<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 0-10096
STRIKER INDUSTRIES, INC.
(Exact name of Company as specified in its charter)
DELAWARE 76-0327658
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
ONE RIVERWAY, SUITE 2450
HOUSTON, TEXAS 77056
(Address of principal executive offices)
(Zip Code)
(713) 622-4092
(Company's telephone number, including area code)
NOT APPLICABLE
(Former name if changed since last report)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by section 13 or 15(D) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of March 31, 1998, there were 4,370,922 shares of Common Stock, par value
$0.50 per share, outstanding and no shares of Preferred Stock, par value $0.50
per share, were outstanding.
Page 1 of 20
<PAGE> 2
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a
Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 20
</TABLE>
Page 2 of 20
<PAGE> 3
STRIKER INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 76,992 151,941
Accounts receivable:
Employee 187,770 180,000
Other, net of bad debt allowance of 489,671
for December 31, 1997 4,006 4,006
Inventories:
Raw materials 1,365 1,365
Prepaid expenses and other current assets 110,078 158,130
------------ ------------
Total current assets 380,211 495,442
Property and equipment, net 13,851,224 13,988,832
Deferred costs and other, net 137,876 72,782
------------ ------------
Total assets $ 14,369,311 14,557,056
============ ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long term debt $ 667,412 746,624
Current obligations under capital leases 7,650 7,650
Trade accounts payable 2,187,403 2,875,965
Accrued liabilities 566,959 703,113
------------ ------------
Total current liabilities 3,429,424 4,333,352
Long-term liabilities:
Zero coupon notes payable 12,052,123 10,507,965
Term loans, net of current portion 785,186 920,450
Capital lease obligation 10,919 10,919
------------ ------------
Total long-term liabilities 12,848,228 11,439,334
------------ ------------
Stockholders' equity (deficit):
Preferred stock, $.20 par value, 5,000,000 shares authorized,
none issued -- --
Common stock, $0.50 par value, 25,000,000 shares authorized,
4,370,922 shares issued and outstanding 2,187,862 2,187,862
Stock subscriptions receivable (275,000) (275,000)
Additional paid-in capital 14,938,085 14,938,085
Accumulated deficit (18,302,075) (17,632,301)
Foreign currency translation adjustment (382,213) (359,276)
Less treasury stock at cost; 4,800 shares (75,000) (75,000)
------------ ------------
Total stockholders' equity (deficit) (1,908,341) (1,215,630)
Commitments and contingencies
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 14,369,311 14,557,056
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 20
<PAGE> 4
STRIKER INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the quarters ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Quarter Ended March 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues -- 769,571
Cost of sales 355,909 1,360,950
------------ ------------
Gross margin (355,909) (591,379)
Selling, general and administrative expenses 394,370 953,624
------------ ------------
Operating loss (750,279) (1,545,003)
------------ ------------
Other income (expense):
Interest expense, net (87,485) (526,508)
Gain on fully reserved debt settlement 110,380
Other income/(expense) 57,610 --
------------ ------------
Loss before income taxes (669,774) (2,071,511)
Income taxes -- --
------------ ------------
Net loss (669,774) (2,071,511)
============ ============
Basic and diluted net loss per common share (.15) (.47)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 20
<PAGE> 5
STRIKER INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss (669,774) (2,071,511)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 209,654 398,181
Amortization 58,017 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (7,770) (263,476)
(Increase) decrease in inventories -- 26,841
(Increase) decrease in prepaid expenses and other current assets (8,693) 349,049
Increase (decrease) in accounts payable and accrued liabilities (824,717) 250,114
---------- ----------
Net cash provided by (used) in operating activities (1,243,283) (1,310,802)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (94,984) (78,336)
---------- ----------
Net cash provided by (used) in investing activities (94,984) (78,336)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of original issue discount notes -- 735,000
Repayment of original issue discount notes (81,000) --
Proceeds from revolving lines of credit -- 860,270
Repayment of revolving lines of credit -- (675,311)
Repayments of fixed asset line of credit (133,474) (85,800)
Principal payments on capital leases -- (9,178)
Deferred and other costs paid (66,366) --
Proceeds from subordinated notes payable -- 579,532
Proceeds from issuance of zero coupon notes payable 1,544,158 --
---------- ----------
Net cash provided by financing activities 1,263,318 1,404,513
---------- ----------
Net increase (decrease) in cash (74,949) 15,375
Cash and cash equivalents, beginning of year 151,941 292,485
---------- ----------
Cash and cash equivalents, end of quarter 76,992 307,860
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 20
<PAGE> 6
STRIKER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Striker and its wholly owned subsidiaries. All material intercompany accounts
and transactions have been eliminated.
Interim Financial Information
The consolidated interim financial statements included herein are unaudited;
however, they include all adjustments of a normal recurring nature which, in the
opinion of management, are necessary to present fairly the consolidated
financial position of the Company at March 31, 1998, the consolidated results of
operations and cash flows for the quarters ended March 31, 1998 and 1997.
Earnings (Loss) Per Common Share
In 1997, the Company adopted the provisions of SFAS No. 128, "Earnings Per
Share." SFAS No. 128 established standards for computing and presenting income
(loss) per common share. It replaces primary and fully diluted income (loss) per
common share with basic and diluted income (loss) per common share. Basic income
(loss) per common share excludes dilution and is computed by dividing income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted income (loss) per common share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock. When dilutive, stock options and
warrants are used in the computation of diluted earnings (loss) per common share
as share equivalents using the treasury stock method.
The number of weighted average shares outstanding used in computing the earnings
(loss) per share was 4,370,922 for the quarter ended March 31, 1998 and
4,365,026 for the quarter ended March 31, 1997. Basic and diluted earnings
(loss) per share are the same for each of these quarters.
During May 1997, the Company's shareholders approved a 1-for-2.5 reverse stock
split. For consistency, the number of shares used in computing the earnings
(loss) per share for the quarter ended March 31, 1997 has been restated as if
the reverse stock split had been in effect for that period.
Page 6 of 20
<PAGE> 7
Cash Flow Information
For purposes of reporting cash flows, cash and cash equivalents include cash and
short-term investments which mature within three months of their date of
purchase.
2. DEBT:
The Company's debt consisted of the following at:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Zero Coupon Notes, 2.25% due 12/31/05 $ 12,602,500 $ 10,702,500
Unamortized Discount on Zero Coupon Notes (550,377) (194,535)
Original Issue Discount Notes 299,276 380,276
Stephens:
Term loan, prime (8.5%) +3.5%, due 5/31/01 505,100 534,650
Revolving line of credit, prime + 3.5% 24,936 23,148
Canadian Facility:
Term loan, prime (6.0%)+ 2.5% due 4/01/01 623,286 729,000
Capitalized lease obligations bearing interest at
rates from 10% to 18% maturing between 1998
and 2000, secured by underlying machinery,
vehicles and computer equipment. 18,569 18,569
------------ ------------
13,523,290 12,193,608
Less-Current maturities (675,062) (754,274)
------------ ------------
$ 12,848,228 $ 11,439,334
============ ============
</TABLE>
CREDIT FACILITIES:
On March 13, 1998, the Company (as guarantor) and its indirect Canadian
subsidiary, Striker Paper Canada, Inc. ("Striker Canada") accepted a
supplemented and amended Offer of Finance from Striker Canada's lender. The
maturity date of April 1, 2001 remains on Striker Canada's term loan facilities
with the lender. In addition, Striker Canada was required to prepay all
principal and interest requirements of the term loans up to and including July
1, 1998.
Page 7 of 20
<PAGE> 8
On March 20, 1998, the Company's indirect Canadian subsidiary, Striker Paper
Canada, Inc. ("Striker Canada"), executed (i) a Subordinated Loan Agreement with
First Ontario Labour Sponsored Investment Fund Ltd. ("FOF") providing a three
year term credit facility to Striker Canada in the maximum principal amount of
$1,500,000 Canadian for the purposes of financing the restart of the Thorold
Mill and for working capital, and (ii) a Commercial Demand Line of Credit
Agreement with Credit Union Central of Ontario Limited and So-Use Credit Union
Limited providing a revolving line of credit to Striker Canada in the aggregate
amount of $800,000 Canadian to fund working capital requirements pending
collection of accounts receivable in connection with the restart of the Thorold
Mill. The first advance in the amount of $1,250,000 Canadian under the FOF term
loan facility was received by Striker Canada on April 14, 1998.
SUBORDINATED DEBT:
Striker Industries, Inc. Notes:
On October 28, 1997, the Company reached an agreement with BlueStone to make
monthly payments for an eight-month period beginning in December 1997. As of the
date of this report, the Company has made all payments as required by the
agreement. The remaining balance of $299,876 and $380,276 of the Original Issue
Discount Notes (the "OID Notes") has been classified as current debt at March
31, 1998 and December 31, 1997, respectively. The OID Notes are secured by a
second and subordinate lien and security interest on the assets of each of the
Company's U.S. subsidiaries, including its Stephens, Arkansas plant, junior in
priority to the lien on the same assets held by its senior lender. The OID Notes
are also guaranteed by each of the Company's U.S. subsidiaries. It is also
secured by a lien and security interest on the assets of the Company's Canadian
subsidiary, either junior in time or subordinated to the subsidiary's senior
lenders in Canada.
STDF Corp. Notes:
In January, February and March 1998, STDF Corp. issued $1,900,000 in aggregate
principal amount of its Zero Coupon Notes due December 31, 2005. The Zero Coupon
Notes carry a minimum interest rate of 2.25% with a maximum interest rate of
10.25% solely dependent upon the discretion of the Board of Directors. Principal
and interest are not due until maturity of the Notes.
Interest paid for all debt instruments for the quarters ended March 31, 1998 and
1997 was $24,309 and $46,544, respectively.
Page 8 of 20
<PAGE> 9
3. CONTINGENCIES:
On April 25, 1996, the Company signed an agreement to combine in a merger
transaction (the Transaction) with the indirect parent corporation of one of the
largest privately owned manufacturers of asphalt shingles and built up roofing
(GS Roofing). The closing of the transaction had been extended in writing by
mutual agreement of the parties to April 21, 1997, provided that (i) a
Registration Statement required to raise the equity component of the financing
required for closing was filed with the Securities and Exchange Commission
(which document was filed with the Securities and Exchange Commission December
26, 1996) and (ii) the merger became effective on or before April 21, 1997 or
within incremental five business day periods of time thereafter so long as bona
fide marketing efforts were being conducted by the underwriters with a view to
such Registration Statement becoming effective on or before April 30, 1997.
On or about February 4, 1997, via facsimile transmission the President of GS
Roofing sent a notice to the Company of GS Roofing's repudiation of the
Transaction. Subsequent to that date, the Company made protracted attempts to
reinstate the Transaction, without success. Accordingly, management ultimately
retained counsel and filed a suit styled Striker Industries, Inc., David A.
Collins and Matthew D. Pond vs. Newgen Holdings, Inc., Gen Holdings, Inc., GS
Roofing Products Company, Inc., Donald F. Smith and Maredon-I, Ltd. pending at
the date of this Report in the 133rd Judicial District Court of Harris County,
Texas alleging, among other things, a breach of contract by the defendants
resulting from the defendants' repudiation of the binding agreements between the
Company and the defendants providing for the Transaction, which action by the
defendants severely impaired the Company's ability to complete the equity and
debt offerings which were a critical part of the Transaction. The lawsuit is
still in the preliminary stages. Pre-trial discovery has commenced and
depositions have begun. The Company is unable at present to express any opinion
regarding the probable outcome of this litigation.
In addition, following extensive negotiations and the inability of the Company's
Canadian subsidiary to reach agreement on an employment termination package with
the former manager of the Thorold Mill, suit was filed on or about April 7, 1997
in Ontario Province, Canada by the former Mill manager against Striker paper
Canada, Inc. claiming damages of $142,000 Canadian for alleged wrongful
dismissal and $50,000 Canadian for alleged mental distress. Striker Paper Canada
filed a Statement of Defense and Counterclaim on September 30, 1997. The
Counterclaim seeks damages in the amount of $150,000 Canadian from the plaintiff
for his fraudulent or negligent misrepresentation in failing to disclose
information within his knowledge to Striker Paper Canada during the negotiations
for Striker Paper Canada's purchase of the Thorold Mill. No further action has
been taken in this proceeding as of the date of this Report.
Page 9 of 20
<PAGE> 10
4. SUSPENSION OF OPERATIONS AT STEPHENS MILL:
Toward the end of the second quarter of 1997, the Company suspended operations
at its Stephens Mill. The Stephens Mill had been experiencing a significant
level of downtime and required continually increasing repairs and maintenance to
operate. Additionally, the Company has experienced a shortage of working capital
during 1997 as a result of unanticipated required repayment of obligations of
the Company caused by the repudiation of the Transaction (See Note 3 to Notes To
Consolidated Financial Statements). These circumstances led to a significant
reduction in dry felt produced and available for sale. The reduction in dry felt
produced (and sold), coupled with unabsorbed production costs, made profitable
operations unachievable under the circumstances. In order to minimize the cash
drain and accomplish the needed repairs and maintenance to the Stephens Mill
machinery and equipment, Management made the decision to suspend operations.
Management is reviewing capital improvement projects that would allow the
Stephens Mill to operate efficiently and profitably upon reactivation. It is
Management's present intention to resume operations at the Stephens Mill in due
course, however, resumption of operations is subject to the Company raising the
funds necessary to complete the capital improvements and repairs and maintenance
that will enable the Stephens Mill to operate efficiently and profitably. While
Management is diligently pursuing the raising of the necessary capital to
accomplish its objective, there can be no assurances that it will be successful
and that the Stephens Mill will be able to resume operations.
5. CASUALTY LOSSES AT MILLS:
On January 16, 1997, the Company experienced a fire at its Thorold Mill. The
fire was caused by an electrical short in the main building, which houses the
paper line. The fire caused extensive damage to a part of the building and the
sheet forming section of the paper line. The final settlement claim indicated
total damage to be approximately $1,500,000. The insurance coverage on the plant
and its contents proved to be more than adequate to cover all the costs of
rebuilding and replacing all fire damage to the plant and equipment. The
fire-damaged repairs were completed on or about May 30, 1997. The Company has
identified additional routine repairs and maintenance that will be necessary
prior to start-up. As of the date of this report, the Company anticipates having
all the repairs completed and the ability to resume full operations on or about
June 15, 1998. Management will evaluate the market and industry seasonality
prior to start-up. Management has estimated that the start-up of the Thorold
Mill will require approximately $1,000,000 to $1,500,000 to complete capital
projects and to provide working capital. In order to facilitate the cash
requirements of the Thorold Mill start-up, the Company's Canadian subsidiary
signed a financing agreement with a new group of Canadian lenders for an
aggregate $2,300,000 Canadian loan for capital projects and working capital on
March 20, 1998. The new financing agreement funded the first tranche of
$1,250,000 Canadian on April 14, 1998.
Page 10 of 20
<PAGE> 11
On or about February 25, 1997, the Company's Stephens Mill experienced a severe
storm in connection with tornado activity in the region. The heavy rains
associated with the storm damaged the roof covering a section of one the main
buildings. The Company was not utilizing the area damaged at the time. The area
is currently partitioned and no activity is allowed in the area. In April 1997,
the Company settled the damage claim for $75,000.
On or about May 14, 1997, a fire occurred in a finished goods warehouse at the
Stephens Mill. The building, which is isolated and separate from the main Mill
building and its contents, was completely destroyed. At the time of the fire,
there were no finished goods stored in the warehouse; however, a quantity of raw
materials stored in the warehouse was destroyed. In June 1997, the Company
settled its fire damage claim with the insurance company for approximately
$122,000. In connection with consideration of any rebuilding of the warehouse,
Management is evaluating several structural configuration changes in the
building, which would maximize operational efficiencies. The rebuilding of the
finished goods warehouse would be a part of the capital improvement projects
mentioned above.
6. OTHER INCOME:
During March 1998, the Company entered into a Settlement and Mutual Release
Agreement with the owners of the Company's former subsidiary (sold April 1,
1996), Striker Services Corporation (SSC) and related parties on all outstanding
claims of the Company against all parties. All parties were released in
consideration of the payment and transfer to the Company of approximately
$63,000 cash, equipment and a 1.3 acre tract of land in Houston, Texas. As the
balance owed the Company by SSC had been fully reserved and expensed to bad debt
effective December 31, 1996, the Company recognized a gain on the consideration
received of approximately $110,000 for the quarter ended March 31, 1998.
In response to vendor's collection efforts, the Company has negotiated several
settlements of outstanding balances due vendors at amounts less than face value.
These vendor concessions, a total of approximately $54,000, have been treated as
other income on the statement of operations for the quarter ended March 31,
1998.
7. SUBSEQUENT EVENTS:
On April 14, 1998, the first advance in the amount of $1,250,000 Canadian under
the FOF term loan facility was received by Striker Canada. See Note 2 "Credit
Facilities" to Notes To Consolidate Financial Statements for further description
of Striker Canada's term loan and revolving line of credit facility with CUCO
and So-Use.
Page 11 of 20
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the financial statements of
the Company included elsewhere in this Form 10-Q:
Results of Operations
<TABLE>
<CAPTION>
Quarters Ended March 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue $ 0 $ 769,571
Cost of Sales 355,909 1,360,950
------------ ------------
Gross Margin (355,909) (591,379)
Selling, general and
administrative 394,370 953,624
------------ ------------
Operating loss (750,279) (1,545,003)
Interest expense, net (87,485) (526,508)
Other income/expense 167,990
------------ ------------
Net loss $ (669,774) $ (2,071,511)
============ ============
</TABLE>
COMPARISON OF THE QUARTERS ENDED MARCH 31, 1998 AND 1997
There were no sales for the quarter ended March 31, 1998 as compared to sales of
$769,571 for the quarter ended March 31, 1997. Both Mills were idled for the
quarter ended March 31, 1998 (See Notes 4 and 5 to Notes To Consolidated
Financial Statements). For the quarter ended March 31, 1997, only the Thorold
Mill was idled.
Gross margin, though negative, improved to negative $355,909 for the quarter
ended March 31, 1998 from negative gross margin of $591,379 for the quarter
ended March 31, 1997. The increase in gross margin is primarily due to a
reduction in operating costs and unabsorbed fixed production costs.
Selling, general and administrative expenses decreased by $559,254 to $394,370
for the quarter ended March 31, 1998, from $953,624 for the quarter ended March
31, 1997. This decrease is primarily due to (i) a decrease in the professional
fees in 1998 and (ii) a reduction in office expenses and reduced salary and
related expenses due to the reduced operations in 1998.
Interest expense, net, decreased to $87,485 for the quarter ended March 31,
1998, from $526,508 for the quarter ended March 31, 1997. This decrease is due
to the reduction of interest rates related to the Zero Coupon Notes, a decrease
in credit facility activity and a decrease in the amortization of deferred
financing costs.
Page 12 of 20
<PAGE> 13
Because the Company has been in a loss position for financial and income tax
reporting purposes, no current or deferred income tax benefits have been
provided due to the uncertainty of realization of net operating loss
carryforwards.
CASH FLOWS - COMPARISON OF THE QUARTERS ENDED MARCH 31, 1998 AND 1997
Cash flows used by operating activities decreased to $1,243,283 for the quarter
ended March 31, 1998 from cash flows used by operating activities of $1,310,802
for the quarter ended March 31, 1997. The decrease is primarily due to a
significant reduction in the net loss partially offset by a decrease in accounts
payable and accrued liabilities for the quarter ended March 31, 1998.
Cash flows used by investing activities increased to $94,984 for the quarter
ended March 31, 1998 from cash flows used by investing activities of $78,336 for
the quarter ended March 31, 1997. The increase was primarily due to asset
purchases related to the start-up of the Thorold Mill.
Cash flows provided by financing activities decreased to $1,263,318 for the
quarter ended March 31, 1998 from $1,404,513 for the quarter ended March 31,
1997. The decrease is primarily due to no proceeds from the lines of credit and
increased payments on the OID notes and the fixed asset lines of credit for the
quarter ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended March 31, 1998, the Company had an operating loss and
continues to experience short-term liquidity concerns. Throughout 1997 and into
the first quarter of 1998, the Company implemented several strategies to survive
in the wake of the failed Transaction and the suspension of operations at its
Thorold and Stephens Mills.
o For the year ended December 31, 1997, the Company raised over
$5,000,000 of subordinated debt to fund working capital needs and
retire a substantial portion of the OID Notes.
o The Company and two of its subsidiaries issued Zero Coupon Notes
bearing a lower stated rate of interest and payable on an extended
maturity date in exchange for a like principal amount of their then
outstanding Subordinated Notes payable. The exchange involved extending
the maturity date from 1998 to 2005 on approximately $10,000,000 of
subordinated debt reducing the interest rate due thereon from 10.25% to
2.25% and provided for payment of principal and interest on the
maturity date of December 31, 2005. In December 1997 and in January,
February and March 1998, an additional $2,900,000 of Zero Coupon Notes
were issued.
Page 13 of 20
<PAGE> 14
o The decision was made under existing agreements to issue warrants to
purchase shares of Common Stock of the Company in exchange for and
cancellation of all indebtedness evidenced by $798,000 in aggregate
principal amount of Subordinated Notes of West Oxford Industries, Inc.
o Striker Paper was able to negotiate a Forbearance Agreement with its
Canadian lender limiting the ability of the lender to enforce its
rights for technical default items, specifically ratio and financial
covenants, under its then existing financing and security agreements
with Striker Canada pending acceptance of the supplemented and amended
Offer of Finance with the lender in March 1998 (see Note 2 to Notes To
Consolidated Financial Statements).
o The Company also negotiated a Forbearance Agreement with its Stephens
Mill lender which calls for the Company to make equal monthly payments
of principal and interest for a period of approximately three years.
The Stephens Mill lender agreed to forbear as long as payments are made
and the other conditions of the Forbearance Agreement are complied
with.
There can be no assurances that the ultimate resolution of the above items,
either individually or in the aggregate will be adequate to ensure the existence
of the Company as a going concern.
The Company experienced a decrease in current liabilities for the quarter ended
March 31, 1998 from the year ended December 31, 1997. Although the Company has
experienced a decrease in current liabilities, the Company has a working capital
deficit of $3,049,213 at March 31, 1998. The decrease in current liabilities is
primarily due to a reclass of short-term debt to long-term debt coupled with a
substantial reduction in both lines of credit and a reduction in accounts
payable.
On January 16, 1997, the Company experienced a fire at its Thorold Mill. An
electrical short in the main building that houses the paper line caused the
fire. The fire caused extensive damage to a part of the building and the sheet
forming section of the paper line. The Company immediately contacted its
insurance carrier and started rebuilding the damaged plant building and
replacement of the damaged equipment. The repairs and rebuilding of the plant
and its equipment were completed on or about May 30, 1997. As of the date of
this Report, the Company anticipates having additional repairs and capital
projects completed and resuming full operation on or about June 15, 1998.
Page 14 of 20
<PAGE> 15
As of the date of this report, both of the Company's plants are idled. The fire
related repairs and rebuilding are complete at the Thorold Mill, however, there
are still capital projects that need to be completed prior to start-up and are
currently in progress. Management has also identified several capital projects
that are necessary at the Stephens Mill to begin operations and improve
efficiencies needed for profitable operation. However, for the Company to
benefit fully from any improvements made to the plants, the Company must operate
the plants at capacity (for the full production levels, typically 11.5 months
per year). Management is committed to seek and obtain the necessary financing to
resume operations, but not to resume operations in any instance until the
financing for each plant is in place and the capital projects have been
completed.
There have been several events from the prior year that continue to affect the
Company. During 1996 and early 1997, the Company devoted substantial amounts of
cash to acquisition activities for the Transaction. The Company raised over
$3,000,000 in subordinated debt during 1996 and early 1997 to pay for the costs
of the Transaction. Due to the substantial amounts of cash used for acquisition
activities and the intention to pay all of the payables at the closing of the
Transaction, accounts payable were aged beyond their terms. Due to the
significant resources devoted to the Transaction and subsequent repudiation of
the Transaction, the Company's ability to repay debt, pay past-due accounts
payable, finance needed capital projects and continue operations has been
gravely impaired.
The factors listed above have led to the ongoing working capital deficit. Upon a
resumption of operations, the Company must closely monitor operations and
continue to identify and implement capital projects that will improve
efficiencies and lower costs. However, there can be no assurance that such cost
reductions will allow the Company to achieve profitability.
Management is currently pursuing various strategies in order to provide needed
liquidity and provide financing for capital projects. Management believes that
negotiations regarding obtaining new debt and/or equity financing are vital to
continuing operations. Effective March 20, 1998, the Company successfully
completed an aggregate $2,300,000 Canadian term loan and revolving line of
credit facility with new Canadian lenders with a first tranche funding of
$1,250,000 Canadian on April 14, 1998 combined with $1,192,131 of Zero Coupon
Note proceeds. Management believes that this new loan will provide the ability
for the Company to complete necessary capital improvement projects and provide
working capital for the start up. Additionally, Management is in discussion with
various financing groups including government sponsored programs and lenders for
financing for the Stephens Mill.
Management believes that the Company can achieve profitability through
operational changes, improvements and acquisitions. Management believes that
strategic acquisitions can enhance profitability and increase
investor/shareholders' value in the Company. The Company intends to focus on
strategic acquisitions in order to grow, gain economies of scale and allocate
administrative costs after it has completed the start up at both Mills.
Page 15 of 20
<PAGE> 16
The ability of the Company to achieve successful operations and realize its
assets is dependent upon many factors including profitable operation of both
Mills, penetration of existing and new markets at a profitable margin and volume
levels and cash liquidity.
Management does not believe its existing funds and its existing financial
arrangements will adequately fund the cash needs of the start-up of both Mills
and the Company's operations during the next year. To meet working capital
requirements and expand its business, the Company will need to borrow additional
amounts, obtain an additional third-party credit facility and/or restructure its
existing debt. The Company currently has two existing credit lines, one
consisting of a revolving line of credit and a term loan collateralized by
receivables, inventories, and fixed assets and one consisting of a term loan
collateralized by receivables, inventories, and fixed assets. At March 31, 1998,
there were no amounts available under the line of credit. The Company is
pursuing additional financing arrangements that might include private or public
sales of equity or debt securities. However, there can be no assurances that the
Company will be able to obtain any additional debt or equity financing.
Management believes that some, if not all, of the above mentioned strategies
will allow the Company to obtain sufficient working capital and acquisition
financing to continue with its plan of growth through acquisitions. However,
there can be no assurance that any of these strategies will be achieved or that
the Company will be able to exist as a going concern.
Page 16 of 20
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
During the quarter ended March 31, 1998, pre-trial discovery, including the
taking of depositions of the parties, continued in Cause No. 97-07032, styled
Striker Industries, Inc., David A. Collins and Matthew D. Pond v. Newgen
Holding, Inc., Gen Holding, Inc., GS Roofing Products Company, Inc., Donald F.
Smith, and Maredon-I, Ltd., pending in the 133rd Judicial District Court of
Harris County, Texas. See Note 3 to Notes to Consolidated Financial Statements
filed with this Quarterly Report for a description of the factual basis
underlying the alleged wrongful repudiation of the Transaction more fully
described therein and made the basis of this pending legal proceeding.
During the quarter ended March 31, 1998, five lawsuits seeking recovery of
significant sums and which were pending at December 31, 1997, principally
against the Company's U.S. and indirect Canadian subsidiaries, Striker Paper
Corporation and Striker Paper Canada, Inc., were settled or were in substantial
discount payment settlement negotiations entered into during the quarter. All
but one of these proceedings were settled by execution between the parties of
written Settlement Agreements providing for time payment plans with respect to
the claims asserted.
One additional suit involving a significant sum was filed by a vendor on or
about February 3, 1998 in the Circuit Court of Ouachita County, Arkansas against
the Company's subsidiary, Striker Paper Corporation seeking recovery of a
balance alleged to be unpaid for goods purchased on open account. An Answer to
the suit was filed timely and no further activity has taken place with respect
to the suit at the date of this Report. As with other similar suits in the past,
it is Management's intention to seek to compromise and settle the claim on the
best terms that can be obtained.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Page 17 of 20
<PAGE> 18
Item 5. Other Information.
(1) In January, February and March 1998, the Company's wholly-owned
subsidiary, STDF Corp., issued an additional $1,000,000 in aggregate
principal amount of Zero Coupon Notes to international investors. The
Zero Coupon Notes mature on December 31, 2005 and have a stated
interest rate of 2.25%, with principal and accrued interest due on the
maturity date.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4.1 Copy of the Zero Coupon Notes ($1,000,000 in aggregate principal
amount) issued in January, February and March 1998 (filed as Exhibit
4.12 to the Company's Form 10-K for the year ended December 31,
1997, and incorporated herein by reference).
4.2 Offer of Finance - Commercial Banking dated March 10, 1998 between
Laurentian Bank of Canada and Striker Paper Canada, Inc., accepted
by Striker Paper Canada, Inc. on March 13, 1998.
4.3 Subordinated Loan Agreement dated March 20, 1998 between the
Company's indirect Canadian subsidiary, Striker Paper Canada, Inc.,
and First Ontario Labour Sponsored Investment Fund, Ltd.
(hereinafter referred to as "FOF").
4.4 General Security Agreement dated March 20, 1998 executed by Striker
Paper Canada, Inc. in favor of FOF.
4.5 Document General (Real Property Registration Document) to which
Exhibit 4.4 is attached.
4.6 Guarantee and Postponement of Claim dated March 20, 1998 executed by
the Company's wholly-owned Canadian subsidiary, Striker Holdings
(Canada) Inc. in favor of FOF with respect to liabilities of Striker
Paper Canada, Inc. to FOF under the Subordinated Loan Agreement
filed as Exhibit 4.3 to this Quarterly Report.
4.7 Guarantee and Postponement of Claim dated March 20, 1998 executed by
Striker Holdings (Canada), Inc. in favor of FOF with respect to
liabilities of Striker Paper Canada, Inc. to FOF under the
Subordinated Loan Agreement filed as Exhibit 4.3 to this Quarterly
Report.
4.8 Share Pledge and Proxy Arrangement Agreement dated March 20, 1998
between Striker Holdings (Canada) Inc. and FOF.
4.9 Guarantee and Postponement of Claim dated March 20, 1998 executed by
David A. Collins in favor of FOF with respect to liabilities of
Striker Paper Canada, Inc. to FOF under both the Subordinated Loan
Agreement and the Unanimous Shareholders Agreement filed as Exhibits
4.3 and 4.10 to this Quarterly Report.
4.10 Unanimous Shareholders Agreement dated March 20, 1998 between the
Company, Striker Holdings (Canada) Inc., FOF and Striker Paper
Canada, Inc.
Page 18 of 20
<PAGE> 19
4.11 Commercial Demand Line of Credit Agreement dated March 20, 1998
between Striker Paper Canada, Inc., Credit Union Central of Ontario
Limited (hereinafter referred to as "CUCO") and So-Use Credit Union
Limited (hereinafter referred to as "So-Use").
4.12 Business Loan General Security Agreement dated March 20, 1998
executed by Striker Paper Canada, Inc. in favor of CUCO and So-Use.
4.13 Charge/Mortgage of Land dated March 20, 1998 executed by Striker
Paper Canada, Inc. in favor of CUCO and So-Use.
4.14 Assignment of Insurance executed by Striker Paper Canada, Inc. in
favor of CUCO and So-Use.
4.15 Guarantee and Postponement of Claim dated March 20, 1998 executed by
the Company in favor of FOF with respect to liabilities of Striker
Paper Canada, Inc. under the Subordinated Loan Agreement filed as
Exhibit 4.3 to this Quarterly Report.
27 Financial Data Schedule
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed by the Company during the quarter ended
March 31, 1998.
Page 19 of 20
<PAGE> 20
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
STRIKER INDUSTRIES, INC.
DATE: May 20, 1998 BY: David A. Collins
------------------------- ------------------------------
David A. Collins
Chief Executive Officer
DATE: May 20, 1998 BY: Matthew D. Pond
------------------------- ------------------------------
Matthew D. Pond
Chief Financial Officer
Page 20 of 20
<PAGE> 21
INDEX TO EXHIBITS
4.1 Copy of the Zero Coupon Notes ($1,000,000 in aggregate principal
amount) issued in January, February and March 1998 (filed as Exhibit
4.12 to the Company's Form 10-K for the year ended December 31,
1997, and incorporated herein by reference).
4.2 Offer of Finance - Commercial Banking dated March 10, 1998 between
Laurentian Bank of Canada and Striker Paper Canada, Inc., accepted
by Striker Paper Canada, Inc. on March 13, 1998.
4.3 Subordinated Loan Agreement dated March 20, 1998 between the
Company's indirect Canadian subsidiary, Striker Paper Canada, Inc.,
and First Ontario Labour Sponsored Investment Fund, Ltd.
(hereinafter referred to as "FOF").
4.4 General Security Agreement dated March 20, 1998 executed by Striker
Paper Canada, Inc. in favor of FOF.
4.5 Document General (Real Property Registration Document) to which
Exhibit 4.4 is attached.
4.6 Guarantee and Postponement of Claim dated March 20, 1998 executed by
the Company's wholly-owned Canadian subsidiary, Striker Holdings
(Canada) Inc. in favor of FOF with respect to liabilities of Striker
Paper Canada, Inc. to FOF under the Subordinated Loan Agreement
filed as Exhibit 4.3 to this Quarterly Report.
4.7 Guarantee and Postponement of Claim dated March 20, 1998 executed by
Striker Holdings (Canada), Inc. in favor of FOF with respect to
liabilities of Striker Paper Canada, Inc. to FOF under the
Subordinated Loan Agreement filed as Exhibit 4.3 to this Quarterly
Report.
4.8 Share Pledge and Proxy Arrangement Agreement dated March 20, 1998
between Striker Holdings (Canada) Inc. and FOF.
4.9 Guarantee and Postponement of Claim dated March 20, 1998 executed by
David A. Collins in favor of FOF with respect to liabilities of
Striker Paper Canada, Inc. to FOF under both the Subordinated Loan
Agreement and the Unanimous Shareholders Agreement filed as Exhibits
4.3 and 4.10 to this Quarterly Report.
4.10 Unanimous Shareholders Agreement dated March 20, 1998 between the
Company, Striker Holdings (Canada) Inc., FOF and Striker Paper
Canada, Inc.
<PAGE> 22
4.11 Commercial Demand Line of Credit Agreement dated March 20, 1998
between Striker Paper Canada, Inc., Credit Union Central of Ontario
Limited (hereinafter referred to as "CUCO") and So-Use Credit Union
Limited (hereinafter referred to as "So-Use").
4.12 Business Loan General Security Agreement dated March 20, 1998
executed by Striker Paper Canada, Inc. in favor of CUCO and So-Use.
4.13 Charge/Mortgage of Land dated March 20, 1998 executed by Striker
Paper Canada, Inc. in favor of CUCO and So-Use.
4.14 Assignment of Insurance executed by Striker Paper Canada, Inc. in
favor of CUCO and So-Use.
4.15 Guarantee and Postponement of Claim dated March 20, 1998 executed by
the Company in favor of FOF with respect to liabilities of Striker
Paper Canada, Inc. under the Subordinated Loan Agreement filed as
Exhibit 4.3 to this Quarterly Report.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.2
[LAURENTIAN BANK OF CANADA LOGO]
CONFIDENTIAL
March 10, 1998
Striker Paper Canada, Inc.
c/o Striker Industries, Inc.
One Riverway, Suite 1250
Houston, Texas 77056
Fax No. 1-713-622-9410
Dear Sirs:
RE: OFFER OF FINANCE - COMMERCIAL BANKING
Laurentian Bank of Canada ("Laurentian") is pleased to offer the following
credit facilities (the "Credit Facilities") subject to the following terms and
conditions.
1. BORROWER:
Stiker Paper Canada, Inc.
2. CREDIT FACILITIES:
<TABLE>
<CAPTION>
LOAN TYPE AMOUNT
- ---- ---- ------
<S> <C> <C>
1 Term Loan #1 $308,333
2 Term Loan #2 $616,667
</TABLE>
3. PROGRAM
Purpose To reinstate existing facilities outstanding.
Source Laurentian Loan #1 $308,333
Loan #2 $616,667
LAURENTIAN BANK OF CANADA
COMMERCIAL BANKING
1
<PAGE> 2
Changes to the program may only be made with our prior written approval.
4. TERM:
4.1 The outstanding balance of (each of the) Term Loan will be due
and payable on the date set opposite ("the Maturity Date"),
as follows:
<TABLE>
<CAPTION>
Loan # Maturity Date
------ -------------
<S> <C>
1 April 1, 2001
2 April 1, 2001
</TABLE>
5. INTEREST RATE AND FEES:
5.1 Interest on each Loan at the applicable Loan Rate (hereinafter
provided) shall be calculated monthly on the daily closing
balance and shall be payable on such day of each month
determined by Laurentian, commencing in the month following
initial disbursement of the Loan.
5.2 Loan # 1 :
The Loan Rate will be a variable annual rate (the "Variable
Rate") which is from time to time 3% above Laurentian's Prime
Lending Rate.
Loan #2 :
The Loan Rate will be a variable annual rate (the "Variable
Rate") which is from time to time 0.5% above Laurentian's
Prime Lending Rate.
FIXED RATE OPTION:
Upon 30 days prior written notice, the Borrower may elect that
the Loan Rate for Term Loan #1 be a fixed annual interest rate
for a period between 2 to 5 years to be selected by the
Borrower (the "Fixed Rate Period"), provided the period chosen
must terminate on or before the Maturity Date of the Loan. The
rate of interest shall be 4.25% above the particular Cost of
Funds Rate in effect on the date the rate is fixed which is
quoted with reference to the shortest period in full years
which is equal to or greater than the Fixed Rate Period.
The Loan Rate will be a variable annual rate (the "Variable
Rate") which is from time to time 3% above Laurentian's Prime
Lending Rate following the expiry of any fixed Rate Period and
prior to any new Fixed Rate Period.
LAURENTIAN BANK OF CANADA 2
COMMERCIAL BANKING
<PAGE> 3
5.3 The current monthly Cost of Funds Rates are as follows for
each period:
<TABLE>
<CAPTION>
Period COF %
------ -----
<S> <C>
2 years 5.31
3 years 5.41
</TABLE>
6. REPAYMENT AND AMORTIZATION:
6.1 Loans # 1 and #2 shall be amortized and repaid in 37 mths on
the first of each month commencing April 1, in equal
consecutive monthly payments of principal, plus interest as
aforesaid and any remaining balance shall be paid on the
Maturity Date.
<TABLE>
<CAPTION>
Loan # Monthly Principal Installment
- ------ -----------------------------
<S> <C>
1 $8,333.33
2 $16,666.67
</TABLE>
7. PRE-AUTHORIZED DEBIT:
The Borrower authorizes Laurentian to prepare monthly debits, by electronic
entry, in amounts sufficient to cover all amounts payable under the Credit
Facilities and the Borrower authorizes and instructs the bank which operates the
Borrower's current account to honour those debits. However, the Borrower agrees
to pay by cheque if requested by Laurentian. Please attach the Borrower's cheque
marked "VOID" to this Offer and complete the attached Pre-Authorized Payment
Plan Application (Schedule E). The Borrower also agrees to renew this
authorization if the Borrower changes its bank, branch or account.
8. PREPAYMENT:
8.1 If no Event of Default has occurred and is continuing, the
Borrower may prepay the principal amount of any Loan either
in whole or once per annum in part, on not less than 30 days
prior written notice with payment of the following premium:
(a)during any Fixed Rate Period, the greater of:
(i) an amount equal to four month's interest on such principal
amount at the Loan Rate then in effect; and
(ii) the present value (calculated using the Loan Rate) of a
series of equal consecutive monthly amounts commencing on the
next regular payment date after the date of prepayment and
continuing until the expiry of the Fixed Rate Period, each
such monthly amount being the product of:
A. the number of percentage points, if any, by which the Loan
Rate exceeds the Government of Canada Bond yield per annum for
a term closest to the number of
LAURENTIAN BANK OF CANADA 3
COMMERCIAL BANKING
<PAGE> 4
days from the date prepayment until the expiry date of the
Fixed Rate Period, divided by 12; and,
B. the amount of the principal prepaid;
(b) at any other time, an amount equal to the greater of:
(i) 3% of such principal amount; or,
(ii) four months interest on such principal amount at the Loan
Rate in effect on the date fixed for prepayment.
8.2 Upon any prepayment, the Borrower shall pay the accrued and
unpaid interest on such principal amount to the date fixed
for prepayment. Any partial prepayment of a Loan shall be
credited to the principal instalments falling due in reverse
order of maturity.
9. SECURITY:
All existing security is to remain in place with the
exception of the following;
A priority agreement with Credit Union Central of Ontario and
So-Use Credit Union Limited postponing Laurentian Bank's
charge on accounts receivable and inventory only to a maximum
first charge of $800,000.
10. COVENANTS:
The Borrower covenants that:
10.1 Working Capital will be maintained at not less than $250,000
from January 1, 1999.
10.2 Current Ratio will be maintained at not less than the ratios
set out below during the time periods indicated:
<TABLE>
<CAPTION>
Ratio Period (start and end dates inclusive)
----- --------------------------------------
<S> <C>
0.4 to 1 from the closing of the First Ontario Fund financing to
April 30, 1998
.75 to 1 from May 1, 1998 to September 30, 1998
1 to 1 from October 1, 1998 to December 31, 1998
1.25 to 1 from January 1, 1999 and continuing thereafter.
</TABLE>
10.3 Tangible Net Worth will not reduce below $11,500,000.
LAURENTIAN BANK OF CANADA 4
COMMERCIAL BANKING
<PAGE> 5
10.4 The ratio of Financial Indebtedness to Tangible Net Worth
will not exceed 0.5 to 1.
10.5 Beginning August 1, 1998, annualized quarterly Cash Flow will
not be permitted during any period to fall below 1.1
(increasing to 1.3 times on June 30, 1999) times the sum of:
The Debt Service (plus dividends) for the financial year in
which such period occurs.
10.6 The Borrower will not, without our prior approval:
(a) incur capital expenditures in excess of $300,000 in any
financial year (net of long term debt incurred for such year),
except for production and building improvements funded with
equity;
(b) enter into any Financial Indebtedness (in excess of
$300,000 in any financial year);
(c) make loans to or investments in, or give guarantees on
behalf of others;
(d) permit voting control to change;
(e) purchase or redeem any shares;
(f) pay any dividends;
(g) allow aggregate shareholder remuneration including salary,
dividends, bonuses, etc. (net of any amounts reinvested in the
Borrower in share capital or effectively postponed in favour
of Laurentian) to exceed $350,000 in any fiscal year;
(h) enter into any Restricted Lease;
(i) dispose of the assets over which the Lender has charge;
(j) grant any charges on the assets;
(k) the Borrower will not incur any other indebtedness with
the exception of payroll and other normal operating expenses;
(l) amend any material contracts, specifically including the
approval of any change in the management contracts for plant
operations;
LAURENTIAN BANK OF CANADA 5
COMMERCIAL BANKING
<PAGE> 6
(m) permit any change in the nature of the business or purpose
for which the assets are used;
(n) pay any dividends or make any form of withdrawal that
would cause an event of default.
10.7 An event of default with First Ontario Labour Sponsored
Investment Fund Ltd. or with So-Use (CUCO) (operating lender)
will constitute an event of default with Laurentian Bank of
Canada.
11. CONDITIONS PRECEDENT:
11.1 This Offer of Finance is available subject to the completion
of the Borrower's financing arrangements with First Ontario
Fund (FOF) as outlined in FOF's Financing Proposal dated
October 20, 1997.
11.2 This Offer of Finance is available subject to the completion
of the Borrower's financing arrangements with Credit Union
Central of Ontario Limited ("CUCO") and So-Use Credit Union
Limited ("SUCO") as outlined in CUCO and SUCO's letter re:
Credit Facility dated December 23, 1997.
11.3 The Borrower is to provide Laurentian with satisfactory
payment arrangements in writing for any payable with prior
claim to Laurentian including but not limited to; Consumers
Gas, Thorold Hydro Electric, City of Thorold (for property
taxes) and Workers Compensation Board.
11.4 The Borrower shall maintain a deposit account with the branch
of Laurentian issuing this Offer of Credit. All funds advanced
from First Ontario Fund for capital expenditures are to be
deposited to this account and dispersed for specific capital
and working capital requirements only.
11.5 The Borrower shall pay to Laurentian Bank adequate funds to
prepay all principal and interest requirements under Term
Loans #1 and #2 up to and including July 1, 1998, this amount
is estimated to be $123,000 subject to interest rate
adjustments on July 1, 1998.
12. REPORTS:
All existing reporting requirements are to remain in place, except that no
separate audit will be required for the Borrower for the year ended December 31,
1997.
13. CANCELLATION:
This Offer of Finance, when accepted, will be a binding contract.
LAURENTIAN BANK OF CANADA 6
COMMERCIAL BANKING
<PAGE> 7
14. REVIEW:
14.1 The terms and conditions applicable to the credit facilities
provided herein are subject to periodic review by Laurentian
at least annually. Laurentian reserves the right to withdraw
therefrom at any time if in the opinion of Laurentian there
should be:
(a) a material adverse change in the financial condition of
the Borrower;
(b) legal implications detrimental to the affairs of the
Borrower; or
(c) an unacceptable change in ownership.
14.2 The financial results of the Borrower are subject to periodic
review by Laurentian at least annually.
14.3 The next annual review shall be completed by April 30, 1998.
15. DEFAULT:
Without prejudice to the right of Laurentian to make demand for payment at any
time of any Credit Facility payable on demand, if any Event of Default occurs
under any Loan Document: (a) the obligation of Laurentian to make further
advances under the Credit Facilities shall immediately terminate, (b) all
principal and interest under the Credit Facilities shall at the option of
Laurentian become immediately due and payable, and (c) all security held by
Laurentian shall at the option of Laurentian become immediately enforceable
including any funds on deposit with Laurentian.
16. EXPENSES:
The Borrower shall pay all legal and other professional fees and disbursements
incurred by Laurentian and the Borrower in respect of the Credit Facilities, the
preparation and issue of this Offer of Finance and the other Loan Documents, the
administration of the Credit Facilities, the enforcement and preservation of
Laurentian's rights and remedies, all appraisals, insurance consultation and
similar fees and all other fees and disbursements of Laurentian.
17. GUARANTORS:
By accepting this Offer, the Guarantor approves hereof and undertakes to do such
acts and things and to execute such instruments as are specified herein on the
part of such Guarantor.
LAURENTIAN BANK OF CANADA 7
COMMERCIAL BANKING
<PAGE> 8
18. GENERAL:
18.1 The Borrower represents and warrants that all information
(financial or otherwise) provided to Laurentian by the
Borrower is true, complete and correct.
18.2 All financial or accounting determinations, reports and
statements provided for in this Offer of Finance shall be made
or prepared in accordance with generally accepted accounting
principles applied in a consistent manner and shall, except
where otherwise expressly provided, be made and prepared on a
consolidated basis.
18.3 Laurentian's standard forms of Loan Documents contain
covenants, representations, warranties and events of default
to which the Borrower shall be bound, in addition to any
covenants, representations, warranties and events of default
herein contained.
18.4 Terms used herein are defined in Schedule "C". Additional
provisions of this Offer of Finance are contained in
Schedule "D".
18.5 This Offer of Finance supplements and amends the following
Offer of Finance: dated May 16, 1995 issued by North American
Trust Company.
18.6 The borrower agrees to have the Thorold Plant fully
operational by May 23, 1998
19. OTHER FEES:
19.1 A loan amendment fee of $7,500 is fully earned and payable at
the time of acceptance hereof.
20. ACCEPTANCE:
This Offer expires if not accepted by the Borrower and the Guarantors by
5:00 p.m. on the 13th day of March, 1998.
If this Offer is acceptable, please indicate your acceptance by returning to us
the enclosed copy of this letter signed by the Borrower and the Guarantor(s),
together with the amendment fee of $ 7,500, the Pre-Authorized Payment Plan
Application and a blank cheque marked "VOID".
Yours Truly,
- --------------------------- ------------------------
Lori Kafato Morris Greenberg
Manager, Commercial Banking Assistant Vice President
ACCEPTED THIS DAY OF , 199 .
----- ------- --
LAURENTIAN BANK OF CANADA 8
COMMERCIAL BANKING
<PAGE> 9
STRIKER PAPER CANADA, INC. STRIKER INDUSTRIES, INC.
(AS GUARANTOR)
Per: Per:
----------------------- ---------------------
Name: Name:
---------------------- --------------------
Title: Title:
--------------------- -------------------
ONTARIO DEVELOPMENT CORPORATION (AS GUARANTOR)
Per:
-----------------------
Name:
----------------------
Title:
---------------------
LAURENTIAN BANK OF CANADA 9
COMMERCIAL BANKING
<PAGE> 10
SCHEDULE "C"
DEFINITIONS
1. "ANNUALIZED CASH FLOW" means the Cash Flow for the period in question,
divided by the proportion which the period in question is of the
financial year in which the period occurs.
2. "CASH FLOW" of the Borrower for any period means the after-tax profit
of the Borrower for the period:
(a) plus depreciation and amortization;
(b) less profit or plus loss resulting from the recognition of the
Borrower's minority interest in investments;
(c) plus deferred income tax;
(d) less capitalized expenses;
(e) plus after-tax portion of management bonuses;
(f) less gain or plus loss on the sale of fixed assets; and
(g) less the minority shareholders' share of losses or plus the
minority shareholders' share of profits from consolidated
Subsidiaries.
as have been deducted or added in determining such profit.
3. "COST OF FUNDS RATE" or "COF", means the annual base rate of interest
which Laurentian establishes and quotes from time to time at Toronto as
the reference rate of interest to determine interest rates it will
charge at such time for fixed rate loans for a particular term and
calculated at a particular frequency (for example, monthly or
semi-annually) and to which it may refer as its "Cost of Funds", such
rate being subject to change at any time without notice.
4. "CURRENT ASSETS" exclude amounts owing by or invested in related
parties
5. "CURRENT LIABILITIES" exclude all amounts effectively postponed in
favour of Laurentian, affiliated companies, shareholders and related
parties and "balloon" payments under Long Term Debt.
6. "CURRENT RATIO" of the Borrower means Current Assets divided by Current
Liabilities.
7. "DEBT SERVICE" of the Borrower for any period means the aggregate
principal payments on Long Term Debt (including, without limitation,
the principal component of capital lease obligations) due and payable,
or scheduled to be due, during such period;
8. "FINANCIAL INDEBTEDNESS" of the Borrower means the aggregate (without
duplication) of the following amounts:
LAURENTIAN BANK OF CANADA 10
COMMERCIAL BANKING
<PAGE> 11
(a) money borrowed, indebtedness represented by notes payable, and
drafts accepted representing extensions of credit (including,
as regards any note or draft issued at a discount, any amount
that could reasonably be regarded as being the amortized
portion of such discount as at the date of determination);
(b) all obligations (whether or not with respect to the borrowing
of money) which are evidenced by bonds, debenture, notes or
other similar instruments or not so evidenced but which would
be considered to be indebtedness for borrowed money;
(c) all indebtedness upon which interest charges are customarily
paid;
(d) net amounts payable pursuant to interest swap arrangements;
(e) capital lease obligations and all other indebtedness issued or
assumed as full or partial payment for property or services or
by way of capital contribution;
(f) all letters of credit and letters of guarantee issued by a
financial institution at the request of or for the benefit of
the Borrower;
(g) any guarantee (other than by endorsement of negotiable
instruments for collection or deposit in the ordinary course
of business) in any manner, directly or indirectly, of any
part or all of any obligation of a type referred to in any of
paragraphs (i) to (v) above;
(h) any of the foregoing amounts in respect of any subsidiary of
the Borrower whose accounts are not required under generally
accepted accounting principles to be consolidated with the
accounts of the Borrower, including without limitation all
present and future obligations to Laurentian;
(i) trade payables, expenses accrued in the ordinary course of
business, customer advance payments and deposits received in
the ordinary course of business unless the time for due
payment of which extends, or is intended to extend, more than
twelve months from the date as of which the determination of
Financial Indebtedness is being made; and,
(j) indebtedness of the Borrower which is effectively postponed in
favour of Laurentian.
9. "LOAN DOCUMENTS" means all instruments now or at any time in future
held by Laurentian to evidence, guarantee, secure, or otherwise
relating to, any obligation under or in connection with the Credit
Facilities, including without limitation this Offer of Finance.
10. "PRIME LENDING RATE" means the annual rate of interest which Laurentian
establishes and quotes from time to time as the reference rate of
interest to determine interest rates it will charge at such time for
variable rate commercial loans in Canadian dollars to its customers in
Canada and to which it may refer as its "prime rate" or "prime lending
rate"; upon any change in the Prime Lending Rate, the rate of interest
hereunder determined with reference to the Prime Lending Rate shall be
adjusted automatically and without the necessity of any notice to the
Borrower.
11. "RESTRICTED LEASE" means any lease of real or personal property other
than a capital lease.
LAURENTIAN BANK OF CANADA 11
COMMERCIAL BANKING
<PAGE> 12
12. "TANGIBLE NET WORTH" of the Borrower means the aggregate of share
capital, earned and contributed surplus (or less any deficit), plus any
indebtedness of the Borrower which is effectively postponed in favour
of Laurentian, less the aggregate of:
(a) any amount due from directors, officers, shareholders and
affiliated companies;
(b) the amount of any investments in affiliated companies;
(c) intangible assets including (without limitation) goodwill,
franchises; copyrights, trademarks and patents; and,
(d) any appraisal increase credit.
13. WORKING CAPITAL of the Borrower means Current Assets minus Current
Liabilities.
LAURENTIAN BANK OF CANADA 12
COMMERCIAL BANKING
<PAGE> 13
SCHEDULE "D"
MISCELLANEOUS PROVISIONS
1. The Borrower and each Guarantor consents to the obtaining from any
credit reporting agency or from any person or entity such information
as Laurentian may require at any time, and consents to the disclosure
at any time of any information concerning the Borrower or the Guarantor
to any credit grantor with whom the Borrower or the Guarantor has
financial relations or to any credit reporting agency.
2. The benefits of this Agreement may not be assigned by the Borrower.
3. This Offer will not merge upon the execution and delivery of the other
Loan Documents but shall remain in full force and effect thereafter. In
the case of any conflict or inconsistency between this Offer and any
other Loan Document, the latter shall govern and prevail.
4. If Laurentian is or becomes subject to any withholding tax or any other
tax with respect to payments of principal, interest or other amounts
payable in connection with the Credit Facilities (except taxes on the
overall net income of Laurentian) or to any reserve or similar
requirement against assets held by, or deposits in, or loans by, an
office of Laurentian, and as a result thereof the cost to Laurentian of
making or maintaining any Credit Facility is increased or the income of
Laurentian therefrom is reduced, then on demand the Borrower shall pay
Laurentian the amount (as certified by Laurentian) that shall
compensate Laurentian for such additional cost or such reduction in
income.
5. Laurentian may in its discretion arrange for the funding or assignment
of all or part of the Credit Facilities, either at the time of the
initial disbursement or from time to time in future, to one or more
other financial institutions (which may or may not be affiliated with
Laurentian).
6. No amendment or waiver of any provision of this Offer of Finance or of
any other Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in
writing and signed by Laurentian, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose
for which given.
7. Any and all payments made at any time in respect of any of the Credit
Facilities or any other obligation hereunder and the proceeds realized
from any security held therefor may be applied (and reapplied from time
to time notwithstanding any previous application) to such part or parts
of the indebtedness of the Borrower as Laurentian sees fit.
8. Time shall be in all respects of the essence hereof.
9. Any provision of this Offer of Finance which is invalid or
unenforceable under the laws of any jurisdiction in which this Offer of
Finance is sought to be enforced shall, as to such jurisdiction and to
the extent such provision is invalid or unenforceable, be deemed
severable and shall not affect any other provision of this Offer of
Finance.
LAURENTIAN BANK OF CANADA 13
COMMERCIAL BANKING
<PAGE> 14
10. In no event shall the interest and all other charges provided for
hereunder exceed the maximum aggregate amount that Laurentian may
collect in compliance with applicable law. Notwithstanding anything to
the contrary herein contained, if at any time implementation of any
provision hereof results in a payment in contravention of the preceding
sentence, the amount of the excess shall be applied as a partial
prepayment of principal.
11. The obligation of the Borrower to make payment in any currency (the
"Payment Currency") shall not be discharged or satisfied by any tender
or recovery pursuant to any judgment expressed in or converted into any
other currency except to the extent to which such tender or recovery
shall result in the effective receipt by Laurentian (at the current
rate of exchange offered by Laurentian for the sale by it of the
Payment Currency) of the full amount of the Payment Currency payable or
expressed to be payable.
LAURENTIAN BANK OF CANADA 14
COMMERCIAL BANKING
<PAGE> 15
SCHEDULE "E"
PRE-AUTHORIZED PAYMENT PLAN APPLICATION
(PLEASE COMPLETE IN FULL)
LOAN NO. - -
-- -- -- -- -- -- --
- ------------------------------------------------------------------------
FIRST NAME LAST NAME AS SHOWN ON BANK RECORDS
- ------------------------------------------------------------------------
NAME OF BANK/FINANCIAL INSTITUTION
- ------------------------------------------------------------------------
BRANCH ADDRESS/STREET
- ------------------------------------------------------------------------
CITY PROVINCE POSTAL CODE
- --------------------------------- ------------------------
BANK/TRANSIT NUMBER ACCOUNT NO.
I/we hereby request and authorize Laurentian Bank of Canada to draw a cheque on
the first day of each month under its "SUREPAY PLAN" against my account at the
bank or financial institution indicated hereon (or any of its branches) for the
purpose of making payment on my loan. I/we understand that if any adjustment is
required in the amount of the monthly payment, I/we will be notified of the
adjustment and the amount of my SUREPAY cheque will be changed effective as of
the month shown on the notice. My bank or financial institution is authorized to
deal with such cheques as if signed by me/us.
- -----------------------
DATE
- ---------------------------------------------------
SIGNATURE(S) AS SHOWN ON BANK RECORDS
- ---------------------------------------------------
LAURENTIAN BANK OF CANADA 15
COMMERCIAL BANKING
<PAGE> 1
EXHIBIT 4.3
SUBORDINATED LOAN AGREEMENT
This agreement dated as of the 20th day of March, 1998
BETWEEN:
STRIKER PAPER CANADA, INC., a corporation
incorporated pursuant to the laws of the Province of
Ontario,
(hereinafter referred to as the "Borrower")
- and -
FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.,
a corporation incorporated pursuant to the laws of
the Province of Ontario,
(hereinafter referred to as the "Lender")
THIS AGREEMENT WITNESSES THAT for valuable consideration the parties agree as
follows:
PART 1.0 - INTERPRETATION
1.1 DEFINITIONS. For the purposes of this Agreement and where the context
does not otherwise require, terms shall have the meanings assigned thereto in
Schedule A annexed hereto.
1.2 AUDITED FINANCIAL STATEMENTS. All references in this Agreement to
audited financial statements of a corporation, including the balance sheet and
related statements of income, retained earnings and changes in financial
position, mean financial statements prepared by the corporation in accordance
with GAAP together with an auditor's opinion that the statements fairly present
the financial position of the corporation and the results of its operations for
the Fiscal Period reported on in accordance with GAAP. All accounting
determinations for purposes of determining compliance with the financial
covenants contained in section 7.2 shall be made in accordance with GAAP as in
effect on the Closing Date and applied on a basis consistent in all material
respects with the Benchmark Financials. If GAAP shall change from the basis
used in preparing the said financial statements, the certificates required to
be delivered pursuant to subsection 7.1(e) attesting to compliance with the
covenants contained herein shall include, at the election of the Borrower or
upon the request of the Lender, calculations setting forth the adjustments
necessary to demonstrate how the Borrower is in compliance with the financial
covenants based upon GAAP in effect on the Closing Date.
1.3 CANADIAN CURRENCY. Unless otherwise specified herein, all amounts and
values referred to in this Agreement shall be calculated in lawful money of
Canada.
1.4 INTEREST ACT. Unless otherwise specified, all annual rates of
interest referred to herein are based on a calendar year of 365 or 366 days, as
the case may be. Where a rate of interest hereunder is calculated on the basis
of a year (the "Deemed Year") which contains fewer days than the actual number
of days in the calendar year of calculation, such rate of interest shall be
expressed as a yearly rate for the purposes of the Interest Act (Canada) by
multiplying such rate of interest by the actual number of days in the calendar
year of calculation and dividing it by the number of days in the Deemed Year.
<PAGE> 2
Page 2
1.5 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into
Parts and sections and the provision of a Table of Contents and the insertion
of headings are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.
1.6 REFERENCES. All references to sections, Parts and Schedules are to
sections and Parts of and Schedules to this Agreement. The words "hereto",
"herein", "hereof", "hereunder", "this Agreement" and similar expressions mean
and refer to this Agreement.
1.7 NUMBER AND GENDER. Where the context so requires, words importing the
singular include the plural and vice versa, and words importing gender include
the masculine, feminine and neuter genders.
1.8 MAXIMUM INTEREST RATE.
(a) In the event that any provision of this Agreement would oblige
the Borrower to make any payment of interest or any other
payment which is construed by a court of competent
jurisdiction to be interest in an amount or calculated at a
rate which would be prohibited by law or would result in a
receipt by the Lender of interest at a criminal rate (as such
terms are construed under the Criminal Code (Canada)), then
notwithstanding such provision, such amount or rate shall be
deemed to have been adjusted nunc pro tunc to the maximum
amount or rate of interest, as the case may be, as would not
be so prohibited by law or so result in a receipt by the
Lender of interest at a criminal rate, such adjustment to be
effected, to the extent necessary, as follows:
(i) firstly, by reducing the amount or rate of interest
required to be paid under sections 4.1 and 4.2 of
this Agreement; and
(ii) thereafter, by reducing any fees, commissions,
premiums and other amounts which would constitute
interest for the purposes of section 347 of the
Criminal Code (Canada);
(b) If, notwithstanding the provisions of clause (a) of this
section and after giving effect to all adjustments
contemplated thereby, the Lender shall have received an amount
in excess of the maximum permitted by such clause, then such
excess shall be applied by the Lender to the reduction of the
principal balance of the Outstanding Borrowing in inverse
order of maturity and not to the payment of interest or if
such excessive interest exceeds such principal balance, such
excess shall be refunded to the Borrower; and
(c) Any amount or rate of interest referred to in this section
shall be determined in accordance with generally accepted
actuarial practices and principles as an effective annual rate
of interest over the term of this Agreement on the assumption
that any charges, fees or expenses that fall within the
meaning of "interest" (as defined in the Criminal Code
(Canada)) shall, if they relate to a specific period of time,
be prorated over that period of time and otherwise be prorated
over the terms of this Agreement and, in the event of dispute,
a certificate of a Fellow of the Canadian Institute of
Actuaries appointed by the Lender shall be conclusive for the
purposes of such determination.
1.9 PARAMOUNTCY. In the event of any conflict or inconsistency between
the provisions of this Agreement and the provisions of the Security, the
provisions of this Agreement shall prevail and be paramount.
<PAGE> 3
Page 3
1.10 SCHEDULES. The Schedules forming part of this Agreement are as
follows:
Schedule A Defined Terms Schedule A
Schedule A-1 Benchmark Financials Schedule A - section (d)
Schedule B Real Property Description section 6.1(x)
Schedule C Opening Balance Sheet Schedule A - section (ww)
Schedule D Taxes section 6.1(p)
Schedule E Location of Collateral section 6.1(m)
Schedule F Environmental Disclosure section 6.1(y)
Schedule G Appraisals section 5.1(bb)
Schedule H Contingent Obligations section 6.1(z)
Schedule I Legal Opinions section 5.1(w)
Schedule J Intentionally Deleted
Schedule K Intellectual Property section 6.1(q)
Schedule L Material Contracts section 1.1(ss)
Schedule M Description of Equipment section 5.1(bb)
Schedule N Cash Flow Plan Schedule A - section (l)
Schedule O Example of Interest Calculation section 4.1
Schedule P Accounts Payable section 7.1(f)
Schedule Q Litigation section 6.1(g)
PART 2.0 - CREDIT FACILITY
2.1 CREDIT FACILITY. Subject to the provisions of this Agreement, the
Lender agrees to make available to the Borrower a non-revolving term facility
in the maximum principal amount of $1,500,000 available by way of two advances
as follows:
(a) an advance in the amount of $1,250,000 on the Closing Date (the
"First Advance"); and
(b) an advance in the amount of $250,000 on or before October 1,
1998 (the "Second Advance").
2.2 PURPOSES OF CREDIT FACILITY. The Borrower shall use the proceeds of the
First Advance and the Second Advance to finance the restart of the Thorold
Plant and to provide the Borrower with working capital to operate its Business,
including the costs related to the financing.
2.3 EVIDENCE OF INDEBTEDNESS. The Lender shall maintain accounts and
records evidencing the obligations of the Borrower to the Lender hereunder.
The Lender's accounts and records shall constitute prima facie evidence of the
indebtedness of the Borrower to the Lender hereunder in the absence of manifest
error.
2.4 ILLEGALITY. If the introduction of or any change in any Applicable Law
or in the interpretation or application thereof by any court or by any
governmental authority charged with the administration thereof, makes it
unlawful or prohibited for the Lender to make, to fund or to perform any of its
obligations under this Agreement, the Lender may, by sixty days written notice
to the Borrower (unless the provision of the Applicable Law requires earlier
prepayment in which case the notice period shall be such shorter period as
required to comply with the Applicable Law), terminate its obligations under
this Agreement and in such event, the Borrower shall prepay such Borrowings
forthwith (or at the end of such period as the Lender in its discretion
agrees), without notice or penalty, together with all accrued but unpaid
interest and fees as may be applicable to the date of payment.
<PAGE> 4
Page 4
PART 3.0 - PRINCIPAL PAYMENTS
3.1 SCHEDULED PRINCIPAL REPAYMENT. Unless the Outstanding Borrowing, or any
part thereof, shall have been required to be paid on an earlier date pursuant
to the terms hereof, the Borrower shall repay the principal portion of the
Outstanding Borrowing in twenty-four (24) consecutive equal monthly instalments
commencing on the last day of the first full month following the first
anniversary date of the Closing Date.
3.2 FIRE AND BUSINESS INTERRUPTION INSURANCE PROCEEDS. Fifty percent (50%)
of the proceeds of the fire and business interruption insurance claims paid to
the Borrower with respect to the January 17, 1997 loss shall be applied to
reduce the principal portion of the Outstanding Borrowing promptly upon their
receipt by the Borrower. Such payment shall be applied in reverse order of
maturity to the scheduled principal repayments contemplated by section 3.1
hereof.
3.3 CATCH-UP PAYMENTS. Should the Borrower for any reason be prohibited
pursuant to the terms of either of the Senior Loan Agreements, from making any
payment of interest or scheduled principal payment to the Lender pursuant to
section 3.1 or the unpaid portion of the structuring fee payable to First
Ontario Management Ltd. pursuant to section 4.3 hereof, or unpaid expenses of
the Lender and its agents pursuant to section 4.4 then the Borrower shall pay
interest on such unpaid amounts at the Interest Rate plus 2% per annum as
provided for in section 4.2 hereof, and all such payments (including principal,
interest and interest on unpaid interest) shall become immediately due and
payable to the extent permitted under the terms of the applicable Senior Loan
Agreement.
3.4 PREPAYMENT. The Borrower shall have the right at any time or from time
to time to prepay without fee or penalty all or any of the Outstanding
Borrowing by providing the Lender with five Business Days' prior written notice
of its intention to prepay. Each such prepayment shall be applied in reverse
order of maturity to the scheduled principal repayments contemplated by section
3.1 hereof.
3.5 PAYMENT MECHANICS. Each payment under this Agreement shall be made for
value at or before 1:00 p.m. (Toronto time) on the day such payment is due,
provided that, if any such day is not a Business Day, such payment shall be
deemed for all purposes of this Agreement to be due on the Business Day
immediately preceding such day (and any such adjustment shall be taken into
account for purposes of the computation of interest and fees payable under this
Agreement). All payments shall be made to the Lender at Credit Union Central
of Ontario, care of the Royal Bank of Canada or such other address and means as
the Lender may from time to time advise the Borrower in writing. Wires should
be sent to the Royal Bank, transit #00002-003 account #247495-5 with payment
instructions stating that the payment is to be directed to the First Ontario
LSI Fund Account Number 0004-710-061 at Credit Union Central of Ontario.
3.6 NO CREDIT FOR TRUST FUNDS. For greater certainty, payments of any nature
whatsoever made by the Borrower to the Lender which the Lender is required to
pay to any Person by reason of any trust imposed by law or by any Person upon
amounts received by the recipient from the Borrower, shall not be credited
against, or deemed to be payment on account of, all or any portion of the
Outstanding Borrowing. All costs and expenses incurred by the Lender, its
agents, representatives and solicitors in connection with the repayment of such
monies to any Person shall be for the account of the Borrower and payable on
demand. Interest shall accrue on these costs and expenses, until paid, at the
Interest Rate.
<PAGE> 5
Page 5
PART 4.0 - INTEREST, FEES AND EXPENSES
4.1 PAYMENT OF INTEREST.
(1) RATE CALCULATION AND PAYMENT. The Borrower shall pay interest
as follows:
(i) on the Outstanding Borrowing from the applicable
Borrowing Date at a rate per annum equal to fifty
percent (50%) of the Interest Rate calculated and
payable monthly in arrears on each Interest Payment
Date both before and after the Maturity Date; and
(ii) on the Outstanding Borrowing from the applicable
Borrowing Date at a rate per annum equal to fifty
percent (50%) of the Interest Rate compounded on each
Interest Payment Date both before and after the
Maturity Date and payable in full on the Maturity
Date.
For purposes of clarification, Schedule O sets out an example of such
calculations.
4.2 INTEREST ON OVERDUE AMOUNTS. Upon a default in the payment of
principal, interest or other amounts due under this Agreement, the Borrower
shall pay interest on such overdue amount both before and after Maturity Date
or judgment at a rate per annum equal to the Interest Rate plus 2% per annum
calculated monthly, computed from the date such amount becomes overdue for so
long as such amount remains overdue. Such interest shall be payable upon
demand by the Lender and shall be compounded on each Interest Payment Date.
4.3 STRUCTURING FEE. The Borrower shall pay to First Ontario Management Ltd.
(acting as agent for the Lender) each of the following:
(a) a non-refundable work fee of $45,000 plus goods and services tax
exigible thereon; and
(b) a commitment fee of $22,500 plus goods and services tax exigible
thereof,
the said work fee and commitment fee are hereinafter collectively referred to
as the structuring fee. Such fee shall be deemed to be earned for the time,
effort and exposure incurred by the Lender in (i) reviewing and establishing
all documentation, financial information, proposal and plans referable to the
Credit Facility, and (ii) establishing satisfactory priority arrangements with
the holders of the Permitted Encumbrances. The structuring fee shall be paid
on the Closing Date if it has not been paid prior to the Closing Date.
4.4 REIMBURSEMENT OF EXPENSES. All statements, reports, certificates,
opinions and other documents or information required to be furnished to the
Lender by the Borrower under this Agreement shall be supplied by the Borrower
without cost to the Lender. The Borrower agrees to pay promptly on demand all
of the reasonable legal fees, documentation costs and other expenses incurred
by the Lender, First Ontario Management Ltd. and Crosbie Capital Management
Ltd. in connection with the preparation, negotiation, documentation and
operation of this Agreement, and any other document to be executed and issued
as provided herein, including the enforcement of the rights of the Lender under
this Agreement or the security granted pursuant to the terms of this Agreement,
whether or not any amounts are advanced
<PAGE> 6
Page 6
under this Agreement; including, without limitation all due diligence expenses
and consulting fees incurred by the Lender.
PART 5.0 - CONDITIONS PRECEDENT
5.1 FIRST ADVANCE CONDITIONS. The obligation of the Lender to make the
First Advance is subject to the terms and conditions of this Agreement and is
conditional upon satisfactory evidence being given to the Lender and its
counsel as to compliance with the following conditions on the date of such
advance:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties contained in section 6.1 are and shall continue to be
true and correct in every respect as if made by the Borrower
contemporaneously with any Borrowing.
(b) RESOLUTIONS AND CERTIFICATES. The Lender shall have received,
duly executed and in form and substance satisfactory to it:
(i) a copy of the constating documents and by-laws of the
Borrower and a copy of the resolutions of the board
of directors of the Borrower authorizing the
execution, delivery and performance of this
Agreement, the Security and any other instruments
contemplated hereunder, certified by an appropriate
officer of the Borrower;
(ii) a certificate of incumbency for the Borrower showing
the names, offices and specimen signatures of the
officers who will execute this Agreement, the
Security and any other instruments contemplated
hereunder and thereunder; and
(iii) such additional supporting documents as the Lender or
its counsel may reasonably request.
(c) APPROVAL. The Lender's Investment Committee and the Lender's
Board of Directors shall have approved the transactions
contemplated hereby.
(d) DELIVERY OF SECURITY. The Lender shall have received the
Security (including any necessary consents or subordinations of
third parties as may be required by the Lender) duly executed by
the issuer thereof and in form and substance satisfactory to the
Lender and its counsel. In particular, the Lender shall be
satisfied that it has a perfected interest in the shares in the
capital of the Borrower pledged by Striker Industries, Inc.
which shall have been duly registered in the name of the Lender
and shall have been delivered to the Lender.
(e) REGISTRATION. The Security has been registered, recorded or
filed in all jurisdictions deemed necessary by the Lender and
its counsel.
(f) EVIDENCE OF OTHER LOANS AND FINANCING COMMITMENTS. The Lender
shall have received evidence to its satisfaction of the
completion of a financing commitment to or in favour of the
Borrower for a $800,000 operating loan committed by a Senior
Operating Lender on terms acceptable to the Lender.
(g) LENDER SATISFIED RE: FINOVA CREDIT FACILITY. The Lender shall
be satisfied with all of the terms and conditions of the Finova
Credit Facility.
<PAGE> 7
Page 7
(h) LENDER SATISFIED RE: FORBEARANCE ARRANGEMENT. The Lender shall
be satisfied with all of the terms and conditions of the
forbearance arrangement with Laurentian Bank and the Ontario
Development Corporation.
(i) LENDER SATISFIED RE: RESTRUCTURING ARRANGEMENTS OF BORROWER.
The Lender shall be satisfied with all of the terms and
conditions of the restructuring plan, including all of the terms
and conditions of the arrangements with trade creditors of the
Borrower. The Borrower shall provide the Lender with a sub-
ledger summary of payments of funds to and owing to each
creditor of its Business assumed or otherwise acknowledged by
the Borrower as an obligation of the Borrower with a commentary
summarizing the terms, if any, negotiated with each such
creditor.
(j) LENDER SATISFIED RE: RESTRUCTURING ARRANGEMENTS OF STRIKER
INDUSTRIES, INC. The Lender shall be satisfied with all of the
terms and conditions of the arrangements with trade creditors of
Striker Industries, Inc. The Borrower shall cause Striker
Industries, Inc. to provide the Lender with a sub- ledger
summary of payments of funds to and owing to each of its
creditor assumed or otherwise acknowledged by Striker
Industries, Inc. as an obligation of Striker Industries, Inc.
with a commentary summarizing the terms, if any, negotiated with
each such creditor.
(k) REVIEW OF DOCUMENTS. The Lender's counsel shall have also
completed a satisfactory review of all agreements between or
among the Shareholders of the Borrower including the
Shareholders Agreement.
(l) EVIDENCE OF CONVERSION OF DEBT TO EQUITY INVESTMENT. The Lender
shall have received evidence to its satisfaction of the
completion by Striker Industries, Inc. of additional common
share equity investments in the Borrower in the amount in
Canadian currency equivalent to $3,471,000 in United States
currency upon conversion of its loan or other such amounts
outstanding in the Borrower.
(m) EVIDENCE OF ADDITIONAL EQUITY INVESTMENT. The Lender shall have
received evidence to its satisfaction of the completion by
Striker Industries, Inc. of additional common share equity
investments in the Borrower in the amount of $835,000
immediately before Closing.
(n) EVIDENCE OF FUNDS FOR INVESTMENT. The Lender shall have
received evidence to its satisfaction on or before the Closing
Date that Striker Industries, Inc. has the funds referred to in
paragraph (l) above available to make the equity investment
contemplated thereby.
(o) EVIDENCE OF CONVERSION OF SHAREHOLDER LOANS BY STRIKER
INDUSTRIES, INC. TO NON INTEREST-BEARING DEBT. The Lender shall
have received evidence to its satisfaction that any debt owing
by Striker Industries, Inc. to a shareholder is non-interest
bearing debt.
(p) EVIDENCE OF ADDITIONAL EQUITY INVESTMENT IN STRIKER INDUSTRIES,
INC. The Lender shall have received a letter from international
investors indicating that they will invest new equity in Striker
Industries, Inc. as required by the Cash Flow Plan if other
sources of this equity investment are not found.
(q) LENDER SATISFIED RE: TITLE AND LIENS. The Borrower shall have
provided evidence satisfactory to the Lender that all the its
Property is free and clear of all Liens except for Liens
relating to Permitted Encumbrances.
<PAGE> 8
Page 8
(r) EVIDENCE OF COMPLIANCE. The Lender shall have received such
environmental reports and audits as it may require acting
reasonably. The Lender and its counsel shall be satisfied with
the environmental risk associated with the transactions
contemplated herein including, if necessary, with the results of
any environmental audit or investigation conducted.
(s) EFFECTIVE NET WORTH. The Borrower shall have provided the
Lender with evidence satisfactory to the Lender in its sole and
unfettered discretion that the Effective Net Worth of the
Borrower at Closing is no less than $11,500,000.
(t) WORKING CAPITAL. The Borrower shall have provided the Lender
with evidence satisfactory to the Lender in its sole and
unfettered discretion that the Borrower has Working Capital of
no less than $525,647.00 immediately after Closing.
(u) DEBT TO NET WORTH RATIO. The Borrower shall have provided the
Lender with evidence satisfactory to the Lender in its sole and
unfettered discretion that the Borrower's ratio of Debt to
Effective Net Worth is no greater than 0.15 to 1 immediately
after Closing.
(v) INDEBTEDNESS. As at the Closing Date, except for the Borrowing
hereunder and Indebtedness permitted hereunder, the Borrower
shall have no other Indebtedness.
(w) LEGAL OPINIONS. The Lender shall have received from counsel to
the Borrower legal opinions in connection with this Agreement
and the Security on terms satisfactory to the Lender, acting
reasonably, including opinions to the effect that this Agreement
and the Security are valid, legally binding and enforceable and
that the shares of the Borrower issued and held by the Lender
are validly issued. In addition, the Lender shall have received
from United States counsel to the Borrower legal opinions in
connection with the Security given by Striker Industries, Inc.,
on terms satisfactory to the Lender, acting reasonably,
including that such Security are valid, legally binding and
enforceable and in connection with the United States securities
law relating to the Security given by Striker Industries, Inc..
Both said opinions shall be substantially in the form of the
draft opinions attached as Schedule I to this Agreement.
(x) NO DEFAULT. No Default or Event of Default has occurred and is
continuing. The Borrower has not received any notice (written
or otherwise), and is not otherwise aware, of any event or
circumstances, whether existing or pending, which would cause
any Default or Event of Default to occur with the lapse of time.
(y) DUE DILIGENCE. The Lender shall have completed and be satisfied
in its sole discretion with its review of the results of its due
diligence inquiries, including, without limitation, its review
of the Opening Balance Sheet, which said balance sheet shall
reflect:
(i) no outstanding operating loan;
(ii) common equity of not less than $12,500,000.00;
(iii) trade payables of not more than $1,412,160.00; and
(iv) no inter-corporate receivables or payables.
(z) INTER-LENDER AGREEMENTS. Lender shall be satisfied with all of
the terms and conditions of the terms of the loans and financing
commitments provided to the Borrower by the Senior
<PAGE> 9
Page 9
Lenders and the Senior Lenders shall have executed an
Inter-Lender Agreement on terms satisfactory to the Lender.
(aa) SENIOR FINANCING DOCUMENTS. The Lender shall have received
copies of all financing and supporting documentation to be
delivered in connection with the Senior Loan Agreements and the
Lender shall be satisfied with the terms and conditions thereof.
(bb) MATERIAL ADVERSE CHANGE. No Material Adverse Change has
occurred and no event shall have occurred since June 30, 1997
which, in the sole discretion of the Lender, has had or could
reasonably be expected to have a Material Adverse Effect,
including without limitation, litigation or claims threatened
against the Borrower.
(cc) FEES AND DISBURSEMENTS. The Lender shall have received payment
in full of all fees and out of pocket expenses payable to the
Lender and its agents which have become due, including, without
limitation, the structuring fee described in section 4.3 and
payment of all disbursements and out of pocket expenses of the
Lender, First Ontario Management Ltd., and Crosbie Capital
Management Inc..
(dd) INSURANCE. The Lender shall have received a certificate of
insurance in respect of all policies maintained by the Borrower
which shall name the Lender as additional insured, mortgagee or
loss payee as specified by the Lender.
(ee) LENDER SATISFIED RE: INSURANCE COVERAGE. The Lender shall be
satisfied with the insurance coverage of the Borrower's Business
and Property on terms satisfactory to the Lender in its sole and
unfettered discretion.
(ff) MATERIAL CONTRACTS. The Lender or its counsel shall have
reviewed copies of all documents including without limitation
all contracts, permits, licenses and leases material to the
Business of the Borrower as determined by the Lender acting
reasonably.
(gg) REOPENING OF THOROLD PLANT. The Lender shall be satisfied in
its sole discretion, acting reasonably, with the Borrower's
plans to reopen and commence production of saleable product at
the Thorold Plant within 12 weeks following Closing.
(hh) REOPENING OF STEPHEN'S PLANT. The Lender shall be satisfied in
its sole discretion, acting reasonably, with Striker Industries,
Inc.'s plans to implement the reopening of the Stephen's Plant.
(ii) SHAREHOLDERS AGREEMENT AND SUBSCRIPTION AGREEMENT. The Lender
shall have received the Shareholders Agreement and Subscription
Agreement duly executed by all parties thereto and the Lender
shall be satisfied that the Shareholders Agreement and the
Subscription Agreement are, respectively, in effect and is
valid, binding and enforceable as against all parties thereto.
(jj) COMPLIANCE WITH LAWS AND MATERIAL CONTRACTS. The Business and
operations of the Borrower comply in all material respects with
all Applicable Laws and with the terms of all Material Contracts
to which the Borrower is a party including, without limitation,
contracts relating to Permitted Encumbrances and other
Indebtedness permitted hereunder.
(kk) CONSENTS, APPROVALS. The Borrower and the Lender shall have
received all necessary consents, approvals, exemptions and
authorizations required to complete all the
<PAGE> 10
Page 10
transactions contemplated herein, including without limitation
the approval of the Lender's Board of Directors.
(ll) ADVANCE OF SENIOR INDEBTEDNESS. All conditions precedent to the
advances under senior credit facilities being provided by each
of the Senior Lenders pursuant to the applicable Senior Loan
Agreement have been satisfied.
(mm) EQUITY. The Lender shall have received pursuant to the
Subscription Agreement that number of the common shares of the
capital stock of the Borrower equal to 25% of all the fully
participating equity of the Borrower (calculated on a fully
diluted basis).
(nn) KEY PERSON INSURANCE. The Lender shall have received evidence
satisfactory to it that the key person life insurance on the
life of Mr. David Collins in the sum of $1,000,000 is in place
and in good standing assigned in favour of the Lender.
(oo) PAYROLL DEDUCTION PLAN. The Borrower shall have implemented a
payroll deduction plan satisfactory to the Lender for the
purchase of shares in the capital of the Lender pursuant to
which the Borrower will match employee contributions to a
maximum of $1,500 per employee per year.
(pp) CONFIRMATION RE: ACCOUNT FOR ADVANCES. Confirmation that
vouchered receipts have been delivered by each of David Collins
and Matthew Pond for the advances made to them for expenses.
5.2 SECOND ADVANCE CONDITIONS. The obligation of the Lender to make the
Second Advance is subject to the terms and conditions of this Agreement and is
conditional upon satisfactory evidence being given to the Lender and its
counsel as to compliance with the following conditions on the date of such
advance:
(a) upon satisfactory evidence being given to the Lender and its
counsel as to compliance with each of the conditions set out in
section 5.1 hereof on the date of the advance of monies pursuant
to the Second Advance;
(b) in each calendar month for the three month period ending on
October 1, 1998:
(i) the Borrower shall have produced and sold on average
at least 2,040 tons of dry felt products;
(ii) the average EBITDA per month of the Borrower shall
have not been less than US$105,000 ; and
(iii) the average revenue per month of the Borrower shall
have not been less than US$482,000;
(c) the Stephen's Plant shall have been operating for three
consecutive months and shall have produced average revenue per
month of not less than $500,000 in each of those three months
ending prior to October 1, 1998; and
(d) the Borrower shall have achieved each of the financial covenants
set forth in section 7.2 hereof throughout the said three month
period then ended.
<PAGE> 11
Page 11
5.3 WAIVER. The terms and conditions stated in this Part 5.0 are inserted
for the sole benefit of the Lender and may be waived by it in whole or in part
and with or without terms or conditions in respect of the Borrowing or either
of the First Advance or the Second Advance.
PART 6.0 - REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATION AND WARRANTIES. The Borrower represents and warrants to
the Lender that:
(a) DUE INCORPORATION. The Borrower is duly incorporated, organized
and validly subsisting under the laws of Ontario. The Borrower
has all necessary corporate power and authority to own its
properties and assets and to carry on its Business as now
conducted and is or will be duly licensed or registered or
otherwise qualified in all jurisdictions wherein the nature of
its assets or the Business transacted by it makes such
licensing, registration or qualification necessary, except where
failure to do so would not give rise to any material legal
impediment to the use of assets in the Business or the ability
of the Borrower to carry on the Business or perform its
obligations hereunder.
(b) POWER. The Borrower has full power and capacity to enter into,
deliver and perform its obligations under this Agreement, the
Security and all other instruments contemplated hereunder.
(c) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Borrower of this Agreement, the Security, and
all other instruments contemplated hereunder and the
consummation of the transactions contemplated hereby and thereby
(i) have been duly authorized by all necessary corporate
action,
(ii) do not and will not conflict with, result in any
breach or violation of, or constitute a default under
the constating documents or by-laws of, or any
Applicable Laws, determination or award presently in
effect and applicable to the Borrower, or of any
commitment, agreement or any other instrument to
which the Borrower is now a party or is otherwise
bound, with the exception of the Senior Loan
Agreements and Permitted Encumbrances,
(iii) do not (except for the Security) result in or require
the creation of any Security Interest upon or with
respect to any of the properties or assets of the
Borrower, and
(iv) do not require the consent or approval (other than
those consents or approvals already obtained and
copies of which have been delivered to the Lender)
of, or registration or filing with, any other party
(including shareholders of the Borrower) or any
governmental body, agency or authority.
(d) VALID AND ENFORCEABLE OBLIGATIONS. This Agreement, the Security
and all other instruments contemplated hereunder are, or when
executed and delivered to the Lender will be, legal, valid and
binding obligations of the Borrower, enforceable in accordance
with their respective terms.
(e) TITLE TO ASSETS. The Borrower has a good and marketable title
to all its Property, free from any mortgage, charge, hypothec,
pledge, assignment, lien, security interest or other
<PAGE> 12
Page 12
encumbrance other than the Permitted Encumbrances.
(f) VALIDITY AND PRIORITY OF SECURITY. The Security constitutes
assignments, floating charges or security interests, as
applicable, on the undertaking and property and assets of the
Borrower purported to be assigned, mortgaged, charged or
subjected to a security interest thereby and ranks in priority
to any other Security Interests upon such undertaking and
property and assets other than Permitted Encumbrances.
(g) NO ACTIONS. Except as disclosed in Schedule Q hereto, there are
no actions, suits, proceedings, inquiries or investigations
existing, pending or threatened, affecting the Borrower in any
court or before or by any federal, provincial or municipal or
other governmental department, commission, board, tribunal,
bureau or agency, Canadian or foreign, which is reasonably
likely to materially and adversely affect the financial
condition, property, assets, operations or Business of the
Borrower, the ability of the Borrower to repay the Outstanding
Borrowing or which is reasonably likely to materially and
adversely affect the ability of the Borrower to perform any of
its obligations under this Agreement, the Security or any other
instrument contemplated hereunder, or the validity or
enforceability of this Agreement or the Security.
(h) FINANCIAL INFORMATION. The financial statements of the Borrower
furnished to the Lender under this Agreement or which were
furnished to the Lender to induce it to enter into this
Agreement present fairly the financial condition of the Borrower
as at the dates thereof. Since the preparation of the Benchmark
Financials, no Material Adverse Change has occurred in respect
of the financial position of the Borrower. All such financial
statements and all other information, certificates, schedules,
reports and other papers and data furnished to the Lender are
accurate, complete and correct in all material respects, and all
financial forecasts have been prepared in good faith based upon
the facts and circumstances known to the Borrower at the time
they were provided to the Lender and are based upon reasonable
assumptions. No event has occurred or subsequent information
has become available to the Borrower since the said financial
forecasts were provided to the Lender which would give rise to a
Material Adverse Change in the said forecasts.
(i) NO DEFAULTS OR EVENTS OF DEFAULT. No event has occurred and is
continuing, and no circumstance exists which has not been waived
which constitutes a Default or Event of Default hereunder or a
default or event of default in respect of any material
commitment, agreement or any other instrument to which the
Borrower is now a party or is otherwise bound, entitling any
other party thereto to accelerate the maturity of amounts of
principal owing thereunder, or which would give rise to a
Material Adverse Change upon the financial condition, property,
assets, operations or Business of the Borrower.
(j) COMPLIANCE WITH LAW. The Borrower is not in violation of any
terms of its constating documents or by- laws or of any law,
regulation, rule, order, judgment, writ, injunction, decree,
determination or award presently in effect and applicable to it,
the violation of which would give rise to a Material Adverse
Change.
<PAGE> 13
Page 13
(k) CAPITAL. The Borrower is authorized to issue an unlimited
number of common shares, and will have issued 15,027,649 by
Closing as fully paid and non-assessable common shares, which
are beneficially owned by and registered in the names of the
following:
Lender 3,756,912
Striker Holdings (Canada) Inc. 11,270,737
(l) NON-DILUTION. Except as contemplated by the Subscription
Agreement, no Person now has any agreement, option or right
capable of becoming an agreement or option for the pledge,
purchase, subscription or issuance from the Borrower of any
shares of the Borrower, issued or unissued, and no other shares
in the capital of the Borrower will be issued without the prior
written consent of the Lender.
(m) LOCATION OF ASSETS. Except for inventory from time to time in
the possession of freight forwarders acting on behalf of the
Borrower in the ordinary course, all property and assets of the
Borrower are located at the Borrower's principal place of
business in Thorold, Ontario as described in Schedule E annexed
hereto..
(n) SUBSIDIARIES. The Borrower does not own any shares or voting
securities of any Person and has no Subsidiaries.
(o) PARTNERSHIP. The Borrower is not in partnership with any Person
nor is it a participant in any joint venture.
(p) TAXES. The Borrower has filed all foreign, provincial and local
tax returns which are required to be filed and has paid all
Taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower except such Taxes, if any, as are being
contested in good faith and as to which adequate reserves have
been provided. The Borrower is not in arrears in the payment of
any amount to any governmental body or agency including, without
limitation, amounts owing or to be remitted with respect to
employee withholdings for income tax or Canada Pension Plan,
goods and services tax or provincial sales taxes. The charges,
accruals and reserves on the books of the Borrower in respect of
any taxes or other governmental charges are adequate except as
described in Schedule D attached hereto.
(q) INTELLECTUAL PROPERTY. The Borrower owns or has the right to
use all patents, trademarks, trade names, copyrights, licenses
and rights with respect thereto necessary for the conduct in all
material respects of its Business as now conducted and as
presently proposed to be conducted, without any known conflict
with the rights of others, and in each case free from any lien
other than Permitted Encumbrances. Schedule K attached hereto
sets out details of all registered and common law trademarks,
trade names and copyright property employed in the Business and
all registered patents and patent applications owned by the
Business or licensed by the Corporation in the operation of the
Business.
(r) SOLVENCY. The Borrower is solvent, is able to pay its debts as
they become due and has capital sufficient to carry on its
Business, now owns property having a value both at fair
valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered
insolvent by the execution and delivery of this Agreement or the
Senior Loan Agreements or by the completion of the transactions
contemplated hereunder or thereunder.
<PAGE> 14
Page 14
(s) MARGIN SECURITIES. The Borrower does not own any margin
securities, and none of the proceeds of the borrowings hereunder
shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase any
margin securities.
(t) EMPLOYEE RELATIONS. Other than as disclosed in writing to the
Lender, there are no controversies pending or threatened between
the Borrower and any of its employees, other than employee
grievances arising in the ordinary course of business which are
not, in the aggregate, material to the continued financial
success and well-being of the Borrower, and the Borrower is in
compliance in all material respects with all federal and
provincial laws respecting employment and employment terms,
conditions and practices, except where the failure to so comply
would not give rise to a Material Adverse Change.
(u) DISCLOSURE OF MATERIAL CONTRACTS. The Borrower has provided
copies of all Material Contracts to which it is a party or by
which it is bound to the Lender or its agents.
(v) ENVIRONMENTAL AUDIT REPORTS. The Borrower has provided the
Lender with all environmental audit reports and site assessment
reports in its possession, including without limitation the
following reports:
o Golder Associates Ltd., 1990. Soil and Groundwater
Conditions, Domtar Construction Materials Roofing and
Insulation Plant, Thorold, Ontario. Report to Domtar Inc.
March 1990.
o Environmental & Safety Designs, Incorporated, EnSafe, 1991.
Final Phase I Pre-Conveyance Environmental Compliance
Survey, Domtar Construction Materials, Roofing and
Insulation Division, Domtar Inc., Canada.
o Jacobs Engineering Group Inc., 1995. Final Phase I
Environmental Site Assessment Report, Roofing Felt Plant,
100 Ormond Street South, Thorold, Ontario (Jacobs Project
No. 13-J684-01). Report to Striker Industries, Inc. June
30, 1995.
o Jacobs Engineering Group Inc., 1995. Final Phase I
Environmental Site Assessment Report Addendum, Striker
Roofing Felt Facility, Thorold, Ontario. Addendums to June
30, 1995. Report to Striker Industries, Inc., August 4,
1995.
The Borrower is in compliance with all Environmental Laws and no
event has arisen since the completion of the following latest
report of Jacobs Engineering Group Inc., 1995. Final Phase I
Environmental Site Assessment Report Addendum, Striker Roofing
Felt Facility, Thorold, Ontario. Addendums to June 30, 1995.
Report to Striker Industries, Inc., August 4, 1995, which would
make the said report inaccurate or incomplete.
(w) FRENCH FORM OF NAME. The Borrower's full corporate name is
Striker Paper Canada, Inc. and the Borrower has no French form
of name.
(x) REAL PROPERTY. Schedule B to this Agreement contains a complete
and accurate description of the Real Property and of the
Borrower's interest in the Real Property. The buildings on the
Real Property are entirely within the limits of the Real
Property. Except as disclosed in this Agreement, the occupation
and uses to which the Real Property has been put and the
construction of all buildings and structures thereon are in
material compliance with all applicable statutes, by-laws,
ordinances, regulations, covenants, restrictions or
<PAGE> 15
Page 15
official plans (including, without limitation, applicable zoning
by-laws, building codes, regulations and ordinances). Without
limiting the generality of the foregoing, there are no
outstanding work orders issued in relation to the Real Property
from any governmental authority (other than work orders of which
the Borrower has notified the Lender and with respect to which
the Borrower is actively and diligently pursuing compliance),
nor are any matters under discussion between the Borrower or the
Borrower's predecessors in title and any governmental authority
relating to work orders with respect to the Real Property.
Except as disclosed in this Agreement, no part of the Real
Property encroaches upon any lands adjoining the Real Property
and there are no encroachments over or upon the Real Property.
There is adequate rights of ingress and egress for the operation
of the Borrower's Business. The Real Property and all
appurtenances thereto and all systems and fixtures therein or
relating thereto (including all plumbing, electrical, drainage
systems) are in a good state of repair and maintenance,
reasonable wear and tear excepted, and are adequate for the
operation of the Borrower's Business. The Borrower is not aware
of any pending legislative change affecting the Real Property or
any condemnation or expropriation of any part thereof. No part
of the Real Property is subject to any watershed, greenbelt or
flood plain control or other restrictions of any conservation or
other governmental authority. The Borrower has not received any
notice, written or otherwise, of any Liens under the
Construction Lien Act (Ontario) against the Real Property. No
construction work is ongoing at the Real Property on the date of
this Agreement and no construction work has taken place at the
Real Property within the last 365 days.
(y) ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule F
attached to this Agreement,
(i) all facilities and property (including underlying
ground water) owned or leased by the Borrower have
been, and continue to be, owned, leased or used in
compliance with all Requirements of Environmental
Law;
(ii) to the best of the Borrower's knowledge there have
been no past, and there are no pending or threatened:
A. claims, complaints notices or requests for
information received by the Borrower with
respect to any alleged violation of any
Requirements of Environmental Law concerning
the Property; or
B. complaints, notices or inquiries to the
Borrower regarding potential liability under
any Requirements of Environmental Law
concerning the Property;
(iii) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned,
leased or used by the Borrower, that, singly or in
the aggregate, have resulted in or may be expected to
result in a Material Adverse Change and there is not
now and has not been any storage tanks located
beneath the surface of any such property;
(iv) except as described in Schedule F hereof, the
Borrower has been issued and is in compliance with
all material permits, certificates, approvals,
licenses and other authorizations under any
Requirements of Environmental Law to carry on its
Business;
<PAGE> 16
Page 16
(v) there are no conditions that, directly or indirectly,
relate to environmental matters and any property
owned, leased or used by the Borrower, (whether on,
above or below the lands or any structures, buildings
or facilities, now or formerly owned, operated or
used by the Borrower, or by adjoining properties or
businesses) including, without limitation, being
located within an environmentally sensitive area as
determined by any governmental authority, the
condition of the soil or ground water in the area,
the use of urea formaldehyde foam insulation, friable
asbestos fireproofing or insulation, PCBs or
radioactive substances that, singly or in the
aggregate have resulted in, or may be expected to
result in, a Material Adverse Change; and
(vi) the Borrower is maintaining and to the best of its
knowledge its predecessors in title have maintained
an appropriate environmental management system and
compliance programs, policies and procedures to
manage its Business and ensure compliance with the
Requirements of Environmental Law and the proper
understanding and management of all environmental and
occupational health and safety matters.
(z) CONTINGENT FINANCIAL OBLIGATIONS. All Contingent Financial
Obligations are described in Schedule H to this Agreement,
including a description of all agreements, documents or
instruments under which those Contingent Financial Obligations
arise or are evidenced. The Borrower has not received notice of
and is not otherwise aware of any event or circumstance, whether
existing or pending, which would cause any Contingent Financial
Obligation to become payable or liquidated.
(aa) PENSION AND BENEFIT PLANS. The Borrower is current with respect
to all of its contributions to all pension, retirement, profit
sharing and benefit plans for its employees, there are no claims
existing, pending or threatened against the Borrower by any
employee or regulatory authority with respect to any of those
plans and there are no deficiencies with respect to any of those
plans on a solvency or going concern basis.
(bb) APPRAISED VALUE OF EQUIPMENT. Schedule G sets out true copies
of all appraisals in the Borrower's possession or control which
are less than two years old of the value of the equipment
described in Schedule M, which appraisals shall establish a
value satisfactory to the Lender.
(cc) APPRAISED VALUE OF LAND. Schedule G sets out true copies of
all available appraisals in the possession or control of the
Borrower of the land and buildings of the Borrower which are
less than two years old.
(dd) "LSVCC QUALIFICATIONS" The Borrower:
(i) is a taxable Canadian corporation within the meaning
of the Income Tax Act (Canada);
(ii) carries on no business other than the Business;
(iii) not less than 90% of the fair market value of the
property of the Borrower is attributable to property
used by the Corporation in the Business;
(iv) the Borrower and all corporations related to it have
fewer than 501 full time employees and the ordinary
place of employment for 50% or more of such full time
employees is located in the Province of Ontario and
the wages and salaries payable to the
<PAGE> 17
Page 17
employees whose ordinary place of employment is
located in the Province of Ontario constitutes 50% or
more of the total payroll expense of the Borrower;
(v) the carrying value of the assets of the Borrower and
all corporations related to it (determined in
accordance with generally accepted accounting
principles) does not exceed $50,000,000; and
(vi) except as contemplated by the Shareholders Agreement
and the Subscription Agreement, there are no
outstanding options or agreements by the Borrower to
issue securities in the capital of the Borrower and
no understandings capable of becoming such
agreements.
(ee) ELIGIBLE USE OF FUNDS. The proceeds of the loan advance
contemplated by this Agreement shall not be used to fund any of
the following purposes:
(i) relending;
(ii) investment in land except land that is incidental and
ancillary to the Business of the Borrower;
(iii) reinvestment outside of Canada;
(iv) the purchasing or acquiring of the securities of any
person;
(v) the payment of dividends
(vi) a return of capital to the shareholders of the
Borrower; or
(vii) to carry on a business through a permanent
establishment or branch operation outside of Canada.
6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Part 6.0 shall survive the execution and delivery
of this Agreement and the making of Borrowings hereunder, regardless of any
investigation or examination made by the Lender or its counsel and the Lender
shall be deemed to have relied upon each of such representations and warranties
in making available each Borrowing hereunder.
PART 7.0 - COVENANTS
7.1 POSITIVE COVENANTS. From the date hereof and until the Outstanding
Borrowing is repaid in full, the Borrower will observe and perform, or will
cause the observance and performance of each of the following covenants, unless
compliance therewith shall have been waived in writing by the Lender:
(a) EXISTENCE. The Borrower will do or cause to be done all such
things as are necessary to maintain its corporate existence in
good standing, to ensure that it has at all times the right and
is duly qualified to conduct its Business and to obtain and
maintain all rights, privileges and franchises necessary for the
conduct of its Business.
<PAGE> 18
Page 18
(b) CONDUCT OF BUSINESS. The Borrower will maintain, operate and
use its properties and assets, and will carry on and conduct its
Business in a proper and efficient manner so as to preserve and
protect such properties and assets and Business and the profits
thereof.
(c) PAYMENT OF PRINCIPAL, INTEREST AND EXPENSES. The Borrower will
duly and punctually pay or cause to be paid to the Lender the
Outstanding Borrowing at the times and places and in the manner
provided for herein.
(d) PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and
discharge promptly when due all Taxes, assessments and other
governmental charges or levies imposed upon it or upon its
properties or assets or upon any part thereof, as well as all
claims of any kind (including claims for labour, materials and
supplies) which, if unpaid, would by law become a Lien or charge
upon any such properties or assets; but the Borrower shall not
be required to pay any such Tax, assessment, charge or levy or
claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings
and if the Borrower shall have set aside on its books a reserve
to the extent required by GAAP in an amount which is reasonably
adequate with respect thereto.
(e) BORROWER REPORTING REQUIREMENTS. The Borrower shall deliver to
First Ontario Management Ltd., or such other party as the Lender
may otherwise from time to time direct:
(i) within 90 days of the Fiscal Year end of the
Borrower, one copy of its annual financial statements
which shall be prepared on a consolidated basis by
the auditor of the Borrower, including the balance
sheet and statements of income, retained earnings and
changes in financial position, together with a
detailed unqualified report of the auditors of the
Borrower and all supporting notes and schedules (the
"Annual Financials");
(ii) within 90 days of the Fiscal Year end of the
Borrower, a certificate signed by the President or
Chief Financial Officer of the Borrower to the effect
that the Annual Financials present fairly the
financial position of the Borrower at the date
thereof and have been prepared in accordance with
GAAP;
(iii) within 30 days prior to the end of each Fiscal Year
an annual business plan and forecast for the next two
Fiscal Years consisting of:
A. monthly detailed pro forma balance sheets, income
statements and statements of changes in financial
position for the Borrower (all prepared in accordance
with GAAP) together with such explanations, notes and
supporting information which are required to explain
and supplement the information so provided and key
assumptions (particularly relating to revenues, gross
margins, costs and working capital);
B. a written bullet point commentary by the President or
the Chief Financial Officer of the Borrower
describing any changes in any Fiscal Year's budget
compared to the most recent previously submitted plan
and forecast for such Fiscal Years;
C. a capital expenditure plan indicating the nature and
amount of capital expenditures proposed to be
incurred in such Fiscal Years; and
<PAGE> 19
Page 19
D. a sales forecast by month for the following Fiscal
Year setting out anticipated revenue and by customer
with prior year comparatives and a brief note
explaining each line of the said forecast; and
(f) within 20 days after the end of each month a monthly financial
report consisting of:
A. monthly and year-to-date financial statements on a
consolidated basis in a form consistent with the
business plan and as normally prepared by management
for its own use which shall contain a comparison of
budget to the actual results of both the current and
prior year, a calculation of all the financial
covenants provided for in section 7.2 hereof, and a
calculation as at the end of each month of the number
of days of receivables, days of inventory on an
aggregate basis and days of payables reflected in
each monthly statement;
B. a report of aged accounts receivable by customer;
C. for each of the first 6 months following Closing, a
report on accounts payable to monitor performance
under the payout agreements in Schedule P hereto;
D. a written bullet point commentary signed by the
President or the Chief Financial Officer of the
Borrower on the material variances in actual results
to date from budgeted results anticipated and on the
outlook for the Business of the Borrower for the
balance of the Fiscal Year in comparison to the
budget for that Fiscal Year;
E. a certificate signed by the either the President or
the Chief Financial Officer of the Borrower stating
that:
(1) the amounts of vacation pay, wages, source
deductions and taxes required to be remitted
by the Borrower and those said amounts not yet
due have been or will be so remitted in a
timely fashion and are in good standing since
the date of the last such certificate;
(2) the property and Business operations and
activities of the Borrower are to the best
knowledge of such officers in compliance in
all material respects with all Environmental
Laws and Environmental Orders or describing in
reasonable detail any such non-compliance; and
(3) that the Borrower is not in breach of any of
the covenants or representations and
warranties contained herein, or if such is not
the case, providing detailed particulars of
all such breaches, together in either case
with reasonably detailed evidence of
compliance with all financial covenants
contained herein;
F. for each of the first 5 Fiscal Quarters (or such
longer period as First Ontario Management Ltd. may
request), a summary of payments made to each creditor
of its Business referred to in clause 7.1(F)C in the
month then ended;
(i) coincident with their delivery to the applicable Senior
Lenders, a copy of all reports and notices given or
delivered to either of the Senior Lenders to the extent that
they are not duplicative of the information provided for in
the section 7.1(e);
<PAGE> 20
Page 20
(ii) within 10 days of the respective filing with the
appropriate governmental authority, the most current
10Q and 10K securities filings relating to Striker
Industries, Inc. together with any attachments
thereto; and
(iii) upon each request, such further information
concerning the financial position and Business
operations as the Lender may from time to time
request.
All forecasts and projections contemplated in the financial
reports and summaries described above shall be prepared by
management of the Borrower based on the best available
information and shall be applied on the basis of an analysis
which shall be consistently applied.
(g) SII MONTHLY REPORTING. If the current ratio of Striker
Industries, Inc. is less than 1 to 1 at any time during a given
month, the Borrower shall cause Striker Industries, Inc. to
provide within 20 days after the end of the particular month a
monthly financial report consisting of:
A. monthly and year-to-date financial statements on a
consolidated basis in the form normally prepared by
management for its own use which shall contain a
comparison of budget to the actual results of both
the current and prior year;
B. a report of aged accounts receivable by customer;
C. for each of the first 12 months following Closing, a
report on accounts payable to monitor performance
under the payout agreements in Schedule P hereto;
D. a written bullet point commentary signed by the
President or the Chief Financial Officer of the
Borrower on the material variances in actual results
to date from budgeted results anticipated and on the
outlook for the business of Striker Industries, Inc.
for the balance of the Fiscal Year in comparison to
the budget for that Fiscal Year; and
E. for each of the first 5 Fiscal Quarters (or such
longer period as First Ontario Management Ltd. may
request), a report providing a summary of compliance
or non-compliance by Striker Industries, Inc. with
all agreements with creditors of Striker Industries,
Inc. which have agreed to defer or postpone their
right to receive payments.
(h) INSURANCE. The Borrower shall insure and keep insured its
Business, properties and assets, placed with such insurers and
with such coverage (including without limitation business
interruption insurance and all existing coverages now in place)
and against such loss or damage to the full insurable value of
such properties and assets without co-insurance as the Lender
shall reasonably require or, in the absence of such requirement,
to the extent insured against by comparable corporations engaged
in comparable businesses. Upon request by the Lender, the
Borrower shall promptly supply the Lender with copies of all
insurance policies; losses under all such insurance policies
affecting assets charged by the Security shall be payable to the
Lender as loss payee as its interest may appear and each such
policy shall provide for a minimum of 45 days notice to the
Lender of cancellation or lapse; the Borrower shall pay or cause
to be paid all premiums necessary to maintain any such insurance
policies in good standing as such premiums become due and
payable.
<PAGE> 21
Page 21
(i) BOOKS AND RECORDS. The Borrower shall at all times maintain
proper records and books of account and therein make true and
correct entries of all dealings and transactions relating to its
Business, shall keep such books, records and accounts relating
to accounts receivable, accounts payable and payroll expenses at
the principal place of business of the Borrower at the Thorold
Facility and all other books, records and accounts shall be
maintained at the principal offices of SII in Houston, Texas
(and shall not maintain any duplicate of such books, records and
accounts elsewhere except for electronic back-ups required for
data recovery) and, if requested by the Lender, will make the
same available for inspection by the Lender or any agent of the
Lender at all times during normal business hours.
(j) ACCESS. The Borrower will permit the Lender through its
officers or employees or through any consultants or agents
retained by it, upon request, to have access at any time and
from time to time, during normal business hours, unless
extraordinary circumstances shall otherwise require, to any of
the Borrower's premises and to any records, information or data
in its possession so as to enable the Lender to ascertain the
state of the Borrower's financial condition or operations, and
will permit the Lender to make copies of and abstracts from such
records, information or data and will upon request of the Lender
deliver to the Lender copies of such records, information or
data.
(k) NOTICE OF ADVERSE CHANGE. The Borrower shall give to the Lender
prompt written notice of any Material Adverse Change in the
condition of its Business, financial or other, or of any
material loss, destruction or damage to its properties and
assets.
(l) NOTICE OF DEFAULT IN THIS AGREEMENT OR SENIOR LOAN AGREEMENTS.
The Borrower shall give to the Lender prompt written notice of:
(i) any Default or Event of Default hereunder; and
(ii) any event of default arising pursuant to either of
the Senior Loan Agreements.
(m) NOTICE OF LITIGATION. The Borrower will give to the Lender
prompt written notice of any action, suit, litigation, or other
proceeding in addition to those actions and proceedings
disclosed herein which is commenced or threatened against it and
which involves a claim or potential claim in excess of $25,000
or an aggregate of claims or potential claims in excess of
$100,000.
(n) REGISTRATION OF SECURITY. The Borrower will provide the Lender
with such assistance and do such things as the Lender may from
time to time request so that the Security and any other
instruments of conveyance or assignment effected pursuant to
this Agreement or otherwise will be and remain registered,
recorded or filed from time to time in such manner and in such
places as may in the opinion of the Lender be necessary or
advisable in perfecting the Security Interests constituted
thereby.
(o) IMPLEMENT PLANS RE REOPENING OF THOROLD PLANT. The Borrower
shall promptly implement and complete its plan to reopen its
Thorold Plant within 12 weeks following the Closing. The
Borrower shall provide the Lender with progress reports every
two weeks on this project and advise the Lender in writing of
the completion of the work.
(p) AFTER ACQUIRED PROPERTY AND FURTHER ASSURANCES. The Borrower
shall notify the Lender in writing in advance of any proposed
acquisition by the Borrower of any material property or asset
including a full description of such property or asset, and the
Borrower shall from time
<PAGE> 22
Page 22
to time execute and deliver to the Lender, in form satisfactory
to the Lender and its counsel, all such further deeds or other
instruments of conveyance, assignment, transfer, mortgage,
pledge, charge or security interest in connection with all
property or assets acquired by the Borrower after the date of
this Agreement, including any insurance thereon.
(q) NON-DILUTION. Except as contemplated by the Subscription
Agreement, the Borrower shall not enter into or grant any
agreement, option or right capable of becoming an agreement or
option for the pledge, purchase, subscription or issuance from
the Borrower of any shares of the Borrower, issued or unissued,
and no other shares in the capital of the Borrower will be
issued without the prior written consent of the Lender.
(r) ENVIRONMENTAL MATTERS. The Borrower shall,
(i) use and operate all of its facilities and properties
in compliance with all Requirements of Environmental
Law, keep all permits, approvals, certificates,
licenses and other authorizations relating to
environmental matters in effect and remain in
compliance therewith, and handle all Hazardous
Materials in compliance with all applicable
Requirements of Environmental Law;
(ii) immediately notify the Lender of any event or
occurrence that will, or is likely to give rise to a
report, inquiry or investigation and provide copies
upon receipt of all written claims, complaints,
investigations, notices or inquiries relating to the
condition of the Borrower's facilities and properties
or compliance with Requirements of Environmental Law,
and shall proceed diligently to resolve any such
claims, complaints, investigations, notices or
inquiries relating to compliance with Requirements of
Environmental Law in a manner which in the judgment
of the Lender is appropriate in the circumstances and
not adverse to the interests of the Lender under this
Agreement;
(iii) immediately notify the Lender of any proposed
business activity to be conducted by the Borrower
that involves the use or handling of Hazardous
Materials or which increases the potential
environmental liability of the Borrower in any
manner;
(iv) immediately notify the Lender of any proposed change
in the use or occupation of any real property
occupied by the Borrower before the change occurs or
of any proposal of the Borrower to acquire or become
a tenant in any real property;
(v) immediately notify the Lender of any release of any
Hazardous Material or of any other environmental
incident affecting the Borrower or any of its
properties or assets that has resulted or may result
in a Material Adverse Change;
(vi) provide such information and certifications which the
Lender may reasonably request from time to time to
evidence compliance by the Borrower of all its
obligations under this Agreement and the Security
Documents;
(vii) undertake, at the Borrower's expense, such
environmental audits or studies on any property
owned, leased or used by the Borrower or the
operations of its Business as the Lender may
reasonably request;
(viii) provide, at the Borrower's expense, all third party
consents, authorizations and directions that are
required to permit any inspection or review of any
property owned, leased or used by the Borrower and
the activities carried out thereon and the Borrower
<PAGE> 23
Page 23
hereby consents to the release to the Lender, or its
representatives, of information relating to the same
and compliance by the Borrower and others having an
interest in the same with all Requirements of
Environmental Law; and
(ix) maintain an appropriate environmental management
system and compliance programs, policies and
procedures to manage its Business and ensure
compliance with the Requirements of Environmental Law
and the proper understanding and management of all
environmental and occupational health and safety
matters.
(s) PAYROLL DEDUCTION PLAN. To facilitate the purchase of shares
in the capital of the Lender by the employees of the shall
implement a payroll deduction plan satisfactory to the Lender
pursuant to which the Borrower will match employee contributions
to a maximum of $1,500 per employee per year.
7.2 FINANCIAL COVENANTS. The Borrower shall maintain and keep in full force
and effect each of the financial covenants set forth below. The calculations
and determination of each such financial covenant, and all accounting terms
contained therein, shall be calculated and construed in accordance with GAAP:
(a) WORKING CAPITAL RATIO. The Borrower shall at all times after
Closing maintain a Working Capital Ratio of not less than 1 to 1
provided that for the period commencing on Closing to and
including June, 1998, the Working Capital Ratio may be as low
as, but no lower than, 0.40 to 1 and for the period from July,
1998 to December, 1998, the Working Capital Ratio may be as low
as, but no lower than, 0.75 to 1.
(b) WORKING CAPITAL. The Borrower shall at all times after
November, 1998 maintain Working Capital of not less than
$200,000.
(c) EFFECTIVE NET WORTH. The Borrower shall at all times after
March, 1998 maintain an Effective Net Worth of not less than
$11,500,000.
(d) DEBT TO EFFECTIVE NET WORTH. The Borrower shall at all times
after March, 1998 maintain a ratio of Debt to Effective Net
Worth of not more than 0.50 to 1.
(e) DEBT SERVICE COVERAGE. Borrower shall at all times after
Closing to and including January, 1999 maintain Debt Service
Coverage of no less than 2, provided that for the period
commencing July, 1998 to and including August, 1998, the Debt
Service Coverage may be as low as, but no lower than, 1 and the
Borrower shall at all time after February, 1999 maintain Debt
Service Coverage of no less than 1.25.
7.3 NEGATIVE COVENANTS. From the date hereof and until the Outstanding
Borrowing is paid in full, the Borrower shall adhere to the following covenants
unless waived in writing by the Lender:
(a) NOT TO AMALGAMATE, ETC. The Borrower shall not enter into any
transaction or series of related transactions (whether by way of
amalgamation, merger, winding-up, consolidation, reorganization,
reconstruction, continuance, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, properties,
rights or assets would become the property of any other Person
or, in the case of amalgamation or continuance, of the
continuing corporation resulting therefrom.
<PAGE> 24
Page 24
(b) NEGATIVE PLEDGE. The Borrower shall not create, assume, incur
or suffer to exist any Security Interest in or upon any of their
respective undertakings, properties, rights or assets except
for:
(i) Permitted Encumbrances; and
(ii) Security Interests in respect of which the Lender has
given its prior written consent as to existence and
ranking.
(c) NO GUARANTEES. The Borrower shall not be or become liable,
directly or indirectly, contingently or otherwise, for any
obligation of any other Person by Guarantee other than as
permitted hereunder.
(d) RESTRICTIONS ON SUBSIDIARIES, INVESTMENTS AND LOANS. The
Borrower shall not, directly or indirectly, acquire or form any
Subsidiary or make any loan to or investment in, or purchase or
otherwise acquire or hold any shares or securities of, any other
Person except as contemplated herein. The Borrower shall not
become a partner in any partnership or a participant in any
joint venture.
(e) RELOCATION OF ASSETS. The Borrower shall not locate or permit
to be situated any of its property or assets in any jurisdiction
other than as set out in section 6.1(m) without having first (i)
obtained the prior consent of the Lender in writing and (ii)
taken such action as is necessary to perfect a Security Interest
in favour of the Lender in such property or assets; (iii) if a
leasehold premises, obtained a form of non-disturbance agreement
satisfactory to the Lender, and (iv) delivered such opinions of
counsel with respect thereto as the Lender may reasonably
require, all at the Borrower's expense.
(f) PAYMENTS TO SHAREHOLDERS. The Borrower shall not declare or
make any payment to any shareholder other than the Lender and
other than management fees to Striker Industries, Inc. without
the prior written consent of the Lender.
(g) MANAGEMENT FEES. The Borrower shall not make any payment to any
Person other than the Lender in respect of management fees
without the prior written consent of the Lender except as
contemplated by the Shareholders Agreement.
(h) CAPITAL EXPENDITURES. The Borrower shall not, during any Fiscal
Year, make Capital Expenditures in excess of the Permitted
Capital Expenditures.
(i) DISPOSITION OF ASSETS. The Borrower shall not sell, assign,
transfer, lease (as lessor) or otherwise dispose to any Person,
including any non-arm's length Persons (within the meaning of
the Income Tax Act (Canada)) of any of its properties or assets
other than inventory in the ordinary course of business.
(j) INVENTORY AND BONA FIDE. All sales of inventory by the
Borrower to Striker Industries, Inc. or any other affiliated
corporation shall be priced at market prices applicable to
transactions between parties dealing at arm's length. At the
request of the Lender, and in any event, no less than every six
month period, the Borrower shall hire a consultant, satisfactory
to the Lender, to confirm compliance with this principle.
(k) CHANGE OF BUSINESS. The Borrower shall not change the nature of
its Business or discontinue any of its material business.
<PAGE> 25
Page 25
(l) NO AMENDMENT TO SENIOR LOAN AGREEMENTS. The Borrower shall not
amend its organizational documents or change its Fiscal Year end
or agree to any amendment or refinancing of the terms,
conditions and provisions of either of the Senior Loan
Agreements as such exist on the Closing Date.
(m) NO REDUCTION IN INSURANCE COVERAGE. The Borrower shall not
reduce the extent or scope of its insurance coverage without the
prior written consent of the Lender.
PART 8.0 - SECURITY
8.1 OBLIGATION TO PROVIDE. As security for the repayment of the Outstanding
Borrowing, and the discharge and performance of all obligations of the Borrower
to the Lender hereunder, the Borrower shall issue or cause to be issued in
favour of the Lender the security contemplated under this Part 8.0.
8.2 SECURITY. The Borrower shall execute and deliver to or shall cause to
be executed and delivered to the Lender in form and substance satisfactory to
the Lender the following documents:
(a) a general security agreement creating a floating charge on all
the undertaking, property and assets of the Borrower including,
without limitation, all licenses and leases in registerable form
(as appropriate);
(b) the Inter-Lender Agreement;
(c) an assignment of insurance policies and proceeds thereof issued
to the Borrower covering its Business or Property;
(d) an assignment of key person life insurance on the life of David
Collins in the amount of $1,000,000 (such assignment to be
acknowledged by the insurer and to be excluded from the security
of either of the Senior Lenders);
(e) a guarantee from Striker Industries, Inc. in respect of the
obligations of the Borrower pursuant to this Agreement and the
Shareholders Agreement;
(f) guarantees from Striker Holdings (Canada) Inc., in respect of
the obligations of the Borrower pursuant to this Agreement and
the Shareholders Agreement such guarantees to be secured by a
pledge to the Lender of the shares of the Borrower held by
Striker Holdings (Canada) Inc.; and
(g) all such other security agreements which the Lender may
reasonably require.
8.3 FURTHER ASSURANCES. The Borrower from time to time shall deliver to the
Lender duly executed documents in form and substance satisfactory to the Lender
and its counsel as may be reasonably requested by the Lender for the purpose of
giving effect to this Agreement or the Security or for the purpose of
establishing compliance with the representations, warranties and conditions of
this Agreement.
<PAGE> 26
Page 26
PART 9.0 - EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT. Notwithstanding anything to the contrary herein,
the Outstanding Borrowing shall, at the option of the Lender, become
immediately due and payable to the Lender and the Security shall, at the option
of the Lender, become immediately enforceable upon the occurrence of any of the
following events:
(a) FAILURE TO PAY PRINCIPAL OR INTEREST - if the Borrower fails to
make payment within 3 Business Days of the day on which any
principal amount or interest payable hereunder is due;
(b) FAILURE TO PAY OTHER AMOUNTS - if the Borrower fails to make
payment when due of any amount payable hereunder other than
principal or interest and if such payment is not made within 5
Business Days of the day on which such payment is due;
(c) FALSE REPRESENTATIONS, ETC. - if any representation, warranty,
certificate, statement or report made or given herein or
otherwise in connection with this Agreement or any advance of
the Credit Facility is false or erroneous in any material
respect;
(d) CROSS-DEFAULT - if: the Borrower defaults in the payment, when
due, of any Indebtedness to any Person in an amount of $25,000
or more or to any Person or Persons in an aggregate amount of
$100,000, and such default has not been waived by such
Person(s); or such Indebtedness is validly accelerated or
otherwise becomes due and payable prior to the stated maturity
thereof;
(e) CROSS DEFAULT TO THE SENIOR LOAN AGREEMENT - if the Borrower is
in default of any obligation which has not been waived by either
of the Senior Lenders under the applicable Senior Loan Agreement
and either of the Senior Lenders shall have validly accelerated
the obligations of the Borrower pursuant to the applicable
Senior Loan Agreement;
(f) CROSS DEFAULT TO SHAREHOLDERS AGREEMENT OR SUBSCRIPTION
AGREEMENT - if the Borrower, SII or Striker Holdings (Canada)
Inc. is in default of any obligation to the Lender pursuant to
the Subscription Agreement, the Share Call Agreement or the
Shareholders Agreement;
(g) DEFAULT IN OTHER COVENANTS - if, other than in respect of any
covenant to pay, there is any default or failure in the
observance or performance of any other act hereby required to be
done or any other covenant or condition hereby required to be
observed or performed, and the default or failure continues for
5 Business Days after notice by the Lender to the Borrower
specifying such default or failure;
(h) DEFAULT IN MATERIAL FINANCING AGREEMENT - if there is any
default or failure in the observance or performance of any other
act required to be done, or any other covenant or condition
required to be observed or performed, in any material financing
agreement, or other agreement contemplated thereby, pursuant to
which a Person has taken steps to enforce its security against
Striker Industries, Inc. in connection with an amount in contest
of $25,000 or more;
(i) INSURANCE LAPSE - if any insurance on the properties or assets
of the Borrower lapses and such coverage shall not be reinstated
within 15 Business Days of such lapse;
<PAGE> 27
Page 27
(j) INSOLVENCY - if the Borrower is unable to pay its debts as such
debts become due, or is, or is adjudged or declared to be, or
admits to being, bankrupt or insolvent;
(k) VOLUNTARY PROCEEDINGS - if the Borrower makes a general
assignment for the benefit of creditors; or any proceeding or
filing is instituted or made by the Borrower seeking relief on
its behalf as debtor, or to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment or composition of it or its debts under
any similar law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for any substantial part of its properties or assets; or the
Borrower takes any corporate action to authorize any of the
actions set forth in this section 9.1(k);
(l) INVOLUNTARY PROCEEDINGS - if any notice of intention is filed or
any proceeding or filing is instituted or made against the
Borrower in any jurisdiction seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its properties or assets or seeking
possession, foreclosure or retention, or sale or other
disposition of, or other proceedings to enforce security over,
all or a substantial part of the assets of the Borrower unless
the same is being contested actively and diligently in good
faith by appropriate and timely proceedings and is dismissed,
vacated or stayed within 30 days of institution thereof;
(m) RECEIVER, ETC. - if a receiver, liquidator, trustee,
sequestrator or other officer with like powers is appointed with
respect to, or an encumbrancer takes possession of, or
forecloses or retains, or sells or otherwise disposes of, or
otherwise proceeds to enforce security over any of the
properties or assets of the Borrower or gives notice of its
intention to do so;
(n) EXECUTION, DISTRESS - if any writ, attachment, execution,
sequestration, extent, distress or any other similar process
becomes enforceable against the Borrower or if a distress or any
analogous process is levied against any of the properties or
assets of the Borrower having a value in any particular instance
of $25,000 or more, and in the aggregate of all such properties
and assets so effected, having a value of $100,000 or more,
except where the same is being contested actively and diligently
in good faith by appropriate and timely proceedings;
(o) SUSPENSION OF BUSINESS - if the Borrower suspends or ceases, or
gives notice to the Lender (or any agent or counsel thereof),
any other creditors or any employees of its intention to suspend
or cease, its Business other than in connection with a annual
scheduled shutdown for equipment maintenance or inventory
adjustment not exceeding six weeks in any calendar year;
(p) SALE - if the Borrower sells or otherwise disposes of, or gives
notice to the Lender (or any agent or counsel thereof), any
other creditors or any employees of its intention to sell or
otherwise dispose of, all or a substantial part of its
undertaking and property and assets whether in one transaction
or a series of related transactions;
(q) IMPAIRMENT OF SECURITY - if in the sole and unfettered opinion
of the Lender and its counsel any Security may be or becomes
impaired, invalid, unperfected or unenforceable unless
<PAGE> 28
Page 28
such impairment, invalidity, unperfection or unenforceability
was solely caused by or was the result of an omission by the
Lender;
(r) MATERIAL CHANGE - if there is a Material Adverse Change in the
Business or affairs of the Borrower;
(s) LITIGATION - if the Borrower fails, within 30 days of the
commencement of same, to contest actively and diligently in good
faith by appropriate and timely proceedings any action, suit,
litigation or other proceeding commenced against it with the
result that the Borrower is exposed to a liability of $25,000 or
more; and
(t) DEATH OF KEY PERSON - if Mr. David Collins should become
deceased.
9.2 APPLICATION OF ASSIGNED LIFE INSURANCE POLICY. In the event of an Event
of Default pursuant to paragraph 9.1(t) hereof, all proceeds of the insurance
policy on the life of Mr. David Collins shall be applied to the obligations of
the Borrower pursuant this Agreement.
9.3 LENDER MAY WAIVE. The Lender may at any time waive any Default or Event
of Default which may have occurred, provided that no such waiver shall extend
to or be taken in any manner whatsoever to affect any subsequent Default or
Event of Default or the rights or remedies resulting therefrom. No such waiver
shall be effective unless given by the Lender in writing.
9.4 ACCELERATION. If any Event of Default shall occur,
(a) the whole or any part of the principal amount of the Outstanding
Borrowing and all accrued and unpaid interest thereon, and
(b) all other payments due under this Agreement,
shall, at the option of the Lender, become immediately due and payable with
interest thereon, at the rate or rates determined as provided in this
Agreement, to the date of actual payment thereof, all without additional notice
presentment, protest, demand, notice of dishonour or any other demand or notice
whatsoever, all of such are hereby expressly waived by the Borrower. In such
event the Security shall become immediately enforceable and the Lender may, in
its discretion, exercise any right or recourse and/or proceed by any action,
suit, remedy or proceeding against the Borrower authorized or permitted by law
for the recovery of all the obligations and proceed to exercise any and all
rights under this Agreement and under the Security, and no such remedy for the
enforcement of the rights of the Lender shall be exclusive of or dependent on
any other remedy but any one or more of such remedies may from time to time be
exercised independently or in combination.
9.5 TERMINATION OF LENDERS' OBLIGATIONS. The occurrence of an Event of
Default terminates any right of the Borrower to obtain any further credit from
the Lender pursuant to this Agreement and relieves the Lender of any obligation
to provide any further credit under this Agreement.
9.6 MONITOR. Upon the occurrence of an Event of Default, and until such
Event of Default is cured, the Lender shall have the right to require the
Borrower to appoint Crosbie Capital Management Inc. or such other financial
adviser as the Lender may specify, as monitor to provide on-going reports to
the Lender on the financial condition and prospects of the Borrower. The
reasonable expenses of such monitor shall be paid by the Borrower.
<PAGE> 29
Page 29
9.7 REMEDIES ARE CUMULATIVE. For greater certainty, the rights and remedies
of the Lender under this Agreement are cumulative and are in addition to and
not in substitution for any rights or remedies provided by law; and any single
or partial exercise by the Lender of any right or remedy for a Default or Event
of Default or breach of any term, covenant, condition or agreement herein
contained shall not be deemed to be a waiver of or to alter, affect or
prejudice any other right or remedy to which the Lender may be lawfully
entitled for the same default or breach, and any waiver by the Lender of the
strict observance, performance or compliance with any term, covenant, condition
or agreement herein contained and any indulgence granted by the Lender shall be
deemed not to be a waiver of that or any subsequent default.
9.8 CASH COLLATERAL ACCOUNTS. Upon the occurrence of an Event of Default
and in addition to any other rights or remedies of the Lender hereunder, the
Lender as and by way of collateral security shall be entitled to deposit and
retain in an account to be maintained by the Lender (with interest) amounts
which are received by the Lender from the Borrower hereunder or as proceeds of
realization of any Security to the extent such amounts may be required to
satisfy any contingent or unmatured obligations or liabilities of the Borrower
to the Lender hereunder.
9.9 INTEREST RATE ADJUSTMENT. If the Lender receives cash proceeds from a
realization on its Security and the Lender is otherwise entitled to receive and
retain the same, but instead establishes a cash collateral account as
contemplated by section 9.8 hereof and the principal monies in that cash
collateral account are subsequently applied in payment of obligations of the
Borrower (the "Subsequently Applied Amount"), then, notwithstanding any other
term hereof, the obligation of the Borrower to pay interest on the Subsequently
Applied Amount shall be limited to the interest actually accruing in the cash
collateral account for the period commencing 45 days following the deposit of
the said sum to the cash collateral account until such sum is subsequently
applied in payment of the obligations of the Borrower.
PART 10.0 - ENVIRONMENTAL MATTERS
10.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants as follows, except as disclosed in Schedule F attached hereto:
(a) The Borrower's business has been operated in compliance in all
material respects with all applicable Environmental Laws and
with all permits, licenses and authorizations issued pursuant to
Environmental Laws.
(b) There are no claims, investigations, litigation, administrative
proceedings, whether pending or to the best of the Borrower's
knowledge, threatened relating to any Contaminants, Releases or
other forms of pollution or alleged violation of applicable
Environmental Laws (collectively Environmental Matters) that may
reasonably be expected to have a give rise to a Material Adverse
Change upon the Borrower. The Borrower has not assumed any
material liability of any other Person for response, removal,
remediation, investigation, clean up, compliance or required
capital expenditures in connection with any matter arising prior
to the date hereof.
10.2 ENVIRONMENTAL COVENANTS. The Borrower covenants with the Lender as
follows:
(a) COMPLIANCE. The Borrower shall comply in all respects with the
requirements of any Environmental Law applicable to it.
<PAGE> 30
Page 30
(b) NOTIFICATION. The Borrower shall promptly forward to the Lender
copies of all material orders, notices, permits, applications or
other communications and reports in connection with any
Environmental Law affecting or relating to the Property or the
operations and activities of the Borrower.
10.3 INDEMNITY. The Borrower shall at all times indemnify and hold the
Lender harmless against and from any and all claims, suits, actions, debts,
damages, costs, losses, obligations, judgments, charges, and expenses, of any
nature whatsoever suffered or incurred by the Lender, whether upon realization
of the Security, or as lender to the Borrower, or as successor to or assignee
of any right or interest of the Borrower, or as a result of any order,
investigation or action by any governmental or regulatory authority relating to
the Borrower or its Business or Property or as privileged or hypothecary
creditor or mortgagee in possession of Property or as successor or
successor-in-interest to the Borrower as a result of any taking of possession
of all or any of the Property or by any other means relating to the Borrower,
under or on account of any breach of Environmental Law, with respect to:
(a) the Release of a Contaminant, the threat of the Release of any
Contaminant, or the presence of any Contaminant affecting any
Property, whether or not the same originates or emanates from
such Property, including any loss of value of the Property as a
result of any of the foregoing,
(b) the Release of a Contaminant owned by, or under the charge,
management or control of the Borrower, or any predecessor or
assignor of the Borrower,
(c) any costs incurred by any federal, provincial, state, municipal,
local or other governmental or regulatory authority or any other
person or damages from injury to, destruction of, or loss of
natural resources in relation to, the Property or elsewhere,
including reasonable costs of assessing such injury, destruction
or loss incurred under any Environmental Laws,
(d) liability for personal injury or property damage arising by
reason of any civil law offenses or quasi-offenses or under any
statutory or common law tort or similar theory, including,
without limitation, damages assessed for the maintenance of a
public or private nuisance or for the carrying on of a dangerous
activity at, near, or with respect to the Property or elsewhere,
and/or
(e) any other environmental matter affecting the Property or the
operations and activities of the Borrower within the
jurisdiction of any federal, provincial, municipal, state or
local environmental agency.
The obligations of the Borrower under this section 10.3 shall arise upon the
discovery of the presence or Release of any Contaminant, whether or not any
federal, provincial, municipal, state or local environmental agency has taken
or threatened any action in connection with the presence of any Contaminant.
10.4 SCOPE OF INDEMNITY. The Borrower acknowledges that the Lender has
agreed to make the Borrowings available in reliance upon its representations,
warranties, and covenants in this Part. For this reason, it is the intention
of the Borrower and the Lender that the provisions of this Part shall supersede
any other provisions in this Agreement, or the Security which in any way limit
the liability of the Borrower and the Borrower shall be liable for any
obligations arising under or in connection with this Part even if the amount of
the liability incurred exceeds the Outstanding Borrowing. The obligations of
the Borrower arising under this Part are absolute and unconditional and shall
not be affected by any act, omission or circumstance whatsoever, except in
respect of negligence or wilful misconduct by the Lender. The
<PAGE> 31
Page 31
obligations of the Borrower arising under this Part shall survive the repayment
of the Outstanding Borrowing and shall survive the transfer of any or all
right, title and interest in and to any Property by the Borrower to any person.
10.5 CONSULTANTS, ETC. The Lender may employ lawyers, engineers, scientists,
or consultants of the Lender's choice at the expense of the Borrower. Any
engineer, scientist, or consultant so engaged by the Lender may upon notice to
the Borrower enter onto the premises of the Borrower for the purpose of any
inquiry and may make any necessary excavation or bore holes and take samples of
any material or substance, and record or copy any information by any method.
The Lender shall ensure that any such Person employed by or acting on behalf of
the Lender shall conduct itself and any inquiry or other activity on or in
respect of any Property in a manner which does not disrupt the Business of the
Borrower or which results in a breach of any Environmental Law. The Borrower
hereby consents to any inquiries by the Lender or any lawyers, engineers,
scientists, or consultants engaged on its behalf under any freedom of access or
freedom of information legislation and agrees to execute such further consents
or documents as may be necessary to give effect to this section 10.5. The
Lender shall not disclose to any Person any of the information obtained as a
result of the foregoing without the prior written consent of the Borrower
unless disclosure is required by law, in which case the Lender shall notify the
Borrower and provide the Borrower with a reasonable opportunity to oppose the
disclosure of such information.
10.6 FEES AND EXPENSES. If the Lender retains the services of any lawyer,
engineer, scientist, or consultant in connection with the subject of this Part,
the Borrower shall pay the out-of-pocket costs and fees thereby incurred if
retained and applicable to such party as a result of any breach of
Environmental Law or in connection with any inquiry or investigation by a
federal, provincial, municipal, state or local government or agency in
connection with Environmental Law or if the services performed are reasonably
necessary for the performance of the functions of the Lender under this
Agreement or for the preservation or protection of the Security.
10.7 INTEREST. If the Lender incurs any obligations, costs or expenses under
this Part or in respect of any Environmental Activity covered by this Part, the
Borrower shall pay the same to the Lender on demand in respect of such party's
obligations, and if such payment is not received within ten days, such amount
will be treated as a Borrowing and the Borrower will pay interest thereon at
the Interest Rate, which shall accrue from the date of expiry of such ten-day
period to the date of payment.
10.8 ENVIRONMENTAL COMPLIANCE. If the Borrower provides the Lender with any
notification required under section 6.1(y) or 10.2 hereof or if the Lender
otherwise receives any environmental information, the Lender in its sole
discretion, may determine that an adverse change in the environmental condition
of the Borrower has occurred, which decision shall constitute, in the absence
of manifest error, conclusive evidence of the adverse change. Following such
determination, the Lender may provide to the Borrower directions or
instructions as to the remedial action to be undertaken by the Borrower with
respect to such adverse change, and the Borrower shall comply with any such
direction or instruction diligently and at its own expense. Notwithstanding
the issuance of any such direction or instruction, the Borrower shall remain
solely responsible for compliance with all Requirements of Environmental Law
with respect to its assets, properties and Businesses and the Lender shall not,
and shall not be deemed to, assume or be charged with any liability or
obligation with respect to such compliance.
PART 11.0 - GENERAL
11.1 NOTICES. Any notice, request or other communication hereunder to any of
the parties hereto shall be in writing and be well and sufficiently given if
delivered personally or sent by prepaid registered mail to its address or by
telecopier to the number and to the attention of the person set forth below:
<PAGE> 32
Page 32
(a) In the case of the Borrower:
Striker Paper Canada, Inc.
100 Ormond Street South
P.O. Box 10
Thorold, Ontario
L2V 3Y7
Attention: David A. Collins
Telecopier No.: (905) 227-8385
With a copy to:
Robert I. Beck and to Will Lambert
Lang Michener
BCE Place
2500 -181 Bay Street
Toronto, Ontario
M5J 2T7
Telecopier No.: (416) 365-1719
(b) In the case of the Lender:
First Ontario Labour Sponsored Labour Fund Ltd.
c/o First Ontario Management Ltd.
234 Eglinton Avenue East
Suite 310
Toronto, Ontario
M4P 1L1
Attention: Mr. Ken Delaney, President
Telecopier No.: (416) 487-1345
With a copy to:
Gowling, Strathy & Henderson
Suite 4900, P.O. Box 438
Commerce Court West
Toronto, Ontario
M5L 1J3
Attention: R. Douglas Kneebone
Telecopier No.: (416) 862-7661
<PAGE> 33
Page 33
Any such notice shall be deemed to be given and received, if delivered, when
delivered, and if mailed, on the third Business Day following the date on which
it was mailed, unless an interruption of postal services occurs or is
continuing on or within the three Business Days after the date of mailing in
which case the notice shall be deemed to have been received on the third
Business Day after postal service resumes and if sent by telecopier on the next
Business Day after the day on which the telecopy is sent. Either party may by
notice to the other, given as aforesaid, designate a changed address or
telecopier number.
11.2 PERFORMANCE OF COVENANTS BY THE LENDER. If any of the covenants or
obligations contained herein shall not be performed by the Borrower, the Lender
may perform such covenant or obligation and, if in so doing the Lender spends
money or incurs liability, the amount of money so spent or liability incurred
shall be added to the principal of Outstanding Borrowing.
11.3 INDEMNITY. In addition to any other indemnity provided for herein, the
Borrower hereby indemnifies the Lender on demand against any loss (other than
loss of profit), expense or liability which the Lender may sustain or incur as
a consequence of the action or inaction of the Borrower in connection with:
(a) any default in payment of the principal amount of any Borrowing
or any part thereof or interest accrued thereon, as and when due
and payable;
(b) any failure to fulfill on or before any Borrowing Date the
conditions precedent to any Borrowing as provided for in this
Agreement, if as a result of such failure such Borrowing is not
made on such date;
(c) the occurrence of any Event of Default; or
(d) any misrepresentation made by the Borrower herein or in any
instrument in writing delivered to the Lender in connection with
this Agreement,
excluding only any loss arising as a result of the Lender's negligence.
11.4 PUBLICITY. The Lender shall be entitled to publicity in connection with
the transactions contemplated in this Agreement. Such publicity will be
reviewed with the Borrower and approved by the Borrower prior to its
publication. Subject to the obligations and constraints of the Borrower as a
public company, the Borrower will not unreasonably withhold its approval to
such publication.
11.5 NO SET-OFF OR COUNTERCLAIM. The obligation of the Borrower to make
payments hereunder shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, any set-off,
compensation, counterclaim, recoupment, defence or other right which the
Borrower may have against the Lender.
11.6 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
11.7 TIME OF ESSENCE. Time shall, in all respects, be of the essence of this
Agreement.
11.8 ASSIGNMENT. The Borrower may not assign this Agreement or any part
hereof without the prior written consent of the Lender. The Lender shall be
entitled to assign this Agreement.
<PAGE> 34
Page 34
11.9 ENTIRE AGREEMENT. This Agreement, together with any security or other
instrument contemplated hereby, constitutes the entire agreement between the
parties with respect to the matters covered hereby and supersedes any other
prior agreements or representations.
11.10 AMENDMENTS. No amendment, modification or waiver of any provision of
this Agreement or consent by the Lender to any departure from any provision of
this Agreement is in any way effective unless it is in writing and signed by
the Borrower (in respect of an amendment or modification), and the Lender, in
which event the amendment, modification, waiver or consent is effective only in
the specific instance and for the specific purpose for which it is given.
11.11 LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as an Ontario contract
and the parties hereby submit and attorn to the non-exclusive jurisdiction of
the courts of the Province of Ontario.
11.12 CONFLICT. In the event that there is any conflict between the
provisions contained in this Agreement and the provisions contained in any
document delivered pursuant hereto or in connection herewith including, without
limitation, the Security, the provisions of this Agreement shall have priority
over and shall override the provisions contained in the other document.
11.13 LOAN PARTICIPATION. The Lender reserves the right to sell, assign or
transfer or grant a participation in the Credit Facility, in whole or in part,
to one or more Persons (the "Participants"), without notice to, or the consent
of the Borrower. For the purpose of selling, assigning, transferring or
granting a participation, a Lender may disclose, on a confidential basis, to a
potential Participant such information concerning the Borrower as the Lender
considers appropriate. The Borrower agrees to execute and deliver such further
documentation and take such further action as the Lender considers necessary or
advisable to give effect to such sale, assignment, transfer or grant of
participation. In the case of sale, assignment, transfer or granting of a
participation, the Participant shall have, to the extent of such sale,
assignment, transfer or grant of participation, the same rights and obligations
as it would have if it were the Lender on the Closing Date and as such had
executed this Agreement and the Security and any other instrument contemplated
hereunder as required.
<PAGE> 35
Page 35
11.14 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and enure
to the benefit of the parties and their respective successors and assigns.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.
STRIKER PAPER CANADA, INC.
c/s
By:
--------------------------------
Name: Matthew Pond
Title: CFO
FIRST ONTARIO LABOUR SPONSORED
INVESTMENT FUND LTD.
By:
--------------------------------
Name: Ken Delaney
Title: President
May 18, 1998
<PAGE> 36
SCHEDULE A
DEFINED TERMS
(a) "AFFILIATES" shall have the meaning ascribed to that term in
the Business Corporations Act (Ontario).
(b) "AGREEMENT" means this agreement and the schedules hereto and
any amendments or supplements to this agreement or the
schedules at any time and from time to time.
(c) "APPLICABLE LAW" means, at any time, with respect to any
Person, property, transaction or event, all applicable laws,
statutes, regulations, treaties, judgments and decrees and
(whether or not having the force of law) all applicable
official directives, rules, consents, approvals, by-laws,
permits, authorizations, guidelines, orders and policies of
any governmental or regulatory body or Persons having
authority over any of the parties hereto.
(d) "BENCHMARK FINANCIALS" means the financial statements of the
Borrower and the notes thereto which are attached as Schedule
A-1 hereto.
(e) "BORROWING" means all advances made pursuant to this Agreement
pursuant to the First Advance and the Second Advance;
(f) "BORROWING DATE" means a Business Day on which a Borrowing is
made.
(g) "BUSINESS" means the business of the Borrower of manufacturing
and selling dry felt products.
(h) "BUSINESS DAY" means a day on which banks are open for
business in Toronto, Ontario other than a Saturday, Sunday or
such other day as banks in Toronto, Ontario are authorized or
required to be closed for business.
(i) "CAPITAL" means, at any particular time, the total of Debt and
Equity.
(j) "CAPITAL EXPENDITURES" means expenditures by the Borrower
which would be classified as capital in nature according to
GAAP.
(k) "CAPITALIZED LEASE OBLIGATIONS" means monetary obligations
under agreements for the lease or rental of real or personal
property that in accordance with GAAP are required to be
capitalized.
<PAGE> 37
Page 2
(l) "CASH FLOW PLAN" means the cash flow plans attached as
Schedule N to this Agreement.
(m) "CLOSING" means the date of the advance of the First Advance
by the Lender to the Borrower under the Credit Facility.
(n) "CLOSING DATE" means March 20, 1998.
(o) "CONTAMINANT" includes, but is not limited to, any pollutant,
dangerous, toxic or hazardous substance, waste of any
description whatsoever, hazardous materials or contaminants
including any of the foregoing as defined in any Environmental
Law.
(p) "CONTINGENT FINANCIAL OBLIGATION" means, at any time and
without duplication, any obligation of the Borrower
guaranteeing, indemnifying or securing or in effect
guaranteeing, indemnifying or securing, whether directly or
indirectly, any indebtedness, liability or obligation,
absolute or contingent, of any other Person, as determined in
accordance with GAAP.
(q) "CREDIT FACILITY" means the credit facility made available
under Part 2.0.
(r) "CURRENT ASSETS" and "CURRENT LIABILITIES" mean, at any
particular time, the aggregate of the amount of the entries
which would, in accordance with GAAP, be classified upon the
balance sheet of the Borrower as at such time as current
assets and current liabilities, respectively, of the Borrower,
provided that, notwithstanding any other provision hereof,
current assets shall not include advances of any kind by the
Borrower to Related Parties or any indebtedness of any kind
owed to the Borrower by Related Parties or any Intangible
Assets and that, further, current liabilities shall not
include either loans by Shareholders or the long-term portion
of loans by other Persons and which loans have been postponed
and subordinated to the indebtedness of the Borrower to the
Senior Lender pursuant to the Inter-Lender Agreement.
(s) "DEBT" means, at any particular time, the aggregate amount of
all Current Liabilities and all long-term debt (both the
current and non-current portions) of the Borrower as such
amounts would be classified on the balance sheet of the
Borrower in accordance with GAAP at such time, provide that,
notwithstanding any other provision hereof, "Debt" shall not
include either loans by Shareholders (other than the Lender)
or the long-term portion of loans by other Persons and which
loans have been postponed and subordinated to the indebtedness
of the Borrower to the Senior Lender pursuant to the
Inter-Lender Agreement.
<PAGE> 38
Page 3
(t) "DEBT SERVICE COVERAGE" means, for any particular Fiscal
Period, the number determined by subtracting the amount of
Capital Expenditures and the amount of dividends paid by the
Borrower for such Fiscal Period from the EBITDA for such
Fiscal Period and then dividing the resulting number by the
number obtained by performing the following calculation with
respect to such Fiscal Period:
Total Principal + Interest Expenses + Lease Payments
(u) "DEFAULT" means any of the events described in section 9.1
regardless of whether any requirement in connection with such
event for the giving of notice, the lapse of time, or the
happening of any further condition, event or act has been
satisfied or met.
(v) "EBITDA" means, in respect of any particular Fiscal Period,
the aggregate of each of the following:
(i) the Net Income;
(ii) Interest Expenses;
(iii) income tax expenses, including deferred income taxes;
(iv) depreciation and amortization expenses and other
non-cash expenses; and
(v) Lease Payments.
all as determined at the end of the said Fiscal Period by the
auditors of the Borrower in accordance with GAAP.
(w) "EFFECTIVE NET WORTH" means, at any particular time, the
aggregate of each of the following, all calculated in
accordance with GAAP:
(i) Equity; and
(ii) loans by Shareholders (other than the Lender) and the
long-term portion of loans by other Persons which
loans have been postponed and subordinated to the
indebtedness of the Borrower to the Senior Lender;
less the aggregate of:
<PAGE> 39
Page 4
(iii) any indebtedness owed to the Borrower, on either a
secured or unsecured basis, by Related Parties;
(iv) any amounts invested by the Borrower by way of
equity, in Related Parties; and
(v) any Intangible Assets.
(x) "ENVIRONMENTAL ACTIVITY" means any past, present or future
activity, event or circumstance in respect of a Contaminant,
including, without limitation, its storage, use, holding,
collection, purchase, accumulation, assessment, generation,
manufacture, construction, processing, treatment,
stabilization, disposition, handling or transportation or its
Release into the natural environment including the movement
through or in the air, soil, subsoil, surface water or
groundwater.
(y) "ENVIRONMENTAL LAWS" means any and all federal, provincial,
municipal, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits,
licences, agreements or other governmental restrictions having
the force of law relating to the environment, occupational
health and safety, health protection or any Environmental
Activity.
(z) "EVENT OF DEFAULT" means any of the events described in
section 9.1, provided that any requirement in connection with
such event for the giving of notice, the lapse of time or the
happening of any further condition, event or act has been
satisfied or met.
(aa) "EQUITY" means, at any particular time, the amount which
would, in accordance with GAAP, be classified upon the balance
sheet of the Borrower as at such time as shareholders' equity,
including preferred equity.
(bb) "FINOVA CREDIT FACILITY" means the credit facility granted by
Finova Capital Corporation to, inter alia, Striker Industries,
Inc. and any other transactions contemplated thereby.
(cc) "FIRST ADVANCE" shall have the meaning ascribed to that term
in subsection 2.1(a) hereof.
(dd) "FISCAL PERIOD" means a Fiscal Year or any period of one, two
or three Fiscal Quarters.
<PAGE> 40
Page 5
(ee) "FISCAL QUARTER" means any of the fiscal quarters of the
Borrower ending on the last day of March, June, September and
December in each year.
(ff) "FISCAL YEAR" of an entity means the 12 month period ending on
the fiscal-year end of that entity and in the case of the
Borrower the 12 month period ending on December 31 of each
year.
(gg) "GAAP" means generally accepted accounting principles which
are in effect in Canada from time to time applied in a
consistent manner from period to period.
(hh) "GUARANTEE" means, with respect to a Person, any absolute or
contingent liability of that Person under any guarantee,
agreement, endorsement (other than for collection or deposit
in the ordinary course of business), discount with recourse or
other obligation to pay, purchase, repurchase or otherwise be
or become liable or obligated upon or in respect of any
Indebtedness of any other Person and including any absolute or
contingent obligations to:
(i) advance or supply funds for the payment or purchase
of any Indebtedness of any other Person,
(ii) purchase, sell or lease (as lessee or lessor) any
property, assets, goods, services, materials or
supplies primarily for the purpose of enabling any
other Person to make payment of Indebtedness or to
assure the holder thereof against loss, or
(iii) indemnify or hold harmless any other Person from or
against any losses, liabilities or damages, in
circumstances intended to enable such other Person to
incur or pay any Indebtedness or to comply with any
agreement relating thereto or otherwise to assure or
protect creditors against loss in respect of such
Indebtedness.
(ii) "HAZARDOUS MATERIALS" means any substance or material that is
prohibited, controlled or otherwise regulated by any
governmental authority pursuant to the Requirements of
Environmental Law, including, without limitation, any
contaminant, pollutant, dangerous substance, toxic substance,
designated substance, controlled product, hazardous waste,
subject waste, hazardous material, dangerous good or
petroleum, its derivatives, by-products or other hydrocarbons,
asbestos, polychlorinated biphenyls (PCBs) or PCB contaminated
fluids or equipment, explosives, or radioactive substances,
all as defined in or pursuant to the Requirements of
Environmental Law.
<PAGE> 41
Page 6
(jj) "INDEBTEDNESS" of a Person means, without duplication,
(i) all debts, liabilities and obligations, contingent
and other, including principal, interest, charges and
fees, which in accordance with GAAP would be
classified upon the Person's balance sheet as
liabilities including, without limitation, all
Capitalized Lease Obligations,
(ii) all obligations secured by any Security Interest,
including principal, interest, charges and fees,
existing on property owned or acquired by the Person
subject to such Security Interest whether or not the
Person has assumed or otherwise become liable for the
payment of such obligations, and
(iii) all obligations and liabilities incurred pursuant to
Guarantees issued by the Person.
(kk) "INTANGIBLE ASSETS" means at any particular time the
intangible and intellectual property assets of the Borrower
(not including accounts receivable) as defined by the Lender
in accordance with its policies and practices.
(ll) "INTER-LENDER AGREEMENT" means a certain agreement dated as of
March 20, 1998 made between, inter alia, the Lender and the
Senior Lenders in form and substance satisfactory to the
Lender.
(mm) "INTEREST EXPENSES" means, for any particular Fiscal Period,
the amount which would, in accordance with GAAP, be classified
on the income statement of the Borrower for such period as
gross interest expense.
(nn) "INTEREST PAYMENT DATE" means the last Business Day of each
calendar month.
(oo) "INTEREST RATE" means twenty percent (20%) per annum.
(pp) "LEASE PAYMENTS" means, for any particular period, the amount
which would, in accordance with GAAP, be classified on the
income statement of the Borrower for such period as operating
or non-capital lease payment expenses.
(qq) "LIEN" means any deed of trust, mortgage, charge, hypothec,
assignment, pledge, lien or other security interest or
encumbrance of
<PAGE> 42
Page 7
whatever kind or nature, including without limitation,
vendor's privilege or supplier's right of reclamation,
regardless of form and whether consensual or arising by law
(statutory or otherwise) that secures the payment of any
indebtedness or liability or the observance or performance of
any obligation, and including any agreement to give any of the
foregoing.
(rr) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means,
with respect to any event, act, condition or occurrence of
whatever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or
proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions,
occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of
the Business, property, assets, operations, conditions
(financial or otherwise) or prospects of the Borrower as
determined in the good faith exercise of the Lender's
judgment.
(ss) "MATERIAL CONTRACTS" means the material contracts and
agreements to which the Borrower is a party in connection with
the Business of the Borrower, including all leases,
conditional sales agreements, licenses, supply agreements and
sales agreements, excluding those which have a remaining term
of less than three months or under which the annual
obligations or benefits of the Borrower are less than $50,000
exclude those which have a remaining term of less than three
months or under which the annual obligations or benefits of
the Borrower are less than $50,000. All of which are
described in Schedule L to this Agreement. as the same may be
amended, modified, supplemented or replaced from time to time.
(tt) "MATURITY DATE" means March 31, 2001.
(uu) "NET INCOME" means, for any particular Fiscal Period, the
amount which would be classified on the income statement of
the Borrower for such period as net income in accordance with
GAAP.
(vv) "OUTSTANDING BORROWING" means the aggregate of (i) the
outstanding principal amount of each Borrowing, (ii) all
unpaid interest and fees thereon as herein provided, and (iii)
all other fees, charges and expenses required to be paid by
the Borrower to the Lender hereunder or pursuant to any
written agreements now or hereafter entered into between the
Borrower and the Lender.
<PAGE> 43
Page 8
(ww) "OPENING BALANCE SHEET" means the pro forma balance sheet for
the Borrower prepared by the management of the Borrower as at
the Closing Date which is attached as Schedule C hereto.
(xx) "PERMITTED CAPITAL EXPENDITURES" means Capital Expenditures of
the Borrower in the amount which is contemplated by the Cash
Flow Plan attached as Schedule N hereto.
(yy) "PERMITTED ENCUMBRANCES" means any one or more of the
following with respect to the property, assets and undertaking
of the Borrower:
(i) Liens for taxes, assessments or government charges or
levies not at the time due and delinquent or the
validity of which are being contested in good faith
by proper legal proceedings and as to which reserves
are being maintained in accordance with GAAP so long
as forfeiture of any part of the property or assets
of the Borrower will not result from the failure to
pay such taxes, assessments or governmental charges
or levies during the period of such contest;
(ii) the Lien of any judgment rendered or claim filed
against the Borrower which is being contested in good
faith by proper legal proceedings and as to which
reserves are being maintained in accordance with GAAP
so long as forfeiture of any part of the property or
assets of the Borrower will not result from the
failure to satisfy such judgment or claim during the
period of such contest;
(iii) undetermined or inchoate Liens and charges incidental
to current operations which have not at such time
been filed pursuant to law or which relate to
obligations not due or delinquent;
(iv) restrictions, easements, rights-of-way, servitudes or
other similar rights in land granted to or reserved
by other Persons which in the aggregate do not
materially impair the usefulness, in the operation of
the Business of the Borrower, of the property subject
to such restrictions, easements, rights-of-way
servitudes or other similar rights in land granted to
or reserved by other Persons;
(v) the right reserved to or vested in any municipality
or governmental or other public authority by the
terms of any lease, licence, franchise, grant or
permit acquired by the Borrower or by any statutory
provision, to terminate any such lease, licence,
franchise,
<PAGE> 44
Page 9
grant or permit, or to require annual or other
payments as a condition to the continuance thereof;
(vi) the encumbrance resulting from the deposit of cash or
securities in connection with contracts, tenders or
expropriation proceedings, or to secure workers'
compensation, surety or appeal bonds, costs of
litigation when required by law and public and
statutory obligations;
(vii) security given to a public utility or any
municipality or governmental or other public
authority when required by such utility or other
authority in connection with the operations of the
Borrower, all in the ordinary course of business;
(viii) the reservations, limitation, provisos and
conditions, if any, expressed in any original grants
from the Crown or in comparable grants, if any, in
jurisdictions other than Canada;
(ix) title defects or irregularities which are of a minor
nature and in the aggregate will not materially
impair the use of the property for the purpose for
which it is held;
(x) any validly perfected Lien created, assumed or
arising by operation of law after the date of this
Agreement, to provide or secure the whole or any part
of the consideration of the acquisition of property,
whether by lease or by conditional sales contract,
where:
A. the principal amount secured does not exceed
the cost to the Borrower of such property,
B. the Borrower's obligation to repay is
secured only by the property so acquired by
the Borrower,
C. the property is not being acquired as a
replacement or substitution for the property
or assets which are charged under the
Security, and
D. the aggregate amount secured by the Liens
described in this paragraph (x) created,
assumed or arising during any Fiscal Year of
the Borrower shall not exceed the annual
amount determined in the discretion of the
Lender, which annual amount shall not exceed
75% of the actual capital expenditures for
the period;
<PAGE> 45
Page 10
(xi) security given to the Senior Lenders pursuant to the
respective Senior Loan Agreements and any liens
created in favour of Bluestone Capital Partners, L.P.
and the Ontario Development Corporation; and
(xii) any other Lien on property or properties of the
Borrower that is hereafter specifically authorized in
writing by the Lender.
(zz) "PERSON" includes an individual, a partnership, a joint
venture, a trust, an unincorporated organization, a company, a
corporation, an association, a government or any department or
agency thereof and any other incorporated or unincorporated
entity.
(aaa) "PROPERTY" means any moveable or immoveable or personal or
real property owned, leased, occupied or under the charge,
management or control of the Borrower.
(bbb) "PURCHASE MONEY OBLIGATIONS" means the outstanding balance of
the purchase price of an asset, title to which has been
acquired or will be acquired upon payment of such purchase
price.
(ccc) "REAL PROPERTY" means the real properties which are owned or
occupied by the Borrower and situated at the locations which
are identified in Schedule B to this Agreement as the
locations of freehold and leasehold properties.
(ddd) "RELATED PARTIES" means Persons who are Affiliates of the
Borrower or Subsidiaries of the Borrower or who are otherwise
related to the Borrower within the meaning of the Bankruptcy
and Insolvency Act (Canada).
(eee) "RELEASE" includes discharge, spray, inject, inoculate,
abandon, deposit, spill, leak, seep, pour, emit, empty, throw,
dump, place, escape, leach, disperse, migrate and exhaust, and
when used as a noun (as applicable) has a similar meaning.
(fff) "REQUIREMENTS OF ENVIRONMENTAL LAW" means all requirements of
the common law or of statutes, regulations, by-laws,
ordinances, treaties, judgments and decrees, and (whether or
not they have the force of law) rules, policies, guidelines,
orders approvals, notices, permits, decisions, directives,
directions and the like, of any federal, territorial,
provincial, regional, municipal or local, judicial, regulatory
or administrative agency, board or governmental authority
relating to environmental or occupational health and safety
matters and any property owned, leased or used by the
<PAGE> 46
Page 11
Borrower and its activities carried out thereon (whether in
the past, present or the future) including, but not limited
to, all such requirements relating to: (i) the protection,
preservation or remediation of the natural environment (the
air, land, surface water or groundwater); (ii) the generation,
handling, treatment, storage, transportation or disposal of or
other dealing with solid, gaseous or liquid waste; and (iii)
Hazardous Materials.
(ggg) "SECURITY" means the security and agreements described in Part
8.0 and any additional security issued from time to time by
any Person in support of the liabilities and obligations
hereunder.
(hhh) "SECURITY INTEREST" includes a mortgage, charge, floating
charge, pledge, hypothec, assignment, lien, interest claim,
encumbrance, conditional sale agreement or other title
retention agreement, subordination trust or other security
interest or arrangement of any kind or character intended to
create a security interest in substance regardless of whether
the Person creating the interest retains an equity of
redemption, and any agreement to provide or enter into at any
time or on the happening of any event such a security interest
or arrangement.
(iii) "SENIOR LENDER" means the Senior Operating Lender or the
Senior Term Lender and "Senior Lenders" means the Senior
Operating Lender and the Senior Term Lender collectively.
(jjj) "SENIOR LOAN AGREEMENT" means the Senior Operating Loan
Agreement or the Senior Term Loan Agreement and "Senior Loan
Agreements" means the Senior Operating Loan Agreement and the
Senior Term Loan Agreement collectively.
(kkk) "SENIOR OPERATING LENDER" means SO-USE (CUCO) as the lender
pursuant to the Senior Operating Loan Agreement, or such other
lender which from time to time provides working capital credit
facilities to which the Lender is subordinated.
(lll) "SENIOR OPERATING LOAN AGREEMENT" means that certain loan
agreement entered into as of December [*], 1997 between the
Borrower and the Senior Operating Lender as lender providing
for up to $800,000 in operating credit facilities.
(mmm) "SENIOR TERM LENDER" means Laurentian Bank of Canada as the
lender pursuant to the Senior Term Loan Agreement, or such
other lender which
<PAGE> 47
Page 12
from time to time provides term credit facilities to which the
Lender is subordinated.
(nnn) "SENIOR TERM LOAN AGREEMENT" means that certain loan agreement
entered into as of July 13, 1995 between the Borrower and the
Senior Term Lender as lender providing for up to $2,000,000 in
term credit facilities, including forbearance agreement dated
August 11, 1997 among the Borrower, the Senior Term Lender,
Striker Industries, Inc. and Ontario Development Corporation,
as amended by a letter dated September 11, 1997, and the
credit agreement dated March 10, 1998 among the Borrower, the
Senior Term Lender, Striker Industries, Inc. and Ontario
Development Corporation.
(ooo) "SHAREHOLDERS" means any Person (other than the Lender) who
directly or indirectly is the legal or beneficial owner of any
share in the capital stock of the Borrower.
(ppp) "SHAREHOLDERS AGREEMENT" means the shareholders agreement
among the Lender, the Borrower and the Shareholders entered
into as at March 20, 1998 as the same may be amended from time
to time.
(qqq) "SUBSCRIPTION AGREEMENT" means a certain share subscription
agreement entered into as at March 20, 1998 between the
Borrower and the Lender.
(rrr) "STEPHEN'S PLANT" means any of those manufacturing assets
located at Striker Drive, Stephens, Arkansas, USA, 71764.
(sss) "SUBSIDIARY" means a body corporate which is a subsidiary of
another body corporate within the meaning of that term as used
in the Business Corporations Act (Ontario) as amended from
time to time and "SUBSIDIARIES" means more than one
Subsidiary.
(ttt) "TAX" and "TAXES" include all present and future taxes,
levies, imposts, stamp taxes, duties, charges to tax, fees,
deductions, withholdings and any restrictions or conditions
resulting in a charge to tax and all penalties, interest and
other payments on or in respect thereof.
(uuu) "THOROLD PLANT" means any of those manufacturing assets
located at 100 Ormond Street South, Thorold, Ontario.
(vvv) "TOTAL PRINCIPAL" means the current portion of the principal
of the long term debt of the Borrower determined in accordance
with GAAP.
<PAGE> 48
Page 13
(www) "WORKING CAPITAL" means, at any time, the amount by which the
aggregate of Current Assets exceed the amount of Current
Liabilities.
(xxx) "WORKING CAPITAL RATIO" means, at any particular time, the
ratio of Current Assets to Current Liabilities at such time.
(yyy) "WRITTEN" and "IN WRITING" shall include printing, typewriting
or any electronic means of communication capable of being
visibly reproduced at the point of reception including telex,
telegraph or telecopy.
<PAGE> 49
SCHEDULE A-1
BENCHMARK FINANCIALS
<PAGE> 50
SCHEDULE B
REAL PROPERTY DESCRIPTION
FIRSTLY:
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, Part of Township Lot 29,
Township of Thorold, Parts of William Street Plan 898, as closed by By-laws
2455 and 1140 (1988), City of Thorold, Regional Municipality of Niagara,
designated as Part 3, Plan 59R-7526. Subject to an easement in favour of the
Corporation of the City of Thorold over those parts of said Park Lot 5 and that
part of said Township Lot 29, designated as Part 17, Plan 59R-1681, as set out
in Instrument No. 303771.
SECONDLY:
Those parts of William Street as closed by By-Laws 2455 and 1140 (1988)
designated as Parts 1 and 2, Plan 59R-7526. Subject to an easement in favour
of Thorold Hydro Electric Commission over that part of William Street, Plan
898, as closed by By-Laws 2455 and 1140 (1988), designed as Part 2, Plan
59R-7526, as more particularly set out in Instrument No. 556427. Subject to an
easement in favour of the Corporation of the City of Thorold over those parts
of William Street as closed by By-laws 2455 and 1140 (1988), designated as
Parts 2, 5 and 7, Plan 59R-6276 as more particularly described in Instrument
No. 585965.
THIRDLY:
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, City of Thorold, Regional
Municipality of Niagara, designated as Part 1, Plan 59R-7527.
<PAGE> 51
SCHEDULE C
OPENING BALANCE SHEET
<PAGE> 52
SCHEDULE D
TAXES INADEQUACIES
NONE
<PAGE> 53
SCHEDULE E
LOCATION OF COLLATERAL
Striker Paper Canada, Inc.
100 Ormond Street South
P.O. Box 10
Thorold, Ontario
L2V 3Y7
<PAGE> 54
SCHEDULE F
EXCEPTIONS TO ENVIRONMENTAL COMPLIANCE
NONE EXCEPT:
1. Honeycomb Dryer [exception to be described]
2. Exceptions disclosed in the following report: Jacobs Engineering
Group Inc., 1995. Final Phase I Environmental Site Assessment Report,
Roofing Felt Plant, 100 Ormond Street South, Thorold, Ontario (Jacobs
Project No. 13-J684-01). Report to Striker Industries, Inc. June 30,
1995.
LICENSES AND PERMITS
No licenses are required to operate the Borrower's Business other than
Municipal occupancy permit, business license, and a Certificate of Approval
(Air).
<PAGE> 55
SCHEDULE G
APPRAISALS
<PAGE> 56
SCHEDULE H
LIST OF CONTINGENT OBLIGATIONS
NONE EXCEPT AS DISCLOSED IN SCHEDULE Q
<PAGE> 57
SCHEDULE I
LEGAL OPINIONS
<PAGE> 58
SCHEDULE J
INTENTIONALLY DELETED
<PAGE> 59
SCHEDULE K
LIST OF INTELLECTUAL PROPERTY
NONE
<PAGE> 60
SCHEDULE L
SUMMARY OF MATERIAL CONTRACTS
NONE
<PAGE> 61
SCHEDULE M
DESCRIPTION OF EQUIPMENT
<PAGE> 62
SCHEDULE N
CASH FLOW PLAN
<PAGE> 63
SCHEDULE O
EXAMPLE OF INTEREST CALCULATION
<PAGE> 64
SCHEDULE P
ACCOUNTS PAYABLE PAYOUT ARRANGEMENTS
<PAGE> 65
SCHEDULE Q
LITIGATION
<PAGE> 1
EXHIBIT 4.4
GENERAL SECURITY AGREEMENT
TO: FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
(hereinafter called the "Lender")
GRANTED BY: STRIKER PAPER CANADA, INC. (hereinafter called the
"Undersigned")
1. SECURITY INTEREST. As and by way of a continuing security interest,
as general and continuing security for the payment of all obligations,
indebtedness and liabilities, direct or indirect, of the Undersigned to the
Lender wheresoever and howsoever incurred and whether incurred before, at the
time of or after the execution hereof, including extensions or renewals
thereof, including without restricting the generality of the foregoing,
obligations to the Lender for advances by the Lender to the Undersigned under a
certain loan agreement made as of March 20, 1998 between the Lender and the
Undersigned (the "Subordinated Loan Agreement") (the obligations, indebtedness
and liabilities of the Undersigned referred to above are hereinafter
collectively called "Obligations"), and, IN CONSIDERATION OF THE OBLIGATIONS,
the Undersigned hereby grants, bargains, assigns and transfers to the Lender a
floating charge, as and by way of a continuing security interest (hereinafter
together with any other security interest hereby created called the "Security
Interest") in the following property described in sub-paragraphs (a), (b), (c)
and (d) of this paragraph now or hereafter owned or acquired by or on behalf of
the Undersigned:
(a) INTANGIBLES - all intangible property and not included in paragraph 10
below including, without limitation, all contractual rights and
insurance claims, patents, trademarks, trade names, goodwill,
copyrights and other industrial property of the Undersigned (all of
which property is hereinafter collectively called "Intangibles");
(b) PROCEEDS - all of the Undersigned's property in any form derived
directly or indirectly from any use or dealing with the Collateral
(defined in the last sentence of this paragraph) or that indemnifies
or compensates for Collateral destroyed or damaged (all of which
property is hereinafter collectively called "Proceeds");
(c) BOOKS & RECORDS - all of the Undersigned's deeds, documents, writings,
papers, books of account and other books relating to or being records
of debts, chattel paper or documents of title or by which such are or
may hereafter be secured, evidenced, acknowledged or made payable;
(d) EQUIPMENT - all tools, machinery, equipment, furniture, plants,
fixtures, and other tangible personal property, vehicles and fixed
goods and chattels including all tools, machinery, equipment,
furniture, plants, fixtures, vehicles, fixed goods and chattels other
than Inventory (as defined below), and any other property or assets of
the kind, nature or description of the property or assets particularly
described in Schedule A hereto (all of which property is hereinafter
collectively called "Equipment");
and for the same consideration the Undersigned hereby grants, bargains, assigns
and transfers to the Lender a floating charge, as and by way of a continuing
security interest, over:
(e) INVENTORY - all goods and chattels now or hereafter forming the
inventory of the Undersigned, of whatever kind and wherever located,
including, without limitation, all goods, merchandise, raw material,
work in process, finished goods and chattels held for sale, lease or
resale, or furnished or to be furnished under contracts for service or
used or consumed in the business of the Undersigned, goods used in or
procured for packing or packaging, timber cut or to be cut, oil, gas
and minerals extracted or to be extracted, all livestock and the young
thereof after conception and
<PAGE> 2
- 2 -
all crops which become such within one year after the date of
execution of this Agreement (all of which goods and chattels are
hereinafter collectively called "Inventory");
(f) REAL ESTATE - all real and immovable property, both freehold and
leasehold, now or hereafter owned or acquired by the Undersigned,
together with all buildings, erections, improvements and fixtures
situate thereupon or used in connection therewith, including any
lease, verbal or written or any agreement therefor, (all of which
property is hereinafter collectively called "Real Estate") provided,
however, the last day of any term of any such lease, verbal or
written, or any agreement therefor now held or hereafter held by the
Undersigned, is excepted out of the Real Estate charged by this
Agreement, but should such charge become enforceable the Undersigned
shall thereafter stand possessed of any such reversion upon trust to
assign and dispose thereof as the Lender may direct; and
(g) OTHER PROPERTY - the undertaking and all other property and assets of
the Undersigned for the time being of whatsoever nature and kind both
present and future including without limiting the generality of the
foregoing, uncalled capital, moneys, rights, franchises, negotiable
and non-negotiable instruments, judgments and securities (all of which
are hereinafter collectively called "Other Property"), other than that
which is at any and all times validly subject to the first, fixed and
specific mortgage and charge hereby created or subject to the
assignment set forth in paragraph 10.
All of the above mentioned property together with the Assignment in paragraph
10 is hereinafter called the "Collateral".
2. LOCATION OF PROPERTY. The Undersigned confirms and warrants that the
Collateral will be kept at the address shown below the Undersigned's signature
to this Agreement, and, subject to the provisions of paragraph 4, the
Undersigned will not remove any of the Collateral from said location without
the prior written consent of the Lender.
3. REPRESENTATIONS, WARRANTIES & COVENANTS. The Undersigned hereby
represents, warrants or covenants to or with the Lender, as the case may be,
that:
(a) subject to any inconsistent provisions of the Subordinated Loan
Agreement, the Undersigned will reimburse the Lender for all costs and
expenses (including legal fees on a solicitor and his own client
basis) incurred by it in the preparation, execution and filing of this
Agreement and the taking, recovering or possessing the Collateral and
in any other proceedings taken for the purpose of protecting or
enforcing the remedies provided herein, or otherwise in relation to
the Collateral or by reason of non-payment of the Obligations and all
such costs and expenses shall bear interest at the highest rate borne
by any of the Obligations and shall be payable on demand;
(b) the Undersigned will keep the Collateral free and clear of all taxes,
assessments, liens and encumbrances other than Permitted Encumbrances
as such term is defined in the Subordinated Loan Agreement;
(c) the Undersigned will care for, protect and preserve the Collateral and
not permit its value to be impaired and, subject to paragraph 4, will
not sell, transfer, assign, mortgage, charge, pledge, hypothecate or
deliver or otherwise dispose of any such property or any interest
therein except as permitted pursuant to the Subordinated Loan
Agreement without the prior written consent of the Lender;
<PAGE> 3
- 3 -
(d) the Undersigned will keep the Collateral insured under policies with
such provisions, for such amounts and by such insurers satisfactory to
the Lender from time to time, and will maintain such insurance with
loss, if any, payable to the Lender and will lodge such policies with
the Lender;
(e) the Lender shall be entitled from time to time and at any time to
inspect the Collateral wherever located and to make enquiries and
tests concerning the Collateral, and the Undersigned will defray all
expenses in connection therewith.
4. USE OF SPECIFICALLY CHARGED PROPERTY DEALING WITH INVENTORY, REAL
ESTATE OR OTHER PROPERTY. Until the occurrence of an event of default, as
hereinafter provided, the Undersigned may use the Collateral specifically
charged in any lawful manner not inconsistent with the Subordinated Loan
Agreement and the charges created by this Agreement, and deal with the
Inventory, Real Estate or Other Property or any party thereof in the ordinary
course of business. Proceeds shall be received by the Undersigned in trust for
the Lender and shall be forthwith paid over to the Lender.
5. EVENTS OF DEFAULT. The Obligations shall become immediately payable
upon the occurrence of an Event of Default as such term is defined in the
Subordinated Loan Agreement.
6. ADDITIONAL POWERS UPON DEFAULT. In addition to the rights and powers
provided in paragraph 5 and 8 and under the Personal Property Security Act, the
Lender and the Receiver, as defined in paragraph 8, shall have the following
rights and powers if the security hereby constituted becomes enforceable:
(a) to dispose of any of the Collateral in the condition in which it was
at the date possession of it was taken, or after any commercially
reasonable repair, processing or preparation thereof for disposition;
(b) if any part of the Collateral is perishable or will decline speedily
in value, to sell or otherwise dispose of same without giving any
notice whatever; and
(c) to demand, sue for and receive any Book Debts with or without notices
to the Undersigned, give effectual receipts and discharges therefor,
compromise any Book Debts which may seem bad or doubtful to the Lender
and give time for payment thereof with or without security,
and the Undersigned shall from time to time forthwith on the Lender's request
execute, do and make all such agreements, statements, further assignments,
acts, matters and things which may from time to time in the opinion of the
Lender be necessary or expedient for the purpose of carrying into effect any of
the provisions hereof and of perfecting the title of the Lender in the
Collateral, and the Lender and any of its managers or acting managers are by
the Undersigned hereby irrevocably constituted and appointed the true and
lawful attorney of the Undersigned with full power of substitution for the
Lender at its option whenever and wherever it may deem necessary or expedient
to do, make and execute all such statements, assignments, documents, acts,
matters or things with the right to use the name of the Undersigned.
7. WAIVER BY THE LENDER. Any breach by the Undersigned of any of the
provisions contained in this Agreement or any default by the Undersigned in the
observance or performance of any covenant or condition required to be observed
or performed by the Undersigned hereunder may only be waived by the Lender in
writing, provided that no such waiver by the Lender shall extend to or be taken
in any manner to affect any subsequent breach or default or the rights
resulting therefrom.
<PAGE> 4
- 4 -
8. APPOINTMENT OF RECEIVER AND MANAGER. The Lender may appoint in
writing any person, whether an employee or employees of the Lender or not, to
be a receiver or a receiver and manager ("Receiver") of the Collateral or any
part or parts thereof. A Receiver so appointed shall have power:
(a) to take possession of, collect and get in the Collateral, or any part
thereof and for that purpose to take any proceedings in the name of
the Undersigned or otherwise;
(b) to carry on or concur in carrying on the business of the Undersigned
and for that purpose to raise money on the Collateral in priority to
this Agreement or otherwise;
(c) to sell or concur in selling any of the Collateral; and
(d) to make any arrangement or compromise which the Receiver shall think
expedient in the interest of the Lender.
Any Receiver so appointed shall be deemed to be the agent of the Undersigned,
and the Undersigned shall be solely responsible for the Receiver's acts or
defaults and for the Receiver's remuneration and expenses, and the Lender shall
not be in any way responsible for any misconduct or negligence on the part of
the Receiver. All moneys received by the Receiver after providing for payment
of all costs, charges and expenses of or incidental to the exercise of any of
the powers of the Receiver shall be applied in or towards satisfaction of the
Security Interest. The rights and powers conferred by this paragraph are in
supplement of and not in substitution for any rights the Lender may have from
time to time.
9. PERISHABLE COLLATERAL. Except to the extent that the Lender believes
on reasonable grounds that any part of the Collateral is perishable or will
decline speedily in value, the Undersigned shall be entitled to not less than
fifteen days' notice in writing of the date, time and place of any intended
disposition of the Collateral, such notice to be sent by registered mail to the
last known post office address of the Undersigned.
10. GENERAL ASSIGNMENT OF BOOK DEBTS. And the Undersigned for good and
valuable consideration assigns, transfers, and sets over unto the Lender all
debts, accounts, choses in action, claims, demands, and moneys now due or owing
or accruing due or which may hereafter become due or owing to the Undersigned,
including (without limiting the foregoing) claims against the Crown in the
right of Canada or of any province, moneys which may become payable under any
policy of insurance in respect of any loss by fire or other cause which has
been or may be incurred by the Undersigned (collectively called "Book Debts"),
together with all contracts, securities, bills, notes, lien notes, judgments,
chattel mortgages, mortgages and all other rights, benefits and documents now
or hereafter taken, vested in or held by the Undersigned in respect of or as
security for the Book Debts hereby assigned or intended so to be or any part
thereof and the full benefit and advantage thereof, and all rights of action,
claim or demand which the Undersigned now has or may at any time hereafter have
against any person or persons, firm or corporation in respect thereof. The
Undersigned further hereby covenants, promises and agrees to and with the
Lender to well and truly execute or cause to be executed all or any such
further or other document or documents as shall or may be required by the
Lender to more completely or fully vest in the Lender the Book Debts hereby
assigned or intended so to be and the right to receive the said moneys or to
enable the Lender to recover same and will from time to time prepare and
deliver to the Lender all deeds, books, vouchers, promissory notes, bills of
exchange, accounts, letters, invoices, papers, and all other documents in any
way relating to the Book Debts. Provided that this assignment is and shall be a
continuing collateral security to the Lender for the Obligations. All money or
any other form of payment
<PAGE> 5
- 5 -
received by the Undersigned in payment of any Book Debts shall be received and
held by the Undersigned in trust for the Lender.
11. APPROPRIATION. The Lender shall have the right at any time to
appropriate any payment made to any portion of the Obligations and to revoke or
alter any such appropriation.
12. DEALING WITH SECURITY INTEREST. The Lender may grant extensions of
time and other indulgences, take and give up any of the Security Interest, or
modify or abstain from perfecting or taking advantage of any of the Security
Interest, accept compositions, grant releases and discharges thereof and
otherwise deal with the undersigned, debtors of the Undersigned, sureties and
others and with any of the Security Interest as the Lender may see fit without
prejudice to the liability of the Undersigned or the Lender's right to hold and
realize any of the Security Interest. The Lender shall not be accountable to
the Undersigned for the value of any of the Security Interest released except
for any moneys actually received by the Lender.
13. TERM. This Agreement shall be a continuing agreement in every respect
for the payment of the Obligations and it shall remain in full force and effect
until all of the Obligations shall be paid in full. In the event any provisions
of this Agreement shall be deemed invalid or void by any court of competent
jurisdiction, the remaining terms and provisions of this Agreement shall remain
in full force and effect.
14. NON-SUBSTITUTION. The Security Interest is in addition to and not in
substitution for any other security now or hereafter held by the Lender.
15. ACKNOWLEDGEMENT. The Undersigned acknowledges receipt of a copy of
this Agreement.
IN WITNESS WHEREOF the Undersigned has executed this Agreement this 20th day of
March, 1998.
STRIKER PAPER CANADA, INC.
Per:
-----------------------------------------
Name: Matthew Pond
Office: Chief Financial Officer
I have authority to bind the Corporation.
COLLATERAL IS NOW AND WILL HEREAFTER BE LOCATED AT THE FOLLOWING ADDRESS(ES):
Striker Paper Canada, Inc.
100 Ormond Street South
P.O. Box 10
Thorold, Ontario
L2V 3Y7
<PAGE> 6
SCHEDULE A
EQUIPMENT LIST
<PAGE> 1
EXHIBIT 4.5
PROVINCE
[LOGO] OF D
ONTARIO
DOCUMENT GENERAL
FORM 4 - LAND REGISTRATION REFORM ACT
FOR OFFICE USE ONLY
744143
'98 04 16 12 08
New Property Identifiers
Additional:
See Schedule [ ]
Executions
Additional:
See Schedule [ ]
(1) Registry [X] Land Titles [ ]
(2) Page 1 of 13 pages
(3) Property Block Property Additional:
Identifier(s) See Schedule [ ]
(4) Nature of Document
GENERAL SECURITY AGREEMENT
(5) Consideration
zero--00/100
Dollars $ 0.00
(6) Description
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, Part of Township Lot
29, Township of Thorold, Parts of William Street Plan 898, as closed by
By-Laws 2455 and 1140 (1988), City of Thorold, Regional Municipality of
Niagara.
(7) This Document Contains:
(a) Redescription New Easement Plan/Sketch [ ]
(b) Schedule for:
Description [X] Additional Parties [ ] Other [X]
(8) This Document provides as follows:
See attached.
Continued on Schedule [X]
(9) This Document relates to instrument number(s)
(10) Party(ies) (Set out Status or Interest)
Name(s) Signature(s) Date of Signature
Y M D
STRIKER PAPER CANADA, INC. Per: 1998 04
Name:
(Owner) Title:
Per: /s/ ILLEGIBLE 1998 04 14
Name: ILLEGIBLE
Title: CFO
I/We have authority to bind the Corporation.
(11) Address for Service
100 Ormond Street South, P.O. Box 10, Thorold, Ontario L2V 3Y7
(12) Party(ies) (Set Status or Interest)
Name(s) Signature(s) Date of Signature
Y M D
FIRST ONTARIO LABOUR SPONSORED /s/ KEN DELANEY 1998 04 14
INVESTMENT FUND LTD. Ken Delaney
(Secured Party) Authorized Signing Officer
(13) Address for Service
Suite 310, 234 Eglinton Ave E Toronto, Ont M4P 1K3
(14) Municipal Address of Property
100 Ormond Street South
P.O. Box 10
Throid, Ontario L2V 3Y7
(15) Document Prepared by:
Jon Venutti (T900442)
GOWLING, STRATHY & HENDERSON
Suite 4900, Commerce Court West
Toronto, Ontario
M5L 1J3
FOR OFFICE USE ONLY
- --------------------------------------------
Fees and Tax
- --------------------------------------------
Registration Fee
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
Total
- --------------------------------------------
<PAGE> 2
PROVINCE
[LOGO] OF S
ONTARIO
SCHEDULE
FORM 6 - LAND REGISTRATION REFORM ACT
Page 2 of 13 Pages
Additional Property Identifier(s) and/or Other Information
FIRSTLY:
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, Part of Township Lot 29,
Township of Thorold, Parts of William Street Plan 898, as closed by By-Laws
2455 and 1140 (1988), City of Thorold, Regional Municipality of Niagara,
designated as Part 3, Plan 59R-7526. Subject to an easement in favour of the
Corporation of the City of Thorold over those parts of said Part Lot 5 and that
part of said Township Lot 29, designated as Part 17, Plan 59R-1681, as set out
in instrument No. 303771.
SECONDLY:
Those parts of William Street as closed by By-Laws 2455 and 1140 (1988)
designated as Parts 1 and 2, Plan 59R-7526. Subject to an easement in favour of
Thorold Hydro Electric Commission over that part William Street Plan 898, as
closed by By-Laws 2455 and 1140 (1988), designated as Part 2, Plan 59R-7526, as
more particularly set out in instrument No. 558427. Subject to an easement in
favour of the Corporation of the City of Thorold over those parts of William
Street as closed by By-Laws 2455 and 1140 (1988), designated as Parts 2, 5 and
7, Plan 59R-6276 as more particularly described in instrument No. 585965.
THIRDLY:
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, City of Thorold, Regional
Municipality of Niagara, designated as Part 1, Plan 59R-7527.
FOR OFFICE USE ONLY
<PAGE> 1
EXHIBIT 4.6
GUARANTEE AND POSTPONEMENT OF CLAIM
TO: FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
FOR VALUABLE CONSIDERATION, the undersigned, STRIKER INDUSTRIES, INC., a
corporation existing under and by virtue of the laws of the State of Delaware
(herein referred to as the "Guarantor"), to the extent permitted by applicable
law, hereby guarantees payment to FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND
LTD. (hereinafter referred to as the "Lender"), forthwith after demand as
hereinafter provided for all of the liabilities which STRIKER PAPER CANADA, INC.
(herein referred to as "Striker") has incurred or is under or may incur or be
under to the Lender pursuant to a certain subordinated loan agreement dated
March 20, 1998 made between Striker and the Lender as the same may be amended,
modified or supplemented from time to time (the "Agreement"), provided an Event
of Default (as defined in the Agreement) has occurred and shall be continuing at
the time of demand.
The liability of the Guarantor hereunder shall be limited to the sum of One
Million, Five Hundred Thousand Dollars ($1,500,000.00) in lawful money of Canada
plus any interest, fees and penalties payable to the Lender pursuant to the
Agreement, together with interest on the said sum at the rate of 20% per annum
calculated semi-annually not in advance commencing upon demand for payment
hereunder by the Lender until the amount demanded shall be paid in full.
And the Guarantor agrees:
1. EXTENSIONS & INDULGENCES DO NOT RELEASE. That the Lender may grant
extensions of time or other indulgences, take and give up securities, accept
compositions, grant releases and discharges and otherwise deal with Striker and
the other parties and securities as the Lender may see fit, and may apply all
moneys received from Striker or others, or from securities, upon such part of
Striker's liability pursuant to the Agreement as it may think best, without
prejudice to or in any way limiting or lessening the liability of the Guarantor
under this guarantee.
2. LENDER NOT BOUND TO EXHAUST RECOURSE. That the Lender shall not be
bound to exhaust its recourse against Striker or other parties or the securities
it may hold before being entitled to payment from the Guarantor under this
guarantee.
3. LOSS DOES NOT DISCHARGE. That any loss of or in respect of securities
received by the Lender from Striker or any other person, whether occasioned
through the fault of the Lender or otherwise, shall not discharge pro tanto or
limit or lessen the liability of the Guarantor under this guarantee.
4. A CONTINUING GUARANTEE. This shall be a continuing guarantee and shall
cover present liabilities (if any) of Striker to the Lender and all liabilities
incurred after the date hereof pursuant to the Agreement and shall apply to and
secure any ultimate balance due or remaining due to the Lender pursuant to the
Agreement and shall be binding as a continuing security on the Guarantor.
5. NAME CHANGES DO NOT RELEASE. That any change or changes in the name of
Striker, shall not affect or in any way limit or lessen the liability of the
Guarantor hereunder and this guarantee shall extend to the person, firm or
corporation acquiring or from time to time carrying on the business of Striker.
6. LIABILITIES OF AGREEMENT INCLUDED. All moneys, advances, renewals and
credits in fact borrowed or obtained from the Lender under the terms of the
Agreement shall comprise the liabilities hereby guaranteed notwithstanding any
incapacity, disability or lack or limitation of status or of power of Striker or
<PAGE> 2
-2-
of the directors, partners or agents thereof, or that Striker may not be a legal
entity, or any irregularity, defect or informality in the borrowing or obtaining
of such moneys, advances, renewals or credits; and any amount which may not be
recoverable from the Guarantor on the footing of a guarantee shall be
recoverable from the Guarantor as principal debtor in respect thereof and shall
be paid to the Lender after demand therefor as hereinafter provided.
7. SETTLED ACCOUNTS CONCLUSIVE. That any account settled or stated by or
between the Lender and Striker shall be accepted by the Guarantor as conclusive
evidence that the balance or amount thereby appearing due by Striker to the
Lender is so due.
8. NO RELEASE UNTIL CONTINGENCIES RESOLVED. That should the Lender receive
from the Guarantor a payment or payments in full or on account of the liability
under this guarantee, the Guarantor shall not be entitled to claim repayment
against Striker or Striker's estate until the Lender's claims against Striker
pursuant to the Agreement have been paid in full; and in case of liquidation,
winding up or bankruptcy of Striker (whether voluntary or compulsory) or in the
event that Striker shall make a bulk sale of any of Striker's assets within the
bulk transfer provisions of any applicable legislation or any composition with
creditors or scheme of arrangement, the Lender shall have the right to rank for
its full claim and receive all dividends or other payments in respect thereof
until its claim has been paid in full and the Guarantor shall continue liable,
up to the amount guaranteed, less any payments made by the Guarantor, for any
balance which may be owing to the Lender by Striker; and in the event of the
valuation by the Lender of any of its securities and/or retention thereof by the
Lender, such valuation and/or retention shall not, as between the Lender and the
Guarantor, be considered as a purchase of such securities, or as payment or
satisfaction or reduction of Striker's liabilities to the Lender, or any part
thereof.
9. PAYMENT DUE ON DEMAND. That the Guarantor shall make payment to the
Lender of the amount of the liability of the Guarantor forthwith after demand
therefor is made in writing and such demand shall be conclusively deemed to have
been effectually made when an envelope containing it addressed to the Guarantor
at the last address of the Guarantor known to the Lender is deposited, postage
prepaid and registered, in the post office.
10. ALL RIGHTS HEREIN IN ADDITION TO OTHER RIGHTS. This instrument is in
addition and without prejudice to any securities of any kind (including without
limitation guarantees and postponement agreements whether or not in the same
form as this instrument) now or hereafter held by the Lender.
11. FORECLOSURE. For greater certainty, foreclosure by the Lender with
respect to a certain share pledge and proxy arrangement agreement dated March
20, 1998 between the Lender and Striker Holdings (Canada) Inc. shall extinguish
this guarantee and release the Guarantor.
12. ENTIRE AGREEMENT. There are no representations, collateral agreements
or conditions with respect to this instrument or affecting the Guarantor's
liability hereunder.
13. APPLICABLE LAW. This instrument shall be construed in accordance with
the laws of the Province of Ontario and the Guarantor agrees that any legal
suit, action or proceeding arising out of or relating to this instrument may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of such courts and acknowledges their
competence and agrees to be bound by any judgment thereof; provided that nothing
herein shall limit the Lender's right to bring proceedings against the Guarantor
elsewhere.
<PAGE> 3
-3-
14. BENEFIT & BINDING. This instrument shall extend to and enure to the
benefit of the successors and assigns of the Lender, and shall be binding upon
the Guarantor and the heirs, executors, administrators, personal
representatives, successors and assigns of the Guarantor.
15. RECEIPT OF COPY ACKNOWLEDGED. The undersigned hereby acknowledges
receipt of a true copy of this instrument.
GIVEN under seal at Toronto, this 20th day of March, 1998.
STRIKER INDUSTRIES, INC.
Per:
------------------------------------
Matthew Pond
May 18, 1998
<PAGE> 1
EXHIBIT 4.7
GUARANTEE AND POSTPONEMENT OF CLAIM
TO: FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
FOR VALUABLE CONSIDERATION, the undersigned, STRIKER HOLDINGS (CANADA) INC., a
corporation incorporated pursuant to the laws of the Province of Ontario (herein
referred to as the "Guarantor"), to the extent permitted by applicable law,
hereby guarantees payment to FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
(hereinafter referred to as the "Lender"), forthwith after demand as hereinafter
provided for all of the liabilities which STRIKER PAPER CANADA, INC. (herein
referred to as "Striker") has incurred or is under or may incur or be under to
the Lender pursuant to a certain shareholders agreement dated March 20, 1998
made between Striker Holdings (Canada) Inc., the Lender and Striker as the same
may be amended, modified or supplemented from time to time (the "Agreement").
Subject to section 5 herein, the liability of the Guarantor hereunder shall be
limited to the amount referred to as the Maximum Amount in section 6 herein, in
lawful money of Canada, together with interest on the said sum at the rate of
20% per annum calculated semi-annually not in advance commencing upon demand for
payment hereunder by the Lender until the amount demanded shall be paid in full.
And the Guarantor agrees:
1. EXTENSIONS & INDULGENCES DO NOT RELEASE. That the Lender may grant extensions
of time or other indulgences, take and give up securities, accept compositions,
grant releases and discharges and otherwise deal with Striker and the other
parties and securities as the Lender may see fit, and may apply all moneys
received from Striker or others, or from securities, upon such part of Striker's
liability pursuant to the Agreement as it may think best, without prejudice to
or in any way limiting or lessening the liability of the Guarantor under this
guarantee.
2. LENDER NOT BOUND TO EXHAUST RECOURSE. That the Lender shall not be bound to
exhaust its recourse against Striker or other parties or the securities it may
hold before being entitled to payment from the Guarantor under this guarantee.
3. LOSS DOES NOT DISCHARGE. That any loss of or in respect of securities
received by the Lender from Striker or any other person, whether occasioned
through the fault of the Lender or otherwise, shall not discharge pro tanto or
limit or lessen the liability of the Guarantor under this guarantee.
4. A CONTINUING GUARANTEE. This shall be a continuing guarantee and shall cover
present liabilities (if any) of Striker to the Lender and all liabilities
incurred after the date hereof pursuant to the Agreement and shall apply to and
secure any ultimate balance due or remaining due to the Lender pursuant to the
Agreement and shall be binding as a continuing security on the Guarantor.
5. A LIMITED RECOURSE GUARANTEE. Recourse under this Guarantee shall be limited
to the remedies and proceeds obtained from the enforcement of the stock pledge
and proxy arrangement agreement given as collateral security for the obligations
of the undersigned hereunder.
6. AMOUNT OF GUARANTEE. This Guarantee shall be limited to the sum of:
(A) $1.0 million; plus
<PAGE> 2
- 2 -
(B) the product of:
(i) First Ontario's Proportionate Share (as defined in the
Agreement); and
(ii) the amount by which the proceeds of sales of all the shares of
the Corporation exceeds $1.0 million.
(such sum defined as the "Maximum Amount")
7. NAME CHANGES DO NOT RELEASE. That any change or changes in the name of
Striker, shall not affect or in any way limit or lessen the liability of the
Guarantor hereunder and this guarantee shall extend to the person, firm or
corporation acquiring or from time to time carrying on the business of Striker.
8. LIABILITIES OF AGREEMENT INCLUDED. All moneys, advances, renewals and credits
in fact borrowed or obtained from the Lender under the terms of the Agreement
shall comprise the liabilities hereby guaranteed notwithstanding any incapacity,
disability or lack or limitation of status or of power of Striker or of the
directors, partners or agents thereof, or that Striker may not be a legal
entity, or any irregularity, defect or informality in the borrowing or obtaining
of such moneys, advances, renewals or credits; and any amount which may not be
recoverable from the Guarantor on the footing of a guarantee shall be
recoverable from the Guarantor as principal debtor in respect thereof and shall
be paid to the Lender after demand therefor as hereinafter provided.
9. SETTLED ACCOUNTS CONCLUSIVE. That any account settled or stated by or between
the Lender and Striker shall be accepted by the Guarantor as conclusive evidence
that the balance or amount thereby appearing due by Striker to the Lender is so
due.
10. NO RELEASE UNTIL CONTINGENCIES RESOLVED. That should the Lender receive from
the Guarantor a payment or payments in full or on account of the liability under
this guarantee, the Guarantor shall not be entitled to claim repayment against
Striker or Striker's estate until the Lender's claims against Striker pursuant
to the Agreement have been paid in full; and in case of liquidation, winding up
or bankruptcy of Striker (whether voluntary or compulsory) or in the event that
Striker shall make a bulk sale of any of Striker's assets within the bulk
transfer provisions of any applicable legislation or any composition with
creditors or scheme of arrangement, the Lender shall have the right to rank for
its full claim and receive all dividends or other payments in respect thereof
until its claim has been paid in full and the Guarantor shall continue liable,
up to the amount guaranteed, less any payments made by the Guarantor, for any
balance which may be owing to the Lender by Striker; and in the event of the
valuation by the Lender of any of its securities and/or retention thereof by the
Lender, such valuation and/or retention shall not, as between the Lender and the
Guarantor, be considered as a purchase of such securities, or as payment or
satisfaction or reduction of Striker's liabilities to the Lender, or any part
thereof.
11. PAYMENT DUE ON DEMAND. That the Guarantor shall make payment to the Lender
of the amount of the liability of the Guarantor forthwith after demand therefor
is made in writing and such demand shall be conclusively deemed to have been
effectually made when an envelope containing it addressed to the Guarantor at
the last address of the Guarantor known to the Lender is deposited, postage
prepaid and registered, in the post office.
12. ALL RIGHTS HEREIN IN ADDITION TO OTHER RIGHTS. This instrument is in
addition and without prejudice to any securities of any kind (including without
limitation guarantees and postponement agreements whether or not in the same
form as this instrument) now or hereafter held by the Lender.
<PAGE> 3
- 3 -
13. ENTIRE AGREEMENT. There are no representations, collateral agreements or
conditions with respect to this instrument or affecting the Guarantor's
liability hereunder.
14. APPLICABLE LAW. This instrument shall be construed in accordance with the
laws of the Province of Ontario and the Guarantor agrees that any legal suit,
action or proceeding arising out of or relating to this instrument may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of such courts and acknowledges their
competence and agrees to be bound by any judgment thereof; provided that nothing
herein shall limit the Lender's right to bring proceedings against the Guarantor
elsewhere.
15. BENEFIT & BINDING. This instrument shall extend to and enure to the benefit
of the successors and assigns of the Lender, and shall be binding upon the
Guarantor and the heirs, executors, administrators, personal representatives,
successors and assigns of the Guarantor.
16. RECEIPT OF COPY ACKNOWLEDGED. The undersigned hereby acknowledges receipt of
a true copy of this instrument.
GIVEN under seal at Toronto, this 20th day of March, 1998.
STRIKER HOLDINGS (CANADA) INC.
Per:
-----------------------------------
Matt Pond
May 18, 1998
<PAGE> 1
EXHIBIT 4.8
SHARE PLEDGE AND PROXY ARRANGEMENT AGREEMENT
THIS AGREEMENT made as of the 20th day of March, 1998
A M O N G:
STRIKER HOLDINGS (CANADA) INC., a corporation
incorporated pursuant to the laws of Ontario
(hereinafter referred to as "Holdings")
- and -
FIRST ONTARIO LABOUR SPONSORED INVESTMENT
FUND LTD., a corporation incorporated pursuant to the laws
of Ontario
(hereinafter referred to as "First Ontario")
CONTEXT OF THIS AGREEMENT
A. As of the date hereof, Holdings owns 75% of the voting equity of
Striker Paper Canada, Inc. (more particularly defined herein as the
"Corporation")
B. First Ontario has agreed to lend certain monies to the Corporation
pursuant to the terms of a Subordinated Loan Agreement (as hereinafter more
particularly defined) on certain conditions including:
(1) First Ontario shall acquire 25% of the voting equity of the
Corporation;
(2) First Ontario, Holdings and the Corporation enter into the
Shareholders Agreement (as more particularly defined herein), which
said agreement provides for certain rights in favour of First Ontario
to put their equity interest in the Corporation to the Corporation;
and
(3) the delivery of a guarantee by Holdings of the performance of the
Corporation of all obligations of the Corporation to First Ontario
arising pursuant to the Subordinated Loan Agreement and the
Shareholders Agreement secured, inter alia, by the pledge of
Holdings's shares in the Corporation as herein contemplated.
C. Pursuant to a certain guarantee dated March 20, 1998 (the "Holdings
Guarantee"), Holdings has given a guarantee of the performance by the
Corporation of its obligations to First Ontario arising pursuant to the
Subordinated Loan Agreement and the Shareholders Agreement (the "Guaranteed
Obligations").
D. Holdings has agreed to pledge and transfer to First Ontario the
Pledged Shares as a continuing collateral security for the Guaranteed
Obligations.
E. Unless there has been a default in the Guaranteed Obligations which
is continuing, Holdings is to enjoy the benefits of and exercise the rights
derived from title to the Collateral pledged hereunder subject to the
provisions of this Agreement.
<PAGE> 2
- 2 -
NOW THEREFORE WITNESSETH THAT in consideration of the sum of Ten Dollars
($10.00) of lawful money of Canada now paid by each of the parties to the other
(the receipt and sufficiency of which is by each hereby acknowledged) the
parties agree each with the other as follows:
1.0 - INTERPRETATION
1.1 DEFINED TERMS. The capitalized terms used in this Agreement shall be
defined as follows:
(a) "AGREEMENT" or "THIS AGREEMENT" means all amendments,
modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such
reference becomes operative;
(b) "BUSINESS DAY" means a day on which chartered banks in Canada
are required to be open for the transaction of regular
business in Toronto, Ontario other than a Saturday, Sunday or
statutory holiday;
(c) "COLLATERAL" means all of the Pledged Shares, together with
all proceeds thereof and all cash, stock or liquidating
dividends, other distributions of property, returns of
capital or other distributions made on or in respect of the
Pledged Shares, whether resulting from a subdivision,
combination or reclassification of the outstanding capital
stock of the Corporation, received in exchange for the
Pledged Shares or any part thereof or received as a result of
any merger, consolidation, acquisition or other exchange of
assets to which the Corporation may be a party or otherwise;
(d) "CORPORATION" means Striker Paper Canada, Inc., a corporation
incorporated pursuant to the laws of the Province of Ontario;
(e) "EVENT OF DEFAULT" has the meaning ascribed to that term in
section 6.1 hereof;
(f) "GUARANTEED OBLIGATIONS" means all debts, liabilities,
obligations, covenants and duties owing by Holdings to First
Ontario of any kind or nature, present or future, arising
under the Holdings Guarantee or this Agreement. The term
includes, but without limitation, all interest, charges,
expenses, fees, legal fees and any other sums chargeable to
Holdings under this Agreement;
(g) "PERSON" means an individual, a partnership, a firm, a
corporation, a trust, an unincorporated organization, a
government or any department or agency thereof and the heirs,
executors, administrators or other legal representatives of
an individual; and words importing persons have a similar
meaning;
(h) "PLEDGED SHARES" means 11,270,737 common shares in the
capital of the Corporation;
(i) "SHAREHOLDERS AGREEMENT" means the unanimous shareholders
agreement dated as of March 20, 1998 made among Holdings,
Striker and First Ontario, together with all amendments,
supplements and modifications thereto; and
<PAGE> 3
- 3 -
(j) "SUBORDINATED LOAN AGREEMENT" means the subordinated loan
agreement dated as of March 20, 1998 made between Striker and
First Ontario, together with all amendments, supplements and
modifications thereto.
1.2 SECTION HEADINGS. Section headings used herein are for convenience
only and are not to affect the construction of or be taken into consideration
in interpreting this Agreement.
1.3 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
1.4 GOVERNING LAW. The validity of this Agreement and of all
transactions provided for herein shall be governed by, interpreted and
construed under the laws of the Province of Ontario.
1.5 CONSENT TO JURISDICTION. For the purpose of all legal proceedings
this Agreement shall be deemed to have been performed in the Province of
Ontario and the courts of the Province of Ontario shall have jurisdiction to
entertain any action arising under this Agreement. The parties to this
agreement each hereby irrevocably attorns to the jurisdiction of the courts of
the Province of Ontario.
2.0 - GRANT OF SECURITY INTEREST IN PLEDGED SHARES
2.1 PLEDGE AS SECURITY. Holdings hereby pledges, transfers, conveys,
hypothecates, mortgages, assigns, sets over, delivers and grants to First
Ontario, title to the Collateral as a continuing collateral security interest
for the punctual performance and payment in full payment of all the Guaranteed
Obligations.
2.2 PLEDGE OF AFTER-ACQUIRED COLLATERAL. Holdings shall cause all
after-acquired Collateral issued to or received by it, whether for value paid
by it or otherwise, to be forthwith pledged, deposited and delivered to First
Ontario, forthwith after its receipt, and in each case all such after-acquired
Collateral shall be duly registered in the name of First Ontario to be held by
First Ontario pursuant to the terms of this Agreement and all further steps,
proceedings and deliveries shall be taken and done by Holdings as First Ontario
may reasonably require in order to perfect the security interest granted hereby
in such after-acquired Collateral.
2.3 DELIVERY OF POSSESSION. Contemporaneously with the execution and
delivery of this Agreement, Holdings shall cause share certificates evidencing
the Pledged Shares to be delivered to First Ontario duly endorsed for transfer
into the name of First Ontario and shall take all steps necessary or desirable
to cause the interest of First Ontario as registered owner of the shares to be
duly recorded in the records of the Corporation and to cause the Corporation to
issue new share certificates representing the Pledged Shares in the name of
First Ontario.
2.4 NO EXERCISE UNTIL DEFAULT. Unless there shall have occurred an Event
of Default First Ontario shall not exercise any rights with respect to the
Pledged Shares other than as herein permitted and shall exercise rights with
respect to the Pledged Shares only for so long as the Event of Default shall be
continuing.
<PAGE> 4
- 4 -
3.0 - VOTING OF PLEDGED SECURITIES
3.1 RIGHTS ARISING ON DEFAULT. Upon the occurrence of an Event of
Default which is continuing, First Ontario shall be entitled to exercise any
and all voting rights with respect to the Collateral and shall be entitled to
receive all dividends and distributions including stock and in specie dividends
and distributions thereafter paid on the Collateral, and to such end First
Ontario may cancel and revoke any proxy power or dividend order issued or
delivered by First Ontario pursuant to this Agreement.
3.2 RIGHTS PRIOR TO DEFAULT. Subject to section 3.3 hereof, until there
shall have occurred an Event of Default which is continuing, Holdings may
direct the manner in which the voting rights attaching to the Collateral are
exercised by First Ontario.
3.3 PROHIBITED ACTIONS. Notwithstanding section 3.2, in no event shall
Holdings, in the absence of First Ontario's prior written consent, exercise any
voting rights or other rights relating to the Collateral generally in any
manner which is prohibited by or would give rise to an Event of Default under
the terms of the Shareholders Agreement.
4.0 - DIVIDENDS & DISTRIBUTIONS
4.1 RIGHT TO RECEIVE DIVIDENDS & PROCEEDS AFTER DEFAULT. Upon the
occurrence of an Event of Default and for so long as an Event of Default is
continuing, First Ontario shall be entitled to receive all cash, additional
securities and other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the
Collateral including stock dividends and in specie dividends and shall apply
all such amounts on account of the Guaranteed Obligations.
4.2 RIGHT TO RECEIVE CASH DIVIDENDS PRIOR TO DEFAULT. Save and except as
otherwise provided for in section 2.3 of the Purchase Agreement, for so long as
no Event of Default shall have occurred, Holdings shall have the right to
receive cash dividends declared and paid with respect to the Collateral.
5.0 - PROXY POWER AND DIVIDEND ORDER
5.1 GENERAL PROXY. Contemporaneously with the execution of this
Agreement and from time to time during the term of this Agreement as Holdings
may reasonably request, First Ontario shall, upon the written request of and at
the expense of Holdings, execute and deliver to Holdings a proxy power and
dividend order in the form attached hereto as Schedule A.
5.2 IDEM. In the event that the Collateral includes voting securities of
any Person other than the Corporation, First Ontario shall also execute and
deliver to Holdings from time to time during the term of this Agreement as
Holdings may reasonably request, a form of similar form of proxy power and
dividend order governing the Collateral issued by such other Person.
5.3 AUTHORITY OF PROXY HOLDER. Unless there shall have occurred an Event
of Default which is continuing, First Ontario:
(a) agrees not to revoke any proxy power or dividend order
granted or issued to Holdings under sections 5.1 and 5.2; and
<PAGE> 5
- 5 -
(b) acknowledges and agrees that no proxy appointed pursuant to
sections 5.1 or 5.2 shall be obligated to seek or follow any
instructions given by First Ontario with respect to the
manner of exercise of such proxy power, so long as the acts
of the proxy are not prohibited by this Agreement.
5.4 AUTOMATIC TERMINATION OF PROXY POWER. Any proxy power issued
hereunder is issued upon the express condition that such proxy power shall be
suspended automatically and without the necessity of any further action on the
part of First Ontario, or any other Person, forthwith upon the occurrence of
any Event of Default and continuing until the Event of Default has been
remedied.
6.0 - DEFAULT, REMEDIES & ENFORCEMENT
6.1 DEFAULT. Each of the following shall constitute an Event of Default
hereunder:
(a) any default in the performance of the Guaranteed Obligations;
or
(b) if any of the Collateral shall be attached or levied upon or
seized in any legal proceedings, or held by virtue of any
lien or distress.
6.2 FIRST ONTARIO'S RIGHTS AND REMEDIES. Upon the occurrence of an Event
of Default First Ontario shall, in addition to the rights and remedies
specifically provided for herein, have the rights and remedies of a secured
party under the Personal Property Security Act, R.S.O. 1980, c. 375, as
amended, and:
(a) First Ontario may appoint by instrument in writing a
receiver and manager (hereinafter referred to as the
"Receiver") of all or any part of the Collateral and
remove or replace such Receiver from time to time or may
institute proceedings in any court of competent
jurisdiction for the appointment of such a Receiver.
Where First Ontario is referred to in this Agreement the
term shall, where the context permits, include any
Receiver so appointed and the officers, employees,
servants or agents of such Receiver. Any Receiver
appointed by instrument in writing pursuant hereto shall,
in addition to any rights and powers granted hereby, be
vested with such other discretions and powers as may be
granted in the instrument of appointment and any
supplement thereto. Holdings shall be solely responsible
for the Receiver's acts and faults and for the Receiver's
remuneration;
(b) First Ontario shall apply any cash dividends received by
First Ontario with respect to the Collateral to reduce the
Guaranteed Obligations arising pursuant to the
Subordinated Loan Agreement;
(c) First Ontario may seize, collect, realize, sell, borrow
money on the security of, release to third parties or
otherwise deal with the Collateral or any part thereof at
public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future
delivery as First Ontario shall deem advisable or in such
other manner, upon such other terms and conditions and at
such time or times as may seem to it advisable, without
demand and without advertisement, notice to Holdings or
legal process of any kind (except as otherwise required by
any applicable law). All reasonable expenses incurred by
First Ontario, including legal advices and services, and
receivers and
<PAGE> 6
- 6 -
accounting fees, in connection with seizing, collecting,
realizing, borrowing on the security of, selling or
obtaining payment of the Collateral, shall be added to the
Obligations secured hereby;
(d) First Ontario may take such steps as it considers
necessary or desirable to enter into or obtain possession
of all or any part of the Collateral, including
proceedings in any court of competent jurisdiction; and
(e) At its option, First Ontario may elect, in the manner
provided by and subject to the provisions of all
applicable statutory provisions (including without
limitation the provisions of the Personal Property
Security Act) to retain all or any part of the Collateral
in satisfaction of the Obligations owed to it by Holdings.
6.3 WAIVER OF NOTICE, PRESENTMENT AND NOTICE. Holdings waives demand,
presentment and protest of any instrument and notice thereof, notice of default
and all other notices to which Holdings might otherwise be entitled, except as
otherwise specifically provided in the Shareholders Agreement or this Agreement
and except those notices which by law cannot be waived.
6.4 WRITTEN WAIVERS, ETC. No waiver by First Ontario will be effective
unless it is in a writing signed by Seller, and then only to the extent
specifically stated, and no waiver by Seller on any occasion shall affect or
diminish First Ontario's right thereafter to require strict performance by
Holdings of any provision of this Agreement.
6.5 REMEDIES CUMULATIVE. First Ontario's rights and remedies under this
Agreement are cumulative and not exclusive of any other right or remedy which
First Ontario may have pursuant to the terms of this Agreement or otherwise.
6.6 SELLER'S RIGHT TO TAKE ACTION WITH RESPECT TO COLLATERAL. First
Ontario may, in its sole discretion:
(a) exchange, enforce, waive or release any right, remedy,
security or portion of the Collateral,
(b) apply such security or any proceeds of the Collateral and
direct the order or manner of sale thereof as First Ontario
may, from time to time, determine, and
(c) settle, compromise, collect or otherwise liquidate any such
security or Collateral for the Obligations in any manner
following the occurrence of an Event of Default and during
the continuance thereof without affecting or impairing First
Ontario's right to take any other further action with respect
to any security for the Obligations or any part thereof.
6.7 RELEASE. First Ontario may grant extensions of time or other
indulgences, take and give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Collateral and the other securities
as First Ontario may see fit, and may apply all moneys received from the
Collateral or other sources, or from securities, upon such part of Holdings's
liability as it may think best, without prejudice to or in any way limiting or
lessening the liability of Holdings hereunder.
<PAGE> 7
- 7 -
6.8 SELLER NOT BOUND TO EXHAUST ALTERNATIVE REMEDIES. First Ontario
shall not be bound to exhaust its recourse against other assets of Holdings or
against other parties or the securities it may hold before being entitled to
enforce its rights in respect of the Collateral.
6.9 NOT LIABLE FOR LOSS. Any loss of or in respect of securities
received by Seller from Holdings or any other person, whether occasioned
through the fault of First Ontario or otherwise, shall not discharge pro tanto
or limit or lessen the liability of Holdings hereunder.
6.10 POWER OF ATTORNEY. Holdings appoints First Ontario, or any other
Person whom First Ontario may designate, as Holdings's attorney, with power to
endorse Holdings's name on any share certificates, stock transfers, cheques,
notes, acceptances, money orders, drafts or other form of payment or security
that may come into Seller's possession on account of proceeds of the sale of
the Pledged Shares after an Event of Default and to do all things necessary to
carry out this Agreement. Holdings agrees that it shall ratify and approve all
acts of such attorney. Neither First Ontario nor any other Person designated
by Holdings as attorney hereunder will be liable for any acts or omissions
except in the case of wilful misconduct on the part of First Ontario, nor for
any errors of judgment or mistakes of fact or law.
6.11 PAYMENTS. First Ontario shall have the continuing and exclusive
right to apply or reverse and reapply any and all payments to any portion of
the Obligations. To the extent that Holdings makes a payment or payments to
First Ontario or First Ontario receives any payment or proceeds of the
Collateral for Holdings's account, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, provincial or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
Obligations or part thereof intended to be satisfied shall be revived and
continue in full force and effect, as if such payment or proceeds had not been
received by First Ontario.
6.12 INDEMNITY. Holdings agrees to indemnify First Ontario from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against First
Ontario in any litigation, proceeding or investigation, including, without
limitation, any of the foregoing brought under any federal or state securities
laws, which is threatened, instituted or conducted by any governmental agency
or instrumentality or any other person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement, whether or not First Ontario is a party thereto, except to the
extent that any of the foregoing arises out of the wilful misconduct of First
Ontario (the "Loss Amount"). Notwithstanding the above, if First Ontario has
acquired all of Pledged Shares pursuant to this Agreement and still holds all
of such Pledges Shares, then any indemnification amount payable by Holdings to
First Ontario pursuant to this section 6.12 shall be limited to Holdings'
Proportionate Share (as defined in the Shareholders Agreement) of the Loss
Amount.
7.0 - TERM & RECONVEYANCE
7.1 TERM OF AGREEMENT. This Agreement shall continue in full force and
effect until the satisfaction in full of the Guaranteed Obligations or release
of the Collateral by First Ontario.
7.2 RE-CONVEYANCE. Upon termination of this Agreement, First Ontario
shall at the request and expense of Holdings reassign and deliver to Holdings
or such other person legally entitled thereto, against
<PAGE> 8
- 8 -
receipt, such of the Collateral, if any, pledged by Holdings as shall not have
been sold or otherwise applied by First Ontario pursuant to the terms hereof
and shall be still held by it hereunder, together with appropriate instruments
of reassignment and release.
8.0 - GENERAL PROVISIONS
8.1 NOTICES. Any notice, request or other communication hereunder to any
of the parties hereto shall be in writing and be well and sufficiently given if
delivered personally or sent by prepaid registered mail to its address or by
telecopier to the number and to the attention of the person set forth below:
(a) In the case of Holdings:
c/o Striker Paper Canada, Inc.
100 Ormond Street South
P.O. Box 10
Thorold, Ontario
L2V 3Y7
Attention: David A. Collins
Telecopier No.: (905) 227-8385
With a copy to:
Robert I. Beck and to Will Lambert
(b) In the case of First Ontario:
First Ontario Labour Sponsored Labour Fund Ltd.
c/o First Ontario Management Ltd.
234 Eglinton Avenue East
Suite 310
Toronto, Ontario
M4P 1L1
Attention: Mr. Ken Delaney, President
Telecopier No.: (416) 487-1345
Any such notice shall be deemed to be given and received, if delivered, when
delivered, and if mailed, on the third Business Day following the date on which
it was mailed, unless an interruption of postal services occurs or is
continuing on or within the three Business Days after the date of mailing in
which case the notice shall be deemed to have been received on the third
Business Day after postal service resumes and if sent by telecopier on the next
Business Day after the day on which the telecopy is sent. Either party may by
notice to the other, given as aforesaid, designate a changed address or
telecopier number.
<PAGE> 9
- 9 -
8.2 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which when so executed shall constitute an original and all of which
together shall constitute one and the same agreement.
8.3 FURTHER ACTS, ETC. Each of First Ontario and Holdings agrees to do
such further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the other party may at
any time request in connection with the administration and enforcement of this
Agreement or relative to the Collateral or any part thereof or in order better
to assure and confirm unto First Ontario or Holdings, as the case may be, its
rights and remedies hereunder.
8.4 RIGHT TO ASSIGN. First Ontario shall have the right to assign this
Agreement and to transfer, assign or sell participations in its interests
hereunder from time to time, but Holdings shall not be permitted to assign this
Agreement or any interest herein.
8.5 SUCCESSORS AND ASSIGNS. All of the rights, privileges, remedies and
options given to First Ontario hereunder shall inure to the benefit of his
heirs, executors, successors and assigns; and all the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of and shall bind the representatives, successors and assigns of
First Ontario and Holdings.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.
STRIKER HOLDINGS (CANADA) INC.
Per:
---------------------------------
Matthew Pond
FIRST ONTARIO LABOUR SPONSORED
INVESTMENT FUND LTD.
Per:
---------------------------------
Ken Delaney
May 18, 1998
<PAGE> 10
SCHEDULE A
TO THE
STOCK PLEDGE AND PROXY ARRANGEMENT AGREEMENT
PROXY POWER
This Proxy is given pursuant to the provisions of a certain Stock Pledge and
Proxy Arrangement Agreement, dated March 20, 1998 (the "Pledge Agreement"),
made between STRIKER HOLDINGS (CANADA) INC. (the "Pledgor") and FIRST ONTARIO
LABOUR SPONSORED INVESTMENT FUND LTD. ("First Ontario").
All terms set out in initial upper case letters herein, shall, unless the
context shall otherwise require have the meanings ascribed to such terms in the
Pledge Agreement.
The authority given to the proxy hereby shall at all times be subject to strict
compliance by the proxy with the provisions of the Pledge Agreement and the
Shareholders Agreement.
Subject to the restrictions set forth below, First Ontario hereby appoints the
Pledgor, as the proxy of First Ontario and hereby authorizes the said proxy to
represent and vote those shares of STRIKER PAPER CANADA INC., a corporation
incorporated pursuant to the laws of the Province of Ontario (the
"Corporation"), pledged by the Pledgor to First Ontario pursuant to the Pledge
Agreement now or hereafter registered in the name of the undersigned on the
books of the Corporation (the "Pledged Shares") on any and all matters which
may properly come before any annual or special meeting of shareholders of the
Corporation, or any adjournment of any such meeting and on which matter or
matters the holders of shares are entitled to vote. First Ontario hereby
undertakes to ratify and confirm all that the said proxy may do by virtue
hereof provided the proxy acts within the authority hereby conferred.
PROVIDED THAT this instrument does not authorize the said proxy to represent or
vote any of the Pledged Shares to approve, ratify or authorize any action which
would violate any provision of the Subordinated Loan Agreement or the
Shareholders Agreement, including without limitation any of the following:
1. the dissolution or winding up of the Corporation;
2. the amalgamation of the Corporation;
3. any action to sell, transfer, licence, franchise or assign all or
substantially all of the assets of the Corporation;
4. the voluntary assignment of the Corporation into bankruptcy or other
assignment of the Corporation's assets for the benefit of its
creditors; or
<PAGE> 11
- 2 -
This Proxy shall be:
(a) suspended upon the occurrence of an Event of Default as that term is
defined in the Pledge Agreement until such Event of Default shall be
remedied; and
(b) terminated upon the sale by First Ontario of the Pledged Shares
pursuant to a realization by First Ontario upon the Pledged Shares as
contemplated by the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Proxy this 20th day
of March, 1998.
FIRST ONTARIO LABOUR SPONSORED
INVESTMENT FUND LTD.
Per:
-----------------------------
Ken Delaney
DIVIDEND ORDER
First Ontario hereby authorizes and directs the Corporation to pay all cash
dividends on the shares to the Pledgor. This direction shall be:
(a) suspended upon the occurrence of an Event of Default as that term is
defined in the Pledge Agreement until such Event of Default shall be
remedied; and
(b) terminated upon the sale by First Ontario of the Pledged Shares
pursuant to a realization by First Ontario upon the Pledged Shares as
contemplated by the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Dividend Order this
20th day of March, 1998.
FIRST ONTARIO LABOUR SPONSORED
INVESTMENT FUND LTD.
Per:
-----------------------------
Ken Delaney
May 18, 1998
<PAGE> 1
EXHIBIT 4.9
GUARANTEE AND POSTPONEMENT OF CLAIM
TO: FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
FOR VALUABLE CONSIDERATION, the undersigned, DAVID A. COLLINS (herein
referred to as "Collins"), to the extent permitted by applicable law, hereby
guarantees payment to FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
(hereinafter referred to as the "Lender"), forthwith after demand as
hereinafter provided for all of the liabilities which STRIKER PAPER CANADA,
INC. (herein referred to as "Striker") has incurred or is under or may incur or
be under to the Lender pursuant to:
(a) a certain subordinated loan agreement dated March 20, 1998 made between
Striker and the Lender as the same may be amended, modified or
supplemented from time to time (the "Subordinated Loan Agreement"); and
(b) a certain shareholders agreement dated March 20, 1998 made between Striker
Industries, Inc. the Lender and Striker as the same may be amended,
modified or supplemented from time to time (the "Shareholders Agreement"),
provided an Event of Default (as defined in the Subordinated Loan Agreement) or
a Major Default (as defined in the Shareholders Agreement") has occurred and
shall be continuing at the time of demand.
The Subordinated Agreements and the Shareholders Agreement are hereinafter
collectively referred to herein as the "Agreements".
The liability of Collins hereunder shall be limited to the sum of Seventy-Five
Thousand Dollars ($75,000.00) in lawful money of Canada together with interest
on the said sum at the rate of 20% per annum calculated semi-annually not in
advance commencing upon demand for payment hereunder by the Lender until the
amount demanded shall be paid in full.
And Collins agrees:
1. EXTENSIONS & INDULGENCES DO NOT RELEASE. That the Lender may grant
extensions of time or other indulgences, take and give up securities, accept
compositions, grant releases and discharges and otherwise deal with Striker and
the other parties and securities as the Lender may see fit, and may apply all
moneys received from Striker or others, or from securities, upon such part of
Striker's liability pursuant to the Agreements as it may think best, without
prejudice to or in any way limiting or lessening the liability of Collins under
this guarantee.
2. LENDER NOT BOUND TO EXHAUST RECOURSE. That the Lender shall not be bound
to exhaust its recourse against Striker or other parties or the securities it
may hold before being entitled to payment from Collins under this guarantee.
3. LOSS DOES NOT DISCHARGE. That any loss of or in respect of securities
received by the Lender from Striker or any other person, whether occasioned
through the fault of the Lender or otherwise, shall not discharge pro tanto or
limit or lessen the liability of Collins under this guarantee.
4. A CONTINUING GUARANTEE. This shall be a continuing guarantee and shall
cover present liabilities (if any) of Striker to the Lender and all liabilities
incurred after the date hereof pursuant to the Agreements
<PAGE> 2
- 2 -
and shall apply to and secure any ultimate balance due or remaining due to the
Lender pursuant to the Agreements and shall be binding as a continuing security
on Collins.
5. NAME CHANGES DO NOT RELEASE. That any change or changes in the name of
Striker, shall not affect or in any way limit or lessen the liability of
Collins hereunder and this guarantee shall extend to the person, firm or
corporation acquiring or from time to time carrying on the business of Striker.
6. LIABILITIES OF AGREEMENTS INCLUDED. All moneys, advances, renewals and
credits in fact borrowed or obtained from the Lender under the terms of the
Agreements shall comprise the liabilities hereby guaranteed notwithstanding any
incapacity, disability or lack or limitation of status or of power of Striker
or of the directors, partners or agents thereof, or that Striker may not be a
legal entity, or any irregularity, defect or informality in the borrowing or
obtaining of such moneys, advances, renewals or credits; and any amount which
may not be recoverable from Collins on the footing of a guarantee shall be
recoverable from Collins as principal debtor in respect thereof and shall be
paid to the Lender after demand therefor as hereinafter provided.
7. SETTLED ACCOUNTS CONCLUSIVE. That any account settled or stated by or
between the Lender and Striker shall be accepted by Collins as conclusive
evidence that the balance or amount thereby appearing due by Striker to the
Lender is so due.
8. NO RELEASE UNTIL CONTINGENCIES RESOLVED. That should the Lender receive
from Collins a payment or payments in full or on account of the liability under
this guarantee, Collins shall not be entitled to claim repayment against
Striker or Striker's estate until the Lender's claims against Striker pursuant
to the Agreements have been paid in full; and in case of liquidation, winding
up or bankruptcy of Striker (whether voluntary or compulsory) or in the event
that Striker shall make a bulk sale of any of Striker's assets within the bulk
transfer provisions of any applicable legislation or any composition with
creditors or scheme of arrangement, the Lender shall have the right to rank for
its full claim and receive all dividends or other payments in respect thereof
until its claim has been paid in full and Collins shall continue liable, up to
the amount guaranteed, less any payments made by Collins, for any balance which
may be owing to the Lender by Striker; and in the event of the valuation by the
Lender of any of its securities and/or retention thereof by the Lender, such
valuation and/or retention shall not, as between the Lender and Collins, be
considered as a purchase of such securities, or as payment or satisfaction or
reduction of Striker's liabilities to the Lender, or any part thereof.
9. PAYMENT DUE ON DEMAND. That Collins shall make payment to the Lender of
the amount of the liability of Collins forthwith after demand therefor is made
in writing and such demand shall be conclusively deemed to have been
effectually made when an envelope containing it addressed to Collins at the
last address of Collins known to the Lender is deposited, postage prepaid and
registered, in the post office.
10. ALL RIGHTS HEREIN IN ADDITION TO OTHER RIGHTS. This instrument is in
addition and without prejudice to any securities of any kind (including without
limitation guarantees and postponement agreements whether or not in the same
form as this instrument) now or hereafter held by the Lender.
11. FORECLOSURE. For greater certainty, foreclosure by the Lender with
respect to a certain share pledge and proxy arrangement agreement dated March
20, 1998 between the Lender and Striker Holdings (Canada) Inc. shall extinguish
this guarantee and release Collins.
<PAGE> 3
- 3 -
12. ENTIRE AGREEMENT. There are no representations, collateral agreements or
conditions with respect to this instrument or affecting Collins's liability
hereunder other than as contained herein or in the Release Agreement which is
attached as Schedule A to this Guarantee.
13. APPLICABLE LAW. This instrument shall be construed in accordance with the
laws of the Province of Ontario and Collins agrees that any legal suit, action
or proceeding arising out of or relating to this instrument may be instituted
in the courts of such province, and Collins hereby accepts and irrevocably
submits to the jurisdiction of such courts and acknowledges their competence
and agrees to be bound by any judgment thereof; provided that nothing herein
shall limit the Lender's right to bring proceedings against Collins elsewhere.
14. BENEFIT & BINDING. This instrument shall extend to and enure to the
benefit of the successors and assigns of the Lender, and shall be binding upon
Collins and the heirs, executors, administrators, personal representatives,
successors and assigns of Collins.
15. RECEIPT OF COPY ACKNOWLEDGED. The undersigned hereby acknowledges receipt
of a true copy of this instrument.
GIVEN under seal at Toronto, this 20th day of March, 1998.
WITNESS: )
)
)
)
)
)
- ---------------------------- -------------------------------------------
Name: DAVID A. COLLINS
May 18, 1998
<PAGE> 4
SCHEDULE A
RELEASE AGREEMENT
TO: DAVID A. COLLINS
Reference is made to a certain guarantee of the obligations of STRIKER PAPER
CANADA, INC. ("Striker") made by you in favour of the undersigned, FIRST
ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD. ("First Ontario") and dated
March 20, 1998 (the "Guarantee").
Reference is also made to:
(a) a certain loan agreement dated March 20, 1998 made between Striker and the
First Ontario as the same may be amended, modified or supplemented from
time to time (the "Subordinated Loan Agreement"); and
(b) a certain shareholders agreement dated March 20, 1998 made between Striker
Industries, Inc. First Ontario and Striker as the same may be amended,
modified or supplemented from time to time (the "Shareholders Agreement")
The undersigned has agreed to release you from your obligations with respect to
the Guarantee if you perform the following consulting services in the event of
a Triggering Event as follows:
1. For purposes of this agreement:
(a) "First Ontario" shall mean, First Ontario Labour Sponsored Investment Fund
Ltd. and its agents.
(b) "Triggering Event" will be any one of the following events:
(a) the insolvency of Striker;
(b) the appointment of a receiver-manager or receiver over all or
substantially all of the property of Striker; or
(c) the occurrence of a Major Default (as such term is defined in the
Shareholders Agreement).
2. In the event of a Triggering Event, you will act as a consultant to First
Ontario for such period as First Ontario may require, not exceeding six months
commencing promptly following First Ontario's written request. Your duties
will be to assist in the
<PAGE> 5
- 2 -
interim operation of Striker business and to assist First Ontario in seeking a
purchaser for Striker business whether in whole or in part.
3. Your engagement as a consultant will be on a basis of two weeks per month
in respect of time and attention. You will be an independent contractor and
not an employee or agent of First Ontario.
4. Unless First Ontario shall otherwise agree, your consulting services will
be rendered at Striker Thorold facility or at the offices of First Ontario or
Crosbie & Co. in the City of Toronto, Ontario.
5. During the term of your consulting engagement, First Ontario will pay you
the sum of US1,000 dollars per month on a gross basis plus your pre-approved
reasonable travel and accommodation costs necessarily incurred in connection
with carrying out your duties hereunder.
6. You will at all times during your engagement as a consultant and
thereafter, hold confidential all matters relating to your engagement as a
consultant as herein contemplated which were not otherwise known by you in your
prior capacity as an officer of Striker Industries, Inc. or Striker.
Upon completion of your consulting duties as herein contemplated, First Ontario
shall release the Guarantee and provide you with written confirmation of the
said release.
May 18, 1998
<PAGE> 1
EXHIBIT 4.10
UNANIMOUS SHAREHOLDERS AGREEMENT
MEMORANDUM OF AN AGREEMENT made as of the 20th day of March, 1998
BETWEEN:
STRIKER INDUSTRIES, INC. a corporation existing under
and by virtue of the laws of the State of Delaware
(hereinafter referred to as "SII")
- and -
STRIKER HOLDINGS (CANADA) INC., a corporation
incorporated pursuant to the laws of Ontario
(hereinafter referred to as "Holdings")
- and -
FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.,
a corporation incorporated pursuant to the laws of
Ontario
(hereinafter referred to as "First Ontario")
- and -
STRIKER PAPER CANADA, INC., a corporation
incorporated pursuant to the laws of Ontario
(hereinafter referred to as the "Corporation").
CONTEXT OF THIS AGREEMENT
A. SII owns all of the issued and outstanding shares of the capital of
Holdings.
B. The authorized capital of the Corporation consists of an unlimited
number of common shares of which 15,027,649 are issued and outstanding and held
as follows:
<TABLE>
<CAPTION>
BENEFICIAL NUMBER COMMON SHARES PERCENTAGE FULLY DILUTED
SHAREHOLDER
- ---------------- ------------------------ ----------------------------
<S> <C> <C>
Holdings 11,270,737 75%
First Ontario 3,756,912 25%
</TABLE>
<PAGE> 2
-2-
B. SII, Holdings and First Ontario have entered into this Agreement as
being in their respective best interests in governing their respective
investments in the Corporation and the Corporation enters into this Agreement to
acknowledge certain of its provisions which are binding upon or affect the
Corporation.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual covenants and agreements herein contained and for other good and
valuable consideration, the receipt and adequacy of which are acknowledged, the
parties hereto agree as follows:
PART 1.0 - INTERPRETATION
1.1 DEFINITIONS. For the purposes of this Agreement and where the context
does not otherwise require, terms shall have the meanings assigned thereto in
Schedule A annexed hereto.
1.2 SECTIONS AND HEADINGS. The division of this Agreement into parts and
sections and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms
"this Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular part, section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to parts and sections are to parts and sections of this Agreement.
1.3 NUMBER & GENDER. Words importing the singular number only shall include
the plural and vice versa and words importing gender shall include the
masculine, feminine and neuter genders.
1.4 ACCOUNTING PRINCIPLES. References in this Agreement to GAAP shall be to
the GAAP from time to time established by the Canadian Institute of Chartered
Accountants, or any successor institute, applicable as at the date on which such
calculation is made or required to be made, provided that if GAAP shall change
subsequent to the date hereof, all calculations herein contemplated shall be
based upon GAAP in effect on the date hereof.
1.5 ENTIRE AGREEMENT. This Agreement and the attached schedules constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, negotiations and
agreements between the parties hereto with respect thereto. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied or statutory, between the parties other than as
expressly set forth in this Agreement.
1.6 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of Ontario and the laws of Canada applicable therein.
Each party hereby irrevocably attorns to the jurisdiction of the courts of the
Province of Ontario.
1.7 AMENDMENTS AND WAIVERS. No amendment to this Agreement shall be valid
and binding unless set forth in writing and duly executed by all of the parties
hereto. No waiver of any breach of any provision of this Agreement shall be
effective or binding unless made in writing and signed by the party purporting
to give the same and, unless otherwise provided in the written waiver, shall be
limited to the specific breach waived.
<PAGE> 3
-3-
1.8 SEVERABILITY. If any provision of this Agreement is determined to be
invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall attach only to such provision or part thereof and the
remaining part of such provision and all other provisions hereof shall continue
in full force and effect.
1.9 TIME. Time shall be of the essence in this Agreement.
1.10 CURRENCY. Unless otherwise specified, all references herein to currency
shall be references to currency of Canada.
1.11 UNANIMOUS SHAREHOLDER AGREEMENT. This Agreement shall be construed as a
unanimous shareholder agreement within the meaning of the Act. The rights,
powers and duties of the directors and all other individuals who become
directors of the Corporations to manage or supervise the management of the
business and affairs of the Corporation are restricted to the extent herein
provided and the Shareholders agree to assume all such rights, powers and duties
of the directors and of all other persons who become directors of the
Corporation.
PART 2.0 - COVENANTS, REPRESENTATIONS AND WARRANTIES
2.1 GENERAL. Each Shareholder hereby represents and warrants to each other
Shareholder and to the Corporation that such Shareholder:
(a) is neither a party to nor bound by any agreement regarding the
ownership of its Shares, other than this Agreement and, in the
case of Holdings, the Pledge Agreement;
(b) is not a party to, bound by or subject to any indenture,
mortgage, lease, agreement, instrument, charter or bylaw
provision, statute, regulation, order, judgement, decree or
law which would be violated, contravened or breached by, or
under which any default would occur as a result of the
execution and delivery of such Shareholder of this Agreement
or the performance by such Shareholder of any of the terms
hereof; and
(c) owns its Shares beneficially and as of record with good and
marketable title thereto free and clear of all legal rights
and encumbrances, other than rights arising under this
Agreement and, in the case of Holdings, the Pledge Agreement.
2.2 THE CORPORATION. The Corporation hereby represents and warrants to
First Ontario that, as of the date of this Agreement:
(a) the Corporation is a taxable Canadian corporation within the
meaning of the Income Tax Act (Canada);
(b) the Corporation carries on no business other than the
Business;
(c) not less than 90% of the fair market value of the property of
the Corporation is attributable to property used by the
Corporation in the Business;
(d) the Corporation and all corporations related to it have fewer
than 501 employees and the ordinary place of employment for
50% or more of its full time employees is located in the
Province of Ontario and the wages and salaries payable to the
employees whose ordinary place of employment is located in the
Province of Ontario constitutes 50% or more of the total
payroll expense of the Corporation;
<PAGE> 4
-4-
(e) the carrying value of the assets of the Corporation and all
corporations related to it (determined in accordance with
GAAP) does not exceed $50,000,000; and
(f) there are no outstanding options or agreements by the
Corporation to issue securities in the capital of the
Corporation and no understandings capable of becoming such
agreements.
PART 3.0 - TERM
3.1 TERM. This Agreement shall come into force and effect as of the date
set out above and shall continue in force until the earlier of:
(a) the date on which only one or no Shareholder holds Shares in
the Corporation as the result of transfers of Shares permitted
pursuant to the provisions of this Agreement;
(b) the date on which the Corporation is wound up or dissolved in
accordance with the applicable provisions of the Act through a
process permitted pursuant to the provisions of this
Agreement; and
(c) the date on which all the shareholders mutually agree to
terminate this Agreement.
PART 4.0 - MANAGEMENT
4.1 NUMBER AND NOMINATION OF DIRECTORS. The Board shall consist of not more
than five (5) directors as follows:
(a) Not more than two directors shall be members of the management
of the Corporation or SII (the "Management Directors");
(b) One of the directors shall be a individual nominated by First
Ontario acting arm's length in relationship to First Ontario
(the "First Ontario Independent Director");
(c) One of the directors shall be an individual nominated by First
Ontario, which individual need not be acting at arm's length
in relationship to First Ontario (the "First Ontario
Nominee"); and
(d) The remaining director shall be an independent director and
acting at arm's length in relationship to First Ontario, the
Corporation and SII and satisfactory to both First Ontario and
SII (the "Independent Director").
The parties shall employ their best efforts to ensure that the Board is
constituted as provided in this section 4.1 within 90 days following the
delivery of this Agreement.
4.2 QUORUM.
(a) Subject to the provisions of subsection (b) hereof, the quorum
for any meeting of the Board shall be a majority of the
directors provided that such quorum shall include the First
<PAGE> 5
-5-
Ontario Nominee (if they shall have been appointed) and at
least one of the Management Directors.
(b) If any properly called meeting of the Board shall fail to be
properly constituted for the conduct of business as a result
of the failure to satisfy the quorum requirement, then the
meeting shall be adjourned to a day which shall be not less
than two Business Days following the originally scheduled
meeting on notice to all the directors (the "Adjourned
Meeting"). The quorum for such Adjourned Meeting shall be a
majority of the directors.
4.3 CHANGING THE BOARD ON MAJOR DEFAULT. If a Major Default (as defined in
Part 12.0) shall occur, then First Ontario may require that the Board be reduced
to one (1) director and that all of the Directors, excluding one of the First
Ontario Nominees, shall resign. The Shareholders shall exercise their rights as
shareholders of the Corporation to cause the reduction in the Board contemplated
herein.
If the Major Default which gave rise to the reduction in the size of the Board
is remedied or waived by the party entitled to the performance of the matter in
default, then, after the elapse of a period of twelve (12) months following such
remedy or waiver, the size of the Board shall revert to five (5), including the
First Ontario Nominees, and the provisions of section 4.1 shall apply.
In the event of a Major Default, First Ontario will also have the option of
terminating and/or replacing any officer or employee of the Corporation.
4.4 PARTICIPATING OBSERVER STATUS. In addition to, or in substitution for,
the First Ontario Nominee, First Ontario shall be entitled to appoint and
individual to act as an observer at all board meetings ("First Ontario
Observer"). The First Ontario Observer shall be entitled to:
(a) attend all board meetings (formal and informal);
(b) attend and participate in all discussions of the business of
the Board;
(c) receive notice of all meetings, copies of all agenda, reports
and other materials distributed to the directors in advance of
meetings contemporaneously with the delivery of such material
to the directors;
(d) cause matters be placed upon the agenda of Board meetings for
discussion and a determination by the directors.
4.5 REIMBURSEMENT AND D&O INSURANCE. The Corporation shall:
(a) reimburse the First Ontario Nominee and any First Ontario
Observer who attend and participate in meetings on behalf of
First Ontario as contemplated by section 4.4 for all
reasonable out-of-pocket costs and expenses associated with
such participation as First Ontario Nominee or observer, as
the case may be;
(b) remunerate the First Ontario Independent Director and the
Independent Director for their participation as directors of
the Corporation at a rate of not less than $500 per meeting
attended and $5,000 per year as an annual director's fee; and
(c) provide and maintain in good standing a policy of directors
and officers insurance for all of the Corporation's directors
and senior officers in form and substance satisfactory to
First Ontario, acting reasonably.
<PAGE> 6
-6-
4.6 BOARD MEETINGS. The Board shall meet on a monthly basis until such time
as the Corporation's Thorold plant facility is operating at a production
capacity of greater than 2,040 tons of dry felt per month produced and sold
("Benchmark Capacity") for at least 3 consecutive months, thereafter the Board
shall meet at least on a quarterly basis. In the event that the capacity of the
Corporation falls below the Benchmark Capacity for a period of 3 consecutive
months, then the Board shall again meet on a monthly basis until the Benchmark
Capacity is maintained for a period of 3 consecutive months. The determination
of whether the Benchmark Capacity has been reached shall be made by First
Ontario or its representative, in either case acting reasonably. Meetings of the
Board may take place by telephone to the extent and under the conditions
permitted by the Act.
4.7 REPORTING OBLIGATIONS.
(a) The Corporation shall deliver to First Ontario Management
Ltd., or such other party as First Ontario may otherwise from
time to time direct:
(i) within 90 days of the Fiscal Year end of the
Corporation, one copy of its annual financial
statements which shall be prepared on a consolidated
basis by the auditor of the Corporation, including
the balance sheet and statements of income, retained
earnings and changes in financial position, together
with a detailed unqualified report of the auditors of
the Corporation and all supporting notes and
schedules (the "Annual Financials");
(ii) within 90 days of the Fiscal Year end of the
Corporation, a certificate signed by the President or
Chief Financial Officer of the Corporation to the
effect that the Annual Financials present fairly the
financial position of the Corporation at the date
thereof and have been prepared in accordance with
GAAP;
(iii) within 30 days prior to the end of each Fiscal Year
an annual business plan and forecast for the next two
Fiscal Years consisting of:
A. monthly detailed pro forma balance sheets,
income statements and statements of changes
in financial position for the Corporation
(all prepared in accordance with GAAP)
together with such explanations, notes and
supporting information which are required to
explain and supplement the information so
provided and key assumptions (particularly
relating to revenues, gross margins, costs
and working capital);
B. a written bullet point commentary by the
President or the Chief Financial Officer of
the Corporation describing any changes in
any Fiscal Year's budget compared to the
most recent previously submitted plan and
forecast for such Fiscal Years;
C. a capital expenditure plan indicating the
nature and amount of capital expenditures
proposed to be incurred in such Fiscal
Years; and
D. a sales forecast by month for the following
Fiscal Year setting out anticipated revenue
and by customer with prior year comparatives
and a brief note explaining each line of the
said forecast; and
<PAGE> 7
-7-
(b) within 20 days after the end of each month a monthly financial
report consisting of:
A. monthly and year-to-date financial
statements on a consolidated basis in a form
consistent with the business plan and as
normally prepared by management for its own
use (the "Monthly Financials") which shall
contain a comparison of budget to the actual
results of both the current and prior year,
a calculation of all the financial covenants
provided for in section 7.2 of the
Subordinated Loan Agreement, and a
calculation as at the end of each month of
the number of days of receivables, days of
inventory on an aggregate basis and days of
payables reflected in each monthly
statement;
B. a report of aged accounts receivable by
customer;
C. for each of the first 6 months following
Closing, a report on accounts payable to
monitor performance under the payout
agreements in Schedule P to the Subordinated
Loan Agreement;
D. a written bullet point commentary signed by
the President or the Chief Financial Officer
of the Corporation on the material variances
in actual results to date from budgeted
results anticipated and on the outlook for
the Business of the Corporation for the
balance of the Fiscal Year in comparison to
the budget for that Fiscal Year;
E. a certificate signed by the either the
President or the Chief Financial Officer of
the Corporation stating that:
(1) the amounts of vacation pay, wages,
source deductions and taxes required
to be remitted by the Corporation
and those said amounts not yet due
have been or will be so remitted in
a timely fashion and are in good
standing since the date of the last
such certificate;
(2) the property and Business operations
and activities of the Corporation
are to the best knowledge of such
officers in compliance in all
material respects with all
Environmental Laws and Environmental
Orders or describing in reasonable
detail any such non-compliance; and
(3) that the Corporation is not in
breach of any of the covenants or
representations and warranties
contained herein, or if such is not
the case, providing detailed
particulars of all such breaches,
together in either case with
reasonably detailed evidence of
compliance with all financial
covenants contained herein;
F. for each of the first 5 Fiscal Quarters (or
such longer period as First Ontario
Management Ltd. may request), a summary of
payments made to each creditor of its
Business referred to in clause 7.1(f)C of
the Subordinated Loan Agreement in the month
then ended;
<PAGE> 8
-8-
(i) coincident with their delivery to the applicable
Secured Lenders, a copy of all reports and notices
given or delivered to either of the Secured Lenders
to the extent that they are not duplicative of the
information provided for in the section 7.1(e) of the
Subordinated Loan Agreement;
(ii) within 10 days of the respective filing with the
appropriate governmental authority, the most current
10Q and 10K securities filings relating to SII
together with any attachments thereto; and
(iii) upon each request, such further information
concerning the financial position and Business
operations as First Ontario may from time to time
request.
All forecasts and projections contemplated in the financial
reports and summaries described above shall be prepared by
management of the Corporation based on the best available
information and shall be applied on the basis of an analysis
which shall be consistently applied.
4.8 SII MONTHLY REPORTING. If the working capital of SII is less than
[insert figure] at any time during a given month, the Corporation shall cause
SII to provide within 20 days after the end of the particular month a monthly
financial report consisting of:
A. monthly and year-to-date financial
statements on a consolidated basis in the
form normally prepared by management for its
own use (the "Monthly Financials") which
shall contain a comparison of budget to the
actual results of both the current and prior
year;
B. a report of aged accounts receivable by
customer;
C. for each of the first 12 months following
Closing, a report on accounts payable to
monitor performance under the payout
agreements in Schedule P to the Subordinated
Loan Agreement;
D. a written bullet point commentary signed by
the President or the Chief Financial Officer
of the Corporation on the material variances
in actual results to date from budgeted
results anticipated and on the outlook for
the business of SII for the balance of the
Fiscal Year in comparison to the budget for
that Fiscal Year; and
E. for each of the first 5 Fiscal Quarters (or
such longer period as First Ontario
Management Ltd. may request), a report
providing a summary of compliance or
non-compliance by SII with all agreements
with creditors of SII which have agreed to
defer or postpone their right to receive
payments.
4.9 ANNUAL BUSINESS PLAN REQUIRING APPROVAL OF FIRST ONTARIO. The annual
business plan to be delivered to First Ontario Management Ltd. within 30 days
prior to the end of each Fiscal year pursuant to the Subordinated Loan Agreement
shall be subject to the written approval of First Ontario.
4.10 MAINTAIN BOOKS & RECORDS. The Corporation shall maintain accurate and
complete books and records of all transactions, receipts, expenses, assets and
liabilities of the Corporation in accordance with GAAP, consistently applied.
<PAGE> 9
-9-
4.11 ACCESS RIGHTS - GENERAL. First Ontario, or its financial advisors,
Crosbie Capital Management Inc. (or such other financial advisor as First
Ontario may subsequently appoint), or their legal counsel, Gowling, Strathy &
Henderson (or such other legal counsel as First Ontario may subsequently
appoint), or any other First Ontario's authorized agents which work exclusively
for First Ontario (which, without limiting the generality of the foregoing,
includes all of First Ontario's employees) shall have the right, exercisable as
frequently as First Ontario determines to be appropriate (acting reasonably),
during normal business hours (or at such other times as First Ontario may
request, acting reasonably), to inspect and audit the properties and facilities
of the Corporation and to inspect, audit and make extracts and photocopies from
the Corporation's records, files and books of account. Upon one and a half hour
prior notice by telephone or facsimile transmission, all other First Ontario
agents shall have the right, exercisable as frequently as First Ontario
determines to be appropriate (acting reasonably), during normal business hours
(or at such other times as First Ontario may request, acting reasonably), to
inspect and audit the properties and facilities of the Corporation and to
inspect, audit and make extracts and photocopies from the Corporation's records,
files and books of account.
4.12 ACCESS RIGHTS - CONFIRMATION OF EBITDA. Without limiting the generality
of the foregoing section 4.11, for the purposes of determination of EBITDA in
connection with the exercise of the put or call rights provided in this
Agreement, First Ontario may, at its option and at the expense of the
Corporation, employ an independent accounting firm for the purposes of
confirming the results of the Corporation's reported EBITDA.
4.13 APPOINTMENT OF A MONITOR. If there shall be a Major Default, First
Ontario may require that the Corporation retain Crosbie Capital Management Inc.
or such other party as First Ontario may direct as a monitor to provide on-going
reports to First Ontario on the financial condition and prospects of the
Corporation. The reasonable expenses of such monitor, which shall not exceed
$12,000 per month plus goods and services tax, shall be paid by the Corporation.
4.14 MATTERS REQUIRING APPROVAL OF FIRST ONTARIO. In addition to any other
approval required by law or pursuant to the Articles or by-laws of the
Corporation, none of the following shall be effected without the prior written
consent of First Ontario;
(a) any change to the arrangements (including inter-corporate
charges and management fees) relating to the provision of
management services or senior executive employees to the
Corporation (including without limitation salary, bonuses,
benefits, incentive payments and director's fees);
(b) the making of any contract between the Corporation and any
Person not dealing at Arm's Length with the Corporation or the
making of any payment or the provision of any guarantee,
indemnification or other form of financial assistance to any
Person not dealing at Arm's Length with the Corporation;
(c) the setting aside of funds for payment, declaration or payment
of any dividends or like distributions;
(d) any material change to the nature or scope of the Business;
(e) any response to offers to finance, proposal relating to an
IPO, takeover bid or offer to acquire the Business or Shares
of the Corporation;
(f) any change to the fiscal year end of the Corporation;
<PAGE> 10
-10-
(g) any change in the auditors of the Corporation;
(h) the making of any capital expenditures in excess of those
contemplated in the Cash Flow Plan;
(i) the incorporation of any subsidiary, or the acquisition,
either directly or indirectly, of all or substantially all of
the assets or capital stock of any Person;
(j) the redemption of any Shares, the repayment of any loans owed
by the Corporation to any Related Parties or the payment of
any bonus payments, commissions, or special fees or payments
to any of the officers or directors of the Corporation or to
Persons not dealing at Arm's Length with the Corporation,
except as contemplated by employment agreements and consulting
contracts with the Corporation which are disclosed to First
Ontario;
(k) the issuance of any shares in the capital of the Corporation
or any securities, rights, warrants or options convertible
into or exchangeable for, or carrying the right to subscribe
for, shares in the capital of the Corporation;
(l) the conversion, reclassification, subdivision, consolidation,
exchange, redesignation or any other change to any of the
shares in the capital of the Corporation;
(m) the merger, amalgamation, continuance, reorganization or
consolidation of the Corporation or the approval of any plan
of arrangement, whether statutory or otherwise;
(n) the taking or instituting of proceedings for the winding-up,
re-organization or dissolution of the Corporation;
(o) the filing of any proposal under the Bankruptcy and Insolvency
Act or the Corporate Creditors Arrangements Act;
(p) the sale, lease, exchange or other disposition of all or
substantially all of the assets of the Corporation or any
sale, lease, exchange, or other disposition of any such assets
out of the ordinary course of business;
(q) the engagement of any financial consultant by the Corporation
other than Crosbie Capital Management Inc.; or
(r) the enactment, revocation or amendment of the Articles or
by-laws of the Corporation.
4.15 POLICY RE: NEPOTISM. The Corporation shall not, without the consent of
all Shareholders, employ any individual, directly or indirectly, who is related
to any of the Shareholders either by marriage, birth or adoption.
4.16 INTER-COMPANY ACCOUNTS. All inter-corporate receivables owed by SII
and/or Holdings to the Corporation or by the Corporation to SII and/or Holdings
as the case may be shall be paid within 35 days of their invoice date. All such
inter-corporate receivables shall be disclosed by the Corporation to First
Ontario in the monthly reports provided pursuant to this Part 4.0.
<PAGE> 11
-11-
4.17 SII MANAGEMENT FEES Except as provided in this section 4.17, monthly
management fees payable by the Corporation to SII ("SII Management Fees") shall
not exceed $20,000 ($US) per month. If David Collins stays in Thorold and
manages the Thorold facility on the basis of two weeks per month during the
first six months following the date hereof and the Corporation is therefore not
required to hire a plant manager for such period of time, then the SII
Management Fees shall be increased by an amount which is equivalent to half the
salary of a plant manager as allocated in the Cash Flow Plan (as defined in the
Subordinated Loan Agreement). Entitlement to and payment of the SII Management
Fees are subject to the following conditions:
(a) prior to the payment of any SII Management Fees, the
Corporation's Working Capital (as defined in section 4.18
hereof) at the end of the preceding month must exceed
US$130,000;
(b) in addition to the foregoing section 4.17(a), for any time
prior to March 1, 1999:
(i) SII Management Fees shall not be paid unless and
until monthly EBITDA exceeds US$105,000;
(ii) the percentage of SII Management Fees payable will be
determined pro-rata, on the basis of a monthly EBITDA
range of US$105,000 to US$160,000. For example (and
assuming that all other conditions precedent to the
receipt of SII Management Fees have been met):
A. where monthly EBITDA equals or exceeds
US$160,000, SII will be entitled to 100% of
the SII Management Fee for the corresponding
month; and
B. where monthly EBITDA equals or exceeds
US$132,500 SII will be entitled to 50% of
the SII Management Fee for the corresponding
month;
(iii) subject to 4.17 (d), any portion of SII Management
Fees in respect of the period prior to March 1, 1999
and which are not paid during that period shall
accrue and be paid to SII only when and if the
following conditions are met:
A. the Corporation's Working Capital (as
defined in section 4.18 hereof) at the end
of the preceding month exceeds US$130,000;
and
B. the monthly EBITDA exceeds US$105,000;
(c) for any period on or after March 1, 1999, and after payment of
the Subordinated Loan, SII Management Fees may exceed
US$20,000 provided that i) the other conditions precedent set
out in this section are met and ii) the Corporation has a cash
balance of $1,000,000 in a designated and restricted account,
which balance may only be used to pay the Put Price to First
Ontario; and
(d) SII Management Fees shall not be paid or payable, and shall
not accrue, with respect to any month in which First Ontario
fails to receive any payment which is due from the
Corporation, including interest or principal ("Default
Month"). For greater certainty, the right to receive any SII
Management Fees which would otherwise be paid or payable with
respect to a Default Month is waived by SII.
<PAGE> 12
-12-
4.18 WORKING CAPITAL. For the purposes of this Part 4.0, "Working Capital"
means the sum of cash, accounts receivable and inventory, less accounts payable,
accrued liabilities and short term bank debt.
4.19 SII BOARD OF DIRECTORS. SII shall pay the First Ontario SII Director
and any First Ontario SII Observer who attend and participate in meetings of the
board of directors of SII on behalf of First Ontario for all reasonable
out-of-pocket costs and expenses associated with such participation as First
Ontario Nominee or observer, as the case may be.
PART 5.0 - SHARE TRANSFERS AND PLEDGES RESTRICTED
5.1 GENERAL PROHIBITION. Except as otherwise permitted by this Agreement or
the Pledge Agreement, no Shareholder shall sell, transfer, assign, pledge,
charge, mortgage or in any other way dispose of or encumber its Shares or its
rights under this Agreement without first complying with all of the provisions
of this Agreement unless, prior to the disposition or encumbrance of its Shares,
all of the Shareholders have consented in writing to such disposition or
encumbrance.
PART 6.0 - PRE-EMPTIVE RIGHTS ON ISSUES FROM TREASURY
6.1 NOTICE OF PROPOSED ISSUE FROM TREASURY. No additional Shares may be
issued from treasury without the consent of First Ontario. If any additional
Shares are to be issued from treasury, the Corporation shall first offer such
Shares (the "Offered Shares") to the Shareholders by a written invitation to
subscribe for the Offered Shares (the "Invitation") setting out reasonable
details of the Corporation's intention to issue additional Shares and the number
and class thereof to be so issued.
6.2 PRE-EMPTIVE RIGHT TO PURCHASE TREASURY STOCK. Each of the Shareholders
shall have the right to purchase its Proportionate Share of the Offered Shares
(rounded to the nearest whole number). The purchase price payable by a
Shareholder pursuant to this section shall be a price at least as favourable as
the price at which the offered shares are offered to any other parties. The
Shareholders shall have 30 Business Days from their receipt of the Invitation in
which to take up and pay for all or any part of the number of the Offered Shares
that they are entitled to purchase.
6.3 SALE OF THE REMAINING SHARES. In the event that any of the Offered
Shares have not been taken up and paid for by the Shareholders within the time
limit stipulated in section 6.2 (the "Residual Shares") then the Residual Shares
may be issued to such Persons acting at Arm's Length with the Corporation and
its Shareholders as the directors in their discretion determine, provided that
such Persons execute and deliver a Confirmation and Acknowledgement and provided
that any such issue of the Residual Shares must be completed within 60 Business
Days of the Invitation given with respect to the Offered Shares.
PART 7.0 - SALE OF SHARES SUBJECT TO
RIGHT OF FIRST REFUSAL AND TAG ALONG RIGHTS
7.1 DEFINED TERMS USED IN THIS PART. For the purposes of this Part 7.0, the
following terms shall have the following meanings respectively:
(a) "OVER-SUBSCRIBING PURCHASER" means a Purchasing Shareholder
which has offered to purchase more than its Pro Rata
Entitlement in its Purchase Notice (as defined in section 7.5
hereof);
<PAGE> 13
-13-
(b) "PURCHASING SHAREHOLDER" means a Remaining Shareholder (as
defined in section 7.2 hereof) which has delivered a Purchase
Notice;
(c) "PRO RATA ENTITLEMENT" means, with respect to each particular
Purchasing Shareholder, a number of Shares equal to the
product obtained by multiplying the number of Offered Shares
(as defined in section 7.2 hereof) by a fraction, the
numerator of which is the number of Shares held by the
particular Purchasing Shareholder and the denominator of which
is the total number of Shares held by all the Purchasing
Shareholders; and
(d) "UNDER-SUBSCRIBING PURCHASER" means a Purchasing Shareholder
which has offered to purchase less than its Pro Rata
Entitlement in its Purchase Notice.
7.2 SALE SUBJECT TO FIRST RIGHT OF REFUSAL AND TAG ALONG. If any
Shareholder (the "Selling Shareholder") receives a bona fide written offer (the
"Offer") from any Person (the "Third Party Purchaser") to purchase all or any
part of the Shares owned by the Selling Shareholder (the "Offered Shares") which
Offer is conditionally accepted by the Selling Shareholder, the Selling
Shareholder shall forthwith give notice of the Offer (the "Sale Notice") to the
Corporation and to the other Shareholder(s) (the "Remaining Shareholders").
7.3 CONTENTS OF THE NOTICE. The Sale Notice shall set out:
(a) reasonable evidence that the Selling Shareholder has accepted
the Offer subject only to compliance with the provisions of
this Agreement;
(b) the date of closing for the proposed transaction (the
"Transaction Closing Date");
(c) the number of Offered Shares to be sold; and
(d) the terms upon which and the price at which (the "Purchase
Price"), the Offered Shares will be sold pursuant to the
Offer.
7.4 RIGHT TO PURCHASE OFFERED SHARES. Upon the Sale Notice being given,
each of the Remaining Shareholders shall have the right to:
(a) subject to the provisions of sections 7.6 and 7.7 hereof,
purchase all or any part of the Offered Shares for the
Purchase Price, by delivering a Purchase Notice as more
particularly set out in section 7.5 hereof; or
(b) require the Selling Shareholder to purchase the Shares held by
such Remaining Shareholder by delivering a Tag Along Notice as
defined and more particularly set out in section 7.8 hereof.
For greater certainty, where there is more than one Remaining Shareholder, a
Remaining Shareholder may deliver both a Tag Along Notice and a Purchase Notice,
with the effect that, subject to section 7.10 hereof, such a Remaining
Shareholder shall preserve its right to sell under a Tag Along Notice in the
event that the transaction contemplated by the Purchase Notices is not completed
for any reason.
7.5 PURCHASE NOTICE. A Remaining Shareholder may, not later than 25
Business Days after receipt of the Sale Notice, deliver to the Selling
Shareholder a notice in writing (the "Purchase Notice") to purchase a specified
number of the Offered Shares for the Purchase Price on the later of the
Transaction
<PAGE> 14
-14-
Closing Date or the first Business Day which is 40 Business Days following
delivery of the Sale Notice to the Remaining Shareholder(s).
7.6 RESOLUTION TO OVER-SUBSCRIPTION. Where more than one Purchasing
Shareholder delivers a Purchase Notice, each such Purchasing Shareholder shall
be entitled to purchase such number of the Offered Shares specified in its
Purchase Notice, unless the aggregate number of Shares to be purchased by all
Purchasing Shareholders as specified in all such Purchase Notices exceeds the
number of the Offered Shares and in that event:
(a) each Under-Subscribing Purchaser shall be entitled to purchase
such number of the Offered Shares specified in its Purchase
Notice; and
(b) each particular Over-Subscribing Purchaser shall be entitled
to purchase that number of Offered Shares equal to the product
obtained by multiplying the difference obtained by subtracting
the number of Shares allocated pursuant to subsection 7.6(a)
above from the total number of Offered Shares by a fraction,
the numerator of which is the number of Shares held by the
particular Over-Subscribing Purchaser and the denominator of
which is the number of Shares held by all the Over-Subscribing
Purchasers.
7.7 PURCHASE NOTICES NOT VALID UNLESS FULLY SUBSCRIBED. The Purchase
Notices shall be void and without effect, unless the aggregate number of Shares
to be purchased pursuant to the Purchase Notices delivered is equal to or
exceeds the number of Offered Shares.
7.8 TAG ALONG NOTICE. A Remaining Shareholder may, not later than 30
Business Days after receipt of the Sale Notice, deliver to the Selling
Shareholder a notice in writing (the "Tag Along Notice") to the Selling
Shareholder requiring the Selling Shareholder to purchase that number of Shares
held by the particular Remaining Shareholder equal to the product obtained by
multiplying the number of Shares held by that particular Remaining Shareholder
by a fraction, the numerator of which is the number of Offered Shares and the
denominator of which is the number of Shares held by the Selling Shareholder for
a purchase price per Share equal to:
(a) in the case of a Remaining Shareholder which is not First
Ontario, the purchase price per Share provided for in the
Offer; and
(b) in the case of a Remaining Shareholder which is First Ontario,
the greater of:
(i) the Sale Value; and
(ii) the purchase price per Share provided for in the
Offer,
on the later of the Transaction Closing Date or the first Business Day which is
45 Business Days following delivery of the Sale Notice to the Remaining
Shareholder(s).
7.9 TAG ALONG EFFECTIVE ONLY IF FIRST RIGHT OF REFUSAL NOT EXERCISED. The
transaction of purchase and sale contemplated by the Tag Along Notice shall be
completed only if the Purchasing Shareholders have not purchased all of the
Offered Shares pursuant to the Purchase Notices.
7.10 DEFAULTING OFFEREE MAY NOT TAG ALONG. A Purchasing Shareholder which
fails to complete the purchase of Offered Shares pursuant to that Purchasing
Shareholder's Purchase Notice shall not have the right to participate in the
sale of its Shares pursuant to a Tag Along Notice.
<PAGE> 15
-15-
7.11 CONDITION PRECEDENT TO SALE BY SELLING SHAREHOLDER. If the Selling
Shareholder shall fail to complete the purchase of the Shares of a Remaining
Shareholder as contemplated by a Tag Along Notice, none of the Offered Shares
shall be transferred to the Third Party Purchaser pursuant to the Offer.
7.12 OBLIGATION RELEASED IF THIRD PARTY DEFAULTS. The obligation of the
Selling Shareholder to purchase and the Remaining Shareholder to sell pursuant
to either a Purchase Notice or a Tag Along Notice shall be released and of no
further effect if the Third Party Purchaser shall neglect or fail to complete
the purchase from the Selling Shareholder contemplated by the Offer.
7.13 WHAT SHARES CAN BE SOLD TO THE THIRD PARTY PURCHASER. Provided that the
Selling Shareholder has complied with the provisions of this Part 7.0 and has
purchased all Shares tendered to the Selling Shareholder pursuant to all Tag
Along Notices, the Selling Shareholder may sell the Offered Shares to the Third
Party Purchaser on the later of:
(a) the date fixed in section 7.8 hereof for the completion of the
Tag Along Notice transaction, or
(b) the Transaction Closing Date,
for a price equal to the Purchase Price and on other terms no more favourable to
the Third Party Purchaser than those set forth in the Notice, provided that the
Third Party Purchaser shall execute and deliver a Confirmation and
Acknowledgment prior to the completion of such transaction.
7.14 EFFECT OF CONFIRMATION & ACKNOWLEDGMENT. Any Person executing a
Confirmation & Acknowledgment shall be deemed to be an original party to this
Agreement and shall be bound by its terms and shall have the benefit of its
provisions.
PART 8.0 - DRAG ALONG OBLIGATIONS
8.1 TAKEOVER BID RECEIVED. If the Corporation or any of the Shareholders
receives a bona fide written all cash offer from any Person who is at Arm's
Length to purchase all but not less than all of the Shares (a "Takeover Offer"),
the Person in receipt of the Takeover Offer shall forthwith provide written
notice and details of the same to all the other Shareholders. The Shareholders
and/or their respective representatives shall meet to discuss the Takeover Offer
as soon as possible and in any event within 15 Business Days of receiving such
notice.
8.2 NOTICE OF ACCEPTANCE OR REJECTION. Within 25 Business Days after the
discussion of the Takeover Offer contemplated by section 8.1, each Shareholder
shall indicate by notice in writing to the other Shareholders whether such
Shareholder proposes to accept or reject the Takeover Offer.
8.3 MINORITY SELLER SITUATION. If Shareholders who own fifty (50%) percent
or less of the Shares (which Shareholders are collectively referred to as the
"Minority Sellers") wish to accept the Takeover Offer, then the Minority Sellers
shall have the right exercised by notice in writing to the other Shareholder(s)
(the "Demand Notice") to require the other Shareholder(s) to purchase the Shares
of the Minority Sellers on terms and conditions equivalent to those of the
Takeover Offer, provided that notwithstanding any terms in the Takeover Offer to
the contrary, the Transaction Closing Date for the transaction shall be the
earlier of:
(i) the transaction closing date provided for in the
Takeover Offer; and
<PAGE> 16
-16-
(ii) 30 days following delivery of the Drag Along Notice.
8.4 MAJORITY SELLER SITUATION. If Shareholders who own more than fifty
(50%) percent of the Shares (which Shareholders are collectively referred to as
the "Majority Sellers") wish to accept the Takeover Offer, then the Majority
Sellers shall have the right exercised by notice in writing to the other
Shareholder(s) (the "Drag Along Notice") to require the other Shareholder(s) to
sell their Shares pursuant to the terms and conditions of the Takeover Offer,
provided that:
(a) First Ontario may require the Corporation to repay the balance
of the Subordinated Loan then outstanding contemporaneously
with the completion of the transaction of purchase and sale;
and
(b) if the purchase price per share payable pursuant to the
Takeover Offer is less than the Sale Value, the Majority
Sellers shall pay to First Ontario on the Transaction Closing
Date of the Takeover Offer an amount for each Share sold by
First Ontario pursuant to the Takeover Offer equal to the
difference between the Sale Value and the amount paid to First
Ontario pursuant to the Takeover Offer.
8.5 SECRETARY'S AUTHORITY. If any Shareholder defaults in that
Shareholder's obligations to transfer Shares as contemplated by this Part 8.0
(which Shareholder is referred to in this Part 8.0 as the "Defaulting
Shareholder"), the Secretary of the Corporation is authorized and directed to
receive the purchase money due to such Defaulting Shareholder and to thereupon
cause the names of purchasers of the Defaulting Shareholder's Shares to be
entered in the registers of the Corporation as the holders of such Shares. The
said purchase money shall be held in trust by the Corporation on behalf of the
Defaulting Shareholder and not commingled with the Corporation's assets, except
that any interest accruing thereon shall be for the account of the Corporation.
The receipt by the Secretary of the Corporation for the purchase money shall be
a good discharge to the purchasers and, after their names have been entered in
the registers of the Corporation in exercise of the aforesaid power, the
validity of the proceedings shall not be subject to question by any person. On
such registration, the Defaulting Shareholder shall cease to have any right to
or in respect of the purchased Shares except the right to receive, without
interest, the purchase price received by the Secretary of the Corporation.
PART 9.0 - ADDITIONAL FINANCING
9.1 The Shareholders shall not be required to provide, directly or
indirectly, any additional financing to the Corporation.
9.2 If First Ontario shall have called the Guarantee and Postponement of
Claim granted by Holdings on March 20, 1998 and the Corporation requires
additional funds to finance its operations, then:
(a) if all Shareholders wish to contribute additional funds, each
Shareholder shall contribute additional funds to the
Corporation, pro rata based on its respective Proportionate
Share, by way of subscription for shares, loan or otherwise
and upon such terms and conditions as shall be agreed upon at
the time of each such contribution; or
(b) if only First Ontario wishes to contribute additional funds,
First Ontario shall contribute additional funds to the
Corporation by way of subscription for shares in exchange for
an additional number of shares of the Corporation to be
determined by a third party valuator.
<PAGE> 17
-17-
PART 10.0 - FIRST ONTARIO PUT
10.1 PUT RIGHT. At any time following the occurrence of any of the following
events:
(i) maturity of the Subordinated Loan;
(ii) full repayment of the Subordinated Loan;
(iii) sale of all or substantially all of the assets or
shares of the Corporation;
(iv) sale of or change in control of Holdings;
(v) the death of David A. Collins;
(vi) if David A. Collins:
A. sells all or substantially all of his shares
in SII
B. holds less than 10% of the common shares in
the capital of SII (other than as a result
of dilution arising from the issue of new
shares from Treasury); or
C. if he ceases to hold a senior executive
position with SII; or
(vii) a Major Default as defined in section 12.1 of this
Agreement;
(any such event being a "Put Event"), First Ontario shall have the
right upon written notice to the Corporation (the "Put Notice"), to
require the Corporation to purchase all of the Shares held by it (the
"Put Shares").
10.2 PUT PRICE. The purchase price payable per share for the Put Shares (the
"Put Price") shall be the greater of (A) $1.0 million divided by the number of
Put Shares ; and (B) the product of First Ontario's Equity Interest and the
greater of the following amounts:
(i) 3.0 times EBITDA for the 12-month period prior to the
Purchase plus cash, less interest bearing debt and
other financing senior to the common equity;
(ii) 3.0 times the average annual EBITDA for the 2 years
prior to the Purchase plus cash, less interest
bearing debt and other financing senior to the common
equity;
(iii) 0.64 times the average annual revenue for the 12
month period prior to the Purchase plus cash, less
interest bearing debt and other financing senior to
the common equity; and
(iv) the value of the Corporation's shares based on the
price at which the business is sold in an arm's
length transaction,
divided by the number of common shares of the Corporation then
outstanding.
For the purposes of calculating the Put Price, EBITDA and interest bearing debt
will be adjusted (normalized) as follows:
<PAGE> 18
-18-
(i) EBITDA will be increased to reflect the amount by
which any SII Management Fees exceed US$20,000 in any
month; and
(ii) Interest bearing debt will be decreased to reflect
the amount by which any SII Management Fees exceed
US$20,000 in any month.
10.3 PAYMENT OF THE PUT PRICE. The transaction contemplated by the Put
Notice and the Put Price shall be paid and satisfied by delivery of a certified
cheque payable to First Ontario within 60 days of the date of the delivery of
the Put Notice (the "Put Closing Date"); provided that if the sole event giving
rise to First Ontario's right to deliver the Put Notice is the death of David A.
Collins, the Put Closing Date shall be the date which is on or before the 90th
day following delivery of the Put Notice.
10.4 RESCIND PUT NOTICE. If the Put Price, as determined by the auditors of
the Corporation, shall be materially different from the amount reasonably
anticipated by First Ontario in reliance upon unaudited management financial
statements available at the time the Put Notice was delivered, then First
Ontario shall have the right to rescind the Put Notice and shall, in that event,
not be required to complete the transaction therein contemplated.
10.5 EFFECT OF AN IPO. If the Corporation shall offer its Shares through an
IPO at any time prior to the delivery of a Put Notice by First Ontario
(a) First Ontario shall have the right to require all of the
Shares held by it to be qualified in the prospectus as a
secondary offering; and
(b) from and after the IPO, First Ontario shall no longer have the
right to deliver a Put Notice.
PART 11.0 - EQUITY EXCHANGE BY FIRST ONTARIO
11.1 EQUITY EXCHANGE. At any time after the earlier of: (i) the occurrence
of a Major Default; or (ii) March 20, 1999, at its option, First Ontario shall
have the right, upon written notice to the Corporation and SII, (the "Exchange
Notice") to exchange all or any part of its Shares in the Corporation for voting
common shares of SII (the "Exchange Option"). For the purposes of the exercise
of the Exchange Option:
(a) First Ontario's equity in the Corporation will be valued at
the Put Price;
(b) First Ontario will be issued voting common shares in SII the
value of which shall be based on a price per share of 66% of
the average price quoted for SII shares during the twenty (20)
trading days preceding the delivery of the Exchange Notice;
and
(c) First Ontario's equity in SII acquired pursuant to the
Exchange Option shall not exceed 3% of the issued and
outstanding common share ownership of SII.
11.2 SUBORDINATED LOAN CONVERSION PROVISION. Upon the happening of a Major
Default or any other event of default, following which First Ontario makes a
demand pursuant to the SII Guarantee, should SII fail to honour the SII
Guarantee within ten (10) Business Days, First Ontario shall have the right,
upon written notice to the Corporation and SII, (the "Conversion Notice") to
convert all or any part of the principal portion of the Subordinated Loan and
all accrued but unpaid interest into voting common shares of SII (the
"Conversion Option"). For the purposes of the exercise of the Conversion Option,
First Ontario will be issued voting common shares in SII, the value of which
shall be based on a price per share of 66% of the average price quoted for SII
shares during the twenty (20) trading days proceeding the
<PAGE> 19
-19-
delivery of the Conversion Notice. First Ontario's equity in SII acquired
pursuant to the Conversion Option shall not exceed 3% of the issued and
outstanding common share ownership of SII.
11.3 EXCHANGE DEFERRAL. Unless there shall have been a Major Default which
has not been remedied, in the event that SII pursues an Equity Offering, First
Ontario will defer any exercise of the Exchange Option or Conversion Option for
a period of twelve (12) months from the closing date of the Equity Offering, or
such other period as the majority of Shareholders approve. SII will use its best
efforts to ensure that any shares which have been, or may be, issued pursuant to
First Ontario's exercise of the Exchange Option and/or Conversion Option (the
"SII Shares") will be qualified pursuant to the prospectus filed in connection
with the Equity Offering, so that the SII Shares can be freely traded. SII
further covenants that it will use its best efforts to sell the SII Shares, if
requested by First Ontario, as part of any such Equity Offering.
PART 12.0 - DEFAULT
12.1 REMEDIES ARISING UPON DEFAULT. If:
(a) the other Shareholder(s) shall default in their obligation to
purchase the Shares of the Minority Sellers as contemplated by
section 8.3;
(b) the Corporation shall fail to honour the Put Notice or default
in its obligation to pay the purchase price for the Put Shares
as contemplated in Part 10.0;
(c) the Corporation shall be in default of its obligation under:
(i) sections 4.11 [permit access],
(ii) 4.12 [permit access],
(iii) 4.13 [access of monitor] or
(iv) 4.14 [corporation actions requiring prior approval by
First Ontario]
and such default remains unremedied, if the default is capable
of remedy, for more than 5 days following First Ontario
providing written notice of default to the Corporation;
(d) SII, Holdings or the Corporation shall be in default of any of
their obligations under this Agreement (other than the
obligations of the Corporation referred to in subsection
12.1(c) hereof) and such default remains unremedied for more
than 45 days following First Ontario providing written notice
of the default to SII, Holdings or the Corporation as the case
may be;
(e) the Corporation shall be in default of the provisions of:
(i) subsection 9.1(p) [Change in Ownership of the
Corporation];
(ii) subsection 9.1(j) [the Corporation becomes
insolvent];
(iii) subsection 9.1(k) [the Corporation makes a Voluntary
Assignment into Bankruptcy, etc.];
<PAGE> 20
-20-
(iv) subsection 9.1(l) [the Corporation is the subject to
Involuntary Petition Proceedings which are not
defended or stayed within 30 days]; or
(v) subsection 9.1(m) [a receiver is appointed over the
assets of the Corporation]
of the Subordinated Loan Agreement;
(f) the Corporation shall be in default of any of the provisions
of the Subordinated Loan Agreement (other than those
provisions referred to in subsection 12.1(e) hereof), and such
default remains unremedied for more than 45 days following
First Ontario providing written notice of default to the
Corporation;
(g) at any time, the First Ontario SII Director shall cease to be
a member of the board of directors of SII, other than as a
result of the death, incapacity or resignation of First
Ontario's nominee and the neglect or refusal of First Ontario
to put forward a replacement for election or appointment;
(h) if First Ontario has elected to appoint a First Ontario SII
Observer to the board of directors of SII, if the First
Ontario Observer is not provided with timely notices of
meetings and the materials circulated by SII to its directors
in advance of meetings, the opportunity to attend meetings and
participate at meetings (provided that such observer shall not
have the right to vote at any such meetings;
(i) the occurrence of any of the following events:
(i) a sale or change in control of SII or Holdings;
(ii) SII shall fail to raise any of the additional capital
for SII as contemplated in the Cash Flow Plan, or be
late in raising the said capital by more than 60 days
in any particular case;
(iii) the failure of SII to commence and maintain
operations at its Stephen's facility in Arkansas, on
or before October 1, 1998;
(iv) SII or Holdings becomes bankrupt or voluntarily seeks
relief from creditors under or pursuant to any
bankruptcy, insolvency or reorganization statute or
proceeding; or
(v) a custodian, receiver, receiver-manager or trustee is
appointed for SII or Holdings or for any substantial
portion of the business or assets of SII or Holdings;
(any of the events enumerated in subsections 12.1(a) through (i) inclusive being
a "Major Default"), from and after such Major Default and so long as the same
shall continue, First Ontario, in addition to any other remedies available:
(i) shall thereafter not be bound by the provisions of
section 5.1 hereof; and
(ii) may make such arrangements as it deems necessary to
arrange for new financing for the Corporation.
<PAGE> 21
-21-
PART 13.0 - GENERAL TERMS & PROVISIONS
13.1 TERMS OF SALE. Except as otherwise provided in this Agreement, whenever a
transaction of purchase and sale of any of the Shares shall be effected under
the provisions of this Agreement the following shall apply to the transaction of
purchase and sale notwithstanding any other term herein to the contrary:
(a) the vendor of the Shares shall convey the Shares free and
clear of all claims and encumbrances whatsoever;
(b) the transaction of purchase and sale shall be completed as
herein provided or if no specific time for closing is
contemplated, 20 Business Days following the expiry of the
time stipulated herein for the applicable exercise of any
right, option or privilege to purchase Shares unless otherwise
agreed in writing by the parties to the transaction of
purchase and sale;
(c) the purchase price shall be paid by the purchaser to or to the
order of the vendor by certified cheque on the closing date;
(d) upon payment of the monies payable on the closing date, the
vendor shall execute and deliver a transfer of her, his or its
Shares to the purchaser, or as the purchaser may in writing
direct, and upon such payment the purchaser is hereby
irrevocably appointed and constituted attorney for the vendor
with full power and authority to execute and deliver such
transfers and other documents as may be necessary or desirable
to complete such transaction of purchase and sale;
(e) except in the case of a sale made pursuant to the Pledge
Agreement hereof, if at the time of any sale, any vendor shall
be indebted to the Corporation, the purchaser shall have the
right out of the purchase money payable by her, him or it to
pay, satisfy and discharge such indebtedness and by such sum
to reduce the amount payable by him or it to the vendor;
(f) if at the time of such sale, the vendor shall be liable or
responsible for any debts, liabilities or obligations incurred
by or on behalf of the Corporation, as guarantor or otherwise,
the purchaser shall cause any and all such guarantees to be
delivered up and canceled or shall indemnify the vendor
against and save her, him or it harmless from all claims
arising out of such guarantees or other obligations;
(g) at the time of such sale, the vendor shall receive from the
Corporation a release of any and all claims which it may have
against her, him or it as a Shareholder and the vendor shall
deliver to the Corporation a release of any and all claims
(other than claims relating to unpaid shareholder loans) which
she, he or it may have against the Corporation as a
shareholder, save and except any claims arising out of a
portion of the purchase price remaining unpaid;
(h) the vendor shall provide the purchaser with a statutory
declaration as to the vendor's status as a resident of Canada
within the meaning of the Income Tax Act (Canada) or other
evidence of compliance with the withholding obligations of
section 116 of the said Act satisfactory to the purchasing
party (acting reasonably);
<PAGE> 22
-22-
(i) except in the case of sales made pursuant to the Pledge
Agreement hereof, all costs and expenses of the Corporation
shall be paid by the Corporation; and
(j) the sale shall be completed in the offices of the solicitor
for the Corporation.
PART 14.0 - ENFORCEMENT OF THE AGREEMENT
14.1 CARRYING OUT THE AGREEMENT. The Shareholders shall at all times carry
out the provisions of this Agreement.
14.2 NOMINEES. The Shareholders shall use their best efforts to cause their
respective director nominees to act and vote as directors of the Corporation in
order that the purpose, intent and provisions of this Agreement shall be carried
out.
14.3 ACKNOWLEDGMENT. The Corporation confirms its knowledge of this
Agreement and will carry out and be bound by the provisions of this Agreement to
the full extent that it has the capacity and power at law to do so.
14.4 ENDORSEMENT ON SHARE CERTIFICATES. Share certificates of the
Corporation shall bear the following language either as an endorsement or on the
face thereof:
"The shares represented by this certificate are subject to all the
terms and conditions of an agreement made as of March 20, 1998, which
restricts transfers of the shares represented by this certificate, a
copy of which is on file at the registered office of the Corporation
and shall be made available on demand to the holder of the shares
represented by this certificate without charge."
PART 15.0 - ARBITRATION
15.1 ARBITRATION. If at any time during the continuance of this Agreement or
after the termination thereof, any dispute, difference or question shall arise
between the parties hereto or their heirs, executors, administrators, successors
or permitted assigns concerning:
(a) the construction, interpretation or effect of this Agreement
or any agreement or covenant entered into pursuant to this
Agreement;
(b) the termination of this Agreement or any agreement or covenant
entered into pursuant to this Agreement; or
(c) the rights or obligations of any of the parties hereto or
their heirs, executors, administrators, successors or
permitted assigns,
then every such dispute, difference or question shall be submitted to and
settled by arbitration.
15.2 INITIATION OF ARBITRATION PROCEEDINGS. If any party wishes to have any
matter arbitrated in accordance with the provisions of this Agreement, it shall
give written notice to the other party specifying particulars of the matters in
dispute.
<PAGE> 23
-23-
15.3 SELECTION OF THE ARBITRATOR. The arbitration shall be conducted by a
single arbitrator agreed upon by the parties to the dispute. If, within 5
Business Days after notice of the matter has been given by one party to the
other, the parties cannot agree upon a single arbitrator, then the arbitration
shall be conducted by a single arbitrator appointed by a judge of the Ontario
Court, General Division in accordance with the terms of the Arbitration Act as
amended from time to time.
15.4 ARBITRATION HEARINGS. Meetings and hearings of the arbitration shall
take place in the City of Toronto, Ontario and a party to the arbitration may be
represented at any meetings or hearings by legal counsel.
15.5 THE DECISION. The decision of the arbitrator shall be final and binding
upon the parties and shall not be subject to any appeal or review procedure
provided that the arbitrator has proceeded in accordance with the rules of
natural justice.
15.6 COSTS. The arbitrator may make any order it sees fit as to the costs of
the arbitration and the party to bear such costs.
15.7 ARBITRATION ACT. The rules and procedures of the Arbitration Act, as
amended from time to time, shall apply to any arbitration conducted hereunder,
except to the extent that they are modified by the express provisions of the
rules set out herein.
PART 16.0 - GENERAL
16.1 BENEFIT & BINDING. This Agreement shall enure to the benefit of and be
binding upon the respective heirs, executors, administrators, successors and
permitted assigns of the parties hereto.
16.2 ASSIGNMENT. Holdings may not assign its right or obligations under this
Agreement without the prior written consent of all of the other parties hereto.
16.3 NOTICES. Any demand, notice or other communication (the
"Communication") to be given in connection with this Agreement shall be given in
writing and may be given by personal delivery, by registered mail or by
transmittal by facsimile addressed to the recipient as follows:
To First Ontario: 234 Eglinton Avenue East
3rd Floor
Toronto, Ontario
M4P 1K5
Attention: Ken Delaney
Facsimile: 416-487-1345
with a copy to: Gowling, Strathy & Henderson
Suite 4900, P.O. Box 438
Commerce Court West
Toronto, Ontario
M5L 1J3
Attention: R. Douglas Kneebone
Telecopier No.: (416) 862-7661
<PAGE> 24
-24-
To the Corporation: Striker Paper Canada, Inc.
100 Ormond Street South
P.O. Box 10
Thorold, Ontario
L2V 3Y7
Attention: Mr. David Collins
Telecopier No.: (905) 227-8385
with a copy to: Lang Michener
BCE Place
2500 -181 Bay Street
Toronto, Ontario
M5J 2T7
Attention: Mr. William Lambert
Telecopier No.: (416) 365-1719
To Holdings or SII: c/o Striker Industries, Inc.
One Riverway
Suite 2450
Houston, Texas
77056
Attention: Mr. David Collins
Telecopier No.: (713) 622-9410
with a copy to: Lang Michener
BCE Place
2500 -181 Bay Street
Toronto, Ontario
M5J 2T7
Attention: Mr. William Lambert
Telecopier No.: (416) 365-1719
or such other address or facsimile number as may be designated by notice by any
party to the other. Any Communication given by personal delivery shall be
conclusively deemed to have been given on the day of actual delivery thereof
and, if given by registered mail, on the 5th Business Day following the deposit
thereof in a governmental public post box or governmental post office and, if
given by facsimile, on the day of transmittal thereof. If the party giving any
Communication knows or ought reasonably to know of any difficulties with the
postal system which might affect the delivery of mail, any such Communication
shall not be mailed but shall be given by personal delivery or by facsimile.
16.4 CALCULATION OF TIME. When calculating the period of time within which
or following which any act is to be done or step taken pursuant to this
Agreement, the date which is the reference date in calculating such period shall
be excluded. If the last day of such period is not a Business Day, then the time
period in question shall end on the first Business Day immediately following
such non-Business Day.
<PAGE> 25
-25-
16.5 FURTHER ASSURANCES. The parties hereto shall from time to time execute
and deliver all such further documents and do all acts and things as the other
parties may reasonably require to effectively carry out or better evidence or
perfect the full intent and meaning of this Agreement.
16.6 CONFLICT WITH ARTICLES OR BY-LAWS. In the event of any inconsistency
between this Agreement and the Articles or by-laws of the Corporation, the
provisions of this Agreement shall prevail and the parties shall forthwith make
all changes to the Articles or the by-laws as are necessary to make them not
inconsistent with the provisions of this Agreement.
16.7 COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute but one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement.
STRIKER INDUSTRIES, INC.
Per:
------------------------------------
Matthew Pond
STRIKER HOLDINGS (CANADA) INC.
Per:
------------------------------------
Matthew Pond
FIRST ONTARIO LABOUR SPONSORED
INVESTMENT FUND LTD.
Per:
------------------------------------
Ken Delaney
STRIKER PAPER CANADA, INC.
Per:
------------------------------------
Matthew Pond
May 18, 1998
<PAGE> 26
SCHEDULE A - DEFINITIONS
(a) "ACT" means the Business Corporations Act (Ontario), as
amended from time to time;
(b) "AGREEMENT" means this agreement and all schedules attached
hereto and all amendments made hereto made by written
agreement among the parties to this agreement;
(c) "ARM'S LENGTH" has the meaning attributed to that term in the
Income Tax Act (Canada) as amended from time to time;
(d) "ARTICLES" means the articles of incorporation of the
Corporation dated December 30, 1994 as amended from time to
time;
(e) "BUSINESS" means the business of the Corporation of
manufacturing and selling dry felt products;
(f) "BUSINESS "DAY" means a day on which banks are open for
business in Toronto, Ontario other than a Saturday, Sunday or
such other day as banks in Toronto, Ontario are authorized or
required to be closed for business;
(g) "CASH FLOW PLAN" means that plan provided by the Corporation
to First Ontario, a copy of which is attached hereto as
Schedule N to the Subordinated Loan Agreement;
(h) "CLOSING DATE" means March 20, 1998;
(i) "CONFIRMATION AND ACKNOWLEDGMENT" means a duly executed and
delivered confirmation and acknowledgment in the form of
Schedule "B" attached to this Agreement;
(j) "DIRECTORS", "BOARD OF DIRECTORS" OR "BOARD" means the persons
who are from time to time, duly elected as directors of the
Corporation;
(k) "EBITDA" means, in respect of any particular Fiscal Period,
the aggregate of each of the following for such period:
(i) the Net Income;
(ii) Interest Expenses;
(iii) income tax expenses, including deferred income taxes;
<PAGE> 27
-2-
(iv) depreciation and amortization expenses and other
non-cash expenses; and
(v) Lease Payments.
all as determined at the end of the said Fiscal Period by the
auditors of the Corporation in accordance with GAAP.
(l) "ENVIRONMENTAL ACTIVITY" means any past, present or future
activity, event or circumstance in respect of a Contaminant,
including, without limitation, its storage, use, holding,
collection, purchase, accumulation, assessment, generation,
manufacture, construction, processing, treatment,
stabilization, disposition, handling or transportation or its
Release into the natural environment including the movement
through or in the air, soil, subsoil, surface water or ground
water.
(m) "ENVIRONMENTAL LAWS" means any and all federal, provincial,
municipal, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits,
licences, agreements or other governmental restrictions having
the force of law relating to the environment, occupational
health and safety, health protection or any Environmental
Activity
(n) "ENVIRONMENTAL ORDERS" shall include applicable orders,
decisions, or the like rendered by any ministry, department or
administrative or regulatory agency relating to Environmental
Laws;
(o) "FIRST ONTARIO SII DIRECTOR" means an individual nominated by
First Ontario to be appointed or elected to the board of
directors of SII;
(p) "FIRST ONTARIO SII OBSERVER" means, the individual nominated
by First Ontario to act, in substitution for a First Ontario
SII Director, as an observer to the proceedings and meetings
of the board of directors of SII;
(q) "FIRST ONTARIO'S EQUITY INTEREST" means First Ontario's
Proportionate Share;
(r) "EQUITY OFFERING" means a distribution of shares representing
not less than 20% of the equity of SII (calculated on a fully
diluted basis) through a prospectus offering;
(s) "FISCAL PERIOD" means a period comprising four consecutive
Fiscal Quarters.
(t) "FISCAL QUARTER" means any of the fiscal quarters of the
Corporation ending on the last day of March, June, September
and December in each year.
<PAGE> 28
-3-
(u) "FISCAL YEAR" of an entity means the 12 month period ending on
the fiscal-year end of that entity and in the case of the
Corporation the 12 month period ending on December 31 of each
year, provided however the Fiscal Year ending December 31,
1998 shall be deemed to include the period from the Closing
Date to and including December 31, 1997;
(v) "GAAP" means generally accepted accounting principles which
are in effect in Canada from time to time applied in a
consistent manner from period to period;
(w) "HOLDINGS BOARD" means the board of directors of Holdings;
(x) "HOLDINGS GUARANTEE" means a certain guarantee from Holdings
to First Ontario, entered into as of March 20, 1998 whereby
Holdings has guaranteed the obligations of the Corporation
under the Subordinated Loan Agreement;
(y) "INTEREST EXPENSES" means, for any particular Fiscal Period,
the amount which would, in accordance with GAAP, be classified
on the income statement of the Corporation for such period as
gross interest expense.
(z) "IPO" means an initial public offering of shares representing
not less than 40% of the participating equity of the
Corporation (calculated on a fully diluted basis) through a
prospectus offering;
(aa) "LEASE PAYMENTS" means, for any particular period, the amount
which would, in accordance with GAAP, be classified on the
income statement of the Corporation for such period as
operating or non-capital lease payment expenses.
(bb) "MAJOR DEFAULT" shall have the meaning ascribed to that term
in section 12.1;
(cc) "NET INCOME" means, for any particular Fiscal Period, the
amount which would be classified on the income statement of
the Corporation for such period as net income in accordance
with GAAP.
(dd) "PERSON" includes an individual, a partnership, a joint
venture, a trust, an unincorporated organization, a company, a
corporation, an association, a government or any department or
agency thereof and any other incorporated or unincorporated
entity;
(ee) "PLEDGE AGREEMENT" means the pledge agreement dated the date
hereof between First Ontario and Holdings;
<PAGE> 29
-4-
(ff) "PROPORTIONATE SHARE" means, with respect to any Shareholder,
a fraction, the numerator of which is the total number of
Shares then owned by that particular Shareholder and the
denominator of which is the total number of Shares then owned
by all of the Shareholders;
(gg) "PURCHASE" means, in the applicable context, a purchase of the
Put Shares by the Corporation pursuant to Part 10 or the
exercise of the Equity Exchange Option by First Ontario
pursuant to Part 11;
(hh) "RELATED PARTIES" means Persons who are Affiliates of the
Corporation or Subsidiaries of the Corporation or who are
otherwise related to the Corporation within the meaning of the
Bankruptcy and Insolvency Act (Canada);
(ii) "RELEASE" includes discharge, spray, inject, inoculate,
abandon, deposit, spill, leak, seep, pour, emit, empty, throw,
dump, place, escape, leach, disperse, migrate and exhaust, and
when used as a noun (as applicable) has a similar meaning.
(jj) "SALE" means the transaction of purchase and sale of the
Shares held by First Ontario pursuant to a Tag Along Notice or
a Demand Notice;
(kk) "SALE AGENT" means Crosbie & Company Ltd., or such other
qualified independent investment dealer, investment banker or
business broker selected by First Ontario;
(ll) "SALE VALUE" means the value of the Corporation's common
Shares calculated on a per share basis as the greater of (A)
$1,000,000 divided by the number of the Corporations common
shares owned by First Ontario; and (B) the greater of:
(i) 4.0 times EBITDA for the 12-month period prior to the
Sale plus cash, less interest bearing debt and other
financing senior to the Corporation's common equity;
(ii) 4.0 times the average annual EBITDA for the 2 years
prior to the Sale plus cash, less interest bearing
debt and other financing senior to the Corporation's
common equity; and
(iii) the value of the Corporation's shares based on the
price at which the Business is sold in an Arm's
Length transaction,
divided by the number of common shares of the Corporation then
outstanding;
<PAGE> 30
-5-
(mm) "SENIOR LOAN AGREEMENTS" means the following loan agreements
entered into between the Corporation or SII and their secured
lenders (collectively, the "Secured Lenders"):
(i) security agreement between the Corporation and
Laurentian Bank of Canada ("Laurentian") dated as of
July 13, 1995, including forbearance agreement dated
August 11, 1997 among the Corporation, SII,
Laurentian and Ontario Development Corporation, as
amended by a letter dated September 11, 1997, and the
credit agreement dated March 10, 1998 among the
Corporation, SII, Laurentian and Ontario Development
Corporation;
(ii) security agreement dated as of April 25, 1995 between
SII and Finova Capital Corporation and others,
including a forbearance agreement dated as of the
20th day of October, 1997; and
(iii) security agreement to be entered into among the
Corporation, Credit Union Central of Ontario Limited
and So-Use Credit Union Limited pursuant to a term
sheet dated December 23, 1997 among the Corporation,
Credit Union Central of Ontario Limited and So-Use
Credit Union Limited providing for an operating line.
For greater certainty, the term Senior Loan Agreements shall
include any agreements which provide that the senior lender
will forbear from the enforcement of its rights and remedies
under the loan agreement or any agreements which amend,
supplement or modify the loan agreement and/or such
forbearance agreements;
(nn) "SHARES" means all of the issued and outstanding shares of the
capital stock of the Corporation now or hereafter issued and
includes any shares into which such shares may be changed,
reclassified, subdivided, consolidated or converted, any
shares which are received by the Shareholders as a stock
dividend or as a distribution payable in shares of the
Corporation and any shares of the Corporation or any successor
or continuing corporation to the Corporation which may be
received by the Shareholders on a reorganization,
amalgamation, consolidation or merger, statutory or otherwise;
(oo) "SHAREHOLDERS" means, collectively, Holdings and First Ontario
together with such other Persons as may acquire Shares
pursuant to the provisions of this Agreement and become
parties to this Agreement;
<PAGE> 31
-6-
(pp) "SUBORDINATED LOAN" means a term loan in the principal amount
of $1,500,000 made by First Ontario to the Corporation
pursuant to the Subordinated Loan Agreement; and
(qq) "SUBORDINATED LOAN AGREEMENT" means a certain loan agreement
of even date made between the Corporation and First Ontario
pursuant to which First Ontario agrees, inter alia, to advance
the Subordinated Loan.
<PAGE> 32
SCHEDULE B
CONFIRMATION AND ACKNOWLEDGMENT
The undersigned hereby confirms receipt of a true copy of a certain shareholders
agreement made as of March 20, 1998 entered into among FIRST ONTARIO LABOUR
SPONSORED INVESTMENT FUND LTD., STRIKER PAPER CANADA, INC. and STRIKER
INDUSTRIES, INC., which agreement is referred to herein as the "Shareholders
Agreement".
In consideration of the issue of Shares (as defined in the Shareholders
Agreement) of Striker Paper Canada to the undersigned, the undersigned hereby
agrees to be bound by the terms of the Shareholders Agreement as if the
undersigned had executed the same as an original signatory thereto.
Dated this ____ day of _________, 199_.
------------------------------------
Per:
<PAGE> 1
EXHIBIT 4.11
COMMERCIAL DEMAND LINE OF CREDIT AGREEMENT
THIS AGREEMENT is made as of the 20th day of March, 1998.
BETWEEN:
STRIKER PAPER CANADA, INC.
(hereinafter called the "BORROWER")
OF THE FIRST PART
- and -
CREDIT UNION CENTRAL OF ONTARIO LIMITED
(hereinafter "CUCO")
OF THE SECOND PART
- and -
SO-USE CREDIT UNION LIMITED
(hereinafter the "CREDIT UNION")
OF THE THIRD PART
(collectively, CUCO and the Credit Union shall be referred to as the
"LENDERS")
WHEREAS the Borrower is a Member of the Credit Union;
AND WHEREAS the Borrower has applied to the Lenders for a line of credit to be
advanced;
AND WHEREAS the Lenders are prepared to provide such line of credit upon
certain terms and conditions;
<PAGE> 2
Page 2
NOW THEREFORE in consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. (1) Subject to the terms and conditions set out in this Agreement
and a commitment letter dated December 23, 1997 (the
"COMMITMENT LETTER"), the Lenders hereby replace the existing
line of credit (if any) previously granted to the Borrower
with a new revolving line of credit (the "LINE OF CREDIT"),
and all advances under this line of credit shall at all times
be subject to the terms and conditions of this Agreement.
(2) Subject to subsection (1) hereof and to any considerations of
precedent lending practice, the Lenders shall advance funds
under the Line of Credit as requested by the Borrower from
time to time, but in no event shall the aggregate amount
advanced and outstanding at one time exceed EIGHT HUNDRED
THOUSAND DOLLARS ($800,000).
(3) Despite subsection (2) hereof, the Lenders and the Borrower
may from time to time enter into negotiations to amend the
Line of Credit, and any such amendment shall be in writing
signed as provided in subsection 8(3) hereof and shall be
subject to the terms and conditions of this Agreement and any
amendments in writing thereto.
(4) All amounts advanced to the Borrower by the Lenders that are
outstanding as of the date hereof under any previous line of
credit agreement between the Lenders and the Borrower shall be
deemed to be demand advances under this Agreement.
(5) The obligations of the Lenders to advance funds or provide
other credit facilities under the terms of this Agreement
shall be conditional upon the Lenders having received:
(a) copies of,
(i) the articles of incorporation and by-laws of
the Borrower, and
(ii) a resolution of the Borrower's Board of
Directors authorizing the Borrower to enter
into and execute this Agreement, and to grant
all security required under it, and
(iii) a list of names, titles and specimen
signatures of the persons authorized to
execute this Agreement or any security
documentation required under this Agreement
on behalf of the Borrower,
<PAGE> 3
Page 3
in each case certified by the Chief Executive
Officer or Treasure of the Borrower to be
true and to remain in full force and effect
unamended, as of the date of the certificate;
(b) a General Security Agreement in the Lenders' standard
form;
(c) the most recent minimum review level financial
statements for the Borrower;
(d) the current financial statements of the Borrower,
certified to be accurate by the Chief Financial
Officer of the Borrower, and
(e) a certificate of the Chief Financial Officer of the
Borrower that, after making due inquiry, he has
determined that there has been no material adverse
change since the date of the most recently audited
financial statements of the Borrower.
2. (1) All funds advanced to the Borrower shall be advanced on a
demand loan basis and the following rules shall apply in case
of such advances:
(a) The Borrower shall pay the Lenders interest at an
annual rate of PRIME plus 1.75%, upon any amount
advanced and outstanding, and upon any arrears of
interest.
"PRIME" shall mean the annual rate of interest which
CUCO establishes as the reference rate of interest to
determine interest rates it will charge at such time
for demand loans in Canadian dollars and which it
refers to as its special rate of interest, such rate
to be adjusted automatically and without the
necessity of any notice to the Borrower upon each
change to such rate.
(b) Interest shall be payable under subsection 2. (1) (a)
herein on any amount outstanding hereunder on the
last day of each month, or at the time of repayment,
if repayment is made before an interest payment date.
(c) Interest shall be payable by the Borrower for the day
on which an advance is made but shall not be payable
for the day on which repayment is made, if the
Lenders were notified of the intended repayment by
12:00 noon (Toronto time) on the day prior to the day
on which the repayment is made, provided the advance
is in fact repaid by the close of banking business in
Toronto on the day specified for the repayment.
<PAGE> 4
Page 4
(d) The Borrower shall repay the Lenders the amounts
advanced from time to time on demand together with
all interest owing thereon in the manner as provided
in this Agreement, but the Borrower may at any time
repay to the Lenders all or any part of the money due
hereunder.
(e) All interest payable to the Lenders under this
Agreement shall be received by the Lenders free and
clear of all taxes or duties imposed by or under the
laws of Canada, and province thereof or any other
jurisdiction, and without limiting the foregoing any
withholding tax, value added tax, business transfer
tax, sales tax or other tax levied on interest
payable which would adversely affect the net interest
received by the Lenders shall be paid by the Borrower
respectively, and not the Lenders, save and except
for taxes on the income or on the capital of the
Lenders which shall be the Lenders' responsibility.
(f) Advances to the Borrower under this agreement may be
made by way of overdraft in the Borrower's current
account with the Credit Union or by making payment
upon a cheque or other bill of exchange drawn by the
Borrower on the Credit Union.
3. (1) All payments to be made by the Borrower to the Lenders shall
be made by depositing the same for credit into the account
maintained by the Borrower with the Credit Union for operating
the line of credit, or with any such other depository at such
other place or places as the Lenders may, by writing, direct.
(2) Where a payment is received by the Lenders from the Borrower,
the Lenders may elect whether to apply that payment first
towards the interest with the remainder, if any, applied to
the line of credit balance, or to apply that payment towards
the reduction of the line of credit balance first.
(3) The records and book maintained by the Lenders in the usual
and ordinary course of its business that touch or concern the
state of accounts between the parties hereto shall be prima
facie evidence of the true state of accounts between the
parties for all purposes including litigation.
4. The Borrower specifically and expressly covenants with the Lenders as
follows:
(a) The Borrower shall provide the Lenders:
(i) with a certified copy of its consolidated (where
applicable) and non-consolidated minimum review level
Year End Financial Statements for each fiscal year
within ninety (90) days of the end of its fiscal
year, including its balance sheet, statement of
income and disbursements, statement of surplus and
statement of changes in financial position; and
<PAGE> 5
Page 5
(ii) reasonable access to the offices, books and records
of the Borrower, for the purpose of determining the
value of the security pledged or given to the
Lenders.
(b) Where the amount advanced and outstanding under this Agreement
exceeds seventy percent (70%) of the funds available to the
Borrower, the Borrower shall not:
(i) borrow any additional funds of money from any other
financial institution; or
(ii) make a loan or other advance which will place it in a
deficit which exceeds its available line of credit
under this Agreement;
unless it gives the Lenders prior notice of its intent to do
so.
5. The Borrower shall draw, execute and deliver at its own expense, all
such instruments and documents, and do all such acts and things as the
Lenders may from time to time reasonably consider necessary or
advisable for the purpose of carrying out the intent and provisions of
this Agreement.
6. (1) All advances hereunder shall be secured by a General Security
Agreement in the Lenders' form, executed and delivered by the
Borrower to the Lenders and such General Security Agreement
shall be a first charge in favour of the Lenders except as
otherwise provided for in the Commitment Letter, and the
Borrower shall not enter into any new borrowing with any
creditor after the date of this Agreement which would afford
that creditor priority over the claims of the Lenders under
this Agreement, or grant any creditor any new or further
security in respect of any existing indebtedness, and the
Borrower shall discharge or postpone any security now held by
any other creditor or person that exists or may exist in
priority to the security given under this Agreement, except
for security in favour of Ontario Development Corporation,
Laurentian Bank of Canada and First Ontario Labour Sponsored
Investment Fund.
(2) The Borrower indemnifies the Lenders with interest at the rate
set above for all payments, costs, charges, legal fees and
other expenses paid or incurred by the Lenders in connection
with the authority of this Agreement or in connection with any
claim, suit, action or other proceeding brought against the
Lenders by reason of this Agreement.
7. (1) All money due from the Borrower to the Lenders by reason of
any advances under the revolving line of credit, whether as to
principal, interest or otherwise under this Agreement, and all
money advanced and outstanding, under this or any other
agreement between the Lenders and the Borrower, shall become
due and payable
<PAGE> 6
Page 6
upon demand in the event that the Borrower defaults on, or is
otherwise in breach of this Agreement or the General Security
Agreement.
(2) The Borrower shall have seven (7) days from the date of demand
to remedy the breach or default and in the event that the
breach or default is nor remedied within the seven (7) day
period, all money advanced and outstanding, under this or any
other agreement plus the full amount of all interest and other
sums as provided above in subsection (1) shall become due and
payable without further demand.
8. (1) Subject to this section, the term of this Agreement shall be
for a period of one (1) year from the date of this Agreement.
(2) The Borrower may apply to the Lenders to renew this Agreement
for a period of twelve (12) months next following the date on
which this Agreement would otherwise terminate and where the
Lenders agree to such a renewal, this Agreement shall remain
in full force and effect, with the necessary modifications,
for the period of renewal so agreed between the parties.
(3) The renewal of this Agreement may be embodied in the form of
commitment letter addressed by the Lenders to the Borrower and
signed by each of the parties, and that letter,
(a) may contain provisions adding to, deleting or
otherwise modifying any of the terms of this
Agreement; and
(b) need not make any specific reference to this
Agreement,
and where such a letter is delivered by the Lenders to the
Borrower, the Lenders shall be deemed not to have agreed to
the renewal of this Agreement until such time as the Borrower
signs and returns a duplicate copy of the commitment letter
evidencing the consent of the Borrower to any amendment set
out in the commitment letter.
(4) Nothing in this section shall be so construed as to permit or
restrict the rights conferred upon the Lenders under this
Agreement to demand payment of, and recover, any amount
advanced on a demand basis or otherwise due and payable under
any provision of this Agreement.
(5) The expiry or other termination of this Agreement shall not
relieve the Borrower or the Lenders from any obligation that
arose prior to the date on which the Agreement expired.
9. (1) In addition to any interest payable under section 2, the
Borrower agrees to pay to the Lenders on demand all reasonable
legal fees and other reasonable costs or expenses
<PAGE> 7
Page 7
incurred in the normal course in connection with or arising
out of the operation of the revolving line of credit, and such
expenses, fees or charges shall be charged to the Borrower
whether or not this creates or increases its indebtedness or
overdraft with the Lenders.
(2) The Borrower shall remain liable to the Lenders in respect of
each amount charged under subsection (1) and promises to pay
on demand all reasonable charges and legal expenses incurred
by the Lenders on behalf of the Borrower in connection with
this Agreement, the line of credit or the enforcement or
realization of any security, together with interest thereon at
the current interest rate and all charges for any overdraft.
10. Where the Borrower, it successors and assigns,
(a) finally and fully pays or causes to be paid to the Lenders the
full amount of their indebtedness to the Lenders together with
all costs and interest payable by the Borrower under this
Agreement;
(b) terminates, in accordance with the terms thereof, any other
lending or other credit agreement between the Borrower and the
Lenders providing for the advance of funds to or to the order
of the Borrower or for the Borrower's benefit, whether or not
that agreement provides for such advances to be made on a
revolving basis or otherwise;
(c) pays in full the amount of any guarantee given by the Borrower
to the Lenders in respect of the debt, default or miscarriage
of any other person; and
(d) observes or performs the terms of every security agreement
granted by the Borrower in favour of the Lenders and all other
agreements to which it relates,
then the security agreements granted by the Borrower to the Lenders
and the rights granted to the Lenders under this Agreement shall cease
and at any time thereafter the Lenders shall, at the request and
expense of the Borrower, it successors or assigns, cancel and
discharge the security held by the Lenders and execute and deliver to
the Borrower, it successors or assigns, such deeds or other
instruments as shall be requisite to cancel and discharge the security
held hereby constituted.
11. This Agreement shall not be deemed to be or construed as having been
amended as a result of any oral communication between the parties or
as a result of any practice of the parties, but all amendments to this
Agreement shall be in writing and shall be signed by both parties,
provided that any such agreement may be executed in counterpart form.
<PAGE> 8
Page 8
12. (1) This Agreement is personal to the Borrower and no right or
obligation of the Borrower under this Agreement may be
assigned by the Borrower without the written consent of the
Lenders.
(2) This Agreement may be assigned, deposited, pledged or
hypothecated by the Lenders absolutely or as collateral
security for its present and future primary or contingent
indebtedness and liabilities, and in the event of any such
assignment, deposit or pledge, the person to whom the
Agreement is assigned, deposited, pledged or hypothecated
shall take it free and clear of any right of set-off,
counterclaim or other contra claim that may exist between the
Lenders and the Borrower.
(3) This Agreement and all its provisions shall enure to the
benefit of, and be binding upon, the parties and their
respective successors and assigns.
13. (1) The rights of the Borrower under this Agreement are subject to
the condition that it remain a Member of the Credit Union
until the expiration of the ninety (90) day period next
following the date on which the Borrower gives notice of its
intention to withdraw from membership in the Credit Union, or
on such earlier date as may be specified by the Lenders.
(2) Where the Borrower ceases to be a member of the Credit Union,
the Borrower shall thereupon repay all amounts advanced and
outstanding under this or any other Agreement.
14. (1) Any demand, notice or communication (a "NOTICE") required to
be given in connection with this Agreement or which this
Agreement permits to be given shall be given in writing and
may be given by personal delivery, by registered mail or by
transmittal by facsimile or other form of recorded
communication addressed to the recipient as follows:
To CUCO: Lending Services Department
2810 Matheson Blvd. East
Mississauga, Ontario
L4W 4X7
Attention: Credit Officer
Facsimile No: (905) 238-9400
To the Credit Union: Lending Services Department
2265 Bloor Street West
Toronto, Ontario
M6S 1P1
Attention: Credit Manager
Facsimile: (416) 761-9604
<PAGE> 9
Page 9
To the Borrower: 100 Ormond Street South
Thorold, Ontario
L2V 3Y7
Attention: Chief Executive Officer
Facsimile No: (905) 227-8385
and to: c/o Striker Industries, Inc.
Suite 2450
One Riverway
Houston, Texas
77056
Attention: Chief Executive Officer
Facsimile: (713) 622-9410
with a copy to: First Ontario Labour Sponsored
Investment Fund Inc.
Suite 310
234 Eglinton Avenue East
Toronto, Ontario
M4P 1K5
Attention: The President
Facsimile: (416) 487-1345
or such other address, facsimile number, telex number or
individual as may be designated by notice by either party.
(2) Any notice given by personal delivery shall be conclusively
deemed to have been given on the day of actual delivery
thereof and, if given by registered mail, on the fourth
business day following the deposit thereof tin the mail and,
if given by facsimile or other form of recorded communication,
shall be deemed given and received on the date of such
transmission if received during the normal business hours of
the recipient and on the next business day if received after
the end of such normal business hours on the date of its
transmission. If any notice is given by facsimile or other
form of recorded transmission, such delivery shall be deemed
given and received only if the transmitter retained a proof of
such transmittal. If the party giving any notice knows or
ought reasonably to know of any difficulties with the postal
system which might affect the delivery of mail, any such
notice shall not be mailed but shall be given personal
delivery or by telex or telecopier transmittal. Any delivery
of a notice in accordance with this Section shall be deemed to
constitute proper notice to the Investor receiving the notice.
<PAGE> 10
Page 10
15. In this Agreement,
(a) a word importing the masculine, feminine or neuter gender only
includes members of the other genders;
(b) a word defined in or importing the singular number has the
same meaning when used in the plural number, and vice versa;
(c) a reference to any Act, By-law, Rule or regulation or to a
provision thereof shall be deemed to include a reference to
any Act, By-law, Rule or regulation or provision enacted in
substitution therefor or amendment thereof; and
(d) all accounting terms have the same meaning as are applied to
those terms by the Canadian Institute of Chartered
Accountants.
16. This Agreement shall be governed by the laws of the Province of
Ontario and the laws of Canada applicable therein.
17. This Agreement shall enure to the benefit and be binding upon the
parties respective successors and permitted assigns.
18. The Borrower acknowledges receipt of a copy of this Agreement.
19. The parties hereto agree that this Agreement may be signed in
counterparts and the counterparts together shall constitute the entire
Agreement.
IN WITNESS WHEREOF the duly authorized officers of the parties have signed this
Agreement and affixed their corporate seals as of the date first above written.
STRIKER PAPER CANADA, INC.
Per: c/s
---------------------------------
Name:
Title:
Per:
---------------------------------
Name:
Title:
I/we have the authority to bind the
Corporation.
<PAGE> 11
Page 11
CREDIT UNION CENTRAL OF ONTARIO
LIMITED
Per:
----------------------------------
Name:
Title:
Per:
----------------------------------
Name:
Title:
I/we have the authority to bind the
Corporation.
SO-USE CREDIT UNION LIMITED
Per:
----------------------------------
Name:
Title:
Per:
----------------------------------
Name:
Title:
I/we have the authority to bind the
Corporation.
<PAGE> 1
EXHIBIT 4.12
[GRAPHIC]
BUSINESS LOAN
GENERAL SECURITY AGREEMENT
TO: CREDIT UNION CENTRAL OF ONTARIO LIMITED and SO-USE CREDIT
UNION LIMITED (collectively hereinafter called "Central")
I/WE STRIKER PAPER CANADA, INC. (hereinafter called the "Assignor")
hereby assign and transfer to Central, as a general and continuing collateral
security for payment of all existing and future indebtedness and liability of
the Assignor to Central wheresoever and howsoever incurred and any ultimate
unpaid balance thereof, all property of the kinds described in paragraph 2 below
of which the Assignor is now or may hereafter become the owner.
1. DEFINITIONS
In this Agreement,
(a) "PPSA" means the Personal Property Security Act (Ontario), and any Act
that may be substituted therefor, as from time to time amended.
(b) "Receivables" means all debts, accounts, claims, moneys and choses in
action now due or hereafter to become due or owing to the Assignor, or
any one or more of them.
(c) "Inventory" means all goods now or hereafter forming part of the
inventory of the Assignor or any one or more of them, including,
without limiting the generality of the foregoing, goods held for sale
or lease; goods furnished or to be furnished under contracts of
service; goods which are raw materials or work in process; goods used
in or procured for packing; materials used or consumed in the business
of the Assignor; emblements; growing crops that become such within one
year after the execution of this Agreement; timber to be cut; oil, gas
and other minerals to be extracted; and goods described in paragraph 9
below.
(d) "Equipment" means all goods, exclusive of inventory or consumer goods,
now or hereafter owned by the Assignor or any one or more of them,
which are used or are intended for use in or about the business
conducted by the Assignor or in the places referred to in paragraph 8
and including, without limiting the generality of the foregoing,
machinery; fixtures; furniture; plant; vehicles of any sort or
description; the property described in paragraph 10 below; and all
accessories installed in or affixed, attached or appertaining to any of
the foregoing.
(e) "Documents of Title" shall have the meaning ascribed to it in the PPSA
and shall include, without limiting the generality of the foregoing,
all warehouse receipts and bills of lading whether negotiable or not.
(f) "Chattel Paper", "goods" and "instrument" shall have the meanings
respectively ascribed to them in the PPSA.
2. SECURITY INTEREST
As security for the payment and performance of all existing and future
liabilities and indebtedness of the Assignor, or any one or more of them,
to Central, howsoever arising, the Assignor hereby grants to Central a
continuing security interest in the business undertaking of the Assignor
and in all property of the following kinds now owned or hereafter acquired
by the Assignor or by any one or more of them:
(a) Inventory;
(b) Equipment;
(c) Receivables;
(d) Chattel Paper;
(e) Documents of Title;
(f) All books and papers recording, evidencing or relating to the
Receivables, Chattel Paper or Documents of Title, and all securities,
bills, notes, instruments or other documents now or hereafter held by
or on behalf of the Assignor or any one or more of them with respect to
the said Receivables, Chattel Paper or Documents of Title;
(g) All shares, stock, warrants, bonds, debentures, debenture stock or
other securities including, without limiting the generality of the
foregoing, the securities listed in paragraph 11 hereof, together with
renewals thereof, substitutions therefor, accretions thereto and all
rights and claims in respect thereof
(h) All proceeds and products of any or all of the foregoing, including any
compensation of Collateral damages, expropriated, stolen or destroyed.
The above named property, whether now owned or hereafter acquired,
shall hereinafter be called the "Collateral".
3. WARRANTIES AND COVENANTS
(a) Except for the security interest granted hereby and as disclosed in the
Personal Property Registry and/or permitted in the Commercial Demand
Line of Credit Agreement or the Inter-Creditor Agreement, the Assignor
or any one or more of them is (and as to collateral to be acquired
after the date hereby, shall be) the owner of the Collateral free and
clear of all liens, charges, claims, encumbrances, taxes or
assessments.
(b) The Assignor will not sell, offer to sell, transfer, pledge or mortgage
the Collateral, nor will the Assignor suffer to exist any other
security interest in the Collateral in favour of any person other than
Central and the holders of security interests disclosed or permitted as
aforesaid, without the prior written consent of Central. All proceeds
of sales shall be received as trustee for Central and shall be
forthwith paid over to Central.
(c) The Assignor shall, during the currency of this Agreement, insure and
keep insured the Collateral to its full insurable value for fire, theft
and such other risks as Central may reasonably require, and will, at
the request of Central, pay such further premium as is necessary to
obtain an endorsement that the security interest of Central will not be
invalidated by any breach of statutory condition. The proceeds in any
insurance held pursuant to this paragraph shall be payable to Central
as its interest may appear and any proceeds of such insurance shall, at
the option of Central, be applied to the replacement of the Collateral
or towards repayment of any indebtedness of the Assignor or any one or
more of them to Central. Should the Assignor neglect to maintain such
insurance Central may insure, and any premiums paid by Central together
with interest thereon shall be payable by the Assignor to Central as
its interest may appear, upon demand. The Assignor will deposit a
certified copy of such insurance with Central on request, or obtain an
insurance endorsement in favour of Central.
(d) The Assignor shall provide from time to time upon request from Central,
written information relating to the Collateral or any part thereof, and
Central shall be entitled from time to time to inspect the tangible
Collateral including, without limitation, the books and records
referred to in paragraph 2(f) above wherever located. For such purpose
Central shall have access at all reasonable times during normal
business hours upon reasonable advance notice to all places where the
Collateral or any part thereof is located, and to all premises occupied
by the Assignor.
4. EVENTS OF DEFAULT
Any or all of the liabilities or indebtedness of the Assignor or any one or
more of them to Central shall, at the option of Central and notwithstanding
any time or credit allowed by any instrument evidencing a liability, be
immediately due and payable without notice or demand upon the occurrence of
any of the following events, subject to a cure period of 7 days from the
date of the event (hereinafter referred to as "Event(s) of Default"):
(a) Default in the payment or performance when due or payable of any
liability of the Assignor or any one or more of them, or of any
endorser, guarantor or surety for any liability of the Assignor or any
one or more of them to Central;
(b) Default by the Assignor of any obligation or covenant contained herein;
(c) Proof that any warranty, representation or statement made by the
Assignor or furnished to Central herein, or in the application for any
loan, was false in any material respect when made or furnished;
(d) Any loss, theft, damage or destruction of Collateral or of any part of
it in excess of $100,000, or the making of any levy, seizure or
attachment thereto or the appointment of a receiver of any part thereof
if unstayed for 15 days;
<PAGE> 2
(f) The death, dissolution, termination of existence, insolvency, business
failure, or commencement of any proceedings under the Bankruptcy Act
affecting the Assignor or any one or more of them.
5. REMEDIES
Upon any Event of Default and at any time thereafter Central, at its
option, may declare that all indebtedness and obligations secured by this
Agreement shall immediately become due and payable, and:
(a) Central shall then have all rights and remedies of a secured party
under the PPSA.
(b) Central shall then be constituted to appoint in writing any person to
be a receiver (which term shall include a receiver and manager) of the
Collateral, including any rents and profits thereof, and may remove any
receiver and appoint another in its stead. Such receiver so appointed
shall have power to take possession of the Collateral and to carry on
or concur in carrying on the business of the Assignor, and to sell or
concur in selling the Collateral or any part thereof. Any such receiver
shall for all purposes to be deemed to be the agent of the Assignor.
Central may from time to time fix the renumeration of such receiver.
All moneys from time to time received by such receiver shall be paid by
him first in discharge of all rents, taxes, rates, insurance premiums
and outgoings affecting the Collateral, secondly in payment of his
renumeration as receiver, thirdly in keeping in good standing any liens
and charges on the Collateral prior to the security constituted by this
Agreement, and fourthly in or toward payment of such parts of the
indebtedness and liability of the Assignor to Central as to Central
seems best, and any residue of such moneys so received shall be paid to
the Assignor. Central in appointing or refraining from appointing such
receiver shall not incur any liability to the receiver, the Assignor or
otherwise.
(c) Central may then collect, realize, sell or otherwise deal with the
Receivables or any part thereof in such manner, upon such terms and
conditions at such time or times, and without notice to the Assignor,
as may seem to it advisable. Central shall not be liable or accountable
for any failure to collect, realize, sell or obtain payment of the
Receivables or any part thereof, and shall not be bound to institute
proceedings for the purpose of collecting, realizing, or obtaining
payment of the same for the purpose of preserving any rights of
Central, the Assignor or any other person, firm or corporation in
respect of the same. All moneys collected or received by the Assignor
in respect of the Receivables shall be received as trustee for Central
and shall be forthwith paid over to Central. All moneys collected or
received by Central in respect of the Receivables or other Collateral
may be applied on account of such parts of the indebtedness and
liability of the Assignor as to Central seems best, or in the
discretion of Central, may be released to the Assignor, all without
prejudice to the liability of the Assignor or Central's right to hold
and realize this security.
6. CHARGES AND EXPENSES
Central may charge on its own behalf and pay to others reasonable sums for
expenses incurred and for services rendered (expressly including legal
advice and services) in or in connection with realizing, disposing of,
retaining or collecting the Collateral or any part thereof. Such sums shall
be a first charge on the proceeds of realization, disposition or
collection. Central may at its option pay taxes, discharge any encumbrance
or charge claimed (whether validly or not) against the Collateral any pay
any amount which, in Central's sole discretion, it may consider requisite
to secure possession of the Collateral with or without litigation or
compromise. Central may settle any litigation in respect of the Collateral
or the possession thereof, and may pay for insurance, repairs and
maintenance to the Collateral, and any sum so paid by Central shall
constitute indebtedness of the Assignor secured hereunder which the
Assignor shall repay on demand.
7. POSSESSION OF COLLATERAL
Until default, the Assignor may have possession of the Collateral and enjoy
the same subject to the terms hereof. However, whether or not default has
occurred, Central may at any time request that debtors on the Receivables
be notified of Central's security interest. Until such notification is
made, the Assignor shall continue to collect Receivables but shall hold the
proceeds received from collection in trust for Central without commingling
the same with other funds, and shall turn the same over to Central
immediately upon receipt in the identical form received.
8. LOCATION OF COLLATERAL
Except for any property described in paragraph 11 hereof, the Collateral,
insofar as it consists of tangible property, is now and will hereafter be
kept at the place or places, listed below. None of the Collateral shall be
removed from such place or places without the written consent of Central.
100 Ormond Street South, Thorold, Ontario
9. SUPPLEMENTARY DESCRIPTION OF INVENTORY
10. SUPPLEMENTARY DESCRIPTION OF EQUIPMENT
11. SUPPLEMENTARY DESCRIPTION OF SECURITIES
12. GENERAL
(a) This Agreement shall be a continuing agreement in every respect.
(b) This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario.
(c) The Assignor may terminate this Agreement by delivering written notice
to Central at any time when the Assignor, or each of them, is not
indebted or liable to Central. No remedy for the enforcement or the
rights of Central hereunder shall be exclusive or dependent on any
other such remedy and any one or more of such remedies may from time to
time be exercised independently or in combination. The security
interest created or provided for by this Agreement is intended to
attach when this Agreement is signed by the Assignor and delivered to
Central. For greater certainty it is declared that any and all future
loans, advances or other value which Central may in its discretion make
or extend to or for the account of the Assignor or of any one or more
of them shall be secured by this Agreement. If more than one person
executes this Agreement their obligations hereunder shall be joint and
several.
(d) In construing the Agreement, the word "Assignor" and the personal
pronouns "he" or "his" and any verb relating thereto shall be read and
construed as the number and gender of the parties signing this
Agreement may require.
<PAGE> 3
(e) Central may grant extensions of time and other indulgences, take and
give up securities, accept compositions, grant releases and discharges
and otherwise deal with the Assignor, debtors of the Assignor, sureties
and others, and with the Collateral and other securities, as Central
may see fit and without prejudice to the liability of the Assignor or
Central's right to hold and realize this security.
<TABLE>
<CAPTION>
Signed, Sealed and Delivered this 20th day of March, 1998 at Toronto, Ontario.
---- ----- -- -------
<S> <C> <C> <C> <C>
Middle Date of birth Gender
Initial dd/mm/yy M/F
- ---------------------------- ------------------------------ --------------------------------------
Witness Signature of Assignor
- ---------------------------- ------------------------------ --------------------------------------
Witness Signature of Assignor
</TABLE>
To be completed
by
incorporated
business
Corporation and/or Trade Name of Assignor STRIKER PAPER CANADA, INC.
Per:
----------------------------------------
Name: Matthew Pond
Title: Chief Financial Officer
I have the authority to bind the corporation
May 19, 1998
To be completed by sole
proprietor or partners
<PAGE> 1
PROVINCE
[LOGO] OF B
ONTARIO
CHARGE/MORTGAGE OF LAND
FORM 2 - LAND REGISTRATION REFORM ACT
FOR OFFICE USE ONLY
New Property Identifiers
Additional:
See Schedule [ ]
Executions
Additional:
See Schedule [ ]
(1) Registry [X] Land Titles [ ]
(2) Page 1 of 6 pages
(3) Property Block Property Additional:
Identifier(s) See Schedule [ ]
(4) Principal Amount Eight Hundred Thousand -- 00/100
Dollars $800,000.00
(5) Description
Part of Lot 5 and Part of Town Lot PP, Plan 898, Part of Township Lot
29, and parts of William Street, as closed by By-Laws 2455 and 1140
City of Thorold
Regional Municipality of Niagara.
as more particularly described on Schedule "A"
(6) This Document Contains:
(a) Redescription New Easement Plan/Sketch [ ]
(b) Schedule for:
Description [X] Additional Parties [ ] Other [X]
(7) Interest/Estate Charged
Fee Simple
(8) Standard Charge Terms - The parties agree to be bound by the provisions in
Standard Charge Terms filed as number 9320 and the Chargor(s) hereby
acknowledge(s) receipt of a copy of these terms.
(9) Payment Provisions
(a) Principal amount $800,000.00
(b) Interest Rate % per annum
(c) Calculation Period
(d) Interest Adjustment Date Y M D
(e) Payment Date and Period ON DEMAND
(f) First Payment Date Y M D
(g) Last Payment Date
(h) Amount of Each Payment Dollars $
(i) Balance Due Date
(j) Insurance Full insurable value Dollars $
(10) Additional Provisions
SEE SCHEDULE ATTACHED Continued on Schedule [ ]
(11) Chargor(s) The chargor hereby charges the land to the chargee
The chargor(s) acknowledge(s) receipt of a true copy of this charge.
Name(s) Signature(s) Date of Signature
Y M D
STRIKER PAPER CANADA, INC. Per: /s/ MATT POND 1998 03 20
Name: Matt Pond
I have authority to bind the corporation.
(12) Spouse(s) of Chargor(s) I hereby consent to this transaction.
Name(s) Signature(s) Date of Signature
Y M D
(13) Chargor(s) Address for Service
181 Bay Street, BCE Place, Suite 2500, Toronto, Ontario M5J 2T7
(14) Chargee(s)
CREDIT UNION CENTRAL OF ONTARIO LIMITED and SO-USE CREDIT UNION LIMITED
(15) Chargee(s) Address for Service
2265 Bloor Street West, Toronto, Ontario, M6S 1P1
Attn: Lending Services Department
for Service
(16) Assessment Roll Number of Property
Cty. Mun. Map Sub. Par.
(17) Municipal Address of Property
100 Ormond Street South
Thorold, Ontario
(18) Document Prepared by:
SUSAN D. ROSEN (MMI) (T913022)
GOWLING, STRATHY & HENDERSON
Suite 4900, Commerce Court West
Toronto, Ontario
M5L 1J3
FOR OFFICE USE ONLY
- --------------------------------------------
Fees
- --------------------------------------------
Registration Fee
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
Total
- --------------------------------------------
<PAGE> 2
Page 2
SCHEDULE 'A'
LEGAL DESCRIPTION
FIRSTLY:
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, Part of Township Lot 29,
Township of Thorold, Parts of William Street Plan 898, as closed by By-Laws 2455
and 1140 (1988), City of Thorold, Regional Municipality of Niagara, designated
as Part 3, Plan 59R-7526. Subject to an easement in favour of the Corporation of
the City of Thorold over those parts of said Part Lot 5 and that part of said
Township Lot 29, designated as Part 17, Plan 59R-1681, as set out in Instrument
No. 303771.
SECONDLY:
Those parts of William Street as closed by By-Laws 2455 and 1140 (1988)
designated as Parts 1 and 2, Plan 59R-7526. Subject to an easement in favour of
Thorold Hydro Electric Commission over that part of William Street Plan 898, as
closed by By-Laws 2455 and 1140 (1988), designated as Part 2, Plan 59R-7526, as
more particularly set out in Instrument No. 556427. Subject to an easement in
favour of the Corporation of the City of Thorold over those parts of William
Street as closed by By-Laws 2455 and 1140 (1988), designated as Parts 2, 5 and
7, Plan 59R-6276 as more particularly described in Instrument No. 585965.
THIRDLY:
Part of Park Lot 5 and Part of Town Lot PP, Plan 898, City of Thorold, Regional
Municipality of Niagara, designated as Part 1, Plan 59R-7527.
<PAGE> 3
Page 2
[GRAPHIC]
SCHEDULE
ADDITIONAL PROVISIONS
1. MORTGAGES ACT/LAND REGISTRATION REFORM ACT
If any of the short forms of words contained herein are also contained in Column
One of Schedule B of the Short Forms of Mortgages Act R.S.O. 1980, Ch. 474 and
distinguished by a number therein, this Charge shall be deemed to include and
shall have the same effect as if it contained the form of words in Column Two of
Schedule B of the said Act distinguished by the same number and this Charge
shall be interpreted as if the Short Forms of Mortgages Act were still in full
force and effect. The implied covenants deemed to be included in a charge under
subsection 7(1) of the Land Registration Reform Act, 1984, shall be and are
hereby expressly excluded from the terms of this Charge.
2. COMPUTATION OF INTEREST
Provided that this Charge is to be void upon payment on demand of the ultimate
balance of the liabilities of the Chargor to the Chargee, the principal
component of such liabilities not to exceed EIGHT HUNDRED THOUSAND DOLLARS
($800,000) of lawful money of Canada, together with interest thereon at a rate
equal to the Credit Union Central of Ontario Limited's Prime Interest Rate per
annum in effect from time to time plus one point seven five percent (1.75%) per
annum calculated and payable monthly as well after as before and after maturity
default and judgment, with interest on overdue interest at the same rate as on
the principal sum, and all other amounts payable by the Chargor hereunder and
paying any taxes, rates, leases, charges, or assessments upon the said lands no
matter by whom or what authority imposed and observing and performing all
covenants, provisos and conditions herein contained. For the purpose hereof the
Prime Interest Rate shall mean the annual rate of interest which the Credit
Union Central of Ontario Limited establishes as the reference rate of interest
to determine interest rates it will charge at such time for demand loans in
Canadian dollars and which it refers to as its special rate of interest, such
rate to be adjusted automatically and without the necessity of any notice to the
Chargor upon each change to such rate. At the date of this Indenture, such Prime
Interest Rate was six and one half percent (1 1/2%) per annum. In the event that
it may be necessary at any time for the Chargee to prove the Prime Interest Rate
applicable as at any time, or times, it is agreed that a certificate in writing
of the Credit Officer of the Credit Union Central of Ontario Limited setting
forth the said Prime Interest Rate as at any time or times, shall be conclusive
evidence as to the said Prime Interest Rate as in the said certificate set
forth.
3. PREPAYMENT PRIVILEGES
The Chargor herein, when not in default, shall have the privilege of prepaying
the whole or any part of the entire principal sum secured herein without giving
any notice or paying any bonus.
4. EVENTS OF DEFAULT
In addition to the cases set out in the standard charge terms, the Chargee may
exercise all of the powers under the Charge and may at its option require
immediate payment of principal and interest under the Charge after any
obligation to the Chargee under any agreement that relates to the obligations
secured by the Charge is not complied with.
5. COMPLIANCE WITH CONSTRUCTION LIEN ACT
In the event of any order or judgment (whether such order or judgment be on
consent or otherwise) whereby any holdback deficiency, or any part thereof,
under the Construction Lien Act, 1990, and any amendments thereto, is ordered,
adjudged, or declared, to have priority over the within charge, the Chargee
herein may, but without any obligation whatsoever so to do, pay such amount of
the holdback deficiency which has priority over the within charge, and all
costs, legal fees and expenses whatsoever (on a solicitor and client basis)
pertaining to such payment, and the amount so paid by the Chargee, including all
costs, legal fees and expenses pertaining to such payment of the holdback
deficiency shall be a charge against the within described mortgaged lands, and
the amount so paid including the said costs, legal fees and expenses, shall be
added to the principal amount of the Charge herein and interest shall be charged
on such amount so paid at the interest rate chargeable herein, as amended from
time to time, from the date of such payment; provided further, that upon payment
of the amount mentioned in this paragraph, all monies owing under the within
Charge shall immediately become fully due and payable, and the Chargee shall
have the privilege of immediately exercising all of its remedies as contained in
the within Charge and the Mortgages Act.
<PAGE> 4
Page 3
[GRAPHIC]
SCHEDULE
ADDITIONAL PROVISIONS
6. RETURNED OR LATE CHEQUES
In the event that any of the Chargor's cheques are not honoured when presented
for payment to the Chargee or in the event that any payment cheque is received
late so as to result in a late payment, the Chargor shall pay to the Chargee for
each such late or returned cheque the sum of TWENTY-FIVE DOLLARS ($25.00) as a
servicing fee as a liquidated amount to cover the Chargee's administrative costs
with respect to same. In the event that the said cheque, which has not been
honoured by the Chargor's bank or credit union, is not forthwith replaced by the
Chargor, the Chargee shall be entitled to a further servicing fee for each
written request which may be necessitated by the Chargor not forthwith replacing
such dishonoured cheque. The aforementioned fee shall become part of the debt
secured and shall bear interest at the interest rate set forth in this Charge.
7. MORTGAGE COMMITMENT REMAINS IN EFFECT
Provided further that the Chargor covenants and agrees that all the obligations,
terms, covenants and stipulations (herein referred to as the "terms") on the
part of the Chargor contained in the commitment letter dated December 23, 1997
between the Chargee and the Chargor form an integral part of this Charge and all
such terms of the aforesaid commitment letter shall be deemed to be part of this
Charge and of the same force and effect as if they were fully set forth herein,
and the Chargor covenants and agrees to observe, keep and perform such terms,
and failure on the part of the Chargor to observe, keep and perform such terms
shall constitute an act of default hereunder and this Charge shall then be
deemed to be in default.
8. DISCHARGE PROVISIONS
The Chargee shall have a reasonable time after payment of the Charge monies in
full within which to prepare and execute a discharge of this Charge. Any
discharge of this Charge shall be prepared by the Chargee at the Chargor's
expense. All payments hereunder shall be made to the Chargee at the Chargee's
address for service noted in the attached Charge. All prepayments of principal
and other monies required to be made other than regular monthly mortgage
payments are to be made by way of certified cheque, cash, bank draft or money
order and interest as aforesaid shall continue to run on any payments received
after 3:00 p.m. and shall not be credited until the following banking business
day. The Chargee's administrative costs, legal costs and other expenses and
costs incurred shall be paid by the Chargor prior to the Chargee being required
to prepare the discharge contemplated herein.
9. VALIDITY OF PROVISIONS
If any provision of this Charge is held to any extent invalid or unenforceable,
the remainder of this Charge, other than the provision which is held invalid or
unenforceable, shall not be affected.
10. APPOINTMENT OF RECEIVER
(a) At any time after the security hereby constituted becomes
enforceable, or the monies hereby secured shall have become
payable, the Chargee may from time to time appoint by writing
a Receiver of the property, with or without Bond, and may from
time to time remove the Receiver and appoint another in his
stead, and any such Receiver appointed hereunder shall have
the following powers:
(i) To take possession of the charged lands and to
collect the same and for such purpose to enter into
and upon any property, buildings and premises
wheresoever and whatsoever and for such purpose to do
any act and take any proceedings in the name of the
Chargor or otherwise as he shall deem necessary;
(ii) To carry on or concur in carrying on the business of
the Chargor, and to employ and discharge agents,
workmen, accountants and others upon such terms and
with such salaries, wages or remuneration as he shall
think proper, and to repair and keep in repair the
charged lands and to do all necessary acts and things
for the carrying on
<PAGE> 5
Page 4
[GRAPHIC]
SCHEDULE
ADDITIONAL PROVISIONS
of the business of the Chargor and the protection of
the said charged property of the Chargor;
(iii) To sell or lease or concur in selling or leasing any
or all of the charged property, or any part thereof,
and to carry any such sale or lease into effect by
conveying in the name of or on behalf of the Chargor
or otherwise; and any such sale may be made either at
public auction or private sale as seen fit by the
Receiver and any such sale may be made from time to
time as to the whole or any part or parts of the
charged lands; and he may make any stipulations as to
title or conveyance or commencement of title or
otherwise which he shall deem proper; and he may buy
or rescind or vary any contracts for the sale of any
part of the charged property and may resell the same;
and he may sell any of the same on such terms as to
credit or part cash and part credit or otherwise as
shall appear in his sole opinion to be most
advantageous and at such prices as can reasonably be
obtained therefor and in the event of a sale on
credit neither he nor the Chargee shall be
accountable for or charged with any monies until
actually received;
(iv) To make any arrangement or compromise which the
Receiver may think expedient in the interest of the
Chargee and to consent to any modification or change
in or omission from the provisions of this Charge and
to exchange any part of parts of the property for any
other property suitable for the purposes of the
Chargee and charged upon such terms as may seem
expedient and either with or without payment or
exchange of money or regard to the equality of the
exchange or otherwise;
(v) To borrow money to carry on the business of the
Chargor and to charge the whole or any part of the
charged property in such amounts as the Receiver may
from time to time deem necessary and in so doing the
Receiver may issue certificates that may be payable
when the Receiver thinks expedient and shall bear
interest as stated therein and the amounts from time
to time payable under such certificates shall charge
the charged property in priority to this Charge;
(vi) To execute and prosecute all suits, proceedings and
actions which the Receiver in his opinion considers
necessary for the proper protection of the charged
property, to defend all suits, proceedings and
actions against the Chargor or the Receiver, to
appear in and conduct the prosecution and defense of
any suit, proceeding or action then pending or
thereafter instituted and to appeal any suit,
proceeding or action;
(vii) To execute and deliver to the purchaser of any part
or parts of the charged lands, good and sufficient
deeds for the same, the Receiver hereby being
constituted the irrevocable attorney of the Chargor
for the purpose of making such sale and executing
such deed, and any such sale made as aforesaid shall
be a perpetual bar both in law and equity against the
Chargor, and all other persons claiming the said
property or any part of parcels thereof by, from,
through or under the Chargor, and the proceeds of any
such sale shall be distributed in the manner
hereinafter provided;
(b) And it is agreed that no purchaser at any sale purporting to
be made in pursuance of the aforesaid power or powers shall be
bound or concerned to see or inquire whether any default has
been made or continued, or whether any notice required
hereunder has been given, or as to the necessity or expediency
of the stipulations subject to which such sale shall have been
made, or otherwise as to the propriety of such sale or
regularity of its proceedings, or be affected by notice that
no such sale default has been made or continues, or notice
given as aforesaid, or that the sale is otherwise unnecessary,
improper or irregular; and notwithstanding any impropriety or
irregularity or notice thereof to such purchaser, the sale as
regards such purchaser shall be deemed to be within the
aforesaid power and be valid accordingly and the remedy (if
any) of the Chargor, or of any party claiming by or under it,
in respect of any impropriety or irregularity whatsoever in
any such sale shall be in damages only.
<PAGE> 6
Page 5
[GRAPHIC]
SCHEDULE
ADDITIONAL PROVISIONS
The net profits of the business of the Chargor and the net proceeds of any sale
of the charged property or part thereof shall be applied by the Receiver subject
to the claims of any creditors ranking in priority to this Charge:
(i) Firstly, in payment of all costs, charges and
expenses of and incidental to the appointment of the
Receiver and the exercise by him of all or any of the
powers aforesaid including the reasonable
remuneration of the Receiver and all amounts properly
payable by him;
(ii) Secondly, in payment of all costs, charges and
expenses payable hereunder;
(iii) Thirdly, in payment to the Chargee of the principal
sum owing hereunder;
(iv) Fourthly, in payment to the Chargee of all interest
and arrears of interest and any other monies
remaining unpaid hereunder; and
(v) Fifthly, any surplus shall be paid to the Chargor;
provided that, in the event that any party claims a
charge against all or a portion of the surplus, the
Receiver shall make such disposition of all or a
portion of the surplus as the Receiver deems
appropriate in the circumstances.
(c) The Chargee shall not be liable to the Receiver for his
remuneration costs, charges or expenses, and the Receiver
shall not be liable for any loss howsoever arising unless the
same shall be caused by his own gross negligence or willful
default; and he shall, when so appointed, by notice in writing
pursuant hereto, be deemed to be the agent of the Chargor and
the Chargor shall be solely responsible for his acts and
defaults and for his remuneration.
11. REALTY TAXES
The Chargor shall each year throughout the term of the Charge pay all municipal
taxes levied upon the property as the same fall due and furnish to the chargee,
within ninety (90) days after payment of such taxes in full, evidence of payment
thereof.
12. SALE OF PROPERTY AND FAILURE TO MAINTAIN GOOD STANDING IN CREDIT
UNION
In the event of any assignment, sale, transfer or conveyance of the Property, or
a change of ownership or control of the Chargor, regardless of whether such
change of ownership or control is beneficial or otherwise, or if the Chargor
ceases to be a member in good standing of the Credit Union, then in such case
the principal sum secured hereunder together with accrued interest thereon
shall, at the option of the Chargee become due and payable.
13. INSPECTIONS
The Chargee shall have access to and the right to inspect the Property at all
reasonable times. The Chargor shall permit the Chargee to conduct, at the
Chargor's expense, any and all tests, inspections, appraisals and environmental
audits of the Property so as to determine and ensure compliance with the
provisions of this paragraph including, without limitation, the right to conduct
soil tests and to review and copy any records relating to the Property or the
businesses and other activities conducted thereon at any time and from time to
time.
<PAGE> 7
Page 6
[GRAPHIC]
SCHEDULE
ADDITIONAL PROVISIONS
May 19, 1998
<PAGE> 1
EXHIBIT 4.14
ASSIGNMENT OF INSURANCE
TO: STRIKER PAPER CANADA, INC.
RE: Credit Union Central of Ontario Limited ("CUCO") and So-Use
Credit Union Limited ("SUCU") (collectively, the "LENDER")
loan to Striker Paper Canada, Inc. (the "BORROWER") - 100
Ormond Street South, Thorold, Ontario (the "PROPERTY")
- --------------------------------------------------------------------------------
WHEREAS the Borrower as of the date of this assignment is
indebted to the Lender in the total amount of Eight Hundred Thousand Dollars
($800,000.00) (the "LOAN") which is secured by a Charge/Mortgage of Land (the
"MORTGAGE"), which is registered against the Property.
AND WHEREAS the Borrower has agreed to assign to the Lender as
additional security for the amounts it borrowed from the Lender on account of
the Loan, all present and future policy or polices of insurance now or hereafter
insuring the building, improvements, fixtures and other property situate in, on
or under or arising out of or from its interest in the Property including,
without limitation, policies of insurance for property damage, loss of rental
income and business interruptions, professional liability, general liability,
fire and extended peril and boiler and machinery (hereinafter collectively
called the "POLICIES").
NOW THEREFORE in consideration of the Lender making the
initial advance under the Loan and the sum of $2.00 paid by the Lender to the
undersigned (the receipt and sufficiency of which are acknowledged by the
undersigned), the undersigned acknowledges and agrees as follows:
1. the Borrower assigns, transfers and sets over the Policies to the
Lender and grants a security interest in the Policies to the Lender
together with all right, title and interest in and to the Policies and
also together with all proceeds and other amounts payable in respect of
the Policies or at any time derived by the Policies or any part or
parts thereof (such Policies and all right, title and interest thereto
and all proceeds and other amounts in respect thereof or derived
therefrom being hereinafter collectively the "COLLATERAL");
2. the Collateral shall be held by the Lender as a general and continuing
security for the payment of the Loan including, without limitation, all
present or future, direct or indirect, absolute or contingent, matured
or unmatured obligations or other indebtedness or liabilities of the
Borrower to the Lender;
3. the issuers from time to time of the Policies are irrevocably
authorized and directed to pay to the Lender or as the Lender may in
writing direct, all proceeds and other amounts payable under or
pursuant to the Policies. Any such proceeds received by the Lender may
be appropriated by the Lender from time to time on account of such part
or parts of the indebtedness and liabilities owing by the Borrower to
the Lender as the Lender may determine to be most advantageous to it.
The Lender is expressly authorized to collect, demand, sue for,
enforce, recover and receive the proceeds of the Policies and to give
valid and binding receipts and discharges therefor, as if the Lender
were the absolute owner thereof and without regard to the state of
accounts between the Borrower and the Lender;
<PAGE> 2
- 2 -
4. the Lender may collect, demand, sue for, enforce, recover, receive,
realize, sell or otherwise deal with the Collateral or any part thereof
in such manner and upon such terms and conditions and at such time or
times, whether before or after default, as may seem to it advisable and
without notice to the Borrower;
5. any proceeds or other amounts collected or received by the Borrower in
respect of the Collateral shall be received as trustee for the Lender
and shall forthwith be paid to the Lender;
6. the Lender shall not be bound or accountable for any failure to
collect, demand, sue for, enforce, recover, receive, realize, sell or
obtain payment of the Collateral or any part thereof and the Lender
shall not be bound to institute proceedings for any such purpose or for
the purpose of preserving any rights of the Lender, the Borrower or any
other person in respect thereof and the Lender shall not be responsible
for any loss or damage which may occur in consequence of the negligence
of any officer, agent or solicitor employed in the collection or
realization thereof;
7. the Lender may charge on its own behalf and also pay to others
reasonable sums for expenses incurred and for services rendered
(expressly including legal advice and services) in connection with its
doing anything authorized by this assignment or by law including,
without limitation, collecting, realizing or obtaining payment of the
Collateral or any part thereof and the Lender may add the amount of
such expenses to the indebtedness owing by the Borrower to the Lender;
8. the Borrower shall from time to time forthwith on the Lender's request
do, make and execute all such assignments, documents, acts, matters and
things as may be required by the Lender of or with respect to the
Collateral or any part thereof or as may be required to give effect to
these presents, and the Borrower irrevocably constitutes and appoints
the Lender the true and lawful attorney of the Borrower with full power
of substitution to do, make and execute all such assignments,
documents, acts, matters and things with the right to use the name of
the Borrower whenever and wherever it may deem necessary or expedient;
9. this assignment shall be a continuing agreement in every respect and
shall be binding upon the heirs, executors, administrators, successors
and assigns of the Borrower. No remedy for the enforcement of the
rights of the Lender hereunder shall be exclusive of or dependent on
any other remedy, but any one or more of the such remedies may from
time to time be exercised independently or in combination. The Borrower
and Lender have not agreed to postpone the time for attachment of the
security interest created or provided for by this assignment. If more
than one person executes this assignment, their obligations hereunder
shall be joint and several;
10. the Borrower shall pay all premiums and renewal premiums and other
charges necessary to keep each of the Policies in full force and effect
and the Borrower shall provide evidence of such payment and of all
renewals to the Lender at least twenty-one (21) days prior to the
expiry of the respective Policies. However, the Lender may at any time
and from time to time pay any such premiums or other charges necessary
to keep any one or more the Policies in full force and effect and the
Lender may charge reasonable amounts for services rendered in so
keeping the Policies in force and may add the amounts so paid or any of
the charges so made to the indebtedness owing by the Borrower to the
Lender. The Borrower shall indemnify and save the Lender harmless from
and against any amounts so paid by the Lender or any charges imposed by
the Lender under this assignment. Notwithstanding the foregoing, the
Lender shall not be obligated to utilize its owns funds or to otherwise
pay for any renewal of any one or more of the Policies or to pay any
premiums or other charges that may be owing in respect of any of the
Policies even if the failure to pay same may jeopardize the existence
of any one or more of the Policies; and
<PAGE> 3
- 3 -
11. this assignment shall extend to and bind and enure to the benefit of
the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the Assignor has executed this assignment as of the _____
day of ___________________, 1998.
STRIKER PAPER CANADA, INC.
Per: c/s
----------------------------------------
Name:
Title:
Per:
----------------------------------------
Name:
Title:
I/We have the authority to bind the Corporation.
May 19, 1998
<PAGE> 1
EXHIBIT 4.15
GUARANTEE AND POSTPONEMENT OF CLAIM
TO: FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.
FOR VALUABLE CONSIDERATION, the undersigned, STRIKER INDUSTRIES, INC., a
corporation existing under and by virtue of the laws of the State of Delaware
(herein referred to as the "Guarantor"), to the extent permitted by applicable
law, hereby guarantees payment to FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND
LTD. (hereinafter referred to as the "Lender"), forthwith after demand as
hereinafter provided for all of the liabilities which STRIKER PAPER CANADA, INC.
(herein referred to as "Striker") has incurred or is under or may incur or be
under to the Lender pursuant to a certain subordinated loan agreement dated
March 20, 1998 made between Striker and the Lender as the same may be amended,
modified or supplemented from time to time (the "Agreement"), provided an Event
of Default (as defined in the Agreement) has occurred and shall be continuing at
the time of demand.
The liability of the Guarantor hereunder shall be limited to the sum of One
Million, Five Hundred Thousand Dollars ($1,500,000.00) in lawful money of Canada
plus any interest, fees and penalties payable to the Lender pursuant to the
Agreement, together with interest on the said sum at the rate of 20% per annum
calculated semi-annually not in advance commencing upon demand for payment
hereunder by the Lender until the amount demanded shall be paid in full.
And the Guarantor agrees:
1. EXTENSIONS & INDULGENCES DO NOT RELEASE. That the Lender may grant extensions
of time or other indulgences, take and give up securities, accept compositions,
grant releases and discharges and otherwise deal with Striker and the other
parties and securities as the Lender may see fit, and may apply all moneys
received from Striker or others, or from securities, upon such part of Striker's
liability pursuant to the Agreement as it may think best, without prejudice to
or in any way limiting or lessening the liability of the Guarantor under this
guarantee.
2. LENDER NOT BOUND TO EXHAUST RECOURSE. That the Lender shall not be bound to
exhaust its recourse against Striker or other parties or the securities it may
hold before being entitled to payment from the Guarantor under this guarantee.
3. LOSS DOES NOT DISCHARGE. That any loss of or in respect of securities
received by the Lender from Striker or any other person, whether occasioned
through the fault of the Lender or otherwise, shall not discharge pro tanto or
limit or lessen the liability of the Guarantor under this guarantee.
4. A CONTINUING GUARANTEE. This shall be a continuing guarantee and shall cover
present liabilities (if any) of Striker to the Lender and all liabilities
incurred after the date hereof pursuant to the Agreement and shall apply to and
secure any ultimate balance due or remaining due to the Lender pursuant to the
Agreement and shall be binding as a continuing security on the Guarantor.
5. NAME CHANGES DO NOT RELEASE. That any change or changes in the name of
Striker, shall not affect or in any way limit or lessen the liability of the
Guarantor hereunder and this guarantee shall extend to the person, firm or
corporation acquiring or from time to time carrying on the business of Striker.
6. LIABILITIES OF AGREEMENT INCLUDED. All moneys, advances, renewals and credits
in fact borrowed or obtained from the Lender under the terms of the Agreement
shall comprise the liabilities hereby guaranteed notwithstanding any incapacity,
disability or lack or limitation of status or of power of Striker or of the
directors, partners or agents thereof, or that Striker may not be a legal
entity, or any irregularity,
<PAGE> 2
- 2 -
defect or informality in the borrowing or obtaining of such moneys, advances,
renewals or credits; and any amount which may not be recoverable from the
Guarantor on the footing of a guarantee shall be recoverable from the Guarantor
as principal debtor in respect thereof and shall be paid to the Lender after
demand therefor as hereinafter provided.
7. SETTLED ACCOUNTS CONCLUSIVE. That any account settled or stated by or between
the Lender and Striker shall be accepted by the Guarantor as conclusive evidence
that the balance or amount thereby appearing due by Striker to the Lender is so
due.
8. NO RELEASE UNTIL CONTINGENCIES RESOLVED. That should the Lender receive from
the Guarantor a payment or payments in full or on account of the liability under
this guarantee, the Guarantor shall not be entitled to claim repayment against
Striker or Striker's estate until the Lender's claims against Striker pursuant
to the Agreement have been paid in full; and in case of liquidation, winding up
or bankruptcy of Striker (whether voluntary or compulsory) or in the event that
Striker shall make a bulk sale of any of Striker's assets within the bulk
transfer provisions of any applicable legislation or any composition with
creditors or scheme of arrangement, the Lender shall have the right to rank for
its full claim and receive all dividends or other payments in respect thereof
until its claim has been paid in full and the Guarantor shall continue liable,
up to the amount guaranteed, less any payments made by the Guarantor, for any
balance which may be owing to the Lender by Striker; and in the event of the
valuation by the Lender of any of its securities and/or retention thereof by the
Lender, such valuation and/or retention shall not, as between the Lender and the
Guarantor, be considered as a purchase of such securities, or as payment or
satisfaction or reduction of Striker's liabilities to the Lender, or any part
thereof.
9. PAYMENT DUE ON DEMAND. That the Guarantor shall make payment to the Lender of
the amount of the liability of the Guarantor forthwith after demand therefor is
made in writing and such demand shall be conclusively deemed to have been
effectually made when an envelope containing it addressed to the Guarantor at
the last address of the Guarantor known to the Lender is deposited, postage
prepaid and registered, in the post office.
10. ALL RIGHTS HEREIN IN ADDITION TO OTHER RIGHTS. This instrument is in
addition and without prejudice to any securities of any kind (including without
limitation guarantees and postponement agreements whether or not in the same
form as this instrument) now or hereafter held by the Lender.
11. FORECLOSURE. For greater certainty, foreclosure by the Lender with respect
to a certain share pledge and proxy arrangement agreement dated March 20, 1998
between the Lender and Striker Holdings (Canada) Inc. shall extinguish this
guarantee and release the Guarantor.
12. ENTIRE AGREEMENT. There are no representations, collateral agreements or
conditions with respect to this instrument or affecting the Guarantor's
liability hereunder.
13. APPLICABLE LAW. This instrument shall be construed in accordance with the
laws of the Province of Ontario and the Guarantor agrees that any legal suit,
action or proceeding arising out of or relating to this instrument may be
instituted in the courts of such province, and the Guarantor hereby accepts and
irrevocably submits to the jurisdiction of such courts and acknowledges their
competence and agrees to be bound by any judgment thereof; provided that nothing
herein shall limit the Lender's right to bring proceedings against the Guarantor
elsewhere.
<PAGE> 3
- 3 -
14. BENEFIT & BINDING. This instrument shall extend to and enure to the benefit
of the successors and assigns of the Lender, and shall be binding upon the
Guarantor and the heirs, executors, administrators, personal representatives,
successors and assigns of the Guarantor.
15. RECEIPT OF COPY ACKNOWLEDGED. The undersigned hereby acknowledges receipt of
a true copy of this instrument.
GIVEN under seal at Toronto, this 20th day of March, 1998.
STRIKER INDUSTRIES, INC.
Per:
--------------------------------------
Matthew Pond
May 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 76,992
<SECURITIES> 0
<RECEIVABLES> 187,770
<ALLOWANCES> 0
<INVENTORY> 1,365
<CURRENT-ASSETS> 380,211
<PP&E> 17,314,626
<DEPRECIATION> 3,463,402
<TOTAL-ASSETS> 14,369,311
<CURRENT-LIABILITIES> 3,429,424
<BONDS> 0
0
0
<COMMON> 2,187,862
<OTHER-SE> (4,096,203)
<TOTAL-LIABILITY-AND-EQUITY> 14,369,311
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 355,909
<TOTAL-COSTS> 750,279
<OTHER-EXPENSES> (167,990)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,485
<INCOME-PRETAX> (669,774)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (669,774)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
