum of this Debenture, into Common Shares of the
Company (the "Conversion Stock") at the conversion rate and upon the
terms and conditions and subject to the adjustments set forth in
Appendix A to this Debenture (the "Conversion Right"), which is
incorporated into and forms an integral part hereof.
4.2 Conversion Stock Fully Paid: Reservation of Shares. The Company
covenants and agrees that all Conversion Stock that may be issued upon
the exercise of the Conversion Right referred to in section 4.1 above
will, upon issuance in accordance with the terms of Appendix A, be
fully paid and non-assessable and free from all taxes, liens and
charges (except for taxes, if any, upon the income of the Holder and
applicable transfer taxes). The Company further covenants and agrees
that the Company will at all times have authorized and reserved a
sufficient number of its Common Shares for the purpose of issue upon
the exercise of such conversion privileges.
4.3 Adjustment of Number of Shares and Conversion Price. The number of
shares of Common Shares issuable upon conversion of the Debentures and
the conversion price with respect thereto shall be subject to
adjustment from time to time as set forth in Appendix A.
4.4 Accrued Interest. Upon conversion of the whole principal sum of this
Debenture, or any part thereof, the Company shall pay to the Holder all
interest then accrued on the whole principal of the Debenture, or in
the case of a partial conversion, interest then accrued upon the
portion of the principal sum of the Debenture converted, to the date of
exercise of the conversion privilege.
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ARTICLE V
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
5.1 General. Nothing contained in this Debenture shall prevent (i) any
consolidation, merger or other amalgamation of the Company with or into
any other corporation or corporations, or successive consolidations,
mergers or other amalgamation in which the Company or its successors is
a party or parties, or (ii) shall prevent any sale or conveyance of
Company assets as an entirety or any part thereof to any other
corporation, partnership, association or other entity, or (iii) shall
prevent any sale or conveyance of Company assets as an entirety or any
part thereof to any other corporation, partnership, association or
other entity of which the Company is the majority owner or general
partner or managing general partner. The successor company resulting
from any consolidation, merger or amalgamation will succeed to and be
substituted for the Company, with the same effect as if it had been
named in this Debenture in the Company's place and be liable for the
due and punctual payment of the principal sum of, and interest accrued
on this Debenture according to its terms.
ARTICLE VI
DEFAULT
6.1 Rights on Default. If a payment of principal or interest is not made
when due hereunder, the Holder may declare the principal sum of this
Debenture, together with any accrued and unpaid interest, not already
due, to be due and payable immediately.
6.2 Enforcement. If the Holder declares the principal sum of this
Debenture, together with all accrued and unpaid interest thereon, due
and payable immediately, the Holder may proceed, subject, however, to
all the terms and conditions of Article II, to protect and enforce
his/her/its rights by action at law, suit in equity, or other
appropriate proceeding.
ARTICLE VII
MISCELLANEOUS
7.1 Restrictions on Transfer. The Debenture cannot be transferred without
the prior written consent of the Company and, in any event, may not be
transferred to any person where the issue of Common Shares on the
exercise of the Conversion Right would require the Company to become a
reporting or public issuer. The Common Shares issued on the exercise of
the Conversion Right may be subject to restraints or restrictions on
transfer.
7.2 Amendments This Debenture is one of a series of Debentures (the "Series
Debentures") having the same terms and conditions. This Debenture may
be amended if such amendment is authorized by the Company and the
holders of 66 2/3% of the aggregate principal sum of all Series
Debentures.
7.3 Immunity. This Debenture is solely a corporate approval obligation of
the Company, and no personal liability for payment whatever shall
attach to, or is or will be incurred by, the directors, officers and/or
shareholders of the Company, or any of them, arising from or in
connection with the Company's indebtedness created under this
Debenture, or by reason of the obligations, covenants, or agreements
contained in or implied from this Debenture. However, this section 7.3
is not intended to modify or otherwise affect the common law and
statutory rights and obligations of the Company, its directors,
officers and shareholders otherwise applicable, as of the date hereof.
7.4 Withholding Tax. All payments will be made net of any required Canadian
withholding tax.
7.5 Notices. All notices, requests, demands, and payments of principal and
interest given to or made upon any party under this Debenture shall,
except as otherwise provided for in this Debenture, be in writing and
shall be sufficiently given if delivered or mailed by first class
registered or certified mail, postage prepaid and will be effective and
shall be deemed to have been received upon the earlier of (i) receipt
or (ii) the third (3rd) Business Day following the date such notice was
mailed as aforesaid properly addressed to the Company and to the Holder
at his/her/its address as follows:
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As to the Company: Triple-C-Inc.
8 Burford Road
Hamilton, Ontario
L8E 5B1
As to the Holder: ____________________________
____________________________
____________________________
____________________________
Any party hereto may change his/her/its address for service from time to time by
notice given to each of the other parties hereto in accordance with the
foregoing.
7.6 Headings. The headings of articles, sections and subsections in this
Debenture are inserted and named for convenience only, and will not
affect the meaning or interpretation of any or all of any such article,
section and subsection in this Debenture.
7.7 Governing Law. This Debenture shall be deemed to be made and entered
into pursuant to the laws of the Province of Ontario. In the event of
any dispute hereunder, this Debenture shall be governed by and shall be
constructed in accordance with the laws of the Province of Ontario.
7.8 Payment Date. In the event where the date of maturity of principal or
interest on this Debenture is not a business day, then payment of
principal and/or interest to the Holder need not be made on such date,
but may be made on the next succeeding business day with the same force
and effect as if made on the date of maturity or the date fixed for
prepayment and no interest shall accrue for the period after such date.
7.9 Construction. Wherever possible, each provision of this Debenture shall
be interpreted in such a manner as to be effective and valid under
applicable laws, but if any provision of this Debenture is prohibited
by or invalid under applicable laws, such provision will be ineffective
and/or invalid only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Debenture.
7.10 Entire Agreement. This Debenture, together with Appendix A, constitutes
the entire agreement among the parties herein with respect to the
subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written,
of the parties. There are no warranties, representations or agreements
among the undersigned and this Company in connection with the subject
matter hereof, except as set forth or referred to herein. No
supplement, modification or waiver or termination of this Debenture
shall be binding unless in writing executed by the Company and Holder.
No waiver of any of the provisions of this Debenture shall constitute a
waiver of any other provision, nor shall waiver constitute a continuing
waiver unless otherwise expressly provided.
IN WITNESS WHEREOF, the Corporation has caused this Debenture to be
executed by its duly authorized officer.
DATED: ___________________
TRIPLE-C-INC.
Per:
--------------------------------
Authorized Signing Officer
<PAGE>
APPENDIX A
The provisions of this Appendix A form an integral part of the Debenture issued
by Triple-C-Inc. All defined terms used in this Appendix without separate
definition shall have the meaning attributed thereto in the Debenture.
(a) Conversion Right. The Conversion Right is exercisable only upon
completion of the IPO at any time prior to the Time of Expiry and may
be exercisable in whole or part, provided that the principal sum of the
Debenture shall be convertible in increments of $10,000. To the extent
the entire principal sum of the Debenture is not converted into Common
Shares as aforesaid, the Company, upon surrender of the Debenture,
shall issue a new Debenture representing the balance of the principal
sum. The number of shares of Conversion Stock issuable on conversion
shall be determined as follows: the principal sum of the Debenture
being converted shall be divided by eighty percent (80%) of the per
share price (the "Conversion Price") at which the shares issued (the
"Issue Price") as part of the IPO are sold by the Company.
(b) Conversion Adjustments. The Conversion Price and the number and kind of
securities which may be received upon the exercise of the Conversion
Right shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(i) Stock Splits and Combinations. If the Company shall at any
time from time to time after the date of the IPO effect a
subdivision of its outstanding shares, the Conversion Price
then in effect immediately before such subdivision shall be
proportionately decreased, and conversely, if the Company
shall at any time or from time to time after the date hereof
combine its outstanding Common Shares, the Conversion Price
then in effect immediately before such combination shall be
proportionately increased. Any adjustment under this section
shall become effective upon the close of business on the date
the subdivision or combination becomes effective.
(ii) Certain Dividends and Distributions. If the Company shall at
any time or from time to time after the date of the IPO make
or issue, or fix a record date for the determination payable
in additional Common Shares entitled to receive a dividend or
other distribution payable in additional Common Shares, then
and in each such event, the Conversion Price then in effect
shall be decreased as of the time of such issuance or, in the
event that such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Shares issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date; and
(2) the denominator of which shall be the sum of the
total number of Common Shares issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date and the number
of Common Shares issuable in payment of such dividend
or distribution; provided, however, that if such
record date shall have been fixed and such dividend
is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Conversion
Price shall be recomputed accordingly as of the close
of business on such record date and thereafter such
Conversion Price shall be adjusted pursuant to this
subsection as of the time of actual payment of such
dividends or distributions.
(c) Exercise of Conversion Right. Subject to paragraph (a) of Appendix A,
the Conversion Right may be exercised at any time prior to the Time of
Expiry by notice in writing given by the Holder to the Company stating
that he/she/it wishes to exercise such Conversion Right, the principal
sum of the Debenture to be converted and shall be accompanied by the
surrender of the Debenture. The Common Shares issuable on the exercise
of the Conversion Right shall be deemed to be issued to the Holder as
the owner of record of such securities as of the close of business on
the date on which the Debenture, shall have been so surrendered.
Certificates for the Common Shares, evidencing the aggregate number of
securities for which the Holder is entitled upon the exercise of the
Conversion Right, shall be delivered to the Holder within a reasonable
time, not exceeding five Business Days, after the Exercise Date.
Certificates for the Common
<PAGE>
Shares so delivered shall be in such denomination as the Holder may
request in writing and shall be registered in the name of the Holder or
such other name as the Holder may designate in writing.
(d) Other Dividends and Distributions. If the Company at any time or from
time to time after the date hereof shall make or issue, or fix a record
date for the determination of holders of Common Shares entitled to
receive, a dividend or other distribution payable in securities of the
Company other than Common Shares, then and in each such event
provisions shall be made so that the Holder shall receive, upon
conversion of this Debenture, in addition to the number of Common
Shares receivable thereupon, the amount of securities or property of
the Company which such holder would have received had this Debenture
been converted into Common Shares on the date of such event and had
thereafter, during the period form the date of such event to and
including the Conversion Date, retained such securities (together with
any distributions payable thereon during such period) receivable by the
holder as aforesaid during such period, giving application to all
adjustments called for during such period under this section with
respect to the rights of the Holder.
(e) Reclassification, Exchange or Substitution. If the Common Shares
issuable upon the conversion of this Debenture shall be changed into
the same or different number of shares of any class or classes of
capital stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation
or sale of assets provided for in subsection (e) below), then and in
each such event, the holder of this Debenture shall have the right
thereafter to convert this Debenture into the kind and amount of shares
of capital stock and other securities and property receivable upon such
reorganization, reclassification or other change, as the holder of the
number of Common Shares into which this Debenture might have been
converted immediately prior to such reorganization, reclassification or
change, all subject to further adjustment as provided herein.
(f) Reorganization, Merger, Consolidation of Assets. If, at any time or
from time to time, there shall be a capital reorganization Common
Shares (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this section) or a merger
or consolidation of the Company with or into another corporation, then
as a part of such reorganization, merger or consolidation, provision
shall be made so that the Holder of this Debenture shall thereafter be
entitled to receive upon conversion of this Debenture, the number of
shares of capital stock or other securities or property of the Company,
or of the successor corporation resulting from such merger or
consolidation or sale, to which the holder of Common Shares deliverable
upon conversion would have been entitled on such reorganization,
merger, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this
section with respect to the rights of the holder of this Debenture
after the reorganization, merger, consolidation or sale to the end that
the provisions of this section (including adjustments of the Conversion
Price then in effect and the number of Common Shares receivable upon
conversion of this Debenture) shall be applicable after that event as
nearly equivalent hereto as may be practicable.
(g) Certificate of Adjustment. Upon the occurrence of each adjustment or
readjustment of the applicable Conversion Price pursuant to this
section, Company shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to Holder a
certificate, signed by a senior officer of the Company, setting forth
such adjustments or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based.
(h) Notices of Record Date. If after the IPO date:
(i) the Company shall set a record date for the purpose of
entitling the holders of Common Shares to receive a dividend,
or any other distribution, payable otherwise than in cash;
(ii) the Company shall set a record date for the purpose of
entitling the holders of shares of Common Stock to subscribe
for or purchase any shares of any class or to receive any
other rights;
(iii) there shall occur any capital reorganization of the Company,
reclassification of the shares of capital stock of the Company
(other than a subdivision or combination of its outstanding
shares of Common Stock), consolidation or merger of the
Company with or into another corporation, or sale of all or
substantially all of the assets of the Company; or
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(iv) there shall occur a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, and in any such case, the Company shall cause to be
mailed to the holder of record of this Debenture, at least
thirty (30) days prior to the dates hereinafter specified, a
notice stating the date: (A) which has been set as the record
date for the purpose of such dividend, distribution, or
rights; or (B) on which such reclassification, reorganization,
consolidation, merger, sale, dissolution, liquidation or
winding up is to take place and the record date as of which
the holder of record shall be entitled to exchange this
Debenture for securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger,
sale, dissolution, liquidation or winding-up.
(i) No Fractional Shares. Notwithstanding any adjustments provided for in this
Appendix "A" or otherwise, the Company shall not be required upon the exercise
of the Conversion Right to issue fractional Common Shares in satisfaction of its
obligations hereunder. Where a fractional common share would, but for this
paragraph (i) have been issued upon exercise of the Conversion Right, in lieu
thereof, there shall be paid to the Holder an amount equal (rounded to the
nearest $0.01) to the product obtained by multiplying such fractional share
interest by the Issue Price, which payment shall be made within ten Business
Days following the Exercise Date.
(j) Time of Expiry. For the purposes this Appendix A, "Time of Expiry" shall be
the earlier of: (i) the date on which the entire principal sum of the Debenture
has been paid, whether as a prepayment or on the Maturity Date; (ii) the
Maturity Date; or (iii) 15 days following receipt by the Holder of a notice from
the Company advising the Holder that the Company has completed its IPO.
<PAGE>
EXHIBIT 1
TO CONVERTIBLE DEBENTURE
THIS AGREEMENT is made the ___th day of ______________, 2000 between
Congress Financial Corporation (Canada) (the "Lender") and _________________(the
"Subordinate Creditor") and Triple-C-Inc. (the "Borrower").
WHEREAS pursuant to a loan agreement dated as of _____________________,
___________________________(such agreement and all amendment, modifications,
restatements, supplements and replacements entered into from time to time being
referred to herein as the "Loan Agreement") between the Borrower and the Lender,
the Lender has agreed to extend credits to the Borrower;
AND WHEREAS the Borrower is indebted to the Subordinate Creditor
pursuant to a subordinated convertible debenture (the "Debenture") dated
_______________, 2000, a copy of which is attached hereto as Schedule "A";
AND WHEREAS the Subordinate Creditor has agreed to subordinate
repayment by the Borrower of all indebtedness owing to it, to the repayment by
the Borrower of all present and future indebtedness and liability of the
Borrower to the Lender including, without limitation, all indebtedness of the
Borrower outstanding at any time and from time to time under the Loan Agreement;
NOW THEREFORE for good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged), the parties hereto make the
following covenants, acknowledgements and agreements.
1. Subordination and Postponement: The Borrower and the Subordinate Creditor
hereby covenant and agree that all indebtedness, liabilities and obligations,
present or future, direct or indirect, absolute or contingent, matured or not,
at any time owing by the Borrower to the Subordinate Creditor (the "Subordinate
Debt") are hereby deferred, postponed and subordinated in all respects by the
Subordinate Creditor to the prior repayment in full by the Borrower of all
indebtedness, liabilities and obligations, present or future, direct or
indirect, absolute or contingent, matured or not, at any time owing by the
Borrower to the Lender (the "Senior Debt").
2. Repayment of Subordinate Debt: Until the Senior Debt has been paid in full
and the Loan Agreement has been terminated, no payment (including, but not
limited to, principal and interest), prepayment or repayment on account of, or
other distribution in respect of, the Subordinate Debt shall be made by the
Borrower except that the Borrower may, prior to the occurrence of an event of
default that is continuing under the Loan Agreement, make scheduled interest and
principal payments pursuant to the Debenture. Notwithstanding the foregoing, the
Borrower shall not be entitled to make any payments under the Debenture if an
event of default would result from such payment or if the Borrower is not or
would not be in compliance with all of the terms, conditions and covenants
contained in the Loan Agreement (including, without limitation, Section 9.9).
The Borrower and the Subordinate Creditor covenant and agree in favour of the
Lender that, so long as any Senior Debt remains outstanding, no amendment will
be made to the Debenture resulting in an increase or an acceleration in any
amount payable by the Borrower to the Subordinate Creditor thereunder.
3. No Security: The Subordinate Creditor represents that it has not received any
security from the Borrower in respect of the Subordinated Debt and covenants in
favour of the Senior Creditor that during the term of this Agreement, it shall
not possess any security for the Subordinated Debt.
4. Restriction on Enforcement: The Subordinate Creditor agrees that it shall not
take any steps whatsoever to enforce the Subordinate Debt (including, without
limitation, rights of set-off, commencement of bankruptcy proceedings,
initiating an action, appointing or making application to a court for an order
appointing an agent or a receiver or receiver manager or by any other means of
enforcement whatsoever) unless the Subordinate Creditor has provided written
notice to the Lender of the occurrence of an event of default under the
Subordinate Debt and 180 days has expired from the date of such notice and such
event of default has not been cured during such time.
5. Lender's Rights: The Subordinate Creditor agrees that:
(a) the Lender, in its absolute discretion or in the absolute
discretion of any authorized officer or agent, and without
diminishing the obligations of the Subordinate Creditor
hereunder, may grant
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time or other indulgences to the Borrower and any other person
or persons now or hereafter liable to the Lender in respect of
the payment of the Senior Debt;
(b) the Subordinate Creditor shall not be released or exonerated
from its obligations hereunder by extension of time periods or
any other forbearance whatsoever, whether as to time,
performance or otherwise or by any release, discharge, loss or
alteration in or dealing with all or any part of the Senior
Debt or by any failure or delay in giving any notice required
under this Agreement or under the Senior Debt, the waiver by
the Lender of compliance with any conditions precedent to any
advance of funds, or by any modification or alteration of the
Senior Debt, or by anything done, suffered or permitted by the
Lender, or as a result of the method or terms of payment under
the Senior Debt or any assignment or other transfer of all or
any part of the Senior Debt;
(c) the Lender shall not be bound to seek or exhaust any recourse
against the Borrower or any other person or against the
property or assets of the Borrower or any other person or
against any security, guarantee or indemnity before being
entitled to the benefit of the Subordinate Creditor's
obligations hereunder and the Lender may enforce the various
remedies available to it and may realize upon the various
security documents, guarantees and indemnities or any part
thereof, held by it in such order as the Lender may determine
appropriate;
(d) the Subordinate Creditor is fully responsible for acquiring
and updating information relating to the financial condition
of the Borrower and all circumstances relating to the payment
or non-payment of the Subordinate Debt; and
(e) the Lender shall be entitled to advance its own monies as it
sees fit in order to preserve or protect the assets of the
Borrower or any part thereof, and all such sums advanced to
the extent reasonably advanced to preserve and protect the
assets of the Borrower or any part thereof, shall constitute
part of the Senior Debt.
6. Liquidation, Dissolution, Bankruptcy, etc.:
(a) In the event of distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the assets of the Borrower,
or the proceeds thereof, to creditors in connection with the
bankruptcy, liquidation or winding-up of the Borrower or in
connection with any composition with creditors or scheme of
arrangement to which the Borrower is a party, the Lender shall
be entitled to receive payment in full (including interest
accruing to the date of receipt of such payment at the
applicable rate whether or not allowed as a claim in any such
proceeding) of the Senior Debt before the Subordinate Creditor
is entitled to receive any direct or indirect payment or
distribution of any cash or other assets of the Borrower on
account of the Subordinate Debt, and the Lender shall be
entitled to receive directly, for application in payment of
such Senior Debt (to the extent necessary to pay all Senior
Debt in full after giving effect to any substantially
concurrent payment or distribution to the Lender in respect of
the Senior Debt), any payment or distribution of any kind or
character, whether in cash or other assets, which shall be
payable or deliverable upon or with respect to the Subordinate
Debt. To the extent any payment of Senior Debt (whether by or
on behalf of the Borrower, as proceeds of security or
enforcement of any right of set-off or otherwise) is declared
to be a fraudulent preference or otherwise preferential, set
aside or required to be paid to a trustee, receiver or other
similar person under any bankruptcy, insolvency, receivership
or similar law, then if such payment is recoverable by, or
paid over to, such trustee, receiver or other person, the
Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as
if such payment had not occurred.
(b) In order to enable the Lender to enforce its rights hereunder
in any of the actions or proceedings described in this Section
6, upon the failure of the Subordinate Creditor to make and
present on a timely basis a proof of claim against the
Borrower on account of the Subordinate Debt or other motion or
pleading as may be expedient or proper to establish the
Subordinate Creditor's entitlement to payment of any
Subordinate Debt, the Lender is hereby irrevocably authorized
and empowered, in its discretion and at its sole expense, to
make and present for and on behalf of the Subordinate Creditor
such proofs of claims or other motions or pleadings and to
demand, receive and collect any and all dividends or other
payments or disbursements made thereon in whatever
<PAGE>
form the same may be paid or issued and to apply the same on
account of the Senior Debt. The Subordinate Creditor hereby
covenants and agrees not to exercise any voting right or other
privilege that it may have from time to time in any of the
actions or proceedings described in this Section 6 in favour
of any plan, proposal, compromise, arrangement or similar
transaction that would defeat: (i) the right of the Lender to
receive payments and distributions otherwise payable or
deliverable upon or with respect to the Subordinate Debt so
long as any Senior Debt remains outstanding; or (ii) the
obligation of the Subordinate Creditor to receive, hold in
trust, and pay over to the Lender certain payments and
distributions as contemplated by this Section 6.
7. Payments Received by the Subordinate Creditor: If, prior to the payment in
full of the Senior Debt, the Subordinate Creditor or any person on its behalf
shall receive any payment from or distribution of assets of the Borrower or on
account of the Subordinate Debt (other than a payment which is authorized by
Section 2), then the Subordinate Creditor shall, and shall cause such other
person to, receive and hold such payment or distribution in trust for the
benefit of the Lender and promptly pay the same over or deliver to the Lender in
precisely the form received by the Subordinate Creditor or such other person on
its behalf, (except for any necessary endorsement or assignment) and such
payment or distribution shall be applied by the Lender to the repayment of the
Senior Debt.
8. No Release: This Agreement shall remain in full force and effect without
regard to, and the obligations of the Subordinate Creditor hereunder shall not
be released or otherwise affected or impaired by:
(a) any exercise or non-exercise by the Lender of any right,
remedy, power or privilege in the Loan Agreement;
(b) any waiver, consent, extension, indulgence or other action,
inaction or omission by the Lender under or in respect of this
Agreement, the Loan Agreement or any security held by the
Lender;
(c) any default by the Borrower under, any limitation on the
liability of the Borrower or on the method or terms of payment
under, or any irregularity or other defect in, the Loan
Agreement;
(d) the lack of authority or revocation thereof by any other
party;
(e) the failure of the Lender to file or enforce a claim of any
kind;
(f) any defence based upon an election of remedies by the Lender
which destroys or otherwise impairs the subrogation rights of
the Subordinate Creditor or the right of the Subordinate
Creditor to proceed against the Borrower for reimbursement, or
both;
(g) any merger, consolidation or amalgamation of any of the
Subordinate Creditor or the Borrower
into or with any other person; or
(h) any insolvency, bankruptcy, liquidation, reorganization,
arrangement, composition, winding-up, dissolution or similar
proceeding involving or affecting any of the Subordinate
Creditor or the Borrower.
9. No Borrower Rights: Nothing contained in this Agreement shall confer any
rights or benefits on the Borrower.
10. Further Assurances: The parties hereto shall forthwith, and from time to
time, execute and do all deeds, documents and things which may be necessary or
advisable, in the reasonable opinion of the Lender's counsel, to give full
effect to the subordination continued herein and the rights and remedies of the
Lender hereunder, in accordance with the intent of this Agreement.
11. Successors and Assigns:
(a) This Agreement is binding upon the Lender, the Subordinate
Creditor and the Borrower and their respective successors and
assigns and, subject to subsection 11(b) below, shall enure to
the benefit of the Lender, the Subordinate Creditor, the
Borrower, and their respective successors and permitted
assigns.
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(b) The Subordinate Creditor shall not be entitled to assign all
or any part of its rights and obligations under this Agreement
or the Subordinate Debt unless, prior to entering into such
assignment, the proposed assignee enters into a written
agreement with the Lender pursuant to which the proposed
assignee agrees to be bound by the terms hereof in effect as
of the date of such assignment and, if reasonably required by
the Lender, the Subordinate Creditor delivers to the Lender a
favourable opinion of counsel to the proposed assignee
confirming the enforceability of such agreement against such
proposed assignee, in form and content reasonably satisfactory
to the Lender's counsel.
Except in accordance with subsections 11(a) and 11(b) hereof, third parties
shall have no rights or benefits under this Agreement.
12. Governing Law: This agreement shall be governed and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
13. Termination: This Agreement shall terminate upon the repayment in full of
the Senior Debt.
14. Counterparts: This agreement may be executed in any number of counterparts,
which when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this agreement as of the
date first written above. CONGRESS FINANCIAL CORPORATION (CANADA)
By: --------------------------------------
Name:
Title:
TRIPLE-C-INC.
By: --------------------------------------
Name: Curtis W. Russell
Title: Chief Operating Officer
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
)
___________________________________________ ) ___________________________
as to the signature of_____________________ ) ___________________________
)
)
)
)
)
)
)
