EXHIBIT 4.1
[NATIONAL BANK OF CANADA LETTERHEAD]
September 21, 2000
Pure Technologies Ltd.
1050, 340 - 12 Avenue SW
Calgary, Alberta T2R 1L5
Attn: Jennifer Stubbs, Chief Financial Officer
Dear Madam:
RE: OFFER OF FINANCING
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The National Bank of Canada is pleased to advise that we agree to make available
the following credit facilities, subject to the terms and conditions described
herein.
This Offer of Financing supersedes any and all previous letters.
BORROWER: PURE TECHNOLOGIES LTD.
(hereinafter called the "Borrower").
BANK: NATIONAL BANK OF CANADA
(hereinafter called the "Bank").
GUARANTOR: PURE TECHNOLOGIES U.S. INC.
(hereinafter called the "Guarantor").
FACILITY A: DEMAND OPERATING CREDIT
Amount: $750,000.00 Canadian or US Equivalent.
Tenor: On demand.
Purpose: Revolving for operating purposes.
Borrowing Options: Demand Loan in $25,000.00 multiples as evidenced by
Acknowledgement of Debt Revolving Demand Credit.
[NATIONAL BANK OF CANADA LETTERHEAD]
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PURE TECHNOLOGIES LTD. PAGE 2
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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Interest Rate: The Bank's Prime Rate as established from time to
time plus one percent per annum (P + 1.00% p.a.) or
US Base Rate plus one percent per annum (US Base
+1.00% p.a.). Interest shall be calculated daily and
paid monthly in arrears on the 26th day (or such
other day designated by the Bank) of each month, or
if such a day is not a business day, on the next
business day by way of automatic debit to the
Borrower's account.
National Bank Prime Rate -- For purposes hereof, the
"National Bank Prime Rate" is the floating annual
rate of interest established from time to time by the
Bank as the base rate. It is used to determine the
rates of interest on Canadian Dollar loans made in
Canada and designated by it as its Prime Rate. The
rates of interest payable herein will be and become
adjusted if and so often as the National Bank Prime
Rate shall change. Interest at the stated rates will
be payable both before and after demand default and
judgement and interest on overdue interest shall be
calculated daily at the same rate, compounded in
arrears monthly and payable on demand.
U.S. Base Rate Advances -- The Bank's U.S. Base Rate,
is calculated from time to time by the Bank, and is
the rate it will use to determine interest on U.S.
Dollar loans to customers resident in Canada and
designated as the Bank's U.S. Base Rate. Interest is
based on a 365 day year, and is payable monthly in
arrears on the 26th day of each month.
The National Bank of Canada's U.S. Base Rate as of
today's date is 9.00%.
The National Bank of Canada's Prime Rate as of
today's date is 7.50%.
Repayment: Unless demanded, interest only paid monthly in
arrears.
Margin: The availability of Facility "A" shall be limited at
all times by the lesser of:
1. $750,000.00
OR
2. 75% of good quality Canadian accounts
receivable under 90 days less inter-
company/employee advances holdbacks, contra
accounts, doubtful accounts, disputed
accounts, and right of offset.
PLUS
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PURE TECHNOLOGIES LTD. PAGE 3
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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3. 90% of good quality Canadian and
International accounts receivable under 90
days that are insured through the Export
Development Corporation as required by the
Bank less inter-company/employee advances,
holdbacks, contra accounts, doubtful
accounts disputed accounts and rights of
offset
PLUS
60% of good quality U.S. accounts receivable
of the Borrower and its U.S. subsidiary Pure
Technologies U.S. Inc. under 90 days less
intercompany/employee advances, holdbacks,
contra accounts, doubtful accounts, disputed
accounts, and right of offset.
LESS
Prior claims being receiver general, EI,
CPP, WCB, employees wages, vacation pay,
rent and GST payable.
SUBLIMIT OF
FACILITY A: LETTERS OF CREDIT/LETTERS OF GUARANTEE
To a maximum of $750,000.00.
1. Letters of Credit 1.50% per annum based on
the face amount for one year (minimum $100)
and pro-rated for any lesser period of time
with any portion of 31 days considered a
complete month.
2. Letters of Guarantee 1.50% per annum based
on the face amount for one year (minimum
$100) and pro-rated for any lesser period of
time with any portion of 31 days considered
a complete month.
Letters of Credit/Guarantee cannot be issued for a
longer period than a one-year term.
FACILITY B: MASTERCARD BUSINESS EXPENSE CARDS
Amount: $200,000.00 Canadian or Canadian Equivalent.
(Increased from $150,000.00).
Tenor: On demand.
Purpose: To facilitate travel, entertainment and supplier
expenses for company officers and/or employees.
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PURE TECHNOLOGIES LTD. PAGE 4
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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Interest Rate: As per MasterCard's schedule of rates as established
from time to time.
Repayment: Payable in full, monthly.
MAXIMUM RATE
OF RETURN: If the interest charged or chargeable under this
Offer Letter, on the credit advanced pursuant to this
Offer Letter or pursuant to any security granted
under this Offer Letter, except for this section,
constitute an illegal rate of interest, then the
interest charged or chargeable on the credit so
advanced or secured shall be reduced such that the
total interest charged or chargeable under this Offer
Letter on the credit advanced pursuant to this Offer
Letter or pursuant to any security granted under this
Offer Letter shall be that rate of interest.
that is one percent per annum less than the minimum
rate which would be an illegal rate of interest,
calculated in accordance with generally accepted
actuarial practices and principles. Such reduction
shall be effected by reducing, or refunding to the
Borrower, such of those charges and expenses (or a
combination thereof) constituting "interest" (as such
term is defined or determined by the statute
establishing or defining illegal rates of interest)
payable hereunder as may be designated by the Lender.
FEES: 1. A renewal fee of $1,875.00 has been earned
in conjunction with the provision of the
Offer of Financing and is payable upon
acceptance thereof.
2. Annual Renewal Fee and/or Amending Credit
Terms fee shall not exceed one-half of one
percent per annum.
3. A standby fee one-eighth of one percent per
annum (1/8 of 1.00% p.a.) of the undrawn
amount of Facility A shall be collected
monthly.
4. A LOAN administration fee of $150.00 shall
be collected monthly.
5. Late Fees:
1) Monthly reporting $50.00 per week;
2) Annual Reporting $100.00 per month.
6. Operating excesses are not condoned by the
Bank; however, it should be noted that the
Bank may, but is not obligated to, cover
said shortfalls. If an excess arises and the
Bank decides to accommodate said shortfall,
there will be a 1.00% fee levied (minimum
$100.00) for each occurrence.
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PURE TECHNOLOGIES LTD. PAGE 5
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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CURRENT ACCOUNT/
ADMINISTRATIVE
CONDITIONS: 1. Regular Bank service charges shall apply in
the day-to-day operations of the Borrower's
account.
2. Interest will be paid monthly on daily
average balance subject to the following:
CANADIAN ACCOUNT #0097824.
o Prime rate minus 2.00% for balances
under $1,000,000.00.
o Prime rate minus 1.75% for balances
over $1,000,000.00 to $2,500,000.00.
o Prime minus 1.50% for balances over
$2,500,000.00.
U.S. ACCOUNT #0033567.
o U.S. base rate minus 3.00%.
SECURITY: Unless otherwise outlined, all National Bank Security
shall be registered in first position.
All security currently held or to be taken by the
Bank (the "Security") shall be held in support of all
indebtedness of the Borrower to the Bank. The Credit
Facilities, the interest thereon and all other
amounts payable in respect of the Credit Facilities
will be secured, inter alla, by the following:
1. General Assignment of Book Debts registered
in all Provinces that the Borrower does
business. (held).
2. A General Security Agreement in a form
satisfactory to the Bank's solicitors,
charging all present and after-acquired
property of the Borrower (held).
3. A General Security Agreement in a form
satisfactory to the Bank's solicitors,
charging all present and after-acquired
property of Pure Technologies U.S. Inc.
(held).
4. An unlimited Guarantee from Pure
Technologies U.S. Inc. held in support of
all facilities (held).
5. Assignment of Export Development Corporation
Insurance for Canadian and foreign accounts
receivable as required by the Bank (held).
6. Acknowledgement of Debt, Revolving Demand
Credit executed by the Borrower in a form
satisfactory to the Bank as evidence of the
indebtedness of the Borrower to the Bank
(held).
7. Assignment of Insurance from Pure
Technologies Ltd. (held)
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PURE TECHNOLOGIES LTD. PAGE 6
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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If we or our solicitors determine, during the
finalization of our security package or in the
ordinary course of business, that altered or
additional security is required, the Borrower will
provide it upon the Bank's request.
Where a contradiction exists between the security
granted hereunder and this Offer of Financing, this
Offer of Financing will be the operative document.
COSTS: All fees and out-of-pocket expenses of the Bank in
respect of the operation, renewal and monitoring of
this Agreement, including all legal fees (unless
disputed), inspection, appraisal of security and the
Bank's costs of complying with any notice provisions
of the Personal Property Security Act, if required,
will be automatically debited to the Borrower's
account.
INCREASED COSTS: Notwithstanding anything contained in this letter to
the contrary, in the event that:
(i) changes to any existing law or regulation or
the introduction of any new law or
regulation, or taxes other than income
taxes, including, without limitation, a
sales tax on loan transactions, or in the
interpretation or administration thereof; or
(ii) compliance by the Bank with any request from
or requirement of any central bank or other
fiscal or monetary authority having
jurisdiction over Canadian banks generally
(whether or not such request or requirement
has the force of law);
cause the Bank to:
1. incur any cost as a result of having entered
into and/or performed its obligations
hereunder and/or as a result of obligations
or options remaining outstanding hereunder
including, without limitation, any reserve
or special deposit requirement or any
payment on or calculated by reference to the
amount of the facility hereunder; and
2. suffer a reduction in the rate of return on
that part of its overall capital (not due to
the rates of tax payable on their overall
profits or net income) as a result of a
requirement to attribute or allocate capital
to the facility provided hereunder in
respect of that part of such facility which
is for the time being undrawn as a result of
a change in the manner in which the Bank is
required to allocate resources to its
obligations hereunder.
Then the Bank reserves the right to increase the
charges for the facility and/or facility options
provided hereunder by the amount of
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PURE TECHNOLOGIES LTD. PAGE 7
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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such additional cost or liability as determined by
the Bank and the Borrower agrees that it will
forthwith on demand pay to the Bank amounts
sufficient to reimburse the Bank against such costs
or liabilities.
BANK OF CANADA
RESTRICTIONS: The availability of this facility is at all times
subject to the necessity of compliance by the Bank in
such manner as we think fit, with any and all
restrictions, rules and regulations of the Bank of
Canada or any other applicable regulatory authority
from time to time in force.
COVENANTS: During the term of this agreement, the Borrower shall
maintain and observe the following:
1. The Borrower shall not exceed a consolidated
Debt/Equity ratio, of 1.00:1. This test
shall be quarterly and at the Borrower's
fiscal year-end. Debt is defined as all
current and long-term liability of the
Borrower excluding postponed shareholder
loans and deferred taxes. Equity is defined
as capital stock, retained earnings and
postponed shareholder loans less
investments/advances to affiliates and
subsidiaries less Intangible or other Assets
as defined by the Bank. The Debt/Equity
ratio is calculated by dividing Equity into
Debt.
2. The Borrower will maintain a minimum
consolidated working capital ratio of 1.50:1
at all times. This test shall be quarterly
and at the Borrower's fiscal year-end.
Current assets include cash, accounts
receivable, inventory, and prepaids. Current
liabilities include bank operating loans,
overdrafts, accounts payable, accrued
liabilities, and current portion of
long-term debt. The working capital ratio is
calculated by dividing current liabilities
into current assets.
3. The Borrower will maintain a minimum
consolidated equity position of at least
$2,000,000.00. This test shall be quarterly
and at the Borrower's fiscal year end.
Equity is defined in covenant #1 above.
4. The Bank's prior consent is required before
declaring bonuses in excess of $30,000.00 or
dividends to shareholders and/or officers of
the Company.
5. Investment in affiliates and/or subsidiaries
is limited to $1,500,000.00 and higher
amounts will not be permitted without the
Bank's prior consent.
REPORTING
REQUIREMENTS: During the term of this agreement, the Borrower shall
provide the following:
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PURE TECHNOLOGIES LTD. PAGE 8
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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1. Aged list of receivables to be provided
within 30 days of the preceding month and
executed by a shareholder or officer of the
Company.
2. Aged list of payables to be provided within
30 days of the preceding month breaking down
trade payables and accruals and executed by
a shareholder or officer of the Company.
3. Provision of a monthly Borrowing Base
Certificate which outlines loan availability
as defined by the margin formula, along with
Bank covenant requirements; to be provided
monthly within 30 days of the preceding
month and executed by a shareholder or
officer of the Company (Bank form).
4. In-house income statement and balance sheet
to be provided within 45 days of the
preceding quarter and executed by a
shareholder or officer of the Company.
5. Audited year-end financial statements of the
Borrower to be provided within 120 days of
the Borrower's year-end and executed by a
shareholder or officer of the Company
6. Annual financial projections within 90 days
of fiscal year-end to include:
a) Income Statement.
b) Cash Flow Statement.
c) Balance Sheet.
TERMS AND
CONDITIONS: 1. The Bank reserves the right to revise the
conditions described herein upon 30 days
written notice, if and when any changes,
levies, assessments or other impositions
whatsoever are imposed by a governmental
authority with respect to the services
offered herein.
2. The Bank's advances are granted on a demand
basis and are subject to review from time to
time and at least annually. The annual
review is scheduled for June 30, 2001.
3. Any material change in the legal or
beneficial ownership of the shares of the
Borrower shall not occur without the prior
written consent of the Bank, such consent
not to be unreasonably withheld.
4. The Borrower authorizes the Bank to
automatically debit its current account for
Bank loan principal and interest payments,
unless these amounts are in dispute, all
fees as outlined herein and security related
legal fees.
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PURE TECHNOLOGIES LTD. PAGE 9
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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5. The Borrower agrees to maintain all Domestic
and International Banking with the National
Bank of Canada. The Borrower's main domestic
Banking will be conducted at 401 - 8th
Avenue S.W., Calgary, Alberta T2P 1E4.
6. As long as any amount shall be outstanding,
the Borrower shall not, without prior
consent of the Bank:
a) in the ordinary course of business,
guarantee or become contingently
liable for the obligations of
another individual or firm
including shareholders,
subsidiaries, and affiliates of the
present company;
b) incur additional indebtedness or
encumber assets of the Borrower
such that any other creditor or
claims will rank ahead of or pari
passu with the interest of the
Bank;
7. The terms of the Offer of Financing shall
not merge or be superseded by the Security
referred to herein or any other document but
shall continue in full force and effect.
Where a contradiction exists between the
security granted hereunder and the Offer of
Financing, the Offer of Financing, the Offer
of Financing will be the operative document.
8. The parties hereto shall from time to time
execute and deliver all such other and
further deeds, documents, instruments and
assurances which, in the opinion of the
Bank, may be necessary or advisable to carry
into force and effect the purpose and intent
of the Offer of Financing including the
provision and preservation of Security.
9. The Borrower shall comply with all
applicable laws, regulations and directives
including, without limitation, those
relating to the environment whether for
protection, preservation, clean-up or
otherwise and will obtain all necessary
permits, business and other authorizations
in connection therewith.
10. The Borrower hereby agrees to provide to the
Bank, written notice of a change in the name
or address immediately.
11. The Borrower hereby waives the requirement
for the Bank to provide copies of Personal
Property Security Act ("PPSA") registrations
undertaken by the Bank.
12. The Borrower will remit when due all
statutory employee deductions.
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PURE TECHNOLOGIES LTD. PAGE 10
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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13. The Borrower will promptly pay when due all
business, income and other taxes (including
goods and services tax) property levied on
its operations and property.
14. In the event of a material change, which is
judged by the Bank to be unfavourable, the
Bank may cancel its Offer of Financing and
credit facilities.
15. The Borrower acknowledges and agrees that
the Bank will perform random credit checks
and balance verifications on accounts
receivable on a periodic basis.
16. The Borrower acknowledges and agrees that it
is a right of the Bank to have its Internal
Consultant perform financial audits at the
Borrower's premises during regular business
hours upon reasonable notice to the
Borrower. The cost of $300.00 per day shall
be paid by the Borrower.
17. Whereas the Borrower requires the Bank to
receive instructions by way of telex or fax
machine, the Borrower hereby agrees to be
bound by the terms and conditions set by the
Bank.
18. All legal fees incurred for security
preparation, review, registration and
renewal, including the Bank's cost of
complying with any notice provisions of the
PPSA, if required, will be for the account
of the Borrower.
19. Borrower must provide Bank with a copy of
Written Notice and copy of News Release to
CDNX confirming any form of borrowings or
receipt of funds from non-approved Financial
Source as defined by the Canadian Venture
Exchange (Policy 5.1) which involves any
charge on security interests in its assets
or which otherwise constitutes a material
charge.
EVENTS OF
DEFAULT: The Bank shall have the discretion to determine the
form, terms and conditions of the Security and such
Events of Default as it may require. In this respect,
the Bank shall have the right to terminate its
obligations to make the Credit Facilities available
and declare the loans to be forthwith due and payable
(and, thereupon, proceed to protect, exercise and
enforce its rights and remedies hereunder and under
the Security and such other rights and remedies as
are provided by law or by equity of statute) if:
1. the Borrower fails to pay when due any
principal, interest or other amount owing
hereunder or under any of the Security
Documents or any indebtedness, liability or
obligation of the Borrower to the Bank;
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PURE TECHNOLOGIES LTD. PAGE 11
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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2. the Borrower or a Guarantor defaults in the
due and prompt performance or observation of
any of its covenants or obligations
hereunder or under any of the Security
Documents;
3. any representations or warranty contained in
any of the Security Documents or any
certificate or opinion delivered hereunder
or thereunder, is found to be untrue,
inaccurate or otherwise misleading in any
particular;
4. the validity, enforceability or, where
applicable, priority of this Offer of
Financing or any of the Security Documents
is prejudiced or endangered;
5. an order is made or a resolution is passed
for the winding up or amalgamation of the
Borrower or a Guarantor;
6. the Borrower or a Guarantor becomes
insolvent, commits an act of bankruptcy or
makes an assignment for the benefit of
creditors or a proposal under the Bankruptcy
Act or a similar act;
7. a custodian, liquidator, receiver,
receiver-manager or trustee or any other
person with similar powers is appointed for
any property of the Borrower or a Guarantor;
8. any execution, sequestration, extent or any
process of any court becomes enforceable
against the Borrower or a Guarantor or a
distress or comparable process is levied
upon any property of the Borrowers or
Guarantor and is outstanding for 30 days;
9. the Bank determines that there has been a
materially adverse change in the condition,
financial or otherwise, of the Borrower or a
Guarantor or in the risk of the loans; and
10. any other event which constitutes or which
with the giving of notice or lapse of time
or otherwise would constitute, an event of
default under any of the Security documents
occurs.
APPLICABLE LAW: The Laws of the Province of Alberta shall apply in
the interpretation of this agreement.
CONFIDENTIALITY: The contents of this letter are confidential between
the Lender and the Borrower; the parties may not
disclose such contents to any unrelated party without
prior written approval of the other party.
ADMINISTRATION: Commercial Banking Centre
600, 407 Eighth Avenue, SW
Calgary, Alberta T2P 1E5
Darryl Elliott, Account Manager
Telephone: (403) 294-4973
Fax: (403) 294-4993
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PURE TECHNOLOGIES LTD. PAGE 12
RE: OFFER OF FINANCING SEPTEMBER 21, 2000
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BRANCH: National Bank of Canada
401 Eighth Avenue, SW
Calgary, Alberta T2P 1E4
Tel: (403) 294-4936
Fax: (403) 294-4965
The Borrower may not transfer or assign any of his rights or obligations
hereunder nor any portion whatsoever of the proceeds of the loan. Any such
transfer or assignment shall be considered null and void by the Bank and shall,
at the Bank's option, render the balance then outstanding on the loan
immediately due and payable and shall relieve the Bank from the obligation of
making any further cash advances hereunder.
Should this Offer of Financing be acceptable, please execute and return one copy
along with an executed copy of the Acknowledgement of Debt Revolving Demand
Credit to the undersigned prior to September 29, 2000 after which time this
Offer of Financing shall, at the Bank's option expire.
We appreciate your allowing the National Bank of Canada the opportunity to
fulfil your financing requirements, and we look forward to a continuing mutually
rewarding relationship.
Yours truly,
NATIONAL BANK OF CANADA
/s/ Darryl Elliott /s/ Daniel T. Hopkins
Darryl Elliott Daniel T. Hopkins
Account Manager Senior Manager
Commercial Banking Centre Commercial Banking Centre
ACKNOWLEDGED AND AGREED TO THIS _____ DAY OF _____________, 2000
BORROWER GUARANTOR
PURE TECHNOLOGIES LTD. PURE TECHNOLOGIES U.S. INC.
Per: /s/ Illegible Per: /s/ Illegible
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Per: Per:
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