UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1997
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 0-12906
RICHARDSON ELECTRONICS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-2096643
(State of incorporation or organization)(I.R.S. Employer Identification No.)
40W267 Keslinger Road, LaFox, Illinois 60147
(Address of principal executive offices and zip code)
(630) 208-2200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant 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 April 9, 1997, there were outstanding 8,687,427 shares of Common
Stock, $.05 par value, and 3,243,081 shares of Class B Common Stock, $.05 par
value, which are convertible into Common Stock on a share-for-share basis.
This Quarterly Report on Form 10-Q contains 15 pages. An exhibit index is at
page 14.
(1)
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended February 28, 1997
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Operations 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II - OTHER INFORMATION 12
(2)
Part 1 - Financial Information
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
February 28 May 31
1997 1996
--------- ---------
(Unaudited) (Audited)
ASSETS
-------
Current assets:
Cash and equivalents $ 11,545 $ 6,784
Receivables, less allowance of $3,032 and $1,461 52,968 48,232
Inventories 93,924 94,327
Other 12,094 8,062
--------- ---------
Total current assets 170,531 157,405
Investments 2,224 2,190
Property, plant and equipment, net 17,381 16,054
Other assets 6,126 4,509
--------- ---------
Total assets $ 196,262 $ 180,158
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 16,488 $ 14,503
Accrued expenses 11,851 9,751
--------- ---------
Total current liabilities 28,339 24,254
Long-term debt 108,820 92,025
Deferred income taxes 1,285 1,087
Stockholders' equity:
Common stock, $.05 par value; issued 8,697 shares
at February 28, 1997 and 8,562 at May 31, 1996 435 428
Class B common stock, convertible, $.05 par value;
issued at 3,243 shares at February 28, 1997 and
3,244 at May 31, 1996 162 162
Additional paid-in capital 53,194 52,185
Retained earnings 7,725 12,430
Foreign currency translation adjustment (3,698) (2,413)
--------- ---------
Total stockholders' equity 57,818 62,792
--------- ---------
Total liabilities and stockholders' equity $ 196,262 $ 180,158
========= =========
See notes to consolidated condensed financial statements.
(3)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
February 28/29 February 28/29
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
Net sales $ 64,163 $ 56,367 $183,874 $175,237
Costs and expenses:
Cost of products sold 52,992 39,551 137,182 123,349
Selling, general and
administrative expenses 19,123 12,724 46,508 39,210
-------- -------- -------- --------
72,115 52,275 183,690 162,559
-------- -------- -------- --------
Operating income (7,952) 4,092 184 12,678
Other (income) expense:
Interest expense 1,869 1,726 5,588 4,969
Investment income (82) (158) (249) (1,045)
Other, net 264 (197) 173 63
-------- -------- -------- --------
2,051 1,371 5,512 3,987
-------- -------- -------- --------
Income before income taxes (10,003) 2,721 (5,328) 8,691
Income taxes (benefit) (3,950) 900 (2,500) 2,900
-------- -------- -------- --------
Net income (loss) before
extraordinary item (6,053) 1,821 (2,828) 5,791
Extraordinary loss, net of
income taxes of $312 (488) -- (488) --
-------- -------- -------- --------
Net income (loss) $ (6,541) $ 1,821 $ (3,316) $ 5,791
======== ======== ======== ========
Income (loss) per share:
Before extraordinary item $ (.50) $ .15 $ (.23) $ .49
Extraordinary loss, net of tax (.04) (.04)
-------- -------- -------- --------
Net income (loss) per share $ (.54) $ .15 $ (.27) $ .49
======== ======== ======== ========
Average shares outstanding 12,172 12,178 12,210 11,931
======== ======== ======== ========
See notes to consolidated condensed financial statements.
(4)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(in thousands)(unaudited)
Nine Months Ended
February 28/29
-----------------------
1997 1996
-------- --------
Operating Activities:
Net income $ (3,316) $ 5,791
Non-cash charges to income:
Depreciation 1,973 1,965
Amortization of intangibles and financing costs 603 256
Deferred income taxes (3,338) 1,785
Contribution to employee stock ownership plan 800 500
Special charges 11,000 --
Extraordinary loss 800 --
-------- --------
Total non-cash charges 11,838 4,506
-------- --------
Changes in working capital, net of effects
of currency translation:
Accounts receivable (3,549) (1,596)
Inventories (922) (12,738)
Other current assets (845) 874
Accounts payable (974) (5,103)
Other liabilities (600) (2,000)
-------- --------
Net changes in working capital (6,890) (20,563)
-------- --------
Net cash provided by (used in)
operating activities 1,632 (10,266)
-------- --------
Financing Activities:
Proceeds from borrowings 56,918 1,000
Proceeds from stock options exercised 218 1,239
Payments on debt (40,123) (929)
Cash dividends (1,389) (1,362)
-------- --------
Net cash provided by (used in)
financing activities 15,624 (52)
-------- --------
Investing Activities:
Sales of investments 3,141 8,893
Purchase of investments (3,181) (3,899)
Capital expenditures (2,947) (1,823)
Business acquisitions (9,409) --
Other (99) (218)
-------- --------
Net cash provided by (used in)
investing activities (12,495) 2,953
-------- --------
Increase (decrease) in cash and equivalents 4,761 (7,365)
Cash and equivalents at beginning of year 6,784 11,151
-------- --------
Cash and equivalents at end of period $ 11,545 $ 3,786
======== ========
See notes to consolidated condensed financial statements.
(5)
Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
Three- and Nine-Month Periods Ended February 28, 1997
(in thousands)(unaudited)
Note A -- Basis of Presentation
The accompanying unaudited Consolidated Condensed Financial Statements
(Statements) have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q. In the opinion of management, all adjustments necessary for a fair
presentation of the results of operations for the periods covered have been
reflected in the Statements. Certain information and footnotes necessary for a
fair presentation of the financial position and results of operations in
conformity with generally accepted accounting principles have been omitted in
accordance with the aforementioned instructions. It is suggested that the
Statements be read in conjunction with the Financial Statements and Notes
thereto included in the Company's Annual Report on Form 10-K for
the year ended May 31, 1996.
The marketing and sales operations of the Company are organized in four
strategic business units (SBUs): Electronic Device Group (EDG), Solid State and
Components (SSC), Display Products Group (DPG) and Security Systems Division
(SSD). References hereinafter are to the acronyms noted parenthetically.
Note B -- Income Taxes
The income tax benefit on pre-tax losses for the nine-month period ended
February 28, 1997 is based on the estimated effective tax rate of 47% for
fiscal 1997 results. This rate exceeds the statutory rate of 34% due to state
income tax benefits, the utilization of previously unrecognized foreign net
operating loss carryforwards and U.S. foreign sales corporation tax benefits.
The rate is higher than that used in the prior quarter because $11 million in
special charges (see Management's Discussion and Analysis of Results of
Operations) recorded in the third quarter generated a year-to-date pre-tax
loss. Accordingly, tax preference items which reduced tax expense for the six
months ended November 30, 1996 now increase the tax benefit to be realized on
the year-to-date pre-tax loss, resulting in an effective rate exceeding the
statutory rate.
The income tax provision for the three- and nine-month periods ended
February 29, 1996 was based on the estimated effective tax rate of 33% for
fiscal 1996 income. The effect of expected state income taxes in 1996 was
offset by U.S. foreign sales corporation tax benefits.
(6)
Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
Three- and Nine-Month Periods Ended February 28, 1997
(in thousands)(unaudited)
Note C - Burtek Acquisition
Effective February 1, 1997 the Company acquired the assets and
liabilities of Burtek Systems, Inc., a Canadian distributor of security systems
with annual sales of $18.0 million (See Note D). The acquisition was accounted
for by the purchase method, and accordingly, the results of operations of
Burtek Systems, Inc. since February 1 have been included in the consolidated
statement of operations.
Note D - Long-Term Debt
On February 15, 1997 the Company exchanged $40.0 million of new 8 1/4%
convertible senior subordinated debentures for an equivalent face amount of its
outstanding 7 1/4% convertible subordinated debentures. The new debentures are
payable at maturity in June 2006, and are convertible to common stock at $18.00
per share.
To complete the acquisition of Burtek Systems, Inc., a Canadian subsidiary
of the Company entered into a revolving credit agreement and term loan
aggregating up to $6.0 million with a Canadian affiliate of the Company's
primary bank. The loan is guaranteed by the Company, bears interest at the
Canadian prime rate and matures in November 1998. The February 28, 1997
balance sheet includes $5.2 million for the initial borrowing under this
agreement at which date the interest rate was 4.5%.
Note E - Special Charges and Extraordinary Item
In the third quarter, the Company re-evaluated its reserve estimates for
inventory and accounts receivable in light of changed market conditions and
provided for severance and other costs associated with a Corporate
reorganization. Inventory reserve adjustments of $7.2 million were included in
cost of sales, and provisions for accounts receivable, severance and other
costs of $3.8 million were included in selling, general and administrative
expense. Collectively, these charges amounted to $11.0 million pre-tax or $6.7
million, net of tax, reducing earnings per share by $.55.
Additionally, the Company recorded an $800,000 extraordinary charge for
the write-off of unamortized debt issuance costs attributable to the 7 1/4%
convertible debentures, which were exchanged for a new issue during the
quarter. Net of tax, the charge was $488,000, or $.04 per share.
(7)
Management's Discussion and Analysis
Of Results of Operations and Financial Condition
Three- and Nine-Month Periods Ended February 28, 1997
(in thousands)(unaudited)
Results of Operations
Net sales for the third quarter of fiscal 1997 were $64.2 million, up 14%
from last year's third quarter of $56.4 million. Sales for the nine-month
period were $183.9 million, a 5% increase from $175.2 million in the prior
year.
Sales, percentage change from the prior year, gross margins and gross
margin percent of sales by SBU are summarized in the following table. Gross
margins for each SBU include provisions for returns and overstock. Provisions
for LIFO, manufacturing charges and other costs are included under the caption
"Corporate" (in thousands).
Sales Gross Margin
-------------------------- ----------------------------------
1997 1996 % 1997 GM % 1996 GM %
Change of Sales of Sales
-------- -------- ---- ------- ----- ------- -----
EDG $ 28,467 $ 25,053 14% $ 5,998 21.1% $ 7,478 29.8%
SSC 19,438 16,234 20% 3,405 17.5% 4,905 30.2%
DPG 6,560 8,501 -23% 561 8.6% 3,194 37.6%
SSD 9,698 6,579 47% 2,140 22.1% 1,405 21.4%
Corporate -- -- (933) (166)
-------- -------- ------- -------
Total $ 64,163 $ 56,367 14% $11,171 17.4% $16,816 29.8%
======== ======== ======= =======
EDG $ 84,647 $ 80,284 5% $22,585 26.7% $24,125 30.0%
SSC 53,201 50,010 6% 13,835 26.0% 15,316 30.6%
DPG 21,737 26,103 -17% 5,875 27.0% 9,634 36.9%
SSD 24,289 18,840 29% 5,151 21.2% 3,980 21.1%
Corporate -- -- (754) (1,167)
-------- -------- ------- -------
Total $183,874 $175,237 5% $46,692 25.4% $51,888 29.6%
======== ======== ======= =======
The Company experienced sales growth in the third quarter in all of the
Company's SBUs except DPG, whose sales continue to be affected by supply
shortages for several types of color CRT's and the loss of a customer in
Europe. SSD sales increased $3.1 million or 47% for the quarter, which
included $1.3 million in sales resulting from the consolidation of Burtek
Systems, Inc., effective February 1, 1997. SSC sales increased $3.2 million or
20% compared to last year, while EDG sales increased by 14% or $3.4 million
for the quarter. Almost half of the EDG sales growth for the quarter was
attributable to medical products, which increased 39%.
Gross margins in the third quarter and nine-month period were affected by
the special charge for overstock. The total charge included in cost of sales
was $7.2 million, which reduced gross margin for EDG by $2.8 million, SSC by
$2.4 million, DPG by $1.9 million and SSD by $.1 million. The impact on third
(8)
Management's Discussion and Analysis
Of Results of Operations and Financial Condition
Three- and Nine-Month Periods Ended February 28, 1997
(in thousands)(unaudited)
quarter gross margins as a percent of sales was 9.8% for EDG, 12.6% for SSC,
28.2% for DPG and 1.0% for SSD.
On a year-to-date basis, SSD sales increased by nearly 30% compared to the
prior year. SSC and EDG sales increased by 5% and 6%, respectfully, compared to
the prior year, while DPG sales decreased by 17%. Nine-month sales for SSC were
negatively impacted by the loss of a semiconductor franchise, which reduced
first half sales by $5.5 million. As these sales have been replaced, SSC has
resumed its prior growth trend.
Sales, percentage change from the prior year, gross margins and gross
margin percent of sales by area of the world are summarized in the following
table. Provisions for LIFO, manufacturing charges and other costs are included
under the caption "Corporate" (in thousands).
Sales Gross Margin
-------------------------- ----------------------------------
1997 1996 % 1997 GM % 1996 GM %
Change of Sales of Sales
-------- -------- ---- ------- ----- ------- ------
North America $ 39,546 $ 32,703 21% $ 7,462 18.9% $ 9,511 29.1%
Europe 13,499 13,631 -1% 2,870 21.3% 4,629 34.0%
Rest of World 11,118 10,033 11% 1,772 15.9% 2,842 28.3%
Corporate -- -- (933) (166)
-------- --------- ------- -------
Total $ 64,163 $ 56,367 14% $11,171 17.4% $16,816 29.8%
======== ======== ======= =======
North America $109,398 $101,895 7% $27,798 25.4% $29,998 29.4%
Europe 40,929 42,434 -4% 11,568 28.3% 14,307 33.7%
Rest of World 33,547 30,908 9% 8,080 24.1% 8,750 28.3%
Corporate -- -- (754) (1,167)
-------- -------- ------- -------
Total $183,874 $175,237 5% $46,692 25.4% $51,888 29.6%
======== ======== ======= =======
On a geographic basis, the Company achieved sales growth of 21% in North
America and 11% in the Rest of World area during the third quarter. Sales
declined 1% in Europe in the third quarter, reflecting the DPG supply shortages
and lost customer described above. European sales were also affected by the
strengthening of the U.S. dollar during the third quarter. The special charge
for overstock reduced gross margin for North America by $4.1 million, Europe by
$1.7 million, and Rest of World by $1.4 million. The impact on third quarter
gross margins as a percent of sales was 10.2% for North America, 12.5% for
Europe, and 13.1% for Rest of World.
Selling, general and administrative expenses increased $6.4 million from
the comparable prior-year quarter, including special charges of $3.8 million
for accounts receivable provisions, severance and other costs associated with
(9)
Management's Discussion and Analysis
Of Results of Operations and Financial Condition
Three- and Nine-Month Periods Ended February 28, 1997
(in thousands)(unaudited)
a Corporate reorganization. The remainder of the increase resulted from
investments in additional sales staff to capitalize on growth opportunities for
SSC, SSD and the EDG medical market.
Non-operating expenses increased by $.7 million primarily as a result of
foreign exchange losses and higher interest expense. Higher net interest costs
were attributable to additional borrowings needed to finance working capital
growth and several business acquisitions.
The net loss for the third quarter before extraordinary item was $6.1
million or $.50 per share, compared to income of $1.8 million or $.15 per share
in the prior year. An extraordinary loss of $.5 million net of tax, or $.04 per
share, resulted from the write-off of unamortized debt issuance costs. The net
loss for the third quarter was $6.5 million or $.54 per share. For the nine-
month period, the net loss before extraordinary item was $2.8 million or
$.23 per share compared to the prior year net income of $5.8 million or $.49
per share. The net loss for the nine-month period after extraordinary item was
$3.3 million or $.27 per share.
Liquidity and Capital Resources
Cash provided by operations was $1.6 million in the first nine months of
fiscal 1997, compared to cash used by operations of $10.3 million for the first
nine months last year. The improvement in cash from operations reflects reduced
growth in the investment in working capital, particularly inventory
investments, which were $.9 million in fiscal 1997 and $12.7 million in fiscal
1996. Due to increased sales, accounts receivable increased $3.5 million in
fiscal 1997 compared to $1.6 million in fiscal 1996. Accounts payable
increased $1.0 million in 1997 and $5.1 million in 1996, reflecting the timing
of inventory purchases. Interest payments for the first nine months of fiscal
1997 were $6.4 million, compared to $6.8 million in 1996.
Investment activity in the current year included the acquisition of Burtek
Systems, Inc., a Canadian distributor of security systems devices, in the third
quarter. Compucon Distributors, Inc., a distributor of interconnect devices in
the Northeastern United States, and two smaller companies operating in the
wireless communications and medical diagnostic imaging markets were acquired in
the first half of fiscal 1997.
In the first quarter the Company amended its $25 million senior revolving
credit note agreement due November 30, 1998 to increase the credit line to $35
million. The loan bears interest at 100 basis points over LIBOR, which at
(10)
Management's Discussion and Analysis
Of Results of Operations and Financial Condition
Three- and Nine-Month Periods Ended February 28, 1997
(in thousands)(unaudited)
February 28, 1997 resulted in a weighted average rate of 6.5%. The Company
borrowed $4.0 million for business acquisitions and working capital in the
third quarter of fiscal 1997. An additional $2.2 million was available at
February 28, 1997 under this agreement for future working capital or other
corporate requirements.
To complete the acquisition of Burtek Systems, Inc., a Canadian subsidiary
of the Company entered into a revolving credit agreement and term loan
aggregating $6.0 million with a Canadian affiliate of the Company's primary
bank. The loan is guaranteed by the Company, bears interest at the Canadian
prime rate and matures in November 1997. The February 28, 1997 balance sheet
includes $5.2 million for the initial borrowing under this agreement at which
date the interest rate was 4.5%.
On February 15, 1997, the Company exchanged $40.0 million of new
8 1/4% convertible debentures for an equivalent face value of its
outstanding 7 1/4% convertible debentures (see Note D). The principal
purpose of the exchange was to improve the Company's future liquidity
and capital position by refinancing a sufficient number of debentures to
eliminate sinking fund requirements until December 15, 2004.
The Company's loan agreements contain various financial and operating
covenants which set benchmark levels for tangible net worth, debt / tangible
net worth ratio and annual debt service coverage. The Company was in compliance
with these covenants at February 28, 1997.
In addition, certain of the current agreements contain restrictions
relating to the purchase by the Company of treasury stock or the payment of
cash dividends. At February 28, 1997, $16.3 million was available for such
transactions. The policy regarding payment of dividends is reviewed
periodically by the Board of Directors in light of the Company's operating
needs and capital structure. Cash reserves, investments, funds from operations
and credit lines are expected to be adequate to meet the operational needs and
future dividends of the Company.
(11)
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
No material developments have occurred in the matters reported under the
category "Legal Proceedings" in the Registrant's Report on Form 10-K for the
fiscal year ended May 31, 1996.
ITEM 2. CHANGES IN SECURITIES
On February 15, 1997 the Company accepted $40.0 million principal amount
of its 7 1/4% Convertible Subordinated Debentures due December 15, 2006 ("Old
Debentures") in exchange for a new issue of an equal principal amount of its
8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006 ("New
Debentures") pursuant to an offer to exchange ("Exchange Offer") as set forth
in the Company's Schedule 13E-4 filed with the Securities and Exchange
Commission on December 18, 1996 (the "Schedule 13E-4").
Such New Debentures are senior in right of payment to, and will mature
prior to, the Old Debentures. Further, the Old Debentures obtained in exchange
for the New Debentures will be utilized by the Company to satisfy sinking fund
requirements on the Old Debentures until December 15, 2004.
In connection with the Exchange Offer, the Company solicited and obtained
consents from the holders of more than a majority of the outstanding principal
amount of the Old Debentures to amend the Indenture under which the Company's
Old Debentures are issued. Such amendment was effected on February 18, 1997.
The amendment changes Section 4.02, Limitation on Dividends and Stock
Purchases, of the Indenture the effect of which was to increase the amount
available for such purposes as of August 31, 1996 from $13.1 million to $21.9
million. The Amendment also modifies events of default under the Indenture to
provide for an increase of the amount of other indebtedness in default which
would be an event of default under the Indenture from $1.0 million to $5.0
million.
(12)
Part II - Other Information
For a further statement of the limitations and qualifications of the
Company's Old Debentures as a result of the issuance of the New Debentures,
reference is made to the Offering Circular and Consent Solicitation dated
December 18, 1996 attached to the Schedule 13E-4 as Exhibit (a)(1) (the
"Offering Circular"). Particularly see "Purpose and Effects of the Tender
Portion of the Exchange Offer and the Proposed Amendments" on page 15, et. seq.
of the Offering Circular and "Certain Considerations for Non-Exchanging
Debentureholders" on page 13 of the Offering Circular, which information is
specifically incorporated herein by reference.
Exemption from registration of the New Debentures issued in the Exchange
Offer was claimed under Section 3(a)(9) of the Securities Act of 1993 as
amended, in reliance on the following facts.
The New Debentures were exchanged with holders of the Company's presently
issued and outstanding Old Debentures pursuant to the Exchange Offer in
connection with which Company filed the Schedule 13E-4 with the Securities and
Exchange Commission. There were not any sales of securities of the same class
by the Company or by or through an underwriter at or about the same time as the
transactions for which the exemption was claimed. No underwriters were
involved in the Exchange Offer. For a statement as to any consideration which
has been or is to be given, directly or indirectly, to any person in connection
with the transaction and the nature of any services rendered or to be rendered,
directly or indirectly, for such consideration see "The Exchange Offer -
Exchange Agent - Financial Advisor - Payment of Expenses"
on pages 24 and 25 of the Offering Circular, which information is specifically
incorporated herein by reference thereto. No cash payment has been made by any
holder of the Old Debentures.
The New Debentures are convertible at any time after issuance into shares
of Common Stock, $.05 par value, of the Company at $18 per share, subject to
adjustments under certain conditions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
(13)
Part II - Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 4 (a) - First Amendment to the Indenture between the
Company and First Trust of Illinois, a National Association,
as successor to Continental Illinois National Bank and Trust
Company of Chicago dated as of February 18, 1997.
Exhibit 4(b) - Indenture between the Company and American
National Bank and Trust Company, as Trustee, for 8%
Convertible Senior Subordinated Debentures due June 15, 2006
(including form of 8% Convertible Senior Subordinated
Debentures due June 13, 2006) incorporated by reference to
Exhibit 10 of the Company's Schedule 13E-4, filed February 18,
1997.
Exhibit 10 (a) - Revolving credit agreement and term loan dated
February 18, 1997 between Richardson Electronics Acquisition
Corporation and First Chicago NBD Bank, Canada, together with
guarantee of the Company.
Exhibit 10 (b) - Agreement dated January 16, 1997 between the
Company and Dennis Gandy setting forth the terms of Mr. Gandy's
employment by the Company.
Exhibit 10 (c) - Agreement dated March 21, 1997 between the
Company and David Gilden setting forth the terms of Mr.
Gilden's employment by the Company.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None.
(14)
Part II - Other Information
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RICHARDSON ELECTRONICS, LTD.
Date April 14, 1997 By \s\
William J. Garry
Vice President and
Chief Financial Officer
(15)
EXHIBIT 4(a)
FIRST AMENDMENT TO INDENTURE
This First Amendment to Indenture (this "First Amendment") is entered
into effective as of February 18, 1997 by and between Richardson Electronics,
Ltd., a Delaware corporation (the "Company"), and First Trust National
Association, as Trustee (the "Trustee").
RECITALS
A. The Company and the Trustee (as successor trustee to Continental
Illinois National Bank and Trust Company of Chicago) are parties to that
certain Indenture dated as of December 15, 1986, pursuant to which the
Trustee is acting as trustee in connection with the Company's 7-1/4%
Convertible Subordinated Debentures due December 15, 2006 (the "Indenture").
B. The Company desires to modify and amend certain provisions of the
Indenture, and the Trustee, having received the written consent to such
modifications and amendments from the holders of a majority of the principal
amount of the outstanding 7-1/4% Convertible Subordinated Debentures due
December 15, 2006 of the Company, is willing to enter into such modifications
and amendments, as set forth herein.
AGREEMENT
For and in consideration of the mutual benefits to be received and other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the
holders of the 7-1/4% Convertible Subordinated Debentures due December 15,
2006 of the Company:
1. Unless otherwise indicated herein, capitalized terms used in this
First Amendment have the meaning set forth in the Indenture.
2. The Indenture is hereby amended as follows:
2.1 Section 4.02 is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"SECTION 4.02. Limitation on Dividends and Stock Purchases.
The Company may not declare or pay any dividend or make any
distribution on its capital stock or to its shareholders
(other than dividends or distributions payable in its capital
stock) or purchase, redeem or otherwise acquire or retire
for value, or permit any Subsidiary to purchase or otherwise
acquire for value, any capital stock of the Company (i) if at
the time of such action an Event of Default shall have
occurred and be continuing, or occur as a consequence of any
such action, or (ii) if, upon giving effect to such
dividend, distribution, purchase, redemption, or other
acquisition or retirement, the aggregate amount expended for
all such purposes (the amount expended for such purposes, if
other than in cash, to be determined by the Board of
Directors, whose determination shall be conclusive and evidenced
by a resolution of the Board of Directors filed with the
Trustee) subsequent to May 31, 1996, shall exceed the sum of
(a) the aggregate Consolidated Net Income (or, in case such
aggregate Consolidated Net Income shall be a deficit, minus
such deficit) of the Company earned on a cumulative basis
subsequent to May 31, 1996, (b) the aggregate net proceeds,
including the fair market value of property other than cash
(as determined by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board
of Directors filed with the Trustee), received by the
Company from the issue or sale, other than to a subsidiary,
after May 31, 1996 of capital stock of the Company, (c) the
aggregate net proceeds received by the Company from the issue
or sale, other than to a subsidiary, of any indebtedness
(including the Securities) of the Company issued subsequent to
May 31, 1996 which has been converted into capital stock of
the Company, plus (d) $20,000,000; provided, however, that
such provisions will not prevent (i) the payment of any
dividend within 60 days after the date of declaration if the
payment complied with the foregoing provisions on the date
of declaration, (ii) the retirement of any shares of the
Company's capital stock by exchange for, or out of the
proceeds of, the substantially concurrent sale of other
shares of its capital stock, including without limitation,
the conversion of the Company's Class B Common Stock, $.05
par value, ("Class B Common Stock"), or (iii) the call for
redemption of any convertible preferred stock of the Company
under an agreement with a responsible underwriter designed to
insure that all such stock is converted rather than
redeemed."
2.2 Section 6.01(4) is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"(4) the happening of an event of default as defined in any
mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced
any Indebtedness of the Company or any Subsidiary,
whether such Indebtedness now exists or shall
hereafter be created, which event of default shall have
caused in any one case or in the aggregate in excess of
$5,000,000 aggregate principal amount of such
Indebtedness to become due and payable prior to the date
on which it would otherwise have become due and
payable, without such acceleration being rescinded,
annulled or otherwise cured within the period and after
the notice specified below;"
3. Except as amended hereby, the Indenture is unchanged and remains in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed as of the day and year first above written.
RICHARDSON ELECTRONICS, LTD.,
a Delaware corporation
By:
Edward J. Richardson
Its: Chairman
Attest
William G. Seils, Secretary
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
Its: Vice President
Attest
Assistant Secretary
EXHIBIT 10(a)
CREDIT AGREEMENT
Made as of February 18, 1997
Between
RICHARDSON ELECTRONICS ACQUISITION CORP.
as Borrower
and
FIRST CHICAGO NBD BANK, CANADA
as Lender
TABLE OF CONTENTS
SECTION 1 - INTERPRETATION . . . . . . . . . . . . . . . . Page 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . Page 1
1.2 Headings and Table of Contents. . . . . . . . . .Page 11
1.3 References. . . . . . . . . . . . . . . . . . . .Page 11
1.4 Number and Gender . . . . . . . . . . . . . . . .Page 11
1.5 Time of Day . . . . . . . . . . . . . . . . . . .Page 12
1.6 Governing Law . . . . . . . . . . . . . . . . . .Page 12
1.7 Entire Agreement. . . . . . . . . . . . . . . . .Page 12
1.8 Conflict. . . . . . . . . . . . . . . . . . . . .Page 12
1.9 Severability. . . . . . . . . . . . . . . . . . .Page 12
1.10 Currency. . . . . . . . . . . . . . . . . . . . .Page 12
1.11 Time. . . . . . . . . . . . . . . . . . . . . . .Page 12
1.12 GAAP. . . . . . . . . . . . . . . . . . . . . . .Page 12
1.13 Schedules . . . . . . . . . . . . . . . . . . . .Page 12
SECTION 2 - REPRESENTATIONS AND WARRANTIES . . . . . . . .Page 13
2.1 Representations and Warranties. . . . . . . . . .Page 13
2.2 Deemed Repetition . . . . . . . . . . . . . . . .Page 15
SECTION 3 - CREDIT FACILITIES. . . . . . . . . . . . . . .Page 15
3.1 Revolving Credit Facility . . . . . . . . . . . .Page 15
3.2 Term Credit Facility. . . . . . . . . . . . . . .Page 15
SECTION 4 - PROVISIONS APPLICABLE TO BORROWINGS. . . . . .Page 16
4.1 Notice of Borrowing . . . . . . . . . . . . . . .Page 16
4.2 Prime and US Prime Loans. . . . . . . . . . . . .Page 16
4.3 Cost of Funds Loans . . . . . . . . . . . . . . .Page 16
4.4 Libor Loans . . . . . . . . . . . . . . . . . . .Page 17
4.5 Substitute Basis of Borrowing . . . . . . . . . .Page 17
4.6 Bankers' Acceptances. . . . . . . . . . . . . . .Page 18
4.7 Letters of Credit . . . . . . . . . . . . . . . .Page 19
4.8 Conversion Option . . . . . . . . . . . . . . . .Page 20
4.9 Reliance on Oral Instructions . . . . . . . . . .Page 21
4.10 Evidence of Indebtedness. . . . . . . . . . . . .Page 21
SECTION 5 - INTEREST, FEES AND EXPENSES. . . . . . . . . .Page 21
5.1 Payment of Interest on Prime Loans. . . . . . . .Page 21
5.2 Payment of Interest on Cost of Funds Loans. . . .Page 22
5.3 Payment of Interest on US Prime Rate Loans. . . .Page 22
5.4 Letters of Credit Fee . . . . . . . . . . . . . .Page 22
5.5 Payment of Interest on Libor Loans. . . . . . . .Page 23
5.6 Interest on Overdue Amounts . . . . . . . . . . .Page 23
5.7 Interest Act. . . . . . . . . . . . . . . . . . .Page 23
5.8 Arrangement Fee . . . . . . . . . . . . . . . . .Page 23
5.9 Administration Fee. . . . . . . . . . . . . . . .Page 23
5.10 Commitment Fee. . . . . . . . . . . . . . . . . .Page 23
5.11 Limit on Rate of Interest . . . . . . . . . . . .Page 24
5.12 Change in Circumstances . . . . . . . . . . . . .Page 24
5.13 Payment of Portion. . . . . . . . . . . . . . . .Page 25
5.14 Illegality. . . . . . . . . . . . . . . . . . . .Page 26
5.15 Indemnity . . . . . . . . . . . . . . . . . . . .Page 26
5.16 Payment of Stamping Fee . . . . . . . . . . . . .Page 27
SECTION 6 - PAYMENTS AND REDUCTIONS OF COMMITMENTS . . . .Page 27
6.1 Payments Generally. . . . . . . . . . . . . . . .Page 27
6.2 No Set-Off. . . . . . . . . . . . . . . . . . . .Page 27
6.3 Application of Payments Before Exercise of RightsPage 27
6.4 Application of Payments After Exercise of Rights.Page 28
6.5 Reduction of Commitment . . . . . . . . . . . . .Page 28
SECTION 7 - COVENANTS. . . . . . . . . . . . . . . . . . .Page 29
7.1 Covenants of the Borrower . . . . . . . . . . . .Page 29
7.2 Accounting, Financial Statements and Other InformationPage 31
SECTION 8 - ENVIRONMENTAL MATTERS. . . . . . . . . . . . .Page 31
8.1 Representations and Warranties. . . . . . . . . .Page 31
8.2 Covenants . . . . . . . . . . . . . . . . . . . .Page 32
8.3 Indemnity . . . . . . . . . . . . . . . . . . . .Page 32
8.4 Scope of Indemnity. . . . . . . . . . . . . . . .Page 33
8.5 Interest. . . . . . . . . . . . . . . . . . . . .Page 34
SECTION 9 - DEFAULT AND ENFORCEMENT. . . . . . . . . . . .Page 34
9.1 Events of Default . . . . . . . . . . . . . . . .Page 34
9.2 Rights upon Default . . . . . . . . . . . . . . .Page 36
9.3 Waiver of Default . . . . . . . . . . . . . . . .Page 36
SECTION 10 - REMEDIES. . . . . . . . . . . . . . . . . . .Page 36
10.1 Remedies Cumulative . . . . . . . . . . . . . . .Page 36
10.2 Remedies Not Limited. . . . . . . . . . . . . . .Page 37
10.3 Set-Off, etc. . . . . . . . . . . . . . . . . . .Page 37
10.4 Lender May Perform Covenants. . . . . . . . . . .Page 37
SECTION 11 - MISCELLANEOUS . . . . . . . . . . . . . . . .Page 37
11.1 Amendments and Waivers. . . . . . . . . . . . . .Page 37
11.2 Notice. . . . . . . . . . . . . . . . . . . . . .Page 38
11.3 Judgment Currency . . . . . . . . . . . . . . . .Page 38
11.4 Further Assurances. . . . . . . . . . . . . . . .Page 38
11.5 Reimbursement of Expenses . . . . . . . . . . . .Page 38
11.6 Survival. . . . . . . . . . . . . . . . . . . . .Page 39
11.7 Attornment. . . . . . . . . . . . . . . . . . . .Page 39
11.8 Successors and Assigns. . . . . . . . . . . . . .Page 39
11.9 Counterparts. . . . . . . . . . . . . . . . . . .Page 40
CREDIT AGREEMENT
This Agreement is made as of February 18, 1997
B E T W E E N:
RICHARDSON ELECTRONICS ACQUISITION CORP.
as Borrower
and
FIRST CHICAGO NBD BANK, CANADA
as Lender
WHEREAS:
A. The Borrower has requested and the Lender has agreed to provide a
revolving credit facility for an amount of up to but not exceeding
CAD6,100,000 or the Equivalent Amount in US Dollars and a term loan credit
facility for an amount up to but not exceeding CAD2,050,000
NOW THEREFORE, for value received the parties agree as follows:
SECTION 1 - INTERPRETATION
1.1 Certain Defined Terms. The terms defined herein shall have, for all
purposes of this Agreement, the following meanings unless the context
expressly or by necessary implication otherwise requires:
"Acceptance Date" means a Business Day on which a Borrowing is to be
made by way of Bankers' Acceptances.
"Acceptance Fee" means, with respect to a Bankers' Acceptance accepted
by the Lender under this Agreement, a fee payable in Canadian Dollars by
the Borrower to the Lender calculated on the face amount of the Bankers'
Acceptance at the rate of 1.25% per annum, on the basis of the number of
days in the Contract Period and a year of 365 days or 366 days as applicable.
"Accounts" means the accounts and records established by the Lender to
record the Borrower's liability to the Lender in respect of the Borrowings
made available to the Borrower.
"Additional Compensation" has the meaning ascribed to it in Section 5.11(c).
"Administration Fee" has the meaning ascribed to in Section 5.8.
"Affected Borrowing" has the meaning ascribed to it in Section 5.12.
"Affiliate" has the meaning established in the Canada Business
Corporations Act in effect on the date hereof.
"Agreement" means this agreement, including the Schedules, as the same
may be amended, varied, supplemented, restated, renewed or replaced at any
time and from time to time.
"Applicable Law" means, in respect of any Person, property, transaction
or event, all present or future applicable laws, statutes, regulations,
treaties, orders, judgments and decrees and all applicable official
directives, rules, guidelines, orders and policies of any governmental
bodies having authority over any of the foregoing.
"Arrangement Fee" has the meaning ascribed to in Section 5.7.
"Associate" has the meaning established in the Canada Business
Corporations Act in effect on the date hereof.
"Auditors" means Ernst & Young Inc. or such other major Canadian
accountancy firm appointed by the Guarantor.
"Available Asset Value" means the consolidated book value of the
Borrower's assets determined in accordance with GAAP less the amount of all
Indebtedness, other than Subordinate Claims, secured by Liens against such
assets.
"BA Rate" means, on any day, the annual rate of interest which is the
rate determined as being the rate of First Chicago NBD Bank applicable to
Canadian Dollar bankers' acceptances.
"Bankers' Acceptance" means a bill of exchange substantially in the form
of Schedule 1 (or such other form as may be acceptable to the Lender)
denominated in Canadian Dollars, drawn by the Borrower and accepted by the
Lender.
"Banking Day" means a Business Day on which dealings in US Dollar
deposits by and between banks in the London interbank market may be conducted.
"Borrower" means Richardson Electronics Acquisition Corp.
"Borrower's Account" means:
(1) for all payments in Canadian Dollars, the following account
maintained by the Borrower with the Lender at the Branch of
Account to which payments and transfers are to be effected:
First Chicago NBD Bank, Canada, transit #0012-270, account
#100431-001,
or such other account as the Borrower and the Lender may agree in
writing, and
(2) for all payments in US Dollars, the following account
maintained by the Borrower with the Lender at the Branch
of Account to which payments and transfers are to be
effected:
First Chicago NBD Bank, Canada, transit #0012-270, account
#100431-010,
or such other account as the Borrower and the Lender may agree in
writing.
"Borrowings" means an extension of credit hereunder by the Lender to the
Borrower by way of advances of Loans, Letters of Credit Advances, and by the
acceptance of Bankers' Acceptances.
"Branch of Account" means, with respect to the Lender, its branch at BCE
Place, 161 Bay Street, Suite 4240, Toronto, Ontario, M5J 2S1 or such other
branch in Canada as the Lender and Borrower may agree in writing.
"Burtek" means Burtek Systems Inc.
"Business Day" means a day on which the Lender is open for money market
dealings in Toronto, Ontario, but excludes Saturday, Sunday and any other
day which is a statutory holiday in Toronto, Ontario and with respect to a
Libor Loan, such a day is a Business Day only if it is also a Banking Day.
"Canadian Dollars" and the symbols "CAD" and "$" each means lawful money
of Canada.
"Closing Date" means February 18, 1997 or such other date as the
Borrower and the Lender may agree.
"Commercial Letter of Credit" means a commercial letter of credit issued
by the Lender to a beneficiary at the request of and for the account of the
Borrower.
"Commitment" means CAD8,150,000 or the Equivalent Amount in US Dollars,
to the extent not cancelled, reduced or terminated hereunder.
"Commitment Fee" has the meaning ascribed to in Section 5.9.
"Contaminant" means any pollutants, hazardous materials or contaminants,
dangerous, toxic or hazardous substances, waste of any description
whatsoever except non-hazardous waste of the kind generated by the Borrower
in the normal course of its operations, including any of the foregoing as
defined in any Environmental Law.
"Contract Period" means, with respect to a Bankers' Acceptance, the term
of days of such Bankers' Acceptance as selected by the Borrower in
accordance with Section 4.6(b), commencing on the Drawdown Date or
Conversion Date, as applicable, of such Bankers' Acceptance and expiring on
a Business Day, which term shall not be less than 30 days or more
than 180 days thereafter, in each case subject to availability.
"Conversion Date" means the date of which the Lender has been notified
by the Borrower at the Branch of Account as being the date on which the
Borrower has elected to convert a Borrowing or a portion of a Borrowing
pursuant to Section 4.7.
"Cost of Funds", for any Cost of Funds Interest Period, applicable to a
Cost of Funds Loan, means an annual rate of interest equal to the sum of:
(a) the interest rate estimated by the Lender for such Cost of Funds
Interest Period as the rate which the Lender would have to pay on Canadian
Dollar short term promissory notes issued by the Lender in the amount of the
applicable Cost of Funds Loan for such period (whether or not any such
promissory notes have in fact been issued by the Lender), plus
(b) the cost of any reserves or fees or costs levied in lieu of
reserves, plus
(c) any brokerage or other funding fees normally expected to be
incurred in such Cost of Funds Interest Period by the Lender upon the issue
of such promissory notes.
"Cost of Funds Interest Payment Date" means the last day of each Cost
of Funds Interest Period.
"Cost of Funds Interest Period" means a period of approximately 30, 60,
90 or 180 days determined in accordance with Section 4.3 of this Agreement.
"Cost of Funds Loan" means a loan or advance under this Agreement which is
denominated in Canadian or US Dollars and in respect of which the Borrower is
obliged to pay interest in accordance with Section 5.2.
"Credit Facilities" means collectively, the Revolving Credit Facility and
Term Credit Facility and individually, either one of them.
"Default" means an event or circumstance or omission which constitutes
an Event of Default or which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default.
"Discount Proceeds" means, in respect of a Bankers' Acceptance accepted and
purchased by the Lender under this Agreement, an amount (rounded to the
nearest whole cent, and with one-half of one cent being rounded up)
calculated on the applicable Drawdown Date or Conversion Date by multiplying:
(a) the face amount of such Bankers' Acceptance divided by one hundred; by
(b) the price, where the price is determined by dividing one hundred by
the sum of one plus the product of:
(i) the applicable Discount Rate (expressed as a decimal); and
(ii) a fraction, the numerator of which is the Contract Period for such
Bankers' Acceptance, and the denominator of which is three hundred
sixty-five (365) or three hundred sixty-six (366) as the case
may be;
with the price as so determined being rounded up or down to the fifth decimal
place and 0.000005 rounded up.
"Discount Rate" applicable to a Bankers' Acceptance being issued on any
Drawdown Date or Conversion Date, and purchased by the Lender, means the
percentage discount rate (expressed in two decimal places) of the Lender
which it would, in accordance with its normal practices, at or about
10:00 a.m. (Toronto time) on such Drawdown Date or Conversion Date,
be prepared to purchase Bankers' Acceptances accepted by it and having a
comparable issue and maturity date as the issue and maturity date of such
Bankers' Acceptance.
"Documents" means this Agreement and all certificates and other documents
delivered or to be delivered to the Lender pursuant hereto or thereto and,
when used in relation to any Person, the term "Documents" shall mean and
refer to those Documents executed and delivered by such Person.
"Drawdown Date" means a Business Day on which a Borrowing is to be made
by way of Loan.
"Environmental Activity" means any 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 movement through or in the air, soil, subsoil, surface water or
groundwater.
"Environmental Laws" means any and all federal, provincial, municipal
and local statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, grants, licences, agreements or other governmental
restrictions of Canada, its provinces, and of all applicable municipalities
thereof relating to the environment, health and safety, health
protection or any Environmental Activity.
"Equivalent Amount" of one currency means, on any date, the amount of a
second currency into which the first currency may be converted at the spot
rate at which the Lender would, on such date at or about 12:00 noon (Toronto
time), be prepared to sell the same amount of such second currency in
Toronto, and if such date is not a Business Day, on the immediately
preceding Business Day, or at such other rate as may have been agreed by the
Borrower and the Lender.
"Event of Default" means any of the events or circumstances specified in
Section 9.1;
"Financial Assistance" by any Person means:
(a) any loan, guarantee, sale with recourse, endorsement (other than
for collection or deposit in the ordinary course of business) or
other obligation (contingent or other) to pay, purchase, repurchase
or otherwise acquire or become liable upon or in respect of any
Indebtedness of another; and
(b) without limiting the generality of the foregoing, any obligation
(contingent or other) to make a payment on behalf of another for
goods, property of services regardless of the non-delivery or
nonfurnishing thereof, or to make an investment in another, or to
maintain the capital, working capital, solvency or general financial
condition of another (other than for the purchase of Marketable
Securities), or to indemnify another Person against and hold such
Person harmless from damage, loss or liability, all under
circumstances intended to enable another to incur or pay any
Indebtedness or to comply with agreement relating thereto or
otherwise to assure or protect creditors against less in respect
of Indebtedness.
The amount of any Financial Assistance shall be the amount of all
Indebtedness of the obligor to which the Financial Assistance relates,
unless the Financial Assistance is limited to a determinable amount in which
case the amount of such Financial Assistance shall be deemed to be such
determinable amount.
"Fiscal Year" means the fiscal year of the Borrower which currently runs
from June 1 to May 31.
"GAAP" means generally accepted accounting principles in effect from time
to time in Canada applicable to the relevant Person, applied in a consistent
manner from period to period.
"Government Approvals" means, with respect to any Person, all material
licences, permits, consents, authorizations and approvals from any and all
Governmental Authorities required for the conduct of that Person's business
as presently conducted.
"Governmental Authority" means the government of any nation, state,
province, municipality or other political subdivision thereof, and any
entity exercising executive, legislative, regulatory or administrative
functions, and any corporation or other entity owned or controlled in any
manner by any of the foregoing.
"Guarantor" means Richardson Electronics, Ltd.
"Indebtedness" of a Person means:
(a) any obligation, contingent and other, which should be classified
upon such Person's balance sheet as a liability in accordance with
GAAP,
(b) any obligation secured by any Lien existing on property owned or
acquired by such Person subject to such Lien whether or not the
obligation secured thereby shall have been assumed,
(c) any debt or liability of such Person representing the deferred
acquisition cost of property or assets created or arising under
any conditional sale agreement or other title retention agreement
even though the rights and remedies of the seller under such
agreement in the event of default are limited to repossession or
sale of property or assets covered thereby,
(d) any liabilities under indemnities given in respect of any bankers'
acceptance, letter of credit or letter of guarantee, and
(e) any Financial Assistance by such Person,
and, for greater certainty, does not include equity.
"Interest Determination Date" means, with respect to a Libor Loan, the
date which is 2 Banking Days prior to the first day of the Libor Interest
Period applicable to such Libor Loan.
"Interest Payment Date" means the last Business Day of each month.
"Letter of Credit" means a Commercial Letter of Credit and a Standby
Letter of Credit.
"Letter of Credit Advances" means a Borrowing by way of its issuance of
a Letter of Credit pursuant to this Agreement.
"Letters of Credit Agreement" means the agreement entered into between
the Borrower and the Lender whereby the Lender agrees to issue Letters of
Credit upon the application of the Borrower, including any recitals and
schedules to such agreement, as amended, supplemented or restated from time
to time.
"Libor" means with respect to each Libor Loan the annual rate of interest
for a period approximately equal to the Libor Interest Period applicable to
such Libor Loan displayed on page 3750 of the Telerate service as at
approximately 11:00 a.m. (London time) on the Interest Determination Date;
provided, however, if such rate does not appear on the Telerate screen
page as contemplated, the Libor shall be such other rate or rates as the
parties may agree.
"Libor Interest Date" means the last day of each Libor Interest Period.
"Libor Interest Period" means, with respect to a Libor Loan, the initial
period (subject to availability) of approximately one month (or longer whole
multiples of 30 days to and including 180 days as agreed from time to time)
commencing with the date on which a Libor Loan is made and thereafter each
successive period of 30 days (or longer whole multiples of one month to and
including 180 days as agreed from time to time) commencing on the last day
of the immediately prior Libor Interest Period.
"Libor Loan" means a loan or advance under this Agreement which is
denominated in US Dollars and in respect of which the Borrower is obliged to
pay interest in accordance with Section 5.4
"Lien" means any mortgage, charge, lien, hypothec, trust, encumbrance,
charge, pledge, assignment, security interest, title retention, or any other
security arrangement of whatsoever nature or kind.
"Loan" means a Prime Loan, Cost of Funds Loan, US Prime Rate Loan or Libor
Loan.
"Material Adverse Effect" means, when used with reference to any event or
circumstance and any Person, an event or circumstance which has or may have a
material adverse effect on (1) the business, operations, property or
financial or other condition of that Person, (2) the ability of that Person
to perform and discharge its obligations under this Agreement or any of the
other Documents, or (3) the Lender's ability to enforce its rights
under this Agreement or any of the other Documents.
"Maturity Date" means,
(a) in respect of a Bankers' Acceptance, the final Business Day of the
applicable Contract Period, and
(b) in respect of Cost of Funds Loans, the earlier of (i) November 30,
1998 and (ii) the date the Lender demands payment of the Revolving
Credit Facility.
"Notice of Borrowing" has the meaning ascribed to it in Section 4.1.
"Outstanding Borrowings" means, at any time, the aggregate of all
accrued interest and unpaid fees payable hereunder which at such time are
due and payable, the principal amount of all Loans and the aggregate amount
payable by the Lender to the holder of all outstanding Bankers' Acceptances.
"Permitted Liens" means, with respect to the Borrower or any of its
subsidiaries, any:
(a) Liens in connection with workers compensation, unemployment
insurance or other social security obligations in respect of
obligations which are not yet due or which are being contested in
good faith;
(b) Liens now or hereafter made or incurred in the ordinary course of
business to secure the performance of bids, tenders, contracts
(other than for the borrowing of money), leases, statutory
obligations or surety and performance bonds;
(c) mechanics', worker's, materialmen's or other like Liens, arising in
connection with construction or in the ordinary course of business,
in respect of obligations which are not due or which are being
contested in good faith;
(d) Liens for Taxes not due or being contested in good faith;
(e) Liens in respect of judgments or awards against the Borrower with
respect to which the Borrower at the time shall in good faith be
processing an appeal or proceedings for review and with respect to
which the Borrower shall have secured a stay of execution pending
such appeal or review;
(f) Liens now or hereafter created or assumed by the Borrower on
existing assets as permitted or not prohibited under existing
agreements with lenders or, in connection with the acquisition or
construction subsequent to the date hereof of property, whether real
or personal (other than current assets), purchase money
pledges of or purchase money mortgages or Liens or security
interests created upon such acquired property to the extent it
secures Indebtedness in an amount up to 100% of the lesser of the
cost and fair market value of the property; and extensions,
renewals or replacements thereof upon such property if the amount
of Indebtedness secured thereby is not increased;
(g) minor imperfections of title and encumbrances, if any which are not
substantial in amount, and do not materially detract from the value
of the properties subject thereto or materially impair the
Borrower's ability to carry on its business;
(h) licences or leases of patents, trademarks or trade names made in
the ordinary course of business; and
(i) other existing and future Liens incidental to the conduct of its
business or the ownership of its property and assets.
"Person" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with or
without share capital, unincorporated association, trust, trustee, executor,
administrator or other legal personal representative, regulatory body or
agency, government or governmental agency, authority or entity however
designated or constituted.
"Prime Loan" means a loan or advance made under this Agreement which is
denominated in Canadian Dollars and in respect of which the Borrower is
obliged to pay interest in accordance with Section 5.1.
"Prime Rate" means the annual rate of interest in effect from time to
time equal to the greater of (i) the annual rate of interest publicly
announced from time to time by the Lender as being its reference rate then
in effect for determining interest rates on Canadian Dollar denominated
commercial loans made by the Lender in Canada; and (ii) the BA Rate plus
1.00%. Any change in the Prime Rate shall be effective on the date such
change becomes effective generally.
"Release" means, with respect to any Contaminant, the method by which such
Contaminant comes to be in the environment at large and includes, without
limitation, discharging, spraying, injection, abandonment, depositing,
spilling, leaking, seeping, pouring, emission, emptying, throwing, dumping,
placing and exhausting, and when used as a noun has a similar meaning.
"Revolving Commitment" means CAD6,100,000 or the Equivalent Amount in US
Dollars, to the extent not cancelled, reduced or terminated hereunder.
"Revolving Credit Facility" means the revolving credit facility referred
in Section 3.1.
"Revolving Credit Facility Maturity Date" means November 30, 1998 or
such other date as may be agreed upon between the Borrower and the Lender
from time to time.
"Rollover Date", for any Cost of Funds Interest Period, means the last
day thereof, provided that if such day is not a Business Day, the Rollover
Date for such period shall be the next Business Day.
"Standby Letter of Credit" means a standby letter of credit issued by
the Lender to a beneficiary at the request of and for the account of the
Borrower.
"Subsidiary" means a subsidiary of the Borrower as defined in the Canada
Business Corporations Act.
"Subordinate Claims" means, at any time and from time to time, all
claims of any Person in respect of Indebtedness owing by the Borrower which
rank subordinate to the claims of the Lender in respect of the Outstanding
Borrowings and other Indebtedness of the Borrower to the Lender hereunder.
"Tax" includes 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 penalty,
interest and other payments on or in respect thereof.
"Term Commitment" means CAD2,050,000 to the extent not cancelled, reduced or
terminated hereunder.
"Term Credit Facility" means the non-revolving term credit facility
referred in Section 3.2.
"Term Credit Facility Maturity Date" means November 30, 1998 or such
other date as may be agreed upon between the Borrower and the Lender from
time to time.
"US Prime Rate" means, with respect to a US Prime Rate Loan, the annual
rate of interest in effect from time to time equal to the annual rate of
interest publicly announced from time to time by the Lender as being its
reference rate then in effect for determining rates on US Dollar denominated
commercial loans made by the Lender in Canada. Any change in the US
Prime Rate shall be effective on the date such change becomes effective
generally.
"US Prime Rate Loan" means a loan or advance made under this Agreement
which is denominated in US Dollars and in respect of which the Borrower is
obliged to pay interest in accordance with Section 5.3.
"US Dollars" and the symbol "USD" each means the lawful money of the
United States of America.
"Written" or "in writing" includes printing, typewriting, or any
electronic means of communication capable of being legibly reproduced at
the point of reception.
SECTION 1 -
1.1
1.2 Headings and Table of Contents. The insertion of headings and the
provision of a table of contents are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement.
1.3 References. Unless otherwise specified, all references to Sections and
Schedules are to Sections of, and Schedules to this Agreement. The words
"hereto", "herein", "hereof", "hereunder" and similar expressions refer to
this Agreement and not to any particular Section or other provision of this
Agreement.
1.4 Number and Gender. Unless otherwise specified, words importing the
singular include the plural and vice versa and words importing gender
include all genders.
1.5 Time of Day. Unless otherwise specified, any reference to a time of day
means local time in Toronto, Ontario.
1.6 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the Province of Ontario and of
Canada applicable therein.
1.7 Entire Agreement. This Agreement, including all Schedules and all documents
contemplated hereby, constitutes the entire agreement among the parties with
respect to the subject matter and supersedes all prior negotiations,
undertakings, representations and understandings including, without
limitation, the letter agreement dated November 28, 1996 (the "Proposal
Letter") between the Guarantor and the Lender and correspondence between
the parties dated prior to the date hereof.
1.8 Conflict. If there is a conflict or inconsistency between the provisions
of this Agreement and any other document including, without limitation, the
Documents and the agreements and correspondence between the Lender and the
Borrower referred to in Section 1.7, the provisions of this Agreement shall
prevail.
1.9 Severability. Any provision of this Agreement which is illegal, invalid or
unenforceable in any jurisdiction shall not affect the legality, validity or
enforceability of the remaining provisions and any such illegality,
invalidity or unenforceability in any jurisdiction shall not affect the
legality, validity or enforceability of such provision in any other
jurisdiction.
1.10 Currency. Unless otherwise specified, all amounts are stated in
Canadian Dollars.
1.11 Time. Time shall be of the essence in all provisions of this
Agreement.
1.12 GAAP. Unless otherwise provided, all accounting terms used in this
Agreement shall be interpreted and all financial information prepared in
accordance with GAAP, consistently applied.
1.13 Schedules. The following Schedules are attached to and form part
of this Agreement:
Schedule 1 - Form of Bankers' Acceptance
Schedule 2.1(i) - Litigation
Schedule 4.1 - Notice of Borrowing
Schedule 4.4(b) - Notice of Rollover of Libor Loan
Schedule 4.6(f) - Confirmation
Schedule 4.7 - Notice of Conversion
Schedule 7.1(h) 2 - Form of Promissory Notes
Schedule 7.1(h) 4 - Form of Guaranty
Schedule 7.1(h) 6 - Opinion of legal counsel to the Borrower
Schedule 8.1(d) - Particulars of environmental inquiries
SECTION 2 - REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. The Borrower, represents and warrants
to the Lender, all of which shall survive the execution and delivery of this
Agreement, as follows:
(a) Existence, Power and Conduct of Business. The Borrower is a corporation
duly organized and validly existing under the laws of Canada, being its
jurisdiction of incorporation, except as disclosed in writing to the Lender,
is up to date in all material filings required under Applicable Laws of
relevance to this transaction and the business conducted by it and the
properties and assets owned or leased by it, has the requisite power and
authority to own and lease its properties and assets and to conduct its
businesses in which it is presently engaged and except in jurisdictions
where failure to register does not materially affect it or its business or
except as disclosed in writing to the Lender, is duly qualified to conduct its
businesses in all jurisdictions where the nature of its assets or its
businesses makes such qualification necessary.
(b) Power and Authority. The execution, delivery and performance by the
Borrower of this Agreement and all other Documents are within its powers,
have been duly authorized by all necessary corporate action and do not
conflict with, result in a breach or violation of, or constitute a material
default under, its constating documents, any unanimous shareholders
agreement, any Applicable Law or any agreement or other document to which
it is a party or by which it is bound and do not result in the creation of
any Lien upon any of its assets.
(c) Execution and Delivery and Binding Effect. Each of this Agreement and
all other Documents has been duly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally, the fact that specific performance and
injunctive relief may be given at the discretion of the courts, and the
equitable or statutory powers of the courts to stay proceedings before them
and to stay the execution of judgments.
(d) No Approvals Required. No further registration, order, permit, filing,
consent, licence, decree or approval of, from or with any Governmental
Authority is necessary or advisable in order to ensure the legality,
validity, binding effect and enforceability of this Agreement or any other
Document as against the Borrower.
(e) Financial Statements. Its most recent annual and quarterly financial
statements, copies of which have been furnished to the Lender, have been
prepared in accordance with GAAP, present fairly its financial position and
the results of its operations as at the date of such financial statements.
(f) Title to Assets and Liens. Except as disclosed in writing to the Lender,
it has good and marketable title to all of its assets and properties free and
clear of any Liens other than Permitted Liens.
(g) No Default. There exists to its knowledge no Event of Default which has
not been waived and no Default of which the Lender has not previously been
notified in writing.
(h) Compliance. The Borrower is in material compliance with its constating
documents, its franchises and licences, and all Applicable Laws including,
without limitation, health, safety and employment standards and labour codes
and, to the best knowledge of the Borrower, with Environmental Laws of all
applicable Governmental Authorities.
(i) Litigation. Except as set out in Schedule 2.1 (i), to Borrower's
knowledge, no material litigation (including, without limitation, derivative
actions), arbitration proceedings, governmental proceedings or
investigations or regulatory proceedings are pending or threatened
against the Borrower (except as previously disclosed by notice to the
Lender), which, if adversely determined, would have a Material Adverse
Effect upon the Borrower, nor does the Borrower know of any basis for any of
the foregoing. In addition, there are no inquiries, formal or informal,
which might give rise to such actions, proceedings or investigations.
(j) Full Disclosure. Neither the financial statements referred to in
Section 2.1(e) nor any other statement furnished by it or on its behalf to
the Lender in connection with the negotiation of this Agreement contain any
untrue statement of a material fact, or omitted a material fact
necessary to make such statements not misleading, and all such statements,
taken as a whole, together with this Agreement, do not contain any untrue
statement of a material fact or omit a material fact necessary to make such
statements not misleading. All expressions of expectation, intention, belief
and opinion were honestly made on reasonable grounds after due and careful
inquiry by it and any other Person who furnished such material. There is no
fact within the knowledge of the Borrower which has not been disclosed to
the Lender in writing which has or which the Borrower could reasonably
expect to have, a Material Adverse Effect.
(k) Tax Returns. The Borrower has filed or caused to be filed all tax
returns which, to its knowledge are required to have been filed, and has
paid all Taxes shown to be due and payable on such returns or on any
assessments made against it and all other Taxes, fees or other
charges imposed on it by any Governmental Authority, other than those the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves have been
provided in its books. No Liens for Taxes have been filed and, to
its knowledge, no claims are being asserted with respect to any such Taxes,
fees or other charges.
(l) Material Change. Save as disclosed to the Lender in writing, there has
been no material adverse change in the financial condition of the Borrower
or any material litigation since the date of the most recent audited or
unaudited financial statements (as the case may be) of the Borrower
delivered under this Agreement.
(m) Liabilities. As of the date of the most recent financial statements
delivered to the Lender under this Agreement, the Borrower has no debts,
liabilities or obligations to any Person, whether direct or indirect,
absolute or contingent, matured or not, or other obligations for the payment
of money which, according to GAAP, are material and which are not disclosed
(1) in its most recent financial statements delivered to the Lender under
this Agreement and the notes to those financial statements or (2) in writing
to the Lender.
2.2 Deemed Repetition. The representations and warranties made in Section
2.1 shall continue in effect until payment and performance of all debts,
liabilities and obligations referred to in this Agreement and any Document
and shall be deemed to be repeated on each Drawdown Date, Acceptance Date
and Conversion Date as if made on each such date, in each case subject to
minor changes which do not have a material effect.
SECTION 3 - CREDIT FACILITIES
3.1 Revolving Credit Facility.
(a) Establishment. Subject to this Agreement, the Lender hereby confirms its
establishment in favour of the Borrower of a revolving credit facility in the
principal amount of the Commitment (the "Revolving Credit Facility") available
to the Borrower by way of advances of Loans, Letter of Credit Advances up to
an aggregate amount not to exceed $700,000 and the acceptance of Bankers'
Acceptances.
(b) Revolving Nature of Revolving Credit Facility. Subject to this
Agreement, the Borrower may, from time to time, increase or reduce the
amount of its Borrowings under the Revolving Credit Facility by borrowing,
repaying and reborrowing Prime Loans, Cost of Funds Loans, US Prime Rate
Loans and Libor Loans and by the acceptance of Bankers' Acceptances.
(c) Repayment. All Outstanding Borrowings under the Revolving Credit
Facility shall be repayable by the Borrower upon the earlier of (i)
Revolving Credit Facility Maturity Date and (ii) demand at any time by the
Lender following the occurrence of an Event of Default.
(d) Purpose. The proceeds of Borrowings under the Revolving Credit Facility
shall be used to acquire shares in the capital stock of Burtek, to refinance
the indebtedness of Burtek, for general corporate purposes and financing day
to day working capital requirements, whether directly or indirectly through
its subsidiary, Burtek.
3.2 Term Credit Facility.
(a) Establishment. Subject to this Agreement, the Lender hereby confirms its
establishment in favour of the Borrower of a term non-revolving credit
facility in the principal amount of the Term Commitment (the "Term Credit
Facility") available to the Borrower by way of a single advance of a Loan.
(b) Non-Revolving Notice of Term Credit Facility. The Borrower is entitled
to a single advance under Term Credit Facility by way of a Prime Loan and
Cost of Funds Loan and by the acceptance of Bankers' Acceptances.
(c) Repayment. All Outstanding Borrowings under the Term Credit Facility
shall be repayable by the Borrower upon the earlier of (i) the Term Credit
Facility Maturity Date; and (ii) demand at any time by the Lender following
the occurrence of an Event of Default; provided that prior to any such
demand, the Borrower shall repay the Outstanding Borrowings under the Term
Credit Facility in 48 equal monthly payments of CAD42,708.33 each on
account of principal commencing March 31, 1997 with the balance due or
accruing on the Term Credit Facility Maturity Date.
(d) Purpose. The proceeds of Borrowings under the Term Credit Facility
shall be used to finance the acquisition of Burtek.
SECTION 4 - PROVISIONS APPLICABLE TO BORROWINGS
4.1 Notice of Borrowing.
Subject to the terms and conditions hereof, the Borrower may borrow by
way of Loans and the acceptance of Bankers' Acceptances upon giving to the
Lender at the Branch of Account:
(1) in the case of Prime Loans and US Prime Rate Loans, irrevocable
telephone notice by 11:00 a.m. one Business Day prior to the
Drawdown Date, and
(2) in the case of Cost of Funds Loans, Libor Loans and Bankers'
Acceptances, irrevocable telephone notice by 11:00 a.m. two
Business Days prior to the Drawdown Date,
in each case followed by written confirmation on the same day substantially
in the form of Schedule 4.1 (a "Notice of Borrowing").
4.2 Prime and US Prime Loans.
Amounts of Borrowing. Each Borrowing by way of a Prime Loan or a US
Prime Loan shall be in increments of CAD or USD25,000.
4.3 Cost of Funds Loans.
(a) Amounts of Borrowing. Each Borrowing by way of a Cost of Funds
Loan shall be in the minimum amount of CAD or USD250,000 and thereafter in
increments of CAD or USD100,000.
(b) Selection of Interest Period. The Borrower may select the Cost of
Funds Interest Period for each Cost of Funds Loan. No Cost of Funds
Interest Period will be less than 30 days or greater than 180 days.
(c) Availability. Cost of Funds Loans will not be available if the
stated maturity or rollover date is after the Maturity Date.
4.4 Libor Loans.
(a) Amounts of Borrowing. Each Borrowing by way of a Libor Loan shall
be in the minimum amount of CAD or USD250,000 and thereafter in increments
of CAD or USD100,000.
(b) Rollover of Libor Loans. With respect to each Libor Loan which is an
outstanding Borrowing, at or before 11:00 a.m. one Business Day before the
applicable Interest Determination Date, the Borrower shall notify the Lender
at the Branch of Account by irrevocable telephone notice followed by written
confirmation on the same day in form and substance substantially as attached
as Schedule 4.4(b) either of (1) the next Libor Interest Period which it has
selected as applicable to the Libor Loan, which new Libor Interest Period
shall commence on and include the last day of the prior Libor Interest
Period, or (2) the intention of the Borrower to repay or convert such Libor
Loan at the end of the relevant Libor Interest Period. If the Borrower
fails to select and to notify the Lender at the Branch of Account of the
Libor Interest Period applicable to the Libor Loan, or its intention to repay or
convert the Borrower shall be deemed to have converted the Libor Loan into a
US Prime Rate Loan as of the last day of the applicable Libor Interest Period.
4.5 Substitute Basis of Borrowing. If at any time during the term of this
Agreement, the Lender determines in good faith (which determination shall be
final, conclusive and binding upon the Borrower) that:
(a) adequate and fair means do not exist for ascertaining the rate of
interest on a Libor Loan,
(b) Libor does not accurately reflect the effective cost to the Lender of
making, funding or maintaining a Libor Loan and the costs to the Lender are
increased or the income receivable by the Lender is reduced in respect of a
Libor Loan,
(c) the making or the continuance of a Libor Loan or a portion of a
Libor Loan by the Lender has become impracticable by reason of circumstances
which materially and adversely affect the London interbank market, or
(d) deposits in US Dollars are not available to the Lender in the
London interbank market in sufficient amounts in the ordinary course of
business for the applicable Libor Interest Period to make, fund or maintain
a Libor Loan during such Libor Interest Period,
then the Lender shall promptly notify the Borrower in writing of such
determination setting forth the basis of such determination and each
outstanding Libor Loan will automatically be converted into a US Prime Rate
Loan on the expiry of its then current Libor Interest Period. The Lender
will not be obligated to make any further Libor Loans available pursuant to
this Agreement, so long as the circumstances referred to in this Section 4.5
continue.
4.6 Bankers' Acceptances.
(a) Amounts of Borrowing. Each Borrowing by way of Bankers'
Acceptances shall be in the minimum amount of CAD1,000,000 and thereafter
in increments of CAD100,000.
(b) Contract Period. No Contract Period with respect to a Bankers'
Acceptances will be less than 30 days or greater than 180 days.
(c) Execution of Bankers' Acceptance. Drafts to be accepted as Bankers'
Acceptances shall be signed by an officer or officers of the Borrower who
are duly authorized by the Borrower to execute the Bankers' Acceptances on
behalf of the Borrower. Notwithstanding that any person whose signature
appears on any Bankers' Acceptance as one of such officers may no longer be
an authorized signatory for the Borrower at the date of issuance of a
Bankers' Acceptance, such signature shall nevertheless be valid and
sufficient for all purposes as if such authority had remained in force at
the time of such issuance and any such Bankers' Acceptance so signed shall
be binding on the Borrower.
(d) Bankers' Acceptances in Blank. To facilitate the acceptance of
Bankers' Acceptances, the Borrower shall, upon execution of this Agreement
and from time to time as required, provide the Lender drafts duly executed
and endorsed in blank by the Borrower. Upon receipt of a Notice of
Borrowing for a Bankers Acceptance or a confirmation as set out in Section
4.6 (f) from the Borrower, the Lender is hereby authorized to issue such
Bankers' Acceptances endorsed in blank in such aggregate face amount as may
be set out in the Notice of Borrowing or confirmation as applicable. The
Lender shall not be responsible or liable for its failure to accept a
Bankers' Acceptance as required hereunder if the cause of such failure is,
in whole or in part, due to the failure of the Borrower to provide duly
executed and endorsed drafts to the Lender on a timely basis nor shall the
Lender be liable for any damage, loss or other claim arising by reason of
any loss or improper use of any such instrument, it being understood and
agreed that the Lender's responsibility is limited in exercising in regard
to the drafts the same degree of care which it gives valuable property of
the Lender at the Lender's office, branch or agency where the drafts are
held. The Lender shall maintain a record with respect to Bankers'
Acceptances (i) received by it from the Borrower in blank hereunder, (ii)
voided by it for any reason, (iii) accepted and purchased by it hereunder,
and (iv) cancelled at their respective maturities. The Lender further
agrees to retain such records in the manner and for the statutory periods
provided in the various provincial or federal statutes and regulations
which apply to the Lender.
(e) Purchase of Bankers' Acceptances. Upon acceptance of a Bankers'
Acceptance of the Borrower by the Lender, the Borrower may offer to sell
Bankers Acceptances to the Lender at the Discount Rate and, if purchased,
the Lender shall credit the Discount Proceeds received to the Borrower's
Account. The Acceptance Fee payable by the Borrower to the Lender in
respect of each Bankers' Acceptance accepted and purchased by the Lender
shall be set off against the Discount Proceeds payable by the Lender under
this Section 4.6(e).
(f) Rollover. With respect to each Borrowing which is outstanding
hereunder by way of Bankers' Acceptances, at or before 11:00 a.m. one
Business Day prior to the expiry of the Contract Period of such Bankers's
Acceptances, the Borrower shall notify the Lender at the Branch of Account
by irrevocable telephone notice followed by written confirmation on the
same day in form and substance substantially as attached as Schedule 4.6(f)
if the Borrower intends to issue Bankers' Acceptances on such Maturity Date
to provide for the payment of such maturing Banker's Acceptances. If the
Borrower fails to give such notice and fails to give notice of proposed
conversion in accordance with Section 4.7, such maturing Bankers'
Acceptances shall be deemed to have converted on their Maturity Date into a
Prime Loan in an amount equal to the face amount of such Bankers' Acceptances.
(g) Rollover not Repayment. A payment of and issue of Bankers' Acceptances
having the same aggregate face amount under Section 4.6(f) shall be deemed not
to constitute a repayment of any Borrowing or a new advance of funds.
(h) Sale of Bankers' Acceptances. The Lender may at any time and from
time to time hold, sell, rediscount or otherwise dispose of any or all
Bankers' Acceptances accepted and purchased by it.
4.7 Letters of Credit.
(a) Letter of Credit Period. Letters of Credit shall have terms of not
greater than 365 days and shall mature on a Business Day.
(b) Refusal to Issue. The Lender may refuse to issue Letters of Credit
on the Borrower's behalf at any time in the Lender's sole discretion.
(c) Letter of Credit Agreement. Each Letter of Credit shall be governed
by the terms and conditions of the Letter of Credit Agreement or other
specific agreement relative to such instruments between the Borrower and the
Lender and each Letter of Credit shall be governed by the terms and
conditions of the applicable Letter of Credit Agreement in the event
of a conflict with this agreement.
(d) Retirement of Letter of Credit. A Letter of Credit may only be
retired on its maturity date (i) unless and to the extent it has been
honoured or (ii) unless the written consent of the beneficiary of such
instrument has been obtained and the original Letter of Credit has
been returned to the Lender.
(e) Charging of Letter of Credit. Each drawing under a Letter of
Credit shall be charged to the Borrower's Accounts.
4.8 Conversion Option.
(a) Notice for and Conditions of Conversion. Subject to this Agreement,
the Borrower may, during the term of this Agreement, effective on any
Business Day, convert, in whole or in part, Outstanding Borrowings into
another basis of Borrowing permitted under the Credit Facilities, upon
giving to the Lender at the Branch of Account prior irrevocable
telephone notice of at least 2 Business Days, followed by written
confirmation on the same day substantially in the form of Schedule 4.8,
provided that:
(i) no Default has occurred and is continuing,
(ii) each conversion to a Borrowing by way of a Prime Loan or a US
Prime Loan shall be for a minimum aggregate amount of CAD or
USD25,000,
(iii) each conversion to a Borrowing by way of Cost of Funds Loan,
Bankers' Acceptance or Libor Loan shall be for a minimum
aggregate amount of CAD1,000,000 or USD1,000,000,
(iv) a conversion to a Borrowing by way of Libor Loans shall only
be made to the extent that the conditions outlined in Section
4.5 shall not exist on the relevant Conversion Date,
(v) each conversion of a Borrowing by way of a Libor Loan may be
converted to another basis of Borrowing only on the last day
of the relevant Libor Interest Period and, provided that, if
less than all of such Libor Loan is converted, then after such
conversion not less than USD1,000,000 (or increments of
USD100,000 in excess thereof) shall remain as a Libor Loan,
(vi) each conversion of a Borrowing by way of a Bankers' Acceptances
may be converted to another basis of Borrowings only on the
last day of the relevant Contract Period and provided that, if
less than all Borrowings by way of Bankers' Acceptances is
converted, then after such conversion not less than
CAD1,000,000 (or increments of CAD100,000 in excess
thereof) shall remain as Borrowings by way of Bankers'
Acceptances, and
(vii) each conversion of a Borrowing by way of a Cost of Funds Loan
may be converted to another basis of Borrowings only on the
last day of the relevant Cost of Funds Interest Period and
provided that, if less than all Borrowings by way of Cost of
Funds Loan is converted, then after such conversion not less
than CAD1,000,000 (or increments of CAD100,000 in excess
thereof) shall remain as Borrowings by way of a Cost of Funds
Loan.
(b) Mandatory Conversion. If an Event of Default, or an event or
circumstance which with notice or lapse of time or both would constitute an
Event of Default, has occurred and is continuing, the Borrower shall be
required to convert (i) its Borrowings by way of Libor Loans to Borrowings
by way of US Prime Rate Loans on the applicable Libor Interest Date,
(ii) its Borrowings by way of Bankers' Acceptances to Borrowings by way of
Prime Loans on the applicable Maturity Date of each Bankers' Acceptances and
(iii) its Borrowings by way of Cost of Funds Loans to Borrowings on the last
day of the relevant Cost of Funds Interest Period.
(c) Conversion Not Repayment. The conversion of any Borrowing to
another type of Borrowing in an equal amount, as provided in this Section
4.6, shall not be deemed to constitute a repayment of any Borrowing or a new
advance of funds.
(d) Determination Final. With respect to all matters referred to in
this Section 4.8, the determination by the Lender shall, prima facie, be
final and binding on the Borrower.
4.9 Reliance on Oral Instructions. The Lender shall be entitled to act upon
the oral instructions of any Person who the Lender, acting reasonably,
believes has been identified by the Borrower in written instructions to the
Lender as someone authorized to give oral instructions regarding the
drawdown or issuance of Borrowings, and the Lender shall not be
responsible for any error or omission in such instructions or in the
performance thereof except in the case of negligence or wilful misconduct by
the Lender or its employees. Any such oral instructions so given shall be
immediately confirmed in writing by the Borrower to the Lender.
4.10 Evidence of Indebtedness. The Lender shall open and maintain at
the Branch of Account, accounts and records evidencing the liability of the
Borrower to the Lender with respect to Borrowings and record therein by
appropriate entries all amounts of Indebtedness of the Borrower to the
Lender arising under or in connection with this Agreement and all
payments on account thereof. Such accounts and records will constitute,
prima facie, conclusive evidence of the Indebtedness of the Borrower to the
Lender from time to time, the date each Borrowing was made and the amounts
the Borrower has paid from time to time on account of such Indebtedness.
SECTION 5 - INTEREST, FEES AND EXPENSES
5.1 Payment of Interest on Prime Loans.
Rate. The Borrower shall pay interest on Prime Loans in Canadian Dollars
at a rate per annum equal to the Prime Rate. Each change in the fluctuating
interest rate for a Prime Loan will take place simultaneously with the
corresponding change in the Prime Rate.
Calculation. Interest on Prime Loans shall be payable monthly in arrears
on each Interest Payment Date for the period up to but not including such
Interest Payment Date and shall be calculated on a daily basis on the
principal amount of the Prime Loans remaining unpaid from time to time and
on the basis of the actual number of days elapsed and a year of
365 days or 366 days, as the case may be.
5.2 Payment of Interest on Cost of Funds Loans.
Rate. The Borrower shall pay interest on each Cost of Funds Loan in US
Dollars for the period commencing on and including the first day of the Cost
of Funds Interest Period applicable to such Cost of Funds Loan up to but not
including the Cost of Funds Interest Date, at the rate per annum determined
by the Lender to be equal to the sum of Cost of Funds plus 1.25%. Each such
determination of the rate of interest applicable to a Cost of Funds Interest
Period shall, prima facie, be final, and binding upon the Borrower. Upon
determination of the rate of interest applicable to a Cost of Funds Interest
Period applicable to a Cost of Funds Loan, the Lender shall promptly notify
the Borrower of such rate.
Calculation. Interest on each Cost of Funds Loan shall be payable on
each Cost of Funds Interest Date with respect to such Cost of Funds Loan and
shall be calculated on a daily basis and on the basis of the actual number of
days elapsed and a year of 360 days, provided however, that in the event that
the relevant Cost of Funds Interest Period is greater than 90 days, interest
shall be due and payable not less frequently than every 90 days.
5.3 Payment of Interest on US Prime Rate Loans.
Rate. The Borrower shall pay interest on US Prime Rate Loans in US
Dollars at a rate per annum equal to the US Prime Rate. Each change in the
fluctuating interest rate for a US Prime Rate Loan will take place
simultaneously with the corresponding change in the US Prime Rate.
Calculation. Interest on US Prime Rate Loans shall be payable monthly
in arrears on each Interest Payment Date for the period up to but not
including such Interest Payment Date and shall be calculated on a daily
basis on the principal amount of the US Prime Rate Loans remaining unpaid
from time to time and on the basis of the actual number of days elapsed and
a year of 365 days or 366 days, as the case may be.
5.4 Letters of Credit Fee.
Fees. The Borrower shall pay to the Lender, at the time the Lender
issues (or renews) a Commercial Letter of Credit an issuance fee, at the
Lender's standard rates calculated on the maximum face amount of each such
Commercial Letter of Credit. The Borrower shall pay to the Lender, at the
time the Lender issues (or renews) a Standby Letter of Credit an issuance fee
equal to the greater of (i) CAD$300 and (ii) an annual fee equal to 1.25% of
the maximum face amount of such Standby Letter of Credit. The calculation of
the amount of such annual fees shall be based on the term of such Letter of
Credit (or the term of such renewal) and shall be based on a 365 or 366 day
year, as the case may be.
5.5 Payment of Interest on Libor Loans.
Rate. The Borrower shall pay interest on each Libor Loan in US Dollars
for the period commencing on and including the first day of the Libor
Interest Period applicable to such Libor Loan up to but not including the
Libor Interest Date, at the rate per annum determined by the Lender to be
equal to the sum of Libor plus 1.25%. Each such determination of the rate
of interest applicable to a Libor Interest Period shall, prima facie, be
final, and binding upon the Borrower. Upon determination of the rate of
interest applicable to a Libor Interest Period applicable to a Libor Loan,
the Lender shall promptly notify the Borrower of such rate.
Calculation. Interest on each Libor Loan shall be payable on each Libor
Interest Date with respect to such Libor Loan and shall be calculated on a
daily basis and on the basis of the actual number of days elapsed and a year
of 360 days; provided however, that in the event that a relevant Libor
Interest Period is greater than 90 days, interest shall be due and payable not
less frequently than every 90 days.
5.6 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, where permitted by law,
after judgment at a rate per annum equal to the rate of interest as is
applicable to the relevant Borrowing prior to default (calculated on the
same basis) plus 2.0% for so long as such amount remains overdue. Such
interest shall be payable upon demand made by the Lender and shall be
compounded on each Interest Payment Date, Cost of Funds Interest Date or
Libor Interest Date, as applicable.
5.7 Interest Act. For the purposes of the Interest Act (Canada), where in
this Agreement a rate of interest is to be calculated on the basis of a year
of 360 or 365 days, as applicable (the "first rate"), the yearly rate of
interest to which the first rate is equivalent is the first rate multiplied
by the actual number of days in the year for which such calculation is made
and divided by 360 or 365 (as applicable).
5.8 Arrangement Fee. The Borrower will pay the Lender an arrangement fee (the
"Arrangement Fee") of CAD18,750 payable on the Borrowers' acceptance of the
Proposal Letter, the receipt of which is hereby acknowledged by the Lender.
5.9 Administration Fee. The Borrower will pay the Lender an administration
fee (the "Administration Fee") of CAD400 payable quarterly in arrears for the
daily monitoring and administration of operating draws and pay downs.
5.10 Commitment Fee. The Borrower will pay the Lender a commitment fee (the
"Commitment Fee") equal to 0.125% of the daily unused portion of the Credit
Facilities payable quarterly in arrears.
5.11 Limit on Rate of Interest.
(a) No Payment shall exceed Lawful Rate. Notwithstanding any other term of this
Agreement, the Borrower shall not be obliged to pay any interest or other
amounts under or in connection with this Agreement in excess of the amount
or rate permitted under or consistent with Applicable Laws. In particular
but without limiting the generality of the foregoing, the Borrower shall not
be obliged to pay any interest or other amounts which would result in the
receipt by the Lender of interest on credit advanced at a rate in excess of
the rate permitted under the Criminal Code (Canada). For purposes of this
Section, "interest" and "credit advanced" have the meanings ascribed in the
Criminal Code (Canada), and the "effective annual rate of interest" shall be
calculated in accordance with generally accepted actuarial principles and
practices.
(b) Payment at Highest Lawful Rate. If, as a result of Section 5.10 (a),
the Borrower is not obliged to make a payment which it would otherwise be
required to make, the Borrower shall make such payment to the maximum extent
permitted by or consistent with Applicable Law.
5.12 Change in Circumstances.
(a) Reduction in Rate of Return. If at any time the Lender determines,
acting reasonably, that (1) any change in any Applicable Law or any
interpretation thereof after the date of execution hereof, or (2) compliance
by the Lender with any direction, requirement or request from any regulatory
authority given after the date of execution hereof, whether or not
having the force of law provided that if not having the force of law, the
Lender's decision to comply therewith is reasonable, prudent and in good
faith, has or would have, as a consequence of the Lender's obligation under
this Agreement and taking into consideration the Lender's policies with
respect to capital adequacy, the effect of reducing the rate of return on
the Lender's capital to a level below that which the Lender could have
achieved but for such change or compliance, then from time to time, upon
demand of the Lender, the Borrower shall pay to the Lender such additional
amounts as may be determined by the Lender as will compensate the Lender for
such reduction provided that the Lender is similarly requiring
payment of compensating amounts from other Borrowers whose credit facilities
with the Lender are similarly effected.
(b) Taxes, Reserves, Capital Adequacy, etc. If, after the date of
execution hereof, any introduction of any Applicable Law or any change or
introduction of a change in any Applicable Law (whether or not having the
force of law) provided that if not having the force of law, the Lender's
decision to comply therewith is reasonable, prudent and in good faith or
in the interpretation or application thereof by any court or by any
Governmental Authority, central bank or other authority or entity charged
with the administration thereof or any change in the compliance of the
Lender therewith now or hereafter:
(i) subjects the Lender to, or causes the withdrawal or termination
of a previously granted exemption with respect to, any Tax or
changes the basis of taxation, or increases any existing Tax,
on payments of principal, interest, fees or other amounts
payable by the Borrower to the Lender under this Agreement
(except for taxes on the overall net income of the Lender),
(ii) imposes, modifies or deems applicable any reserve, special
deposit, deposit insurance or similar requirement against
assets held by, or deposits in or for the account of or loans
by or any other acquisition of funds by, an office of the
Lender, or
(iii) imposes on the Lender or expects there to be maintained by the
Lender any capital adequacy or additional capital requirement
in respect of any Borrowing or any other condition with respect
to this Agreement,
and the result of any of the foregoing, in the sole determination of the
Lender acting reasonably, shall be to increase the cost to, or reduce the
amount received or receivable by, the Lender hereunder or its effective rate
of return hereunder in respect of making, maintaining or funding a Borrowing
hereunder, the Lender shall, acting reasonably, determine that amount of
money which shall compensate the Lender for such increase in cost or
reduction in income. The Lender shall make reasonable efforts to limit the
incidence of any Additional Compensation, as defined below.
(c) Payment of Additional Compensation. Upon the Lender having
determined that it is entitled to compensation in accordance with the
provisions of Sections 5.11(a) or 5.11 (b) (herein referred to as
"Additional Compensation"), the Lender shall promptly so notify the
Borrower and shall provide to the Borrower a photocopy of the relevant
Applicable Law or direction, requirement or request, as applicable, and a
certificate of a duly authorized officer of the Lender setting forth the
Additional Compensation and the basis of calculation thereof, which shall be
prima facie evidence of such Additional Compensation. The Borrower shall
pay to the Lender within 30 Business Days of the giving of such notice the
Additional Compensation calculated and accruing from the date of such
notification. The Lender shall be entitled to be paid such Additional
Compensation from time to time to the extent that the provisions of this
Section 5.11 are then applicable notwithstanding that Lender has previously
been paid any Additional Compensation.
(d) Bank for International Settlements Capital Rules. For greater
certainty, the term "Applicable Law" for the purposes of this Section 5.11
includes any law relating in any way to international convergence of capital
measurement and capital standards developed by the Lender for International
Settlements.
5.13 Payment of Portion. Notwithstanding any other term or condition of
this Agreement, if the Lender gives the notice provided for in Section 5.11
with respect to any Borrowing (an "Affected Borrowing"), the Borrower may at
its option, upon 10 Business Days notice to that effect given to the Lender
(which notice shall be irrevocable) unless such prepayment causes an
Event of Default hereunder, prepay in full without penalty such Affected
Borrowing outstanding together with accrued and unpaid interest on the
principal amount so prepaid up to the date of such prepayment and pay such
Additional Compensation as may be applicable to the date of such payment and
all costs, losses and expenses incurred by the Lender by reason of the
liquidation or re-employment of deposits or other funds or for any other
reason whatsoever resulting from the repayment of such Affected Borrowing or
any part thereof. Upon its receipt of such prepayment, the Lender shall
refund a proportionate share of the Arrangement Fee.
5.14 Illegality. If any Applicable Law, or any change therein or in the
interpretation or application thereof by any court or by any Governmental
Authority or central bank or comparable agency or any other entity charged
with the interpretation or administration thereof or compliance by the Lender
with any request or direction (whether or not having the force of
law provided that if not having the force of law, the Lender's decision to
comply therewith is reasonable, prudent and in good faith) of any such
Governmental Authority, central bank or comparable agency or entity, now or
hereafter makes it unlawful or impossible for the Lender to make, fund or
maintain a Borrowing or to perform its obligations under this Agreement, the
Lender may, by written notice thereof to the Borrower terminate its
obligations to make further advances under this Agreement, and the Borrower,
if required by the Lender, shall repay forthwith (or at the end of such
longer period as the Lender at its discretion has agreed) the principal
amount of such Borrowing together with accrued interest (without penalty or
bonus), along with such Additional Compensation as may be applicable to the
date of such payment and all costs, losses and expenses incurred by the
Lender by reason of the liquidation or re-deployment of deposits or other
funds or for any other reason whatsoever resulting from the repayment of
such Borrowing or any part thereof. If any such change shall only affect a
portion of the Lender's obligations under this Agreement which is, in the
opinion of the Lender acting reasonably, severable from the remainder of
this Agreement so that the remainder of this Agreement may be continued in
full force and effect without otherwise affecting any of the obligations of
the Lender or the Borrower hereunder, the Lender shall, after allowing the
Borrower the option to convert its Loan, only declare its obligations under
that portion so terminated.
5.15 Indemnity.
(a) General. The Borrower shall indemnify the Lender against all losses,
reasonable expenses and liabilities which the Lender may sustain or incur as
a consequence of (1) any Default by the Borrower under this Agreement, (2)
any material misrepresentation by the Borrower contained in any writing
delivered to the Lender in connection with this Agreement, or (3) any
material failure by the Borrower to comply with any Applicable Law.
(b) Libor Loans. For greater certainty, but without limitation, if the
Borrower repays, prepays or cancels a Libor Loan on a day other than a Libor
Interest Date falling on the last day of a Libor Interest Period, the
Borrower shall indemnify the Lender for any loss or expense suffered or
incurred by the Lender including, without limitation, any loss or expenses
which the Lender incurs by reason of the liquidation or re-deployment of
deposits or other funds acquired by the Lender to maintain the Libor Loan
and any interest or other charges payable to lenders of funds borrowed by
the Lender in order to maintain the Libor Loan together with any other
charges, costs or expenses incurred by such Lender relative thereto.
(c) Telephone Instructions. The Borrower shall indemnify the Lender for
any loss or expense suffered or incurred by the Lender as a consequence of
the Lender acting in accordance with prudent banking standards upon
instructions given or agreements made over the telephone or by electronic
transmission of any type with Persons who the Lender, acting reasonably,
believes to have been acting on the Borrower's behalf and who have been
identified in writing by the Borrower as Persons authorized to give such
instructions, provided this indemnity shall not apply to losses or expenses
incurred or suffered by the Lender as a result of its own gross negligence
or wilful misconduct.
(d) Certificate. A certificate of the Lender setting out the basis for the
determination of the amount necessary to indemnify the Lender pursuant to
this Section 5.14 shall be, prima facie, conclusive evidence of the
correctness of such determination.
5.16 Payment of Stamping Fee.
The stamping fee applicable to Bankers' Acceptances is to be paid at the
time of issuance, with the face value due at maturity.
SECTION 6 - PAYMENTS AND REDUCTIONS OF COMMITMENTS
6.1 Payments Generally. Each payment to the Lender under this Agreement
shall be paid in the currency in which the relevant Borrowing is outstanding
and all other amounts owing hereunder shall be paid in Canadian Dollars
except as otherwise herein required or contemplated. Each such payment
shall be made for value at or before 1:00 p.m. 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
next following such day (and any such extension shall be taken into account
for purposes of the computation of interest and fees payable under this
Agreement).
6.2 No Set-Off. All payments to be made by the Borrower shall be made without
set-off or counterclaim and without any deduction of any kind.
6.3 Application of Payments Before Exercise of Rights. All payments made
by or on behalf of the Borrower under this Agreement before the exercise by
the Lender of any rights arising under Section 9.2 shall be applied in each
instance in the following order:
(a) firstly, in payment of any amounts due and payable as and by way of
recoverable expenses hereunder;
(b) secondly, in payment of any fees, interest, or default interest
then due and payable on or in respect of the Borrowings;
(c) thirdly, in repayment of any principal amounts outstanding on
account of the Borrowings; and
(d) fourthly, in payment of any other amounts then due and payable by the
Borrower hereunder.
6.4 Application of Payments After Exercise of Rights. All payments made by
or on behalf of the Borrower under this Agreement after the exercise by the
Lender of any rights arising under Section 9.2 shall be applied in each
instance in the following order, unless the Lender otherwise determines in
its sole and absolute discretion:
(a) firstly, in payment of the reasonable costs and expenses of any
realization, including the out-of-pocket expenses of the Lender and
the reasonable fees and out-of-pocket expenses of counsel employed
in connection therewith, and to the payment of all reasonable funds
made available by the Lender for the account of the Borrower in
connection with such realization and the payment of all
reasonable out-of-pocket costs and expenses incurred by the Lender in
connection with the administration and enforcement of this Agreement
or the other Documents, to the extent that such funds, costs and
expenses shall not have been reimbursed to the Lender;
(b) secondly, in payment of any unpaid fees payable hereunder to and
including the date of such application;
(c) thirdly, in payment of principal and then to the payment of any other
Indebtedness (other than on account of interest) outstanding under this
Agreement and under any other agreement applicable to the Outstanding
Borrowings, and then to the payment of accrued and unpaid interest
thereunder to and including the date of such application; and
(d) fourthly, in payment of the balance, if any, of such proceeds to the
Borrower or such other person or persons who may be entitled at law
to such proceeds or, in each case, their respective successors or
assigns, or as a court of competent jurisdiction may otherwise direct.
6.5 Reduction of Commitment. The Borrower may reduce or cancel the amount of
the Commitment at any time upon not less than five Business Days prior
irrevocable written notice to the Lender without bonus or penalty; provided
that on or prior to the effective date of such reduction or cancellation all
Outstanding Borrowings in excess of the Commitment, as reduced or cancelled,
together with interest accrued thereon and fees outstanding in respect
thereof is paid in full.
SECTION 7 - COVENANTS
7.1 Covenants of the Borrower. While any amount owing hereunder remains
unpaid or the Lender has any obligations hereunder, the Borrower covenants
with the Lender, that it will:
(a) Corporate Existence and Franchises. except as otherwise expressly
permitted in this Agreement, maintain in full force and effect its separate
existence and all rights, licenses, leases and franchises reasonably
necessary to the conduct of its business.
(b) Books, Records and Inspections. maintain complete and accurate
books and records, permit the Lender to have reasonable access to the
Borrower's books and records, and permit the Lender to inspect the
Borrower's properties and operations at reasonable times.
(c) Insurance. maintain insurance to such extent and against such
hazards and liabilities as may be required by law and as is commonly
maintained by companies similarly situated or as the Lender may reasonably
request from time to time.
(d) Taxes and Liabilities. promptly pay when due all taxes, duties,
assessments and other liabilities, except such taxes, duties, assessments
and other liabilities as the Borrower is diligently contesting in good faith
and by appropriate proceedings or which the failure to pay would not have a
Material Adverse Effect; provided that the Borrower has provided for and is
maintaining adequate reserves with respect thereto in accordance with GAAP.
(e) Liens. not create or permit to exist any Lien with respect to any of
the properties or assets of the Borrower or any Subsidiary, whether nor owned
or hereafter acquired, including, without limitation, accounts or inventory
now owned or hereafter acquired, except the following Liens (a) Permitted
Liens; (b) Liens which arise in the ordinary course of business for sums not
due or sums which the Borrower is contesting in good faith and by appropriate
proceedings and with respect to which the Borrower has provided for and is
maintaining adequate reserves in accordance with GAAP, but which do not
involve any deposits or advances or borrowed money or the deferred purchase
price of property or services; and (c) any other Lien in respect of which
the Lender has provided its prior written consent.
(f) Other Agreements. not enter into any agreement which would have a
Material Adverse Effect on the Borrower containing any provision which would
be violated or breached by the performance of its obligations hereunder or
under any instrument or document delivered or to be delivered by it hereunder
or in connection herewith or which would violate or breach any
provision hereof or of any such instrument or document.
(g) Compliance with Applicable Laws. comply with the requirements of all
Applicable Laws, rules, regulations, and orders of all Governmental Authorities
(Federal, state, provincial, local or foreign, and including, without
limitation, environmental laws, rules, regulations and orders), except for
failures to comply with such statutes, rules and regulations which in the
aggregate would not materially and adversely affect the Borrower's business,
credit, operations, financial condition or prospects, except where the
Borrower is contesting an alleged breach in good faith and by proper
proceedings and for which the Borrower is maintaining adequate reserves in
accordance with GAAP.
(h) Delivery of Documents. on or before the Closing Date (except as
otherwise noted), the Borrower shall execute, or cause to be executed, and
delivered to the Lender, in form and substance satisfactory to it acting
reasonably, the following:
1. a certificate of an officer on behalf of the Borrower dated as of
the Closing Date certifying:
(i) the names and specimen signatures of the Persons authorized to
sign the Documents to be executed and delivered by the Borrower;
(ii) that the constating documents and by-laws of the Borrower attached
thereto are complete and correct copies, have not been amended,
modified or supplemented except as described in the Certificate
and are in full force and effect, except that, to the extent
that the Borrower has provided the Lender within the previous
8 months with a copy of its constating documents or by-laws,
instead of providing a new copy it may provide the Lender with
a certificate of one of its officers to the effect that such
documents are complete and correct copies of the originals
thereof which originals have not been amended, modified or
supplemented and are in full force and effect;
(iii) that attached thereto is the resolution of the Borrower and
all other authorizations necessary to authorize the execution
and delivery and performance of the Documents executed and
delivered by it;
2. promissory note(s) given by the Borrower in favour of the Lender
evidencing the Outstanding Borrowings substantially in the form set
out in Schedule 7.1(h) 2.
3. Letter of Credit Agreement given by the Borrower in favour of the
Bank with respect to the issuance of Letters of Credit.
4. unlimited guarantee and postponement of claim given by the Guarantor
in favour of the Lender with respect to the indebtedness of the
Borrower to the Lender substantially in the form set out in
Schedule 7.1(h) 4;
5. acknowledgements by the Guarantor and the domestic senior lenders
of the Guarantor that the said guarantee shall be held by the Lender
on a pari passu basis;
6. opinions of legal counsel to the Borrower and the Guarantor, addressed
to the Lender substantially in the form set out in Schedule 7.1(h) 6;
and
7. such other documents related to the foregoing as the Lender may
reasonably request.
7.2 Accounting, Financial Statements and Other Information.
General. The Borrower shall maintain a system of accounting established and
administered in accordance with GAAP consistently applied and shall set
aside on its books all proper reserves.
Reports. The Borrower shall provide to the Lender each of the following:
(a) Audit Report. on or before the 90th day after each of the Guarantor's
fiscal years, a copy of an annual audit report of the Guarantor
prepared in conformity with GAAP, duly certified by its Auditors,
together with a certificate from such Auditors containing a
computation of, and showing compliance with, each of the
financial ratios and restrictions contained in this Agreement.
(b) Interim Reports. on or before the 45th day after the end of each
of the Borrower's fiscal quarters, a copy of unaudited financial
statements of the Borrower prepared in a manner consistent with the
financial statements referred to above, signed by a senior financial
officer of the Borrower and consisting of, at least, balance sheets
as at the close of such month and statements of earnings for such
quarter and for the period from the beginning of such fiscal quarter
to the close of such quarter.
(c) Notice of Default and Litigation. forthwith upon learning of the
occurrence of any of the following written notice thereof which
describes the same and the steps being taken by the Borrower with
respect thereto: (i) the occurrence of an Event of Default or
Default, (ii) the institution of, or any adverse determination in,
any litigation, arbitration proceedings or governmental proceeding
in which any injunctive relief is sought or in which money damages
in excess of $1,000,000.00 are sought.
(d) Other Information. such other information concerning the Borrower
as the Lender may reasonably request from time to time.
SECTION 8 - ENVIRONMENTAL MATTERS
8.1 Representations and Warranties. The Borrower represents and warrants to
the Lender, all of which shall survive the execution and delivery of this
Agreement, as follows:
(a) Compliance. Subject to Section 8.1(d) below, to the best knowledge
of the Borrower, the property, assets, activities and operations of the
Borrower and those of any prior owner, lessee, licensee or other occupant
thereof comply in all material respects with all Environmental Laws and with
any authorization, permit, grant, licence, consent, right, privilege,
registration, filing, commitment, order, approval, judgment, direction,
ordinance or decree issued or granted by law or by any Governmental
Authority and are not subject to any judicial, governmental, regulatory or
other investigations, proceedings, inquiries or notices; save and except to
the extent disclosed in writing to the Lender and in respect of which, to the
extent possible, adequate remedial action has been undertaken. To the best
knowledge of the Borrower, none of the Borrower, and any present or prior
owner, lessee, licensee or occupant or any Person having the charge,
management or control of any of their respective properties has filed any
notice or report under any Environmental Law with any Governmental Authority.
(b) Presence of Contaminant. Subject to Section 8.1 (d) below, to the
best knowledge of the Borrower, there neither is nor has been, any
Environmental Activity at, upon, under, over, within or with respect to
their properties with the exception of the handling, use or storage in
accordance with Environmental Laws, of electrical and/or hydraulic
equipment that may contain PCBs or related substances, which equipment is of
a kind normally used in premises similar to the properties of the Borrower.
(c) Liability. Subject to Section 8.1 (d) below, to the best knowledge
of the Borrower, none of the Borrower and any present or prior owner, lessee,
licensee or occupant of any of their respective properties has been, nor is
it, involved in any operations at, or with respect to their properties which
could lead to the imposition of liability on the Borrower or Person who has
or will have the charge, management or control of any such property or the
creation of a Lien thereon under any Environmental Law; save and except to
the extent disclosed in writing to the Lender and in respect of which to the
extent possible adequate remedial action has been undertaken.
(d) Inquiry. The representations and warranties provided in Sections
8.1(a)(b) and (c) are given after limited inquiry by the Borrower, the
details of which are provided in Schedule 8.1(d).
8.2 Covenants. While any amount owing hereunder remains unpaid or the
Lender has any obligations hereunder, the Borrower covenants with the Lender
as follows:
(a) Compliance. It shall comply in all material respects with the
requirements of any Environmental Law.
(b) Notification. It shall notify the Lender within 10 days of
becoming aware of any Release or within 15 days of any other discovery of
any Contaminant at, upon, under, over, within or with respect to any of its
property or any contiguous real or immovable property. It shall promptly
thereafter forward to the Lender copies of all orders, notices,
permits, applications or other communications and reports in connection with
any Environmental Law affecting or relating to any of its property or its
operations and activities.
8.3 Indemnity. The Borrower shall at all times indemnify and hold harmless
the Lender from and against any and all claims, suits, actions, debts,
damages, costs, losses, obligations, judgments, charges, and expenses, of
any nature whatsoever (in this Section 8.3, a "Claim") suffered or incurred
by the Lender, whether upon realization of any security, or as a 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 Authority relating to the Borrower, or the business or property
of the Borrower as privileged or hypothecary creditor or mortgagee in
possession of property or as successor or successor-in-interest as a result
of any taking of possession of all or any property or by foreclosure deed or
deed in lieu of foreclosure or by any other means relating to the Borrower,
under or on account of any breach of Environmental Law (except as a result
of the negligence or wilful misconduct of the Lender), or the assertion of
any Lien thereunder, 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 of
their respective properties,
(b) the Release of a Contaminant owned by, or under the charge,
management or control of, the Borrower,
(c) any costs incurred by any Governmental Authority or any other Person
or damages from injury to, destruction of, or loss of natural
resources in relation to, any such property or personal property
located thereon, including reasonable costs of assessing such
injury, destruction or loss incurred pursuant to any
Environmental Laws,
(d) liability for personal injury or property damage arising by reason
of any civil law offences or quasi-offences 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, or with respect
to its property, and/or
(e) any other environmental matter affecting any property or the
operations and activities of the Borrower within the jurisdiction
of any federal, provincial, municipal or local environmental agency.
8.4 Scope of Indemnity. The Borrower acknowledges that the Lender has
agreed to make the Credit Facilities available in reliance upon the
representations, warranties, and covenants in this Section 8.4. For this
reason, it is the intention of the Borrower and the Lender that the
provisions of this Section 8 shall supersede any other provisions in this
Agreement or in any Document which in any way limit the liability of the
Borrower and that the Borrower shall be liable for any obligations arising
under this Section 8 even if the amount of the liability incurred exceeds
the amount outstanding under this Agreement. The obligations arising under
this Article 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 obligations of the Borrower arising
under this Section 8 shall survive the repayment of the Borrowings and shall
survive the transfer of any or all right, title and interest in and to any
property to any party, whether or not affiliated with the Borrower.
8.5 Interest. If the Lender incurs any obligations, costs or expenses
under this Section 8 or in respect of any Environmental Activity covered by
this Section 8, the Borrower shall pay the same to the Lender immediately on
demand, and if such payment is not received within 10 days, such amount will
be treated as a Prime Loan and the Borrower will pay interest thereon on
demand, but otherwise calculated as set out in Section 5.1.
SECTION 9 - DEFAULT AND ENFORCEMENT
9.1 Events of Default. Upon the occurrence of any one or more of the
following events the Lender may, by written notice to the Borrower, declare
an Event of Default:
(a) Non-payment of Principal. The Borrower fails to make when due, whether
by acceleration or otherwise, any payment of principal required to be made
by the Borrower hereunder and such default continues for more than one (1)
Business Day.
(b) Non-payment of Interest, Fees and Other Amounts. The Borrower fails to
make when due, whether by acceleration or otherwise, any payment of interest,
fees or any other payment hereunder not referred to in Section 9.1(a) and
such failure continues for 5 Days of such due date.
(c) Covenants. The Borrower fails to perform or observe to any material
extent any other term, condition, covenant or undertaking contained in any
Document. Except as regards breaches of covenants contained in Sections
7.1(a) and 7.2(a) in respect of which the Lender may immediately declare an
Event of Default, the Borrower shall have 30 days after the occurrence of
such event to remedy such failure. Only if the Borrower does not remedy such
failure within that time shall the Lender become entitled to declare an
Event of Default on the basis of such failure.
(d) Nonpayment of Other Indebtedness. The Borrower or the Guarantor
defaults in the payment when due (subject to any applicable grace period),
whether by acceleration or otherwise, of any other Indebtedness in the
principal amount in excess of $500,000 of, or guaranteed by, the
Borrower or the Guarantor or defaults in the performance or observance of
any obligation or condition with respect to any such other Indebtedness if
the effect of such default is to accelerate the maturity of any such
Indebtedness or to permit the holder or holders thereof, or any trustee or
agent for such holders, to cause such Indebtedness to become due and payable
prior to its expressed maturity, and continuation thereof after the Lender
gives notice to the Borrower or the Guarantor that such default is an Event
of Default.
(e) Representation and Warranties. Any material representation, warranty
or statement which is made by the Borrower in any Document or which is
contained in any certificate, written statement or written notice provided
under or in connection with any Document is untrue or incorrect in any
material adverse respect when made and such default continues for
30 days.
(f) Execution. A distress or execution or any similar process is levied
or enforced against any material property or assets of the Borrower or any
of its Subsidiaries with an aggregate fair market value in excess of an
amount equal to 3% of the Borrower's shareholders equity.
(g) Invalidity and Contestation. This Agreement or any of the other
Documents shall at any time after execution and delivery and for any reason
(other than in accordance with its terms) cease to be in full force and
effect or shall be declared to be null and void, or the legality, validity,
binding nature or enforceability of this Agreement or any other Document or
any term or provision thereof shall be contested by the Borrower or any
other party thereto, or the Borrower or any other such party shall deny
that it has any or further liabilities or obligations thereunder.
(h) Government Approval. Any material Government Approval required to
enable the Borrower or any of its Subsidiaries to conduct its business
substantially as presently conducted or to perform its obligations under
any Document is not obtained or is withdrawn or ceases to be in full force
and effect and such required Government Approval cannot be acquired or
reinstated within 60 days of the date on which the Borrower or such
Subsidiary knew or ought to have known such Government Approval was
required or withdrawn or, if capable of acquisition or reinstatement
within such 60-day period, the Borrower or such Subsidiary has
not proceeded diligently to obtain or reinstate such Government Approval
within such 60-day period.
(i) Voluntary Proceedings. The commencement by or acquiescence of the
Borrower or any of its Subsidiaries of or to proceedings for substantive
relief with respect to the Borrower or a Subsidiary in any bankruptcy,
insolvency, debt restructuring, reorganization, readjustment
of debt, dissolution, liquidation or other similar proceedings (including,
without limitation, proceedings under the Bankruptcy and Insolvency Act
(Canada), the Winding-up Act (Canada), the Companies' Creditors Arrangement
Act (Canada), or similar legislation in the United States of America, the
corporation statute under which any of them is organized or other similar
legislation) including, without limitation, the filing of a proposal or plan
of arrangement or a notice of intention to file same, or proceedings for the
appointment of a trustee, interim receiver, receiver, receiver and manager,
custodian, liquidator, provisional liquidator, administrator, sequestrator
or other like official with respect to the Borrower or any of its
Subsidiaries or all or any material part of their respective assets, or any
similar relief; where such proceeding would result in a Material Adverse
Effect on the Borrower or any of its Subsidiaries.
(j) Involuntary Proceedings. If a petition or any other proceeding or
case shall be filed, instituted or commenced with respect to the Borrower
or any of its Subsidiaries under any bankruptcy, insolvency, debt
restructuring, reorganization, incorporation, readjustment of debt,
dissolution, liquidation, winding-up or similar law, now or hereafter in
effect, seeking the bankruptcy, liquidation, reorganization, dissolution,
winding-up, composition or readjustment of debts of the Borrower or any of
its Subsidiaries, the appointment of a trustee, interim receiver, receiver,
receiver and manager, custodian, liquidator, provisional liquidator,
administrator, sequestrator or other like official for the Borrower or any
of its Subsidiaries or all or any material part of their respective assets,
or any similar relief; where such proceeding would result in a Material
Adverse Effect on the Borrower or any of its Subsidiaries.
(k) Receiver. Any Person including, without limitation, a receiver,
receiver and manager, or other similar official whether appointed privately
or judicially, is appointed for the Borrower or any of its Subsidiaries or
takes possession of the properties or assets of the Borrower or any of its
Subsidiaries with an aggregate fair market value in excess of an amount
equal to 3% of the Borrower's shareholders equity.
(l) Act of Bankruptcy. The Borrower or any of it Subsidiaries is unable
to pay debts generally as such debts become due, is adjudged or declared to
be bankrupt or commits an act of bankruptcy.
9.2 Rights upon Default. Upon the occurrence of an Event of Default, the
Lender may, on written notice to the Borrower, declare that the entire
principal amount of the Outstanding Borrowings, all unpaid accrued interest
and all fees and other amounts required to be paid by the Borrower hereunder
are immediately due and payable without the necessity of presentment
for payment, notice of non-payment and of protest (all of which are hereby
expressly waived to the fullest extent permitted by Applicable Law) and
proceed to exercise any and all rights and remedies hereunder and under any
other Document. From and after the issuance of any declaration referred to
in this Section 9.2, the Lender shall not be required to honour any
cheque or other instrument presented to it regardless of the date of issue
or presentation. Immediately upon receipt of such declaration, the Borrower
shall pay to the Lender all amounts referred to therein.
9.3 Waiver of Default. No express or implied waiver by the Lender of any
Event of Default shall in any way be or be construed to be a waiver of any
future or subsequent Event of Default. To the extent permitted by Applicable
Law, the Borrower hereby waives any rights now or hereafter conferred by
statute or otherwise which may limit or modify any of the Lender's rights or
remedies under this Agreement. The Borrower acknowledges and agrees
that the exercise by the Lender of any rights under any Document without
having declared an acceleration shall not in any way alter, affect or
prejudice the right of the Lender to make a declaration pursuant to the
provisions of Section 9.2 at any time and, without limiting the
foregoing, shall not be construed as or deemed to constitute a waiver of any
rights under Section 9.3.
SECTION 10 - REMEDIES
10.1 Remedies 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. Any single
or partial exercise by the Lender, of any right or remedy for a 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 or other rights or remedies 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 thereby, shall be deemed not to be a waiver of any subsequent
default.
10.2 Remedies Not Limited. The Lender may, to the extent permitted by
Applicable Law, bring suit at law, in equity or otherwise for any available
relief or purpose including but not limited to (a) the specific performance
of any covenant or agreement contained in this Agreement or in any other
Document, (b) an injunction against a violation of any of the terms
of this Agreement or any other Document, (c) in aid of the exercise of any
power granted by this Agreement or any other Document or by law, or (d) the
recovery of any judgment for any and all amounts due in respect of the
Borrowings or amounts otherwise due hereunder or under any Document.
10.3 Set-Off, etc. Upon and after the declaration of any Event of Default
pursuant to Section 9.2, the Lender and each of its branches and offices are
hereby authorized by the Borrower, at any time and from time to time, without
notice, (a) to set off and apply any and all amounts owing by the Lender or
any such branch or office to the Borrower (whether payable in Canadian
Dollars or any other currency, whether matured or unmatured, and in the
case of deposits, whether general or special, time or demand and however
evidenced) against and on account of the obligations and liabilities of the
Borrower due to the Lender under this Agreement or any other agreement
delivered under or in connection with this Agreement including, without
limitation, the Documents, (whether such obligations or liabilities are
payable in Canadian Dollars or any other currency, and whether such
obligations or liabilities are unmatured or contingent), (b) to hold any
such amounts owing by the Lender as collateral to secure the obligations
and liabilities of the Borrower under this Agreement to the extent such
amounts may be required to satisfy any contingent or unmatured obligations
or liabilities of the Borrower to the Lender hereunder, and (c) to return as
unpaid for insufficient funds any and all cheques and other items drawn
against any deposits so held as the Lender in its sole discretion
may elect.
10.4 Lender May Perform Covenants. If the Borrower shall fail to perform
any of its obligations under any covenant contained in this Agreement or
any other Document, the Lender may (but has no obligation to), upon notice
to the Borrower, if the Lender, acting reasonably, believes it necessary to
do so to protect or preserve its rights and remedies hereunder perform any
such covenant capable of being performed by it and, if any such
covenant requires the payment or expenditure of money, it may make such
payment or expenditure with its own funds. All amounts so paid by the
Lender hereunder shall be repaid by the Borrower on demand therefor, and
shall bear interest at the rate applicable to a Prime Loan from and
including the date paid by the Lender hereunder to but excluding the date
such amounts are irrevocably repaid in full by the Borrower.
SECTION 11 - MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or consent to any departure by the Borrower from any provision of
this Agreement will in any event be effective unless it is in writing and
then the amendment, modification, waiver or consent will be effective only
in the specific instance, for the specific purpose and for the specific
length of time for which it is given by the Lender.
11.2 Notice. Any notice, request or other communication to be given under
this Agreement, except as otherwise specifically stated, shall be in writing
and shall be either delivered personally or sent by telecopier or by prepaid
mail to the mailing address, or telecopier number applicable, of a party
stated beside the name of the party at the foot of this Agreement and to
the attention of the Person or to such other mailing or telecopier number as
the party may notify to the other from time to time under this provision.
Any such notice, request or other communication if delivered or mailed,
shall be deemed to have been given when received and, if telecopied before
4:30 p.m. on a Business Day, shall be deemed to have been received on
that day, and if telecopied after 4:30 p.m. on a Business Day, shall be
deemed to have been received on the Business Day next following the date of
transmission.
11.3 Judgment Currency. If for the purposes of obtaining judgment in any
court in any jurisdiction with respect to this Agreement, it becomes
necessary to convert into the currency of such jurisdiction (herein called
the "Judgment Currency") any amount due hereunder in the currency in which
such amount is payable in accordance with this Agreement (the"Agreed
Currency"), then conversion shall be made at the rate of exchange prevailing
on the Business Day before the day on which judgment is given. For this
purpose, "rate of exchange" means the spot rate at which the Lender would,
on the relevant date at or about 12:00 noon (Toronto time), be prepared to
purchase the Judgment Currency with the amount applicable in the
Agreed Currency in Toronto, Ontario. In the event that there is a change
in the rate of exchange prevailing between the Business Day before the day
on which the judgment is given and the date of payment of the amount due,
the Borrower will, on the date of payment, pay such additional amounts (if
any) or be entitled to receive reimbursement of such amount, if any, as may
be necessary to ensure that the amount paid on such date is the amount in the
Judgment Currency which when converted at the rate of exchange prevailing on
the date of payment is the amount then due under this Agreement in the
Agreed Currency. Any additional amount due from the Borrower under this
Section 11.3 will be due as a separate debt and shall not be affected by
judgment being obtained for any other sums due under or in respect of this
Agreement.
11.4 Further Assurances. The Borrower shall from time to time promptly upon
the reasonable request of the Lender take such action, and execute and
deliver such further documents, as may be reasonably necessary or
appropriate to fully give effect to the provisions and intent of this
Agreement.
11.5 Reimbursement of Expenses. The Borrower shall, on demand, pay to the
Lender all of the reasonable legal fees of the Lender, out-of-pocket
documentation costs and other out-of-pocket expenses, all reasonably incurred:
(a) in the negotiation, preparation and execution of this Agreement and
the other Documents; and
(b) in connection with the administration of this Agreement.
In addition, the Borrower shall pay all reasonable legal fees, and other
out-of-pocket expenses reasonably incurred by the Lender in connection with
the determination or preservation of any rights, or the enforcement of or
legal advice in respect of rights or responsibilities, of the Lender under
this Agreement or the other Documents.
11.6 Survival. Without prejudice to the survival or termination of any
other agreement of the Borrower under this Agreement, the obligations of the
Borrower under Sections 5.14, 8.3 and 11.8 shall survive the repayment of
all the Borrowings.
11.7 Attornment. Each of the parties irrevocably attorns to the
non-exclusive jurisdiction of the courts of Ontario.
11.8 Successors and Assigns.
(a) Enurement. This Agreement shall be binding upon and enure to the
benefit of the Borrower, the Lender and their respective successors and
assigns, except that the Borrower may not assign or transfer all or any
part of its rights and obligations under this Agreement without the Lender's
prior written consent.
(b) Amalgamation. The Lender consents to the amalgamation of the
Borrower with Burtek provided that the Lender receives, in form and
substance satisfactory to it, acknowledgements and confirmations from the
Guarantor and the amalgamated party as to the continued validity, effect
and applicability of the Documents.
(c) Assignment By Lender. The Lender may at any time assign all or
any part of its rights or obligations hereunder to another Person with the
Borrower's prior written consent, which consent not to be unreasonably
withheld. The Lender will only assign the Documents to a Person to the
extent the Lender's rights and obligations hereunder have been assigned to
that Person; provided that any such assignment shall be to a financial
institution which is a Canadian resident and the Borrower shall not be
liable for, or obligated to pay any increased costs, fees, interest or
other amounts as a result of any assignment.
(d) Sub-Participations. The Lender may grant one or more
sub-participations in its rights and obligations hereunder to another bank
or financial institution with the Borrower's prior written consent, which
consent not to be unreasonably withheld; provided that following any such
sub-participation, the Borrower shall not be liable for, or obligated to pay
any increased costs, fees, interest or other amounts as a result of any such
sub-participation and the Borrower shall be entitled to continue to deal
with Lender notwithstanding the sub-participation.
(e) Disclosure to Assignee or Sub-Participant. The Lender may
disclose to an assignee or sub-participant or proposed assignee or
sub-participant information in the possession of the Lender relating to the
Borrower or its Subsidiaries and furnished to it in connection herewith,
provided that the Lender shall require such assignee, sub-participant,
proposed assignee or proposed sub-participant to enter into an agreement in
form satisfactory to the Borrower acting reasonably whereby it agrees to
maintain such information confidential.
11.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
day and year first above written.
THE BORROWER: RICHARDSON ELECTRONICS
ACQUISITION CORP.
Address: 40W267 Keslinger Rd. By: /s/ Edward J. Richardson
La Fox, Illinois 60147 Name: Edward J. Richardson
U.S.A. Title: President
Fax: (630) 208-2950 By: /s/ William G. Seils
Name: William G. Seils
Phone: (630) 208-2200 Title: Secretary
THE LENDER: FIRST CHICAGO NBD BANK,
CANADA
Address: First Chicago NBD Bank, Canada By: /s/ M.C. Bauer
161 Bay Street, Suite 4240 Name: M. C. Bauer
Toronto, Ontario Title: V.P.
M5J 2S1
By: /s/ C. H. Delaney
Name: C. H. Delaney
Title: A. V. P.
Fax: (416) 363-7574
Phone: (416) 365-5259
EXHIBIT 10(B)
AGREEMENT
RICHARDSON ELECTRONICS, LTD., whose principal office is located at
40W267 Keslinger Road, LaFox, Illinois 60147 (the "Company"), and DENNIS
R. GANDY of 38 W 111 Hawkins Lane, St Charles IL 60175 (the "Employee").
WHEREAS, the Employee has been an executive officer of the Company for
many years and the parties agree that Employee's employment with the Company
as an executive officer, particularly as Executive Vice President, is to be
terminated and the Employee will be continue to be employed as a non-officer
employee of the Company for the period of time herein specified and that the
payments provided herein shall be in lieu of any payments under any Company
policy relating to termination of Employee's employment as an executive
officer and eventually as an employee at the expiration of employment term
provided herein and to resolve and settle all possible claims the Employee
may have against or with respect to the Company;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. The Company and the Employee agree that the Employee's employment
with the Company as an executive officer and any other officer position with
the Company will cease and terminate on the close of business on February 28,
1997 (the "Termination Date") and Employee hereby resigns as a member of the
Board of Directors and any committee thereof effective as of the Termination
Date.
2. Employee shall be entitled to payment of his compensation and
benefits, including bonus, as presently being paid through the Termination
Date.
3. In consideration of Employee's service with the Company as an
executive officer and his other promises and agreements made in this
Agreement and in full settlement of any and all claims that the Employee
may have against the Company, its successors, assigns, affiliates, or any
of its officers, directors, shareholders, employees, agents or
representatives, for compensation or otherwise in connection with his
past employment or termination of his employment as an officer of the
Company, the Company agrees to provide the Employee with the following
in addition to the compensation referred to in paragraph 2. above:
(a) Compensation of NINE THOUSAND FOUR HUNDRED AND NO/100THS Dollars
($9,400.00) per month, payable beginning on the 30th day after the
Termination Date and continuing on the same date of each month
thereafter for an additional 59 months, provided, however, that
the Employee's right to receive and the Company's obligation to
make such payment shall cease in the event of Employee's breach of
paragraphs 5, 8, 9 or 10 below;
(b) As of the Termination Date, forgive the then outstanding balance
and interest, if any, on the personal loan made to Employee by the
Company in connection with the auto previously belonging to the
Company and used by Employee, title to which was transferred to
him in December, 1996, which now has a principal balance of $2,000
and against which Employee agrees he will pay $1,000 in each of
January and February 1997 by applying the $1,000 monthly car
allowance to which he is entitled for those months;
(c) Without charge, transfer to Employee ownership and title to the
laptop personal computer belonging to the Company and now being
used by the Employee, and, until the Company's obligation to make
payments to Employee under subparagraph 4(a) cease, the right to
continue to use (subject to the other provisions of this
Agreement, including, without limitation, paragraphs 5, 8, 9, 10
and 11) software now installed on such computer, if any, belonging
to the Company and now being used by the Employee and his now
existing modem/network e-mail connection for connection to those
outside the Company, provided, that, the Company may modify or
terminate such connection service or software if the same is
modified or terminated for its other employees generally now
utilizing the same; and
(d) Indemnification, including for related legal costs, as provided
under the Company's by-laws for all action of Employee in any
capacity during the course of his employment with the Company.
4. The parties agree that after the Termination Date, Employee will
continue to be employed with the Company as a non-officer to work on such
matters as may be directly requested by, and under the direct supervision of,
Edward J. Richardson through the period from the Termination Date until
February 28, 2002. Such requested work shall take into consideration the
Employee's health, residence, and personal circumstances, including, without
limitation, other employment in which he may be engaged. Employee's
employment under this paragraph and his right to receive compensation as
provided for in this paragraph 4 may not be terminated for reasons of the
quality of his work. Employee shall not be required to report to any
office to perform his work unless specifically requested by Edward J.
Richardson and, except by mutual agreement, shall not be required to
perform such work at a location that is beyond 80 miles of his then
residence. Employee's unavailability for work as provided in this
paragraph 2 due to health reasons shall not terminate the Company's
obligation to make the payments provided for in subparagraph 2(a)
below, but, in such event the Company may reduce the amount paid by any
disability or other insurance payments to which the Employee is entitled or
receives. In consideration for the promises made by the Employee in this
paragraph 4 and subsequent paragraphs, the Company agrees to provide the
Employee with the following in addition to the compensation referred to in
paragraphs 2 and 3 above:
(a) Compensation at the rate of TWO THOUSAND SIX HUNDRED AND NO/100THS
Dollars ($2,600.00) per month beginning on the day following the
Termination Date and continuing through February 28, 2002, or such
earlier date as the obligation to make such payment shall cease,
payable in such installments as the regular pay periods of the
Company during such period, provided, however, that the Employee's
right to receive and the Company's obligation to make such payment
shall cease in the event of Employee's breach of paragraphs 5, 8,
9 or 10 below. Employee acknowledges and agrees that such
aggregate amount as the Company is obligated to pay under this
subparagraph (a) shall be full compensation for all services
rendered to Company after the Termination Date through February
28, 2002 and shall be in lieu of any payments under any Company
policy relating to termination of Employee's employment at the
expiration of the employment term provided in this paragraph 4;
(b) During the employment period provided in this paragraph 4,
Employee shall be entitled to participate in the medical, dental,
disability and life insurance and other benefits (notwithstanding
the foregoing Employee shall not be entitled to participate in any
bonus or incentive compensation plan) on the same or similar terms
as such benefits are provided to Company's other regular employees
during such period; provided, however, that such benefits shall
cease to be made available to Employee if the Company's obligation
to make payment under subparagraph (a) has ceased prior to
February 28, 2002; and, further, if, at any time, Employee becomes
engaged in employment with any entity or person that offers such
types of benefits and Employee is entitled to participate therein,
then Employee shall elect to participate in such benefits of the
other employer and does hereby elect to terminate and cease to
participate in the Company's benefits of such type as are
available to him through his other employment;
(c) Options previously granted to Employee under the Company's various
stock option or incentive compensation plans shall continue to be
exercisable or become exercisable in accordance with the terms
thereof through termination of Employee's employment under this
paragraph 4; and
(d) Indemnification, including for related legal costs, as provided
under the Company's by-laws for all action of Employee in any
capacity during the course of his employment with the Company
after the Termination Date.
5. The payments provided for in subparagraphs 4(a) above shall be
payable if and when but not unless, the Employee shall without additional
compensation, fee, or other payment by the Company;
(a) Refrain (independently of and without reference to paragraph 10
hereof), after the expiration of a period of thirty (30) days from the
mailing to him of written notice by the Secretary of the Company of a
direction to do so, from engaging in the operation or management of a
business, whether as owner, shareholder, partner, officer, employee or
otherwise, which then shall be one in which the Employee could not
engage without being in violation of his obligations not to compete as
provided in paragraph 10 hereof;
(b) Refrain (independently of and without reference to paragraph 9
hereof) from disclosing to unauthorized persons information relative to
the business, properties, products, technology or other assets of the
Company or any of its subsidiaries which he shall have reason to believe
is confidential; and
(c) Refrain (independently of and without reference to paragraph 8
hereof) from otherwise acting or conducting himself in a manner which he
shall have reason to believe is inimical or contrary to the best
interests of the Company.
In the event that the Employee shall fail to comply with any provision of
this paragraph 5, the Company's obligation to make any further payment
provided for in subparagraph 4(a) above shall forthwith terminate and cease.
6. The consideration from the Company set forth in 4 above constitutes
full settlement of any and all claims that the Employee may have against the
Company, its successors, assigns, affiliates, or any of its officers,
directors, shareholders, employees, agents or representatives, for
compensation or otherwise in connection with termination of his employment
after the Termination Date, except for any and all claims arising out of
the performance by the Company of this Agreement, including, but not
limited to, rights under the Company's profit sharing and employee stock
ownership plans.
7. In further consideration for the promises made by the Company
herein, the Employee, on behalf of himself, his agents, assignees, attorneys,
heirs, executors, and administrators, fully releases the Company, and its
successors, assigns, parents, subsidiaries, divisions, affiliates, officers,
directors, shareholders, employees, agents and representatives, from any and
all liability, claims, demands, actions, causes of action, suits, grievances,
debts, sums of money, controversies, agreements, promises, damages, back and
front pay, costs, expenses, attorneys' fees, and remedies of any type, by
reason of any matter, act or omission arising out of or in connection with
the Employee's employment with or termination by the Company, including but
not limited to claims, demands or actions under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, the Americans
With Disabilities Act, the Civil Rights Act of 1986, the Illinois Human
Rights Act, any other federal, state or local statute or regulation
regarding employment, discrimination in employment, or the termination of
employment, and the common law of any state relating to employment
contracts, public policy torts, wrongful discharge, or any other matter,
including, without limitation, claims, demands or actions under the False
Claims Act or any qui tam rights, except, however, any and all claims
arising out of the performance by the Company of this Agreement (the
"Released Claims").
8. Employee agrees that he will at no time engage in conduct which
injures, harms, destroys, corrupts, demeans, defames, libels, slanders,
destroys or diminishes in any way the reputation or goodwill of the Company,
its subsidiaries, or their respective shareholders, directors, officers,
employees, or agents or the products sold by the Company, or its other
properties or assets. Nor will Employee cause any computer bugs to the
Company's computer system, database or software.
9. The Employee shall not (except in the proper course of his duties
to the Company) either during the period of his employment with the Company
or thereafter make use of, disseminate or divulge to any person, firm,
company, association or other entity, and shall use his best endeavors to
prevent the use, dissemination, publication or disclosure of, any
information, knowledge or data disclosed to Employee or known by Employee
as a consequence of or through his employment or relationship with the
Company or any of its predecessors or subsidiaries (including information,
knowledge or data conceived, originated, discovered or developed by
Employee) not generally known in the business of manufacturing or
distributing electron tubes, closed circuit television products,
semiconductors, or data display products, whether patentable or not,
about the Company's or its predecessors' or subsidiaries'
businesses, products, processes and services, including without limitation
information relating to manufacturing matters, purchasing, sales, research,
development, methods, policies, procedures, technology, techniques,
processes, know-how, designs, drawings, specifications, systems, practices,
merchandising, suppliers or customers, including, without limitation,
customer lists, information or data. It is not intended to limit or
restrict Employee's right to utilize information, ideas, concepts or
structures of a general nature so long as they are not used in a business
competitive with that of the Company. The failure to mark any of the
information confidential or proprietary shall not affect its status as
such under this Agreement.
10. It is agreed that:
(a) Independent of any obligation under any other paragraph or
subparagraph hereof or any other agreement, Employee agrees that
during the term of his employment, including, without limitation,
the period through February 28, 2002, he will not, except with the
approval of the Chairman of the Board or President of the Company,
directly or indirectly (whether or not for compensation or profit)
through any other individual or entity whether as an officer,
director, shareholder, creditor, partner, promoter, proprietor,
associate, employee, owner, agent, representative or otherwise,
become or be interested in, or associated with, any individual or
entity, other than the Company, engaged in any business or
enterprise the nature of which is competitive with that of the
Company in the sale of electron tubes, CRTs, closed circuit
television products, discrete RF semiconductors or DC power
semiconductors in the territories served by the Company, provided,
however, that, anything above to the contrary notwithstanding,
Employee may, after the date of this Agreement, own as an inactive
investor, securities of any corporation engaged in any prohibited
business as described above which is publicly traded on a national
securities exchange, so long as the holdings of the Employee,
directly or indirectly, in the aggregate, constitute less than 1%
of the outstanding voting securities of such corporation.
(b) Independent of any obligation under any other paragraph or
subparagraph hereof or any other agreement, Employee agrees that
during the term of his employment, including, without limitation,
the period through February 28, 2002, he will not, except with the
approval of the Chairman of the Board or President of the Company,
directly or indirectly (whether or not for compensation or profit)
through any other individual or entity call upon, solicit, entice,
persuade or induce any individual or entity which during
Employee's term of employment with the Company was a customer or
supplier, or proposed customer or supplier, of the Company upon
whom Employee called or dealt with or whose account he supervised
on behalf of the Company, to purchase (with respect to customers)
or sell (with respect to suppliers) electron tubes, CRTs, closed
circuit television products, discrete RF semiconductors or DC
power semiconductors of the types or kind sold or purchased by the
Company or which could be substituted for or which serve the same
purpose or function as such products sold or purchased by the
Company during Employee's employment, or request or advise any
such customer or supplier to withdraw, curtail or cancel its
business with the Company, and Employee shall not approach,
respond to, or otherwise deal with any such customer or supplier
for any such purpose or authorize or knowingly cooperate with the
taking of any such actions by any other individual or entity.
(c) Independent of any obligation under any other paragraph or
subparagraph hereof or any other agreement, Employee agrees that
during the term of his employment, including, without limitation,
the period through February 28, 2002, he will not, except with the
approval of the Chairman of the Board or President of the Company,
directly or indirectly (whether or not for compensation or profit)
through any other individual or entity call upon, solicit, entice,
persuade, induce or offer any individual which during Employee's
term of employment with the Company was an employee of the
Company, employment or with respect to employment by any one other
than the Company, or request or advise any such employee to cease
employment with the Company, and Employee shall not approach,
respond to, or otherwise deal with any such employee for any such
purpose, or authorize or knowingly cooperate with the taking of
any such actions by any other individual or entity.
11. All notes, data, reference materials, memoranda, files and records,
including without limitation computer reports, products lists and information,
process manuals and notes, drawings, and technology manuals and notes,
customer or supplier lists, data or information, in any way relating to
any of the Company's or its predecessors' or subsidiaries' businesses,
operations or products shall belong exclusively to Company, and Employee
agrees to turn over to Company all copies of such materials and all keys,
equipment and other Company property in his possession or control at the
request of Company or, in the absence of such a request, upon the
termination of Employee's employment with Company. Upon the Termination
Date, Employee shall immediately refrain from seeking access to or
utilization of Company's (a) telephonic voice mail, E-mail or message
system, (b) computerized order entry system, and (c) computer data bases
and software, except to use the modem/network e-mail connection to
those outside the Company as provided for in subparagraph 3(c) above or as
specifically authorized by the Chairman of the Board of the Company.
12. In the event of a breach or threatened breach by the Employee of
the provisions of paragraphs 8, 9, or 10, the Company shall be entitled to an
injunction restraining the Employee from such breach. Nothing herein shall
be construed as prohibiting the Company from pursuing any other remedies
available to the Company for such breach or threatened breach. The parties
hereto desire that paragraphs 8, 9, and 10 shall be fully enforceable in
accordance with the terms thereof but if any portion is held unenforceable
or void or against public policy by any court of competent jurisdiction,
the remainder shall continue to be fully enforceable in accordance with its
terms or as it may be modified by such court. The period of restriction
specified in paragraphs 8, 9, or 10 shall abate during the time of any
violation thereof and the remaining portion at the commencement of the
violation shall not begin to run until the violation is cured.
13. Employee's death shall not terminate the Company's obligation to
pay the amounts it would otherwise be obligated to pay Employee under
subparagraphs 3(a) or 4(a). In the event of Employee's death prior to
payment of all amounts due under subparagraphs 3(a) and 4(a), such amounts
thereafter shall be paid to Employee's estate or, if Employee has provided
Company with written direction prior to his death of an alternative
beneficiary, to the beneficiary so designated by Employee in such written
direction. Such payments shall be made on the dates and to the extent
subparagraphs 3(a) or 4(a), as the case may be, would require them to be
made to Employee if he were still alive. In the event the Company, at its
expense, purchases reducing term life insurance for the Employee that would
cover the amount of its obligation to continue payments in the event of
Employee's death as provided above in this paragraph, then the Company
shall not be obligated to continue payments in the event of Employee's
death and all payments hereunder would cease upon Employee's death.
14. The Employee understands and agrees that the existence and terms
of this Agreement are confidential and shall not be disclosed to any third
party without the prior written consent of the Company, except as may be
required by law and in response to a lawful subpoena in which event Employee
shall provide prompt notice to the Company.
15. The existence and execution of this Agreement shall not be
considered, and shall not be admissible in any proceeding, as an admission by
the Employee or the Company, or any of its agents or employees, of any
liability, error, violation or omission.
16. It is agreed that:
(a) This Agreement shall be binding upon the parties hereto, their
heirs, legal representatives, successors and assigns and shall
inure to their respective benefits.
(b) This Agreement shall not be subject to change, modification, or
discharge, in whole or in part, except by written instrument
signed by the parties; provided, however, that if any of the
terms, provisions or restrictions of paragraph 8, 9, or 10 are
held to be in any respect unreasonable restrictions upon Employee,
then the court so holding shall reduce the territory to which it
pertains and/or the period of time in which it operates or effect
any other change to the extent necessary to render any of said
terms, provisions or restrictions enforceable.
(c) The failure by the Company to insist upon strict compliance by the
Employee with respect to any of the terms or conditions hereof
shall not be deemed a waiver or relinquishment of any other terms
or conditions nor shall any failure to exercise any right or power
hereunder at one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
(d) This Agreement shall be governed and construed in accordance with
the laws of the State of Illinois.
(e) All notices required to be given hereunder to the Company shall be
addressed to its principal executive office at 40W267 Keslinger
Road, LaFox, Illinois 60147; attention: William G. Seils, by
certified or registered mail. All notices required or to be given
hereunder to the Employee shall be addressed to the Employee at
his residence as last reflected on the records of the Company, by
certified or registered mail. Notice shall be deemed given if
delivered in person to William G. Seils on behalf of the Company
or to the Employee, or if mailed, when deposited in the United
States Mail addressed as aforesaid.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year written below their respective signatures.
EMPLOYEE RICHARDSON ELECTRONICS, LTD.
By:
Dennis R. Gandy Edward J. Richardson,
Chairman of the Board
Dated: 1/16/97 Dated: 1/16/97
Subscribed and sworn to
before me this 16th day
of January, 1997
____________________________
Notary Public
EXHIBIT 10(c)
AGREEMENT AND GENERAL RELEASE
Agreement made as of this 21st day of March 1997, between
RICHARDSON ELECTRONICS, LTD., whose principal office is located
at 40W267 Keslinger Road, LaFox, Illinois 60147 (the "Company"),
and DAVID GILDEN of 1326 Ginger Circle, Ft Lauderdale, FL 33326
(the "Employee").
WHEREAS, the Employee has been an officer of the Company
and/or its subsidiaries for many years and the parties agree that
Employee's employment with the Company and/or its subsidiaries as
an officer is to be terminated and the Employee will continue to
be employed as a non-officer employee of the Company for the
period of time herein specified for limited services performed at
mutually convenient times to both parties hereto and that the
payments provided herein shall be in lieu of any payments under
any Company or subsidiary policy relating to termination of
Employee's employment as an officer and eventually as an employee
at the expiration of employment term provided herein and to
resolve and settle all possible claims the Employee may have
against or with respect to the Company and/or its subsidiaries;
and
WHEREAS, the Company is in the business of distributing and
manufacturing electron tubes, RF transistors, silicon controlled
rectifiers ("SCR's") and RF power and microwave semiconductors,
data display products and components, security systems and
components, (hereinafter "The Business") and in the course of
such activities the Company has acquired or developed certain
Proprietary Information, as further defined herein, including,
but not limited to, information not generally known in the others
engaged in the same or similar business to The Business or
otherwise or which could not be gathered or obtained without
significant expenditure of time, effort and money, which
Proprietary Information provides the Company with a competitive
advantage in the marketplace in which it competes, and
WHEREAS, Employee's employment with the Company has
involved, and hereafter may involve, positions of trust and
confidence; and
WHEREAS, in the course of his employment with the Company
Employee has received, and he hereafter may receive, (1)
extensive training in (i) how to successfully purchase and sell
products and (ii) operating policies and procedures, and (2)
access to Proprietary Information, as further defined herein; and
WHEREAS, in the course of his employment with the Company,
or through his use of the facilities and resources of the
Company, Employee may have developed or contributed to the
development of, or may in the future develop or contribute to the
development of, additional Proprietary Information, as further
defined herein; and
WHEREAS, in the course of his employment with the Company,
Employee has had and may hereafter have primary contact with
suppliers and customers of The Business and for this reason, the
suppliers and customers who have been served and dealt with by
Employee may have come or may come to associate the service and
business they received with Employee rather than the Company
itself;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. The Company and the Employee agree that the Employee's
employment with the Company and/or its subsidiaries as an officer
and any other position with the Company (except non-officer
employee of Company as provided in this Agreement) and/or its
subsidiaries will cease and terminate on the close of business on
May 31, 1997 (the "Termination Date") and Employee hereby resigns
as a member of any of the Boards of Directors of subsidiaries of
the Company on which he may be serving and any committee thereof
and from any officer position therein.
2. Employee shall be entitled to payment of his
compensation and benefits, including bonus, as presently being
paid through the Termination Date, and 136 hours of pay for
earned but unused vacation pay.
3. In consideration of Employee's service with the Company
and/or its subsidiaries as an officer and his other promises and
agreements made in this Agreement and in full settlement of any
and all claims that the Employee may have against the Company,
its subsidiaries, their successors, assigns, affiliates, or any
of their officers, directors, shareholders, employees, agents or
representatives, for compensation or otherwise in connection with
his past employment or termination of his employment as an
officer of the Company and/or its subsidiaries, the Company
agrees to provide the Employee with the following in addition to
the compensation referred to in paragraph 2. above:
(a) The sum of TWO THOUSAND TWO HUNDRED FIFTY DOLLARS
($2,250.00) per month, payable beginning on the 30th
day after the Termination Date and continuing
thereafter for an additional 55 months, provided,
however, that the Employee's right to receive and the
Company's obligation to make such payment shall cease
in the event of Employee's breach of paragraphs 5, 9,
10 or 11 below;
(b) As of the date hereof, to forgive the outstanding
balance and interest, if any, on the personal loan made
to Employee by the Company, which loan now has a
principal balance of $18,306 and accrued interest
through February 28, 1997 of $4,013; and
(c) As of June 1, 1997, without charge, transfer to
Employee ownership and title of Company's 1994 SAAB,
Vehicle Identification # YS3AK75EXR7003061.
4. The parties agree that after the Termination Date,
Employee will continue to be employed with the Company as a non-
officer to work on such matters as may be directly requested by,
and under the direct supervision of, Edward J. Richardson through
the period from the Termination Date until May 31, 2002. Such
requested work shall take into consideration the Employee's
health, residence, and personal circumstances, including, without
limitation, other employment in which he may be engaged which
shall take priority over work to be performed for the Company
hereunder, and shall be for limited services provided at mutually
convenient times to both parties. Employee's employment under
this paragraph and his right to receive compensation as provided
for in this paragraph 4 may not be terminated for reasons of the
quality of his work. Employee shall not be required to report to
any office to perform his work unless specifically requested by
Edward J. Richardson and agreed to by Employee, and, except by
mutual agreement, shall not be required to perform such work at a
location that is beyond 80 miles of his then residence.
Employee's unavailability for work as provided in this paragraph
4 due to health reasons shall not terminate the Company's
obligation to make the payments provided for in in paragraph 4(a)
below, but, in such event the Company may reduce the amount paid
by any disability or other insurance payments to which the
Employee, directly or indirectly, is entitled or receives or the
benefit of which he receives. In consideration for the promises
made by the Employee in this paragraph 4 and subsequent
paragraphs, the Company agrees to provide the Employee with the
following in addition to the compensation referred to in
paragraphs 2 and 3 above:
(a) Compensation at the rate of FOUR THOUSAND AND NO/100THS
DOLLARS ($4,000.00) per month beginning on the day
following the Termination Date and continuing through
February 15, 2002, payable in such installments as the
regular pay periods of the Company during such period,
provided, however, that the Employee's right to receive
and the Company's obligation to make such payment shall
cease in the event of Employee's breach of paragraphs
5, 9, 10 or 11 below. Employee acknowledges and agrees
that such aggregate amount as the Company is obligated
to pay under this subparagraph (a) shall be full
compensation for all services rendered to Company after
the Termination Date through May 31, 2002 and shall be
in lieu of any payments under any Company policy
relating to termination of Employee's employment at the
expiration of the employment term provided in this
paragraph 4;
(b) During the employment period provided in this paragraph
4, Employee shall be entitled to participate in the
medical, dental, disability and life insurance and
other benefits (notwithstanding the foregoing Employee
shall not be entitled to participate in any bonus or
incentive compensation plan) on the same or similar
terms as such benefits are provided to Company's other
regular employees during such period; provided,
however, that such benefits shall cease to be made
available to Employee if the Company's obligation to
make payment under subparagraph (a) has ceased prior to
February 15, 2002; and, further, if, at any time,
Employee becomes engaged in employment with any entity
or person that offers such types of benefits and
Employee is entitled to participate therein, then
Employee shall elect to participate in such benefits of
the other employer and elects to terminate and cease to
participate in the Company's benefits of such type as
are available to him through his other employment; and
(c) Options previously granted to Employee under the
Company's various stock option or incentive
compensation plans shall continue to be exercisable or
become exercisable in accordance with the terms thereof
through termination of Employee's employment as a non-
officer under this paragraph 4.
5. The payments provided for in subparagraphs 3(a) and
4(a) above shall be payable if and when but not unless, the
Employee shall without additional compensation, fee, or other
payment by the Company;
(a) Refrain (independently of and without reference to
paragraph 11 hereof), after the expiration of a period
of thirty (30) days from the mailing to him of written
notice by the Secretary of the Company of a direction
to do so, from engaging in the operation or management
of a business, whether as owner, shareholder, partner,
officer, employee or otherwise, which then shall be one
in which the Employee could not engage without being in
violation of his obligations not to compete as provided
in paragraph 11 hereof;
(b) Refrain (independently of and without reference to
paragraph 10 hereof) from disclosing to unauthorized
persons information relative to the business,
properties, products, technology or other assets of the
Company or any of its subsidiaries which he shall have
reason to believe is confidential; and
(c) Refrain (independently of and without reference to
paragraph 9 hereof) from acting or conducting himself
in a manner which he shall have reason to believe is
inimical or contrary to the best interests of the
Company.
In the event that the Employee shall fail to comply with any pro-
vision of this paragraph 5, the Company's obligation to make any
further payment provided for in subparagraph 4(a) above shall
forthwith terminate and cease.
6. Employee acknowledges that the payments and other
considerations to be made to him pursuant to the terms of this
Agreement exceed those to which he would be entitled in
connection with the termination of his employment under the
normal operation of any benefit plan, policy or procedure of the
Company or under any previous agreement (written or oral) between
him and the Company. Employee further acknowledges that the
Company's agreement to provide such additional payments and
considerations beyond his entitlement is conditioned upon his
release of all claims against the Company and his compliance with
the terms and conditions of this Agreement.
7. The consideration from the Company set forth herein
constitutes full settlement of any and all claims that the
Employee may have against the Company and its subsidiaries, their
respective successors, assigns, affiliates, or any of their
officers, directors, shareholders, employees, agents or
representatives, for compensation or otherwise in connection with
or related to his employment or its termination, except for any
and all claims arising out of the performance by the Company of
this Agreement, including, but not limited to, rights under the
Company's profit sharing and employee stock ownership plans.
8. In further consideration for the promises made by the
Company herein, the Employee, on behalf of himself, his agents,
assignees, attorneys, heirs, executors, and administrators, fully
releases the Company and it subsidiaries, and each of their
successors, assigns, parents, subsidiaries, divisions,
affiliates, officers, directors, shareholders, employees, agents
and representatives, from any and all liability, claims, demands,
actions, causes of action, suits, grievances, debts, sums of
money, controversies, agreements, promises, damages, back and
front pay, costs, expenses, attorneys' fees, and remedies of any
type, by reason of any matter, act or omission arising out of or
in connection with the Employee's employment with the Company or
any of its subsidiaries or termination thereof, including but not
limited to claims, demands or actions under Title VII of the
Civil Rights Act of 1964, the Americans With Disabilities Act,
the Civil Rights Act of 1986, the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act, as any
of the foregoing are amended, any other federal, state or local
statute or regulation regarding employment, discrimination in
employment, or the termination of employment, and the common law
of any state relating to employment contracts, public policy
torts, wrongful discharge, or any other matter, including,
without limitation, claims, demands or actions under the False
Claims Act or any qui tam rights, and claims under any prior
contract (written or oral) relating to Employee's employment,
compensation, or termination of employment, except, however, any
and all claims arising out of the performance by the Company of
this Agreement (the "Released Claims").
9. Company's Good Name. Employee agrees that Employee
will at no time engage in conduct which injures, harms, corrupts,
demeans, defames, libels, slanders, destroys or diminishes in any
way the reputation or goodwill of the Company, its subsidiaries,
or their respective shareholders, directors, officers, employees,
or agents, or the products sold by the Company, or its other
properties or assets, including, without limitation, its computer
systems hardware and software and its data or the integrity and
accuracy thereof.
10. Confidentiality.
A. Definition of Proprietary Information. For purposes of
this Agreement, the term "Proprietary Information" shall mean all
of the following materials and information (whether or not
reduced to writing and whether or not patentable) to which
Employee has received or may receive access or has developed or
may develop, in whole or in part, as a direct or indirect result
of his employment with the Company or any of its predecessors or
subsidiaries, or in the course of his employment with the Company
or any of its predecessors or subsidiaries, or through the use of
any of the Company's or any of its predecessors or subsidiaries
facilities or resources:
(1) Customer lists, including, but not limited to, customer
names, customer requirements, and customer data;
supplier lists, including, but not limited to, supplier
names, supplier capabilities, and supplier data;
marketing techniques; practices; methods; plans;
systems; processes; purchasing information; price
lists; pricing policies; quoting procedures; product
information; operating policies and procedures;
financial information; and other materials or
information relating to the manner in which the Company
does business;
(2) Discoveries, concepts and ideas, whether patentable or
not, or copyrightable or not, including, but not
limited to, the nature and results of research and
development activities, processes, formulas,
techniques, "know-how", designs, drawings and
specifications;
(3) Any other materials or information related to the
business or activities of the Company (or by any of its
predecessors in business) which are not generally known
to others engaged in similar businesses or activities
or which could not be gathered or obtained without
significant expenditure of time, effort and money; and
(4) All inventions and ideas which are derived from or
relate to Employee's access to or knowledge of any of
the above enumerated materials or information.
The Proprietary Information shall not include any materials or
information of the types specified above to the extent that such
materials or information are publicly known or generally utilized
by others engaged in the same business or activities in the
course of which the Company utilized, developed or otherwise
acquired such information or materials and which Employee has
gathered or obtained from such other public sources by his own
expenditure of significant time, effort and money. Failure to
mark any of the Proprietary Information as confidential shall not
affect its status as part of the Proprietary Information under
the terms of this Agreement.
B. Ownership of Proprietary Information. Employee agrees
that the Proprietary Information is and at all times shall remain
the sole and exclusive property of the Company.
C. Non-Disclosure of Proprietary Information. Employee
represents, warrants and agrees that he has not and will not
(except in the proper course of his employment), either during or
after the period of his employment with the Company, made or make
use of, disseminated or disseminate, published or publish, or
disclosed or disclose to any person, firm, company, association,
or other entity, and shall use his best endeavors to prevent the
use, dissemination, publication, or disclosure of, any
Proprietary Information.
11. Non-Competition.
A. Restrictions. Employee agrees that, during the period
from the date this Agreement is signed through May 31, 2002, he
will not, except with the approval of the Chairman of the Board
of the Company, directly or indirectly (whether or not for
compensation or profit):
1. Engage in any business or enterprise the nature of
which is competitive with that of the Company as
described in the Preamble to this Agreement as The
Business in the territories served by the Company (a
"Prohibited Business"); or
2. Participate as an officer, director, creditor,
promoter, proprietor, associate, agent, employee,
partner, consultant, sales representative or otherwise,
or directly or indirectly own any interest in any
person or entity involved in any Prohibited Business;
or
3. Canvas, call upon, solicit, entice, persuade, or
induce any individual or entity which, during
Employee's term of employment with the Company, was or
is a customer or supplier, or proposed customer or
supplier, of the Company upon whom Employee called or
whose account he supervised on behalf of the Company,
for the following:
(a) to purchase (with respect to customers) or
sell (with respect to suppliers) products of
the types or kinds sold by the Company or
which could be substituted for (including, but
not limited to, rebuilt products), or which
serve the same purpose or function as,
products sold by the Company (all of which
products are herein sometimes referred to,
jointly and severally as "Prohibited
Products"), or
(b) to request or advise any such customer or
supplier to withdraw, curtail or cancel its
business with the Company, and
Employee shall not approach, respond to, or otherwise
deal with any such customer or supplier for such
purpose or authorize or knowingly cooperate with the
taking of any such actions by any other individual or
entity; or
4. For himself or for or through any other individual
or entity call upon, solicit, entice, persuade, induce
or offer any individual who, during Employee's term of
employment with the Company, was an employee of the
Company, employment or with respect to employment by
any one other than the Company, or request or advise
any such employee to cease employment with the Company,
and Employee shall not approach, respond to, or
otherwise deal with any such employee for any such
purpose, or authorize or knowingly cooperate with the
taking of any such actions by any other individual or
entity.
Each obligation of each subparagraph and provision of this
paragraph A. shall be independent of any obligation under any
other subparagraph or provision hereof.
B. Permitted Activities. Anything above to the contrary
notwithstanding:
1. Employee may, after the date of this Agreement, own
as an inactive investor, securities of any corporation
engaged in any Prohibited Business which is publicly
traded on a national securities exchange or in the
over-the-counter market, so long as the holdings of
Employee, directly or indirectly, in the aggregate,
constitute less than 1% of the outstanding voting
securities of such corporation;
2. Employee may act as a representative for entities
that are or have been customers or suppliers of the
Company for the purpose of purchasing for, or selling
to, such entities products other than Prohibited
Products; and
3. Employee may purchase Prohibited Products which he
resells to the Company.
12. Employee acknowledges and agrees to Employee's
obligations of confidentiality, use of information and return of
Company property as set forth in the Company's Corporate Code of
Conduct and Employee Handbook and without limiting the foregoing
or the following, the Employee further agrees that all notes,
data, reference materials, memoranda, files and records,
including without limitation computer reports, financial,
accounting, employee, customer, vendor and product data, reports
or records, lists and information, process manuals and notes,
drawings, and technology manuals and notes, in any way relating
to any of the Company's or its predecessors' or subsidiaries'
businesses, operations or products shall belong exclusively to
Company, and Employee agrees to turn over to Company all copies
of such materials and all keys, equipment and other Company
property in Employee's possession or control at the request of
Company or, in the absence of such a request, upon the
Termination Date. Employee shall immediately refrain from
seeking access to or utilization of Company's (a) telephonic
voice mail, E-mail or message system, (b) computer system, and
(c) computer data bases and software.
13. Employee acknowledges that the restrictions contained
in this Agreement will not prevent him from obtaining such other
gainful employment he may desire to obtain or cause him any undue
hardship and are reasonable and necessary in order to protect the
legitimate interests of the Company and that violation thereof
would result in irreparable injury to the Company. Employee
therefor acknowledges and agrees that in the event of a breach or
threatened breach by Employee of the provisions of paragraphs 9,
10, 11 or 12, the Company shall be entitled to an injunction
restraining Employee from such breach or threatened breach and
shall be entitled to terminate all payments otherwise to be made
to or for the benefit of Employee under the provisions of this
Agreement. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company
for such breach or threatened breach. The parties hereto desire
that this paragraph 13 and paragraphs 9, 10, 11 and 12 shall be
fully enforceable in accordance with the terms hereof and
thereof, but if any portion is held unenforceable or void or
against public policy by any court of competent jurisdiction, the
remainder shall continue to be fully enforceable in accordance
with its terms or as it may be modified by such court. If,
however, such provisions are not enforced in accordance with
their terms there shall be a corresponding reduction in the
consideration provided in this Agreement. The period of
restriction specified in paragraph 11 shall abate during the time
of any violation thereof, and the portion of such period
remaining at the commencement of the violation shall not begin to
run until the violation is cured.
14. The provisions of this paragraph 14 and of paragraphs
9, 10, 11, 12 and 13 shall survive the termination or expiration
of this Agreement for any reason.
15. Employee's death shall not terminate the Company's
obligation to pay the amounts it would otherwise be obligated to
pay Employee under subparagraphs 3(a) or 4(a). In the event of
Employee's death prior to payment of all amounts due under
subparagraphs 3(a) and 4(a), such amounts thereafter shall be
paid to Employee's estate or, if Employee has provided Company
with written direction prior to his death of an alternative
beneficiary, to the beneficiary so designated by Employee in such
written direction; provided, however, that the amount of such
payments shall be reduced by the amount, if any, of any payment
under any life insurance paid or to be paid to Employee's estate
or other beneficiary under any life insurance provide Employee as
a benefit under this Agreement. Such payments shall be made on
the dates and to the extent subparagraphs 3(a) or 4(a), as the
case may be, would require them to be made to Employee if he were
still alive.
16. The Employee understands and agrees that the existence
and terms of this Agreement are confidential and shall not be
disclosed to any third party except Employee's immediate family
or Employee's counsel or accountant without the prior written
consent of the Company, except as may be required by law and in
response to a lawful subpoena in which event Employee shall
provide prompt notice to the Company.
17. The existence and execution of this Agreement shall not
be considered, and shall not be admissible in any proceeding, as
an admission by the Employee or the Company, or any of its agents
or employees, of any liability, error, violation or omission.
18. It is agreed that:
(a) This Agreement shall be binding upon the parties
hereto, their heirs, legal representatives, successors
and assigns and shall inure to their respective
benefits.
(b) This Agreement shall not be subject to change,
modification, or discharge, in whole or in part, except
by written instrument signed by the parties; provided,
however, that if any of the terms, provisions or
restrictions of paragraphs 9, 10, subparagraphs A.1,
A.2, A.3, A.4, or B of paragraph 11, or paragraph 12
are held to be in any respect unreasonable restrictions
upon Employee, then the court so holding shall reduce
the territory to which it pertains and/or the period of
time in which it operates or effect any other change to
the extent necessary to render any of said terms,
provisions or restrictions enforceable.
(c) The failure by the Company to insist upon strict
compliance by the Employee with respect to any of the
terms or conditions hereof shall not be deemed a waiver
or relinquishment of any other terms or conditions nor
shall any failure to exercise any right or power
hereunder at one or more times be deemed a waiver or
relinquishment of such right or power at any other time
or times.
(d) This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois.
(e) All notices required to be given hereunder to the
Company shall be addressed to its principal executive
office at 40W267 Keslinger Road, LaFox, Illinois 60147;
attention: William G. Seils, by certified or registered
mail. All notices required or to be given hereunder to
the Employee shall be addressed to the Employee at his
residence as last reflected on the records of the
Company, by certified or registered mail. Notice shall
be deemed given if delivered in person to William G.
Seils on behalf of the Company or to the Employee, or
if mailed, when deposited in the United States Mail
addressed as aforesaid.
19. The Employee acknowledges that Employee had an adequate
opportunity of at least 21 days to review this Agreement and
General Release and consult with such persons, including legal
counsel, as he saw fit, that Employee fully understands its
terms, that Employee was not coerced into signing it, that
Employee has signed it knowingly and voluntarily, and that he has
not relied on any promise or representation (written or oral)
other than those expressly set forth herein.
20. This Agreement and General Release shall take effect
seven days after the Employee signs it. The Employee has the
right to revoke this Agreement and General Release during that
seven day period. In order to revoke the Agreement and General
Release, the Employee must notify the undersigned representative
of the Company, in writing, of his decision to revoke, and that
notice must be received by the undersigned representative of the
Company no later than seven days after the Employee signed the
Agreement and General Release. If the Employee revokes this
Agreement and General Release, he must promptly repay to the
Company all consideration paid to the Employee under the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement the day and year written below their respective
signatures.
EMPLOYEE RICHARDSON ELECTRONICS, LTD.
____________________________ By: ________________________________
David Gilden Edward J. Richardson,
Chairman of the Board
Dated:__________________ Dated:___________________
Subscribed and sworn to
before me this _______ day
of March, 1997
____________________________
Notary Public
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<PERIOD-END> FEB-28-1997
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