<PAGE> 1
CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 1-228
ZEMEX CORPORATION
(Exact name of registrant as specified in its charter)
CANADA NONE
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
CANADA TRUST TOWER, BCE PLACE
161 BAY STREET, SUITE 3750
TORONTO, ONTARIO, CANADA, M5J 2S1
(Address of principal executive offices)
(416) 365-8080
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
TORONTO STOCK EXCHANGE/NEW YORK STOCK EXCHANGE CAPITAL STOCK, NO PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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
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As of June 30, 1999, there were 8,819,152 common shares outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ZEMEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(US$)
<TABLE>
<CAPTION>
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JUNE 30, 1999 DECEMBER 31, 1998
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<S> <C> <C>
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 735,000 $ 1,062,000
Accounts receivable 19,621,000 17,642,000
Inventories 18,139,000 18,036,000
Prepaid expenses and other 998,000 946,000
Future tax benefits 657,000 657,000
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40,150,000 38,343,000
Property, plant and equipment 94,221,000 90,058,000
Other assets 21,500,000 20,374,000
Future tax benefits (non-current) 534,000 91,000
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TOTAL ASSETS $156,405,000 $148,866,000
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LIABILITIES
CURRENT LIABILITIES
Bank indebtedness $ -- $ 10,000,000
Accounts payable 6,870,000 6,324,000
Accrued liabilities 4,988,000 4,433,000
Accrued income taxes 906,000 644,000
Current portion of long term debt 961,000 2,132,000
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13,725,000 23,533,000
LONG TERM DEBT 52,912,000 39,354,000
OTHER NON-CURRENT LIABILITIES 895,000 1,006,000
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67,532,000 63,893,000
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NON-CONTROLLING INTEREST 3,059,000 3,075,000
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SHAREHOLDERS' EQUITY
Common stock 8,819,000 8,708,000
Paid-in capital 49,066,000 48,691,000
Retained earnings 31,421,000 28,418,000
Note receivable from shareholder (1,749,000) (1,749,000)
Cumulative translation adjustment (1,743,000) (2,170,000)
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85,814,000 81,898,000
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $156,405,000 $148,866,000
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</TABLE>
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<PAGE> 3
ZEMEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(US$)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
3 MONTHS ENDED JUNE 30 6 MONTHS ENDED JUNE 30
1999 1998 1999 1998
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(unaudited)
<S> <C> <C> <C> <C>
NET SALES $29,501,000 $25,933,000 $57,411,000 $52,380,000
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COSTS AND EXPENSES
Cost of goods sold 20,059,000 18,317,000 39,641,000 37,465,000
Selling, general and administrative 3,925,000 3,528,000 7,311,000 6,861,000
Depreciation, depletion and amortization 2,184,000 1,670,000 4,295,000 3,262,000
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26,168,000 23,515,000 51,247,000 47,588,000
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OPERATING INCOME 3,333,000 2,418,000 6,164,000 4,792,000
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Interest income 39,000 48,000 90,000 82,000
Interest expense (1,100,000) (567,000) (2,022,000) (1,118,000)
Other, net expense (32,000) (45,000) (82,000) (127,000)
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(1,093,000) (564,000) (2,014,000) (1,163,000)
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INCOME BEFORE PROVISION FOR
INCOME TAXES AND NON-CONTROLLING INTEREST 2,240,000 1,854,000 4,150,000 3,629,000
Provision for income taxes 629,000 556,000 1,163,000 1,089,000
Non-controlling interest in (loss) earnings of subsidiary (3,000) 24,000 (16,000) 38,000
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NET INCOME $ 1,614,000 $ 1,274,000 $ 3,003,000 $ 2,502,000
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NET INCOME PER SHARE -- basic $ 0.19 $ 0.15 $ 0.36 $ 0.30
-- fully diluted $ 0.17 $ 0.14 $ 0.32 $ 0.28
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,403,728 8,275,436 8,377,306 8,270,061
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</TABLE>
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<PAGE> 4
ZEMEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30
(US$)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1999 1998
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(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,003,000 $ 2,502,000
Adjustments to reconcile income from operations
to net cash flows from operating activities
Depreciation, depletion and amortization 4,295,000 3,262,000
Amortization of deferred financing costs 97,000 84,000
Increase in future tax benefits (443,000) (119,000)
Non-controlling interest in (loss) earnings of subsidiary (16,000) 38,000
Loss on sale of property, plant and equipment 65,000 4,000
Increase in other assets (1,762,000) (474,000)
Decrease in non-current liabilities (111,000) (113,000)
Changes in non-cash working capital items (828,000) (1,245,000)
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Net cash provided by operating activities 4,300,000 3,939,000
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,594,000) (6,513,000)
Assets acquired in connection with acquisitions,
net of cash acquired -- (7,397,000)
Acquisitions of securities -- (12,855,000)
Proceeds from sale of property, plant and equipment 1,000 3,117,000
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Net cash used in investing activities (7,593,000) (23,648,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in bank indebtedness (10,000,000) 2,000,000
Net increase in long term debt 12,387,000 17,502,000
Issuance of common stock 521,000 475,000
Purchase of common stock and options for treasury (35,000) (418,000)
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Net cash provided by financing activities 2,873,000 19,559,000
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 93,000 (25,000)
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NET DECREASE IN CASH (327,000) (175,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,062,000 2,189,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 735,000 $ 2,014,000
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</TABLE>
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<PAGE> 5
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements include the accounts of Zemex
Corporation and its wholly-owned subsidiaries (the "Corporation"). The financial
data for the three months ended June 30, 1999 and 1998 and for the six months
ended June 30, 1999 and 1998 are unaudited but, in the opinion of the management
of the Corporation, reflect all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation of financial position
and results of operations. All material intercompany transactions have been
eliminated. See the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998 for a complete list of accounting policies.
1. LONG TERM DEBT
In May 1999, the Corporation entered into note purchase agreements with private
investors whereby the Corporation issued US$35 million, 7.54% Senior Secured
Notes, Series A, due May 21, 2009 and US$15 million, 7.76% Senior Secured Notes,
Series B, due May 21, 2014. The proceeds of the bond issue were used to retire
the Corporation's existing bank debt. The Corporation also entered into a credit
agreement, which provides a 364-day US$20 million operating line of credit. The
bonds and the credit facility rank pari-pasu with respect to security. The
obligations are secured by a pledge of subsidiary shares, a general security
interest and a negative pledge. As at June 30, 1999 there were no borrowings
under the credit facility.
2. SEGMENT INFORMATION
The Corporation has three principal lines of business and is organized into
three operating units based on its product lines: (i) industrial minerals,
(ii) metal powders, and (iii) aluminum recycling.
Information pertaining to sales and earnings from operations and assets by
business segment appears below:
<TABLE>
<CAPTION>
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Three Months Ended Industrial Metal Aluminum
June 30, 1999 Consolidated Minerals Powders Recycling Corporate
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<S> <C> <C> <C> <C> <C>
Net sales $29,501,000 $12,716,000 $9,749,000 $7,036,000 $ --
Operating income (loss) 3,333,000 1,986,000 1,277,000 883,000 (813,000)
Interest expense (1,100,000) (67,000) (48,000) (17,000) (968,000)
Net income 1,614,000 -- -- -- --
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</TABLE>
<TABLE>
<CAPTION>
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Three Months Ended Industrial Metal Aluminum
June 30, 1998 Consolidated Minerals Powders Recycling Corporate
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<S> <C> <C> <C> <C> <C>
Net sales $25,933,000 $11,759,000 $8,133,000 $6,041,000 $ --
Operating income (loss) 2,418,000 1,553,000 852,000 652,000 (639,000)
Interest (expense) income (567,000) 43,000 (58,000) (7,000) (545,000)
Net income 1,274,000 -- -- -- --
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</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended Industrial Metal Aluminum
June 30, 1999 Consolidated Minerals Powders Recycling Corporate
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<S> <C> <C> <C> <C> <C>
Net sales $57,411,000 $25,293,000 $19,073,000 $13,045,000 $ --
Operating income (loss) 6,164,000 4,102,000 2,304,000 1,284,000 (1,526,000)
Interest expense (2,022,000) (79,000) (94,000) (46,000) (1,803,000)
Net income 3,003,000 -- -- -- --
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</TABLE>
<TABLE>
<CAPTION>
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Six Months Ended Industrial Metal Aluminum
June 30, 1998 Consolidated Minerals Powders Recycling Corporate
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<S> <C> <C> <C> <C> <C>
Net sales $52,380,000 $23,048,000 $18,338,000 $10,994,000 $ --
Operating income (loss) 4,792,000 3,194,000 2,077,000 1,020,000 (1,499,000)
Interest (expense) income (1,118,000) 35,000 (110,000) (10,000) (1,033,000)
Net income 2,502,000 -- -- -- --
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</TABLE>
<TABLE>
<CAPTION>
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Industrial Metal Aluminum
June 30, 1999 Consolidated Minerals Powders Recycling Corporate
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<S> <C> <C> <C> <C> <C>
Current assets $ 40,150,000 $24,425,000 $10,438,000 $ 3,903,000 $ 1,384,000
Total assets 156,405,000 77,607,000 25,894,000 35,933,000 16,971,000
Total current liabilities 13,725,000 5,448,000 4,339,000 3,401,000 537,000
Total shareholders' equity 85,814,000 -- -- -- 85,814,000
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</TABLE>
<TABLE>
<CAPTION>
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Industrial Metal Aluminum
June 30, 1998 Consolidated Minerals Powders Recycling Corporate
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<S> <C> <C> <C> <C> <C>
Current assets $ 38,597,000 $21,822,000 $10,065,000 $ 4,451,000 $ 2,259,000
Total assets 145,632,000 71,069,000 24,170,000 26,812,000 23,581,000
Total current liabilities 21,098,000 5,526,000 3,093,000 5,112,000 7,367,000
Total shareholders' equity 78,874,000 -- -- -- 78,874,000
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</TABLE>
3. DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP"). The
differences between Canadian and U.S. generally accepted accounting principles
("U.S. GAAP") do not have a material effect on the Corporation's reported
financial position, net income or cash flows except as follows:
a. Statements of Income
The implementation of the American Institute of Certified Public
Accountants Statement of Position 98-5 ("SOP 98-5") requires costs of
start-up activities and organization costs to be expensed as incurred.
Canadian GAAP permits the deferral of such costs.
For purposes of reporting in accordance with U.S. GAAP, certain equity
securities that are not held principally for the purpose of sale in the
near term are classified as available-for-sale securities and are
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<PAGE> 7
reported at fair value and are translated at current exchange rate which
can give rise to an exchange gain or loss. For Canadian GAAP purposes, such
securities are to be reported at cost and at the historical exchange rate.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income, as reported $1,614,000 $1,274,000 $3,003,000 $2,502,000
Less: Start-up activities (749,000) -- (1,291,000) --
Add: Exchange gain on 127,000 -- 127,000 --
available-for-sale securities
Tax effect related thereto 174,000 -- 326,000 --
----------------------------------------------------------------------------------------------------------------
Net income (U.S. GAAP) $1,166,000 $1,274,000 $2,165,000 $2,502,000
----------------------------------------------------------------------------------------------------------------
Net income per share (U.S. GAAP)
- basic $ 0.14 $ 0.15 $ 0.26 $ 0.30
- fully diluted $ 0.14 $ 0.15 $ 0.26 $ 0.28
----------------------------------------------------------------------------------------------------------------
</TABLE>
b. Balance Sheets
The following summarizes the balance sheet amounts in accordance with U.S.
GAAP where different from the amounts reported under Canadian GAAP.
For purposes of reporting in accordance with U.S. GAAP, certain equity
securities that are not held principally for the purpose of sale in the
near term are classified as available-for-sale securities and are reported
at fair value, with unrealized gains and losses excluded from earnings and
reported in a separate component of shareholders' equity. For Canadian GAAP
purposes, such securities are to be reported at cost and included in other
assets unless there is deemed to have been a permanent impairment in their
value.
U.S. GAAP, SOP 98-5, requires that the costs of start-up activities be
expensed in the period incurred rather than be deferred. SOP 98-5 is
effective for periods beginning after December 15, 1998. Initial
implementation is reported as a cumulative effect of a change in accounting
principle without retroactive application.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
June 30, 1999 December 31, 1998
Canadian GAAP U.S. GAAP Canadian GAAP U.S. GAAP
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property, plant and equipment $94,221,000 $92,036,000 $ -- $ --
Other assets 21,500,000 19,625,000 20,374,000 20,440,000
Accrued income taxes 906,000 581,000 -- --
Retained earnings 31,421,000 29,396,000 -- --
Unrealized loss on
available-for-sale securities -- (1,710,000) -- (934,000)
---------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 8
c. Statements of Comprehensive Income
U.S. GAAP requires a statement of comprehensive income as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income (U.S. GAAP) $1,166,000 $1,274,000 $2,165,000 $2,502,000
Change in foreign currency translation
adjustment, net of tax (1999, $80,000,
$119,000; 1998, $(85,000), $(66,000)) 205,000 (199,000) 307,000 (154,000)
Change in unrealized holding losses on
available-for-sale securities (402,000) -- (775,000) --
----------------------------------------------------------------------------------------------------------------
Comprehensive income $969,000 $1,075,000 $1,697,000 $2,348,000
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</TABLE>
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), which established accounting
and reporting standards for derivative instruments and hedging activities. It
requires an entity to measure all derivatives at fair value and to recognize
them in the balance sheet as an asset or liability, depending on the entity's
rights or obligations under the applicable derivative contract. Management has
not yet evaluated the effects of this statement on its results of operations. As
required, the Corporation will adopt SFAS No. 133 for years ending on or after
June 15, 2000, for U.S. GAAP purposes.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE CORPORATION
The following is a discussion and analysis of the financial condition and
results of operations of the Corporation for the three months ended June 30,
1999 and the three months ended June 30, 1998, and for the six months ended June
30, 1999 and the six months ended June 30, 1998, and certain factors that may
affect the Corporation's prospective financial condition and results of
operations. The following should be read in conjunction with the condensed
consolidated financial statements and related notes thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net Sales
The Corporation's net sales for the three months ended June 30, 1999 were $29.5
million compared to $25.9 million for the three months ended June 30, 1998,
reflecting an 8.1% increase in sales of industrial minerals, a 19.9% increase in
sales of metal powders and a 16.5% increase in sales from the Corporation's
aluminum recycling group.
Net sales in the industrial minerals segment for the three month period ended
June 30, 1999 increased by $1.0 million to $12.7 million from $11.7 million in
the corresponding period of 1998. Of the increase, $0.7 million came from
increased volume of mica sales.
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<PAGE> 9
Net sales of the Corporation's metal powders were $9.7 million for the
three-months ended June 30, 1999, an increase of $1.6 million from the
comparable period in 1998. The increase was solely attributable to increased
sales of ferrous metal powder products.
Net sales in the aluminum recycling segment for the three months ended June 30,
1999 were $7.0 million higher than the corresponding period of 1998 of $6.0
million. The 1998 period included only one months contribution from Alumitech of
Wabash, a business the Corporation acquired in June 1998.
Cost of Goods Sold
Cost of goods sold for the three months ended June 30, 1999 was $20.1 million,
compared to $18.3 million for the second quarter of 1998. As a percentage of net
sales, gross margin increased from 29.4% in 1998 to 32.0% for the three months
ended June 30, 1999, reflecting higher sales, improved cost efficiencies and the
benefit of higher recoveries at the Spruce Pine feldspar operation. The higher
recovery is a result of the mine plan and will revert to normal late in 1999.
Selling, General and Administrative Expense
Selling, general, and administrative ("SG&A") expense for the three months ended
June 30, 1999 increased by 11.2% to $3.9 million from $3.5 million in the like
period of 1998. As a percentage of net sales, SG&A expense remained virtually
unchanged from the same period in 1998.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization ("DD&A") for the three months ended
June 30, 1999 was $2.2 million, an increase of $0.5 million, or 30.7%, over the
corresponding period in 1998. Of the increase, 40% was due to the impact of the
acquisition of Alumitech of Wabash in June 1998. The balance of the increase was
as a result of capital expenditures coming on line.
Operating Income
Operating income for the three month period ended June 30, 1999 was $3.3
million, an increase of $0.9 million, or 37.8%, from the comparable period in
1998. The increase was due to the reasons discussed above.
Interest Income
Interest income for the three months ended June 30, 1999 was slightly lower than
the same period in 1998.
Interest Expense
Interest expense for the three months ended June 30, 1999 was $1.1 million,
compared to $0.6 million in the corresponding period of 1998. Total indebtedness
was $53.9 million as of June 30, 1999, $6.6 million higher than the balance of
$47.3 million at June 30, 1998.
Provision for Income Taxes
The Corporation's provision for income taxes for the three months ended June 30,
1999 was $0.6 million, $0.1 million higher than in the corresponding period of
1998.
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<PAGE> 10
Net Income
As a result of the factors discussed above, net income for the three months
ended June 30, 1999 was $1.6 million, an increase of $0.3 million, or 26.7%,
from the comparable period in 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net Sales
The Corporation's net sales for the six months ended June 30, 1999 were $57.4
million, an increase of $5.0 million, or 9.6%, from 1998. The increase is due to
a 9.7% increase in sales of industrial minerals, a 4.0% increase in sales of
metal powders and an 18.7% increase in sales from the aluminum recycling
segment.
Net sales in the industrial minerals segment for the six month period ended June
30, 1999 increased by $2.2 million to $25.2 million from $23.0 million in the
corresponding period of 1998. The increase is due to higher sales volumes of
feldspar, mica and industrial sand.
Net sales in the metal powders segment for the six months ended June 30, 1999
were $19.1 million, an increase of $0.7 million, or 4.0%, from the comparable
period in 1998. The increase is due to stronger sales volume of ferrous atomized
products.
Sales from the Corporation's aluminum recycling segment for the six months ended
June 30, 1999 were $13.0 million, $2.1 million or 18.7% higher than in the same
period of 1998. The increase is due to the acquisition of Alumitech of Wabash in
June 1998. The 1999 period includes a full six months contribution from this
operation.
Cost of Goods Sold
Cost of goods sold for the six months ended June 30, 1999 was $39.6 million, an
increase of $2.2 million, or 5.8%, from the comparable period in 1998. As a
percent of net sales, gross margin increased to 31.0% for the six months ended
June 30, 1999 from 28.5% for the same period in 1998. The increase is due to
higher sales, improved operating efficiencies and favorable recoveries at the
Spruce Pine, North Carolina feldspar operation.
Selling, General and Administrative Expense
SG&A expense for the six months ended June 30, 1999 increased to $7.3 million
from $6.9 million in 1998, an increase of $0.4 million, or 6.6%. As a percentage
of net sales, SG&A expense decreased to 12.7% in 1999 from 13.1% in the same
period in 1998.
Depreciation, Depletion and Amortization
DD&A for the six months ended June 30, 1999 was $4.3 million, an increase of
$1.0 million, or 31.7%, over the comparable period in 1998 as a result of
capital expenditures coming on line and the impact of the June 1998 acquisition
of Alumitech of Wabash.
Operating Income
Operating income for the six month period ended June 30, 1999 was $6.2 million,
an increase of $1.4 million, or 28.6%, from the comparable period in 1998.
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<PAGE> 11
Interest Income
Interest income for the six months ended June 30, 1999 was $0.1 million,
marginally higher than the same period in 1998.
Interest Expense
Interest expense for the six months ended June 30, 1999 was $2.0 million, $0.9
million or 80.9% higher than the same period in 1998 as a result of increased
indebtedness. The Corporation's indebtedness was $53.9 million at June 30, 1999,
$6.6 million higher than the balance of $47.3 million as of June 30, 1998.
Provision for Income Taxes
The Corporation's provision for income taxes for the six months ended June 30,
1999 was $1.2 million, $0.1 million higher than the comparable period in 1998.
The increase is due to higher pre-tax income in the first six months of 1999.
Net Income
As a result of the factors discussed above, net income for the six months ended
June 30, 1999 was $3.0 million, an increase of $0.5 million, or 20.0%, from the
comparable period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
During the first half of 1999, operating activities generated $4.3 million of
cash as compared to $3.9 million cash generated from operations for the first
six months of 1998. In 1999, non-cash working capital items used $0.8 million of
the cash otherwise generated from operations as compared to a use of $1.2
million for the corresponding period of 1998. The use of cash in 1999 was
primarily due to an increase in accounts receivable and inventories, partially
offset by an increase in accounts payable and accrued liabilities.
The Corporation had $26.4 million of working capital at June 30, 1999, compared
to $14.8 million at December 31, 1998. The working capital increase was due to
the new debt facilities entered into by the Corporation. On May 21, 1999 the
Corporation issued $35 million of 7.54% Senior Secured Notes, Series A, due May
21, 2009 and $15 million of 7.76% Senior Secured Notes, Series B, due May 21,
2014. The proceeds were used to repay the Corporations existing credit
facilities. Concurrent with the bond issue the Corporation entered into a credit
agreement, which provides a 364-day, $20 million revolving operating facility.
As at June 30, 1999 the operating facility was undrawn.
It is the opinion of management that there are sufficient sources of funds
available to meet its anticipated cash requirements.
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<PAGE> 12
YEAR 2000
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems, which use certain dates in 1999 to represent something other than a
date. The effects of the year 2000 issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the year 2000 issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
The Corporation operates in basic industries that do not rely heavily on
computerized systems. The major systems operated by the Corporation are those
for financial reporting, all of which are year 2000 compliant. As a result, it
is the opinion of management that any year 2000 issues that may arise will not
have a material adverse impact on the financial condition or performance of the
Corporation. The Corporation is continuing its review of key suppliers to
determine their exposure to problems arising from Year 2000. The review is being
conducted by management personnel and additional resources are not believed to
be required. Given the current status of the Corporation's activities, no
contingency plans are currently in place.
ITEM 3 - MARKET RISK
Market risk represents the risk of loss that may impact the consolidated
financial statements of the Corporation due to adverse changes in financial
market prices and rates. The Corporation's market risk is primarily the result
of fluctuations in interest rates and aluminum prices. Management monitors the
movements in interest rates in the current environment are such that no measures
need be taken at this time.
The Corporation does not hold or issue financial instruments for trading
purposes. A discussion of the Corporation's financial instruments is included in
the financial instruments note to the Consolidated Financial Statements in the
Corporation's 1998 Annual Report, which are incorporated by reference in the
Corporation's Form 10K for the year ended December 31, 1998.
CAUTIONARY "SAFE HARBOR" STATEMENT UNDER THE
UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
are forward looking statements that involve risks and uncertainties that could
cause actual results to differ materially from targeted or projected results.
Factors that could cause actual results to differ materially include, among
others, fluctuations in aluminum prices, problems regarding unanticipated
competition, processing, access and transportation of supplies, availability of
materials and equipment, force majeure events, the failure of plant equipment or
processes to operate in accordance with specifications or expectations,
accidents, labor relations, delays in start-up dates, environmental costs and
risks, the outcome of acquisitions negotiations and general domestic and
international economic and political conditions, as well as other factors
described herein or in the Corporation's filings with the Commission. Many of
these factors are beyond the Corporation's ability to predict or control.
Readers are cautioned not to put undue reliance on forward looking statements.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
(4)(q) Credit Agreement dated as of May 21, 1999 among Zemex Corporation and
Zemex U.S. Corporation as Borrowers, Bank of America Canada as Canadian
Agent, Bank of America National Trust and Savings Association as U.S.
Agent and The Other Financial Institutions Party Hereto.
(4)(r) Zemex U.S. Corporation, Note Purchase Agreement Dated as of May 21, 1999.
Reports on Form 8-K
None
-12-
<PAGE> 13
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 hereunto duly authorized.
Dated this 9th day of August, 1999.
ZEMEX CORPORATION
(Registrant)
By: /s/ Allen J. Palmiere
--------------------------------------
Allen J. Palmiere
Vice President and Chief Financial Officer
-13-
<PAGE> 14
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S> <C>
(4)(q) Credit Agreement dated as of May 21, 1999 among Zemex Corporation and
Zemex U.S. Corporation as Borrowers, Bank of America Canada as Canadian
Agent, Bank of America National Trust and Savings Association as U.S.
Agent and The Other Financial Institutions Party Hereto.
(4)(r) Zemex U.S. Corporation, Note Purchase Agreement Dated as of May 21, 1999.
</TABLE>
-14-
<PAGE> 1
CREDIT AGREEMENT
Dated as of May 21, 1999
AMONG
ZEMEX CORPORATION
AND
ZEMEX U.S. CORPORATION,
AS BORROWERS
BANK OF AMERICA CANADA
AS CANADIAN AGENT,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
AS US AGENT
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms........................................ 1
1.02 Other Interpretive Provisions................................ 20
1.03 Accounting Principles........................................ 22
ARTICLE II
THE CREDIT
2.01 Amounts and Terms of Commitments............................. 22
2.02 Loan Accounts................................................ 23
2.03 Procedure for Borrowing by Company........................... 23
2.04 Conversion and Continuation Elections........................ 24
2.05 Procedure for Borrowing by US Borrower....................... 26
2.06 Conversion and Continuation Elections........................ 27
2.07 Optional Prepayments......................................... 28
2.08 Repayment and Termination Date............................... 29
2.09 Extension Date............................................... 29
2.10 Interest..................................................... 30
2.11 Fees......................................................... 31
2.12 Computation of Fees and Interest............................. 31
2.13 Payments by a Borrower....................................... 32
2.14 Payments by the Banks to the Agents.......................... 32
2.15 Sharing of Payments, Etc..................................... 33
2.16 Security and Guarantee....................................... 34
2.17 Allocation of Total Commitment............................... 34
2.18 Swing Line Facility.......................................... 35
ARTICLE III
THE LETTERS OF CREDIT
3.01 Letters of Credit............................................ 37
3.02 Issuance, Amendment and Renewal of Letters of Credit......... 37
3.03 Payments, Risk Participations, Drawings and Reimbursements... 38
3.04 Repayment of Participations.................................. 40
3.05 Obligations Absolute......................................... 40
3.06 Cash Collateral Pledge....................................... 41
</TABLE>
-1-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes........................................................ 41
4.02 Illegality................................................... 42
4.03 Increased Costs and Reduction of Return...................... 43
4.04 Funding Losses............................................... 44
4.05 Inability to Determine Rates................................. 44
4.06 Certificates of Banks........................................ 44
4.07 Survival..................................................... 45
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Loans.................................. 45
5.02 Conditions to All Borrowings................................. 48
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01 Corporate Existence and Power................................ 49
6.02 Corporate Authorization; No Contravention.................... 49
6.03 Governmental Authorization................................... 50
6.04 Binding Effect............................................... 50
6.05 Litigation................................................... 50
6.06 No Default................................................... 51
6.07 ERISA Compliance............................................. 51
6.08 Use of Proceeds; Margin Regulations.......................... 51
6.09 Title to Properties.......................................... 52
6.10 Taxes........................................................ 52
6.11 Financial Condition.......................................... 52
6.12 Environmental Matters........................................ 52
6.13 Collateral Documents......................................... 53
6.14 Regulated Entities........................................... 53
6.15 No Burdensome Restrictions................................... 54
6.16 Copyrights, Patents, Trademarks and Licenses, etc............ 54
6.17 Subsidiaries................................................. 54
6.18 Insurance.................................................... 54
6.19 Solvency..................................................... 54
6.20 Full Disclosure.............................................. 54
</TABLE>
-2-
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VII
AFFIRMATIVE COVENANTS
7.01 Financial Statements.......................................... 55
7.02 Certificates; Other Information............................... 56
7.03 Notices....................................................... 56
7.04 Preservation of Corporate Existence, Etc ..................... 58
7.05 Maintenance of Property....................................... 58
7.06 Insurance..................................................... 59
7.07 Payment of Obligations........................................ 59
7.08 Compliance with Laws.......................................... 59
7.09 Compliance with ERISA......................................... 60
7.10 Inspection of Property and Books and Records.................. 60
7.11 Environmental Laws............................................ 60
7.12 Use of Proceeds............................................... 61
7.13 Industrial Development Revenue Bond........................... 61
7.14 Further Assurances............................................ 61
ARTICLE VIII
NEGATIVE COVENANTS
8.01 Limitation on Liens........................................... 62
8.02 Disposition of Assets......................................... 63
8.03 Consolidations and Mergers ................................... 63
8.04 Permitted Loans............................................... 64
8.05 Limitation on Indebtedness.................................... 64
8.06 Transactions with Affiliates.................................. 64
8.07 Prohibited Use of Proceeds.................................... 64
8.08 Operating Lease Obligations................................... 65
8.09 Sale Leaseback Transactions................................... 65
8.10 Restricted Payments........................................... 65
8.11 Change in Business............................................ 65
8.12 Accounting Changes............................................ 65
8.13 Asset Acquisition............................................. 65
8.14 Capital Expenditures.......................................... 66
8.15 Permitted Investments........................................ 66
8.16 Prohibited Investments....................................... 66
8.17 Minimum Net Worth............................................ 66
8.18 Leverage Ratio............................................... 66
8.19 Interest Coverage Ratio...................................... 66
8.20 Debt - Capitalization........................................ 66
8.21 Year 2000.................................................... 66
8.22 Private Placement Repayments................................. 66
8.23 Material Documents........................................... 67
</TABLE>
-3-
<PAGE> 5
<TABLE>
<S> <C> <C>
8.24 Excluded Subsidiaries....................................... 67
8.25 Maximum Acquisitions........................................ 67
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default............................................ 67
9.02 Remedies.................................................... 70
9.03 Rights Not ................................................. 70
ARTICLE X
THE AGENT
10.01 Appointment and Authorization; "Agent"...................... 70
10.02 Delegation of Duties........................................ 71
10.03 Liability of Agent.......................................... 71
10.04 Reliance by Agent........................................... 71
10.05 Notice of Default........................................... 72
10.06 Credit Decision............................................. 72
10.07 Indemnification of Agents................................... 73
10.08 Agents in Individual Capacity............................... 73
10.09 Successor Agent............................................. 73
10.10 Withholding Tax............................................. 74
10.11 Collateral Matters.......................................... 74
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers...................................... 75
11.02 Notices..................................................... 76
11.03 No Waiver; Cumulative Remedies.............................. 76
11.04 Costs and Expenses.......................................... 76
11.05 Borrower Indemnification.................................... 77
11.06 Marshaling; Payments Set Aside.............................. 78
11.07 Successors and Assigns...................................... 79
11.08 Assignments, Participations, etc............................ 79
11.09 Confidentiality............................................. 80
11.10 Set-off..................................................... 81
11.11 Notification of Addresses, Lending Offices, Etc............. 81
11.12 Counterparts................................................ 81
11.13 Severability................................................ 81
11.14 No Third Parties Benefited.................................. 82
11.15 Governing Law and Jurisdiction.............................. 82
11.16 Entire Agreement............................................ 82
</TABLE>
-4-
<PAGE> 6
<TABLE>
<S> <C>
SCHEDULES
Schedule 1 Guarantors
Schedule 2 Inter-Company Notes
Schedule 2.01 Commitments
Schedule 5.01(i) Environmental Assessments
Schedule 6.05 Litigation
Schedule 6.07 ERISA
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.17 Subsidiaries and Minority Interests
Schedule 8.01 Permitted Liens
Schedule 8.05 Permitted Indebtedness and Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Reallocation Notice
</TABLE>
<PAGE> 7
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of May 21, 1999, among ZEMEX
CORPORATION, a corporation established under the federal laws of Canada (the
"Company") and ZEMEX U.S. CORPORATION, a corporation established under the laws
of Delaware (the "US Borrower") (the Company and US Borrower called the
"Borrowers") the several financial institutions from time to time party to this
Agreement (collectively, the "Banks"; individually, a "Bank"), Bank of America
Canada as agent for the Canadian Banks, Bank of America National Trust and
Savings Association as agent for the US Banks, and Bank of America Canada as
arranger.
WHEREAS, the Borrowers have requested the Banks to provide certain credit
facilities to the Company and the US Borrower to provide funds for working
capital, short term liquidity and general corporate purposes, including
permitted Acquisitions;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following meanings:
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Acquisition of an Excluded Subsidiary" means any transaction or series of
related transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise causing
any Person to become an Excluded Subsidiary, or (b) a merger or consolidation or
any other combination with another Person (other than a Person that is a
Subsidiary) provided that the Excluded Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person for the purposes
of this definition if the controlling Person
<PAGE> 8
-2-
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of the other Person, whether through the ownership
of voting securities, membership interests, by contract, or otherwise. In the
case of a Borrower, "Affiliate" shall be deemed to include any Excluded
Subsidiaries.
"Agents" means BACAN in its capacity as Canadian Agent for the Canadian
Banks hereunder, and BofA in its capacity as US Agent for the US Banks
hereunder, as well as any successor agents arising under Section 10.09.
"Agent Related Persons" means BACAN or BofA, as the case may be and any
successor agent arising under Section 10.09, together with their respective
Affiliates and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"Agent's Payment Office" means (a) in respect of payments made by the
Company, the address for payments set forth on Schedule 11.02 - Part I or such
other address as the Canadian Agent may from time to time specify, and (b) in
respect of payments made by the US Borrower, the address for payments set forth
on Schedule 11.02 - Part II or such other address as the US Agent may from time
to time specify.
"Agreement" means this Credit Agreement and all Schedules attached hereto.
"Applicable Margin" for Loans (other than Letters of Credit) and L/C Fee
calculation means
<TABLE>
<CAPTION>
Leverage LIBOR, B/A Rate Prime and Base
Ratio Loans and L/Cs Rate Loans
----- -------------- ----------
<S> <C> <C>
Under 2.75 1.625% .625%
From and including
2.75 to less
than 3.00 1.75% .75%
3.00 or more 1.875% .875%
</TABLE>
"Arranger" means BACAN.
"Assignee" has the meaning specified in subsection 11.08(a).
"Assignment and Postponement Agreement" means each assignment and
postponement agreement delivered by each of the holders of an Inter-Company Note
(as listed on Schedule 2 hereto) in favour of the Canadian Agent for and on
behalf of the Banks.
<PAGE> 9
-3-
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel.
"BofA" means Bank of America National Trust and Savings Association, a US
national banking association.
"BACAN" means Bank of America Canada.
"Bank" means the institutions specified in the introductory clause hereto.
"B/A Rate" means, for the Interest Period of each BA Equivalent Loan, the
rate of interest per annum equal to the annual rate of interest quoted at 11:00
a.m. (Toronto time) on the Business Day which is the first day of such Interest
Period by the Canadian Agent as being its rate of interest for bankers'
acceptances in Canadian Dollars for a face amount similar to the amount of the
applicable BA Equivalent Loan and for a term similar to the applicable Interest
Period.
"B/A Equivalent Loan" means a Canadian Loan that bears interest at the B/A
Rate plus the Applicable Margin.
"Base Rate" means:
(a) in the case of Base Rate Loans to the US Borrower, for any day, the
higher of: (i) 0.50% per annum above the latest Federal Funds Rate;
and (ii) the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco, California, as
its "reference rate." (The "reference rate" is a rate set by BofA
based upon various factors including BofA's costs and desired return,
general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above,
or below such announced rate.) Any change in the reference rate
announced by BofA shall take effect at the opening of business on the
day specified in the public announcement of such change; and
(b) in the case of Base Rate Loans to the Company for any day, the
variable rate of interest expressed as a percentage per annum,
determined, approved and adjusted by the Canadian Agent from time to
time as a reference rate for commercial loans made by the Canadian
Agent in Canada in Dollars.
"Base Rate Loan" means a Loan or an L/C Loan that bears interest at the
applicable Base Rate plus the Applicable Margin.
"Borrower" means either the Company or the US Borrower, as the case may be.
<PAGE> 10
-4-
"Borrowing Date" means any date on which a Borrowing occurs under Section
2.03 or 2.05.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in Toronto, Atlanta or San Francisco are authorized or
required by law to close, and if the applicable Business Day relates to any
LIBOR Loans, means such day on which dealings are carried on in the London
interbank market.
"Canadian Agent" means BACAN.
"Cdn.$" or "Canadian Dollar" each mean lawful money of Canada.
"Canadian Loan" means a Loan in Canadian Dollars or US Dollars hereunder by
the Company from the Canadian Banks, including those Loans referenced in Section
2.01(a).
"Canadian Banks" means those Schedule I or Schedule II Banks to which the
Bank Act (Canada) applies and which agree to make Loans to the Company.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means, for any period and with respect to any
Person, the aggregate of all expenditures by such Person and its Subsidiaries,
the acquisition or leasing of fixed or capital assets or additions to equipment
(including replacements, capitalized repairs and improvements during such
period) which are required to be capitalized under GAAP on a consolidated
balance sheet of such a Person and its Subsidiaries.
"Capitalization" means the resultant amount of the Net Worth of the Company
(excluding any calculation or allowance for Excluded Subsidiaries) plus the
Company's Indebtedness on a consolidated basis (excluding any Indebtedness of
Excluded Subsidiaries).
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of the Agents and the Banks, as additional collateral for
the L/C Obligations, cash or deposit account balances pursuant to documentation
in form and substance satisfactory to the Agent and the Issuing Banks (which
documents are hereby consented to by the Banks).
"Change of Control" means
(a) with respect to the Company, a successful takeover bid made for
the Company, as that term is used in the Ontario Securities Act,
resulting in
<PAGE> 11
-5-
ownership by any one Person of over 50% of the Company's issued
and outstanding shares,
(b) with respect to the US Borrower, the Company ceasing to
beneficially own all of the capital stock of the US Borrower;
and,
(c) with respect to a Guarantor, the US Borrower ceasing, directly or
indirectly to beneficially own all of the capital stock of such
Guarantor.
"Closing Date" means May 26, 1999 or such other date as the parties hereto
may agree.
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Company, the US Borrower, or any
Guarantor and their respective Subsidiaries in or upon which a Lien now or
hereafter exists in favour of the Banks, or an Agent on behalf of the Banks,
whether under this Agreement or under any of the Collateral Documents executed
by any such Person and delivered to the Agents or the Banks.
"Collateral Documents" means, collectively, (a) the Security Agreements,
the Pledge Agreements, the Inter-Creditor Agreement, the Guarantees, the
Assignment and Postponement Agreements and all other security agreements,
mortgages, deeds of trust, patent and trademark assignments, lease assignments,
guarantees and other similar agreements between a Borrower or any Subsidiary or
any Guarantor and the Banks or an Agent for the benefit of the Banks now or
hereafter delivered to the Banks or the Agents pursuant to or in connection with
the transactions contemplated hereby, and all financing statements (or
comparable documents now or hereafter filed in accordance with the PPSA, UCC or
comparable law) against a Borrower or any Subsidiary or any Guarantor as debtor
in favour of the Banks or an Agent for the benefit of the Banks as secured
party, and (b) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of the
foregoing.
"Commitment", as to each Bank, has the meaning specified in Section 2.01.
"Company" means Zemex Corporation, a company continued under the federal
laws of Canada.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C.
"Consolidated Funded Debt" means at any time in respect of the Company on a
consolidated basis (excluding any calculation or allowance for Excluded
Subsidiaries) the sum of (i) all indebtedness for borrowed money; (ii) all
obligations evidenced by notes, bonds,
<PAGE> 12
-6-
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (iii) all
obligations with respect to capital leases; (iv) all indebtedness referred to in
clauses (i) through (iii) above secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness; and (v) any Redeemable Preferred Shares.
"Consolidated Interest Expense" means, for any period, gross consolidated
interest expense for the period (including all commissions, discounts, fees and
other charges in connection with stand-by letters of credit and similar
instruments) for the Company on a consolidated basis (excluding any calculation
or allowance for Excluded Subsidiaries), as determined in accordance with GAAP.
"Consolidated Tangible Net Worth" means the consolidated shareholders'
equity of the Company and its Subsidiaries (excluding any calculation or
allowance for Excluded Subsidiaries) as shown on the consolidated balance sheet
of the Company in accordance with GAAP, less the aggregate of (a) any amount
attributable to goodwill, trademarks, copyrights, deferred assets and other
similar intangible assets of the Company and Subsidiaries, all in accordance
with GAAP; and (b) any Redeemable Preferred Shares.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guarantee Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or
<PAGE> 13
-7-
other instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section 2.04
or 2.06, the Company or the US Borrower, as the case may be (a) converts Loans
of one Type to another Type, or (b) continues Loans having Interest Periods
expiring on such date as Loans of the same Type, but with a new Interest Period.
"Credit Extension" means and includes the making of all Loans hereunder.
"Credit" means the revolving credit facility of up to $20 million (or the
Canadian Dollar equivalent) established by the Banks in favour of the Borrowers.
"Default" means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Disposition" means (a) the sale, lease, conveyance or other disposition of
property, other than sales, leases, conveyances or other dispositions expressly
permitted under this Agreement or the Collateral Documents, and (b) the sale or
transfer by the Company or any Subsidiary of any shares in the capital of any
Subsidiary held by such transferor Person.
"Dollars", "dollars" and "$" each mean lawful money of the United States.
"EBITDA" means, for any period, the Net Income of the Company and its
Subsidiaries on a consolidated basis (excluding any calculation or allowance for
Excluded Subsidiaries), determined in accordance with GAAP; plus, to the extent
deducted in the computation of Net Income for such period, (a) Consolidated
Interest Expense; (b) income or franchise taxes paid or accrued; and (c)
amortization, depreciation, depletion and other non-cash expenses of the Company
and the Subsidiaries; provided however that Net Income shall be computed for
these purposes without giving effect to any non-cash, non-recurring
extraordinary losses or special charges or extraordinary or special gains.
"Eligible Assignee" means (a) a bank, financial institution, finance
company or commercial lender referred to in Schedule I or II of the Bank Act
(Canada), (b) a commercial bank organized under the laws of the United States,
or any state thereof, and having a combined capital and surplus of at least
$100,000,000; (c) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the OECD or (d) a
Person that is primarily engaged in the business of commercial banking and that
<PAGE> 14
-8-
is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is
a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, against a
Borrower, a Guarantor or Excluded Subsidiary by any Governmental Authority or
other Person alleging potential liability or responsibility for violation of any
Environmental Law, or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or death), property
damage, natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal, remedial
or response costs, restitution, civil or criminal penalties, injunctive relief,
or other type of relief, resulting from or based upon the presence, placement,
discharge, emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or non-accidental,
placement, spills, leaks, discharges, emissions or releases) of any Hazardous
Material at, in, or from property of the Borrower, the Guarantors or the
Excluded Subsidiary, whether or not owned by the Borrowers, the Excluded
Subsidiary or the Guarantors.
"Environmental Laws" means all federal, state, provincial or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters.
"Equivalent Amount" means, on any date, the amount of Canadian Dollars or
US Dollars, as the case may be, which can be purchased with the specified amount
of US Dollars or Canadian Dollars, as the case may be, at the applicable
Exchange Rate on that date.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the US Borrower within the meaning of Section 414(b)
or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the US Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the US Borrower or any ERISA
Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan
is in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings
<PAGE> 15
-9-
by the PBGC to terminate a Pension Plan or Multi-employer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multi-employer Plan; or (f) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the US Borrower or any ERISA
Affiliate.
"Estimated Remediation Costs" means all costs associated with performing
work to remedy contamination of real property or groundwater, including
engineering and other professional fees and expenses, costs to remove, transport
and dispose of contaminated soil, costs to "cap" or otherwise contain
contaminated soil, and costs to pump and treat water and monitor water quality.
"Event of Default" means any of the events or circumstances specified in
Section 9.01.
"Event of Loss" means, with respect to any property, any of the following:
(a) any loss, destruction or damage of such property; (b) any pending or
threatened institution of any proceedings for the condemnation or seizure of
such property or for the exercise of any right of eminent domain; or (c) any
actual condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, of such property, or confiscation of such property or the
requisition of the use of such property.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder.
"Exchange Rate" means on any date, for any conversion of Dollars into
Canadian Dollars, or vice versa, the applicable spot buying rate of Canadian
Dollars or Dollars, as the case may be, reported by the Bank of Canada at its
daily official noon (Toronto time) spot rate of exchange on such date if it is a
Business Day or on the immediately preceding Business Day if such day is not a
Business Day.
"Excluded Subsidiary" means any corporation, association, partnership,
limited liability company, joint venture or other business entity (an "Entity")
owned or controlled directly or indirectly by a Borrower or any Subsidiary
wherein recourse to any obligations of the Entity are limited solely to the
property of such Entity and not otherwise to the Borrower, any Subsidiary or any
Collateral, notice of which is given to the Agents and the Banks pursuant to
section 7.03(g). Subject to consent from the Agents and the Banks, and subject
to notice being given to the Agents and the Banks pursuant to Section 7.03(h), a
Borrower may convert an Excluded Subsidiary to a Subsidiary.
"Extension Date" has the meaning specified in Section 2.09 of this
Agreement.
<PAGE> 16
-10-
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by BofA of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
BofA.
"Fee Letters" has the meaning specified in subsection 2.11(a).
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"GAAP" means generally accepted accounting principles which are in effect
from time to time in Canada, as published in the handbook of the Canadian
Institute of Chartered Accountants.
"Governmental Authority" means any nation or government, any provincial,
state, or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee" means each guarantee delivered by each Guarantor to the
Canadian Agent for and on behalf of the Banks, guaranteeing the Obligations.
"Guarantor" means each of the Company, the US Borrower and the companies
listed on Schedule 1 hereto.
"Guaranteed Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Hazardous Materials" means all those substances that are regulated by, or
which may form the basis of liability under, any Environmental Law, including
any substance identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent,
<PAGE> 17
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special waste, hazardous substance, hazardous material, or toxic substance, or
petroleum or petroleum derived substance or waste.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all Contingent Obligations; (e) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses; (f) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property); (g) all obligations with
respect to capital leases; (h) all indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness; and (i) all Guaranteed Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (h) above.
For all purposes of this Agreement, the Indebtedness of any Person shall include
all recourse Indebtedness of any partnership or joint venture or limited
liability company in which such Person is a general partner or a joint venturer
or a member.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
"Indemnified Person" has the meaning specified in Section 11.05.
"Independent Auditor" has the meaning specified in subsection 7.01(a).
"Initial Term" has the meaning specified in Section 2.08 of this Agreement.
"Inmet Securities" means all of the shares and share purchase warrants of
Inmet Mining Corporation now or hereafter owned by the US Borrower and/or the
Company.
"Insolvency Proceeding" means, with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under the
Canadian provincial or federal laws, or under US federal, state or foreign law.
<PAGE> 18
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"Insolvent" means, when used in reference to any Borrower or Subsidiary,
that such Person shall suffer, or there shall have occurred with respect to such
Person, one or more of the following events:
(a) such Person shall generally not pay its debts as they become due; or
(b) such Person shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or
(c) a receiver shall be appointed for such Person or any substantial part
of its property; or
(d) any proceeding shall be instituted by or against such Person seeking
to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding-up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief by the appointment of a
receiver, trustee, custodian or other similar official for it or any
substantial part of its property, where any such proceeding has not
been stayed or dismissed within 45 days of a receiver, trustee,
custodian or other similar official being appointed for it or any
substantial part of its property; or
(e) such Person takes any corporate action to authorize any of the actions
described in clauses (a) to (d).
"Inter-Company Notes" means those notes or evidence of indebtedness issued
by the Company, the US Borrower or any of their respective Subsidiaries in
favour of the Company, the US Borrower or a Subsidiary as the case may be, as
listed on Schedule 2 hereto.
"Inter-Creditor Agreement" means the inter-creditor agreement dated May 21,
1999 between the Agents, for and on behalf of the Banks, the Company, and those
certain US noteholders holding the Senior Secured Notes.
"Interest Coverage Ratio" means, at any date, the ratio of (a) EBITDA for
the immediately preceding four quarters to (b) Consolidated Interest Expense for
the immediately preceding four consecutive fiscal quarters for which the Banks
and the Agents have received financial statements in compliance with Section
7.01.
"Interest Payment Date" means, (a) as to any LIBOR Loan or B/A Equivalent
Loan, the earlier of (i) 90 days from the Borrowing Date or previous Interest
Payment Date, and (ii) the last day of each Interest Period applicable to such
LIBOR Loan or B/A Equivalent Loan and, (b)
<PAGE> 19
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as to any Base Rate Loan or Prime Rate Loan, the last Business Day of each
calendar quarter and, in each case, on the Termination Date.
"Interest Period" means, as to any LIBOR Loan, the LIBOR Period, and as to
any B/A Equivalent Loan, the period commencing on the Borrowing Date of such
Loan or on the Conversion/Continuation Date on which the Loan is converted into
or continued as a B/A Equivalent Loan, and ending on the date one, two, three or
six months thereafter as selected by the Company, in each case as may be
applicable in a Notice of Borrowing or Notice of Conversion/Continuation,
provided that:
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such
Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such
Interest Period.
"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Issue" means with respect to any L/C, to issue or to extend the expiry of,
or to renew or increase the amount of, such L/C and the terms "Issued",
"Issuing" and "Issuance" have corresponding meanings.
"Issuing Bank" means BACAN, or any other Canadian Bank that may agree to
become an Issuing Bank hereunder, in its capacity as issuer of one or more L/Cs
denominated in Cdn.$ and BofA, or any other US Bank that may agree to become an
Issuing Bank hereunder, in its capacity as issuer of one or more L/Cs
denominated in US$, or any other Bank from time to time that may be a party to
this Agreement and agrees to be an Issuing Bank.
"Lending Office" means, as to any Bank, the office or offices of such Bank
specified as its "Lending Office" or "Domestic Lending Office" as the case may
be, on Schedule 11.02, or such other office or offices as the Bank may from time
to time notify the Company, the US Borrower and the Agents.
"LIBO Rate" means, for any LIBOR Period the sum of:
(a) either
<PAGE> 20
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(i) the rate of interest per annum on the basis of a 360 day year for
deposits in Dollars in the London interbank market in the
approximate amount of the Loan to be made or continued as, or
converted into, a LIBOR Loan rounded up to the nearest 1/100th%
and having a maturity comparable to such Interest Period that
appears on the Telerate Page 3750 (or any successor source from
time to time) as of 11:00 a.m. (London time) two Business Days
prior to the commencement of such LIBOR Period, or
(ii) if no such rate as contemplated in (i) appears, the simple
average of the interest rates expressed as a percentage per annum
on the basis of a 360 day year at which deposits in Dollars are
offered to the principal offices of each of the Canadian Banks in
London, England in the London Interbank market at 11:00 a.m.
(London time) two Business Days prior to the commencement of such
LIBOR Period and in an amount equal to the amount of the Loan to
be made or continued as, or converted into a LIBOR Loan, rounded
up to the nearest 1/100th% per annum, and
(b) the Applicable Margin.
"LIBOR Loan" means an advance in US Dollars bearing interest based on the
LIBO Rate.
"LIBOR Period" means the 1, 2, 3 or 6 month period selected by a Borrower
for a LIBOR Loan.
"L/C" or "Letter of Credit" means a commercial letter of credit or stand-by
letter of credit in a form satisfactory to an Issuing Bank issued by an Issuing
Bank at the request of a Borrower in favour of a third party to secure the
payment or performance of an obligation of the Borrower to the third party.
"L/C Fee" means the Applicable Margin payable per annum upon the issuance
or renewal of each L/C calculated based on the face amount of each L/C issued by
the applicable Issuing Bank.
"L/C Issuance Fee" means an issuance fee in the amount of .125% per annum
payable upon the issuance or renewal of each L/C (subject to a minimum fee of
$250 Canadian or US, depending on the denomination of the L/C) calculated based
on the face amount of each L/C issued by the applicable Issuing Bank.
"L/C Advance" means each Bank's Pro Rata Share in any L/C Loan.
<PAGE> 21
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"L/C Amendment Application" means an application form for amendment of
outstanding stand-by or documentary letters of credit and shall at any time be
in use by the Issuing Bank as the Issuing Bank shall request.
"L/C Application" means an application form for issuance of Letters of
Credit as shall at any time be in use by the Issuing Bank, as the Issuing Bank
shall request.
"L/C Loan" means an extension of credit resulting from a Borrowing under
any L/C which shall not have been reimbursed on the date when made nor converted
into another Borrowing.
"L/C Obligations" means at any time the sum of (a) the aggregate undrawn
amount of all L/Cs then outstanding plus (b) the amount of all unreimbursed
drawings under all L/Cs, including all outstanding L/C Loans.
"Leverage Ratio" means at any date, the ratio of (a) Consolidated Funded
Debt to (b) the sum of EBITDA for the immediately preceding four consecutive
full fiscal quarters then ending and for which the Banks and the Agents have
received financial statements in compliance with Section 7.01.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or other arrangement of any kind or nature whatsoever in
respect of any property that in substance secures payment or performance of any
obligation (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the PPSA or UCC or any comparable law) but not including the interest of a
lessor under an operating lease.
"Loan" means an extension of credit by a Bank to a Borrower under Article
II or III, and may be a Base Rate Loan, Prime Rate Loan, B/A Equivalent Loan,
LIBOR Loan, Swing Line Loan or issuance of L/Cs (each, a "Type" of Loan).
"Loan Documents" means this Agreement, the Collateral Documents, the Fee
Letters, and all other documents delivered to the Agents or any Bank in
connection with the transactions contemplated by this Agreement.
"Majority Banks" means at any time Banks then holding at least 66 2/3% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, at least two Banks then having at least 66
2/3% of the Commitments.
<PAGE> 22
-16-
"Margin Stock" means "margin stock" as such term is defined in Regulation
G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of the
Company and the Subsidiaries taken as a whole to perform under the Loan
Documents, or (c) a material adverse effect upon (i) the legality, validity,
binding effect or enforceability against the Company or any Subsidiary of any
Loan Document, or (ii) the perfection or priority of any Lien granted under any
of the Collateral Documents.
"Material Documents" means this Agreement, the Inter-Creditor Agreement,
the note purchase agreement dated as of May 21, 1999 made between the US
Borrower and purchasers of the Senior Secured Notes as identified therein, and
all guarantees and security documents in favour of the holders of the Senior
Secured Notes.
"Mortgage" means any deed of trust, mortgage, leasehold mortgage,
assignment of rents or other document creating a Lien on real property or any
interest in real property.
"Mortgaged Property" means all property of the Borrower or of the
Guarantors which is subject to a Lien pursuant to a Mortgage.
"Multi-employer Plan" means a "multi-employer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which the US Borrower or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make, contributions.
"Net Income" shall mean for any period, the net income (or loss) of the
Company on a consolidated basis (excluding any calculation or allowance for
Exclude Subsidiaries) for such period taken as a single accounting period
determined in conformity with GAAP, provided that there shall be excluded (i)
the income (or loss) of any entity accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with the Company or any Subsidiary
or on which its assets are required by the Company or any Subsidiary, (ii) the
net income (loss) of any Person which is not a Subsidiary except to the extent
of the amount of cash dividends or distributions paid to the Company or to a
Subsidiary; and (iii) the income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by the Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
government regulation applicable to the Subsidiary.
"Net Worth" means shareholders' equity as determined in accordance with
GAAP.
"Notice of Borrowing" means a notice in substantially the form of Exhibit
A.
<PAGE> 23
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"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit B.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company or the
US Borrower, as the case may be to any Bank, an Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising.
"Organization Documents" means, for any corporation, the certificate or
articles of incorporation, amalgamation or continuance, the bylaws, any
certificate of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and all
applicable resolutions of the board of directors (or any committee thereof) of
such corporation.
"OSC" means the Ontario Securities Commission, or any Governmental
Authority succeeding to any of its prescribed functions.
"Other Taxes" means any present or future stamp, court or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Participant" has the meaning specified in subsection 11.08(c).
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"PPSA" means the Personal Property Security Act (Ontario).
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the US Borrower sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in the case
of a multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
<PAGE> 24
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"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the US Borrower or a Subsidiary sponsors or maintains or to which the US
Borrower or a Subsidiary makes, is making, or is obligated to make contributions
and includes any Pension Plan.
"Pledge Agreements" means collectively (a) the agreement between the
Canadian Agent on behalf of the Banks and the Company pledging all of the shares
of its directly-owned Subsidiaries, including the US Borrower; (b) the agreement
between the Canadian Agent on behalf of the Banks and the US Borrower pledging
all of the Inmet Securities and all of the shares of all its directly-owned
Subsidiaries, and (c) the agreements between the Canadian Agent on behalf of the
Banks and certain Guarantors pledging all of the shares of such Guarantors'
directly owned Subsidiaries, all as may be amended, supplemented or otherwise
modified from time to time.
"Pledged Collateral" has the meaning specified in the relevant Pledge
Agreement.
"Prime Rate" means, on any day, the greater of: (a) the annual rate of
interest expressed as a percentage per annum announced by BACAN on that day as
its reference rate for commercial loans made by it in Canada in Canadian
Dollars; and (b) the average rate for 30-day Canadian Dollar Banker's
Acceptances that appear on the Reuter Screen CDOR Page at 10:00 a.m. Toronto
time on that day, plus 3/4% per annum.
"Prime Rate Loan" means a Loan in Canadian Dollars bearing interest at
Prime Rate plus the Applicable Margin.
"Private Placement" means the offering of Senior Secured Notes by the US
Borrower totaling $50 million in the United States, as arranged by Banc of
America Securities LLC, successor to NationsBank Montgomery Securities LLC.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks,
including as such Commitments may be reallocated pursuant to Section 2.17.
"Reallocation Request" has the meaning specified in Section 2.17.
"Redeemable Preferred Shares" means any capital stock of the Company or a
Subsidiary which is redeemable, payable or required to be purchased or otherwise
retired or extinguished, or convertible into any Indebtedness at the option of
the holder of such capital stock, whether or not it pays dividends at a
specified or non-specified rate, and whether or not such capital stock has
preference over common stock in any respect.
"Reference Bank" means BofA.
<PAGE> 25
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"Reportable Event" means, any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the president of
the Company, or any other officer having substantially the same authority and
responsibility; or, with respect to compliance with financial covenants, the
chief financial officer or the treasurer of the Company, or any other officer
having substantially the same authority and responsibility.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Security Agreements" means, collectively, the general security agreements
executed by each of the Borrowers and each Guarantor in favour of the applicable
Agent, for and on behalf of the Banks, granting such Agent a security interest
over the Collateral specified therein.
"Senior Secured Notes" means those notes issued pursuant to the Private
Placement.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which more
than 50% of the voting stock, membership interests or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof, except that "Subsidiary" shall not include an Excluded
Subsidiary. Unless the context otherwise clearly requires, references herein to
a "Subsidiary" refer to a Subsidiary of the Company.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Swing Line Facility" means the revolving credit facility to be made
available to the US Borrower by the Swing Line Lender under Section 2.18 hereof.
"Swing Line Lender" means BofA.
"Swing Line Loan" means a US Borrowing made pursuant to Section 2.18
hereof.
"Swing Line Repayment Date" has the meaning specified in Section 2.18(d)
hereof.
<PAGE> 26
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"Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agents, respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Bank or the Agents, as the case may be, is organized or maintains a lending
office or imposed by reason of the Bank being connected with Canada or the
United States or any other relevant jurisdiction otherwise than merely by
lending money under this Agreement.
"Termination Date" has the meaning specified in Section 2.08 of this
Agreement.
"Total Commitment" means, collectively, the Total Canadian Commitment and
the Total US Commitment.
"Total Canadian Commitment" means the sum of the Commitments as available
to the Company from time to time.
"Total US Commitment" means the sum of the Commitments as available to the
US Borrower from time to time.
"Type" has the meaning specified in the definition of "Loan."
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
"US Agent" means Bank of America National Trust and Savings Association.
"US Banks" means those Banks other than the Canadian Banks.
"US Borrower" means Zemex U.S. Corporation.
"US Loan" means a Loan hereunder in Dollars by the US Borrower from the US
Banks, including those loans referenced in Section 2.01(b).
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "US" each means the United States of America.
"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock of each
class having ordinary voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which
<PAGE> 27
-21-
any determination is being made, is owned, beneficially and of record, by the
Company, or by one or more of the other Wholly-Owned Subsidiaries, or both, but
shall not include Excluded Subsidiaries.
"Year 2000 Problem" has the meaning specified in Section 5.01(n).
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer to this
Agreement as a whole and not to any particular provision of this Agreement;
and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including without
limitation."
(iii) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(iv) The term "property" includes any kind of property or asset, real,
personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to agreements
(including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to
any statute or regulation are to be construed as including all statutory
and regulatory provisions consolidating, amending, replacing, supplementing
or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters.
All such limitations, tests and measurements are cumulative and shall each
be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agents or the
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Banks by way of consent, approval or waiver shall be deemed modified by the
phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result of negotiations
among and have been reviewed by counsel to the Agents, the Company and the
other parties, and are the products of all parties. Accordingly, they shall
not be construed against the Banks or the Agents merely because of the
Agents' or Banks' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to such
fiscal periods of the Company.
ARTICLE II
THE CREDIT
2.01 Amounts and Terms of Commitments.
(a) Each Canadian Bank severally agrees, on the terms and conditions set forth
herein, to make Prime Rate Loans, Base Rate Loans, B/A Equivalent Loans and
LIBOR Loans to the Company from time to time on any Business Day during the
period from the Closing Date to the Termination Date, in an aggregate
amount not to exceed at any time outstanding the Equivalent Amount in Cdn.$
of the amount set forth on Schedule 2.01 next to its name (such amount as
the same may be reduced under Section 2.07 or as a result of one or more
assignments under Section 11.08, a Canadian Bank's "Commitment"). Within
the limits of each Canadian Bank's Commitment, and subject to the other
terms and conditions hereof, the Company may borrow under this Section
2.01(a), prepay under Section 2.07 and reborrow under this Section 2.01(a)
or convert or continue such Loans under Section 2.04, provided that no
borrowing, reborrowing, conversion or continuation of Loans may be made
after the end of the Initial Term or, if the Initial Term is extended in
accordance with Section 2.09, the applicable Extension Date.
(b) Each US Bank severally agrees, on the terms and conditions set forth
herein, to make Base Rate Loans, LIBOR Loans and, in respect of the Swing
Line Lender only, the Swing Line Loans to the US Borrower from time to time
on any Business Day during the period from the Closing Date to the
Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth on Schedule 2.01 next to its name (such
amount as
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the same may be reduced under Section 2.07 or as a result of one or more
assignments under Section 11.08, a US Bank's "Commitment"). Within the
limits of each US Bank's Commitment, and subject to the other terms and
conditions hereof, the US Borrower may borrow under this Section 2.01(b),
prepay under Section 2.07 and reborrow under this Section 2.01(b) or
convert or continue such Loans under section 2.06, provided that no
borrowing, reborrowing, conversion or continuation of Loans may be made
after the end of the Initial Term or, if the Initial Term is extended in
accordance with Section 2.09, the applicable Extension Date.
(c) The Canadian Banks shall make Canadian Loans to the Company and the US
Banks shall make US Loans to the US Borrower.
2.02 Loan Accounts.
The Loans made by each Bank and the L/Cs issued by an Issuing Bank shall be
evidenced by one or more loan accounts or records maintained by the applicable
Agent and such Bank, or Issuing Bank, as the case may be in the ordinary course
of business. The loan accounts or records maintained by the applicable Agent,
the Issuing Bank and each Bank shall be of the amount of the Loans made by the
Banks to the applicable Borrower and the interest and payments thereon. In the
event of any conflict, the loan accounts of the Agents shall govern. Any failure
so to record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Company or the US Borrower hereunder to pay any
amount owing with respect to the Loans or any L/C.
2.03 Procedure for Borrowing by Company.
(a) Each Canadian Loan by the Company (other than an L/C Loan) shall be made
upon the Company's irrevocable written notice delivered to the Canadian
Agent in the form of a Notice of Borrowing (which notice must be received
by the Canadian Agent prior to 12:00 noon (Toronto time) (i) three Business
Days prior to the requested Borrowing Date, in the case of B/A Equivalent
Loans; (ii) one Business Day prior to the requested Borrowing Date, in the
case of Prime Rate Loans or Base Rate Loans, and (iii) three Business Days
prior to the requested Borrowing Date, in the case of LIBOR Loans
specifying:
(A) the amount of the Canadian Loan, which shall be in an aggregate
minimum amount of (i) in the case of B/A Equivalent Loans, Cdn.
$500,000 or any multiples of Cdn. $100,000 in excess thereof; (ii) in
the case of LIBOR Loans, $1,000,000 or any multiple of $250,000 in
excess thereof; (iii) in the case of Prime Rate Loans, Cdn.$200,000 or
multiples of Cdn.$50,000 in excess thereof; and (iv) in the case of
Base Rate Loans, $200,000 or multiples of $50,000 in excess thereof.
(B) the requested Borrowing Date, which shall be a Business Day;
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(C) the Type of Loans comprising the Canadian Loan; and
(D) the duration of the Interest Period applicable to such B/A Equivalent
Loans or LIBOR Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest Period such
Interest Period shall be 30 days.
(b) The Canadian Agent will promptly notify each Canadian Bank of its receipt
of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share
of that Borrowing.
(c) Each Canadian Bank will make the amount of its Pro Rata Share of each
Canadian Loan available to the Canadian Agent for the account of the
Company at the Agent's Payment Office by 11:00 a.m. (Toronto time) on the
Borrowing Date requested by the Company in funds immediately available to
the Canadian Agent. The proceeds of all such Loans will then be made
available to the Company by the Canadian Agent at such office by crediting
the account of the Company on the books of BACAN with the aggregate of the
amounts made available to the Canadian Agent by the Banks and in like funds
as received by the Canadian Agent.
(d) After giving effect to any Canadian Loan, unless the Canadian Agent shall
otherwise consent, there may not be more than six different Interest
Periods in effect.
2.04 Conversion and Continuation Elections.
(a) The Company may, upon irrevocable written notice to the Canadian Agent in
accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of Prime Rate Loans, Base
Rate Loans, or as of the last day of the applicable Interest Period,
in the case of LIBOR Loans or B/A Equivalent Loans, to convert any
such Canadian Loans (or any part thereof in an amount not less than
Cdn.$500,000 (or the Equivalent Amount), or that is in an integral
multiple of Cdn.$100,000 (or the Equivalent Amount) in excess thereof)
into Canadian Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any Canadian Loans having Interest Periods expiring on such
day (or any part thereof in an amount not less than Cdn.$500,000 (or
the Equivalent Amount), or that is in an integral multiple of
Cdn.$100,000 (or the Equivalent Amount) in excess thereof;
provided, that if at any time the aggregate amount of LIBOR Loans in
respect of any Canadian Loan is reduced by payment, prepayment, or
conversion of part thereof to be
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less than $1,000,000, such LIBOR Loans shall automatically convert into
Base Rate Loans.
(b) The Company shall deliver a Notice of Conversion/Continuation to be
received by the Canadian Agent not later than noon (Toronto time) at least
(i) three Business Days in advance of the Conversion/Continuation Date, if
the Canadian Loans are to be converted into or continued as LIBOR Loans or
B/A Equivalent Loans; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Canadian Loans are to be converted
into or continued as Base Rate Loans or Prime Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Canadian Loans to be converted or continued;
(C) the Type of Canadian Loans resulting from the proposed conversion or
continuation; and
(D) other than in the case of conversions into Base Rate Loans or Prime
Rate Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to LIBOR Loans or
B/A Equivalent Loans, the Company has failed to timely select a new
Interest Period to be applicable to such LIBOR Loans or B/A Equivalent
Loans, as the case may be, or if any Default or Event of Default then
exists, the Company shall be deemed to have elected to convert such LIBOR
Loans into Base Rate Loans and such B/A Equivalent Loans into Prime Rate
Loans effective as of the expiration date of such Interest Period.
(d) The Canadian Agent will promptly notify each Canadian Bank of its receipt
of a Notice of Conversion/Continuation, or, if no timely notice is provided
by the Company, the Canadian Agent will promptly notify each Canadian Bank
of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Canadian Loans with respect to which the notice
was given held by each Canadian Bank.
(e) Unless the Majority Banks otherwise consent, during the existence of a
Default or Event of Default, the Company may not elect to have a Canadian
Loan converted into or continued as an LIBOR Loan or B/A Equivalent Loan.
(f) After giving effect to any conversion or continuation of Canadian Loans,
unless the Canadian Agent shall otherwise consent, there may not be more
than six different Interest Periods in effect.
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2.05 Procedure for Borrowing by US Borrower.
(a) Each US Loan by the US Borrower (other than an L/C Loan or a Swing Line
Loan) shall be made upon the US Borrower's irrevocable written notice
delivered to the US Agent in the form of a Notice of Borrowing (which
notice must be received by the US Agent prior to 9:00 a.m. (San Francisco
time) (i) three Business Days prior to the requested Borrowing Date, in the
case of LIBOR Loans; (ii) one Business Day prior to the requested Borrowing
Date, in the case of Base Rate Loans, specifying:
(A) the amount of the US Loan, which shall be in an aggregate minimum
amount of (i) in the case of LIBOR Loans, $1,000,000 or any multiple
of $250,000 in excess thereof and (ii) in the case of Base Rate Loans,
$200,000 or any multiple of $50,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising the US Loan; and
(D) the duration of the LIBOR Period applicable to such LIBOR Loans
included in such notice. If the Notice of Borrowing fails to specify
the duration of the LIBOR Period, such LIBOR Period shall be one
month.
(b) The US Agent will promptly notify each US Bank of its receipt of any Notice
of Borrowing and of the amount of such US Bank's Pro Rata Share of that US
Loan.
(c) Each US Bank will make the amount of its Pro Rata Share of each US Loan
available to the US Agent for the account of the US Borrower at the Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the US Borrower in funds immediately available to the US
Agent. The proceeds of all such Loans will then be made available to the US
Borrower by the US Agent at such office by crediting the account of the US
Borrower on the books of BofA with the aggregate of the amounts made
available to the US Agent by the US Banks and in like funds as received by
the US Agent.
(d) After giving effect to any US Loan, unless the US Agent shall otherwise
consent, there may not be more than six different LIBOR Periods in effect.
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2.06 Conversion and Continuation Elections.
(a) The US Borrower may, upon irrevocable written notice to the US Agent in
accordance with subsection 2.06(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or as
of the last day of the applicable Interest Period, in the case of
LIBOR Loans, to convert any such US Loans (or any part thereof in an
amount not less than $1,000,000, or that is in an integral multiple of
$250,000 in excess thereof) into US Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any US Loans having Interest Periods expiring on such day (or
any part thereof in an amount not less than $1,000,000, or that is in
an integral multiple of $250,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBO Rate Loans in
respect of any US Loan is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such LIBOR Loans shall
automatically convert into Base Rate Loans.
(b) The US Borrower shall deliver a Notice of Conversion/Continuation to be
received by the US Agent not later than 9:00 a.m. (San Francisco time) at
least (i) three Business Days in advance of the Conversion/Continuation
Date, if the US Loans are to be converted into or continued as LIBOR Loans;
(ii) one Business Day in advance of the Conversion/Continuation Date, if
the US Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of US Loans to be converted or continued;
(C) the Type of US Loans resulting from the proposed conversion or
continuation; and
(D) the duration of the requested LIBOR Period.
(c) If upon the expiration of any Interest Period applicable to LIBOR Loans,
the US Borrower has failed to select timely a new LIBOR Period to be
applicable to such LIBOR Loans, or if any Default or Event of Default then
exists, the US Borrower shall be deemed to have elected to convert such
LIBOR Loans into Base Rate Loans effective as of the expiration date of
such LIBOR Period.
<PAGE> 34
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(d) The US Agent will promptly notify each US Bank of its receipt of a Notice
of Conversion/Continuation, or, if no timely notice is provided by the US
Borrower, the US Agent will promptly notify each US Bank of the details of
any automatic conversion. All conversions and continuations shall be made
ratably according to the respective outstanding principal amounts of the US
Loans with respect to which the notice was given held by each US Bank.
(e) Unless the Majority Banks otherwise consent, during the existence of a
Default or Event of Default, the US Borrower may not elect to have a US
Loan converted into or continued as an LIBOR Loan.
(f) After giving effect to any conversion or continuation of US Loans, unless
the US Agent shall otherwise consent, there may not be more than six
different Interest Periods in effect.
2.07 Optional Prepayments.
(a) Subject to Section 4.04, the Company may, at any time or from time to time,
without penalty, upon not less than one Business Days' irrevocable notice
to the Canadian Agent, ratably prepay Canadian Loans in whole or in part,
in minimum amounts of Cdn. $250,000 (or the Equivalent Amount). Such notice
of prepayment shall specify the date and amount of such prepayment and the
Type(s) of Loans to be prepaid. The Canadian Agent will promptly notify
each Canadian Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by the Company,
the Company shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein,
together with accrued interest to each such date on the amount prepaid and
any amounts required pursuant to Section 4.04.
(b) Subject to Section 4.04, the US Borrower may, at any time or from time to
time, without penalty, upon not less than one Business Days' irrevocable
notice to the US Agent, ratably prepay US Loans in whole or in part, in
minimum amounts of $500,000 or any multiple of $100,000 in excess thereof.
Such notice of prepayment shall specify the date and amount of such
prepayment and the Type(s) of Loans to be prepaid. The US Agent will
promptly notify each US Bank of its receipt of any such notice, and of such
Bank's Pro Rata Share of such prepayment. If such notice is given by the US
Borrower, the US Borrower shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount
prepaid and any amounts required pursuant to Section 4.04.
<PAGE> 35
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2.08 Repayment and Termination Date.
The Company shall repay to the Canadian Banks the aggregate principal
amount of Canadian Loans outstanding, and the US Borrower shall repay to the US
Banks the aggregate amount of US Loans outstanding, on the day which is the
earlier of (the "Termination Date"):
(a) the date on which the Commitments terminate in accordance with the
provisions of this Agreement; and
(b) the date which is the later of:
(i) 364 days from the date of this Agreement (the "Initial Term"); and
(ii) the Extension Date;
EXCEPT in the case of LIBOR Loans or B/A Equivalent Loans which may be
outstanding on such date, such date shall be the date which is the later
of:
(iii) the Initial Term;
(iv) the Extension Date; and
(v) the date on which the LIBOR Period or Interest Period applicable
thereto expires (which in no case shall be later than 6 months from
the end of the Initial Term or from the Extension Date, as
applicable).
2.09 Extension Date
"Extension Date" shall mean the date to which the Credit is extended with
the unanimous consent of the Banks, any such extensions to be made only for 364
days at a time. The Company may annually request an extension of the expiry of
the Credit for an additional 364 days period by delivering a request for
extension no later than 90 days prior to the expiry of the Initial Term or any
subsequent extended term. The Canadian Agent shall notify the Company no later
than 30 days following the receipt of a request for extension as to whether or
not the extension has been granted.
<PAGE> 36
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2.10 Interest.
(a) Each Loan (other than a Letter of Credit) shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at
the rate per annum applicable thereto.
(b) Interest on each Prime Rate Loan, Base Rate Loan, LIBOR Loan and B/A
Equivalent Loan shall be paid in arrears on each Interest Payment Date.
Failure to pay interest on the last day of a LIBOR Period shall be subject
to the provisions of Section 4.04. Interest shall also be paid on the date
of any prepayment of Loans under Section 2.07 for the portion of the Loans
so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be paid on
demand of the applicable Agent at the request or with the consent of the
Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event of Default
exists or after acceleration, the applicable Borrower shall pay interest
(after as well as before entry of judgment thereon to the extent permitted
by law) on the principal amount of all outstanding Obligations, at a rate
per annum which is determined by adding 3% per annum to the interest rate
then in effect for such Loans; provided, however, that, on and after the
expiration of any Interest Period applicable to any LIBOR Loan or B/A
Equivalent Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall, during
the continuation of such Event of Default or after acceleration, bear
interest at a rate per annum equal to the Base Rate plus 3% and the
Applicable Margin in the case of LIBOR Loans and Prime Rate plus 3% and the
Applicable Margin in the case of B/A Equivalent Loans.
(d) Anything herein to the contrary notwithstanding, the obligations of each
Borrower to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which
interest is computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate
of interest that may be lawfully contracted for, charged or received by
such Bank, and in such event the applicable Borrower shall pay such Bank
interest at the highest rate permitted by applicable law.
<PAGE> 37
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2.11 Fees.
(a) Arrangement, Agency Fees. The Borrowers shall pay such fees, which shall
include arrangement and agency fees, to the Agents and/or the Banks as
required by separate letter agreements ("Fee Letters").
(b) Commitment Fees. The Company shall pay to the Canadian Agent and the US
Borrower shall pay to the US Agent for the account of each applicable Bank
a commitment fee of 0.375% per annum of the daily unused portion of such
Bank's Commitment (determined as an average), computed on a quarterly basis
in arrears on the last Business Day of each calendar quarter based upon the
daily utilization for that quarter as calculated by the Agents. Such
commitment fee shall accrue from the Closing Date to the Termination Date
and shall be due and payable quarterly in arrears on the last Business Day
of each calendar quarter commencing on first calendar quarter following the
Closing Date through the Termination Date, with the final payment to be
made on the Termination Date; provided that, in connection with any
reduction or termination of Commitments under Section 2.07, the accrued
commitment fee calculated for the period ending on such date shall also be
paid on the date of such reduction or termination, with the following
quarterly payment being calculated on the basis of the period from such
reduction or termination date to such quarterly payment date. The
commitment fees provided in this subsection shall accrue at all times after
the above-mentioned commencement date, including at any time during which
one or more conditions in Article V are not met.
2.12 Computation of Fees and Interest.
(a) All computations of interest for Prime Rate Loans and B/A Equivalent Loans
shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365
day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last
day thereof.
(b) Each determination of an interest rate by an Agent shall be conclusive and
binding on the Borrowers and the Banks in the absence of manifest error.
The Agent will, at the request of a Borrower or any Bank, deliver to such
Borrower or the Bank, as the case may be, a statement showing the
quotations used by such Agent in determining any interest rate and the
resulting interest rate.
(c) Each rate of interest which is calculated with reference to a period (the
"deemed interest period") that is less than the actual number of days in
the calendar year of calculation is, for the purposes of the Interest Act
(Canada), equivalent to a rate based on a calendar year
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calculated by multiplying such rate of interest by the actual number of
days in the calendar year of calculation and dividing by the number of days
in the deemed interest period.
2.13 Payments by a Borrower
(a) All payments to be made by a Borrower shall be made without set off,
recoupment or counterclaim. Except as otherwise expressly provided herein,
all payments by the Company shall be made to the Canadian Agent and all
payments by the US Borrower shall be made to the US Agent for the account
of the applicable Banks at the applicable Agent's Payment Office, and shall
be made in dollars or Cdn. Dollars, as applicable, and in immediately
available funds, no later than 12:00 noon Toronto time on the date
specified herein for payments to the Canadian Agent, and no later than
11:00 a.m. San Francisco time for payments to the US Agent. The applicable
Agent will promptly distribute to each applicable Bank its Pro Rata Share
(or other applicable share as expressly provided herein) of such payment in
like funds as received. Any payment received by the applicable Agent later
than the times specified above shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue.
(b) Subject to the provisions set forth in the definition of "Interest Period"
herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless an Agent receives notice from the applicable Borrower prior to the
date on which any payment is due to the Banks that the applicable Borrower
will not make such payment in full as and when required, the Agent may
assume that the applicable Borrower has made such payment in full to the
Agent on such date in immediately available funds and the Agent may (but
shall not be so required), in reliance upon such assumption, distribute to
each Bank on such due date an amount equal to the amount then due such
Bank. If and to the extent the applicable Borrower has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand
such amount distributed to such Bank, together with interest thereon at the
Federal Funds Rate for each day from the date such amount is distributed to
such Bank until the date repaid.
2.14 Payments by the Banks to the Agents.
(a) Unless the applicable Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, at
least one Business Day prior to the date of such Borrowing, that such Bank
will not make available as and when required hereunder to the applicable
Agent for the account of the applicable Borrower the amount of that Bank's
Pro Rata Share of the Borrowing, such Agent may assume that each Bank has
made such amount available to the applicable Agent in immediately available
<PAGE> 39
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funds on the Borrowing Date and such Agent may (but shall not be so
required), in reliance upon such assumption, make available to the
applicable Borrower on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to the
applicable Agent in immediately available funds and the applicable Agent in
such circumstances has made available to the applicable Borrower such
amount, that Bank shall on the Business Day following such Borrowing Date
make such amount available to such Agent, together with interest at the
Federal Funds Rate for each day during such period. A notice of the
applicable Agent submitted to any Bank with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount
is so made by the Agent, such payment to the applicable Agent shall
constitute such Bank's Loan on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to the applicable
Agent on the Business Day following the Borrowing Date, the applicable
Agent will notify the applicable Borrower of such failure to fund and, upon
demand by the Agent, the applicable Borrower shall pay such amount to the
applicable Agent for the Agent's account, together with interest thereon
for each day elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Loans comprising
such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date shall not
relieve any other Bank of any obligation hereunder to make a Loan on such
Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing
Date.
2.15 Sharing of Payments, Etc. If, other than as expressly provided elsewhere
herein, any Bank shall obtain on account of the Loans made by it any payment
(whether voluntary, involuntary, through the exercise of any right of set off,
or otherwise) in excess of its Pro Rata Share (or other share contemplated
hereunder), such Bank shall immediately (a) notify the applicable Agent of such
fact, and (b) purchase from the other Canadian Banks, in the case of Canadian
Loans and US Banks, in the case of US Loans, such participations in the Loans
made by them as shall be necessary to cause such purchasing Bank to share the
excess payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing Bank,
such purchase shall to that extent be rescinded and each other Bank shall repay
to the purchasing Bank the purchase price paid therefor, together with an amount
equal to such paying Bank's Pro Rata Share (according to the proportion of (i)
the amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. Each
Borrower agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set off, but subject to Section 11.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation. The applicable Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
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of participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
2.16 Security and Guarantee.
(a) All obligations of each Borrower and the Guarantors under this Agreement
and all other Loan Documents shall be secured in accordance with the
Collateral Documents.
(b) All obligations of each Borrower under this Agreement, and all other Loan
Documents shall be unconditionally guaranteed by each Guarantor pursuant to
the Guarantees.
2.17 Allocation of Total Commitment.
(a) The Borrowers shall be entitled from time to time prior to the Termination
Date to allocate such portions of the Total Commitment as it determines as
between the Total Canadian Commitment and Total US Commitment by delivering
a request hereunder (the "Reallocation Request") substantially in the form
of Exhibit E to each of the Agents provided that:
(i) the Reallocation Request shall be given at least three Business Days
prior to it becoming effective;
(ii) at the time the Reallocation Request becomes effective, no Default or
Event of Default has occurred and is continuing;
(iii) after giving effect to the Reallocation Request, the aggregate of the
Total Canadian Commitment and the Total US Commitment does not exceed
the then current Total Commitment;
(iv) if any such Reallocation Request would result in the Equivalent Amount
in Canadian Dollars of the Canadian Loan or the US Loan, as
applicable, then outstanding to the Company or the US Borrower, as
applicable, exceeding the Total Canadian Commitment or the Total US
Commitment, then, concurrently with any such Reallocation Request
becoming effective, the Company shall ensure that all payments
necessary are made by it or the US Borrower, as applicable and
including, without limitation, any costs payable pursuant to Section
4.04, so that the Equivalent Amount in Canadian dollars of the
Canadian Loan and the US Loan after giving effect to any such
Reallocation Request do not exceed the Total Canadian Commitment and
the Total US Commitment, respectively;
(v) a Reallocation Request shall not be given more than four (4) times in
any calendar year; and
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(vi) a Reallocation Request shall be for a minimum amount of $1,000,000 or
any multiples of $1,000,000 in excess thereof.
(b) The Canadian Agent shall notify the Canadian Banks and the US Agent shall
notify the US Banks of the receipt of a Reallocation Request and the
resulting Pro Rata Shares.
2.18 Swing Line Facility.
(a) Upon the satisfaction of the conditions precedent set forth in Article V
and after execution and delivery by the US Borrower of the Swing Line
Lender's usual and customary account operating documentation, as
applicable, from and including the date of this Agreement and prior to the
Termination Date, the Swing Line Lender agrees, on the terms and conditions
set forth in this Agreement, to make Swing loans to the US Borrower from
time to time on any Business Day, in an amount not to exceed $1 million
(such facility the "Swing Line Facility" and Loans thereunder "Swing Line
Loans"); provided, however, at no time shall the aggregate of the principal
amount of the Swing Line Loans and the Equivalent Amount of all other Loans
exceed the Total Commitment; and provided, further, that at no time shall
the sum of (i) the outstanding amount of the Swing Line Loans, plus (ii)
the outstanding amount of Loans made by the US Banks, pursuant to Section
2.05 (after giving effect to any concurrent payment of Loans), exceed the
Total US Commitment at such time. Subject to the terms of this Agreement,
the US Borrower may borrow, repay and re-borrow Swing Line Loans at any
time prior to the Termination Date.
(b) The proceeds from any and all Swing Line Loans shall only be used to repay
the US Borrower's master concentration account maintained at a NationsBank,
N.A. branch in Nashville, Tennessee.
(c) NationsBank, N.A. as attorney for the US Borrower shall deliver to the US
Agent a Notice of Borrowing not later than 10:00 a.m. (San Francisco time)
on the Borrowing Date of each Swing Line Loan, specifying (i) the
applicable Borrowing Date (which date shall be a Business Day and may be
the same date as the Notice of Borrowing is given); (ii) the aggregate
amount of the requested Swing Line Loans; and (iii) instructions for the
disbursement of the proceeds of such Swing Line Loan to the US Borrower's
master concentration account at NationsBank, N.A. The Swing Line Loans
shall at all times be US Base Rate Loans but shall not be subject to the
minimum borrowing amounts specified in Section 2.05(a)(A).
(d) Each Swing Line Loan shall be paid in full by the US Borrower on or before
the earlier of (the "Swing Line Repayment Date"): (i) the fifth Business
Day after the Borrowing Date for such Swing Line Loan (subject to the
minimum borrowing amounts specified in Section 2.05(a)(A)); or (ii) the
outstanding balance of the Swing Line Loans reaching $500,000 or more; or
(iii) the Termination Date. The US Borrower may at any time,
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without penalty or premium, repay all outstanding Swing Line Loans upon
notice to the US Agent. In addition, the US Agent shall on the Swing Line
Repayment Date, notify each US Bank (with a copy to the US Borrower) and
advise it to make a Base Rate Loan in the amount of such US Bank's Pro Rata
Share of such Swing Line Loan, for the purpose of repaying such Swing Line
Loan. Not later than 11:00 a.m. (San Francisco time) on the day following
the date of any notice from the US Agent to the US Banks received pursuant
to this Section 2.18(d), each US Bank shall make available its required
loan or loans, in funds immediately available to the US Agent at the US
Agent's Designated Account. Loans made by the US Banks in repayment of a
Swing Line Loan pursuant to this Section 2.18(d) shall be US Base Rate
Loans and subject to the minimum borrowing amount specified in Section
2.05(a)(A). Unless a US Bank shall have notified the US Agent, prior to its
making any Swing Line Loan, that any applicable condition precedent set
forth in Article V had not been satisfied, such US Bank's obligation to
make Loans pursuant to this Section 2.18(d) to repay Swing Line Loans shall
be unconditional, continuing, irrevocable and absolute and shall not be
affected by any circumstances, including, without limitation, (i) any
set-off, counterclaim, defence or other claim which the US Bank may have
against the US Agent or any other Person; (ii) the occurrence and
continuance of an Event of Default; (iii) any Material Adverse Change; or
(iv) any other circumstance, happening or event whatsoever. In the event
that any US Bank fails to make payment to the US Agent of any amount due
under this Section 2.18(d), the US Agent shall be entitled to receive,
retain and apply against such obligation owing to the Swing Line Lender the
principal and interest otherwise payable to the US Bank hereunder until the
Swing Line Lender receives such payment from the US Bank or such obligation
is otherwise fully satisfied. In addition to the foregoing, if, for any
reason any US Bank fails to make payment to the US Agent of any amount due
under this Section 2.18(d), such US Bank shall be deemed to have
unconditionally and irrevocably purchased from the Swing Line Lender,
without recourse or warranty, an undivided interest and participation in
the applicable Swing Line Loan in the amount of such Loan, and such
interest and participation may be recovered from such US Bank together with
interest thereon at the Federal Funds Rate for each day during the period
commencing on the date of demand and ending on the date such amount is
received. On the Termination Date, the US Borrower shall repay in full the
outstanding principal balance of the Swing Line Loans and all interest
accrued thereon.
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ARTICLE III
THE LETTERS OF CREDIT
3.01 Letters of Credit. On the terms and conditions set forth herein (i) the
Issuing Banks agree, (A) from time to time on any Business Day during the period
from the Closing Date to the day which is five days prior to the Termination
Date to issue Letters of Credit for the account of the Company in the case of
Cdn.$ L/Cs and to the US Borrower in the case of US$ L/Cs, and to amend or renew
Letters of Credit previously issued by it, in accordance with Sections 3.02(b)
and (c), and (B) to honour drafts under the Letters of Credit; and (ii) the
Canadian Banks severally agree to participate in Letters of Credit issued for
the account of the Company and the US Banks severally agree to participate in
Letters of Credit issued for the amount of the US Borrower, as applicable;
provided, that the Issuing Bank shall not be obligated to Issue, and no Bank
shall be obligated to participate in, any Letter of Credit if as of the date of
Issuance of such Letter of Credit (the "Issuance Date") (1) the Equivalent
Amount of all L/C Obligations plus the Equivalent Amount of all Loans (excluding
the issuance of such L/Cs) exceeds the combined Commitments, or, (2) the
participation of any Bank in the Equivalent Amount of all L/C Obligations plus
the Equivalent Amount of all outstanding Loans exceeds such Bank's Commitment.
Within the foregoing limits, and subject to the other terms and conditions
hereof, the applicable Borrower's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the applicable Borrower may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit which
have expired or which have been drawn upon and reimbursed. Upon issuance or
renewal by the Issuing Bank of an L/C, the Borrower for whose benefit or at
whose request such L/C was issued or renewed shall pay to the Issuing Bank (or
to the applicable Agent on behalf of the Issuing Bank) the L/C Issuance Fee and
L/C Fee. The L/C Issuance Fee and the L/C Fee shall apply to each Letter of
Credit issued, including all renewals or amendments pursuant to Sections 3.02.
3.02 Issuance, Amendment and Renewal of Letters of Credit
(a) Each Letter of Credit shall be issued upon the irrevocable written request
of the applicable Borrower received by the Issuing Bank at least three days
(or such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed Issuance Date, with
a copy of such written request delivered to the Applicable Agent. The
issuance of a Letter of Credit shall be made no later than noon (Toronto
time) on the Issuance Date. Each such request for issuance of a Letter of
Credit shall be by facsimile, confirmed immediately in an original writing,
in the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Bank (i) the proposed date of issuance of the
Letter of Credit (which shall be a Business Day); (ii) the face amount of
the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv)
the name and address of the beneficiary thereof; (v) the documents to be
presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be
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presented by the beneficiary in case of any drawing thereunder; and (vii)
such other matters as the Issuing Bank may require.
(b) From time to time while a Letter of Credit is outstanding and prior to the
Termination Date, the Issuing Bank will, upon the written request of the
applicable Borrower received by the Issuing Bank at least three days (or
such shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of amendment, amend any
Letter of Credit issued by it. Each such request for amendment of a Letter
of Credit shall be made by facsimile, confirmed immediately in an original
writing, made in the form of an L/C Amendment Application and shall specify
in form and detail satisfactory to the Issuing Bank: (i) the Letter of
Credit to be amended; (ii) the proposed date of amendment of the Letter of
Credit (which shall be a Business Day); (iii) the nature of the proposed
amendment; and (iv) such other matters as the Issuing Bank may require. The
Issuing Bank shall be under no obligation to amend any Letter of Credit if:
(A) the Issuing Bank would have no obligation at such time to issue such
Letter of Credit in its amended form under the terms of this Agreement; or
(B) the beneficiary of any such Letter of Credit does not accept the
proposed amendment to the Letter of Credit. The Agent will promptly notify
the Lenders of the receipt by it of any L/C Application, L/C Amendment
Application or notice of renewal.
(c) The Issuing Bank and the Banks agree that, while a Letter of Credit is
outstanding and prior to the Termination Date, at the option of the
applicable Borrower at least five days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of notification of renewal, the Issuing Bank shall be
entitled to authorize the renewal of any Letter of Credit issued by it.
Each such request for renewal of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the form of an
L/C Amendment Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be renewed;
(ii) the proposed date of notification of renewal of the Letter of Credit
(which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Bank may
require.
3.03 Payments, Risk Participations, Drawings and Reimbursements
(a) The applicable Borrower shall provide for the payment to the Canadian Agent
in the case of Cdn.$ L/Cs, and to the US Agent, in the case of US$ L/Cs, of
the full face amount of each Letter of Credit on the earlier of (i) the
Honour Date (as defined in Section 3.03(c) below), and (ii) demand for
payment in accordance with 9.02.
(b) Immediately upon the Issuance of each Letter of Credit, each Canadian Bank
in the case of Cdn.$ L/Cs and each US Bank in the case of US$ L/Cs shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase
from the Issuing Bank a participation
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in such Letter of Credit and each drawing thereunder in an amount equal to
the product of (i) the Pro Rata Share of such Bank, times (ii) the maximum
amount available to be drawn under such Letter of Credit and the amount of
such drawing, respectively. For purposes of Section 2.01, each Issuance of
a Letter of Credit shall be deemed to utilize the Commitment of each
applicable Bank by an amount equal to the amount of such participation.
Upon the Issuance of each Letter of Credit, the applicable Agent, on behalf
of the Issuing Bank, shall notify each applicable Bank of the amount of
such Bank's participation and the proportionate share of the L/C Fee.
(c) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, the Issuing Bank will promptly notify
the applicable Borrower. The applicable Borrower shall reimburse the
Issuing Bank (by an L/C Loan or otherwise) prior to 12:00 Noon (Toronto
time) on each date that any amount is paid by the Issuing Bank under any
such Borrower's Letter of Credit (each such date, an "Honour Date"), in an
amount equal to the amount so paid by the Issuing Bank. In the event that
the applicable Borrower fails to reimburse the Issuing Bank for the full
amount of any drawing under any such Borrower's Letter of Credit by 12:00
Noon (Toronto time) on the Honour Date, the Issuing Bank will promptly
notify the applicable Agent thereof, and the applicable Borrower shall be
deemed to have requested that Base Rate or Prime Rate Loans, as the case
may be, in an aggregate amount equal to the unreimbursed drawing made by
the Banks to be disbursed on the Honour Date under such Letter of Credit,
subject to the amount of the unutilized portion of the Bank's Commitment.
Any notice given by the Issuing Bank pursuant to this clause may be oral if
immediately confirmed in writing (including by facsimile); provided, that
the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(d) Each Bank shall upon any notice pursuant to Section 3.03(c) make available
to the relevant Issuing Bank an amount in immediately available funds equal
to its Pro Rata Share of the amount of the unreimbursed drawing, whereupon
the applicable Banks shall each be deemed to have made a Prime Rate Loan or
Base Rate Loan, or the case may be, to the applicable Borrower. If any Bank
so notified fails to make available to the applicable Issuing Bank the
amount of such Lender's Pro Rata Share of the amount of the unreimbursed
drawing by no later than 2:00 p.m. (Toronto time) on the Honour Date, then
interest shall accrue on such Bank's obligation to make such payment, from
the Honour Date to the date such Bank makes such payment, at a rate per
annum equal to the Federal Funds Rate in effect from time to time during
such period.
(e) Each Bank's obligation in accordance with this Agreement to make the Loans
or L/C Advances, as contemplated by this Section 3.03, as a result of a
drawing under a Letter of Credit, shall be absolute and unconditional and
without recourse to the applicable Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defence or other right which such Bank may have against the
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Issuing Bank, the Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default, an Event of Default or a
Material Adverse Effect; or (iii) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
3.04 Repayment of Participations
(a) Upon (and only upon) receipt by the Issuing Bank of immediately available
funds from the applicable Borrower (i) in reimbursement of any payment made
by the Issuing Bank under the Letter of Credit with respect to which any
Bank has paid to the Issuing Bank for such participation in the Letter of
Credit pursuant to Section 3.03 or (ii) in payment of interest thereon, the
Issuing Bank will pay to each Bank in the same funds as those received by
the Issuing Bank, the amount of such Bank's Pro Rata Share of such funds,
and the Issuing Bank shall receive the amount of the Pro Rata Share of such
funds of any Bank that did not so pay.
(b) If the Issuing Bank is required at any time to return to the Company or the
US Borrower, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by
the Company or US Borrower to the Issuing Bank pursuant to Section 3.04(a)
in reimbursement of a payment made under a Letter of Credit or interest or
fee thereon, each Bank shall, on demand of the Agent, forthwith return to
the Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Issuing Bank plus interest thereon from the date
such demand is made to the date such amounts are returned by such Bank to
the Agent or the Issuing Bank, at a rate per annum equal to the Federal
Funds Rate in effect from time to time.
3.05 Obligations Absolute The obligations of the applicable Borrower under this
Agreement and any L/C-related document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Loan and any drawing
under a Letter of Credit converted into Base Rate Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-related document under all circumstances. The
obligations of a Borrower to reimburse the Issuing Bank (or the applicable Agent
on behalf of the Issuing Bank) for payment to a beneficiary of an L/C shall
survive termination of this Agreement and shall, except for matters arising from
the Issuing Bank's wilful misconduct or negligence (which shall include
instances where the fraud by a beneficiary has been established to the knowledge
of the Issuing Bank so as to make the fraud clear or obvious to the Issuing
Bank), be absolute and unconditional and shall not be reduced by a demand or
other request for payment of the L/C (a "Demand") paid or acted upon being
invalid, insufficient, fraudulent or forged, or be subject to any defence or be
affected by any right of set-off, counterclaim or recoupment which such Borrower
may now or hereafter have against the beneficiary, the Issuing Bank or any other
Person for any reason whatsoever, including the fact that the Issuing Bank or
its correspondents paid a Demand or Demands (if applicable) aggregating up to
the amount of the
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L/C notwithstanding any contrary instructions from a Borrower to the Issuing
Bank or applicable Agent. Any action, inaction or omission taken or suffered by
the Issuing Bank or by the Issuing Bank's correspondent under or in connection
with an L/C or any Demand, if in good faith and in conformity with foreign, US
or Canadian laws, regulations or customs applicable thereto shall be binding on
each Borrower and their respective subsidiaries and shall not place either Agent
or the Issuing Bank or any of its correspondents under any resulting liability
to the Borrowers, their subsidiaries or any of them. Without limiting the
generality of the foregoing, the Issuing Bank and its correspondents may
receive, accept or pay as complying with the terms of the L/C, any Demand
otherwise in order which may be signed by, or issued to, any administrator,
executor, trustee in bankruptcy, receiver or other Person acting as a
representative of, or in place of, the beneficiary. Each of the Borrowers
covenants that, in the absence of fraud on the part of the beneficiary of an
L/C, it will not take steps, issue any instructions to the Issuing Bank or any
correspondence or institute any proceedings intended to derogate from the right
or ability of the Issuing Bank or its correspondents to honour or pay any
Demand.
3.06 Cash Collateral Pledge. Upon (a) the request of the applicable Agent or the
Majority Lenders, if the Issuing Bank has honoured any full or partial drawing
request on any Letter of Credit and such drawing has resulted in an L/C Loan
hereunder at a time when any Event of Default has occurred and is continuing, or
(b) if, as of the Termination Date, any Letters of Credit may for any reason
remain outstanding and partially or wholly undrawn, then, the applicable
Borrower shall immediately Cash Collateralize the L/C Obligations in an amount
equal to such L/C Obligations.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
(a) Subject to Section 4.01(b), any and all payments by the Company or the US
Borrower to each Bank or the Agents under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction or
withholding for, any Taxes. In addition, the Company or the US Borrower, as
the case may be, shall pay all Other Taxes.
(b) If the Company or the US Borrower shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any
sum payable hereunder to any Bank or the Agents, then:
(i) the sum payable shall be increased as necessary so that, after making
all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this
Section), such Bank or the Agents, as the case may be, receives and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
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(ii) the Company or the US Borrower, as the case may be, shall make such
deductions and withholdings;
(iii) the Company or the US Borrower, as the case may be, shall pay the
full amount deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law; and
(iv) the Company or the US Borrower, as the case may be, shall also pay to
each Bank or the Agents for the account of such Bank, at the time
interest is paid, Further Taxes in the amount that the respective Bank
specifies as necessary to preserve the after-tax yield the Bank would
have received if such Taxes, Other Taxes or Further Taxes had not been
imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and the Agents
for the full amount of i) Taxes, ii) Other Taxes, and iii) Further Taxes
paid by Banks in the amount that the respective Bank specifies as necessary
to preserve the after-tax yield the Bank would have received if such Taxes,
Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes, Other Taxes
or Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Bank or the
Agents make written demand therefor.
(d) Under this Section within 30 days after the date of any payment by the
Company of Taxes, Other Taxes or Further Taxes, under Section 4.01(b) the
Company or the US Borrower, as the case may be, shall furnish to each Bank
or the Agents the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to such Bank or
the Agents.
(e) If the Company or the US Borrower, as the case may be, is required to pay
any amount to any Bank or the Agents pursuant to subsection (b) or (c) of
this Section, then such Bank shall use reasonable efforts (consistent with
legal and regulatory restrictions) to change the jurisdiction of its
Lending Office so as to eliminate any such additional payment by the
Company or the US Borrower which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such
Bank.
4.02 Illegality.
(a) If any Bank determines that the introduction of any Requirement of Law, or
any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is
unlawful, for any Bank or its applicable Lending Office to make LIBOR
Loans, then, on notice thereof by the Bank to the Company through the
applicable
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Agent, any obligation of that Bank to make LIBOR Loans shall be suspended
until the Bank notifies the applicable Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any LIBOR Loan, each
Borrower shall, upon its receipt of notice of such fact and demand from
such Bank (with a copy to the applicable Agent), prepay in full such LIBOR
Loans of that Bank then outstanding, together with interest accrued thereon
and amounts required under Section 4.04, either on the last day of the
Interest Period thereof, if the Bank may lawfully continue to maintain such
LIBOR Loans to such day, or immediately, if the Bank may not lawfully
continue to maintain such LIBOR Loan. If any Borrower is required to so
prepay any LIBOR then concurrently with such prepayment, the Borrower shall
borrow from the affected Bank, in the amount of such repayment, a Base Rate
Loan.
(c) If the obligation of any Bank to make or maintain LIBOR Loans has been so
terminated or suspended, the Borrower may elect, by giving notice to the
Bank through the applicable Agent that all Loans which would otherwise be
made by the Bank as LIBOR Loans shall be instead a Base Rate Loan.
(d) Before giving any notice to an Agent under this Section, the affected Bank
shall designate a different Lending Office with respect to its LIBOR Loans
if such designation will avoid the need for giving such notice or making
such demand and will not, in the judgment of the Bank, be illegal or
otherwise disadvantageous to the Bank.
4.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) the
compliance by that Bank with any guideline or request from any central bank
or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any LIBOR Loans, B/A Equivalent Loans or
participating in L/Cs, then the Company or the US Borrower shall be liable
for, and shall from time to time, upon demand (with a copy of such demand
to be sent to the Agent), pay to the applicable Agent for the account of
such Bank, additional amounts as are sufficient to compensate such Bank for
such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any Capital
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital
Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation
controlling the Bank with any Capital Adequacy Regulation, affects or would
affect the amount of capital
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required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitments, loans, credits or
obligations under this Agreement, then, upon demand of such Bank to any
Borrower through the applicable Agent, such Borrower shall pay to the Bank,
from time to time as specified by the Bank, additional amounts sufficient
to compensate the Bank for such increase.
4.04 Funding Losses. Each Borrower shall reimburse each Bank and hold each Bank
harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of such Borrower to make on a timely basis any payment of
principal or interest of any LIBOR Loan or B/A Equivalent Loan;
(b) the failure of such Borrower to borrow, continue or convert a Loan after
the Borrower has given (or is deemed to have given) a Notice of Borrowing
or Notice of Conversion/Continuation;
(c) the failure of such Borrower to make any prepayment in accordance with any
notice delivered under Section 2.07;
(d) the prepayment (including pursuant to Section 2.07) or other payment
(including after acceleration thereof) of a LIBOR Loan or B/A Equivalent
Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion of a LIBOR Loan or a B/A Equivalent Loan under
Section 2.04 or 2.06, as the case may be on a day that is not the last day
of a relevant Interest Period,
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Loans or B/A Equivalent Loans or
from fees payable to terminate the deposits from which such funds were obtained.
4.05 Inability to Determine Rates. If an Agent determines that for any reason
adequate and reasonable means do not exist for determining the LIBO Rate for any
requested LIBOR Period with respect to a proposed LIBOR Loan, or that the LIBO
Rate applicable does not adequately and fairly reflect the cost to the
applicable Banks of funding such Loan, the Agent will promptly so notify the
applicable Borrower and each applicable Bank. Thereafter, the obligation of such
Banks to make or maintain LIBOR Loans, as the case may be, hereunder shall be
suspended until the applicable Agent revokes such notice in writing. Upon
receipt of such notice, either Borrower may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the applicable
Borrower does not revoke such Notice, the applicable Banks shall make, convert
or continue the Loans, as proposed by the applicable Borrower in the amount
specified in the
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applicable notice submitted by such Borrower, but such Loans shall be made,
converted or continued as Base Rate Loans instead of LIBOR Loans.
4.06 Certificates of Banks. Any Bank claiming reimbursement or compensation
under this Article IV shall deliver to the applicable Borrower (with a copy to
applicable the Agent) a certificate setting forth in reasonable detail the
amount payable to the Bank hereunder and such certificate shall be conclusive
and binding on the applicable Borrower in the absence of manifest error.
4.07 Survival. The agreements and obligations of the Borrowers in this Article
IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Loans. The obligation of each Bank to make its
initial Loan hereunder is subject to the condition that the Canadian Agent shall
have received on or before the Closing Date all of the following, in form and
substance satisfactory to the Canadian Agent and each Bank, and in sufficient
copies for each Bank:
(a) Credit Agreement. This Agreement executed by each party thereto;
(b) Borrower Guarantees, Subsidiary Guarantees and Security. Each Guarantor
shall have authorized, executed and delivered a Guarantee in form
satisfactory to the Canadian Agent, as well as such security documentation
as the Agent may request, which shall include Security Agreements from each
Guarantor;
(c) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of each Borrower
authorizing the transactions contemplated hereby, certified as of the
Closing Date by the Secretary of each Borrower;
(ii) A certificate of the Secretary of each Borrower certifying the names
and true signatures of the officers of each Borrower authorized to
execute, deliver and perform, as applicable, this Agreement, and all
other Loan Documents to be delivered by it hereunder;
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(iii) Copies of the resolutions of the board of directors of each Guarantor
authorizing the Guarantee contemplated hereby, certified as of the
Closing Date by the Secretary of each Guarantor; and
(iv) A certificate of the Secretary of each Guarantor certifying the names
and true signatures of the officers of each Guarantor authorized to
execute, deliver and perform, as applicable, the Guarantees, and all
other Loan Documents to be delivered by it hereunder;
(d) Organization Documents; Good Standing. Each of the following documents:
(i) the Organization Documents of each Borrower as in effect on the
Closing Date, certified by the Secretary of each Borrower as of the
Closing Date; and
(ii) a good standing certificate (or the equivalent) for each Borrower;
(iii) the Organization Document of each Guarantor as in effect on the
Closing Date, certified by the Secretary of each Guarantor as of the
Closing Date; and
(iv) a good standing certificate (or the equivalent) for each Guarantor;
(e) Legal Opinions.
(i) an opinion of Stikeman, Elliott, counsel to the Company and addressed
to the Agents and the Banks, in form satisfactory to the Agents, the
Banks and their counsel;
(ii) an opinion of Hogan & Hartson, counsel to the US Borrower and
addressed to the Agents and the Banks, in form satisfactory to the
Agents, the Banks and their counsel.
(f) Payment of Fees. Evidence of payment by the Company on drawdown under the
initial Loan of all accrued and unpaid fees, costs and expenses to the
extent then due and payable on the Closing Date, together with Attorney
Costs of BACAN to the extent invoiced prior to or on the Closing Date,
including any such costs, fees and expenses arising under or referenced in
Sections 2.11 and 11.04;
(g) Collateral Documents. The Collateral Documents, executed by the Company or
the US Borrower as applicable, in appropriate form for recording, where
necessary, together with
(i) acknowledgment copies of all UCC or PPSA financing statements filed,
registered or recorded to perfect the security interests of the Agents
for the benefit of the
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Banks, or other evidence satisfactory to the Agents that there has
been filed, registered or recorded all financing statements and other
filings, registrations and recordings necessary and advisable to
perfect the Liens of the Agents for the benefit of the Banks in
accordance with applicable law;
(ii) written advice of Borrowers' counsel relating to such Lien and
judgment searches as the Agents shall have requested, and such
termination statements or other documents as may be necessary to
confirm that the Collateral is subject to no other Liens in favor of
any Persons (other than Permitted Liens);
(iii) all certificates and instruments representing the Pledged Collateral,
all original Inter-Company Notes, stock transfer powers executed in
blank with signatures guaranteed as the Agents or the Banks may
specify;
(iv) evidence that all other actions necessary or, in the opinion of the
Agents or the Banks, desirable to perfect and protect the first
priority security interest created by the Collateral Documents have
been taken;
(v) where appropriate, flood insurance and earthquake insurance on terms
satisfactory to the Agents and the Banks;
(vi) evidence that all other actions necessary or, in the opinion of the
Agents or the Banks, desirable to perfect and protect the first
priority Lien created by the Collateral Documents, and to enhance the
Agents' ability to preserve and protect its interests in and access to
the Collateral, have been taken;
(h) Insurance Policies. Standard lenders' payable endorsements with respect to
the insurance policies or other instruments or documents evidencing
insurance coverage on the assets of the Company and/or the US Borrower in
accordance with Section 7.06;
(i) Environmental Review. An environmental site assessment with respect to the
real property owned or leased by a Borrower or any of its Subsidiaries, as
listed on Schedule 5.01(i), dated as of a recent date prior to the Closing
Date or otherwise satisfactory to the Agents and the Banks, prepared by a
qualified firm acceptable to the Agents and the Banks, stating, among other
things, that such real property is free from Hazardous Materials and that
operations conducted thereon are in compliance with all Environmental Laws;
(j) Certificate. A certificate signed by a Responsible Officer, dated as of the
Closing Date, stating that:
(i) the representations and warranties contained in Article VI are true
and correct on and as of such date, as though made on and as of such
date;
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(ii) no Default or Event of Default exists or would result from the initial
Borrowing; and
(iii) there has occurred since December 31, 1998, no event or circumstance
that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(k) Private Placement. Evidence that the Private Placement has been completed
by the US Borrower on the terms as previously disclosed to the Banks and
the Agents, and on terms satisfactory to the Banks and the Agents.
(l) Litigation. The absence of any action, suit, investigation or proceeding
pending or threatened in any court or before any arbitrator or Governmental
Authority that, if determined adversely to the Company or any Subsidiary,
could reasonably be expected to have a Material Adverse Effect;
(m) Due Diligence. Receipt and review, with results satisfactory to the Agents,
the Banks and their counsel, of information regarding various matters
relating to the Company and its Subsidiaries, including litigation, tax,
accounting, labour, insurance, pension liabilities (actual or contingent),
real estate leases, material contracts, debt agreements, property
ownership, environmental matters, contingent liabilities and management;
(n) Year 2000. Receipt and review, with results satisfactory to the Agents and
the Banks, of a report prepared by the Company confirming that (i) the
Company and its Subsidiaries are taking all necessary and appropriate steps
to ascertain the extent of, and to quantify and successfully address,
business and financial risks facing the Company and its Subsidiaries as a
result of what is commonly referred to as the "Year 2000 Problem" (i.e.,
the inability of certain computer applications to recognize correctly and
perform date-sensitive functions involving certain dates prior to and after
December 31, 1999), including risks resulting from the failure of key
vendors and customers of the Company and its Subsidiaries to successfully
address the Year 2000 Problem, and (b) the Company's and its Subsidiaries'
material computer applications and those of its key vendors and customers
will, on a timely basis, adequately address the Year 2000 Problem in all
material respects;
(o) Other Documents. Such other approvals, opinions, documents or materials as
the Agents or any Bank may request, including evidence that all existing
capital loans, term loans and revolving loans of the Company and/or the US
Borrower have been repaid in full, other than the bonds issued as part of
the Private Placement.
5.02 Conditions to All Borrowings. The obligation of each Bank to make any Loan
to be made by it (including its initial Loan) or to continue or convert any Loan
under Section 2.04 or 2.06, as the case may be is subject to the satisfaction of
the following conditions precedent on the relevant Borrowing Date or
Conversion/Continuation Date:
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(a) Notice of Borrowing or Conversion/Continuation. The applicable Agent shall
have received (with, in the case of the initial Loan only, a copy for each
Bank) a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable;
(b) Continuation of Representations and Warranties. The representations and
warranties in Article VI shall be true and correct on and as of such
Borrowing Date or Conversion/Continuation Date with the same effect as if
made on and as of such Borrowing Date or Conversion/Continuation Date
(except to the extent such representations and warranties expressly refer
to an earlier date, in which case they shall be true and correct as of such
earlier date);
(c) No Existing Default. No Default or Event of Default shall exist or shall
result from such Borrowing or continuation or conversion; and
(d) No Future Advance Notice. Neither the Agents nor any Bank shall have
received from a Borrower any notice that any Collateral Document will no
longer secure on a first priority basis future advances or future Loans to
be made or extended under this Agreement.
Each Notice of Borrowing or Notice of Conversion/Confirmation submitted by a
Borrower hereunder shall constitute a representation and warranty by such
Borrower hereunder, as of the date of each such notice and as of each Borrowing
Date or Conversion/Continuation Date or that the conditions in this Section 5.02
are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company and the US Borrower each represents and warrants to the Agents
and each Bank that:
6.01 Corporate Existence and Power. Each Borrower and each of its Subsidiaries:
(a) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and to
execute, deliver, and perform its obligations under the Loan Documents;
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(c) is licensed and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its
business requires such qualification or license; and
(d) is in compliance with all Requirements of Law, except for those, the
non-compliance with which would not have a Material Adverse Effect on the
Borrower or its Subsidiaries;
6.02 Corporate Authorization; No Contravention. The execution, delivery and
performance by each Borrower and each of its Subsidiaries of this Agreement and
each other Loan Document to which such Borrower or Subsidiary is party, have
been duly authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Borrower's or Subsidiary's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the creation
of any Lien under, any document evidencing any Contractual Obligation to
which such Borrower or Subsidiary is a party or any order, injunction, writ
or decree of any Governmental Authority to which such Borrower or its
property is subject other than under the Collateral Documents; or
(c) violate any Requirement of Law, except for those, the non-compliance with
which would not have a Material Adverse Effect on the Borrower, the
Subsidiary or its Subsidiaries.
6.03 Governmental Authorization. No approval, consent, exemption, authorization,
or other action by, or notice to, or filing with, any Governmental Authority
(except for recordings or filings in connection with the Liens granted to the
Agents under the Collateral Documents) is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, either
Borrower of the Agreement or any other Loan Document or by any of its
Subsidiaries of any Loan Document to which it is a party.
6.04 Binding Effect. This Agreement and each other Loan Document to which a
Borrower or any of its Subsidiaries is a party constitute the legal, valid and
binding obligations of such Borrower and such Subsidiary enforceable against
such Borrower and such Subsidiary in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
6.05 Litigation. Except as listed on Schedule 6.05, there are no actions, suits,
proceedings, claims or disputes pending, or to the best knowledge of either
Borrower, threatened or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, against such Borrower or its Subsidiaries or
any of their respective properties which:
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(a) purport to affect or pertain to this Agreement or any other Loan Document,
or any of the transactions contemplated hereby or thereby; or
(b) are for amounts of $100,000 or more or which, if determined adversely to
such Borrower or its Subsidiaries, would reasonably be expected to have a
Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
6.06 No Default. No Default or Event of Default exists or would result from the
incurring of any Obligations by a Borrower or from the grant or perfection of
the Liens of the Agents and the Banks on the Collateral. As of the Closing Date,
neither Borrower nor any Subsidiary is in default under or with respect to any
Contractual Obligation in any respect which, individually or together with all
such defaults, could reasonably be expected to have a Material Adverse Effect,
or that would, if such default had occurred after the Closing Date, create an
Event of Default under subsection 9.01(e).
6.07 ERISA Compliance. Except as specifically disclosed in Schedule 6.07:
(a) Each Plan is, to the best of the US Borrower's knowledge, in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter
from the IRS and to the best knowledge of the US Borrower, nothing has
occurred which would cause the loss of such qualification. The US Borrower
and each ERISA Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.
(b) To the best of the US Borrower's knowledge, there are no pending or
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably
be expected to result in a Material Adverse Effect. To the best of the US
Borrower's knowledge, there has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability except as disclosed on
Schedule 6.07; (iii) neither the US Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums
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due and not delinquent under Section 4007 of ERISA); (iv) neither the US
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multi- employer Plan; and
(v) neither the US Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be
used solely for the purposes set forth in and permitted by Section 7.12 and
Section 8.07. Neither Borrower nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.09 Title to Properties. Each Borrower and each Subsidiary have good record and
marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of each Borrower and their Subsidiaries is subject to no Liens, other
than Permitted Liens.
6.10 Taxes. Each Borrower and their Subsidiaries have filed all federal,
provincial and other material tax returns and reports required to be filed, and
have paid all federal, provincial and other material taxes, assessments, fees
and other governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax
assessment against either Borrower or any Subsidiary that would, if made, have a
Material Adverse Effect.
6.11 Financial Condition.
(a) The audited consolidated financial statements of the Company and its
Subsidiaries dated December 31, 1998, and the related consolidated
statements of income or operations, shareholders' equity and cash flows for
the fiscal year ended on that date and the unaudited statements of the
Company and its Subsidiaries dated March 31, 1999:
(i) were prepared in accordance with GAAP consistently applied throughout
the period covered thereby or restated as necessary, except as
otherwise expressly noted therein;
(ii) fairly present the financial condition of the Company and its
Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
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(iii) except as specifically disclosed in Schedule 6.11, show all material
indebtedness and other liabilities, direct or contingent, of the
Company and its consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Contingent
Obligations.
(b) Since December 31, 1998, there has been no Material Adverse Effect.
6.12 Environmental Matters.
(a) The on-going operations of each Borrower and each of their Subsidiaries
comply in all respects with all Environmental Laws, except such
noncompliance which would not (if enforced in accordance with applicable
law) result in liability in excess of $100,000 in the aggregate.
(b) Each Borrower and each of their Subsidiaries have obtained all licenses,
permits, authorizations and registrations required under any Environmental
Law ("Environmental Permits") and necessary for their respective ordinary
course operations, all such Environmental Permits are in good standing, and
each Borrower and each of their Subsidiaries are in compliance with all
material terms and conditions of such Environmental Permits.
(c) None of the Borrowers, any of their Subsidiaries or any of their respective
present property or operations, is subject to any outstanding written order
from or agreement with any Governmental Authority, nor subject to any
judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material, except those
as set forth in Schedule 6.12.
(d) There are no Hazardous Materials or other conditions or circumstances
existing with respect to any property of either Borrower or any Subsidiary,
or arising from operations prior to the Closing Date, of either Borrower or
any of their Subsidiaries that would reasonably be expected to give rise to
Environmental Claims with a potential liability of a Borrower and their
Subsidiaries in excess of $100,000 in the aggregate for any such condition,
circumstance or property, except those as set forth in Schedule 6.12. In
addition, (i) neither Borrower nor any Subsidiary has any underground
storage tanks (x) that are not properly registered or permitted under
applicable Environmental Laws, or (y) that are leaking or disposing of
Hazardous Materials offsite, and (ii) each Borrower and its Subsidiaries
have notified all of their employees of the existence, if any, of any
health hazard arising from the conditions of their employment and have met
all notification requirements under all Environmental Laws.
6.13 Collateral Documents.
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(a) The provisions of the Collateral Documents in aggregate are effective to
create in favour of the Agents for the benefit of the Banks, a legal, valid
and enforceable first priority security interest in all right, title and
interest of the respective Borrower and its Subsidiaries in the Collateral
described therein subject to Permitted Liens; and financing statements have
been filed in the offices in all of the jurisdictions listed in the
schedules to the Security Agreements.
(b) All representations and warranties of each Borrower and any of their
Subsidiaries party thereto contained in the Collateral Documents are true
and correct.
6.14 Regulated Entities. None of the Borrowers, any Person controlling a
Borrower, or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. Neither Borrower is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
6.15 No Burdensome Restrictions. Neither Borrower nor any Subsidiary is a party
to or bound by any Contractual Obligation, or subject to any restriction in any
Organization Document, or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
6.16 Copyrights, Patents, Trademarks and Licenses, etc. Each Borrower and its
Subsidiaries own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of each Borrower, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by each Borrower or any
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 6.05, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of such Borrower, proposed, which, in either
case, could reasonably be expected to have a Material Adverse Effect.
6.17 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries other
than those specifically disclosed in part (a) of Schedule 6.17 hereto and has no
equity investments in any other corporation or entity other than those
specifically disclosed in part (b) of Schedule 6.17.
6.18 Insurance. The properties of each Borrower and their Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates
of such Borrower, in such amounts, with such deductibles and covering such risks
as are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where each Borrower or such Subsidiary
operates.
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6.19 Solvency. The Company and its Subsidiaries, on a consolidated basis, are
not Insolvent.
6.20 Full Disclosure. None of the representations or warranties made by each
Borrower or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of a Borrower or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of a Borrower to the Banks prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
7.01 Financial Statements. The Company shall deliver to each Bank and the
Agents, in form and detail satisfactory to the Agents and the Majority Banks:
(a) as soon as available, but not later than 90 days after the end of each
fiscal year (commencing with the fiscal year ended December 31, 1999), a
copy of the audited consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and cash flows for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, and accompanied by the opinion of a nationally
recognized independent public accounting firm ("Independent Auditor") which
report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years. Such opinion shall not
be qualified or limited because of a restricted or limited examination by
the Independent Auditor of any material portion of the Company's or any
Subsidiary's records;
(b) as soon as available, but not later than 45 days after the end of each of
the first three fiscal quarters of each fiscal year (commencing with the
fiscal quarter ended March 31, 1999), a copy of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such
quarter and the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing on the first day and ending
on the last day of such quarter, and certified by a Responsible Officer as
fairly presenting, in
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accordance with GAAP (subject to ordinary, good faith adjustments), the
financial position and the results of operations of each Borrower and the
Subsidiaries;
(c) as soon as available, but not later than 30 days after the end of each
month, income statements and balance sheets of the Company and each of its
Subsidiaries and Excluded Subsidiaries compared to budget for the prior
month in form satisfactory to the Agents;
(d) as soon as available, but not later than 90 days after the end of each
fiscal year (commencing with the fiscal year ended December 31, 1999), a
copy of an unaudited consolidating balance sheet of the Company, its
Subsidiaries and its Excluded Subsidiaries as at the end of such year and
the related consolidating statement of income, shareholders' equity and
cash flows for such year, and used in connection with the preparation of
the financial statements referred to in subsection 7.01(a);
(e) as soon as available, but not later than 30 days after the end of each of
the first three fiscal quarters of each fiscal year (commencing with the
fiscal quarter ended March 31, 1999), a copy of the unaudited consolidating
balance sheets of the Company and its Subsidiaries and its Excluded
Subsidiaries, and the related consolidating statements of income,
shareholders' equity and cash flows for such quarter, all certified
developed and used in connection with the preparation of the financial
statements referred to in subsection 7.01(b);
(f) together with the statements required in (a) and (b) above, such other
statements or information required by the Banks and the Agents reflecting
an exclusion of Excluded Subsidiaries in such financial statements,
including a report from the Independent Auditor with respect to the
consolidating financial statements of the Company and its Subsidiaries.
7.02 Certificates; Other Information. The Company shall furnish to each Bank and
the Agents:
(a) concurrently with the delivery of the financial statements referred to in
subsection 7.01(a), a certificate of the Independent Auditor stating that
in making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements referred to in
subsections 7.01(a) and (b), a Compliance Certificate executed by a
Responsible Officer, in the form of Exhibit C;
(c) promptly, copies of all financial statements and reports that the Company
sends to its shareholders, and copies of all financial statements and
regular, periodical or special reports (including Forms 10K, 10Q and 8K)
that the Company or any Subsidiary may make to, or file with, the SEC or
the OSC; and
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(d) promptly, such additional information regarding the business, financial or
corporate affairs of either Borrower or any Subsidiary as the Agents, at
the request of any Bank, may from time to time request.
7.03 Notices. Each Borrower shall promptly notify the Agents and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the occurrence
or existence of any event or circumstance that foreseeably will become a
Default or Event of Default;
(b) of (i) any breach or nonperformance of, or any default under, any
Contractual Obligation of the Borrower or any of its Subsidiaries which
could result in a Material Adverse Effect; and (ii) any dispute,
litigation, investigation, proceeding or suspension which may exist at any
time between such Borrower or any of its Subsidiaries and any Governmental
Authority;
(c) of the commencement of, or any material development in, any litigation or
proceeding affecting such Borrower or any Subsidiary (i) in which the
amount of damages claimed is $100,000 (or its equivalent in another
currency or currencies) (if such claim is not covered by insurance) or
$1,000,000 (if such claim is covered by insurance) or more, (ii) in which
injunctive or similar relief is sought and which, if adversely determined,
would reasonably be expected to have a Material Adverse Effect, or (iii) in
which the relief sought is an injunction or other stay of the performance
of this Agreement or any Loan Document;
(d) upon, but in no event later than 10 days after, becoming aware of (i) any
and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against such Borrower or any
Subsidiary or any of their respective properties pursuant to any applicable
Environmental Laws, (ii) all other Environmental Claims, and (iii) any
environmental or similar condition on any real property adjoining or in the
vicinity of the property of such Borrower or any Subsidiary that could
reasonably be anticipated to cause such property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or
use of such property under any Environmental Laws;
(e) of the occurrence of any of the following events affecting the Borrower or
any ERISA Affiliate (but in no event more than 10 days after such event),
and deliver to the Agents and each Bank a copy of any notice with respect
to such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Borrower or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of any Pension
Plan;
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(iii) the adoption of, or the commencement of contributions to, any Plan
subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(iv) the adoption of any amendment to a Plan subject to Section 412 of the
Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability;
(f) of any material change in accounting policies or financial reporting
practices by the Company or any of its consolidated Subsidiaries;
(g) of any intention by the Company or a Subsidiary to create or effect an
Acquisition of an Excluded Subsidiary; and
(h) of its request that an Excluded Subsidiary be converted to a Subsidiary and
include in such request:
(i) evidence that the assets and shares of such Excluded Subsidiary are
free from Liens, other than Permitted Liens;
(ii) detailed information of all Indebtedness of the Excluded Subsidiary;
and
(iii) such other information as the Agents and the Banks may reasonably
request.
Each notice under this Section shall be accompanied by a written statement
by a Responsible Officer setting forth details of the occurrence referred to
therein, and stating what action the applicable Borrower or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 7.03(a) shall describe with particularity any and all clauses
or provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
7.04 Preservation of Corporate Existence, Etc. The Company shall, and shall
cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate existence and
good standing under the laws of its state or jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business;
(c) use reasonable efforts, in the ordinary course of business, to preserve its
business organization and goodwill; and
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(d) preserve or renew all of its registered patents, trademarks, trade names
and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.05 Maintenance of Property. The Company shall maintain, and shall cause each
Subsidiary to maintain, and preserve all its property which is used or useful in
its business in good working order and condition, ordinary wear and tear
excepted and make all necessary repairs thereto and renewals and replacements
thereof except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect. The Company and each Subsidiary shall use the
standard of care typical in the industry in the operation and maintenance of its
facilities.
7.06 Insurance.
(a) In addition to insurance requirements set forth in the Collateral
Documents, each Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar
circumstances by such other Persons. All such insurance shall name the
Agents as loss payee/mortgagee and as additional insured, for the
benefit of the Banks, as their interests may appear. The Agents and
the Banks agree that proceeds from insurance for damage or loss to
property shall be applied by the applicable Borrower or Subsidiary as
the case may be to replace or repair such property, provided that
prior notice of any required repairs or sustained damage to property
in excess of $250,000 is given to the Agents. All casualty and key man
insurance maintained by the Company shall name the Agents as loss
payee and all liability insurance shall name the Agents as additional
insured for the benefit of the Banks, as their interests may appear.
(b) The Company shall furnish the Agents, with sufficient copies for each
Bank, at reasonable intervals (but not more than once per calendar
year) a certificate of a Responsible Officer of the Company (and, if
requested by the Agent, any insurance broker of the Company) setting
forth the nature and extent of all insurance maintained by the Company
and its Subsidiaries in accordance with this Section or any Collateral
Documents (and which, in the case of a certificate of a broker, were
placed through such broker).
7.07 Payment of Obligations. The Company shall, and shall cause each Subsidiary
to, pay and discharge as the same shall become due and payable, all their
respective obligations and liabilities, including:
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(a) all Taxes upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such
Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien upon its
property; and
(c) all indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.
7.08 Compliance with Laws. The Company shall comply, and shall cause each
Subsidiary to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business including
labour and employment statutes except such as may be contested in good faith or
as to which a bona fide dispute may exist.
7.09 Compliance with ERISA. The US Borrower shall, and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. Each Borrower shall maintain
and shall cause each Subsidiary to maintain proper books of record and account,
in which full, true and correct entries in conformity with GAAP consistently
applied shall be made of all financial transactions and matters involving the
assets and business of the Borrower and such Subsidiary. Each Borrower shall
permit, and shall cause each Subsidiary to permit, representatives and
independent contractors of the Agents or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Borrowers and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
respective Borrower; provided, however, when an Event of Default exists the
Agents or any Bank may do any of the foregoing at the expense of the Borrowers
at any time during normal business hours and without advance notice. The Agents
and/or the Banks shall make reasonable efforts to ensure any information that is
confidential information of the Company or its Subsidiaries obtained by
independent contractors is kept confidential by such independent contractors.
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7.11 Environmental Laws.
(a) Each Borrower shall, and shall cause each Subsidiary to, conduct its
operations and keep and maintain its property in compliance with all
Environmental Laws.
(b) Upon the written request of an Agent or any Bank, each Borrower shall
submit and cause each of its Subsidiaries to submit, to the Agent with
sufficient copies for each Bank, at the Borrower's sole cost and expense,
at reasonable intervals, a report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue
identified in any notice or report required pursuant to subsection 7.03(d),
that could, individually or in the aggregate, result in liability in excess
of $100,000.
(c) The Company shall cause an environmental audit(s) to be made in connection
with any Acquisition that it or any of its Subsidiaries propose or any
Acquisition of an Excluded Subsidiary, and deliver copies of the same to
the Agents as soon as such audit is available, the results of which
indicate that any Estimated Remediation Costs will have no Material Adverse
Effect.
7.12 Use of Proceeds. The Borrowers shall use the proceeds of the Loans for
working capital, short term liquidity purposes, acquisitions as permitted by
this Agreement (which shall not include hostile acquisitions or Acquisitions of
Excluded Subsidiaries) and other general corporate purposes not in contravention
of any Requirement of Law or of any Loan Document.
7.13 Industrial Development Revenue Bond. The Company shall take immediate steps
to cause the existing Industrial Development Revenue Bond registered against the
real property owned by its Subsidiary, Pyron Corporation, in New York State to
be repaid and discharged as soon as possible and in any event within six months
from the date of this Agreement.
7.14 Further Assurances.
(a) Each Borrower shall, and shall cause each Subsidiary to, ensure that all
written information, exhibits and reports furnished to the Agents or the
Banks do not and will not contain any untrue statement of a material fact
and do not and will not omit to state any material fact or any fact
necessary to make the statements contained therein not misleading in light
of the circumstances in which made, and will promptly disclose to the
Agents and the Banks and correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgment or
recordation thereof.
(b) Promptly upon request by the Agents or the Majority Banks, each Borrower
shall (and shall cause any of its Subsidiaries to) do, execute,
acknowledge, deliver, record, rerecord, file, refile, register and
reregister, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing
statements
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and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Agents or
such Banks, as the case may be, may reasonably require from time to time in
order (i) to carry out more effectively the purposes of this Agreement or
any other Loan Document, (ii) to subject to the Liens created by any of the
Collateral Documents any of the properties, rights or interests covered by
any of the Collateral Documents, (iii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and
the Liens intended to be created thereby, and (iv) to better assure,
convey, grant, assign, transfer, preserve, protect and confirm to the
Agents and Banks the rights granted or now or hereafter intended to be
granted to the Banks under any Loan Document or under any other document
executed in connection therewith; provided that no financing statements
specific only to and in respect of only of patents, trademarks, copyrights
or fixtures will be filed or registered prior to a Default or Event of
Default.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
8.01 Limitation on Liens. Neither Borrower shall, and shall not suffer or permit
any Subsidiary to, directly or indirectly, make, create, incur, assume or suffer
to exist any Lien upon or with respect to any part of its property, whether now
owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien (other than a Lien on the Collateral) existing on property of such
Borrower or any Subsidiary on the Closing Date and set forth in Schedule
8.01 securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges which are
not delinquent or remain payable without penalty, or to the extent that
nonpayment thereof is permitted by Section 7.07;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business which are not delinquent or remain payable without penalty or
which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of
the property subject thereto;
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(e) Liens (other than any Lien imposed by ERISA and other than on the
Collateral) consisting of pledges or deposits required in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and pension legislation;
(f) Liens (other than Liens on the Collateral) on the property of such Borrower
or its Subsidiary securing (i) the non-delinquent performance of bids,
trade contracts (other than for borrowed money), leases, statutory
obligations, (ii) contingent obligations on surety and appeal bonds, and
(iii) other non-delinquent obligations of a like nature; in each case,
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are
not substantial in amount, and which do not in any case materially detract
from the value of the property subject thereto or interfere with the
ordinary conduct of the businesses of such Borrower and its Subsidiaries;
(h) Liens arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions
against access by US Borrower in excess of those set forth by regulations
promulgated by the FRB, and (ii) such deposit account is not intended by a
Borrower or any Subsidiary to provide collateral to the depository
institution; and
(i) Liens (other than those described in (a) to (h) above) where the aggregate
amount subject to or secured by such Lien does not exceed 5% of
Consolidated Tangible Net Worth.
8.02 Disposition of Assets. Neither Borrower shall, and shall not suffer or
permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
any property (including accounts and notes receivable) or enter into any
agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus equipment, all in
the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is exchanged for
credit against the purchase price of similar replacement equipment, or the
proceeds of such sale are reasonably promptly applied to the purchase price
of such replacement equipment; and
(c) dispositions not otherwise permitted hereunder which are made for fair
market value; provided, that (i) at the time of any disposition, no Event
of Default shall exist or shall result from such disposition, (ii) the
aggregate sales price from such disposition shall be
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paid in cash, and (iii) the aggregate value of all assets so sold by the
Company and its Subsidiaries, together, shall not exceed in any fiscal year
$2 million.
8.03 Consolidations and Mergers. The Company shall not, and shall not suffer or
permit any Subsidiary to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) substantially all of its assets (whether now owned or hereafter
acquired) to or in favour of any Person, except:
(a) any Subsidiary may merge with a Borrower, provided that the Borrower shall
be the continuing or surviving corporation, or with any one or more other
Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall
be the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets (upon
voluntary liquidation or otherwise), to the Borrower or another Wholly
Owned Subsidiary.
8.04 Permitted Loans. Neither Borrower shall, or permit any Subsidiary to, make
or commit to make any advance, loan, extension of credit or capital contribution
to or in, any Person including any Affiliate of the Borrower (together,
"Loans"), except for:
(a) Loans held by a Borrower or Subsidiary in the form of cash equivalents;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business; or
(c) extensions of credit by the Company to any of its Subsidiaries or by any of
its Subsidiaries to another of its Subsidiaries;
(d) extensions of credit or capital contributions by a Borrower in the course
of an Acquisition.
8.05 Limitation on Indebtedness. The Company shall not, and shall not suffer or
permit any Subsidiary to, create, incur, assume, suffer to exist, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness (including Contingent Obligations) existing on the Closing
Date and set forth in Schedule 8.05;
(c) Indebtedness other than that described in (a) to (b) which in the aggregate
does not exceed 5% of Consolidated Tangible Net Worth;
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(d) Indebtedness evidenced by the Senior Secured Notes.
8.06 Transactions with Affiliates. Other than in respect of transactions among
and between the Borrowers and the Subsidiaries, neither Borrower shall, and
shall not suffer or permit any Subsidiary to, enter into any transaction with
any Affiliate of the Borrower, except upon fair and reasonable terms no less
favourable to the Borrower, or such Subsidiary than would obtain in a comparable
arm's length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary.
8.07 Prohibited Use of Proceeds. The Borrowers shall not, and shall not suffer
or permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act, (v) to enter into or consummate
any Acquisition except in accordance with this Agreement; or (vi) for the direct
or indirect benefit, financial or otherwise, of an Excluded Subsidiary or for an
Acquisition of an Excluded Subsidiary.
8.08 Operating Lease Obligations. Neither Borrower shall, and shall not suffer
or permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases associated with mineral properties;
(b) leases associated with office space entered into on commercially reasonable
terms; and
(c) operating leases entered into by the Borrower or any Subsidiary after the
Closing Date in the (excepting mineral lease properties) ordinary course of
business wherein the obligations under such operating lease do not exceed
$1,000,000 per operating lease.
8.09 Sale Leaseback Transactions. Neither Borrower shall, and shall not suffer
or permit any Subsidiary to, enter into any sale leaseback transactions except
for:
(a) sale leaseback transactions made in connection with completion of
construction of an asset or assets acquired after the Closing Date
whereby the value of the property or assets, the subject of such sale
leaseback transactions does not exceed $3 million per annum in
aggregate; and,
(b) the subject sale leaseback transaction is completed within 270 days of
the acquisition date of the property or assets which are the subject
of such transaction.
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8.10 Restricted Payments. The Company shall not declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock, now or
hereafter outstanding, except that the Company may declare and make dividend
payments or other distributions payable solely in its common stock.
8.11 Change in Business. Neither Borrower shall, and shall not suffer or permit
any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Borrower and its
Subsidiaries on the date hereof.
8.12 Accounting Changes. Neither Borrower shall, and shall not suffer or permit
any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Borrower or of any Subsidiary.
8.13 Asset Acquisition. Neither the Company nor any of its Subsidiaries shall
acquire assets or shares of any Person in whole or in part (other than an
Excluded Subsidiary), in excess of $5 million per acquisition and the aggregate
cost of all acquisitions in any fiscal year cannot be in excess of $20 million
without the prior approval of the Majority Banks.
8.14 Capital Expenditures. Neither the Company nor its Subsidiaries shall make
any capital expenditure in excess of $18 million per year without the prior
written approval of the Agents and the Majority Banks.
8.15 Permitted Investments. The Company, its Subsidiaries and its Excluded
Subsidiaries shall only make investments in Persons that are primarily involved
in manufacturing or processing either metals, mica, feldspar, talc, ceramic
clays or other industrial mineral or metal waste recycling.
8.16 Prohibited Investments. At no time shall the Company or any of its
Subsidiaries make any Acquisition of any kind (including an Acquisition of an
Excluded Subsidiary) in a Person who carries on business or activities in base
or precious metal mining.
8.17 Minimum Net Worth. The Company shall not permit its Consolidated Tangible
Net Worth at any time to be less than an amount equal to at least (a) $60
million plus (b) 50% of the Company's Net Income, which has accumulated
subsequent to March 31, 1999.
8.18 Leverage Ratio. The Company shall not permit for any fiscal quarter
(determined as at the last date of such fiscal quarter) ending in any period its
Leverage Ratio to be greater than 3.50 to 1.
8.19 Interest Coverage Ratio. The Company shall not permit for any fiscal
quarter (determined as of the last date of such fiscal quarter) ending in any
period its Interest Coverage Ratio to be less than 2.50 to 1.
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8.20 Debt - Capitalization. The Company shall not permit its Indebtedness to be
more than 50% of its Capitalization in any fiscal quarter (determined as of the
last date of such fiscal quarter).
8.21 Year 2000. The Company will take, and will cause each of the Subsidiaries
to take, all such actions as are reasonably necessary to successfully implement
a program to assure the Year 2000 problem will not have a Material Adverse
Effect. At the request of the Agent, the Company will provide a description of
such program, together with any updates or progress reports with respect
thereto.
8.22 Private Placement Repayments. The US Borrower shall make voluntary
prepayment of principle to the noteholders of the Senior Secured Notes without
the consent of the Banks and the Agents.
8.23 Material Documents. Neither the Company nor the US Borrower shall allow or
cause to be made any amendments to the Material Documents without the consent of
the Agents and the Banks.
8.24 Excluded Subsidiaries. Neither Borrower shall use or permit to be used any
part of the Credit or any Loan proceeds for the direct or indirect Acquisition
of an Excluded Subsidiary. In addition, neither Borrower nor any Subsidiary
shall give financial assistance of any kind to an Excluded Subsidiary, whether
by way of loan, guarantee or otherwise.
8.25 Maximum Acquisitions. The aggregate cost at any time in the Initial Term or
any extended term of the Credit of (a) all acquisitions of assets or shares of
any Person in whole or in part (including Acquisitions of Excluded Subsidiaries)
by the Company, any of its Subsidiaries or any of its Excluded Subsidiaries
shall not exceed $30 million in the aggregate; and (b) all Acquisitions of
Excluded Subsidiaries by the Company, any of its Subsidiaries or any of its
Excluded Subsidiaries shall not exceed the difference between $30 million and
the aggregate cost of all such Acquisitions of Excluded Subsidiaries undertaken
at any prior time (and which have not been converted to Subsidiaries).
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. Either Borrower fails to make, (i) when and as required to be
made herein, payments of any amount of principal of any Loan, or (ii)
within 5 days after the same becomes due, payment of any interest, fee or
any other amount payable hereunder or under any other Loan Document; or
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(b) Representation or Warranty. Any representation or warranty by a Borrower or
made or deemed made herein, in any other Loan Document, or which is
contained in any certificate, document or financial or other statement by
the Borrower, any Subsidiary, or any Responsible Officer, furnished at any
time under this Agreement, or in or under any other Loan Document is
incorrect in any material respect on or as of the date made or deemed made;
or
(c) Specific Defaults. A Borrower fails to perform or observe any term,
covenant or agreement contained in (i) Section 7.03 or in Article VIII
(provided that a Borrower shall be allowed 10 days from the date of
creation of any Lien against its property to discharge or cause to be
discharged such Lien); or (ii) any of Section 7.01, 7.02, or 7.09 and such
failure continues for a period of 10 consecutive days; or (iii) Section
7.06(b) and such failure continues for a period of 10 consecutive days
after receipt by a Borrower of notice from the applicable Agent; or
(d) Other Defaults. A Borrower or any Subsidiary party thereto fails to perform
or observe any other term or covenant contained in this Agreement or any
other Loan Document and such default continues for a period of 10
consecutive days; or
(e) Cross-Default. (i) Either Borrower or any Subsidiary (A) fails to make any
payment in respect of any Indebtedness or Contingent Obligation, in such
case, which is outstanding in an aggregate principle amount of $1,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace
or notice period, if any, specified in the relevant document on the date of
such failure; or (B) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such
failure if the effect of such failure, event or condition is to cause, or
to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its stated
maturity, or such Contingent Obligation to become payable or cash
collateral in respect thereof to be demanded; or (ii) the US Borrower
defaults on its obligations under the Senior Secured Notes, or there exists
any event of default under the Senior Secured Notes and/or the note
purchase agreement related thereto dated as of May 21, 1999; or
(f) Insolvency; Voluntary Proceedings. A Borrower, or any Subsidiary
representing five per cent or more of the Consolidated Tangible Net Worth
(a "Material Subsidiary") (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in
the ordinary course;
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(iii) commences any Insolvency Proceeding with respect to itself; or (iv)
takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against a Borrower or any Material Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is
issued or levied against a substantial part of the Borrower or any
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 60
days after commencement, filing or levy; (ii) the Borrower or any
Subsidiary admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under
non-US law) is ordered in any Insolvency Proceeding; or (iii) the Borrower
or any Subsidiary acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of
its property or business; or
(h) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against
a Borrower or any Subsidiary involving in the aggregate a liability (to the
extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $ 1,000,000 or more, and the same
shall remain unvacated and unstayed pending appeal for a period of 10 days
after the entry thereof; or
(i) Non-Monetary Judgments. Any non-monetary judgment, order or decree is
entered against a Borrower or any Subsidiary which does or would reasonably
be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(j) Change of Control. There occurs any Change of Control; or
(k) Adverse Change. There occurs a Material Adverse Effect; or
(l) Guarantor Defaults. A Guarantor fails in any material respect to perform or
observe any term, covenant or agreement in the Guarantee; or the Guarantee
is for any reason partially (including with respect to future advances) or
wholly revoked or invalidated, or otherwise ceases to be in full force and
effect, or the Guarantor or any other Person contests in any manner the
validity or enforceability thereof or denies that it has any further
liability or obligation thereunder; or any event described at subsections
(f) or (g) of this Section occurs with respect to the Guarantor; or
(m) Collateral.
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(i) any provision of any Collateral Document shall for any reason cease to
be valid and binding on or enforceable against a Borrower or any
Subsidiary party thereto or the Company or any Subsidiary shall so
state in writing or bring an action to limit its obligations or
liabilities thereunder; or
(ii) any Collateral Document shall for any reason (other than pursuant to
the terms thereof) cease to create a valid security interest in the
Collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority
security interest subject only to Permitted Liens.
9.02 Remedies. If any Event of Default occurs, the Canadian Agent shall, at the
request of, or may, with the consent of, the Majority Banks,
(a) declare the Commitment of each Bank to make Loans to be terminated,
whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.01 (in the case of clause (i) of
subsection (g) upon the expiration of the time periods mentioned therein),
the obligation of each Bank to make Loans shall automatically terminate and
the unpaid principal amount of all outstanding Loans and all interest and
other amounts as aforesaid shall automatically become due and payable
without further act of the Canadian Agent or any Bank.
9.03 Rights Not Exclusive. The rights provided for in this Agreement and the
other Loan Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.01 Appointment and Authorization; "Agent". Each (i) Canadian Bank hereby
irrevocably (subject to Section 10.09) appoints, designates and authorizes the
Canadian Agent and (ii) each US Bank hereby irrevocably (subject to Section
10.09) appoints, designates and authorizes the US Agent and/or the Canadian
Agent as applicable to take such action on its behalf under the
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provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, each Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agents have or be deemed to have any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agents.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to an Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
10.02 Delegation of Duties. An Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorney's-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agents shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
10.03 Liability of Agent. None of the Agent Related Persons shall (i) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or for the value of
or title to any Collateral, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Company or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
10.04 Reliance by Agent.
(a) The Agents shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
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Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agents. The Agents shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Agents shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request
and any action taken or failure to act pursuant thereto shall be binding
upon all of the Banks.
(b) For purposes of determining compliance with the conditions specified in
Section 5.01, each Bank that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the applicable Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the
Bank.
10.05 Notice of Default. The Agents shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to the Agents for the account of the Banks, unless the Agents shall have
received written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agents will notify the Banks of its receipt of any such
notice. The Agents shall take such action with respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance with Article
IX; provided, however, that unless and until the Agents have received any such
request, the Agents may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the Agent Related
Persons has made any representation or warranty to it, and that no act by the
Agents hereinafter taken, including any review of the affairs of the Company and
its Subsidiaries, shall be deemed to constitute any representation or warranty
by any Agent-Related Person to any Bank. Each Bank represents to the Agents that
it has, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower and
its Subsidiaries, the value of and title to any Collateral, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to the
Borrower hereunder. Each Bank also represents that it will, independently and
without reliance
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upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agents, the Agents shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent Related Persons.
10.07 Indemnification of Agents. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be liable
for the payment to the Agent Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agents upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agents in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agents are not reimbursed for such expenses by or on
behalf of the Borrower. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Agents.
10.08 Agents in Individual Capacity. BACAN, BofA and their Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BACAN or BofA were not the Agents
hereunder and without notice to or consent of the Banks. The Banks acknowledge
that, pursuant to such activities, BACAN, BofA or their Affiliates may receive
information regarding a Borrower or its Affiliates (including information that
may be subject to confidentiality obligations in favour of a Borrower or such
Subsidiary) and acknowledge that the Agents shall be under no obligation to
provide such information to them. With respect to its Loans, BACAN and BofA
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent, and the terms "Bank" and
"Banks" include BACAN and BofA in its individual capacity.
10.09 Successor Agent. The Agents may, and at the request of the Majority Banks
shall, resign as Agent upon 30 days' notice to the Banks. If an Agent resigns
under this Agreement, the
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Majority Banks shall appoint from among the Banks a successor agent for the
Banks. If no successor agent is appointed prior to the effective date of the
resignation of an Agent, the applicable Agent may appoint, after consulting with
the Banks and the Borrower, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article X and
Sections 11.04 and 11.05 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Majority Banks appoint a successor agent as provided for above.
10.10 Withholding Tax.
If Revenue Canada, the IRS or any other Governmental Authority of Canada or the
United States or other jurisdiction asserts a claim that an Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Agents of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Agents fully for all amounts
paid, directly or indirectly, by the Agents as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Agents under this Section, together with all costs
and expenses (including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Agents.
10.11 Collateral Matters.
(a) The Agents are authorized on behalf of all the Banks, without the necessity
of any notice to or further consent from the Banks, from time to time to
take any action with respect to any Collateral or the Collateral Documents
which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the Collateral granted pursuant to the
Collateral Documents.
(b) Each Bank authorizes the Canadian Agent to execute on its behalf any such
Collateral Documents as may be necessary, including any notices or
documents required to register the Collateral Documents in appropriate
governmental registries or offices.
(c) The Banks irrevocably authorize the Agents, at their option and in their
discretion, to release any Lien granted to or held by the Agents upon any
Collateral (i) upon termination
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of the Commitments and payment in full of all Loans and all other
Obligations known to the Agents and payable under this Agreement or any
other Loan Document; (ii) constituting property sold or to be sold or
disposed of as part of or in connection with any disposition permitted
hereunder; (iii) constituting property in which a Borrower or any
Subsidiary owned no interest at the time the Lien was granted or at any
time thereafter; (iv) constituting property leased to a Borrower or any
Subsidiary under a lease which has expired or been terminated in a
transaction permitted under this Agreement or is about to expire and which
has not been, and is not intended by a Borrower or such Subsidiary to be,
renewed or extended; (v) consisting of an instrument evidencing
Indebtedness or other debt instrument, if the indebtedness evidenced
thereby has been paid in full; or (vi) if approved, authorized or ratified
in writing by the Majority Banks or all the Banks, as the case may be, as
provided in subsection 11.01(f). Upon request by the Agents at any time,
the Banks will confirm in writing the Agent's authority to release
particular types or items of Collateral pursuant to this subsection
10.11(b), provided that the absence of any such confirmation for whatever
reason shall not affect the Agent's rights under this Section 10.11.
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by a Borrower or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks
(or by an Agent at the written request of the Majority Banks) and the Borrower
and acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Banks and a Borrower and acknowledged by
such Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate any Commitment
terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein on any
Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Loan Document;
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(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder; or
(e) amend this Section, or Section 2.15, or any provision herein providing for
consent or other action by all Banks; or
(f) discharge any Guarantor, or release any portion except as otherwise may be
provided in the Collateral Document or except where the consent of the
Majority Banks only is specifically provided for; and, provided further,
that (i) no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Majority Banks or all the Banks, as
the case may be, affect the rights and duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letters may be
amended, or rights or privileges thereunder waived, in a writing executed
by the parties thereto.
11.02 Notices.
(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by a Borrower by facsimile (i) shall be immediately confirmed
by a telephone call to the recipient at the number specified on Schedule
11.02, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or
facsimile number specified for notices on Schedule 11.02; or, as directed
to a Borrower or the Agents, to such other address as shall be designated
by such party in a written notice to the other parties, and as directed to
any other party, at such other address as shall be designated by such party
in a written notice to a Borrower and the Agents.
(b) All such notices, requests and communications shall, when transmitted by
overnight delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date
deposited into the mail, or if delivered, upon delivery; except that
notices pursuant to Article II or XI to the Agent shall not be effective
until actually received by the Agents.
(c) Any agreement of the Agents and the Banks herein to receive certain notices
by telephone or facsimile is solely for the convenience and at the request
of the Company. The Agents and the Banks shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agents and the Banks shall not have any
liability to the Company or other Person on account of any action taken or
not taken by the Agents or the Banks in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall
not be affected in any way or to
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any extent by any failure by the Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Agents and the Banks of a confirmation which is at variance with the terms
understood by the Agents and the Banks to be contained in the telephonic or
facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agents or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
11.04 Costs and Expenses. Each Borrower shall:
(a) whether or not the transactions contemplated hereby are consummated, pay or
reimburse BACAN and/or BofA (including in their capacity as Agents) within
five Business Days after demand (subject to subsection 5.01(f)) for all
costs and expenses incurred by BACAN and/or BofA (including in their
capacity as Agents) in connection with the development, preparation,
delivery, administration and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not consummated), this
Agreement, any Loan Document and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney Costs
incurred by BACAN and/or BofA (including in their capacity as Agents) with
respect thereto; and
(b) pay or reimburse the Agents, the Arranger and each Bank within five
Business Days after demand (subject to subsection 5.01(f)) for all costs
and expenses (including Attorney Costs) incurred by them in connection with
the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate proceeding);
and
(c) pay or reimburse BACAN and/or BofA (including in their capacity as Agents)
within five Business Days after demand for environmental inspection and
review, search and filing costs, fees and expenses, incurred or sustained
by BACAN and/or BofA (including in their capacity as Agents) in connection
with the matters referred to under subsections (a) and (b) of this Section.
11.05 Borrower Indemnification.
(a) Whether or not the transactions contemplated hereby are consummated, the
Company shall indemnify, defend and hold the Agent-Related Persons, and
each Bank and each of its
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respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agents or replacement of any
Bank) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in
connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this
Agreement or the Loans or the use of the proceeds thereof, whether or not
any Indemnified Person is a party thereto (all the foregoing, collectively,
the "Indemnified Liabilities"); provided, that the Company shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
(b) (i) The Company shall indemnify, defend and hold harmless each Indemnified
Person, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges,
expenses or disbursements (including Attorney Costs and the allocated
cost of internal environmental audit or review services), which may be
incurred by or asserted against such Indemnified Person in connection
with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with
respect to any Environmental Claim arising out of or related to any
property subject to a Mortgage in favour of the Agents or any Bank. No
action taken by legal counsel chosen by the Agents or any Bank in
defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action shall vitiate or any
way impair the Company's obligation and duty hereunder to indemnify
and hold harmless the Agents and each Bank.
(ii) In no event shall any site visit, observation, or testing by the
Agents or any Bank (or any contractee of the Agents or any Bank) be
deemed a representation or warranty that Hazardous Materials are or
are not present in, on, or under, the site, or that there has been or
shall be compliance with any Environmental Law. Neither the Company
nor any other Person is entitled to rely on any site visit,
observation, or testing by the Agents or any Bank. Neither the Agents
nor any Bank owes any duty of care to protect the Company or any other
Person against, or to inform the Company or any other party of, any
Hazardous Materials or any other adverse condition affecting any site
or property. Neither the Agents nor any Bank shall be obligated to
disclose to the Company or any other Person any report
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or findings made as a result of, or in connection with, any site
visit, observation, or testing by the Agents or any Bank.
(c) Survival; Defense. The obligations in this Section shall survive payment of
all other Obligations. At the election of any Indemnified Person, the
Company shall defend such Indemnified Person using legal counsel
satisfactory to such Indemnified Person in such Person's sole discretion,
at the sole cost and expense of the Borrower. All amounts owing under this
Section shall be paid within 30 days after demand.
11.06 Marshaling; Payments Set Aside. Neither the Agents nor the Banks shall be
under any obligation to marshall any assets in favour of either Borrower or any
other Person or against or in payment of any or all of the Obligations. To the
extent that either Borrower makes a payment to the Agents or the Banks, or the
Agents or the Banks exercise their right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Agents or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Agents upon demand its pro rata share of any
amount so recovered from or repaid by the Agents.
11.07 Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that neither Borrower may assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agents and each Bank.
11.08 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Agents, and the Company,
which consent shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (each an "Assignee") all, or any
ratable part of all, of the Loans, the Commitments and the other rights and
obligations of such Bank hereunder, in a minimum amount of $5,000,000;
provided, however, that (i) a Canadian Bank will assign only to another
Canadian Bank capable of making loans in Canadian Dollars and Dollars in
Canada, and a US Bank will assign only to another bank capable of making
loans in Dollars in the United States; (ii) the applicable Borrower and the
Agent may continue to deal solely and directly with such Bank in connection
with the interest so assigned to an Assignee until (A) written notice of
such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the
applicable Borrower and the Agent by such Bank and the Assignee; (B) such
Bank and its Assignee shall have delivered to the applicable Borrower and
the Agent an Assignment
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and Acceptance in the form of Exhibit D ("Assignment and Acceptance") and
(c) the assignor Bank or Assignee has paid to the Agent a processing fee in
the amount of $3,500;
(b) From and after the date that the Agent notifies the assignor Bank that it
has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing
fee, (i) the Assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the
extent that rights and obligations hereunder and under the other Loan
Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
under the Loan Documents.
(c) Any Bank may at any time sell to one or more commercial banks or other
Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests
of that Bank (the "originating Bank") hereunder and under the other Loan
Documents; provided, however, that (i) the originating Bank's obligations
under this Agreement shall remain unchanged, (ii) the originating Bank
shall remain solely responsible for the performance of such obligations,
(iii) the Borrower and the Agents shall continue to deal solely and
directly with the originating Bank in connection with the originating
Bank's rights and obligations under this Agreement and the other Loan
Documents, and (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment
to, or any consent or waiver with respect to, this Agreement or any other
Loan Document, except to the extent such amendment, consent or waiver would
require unanimous consent of the Banks as described in the first proviso to
Section 11.01. In the case of any such participation, the Participant shall
not have any rights under this Agreement, or any of the other Loan
Documents, and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement.
(d) Notwithstanding the provisions of this Article XI, if there shall have
occurred an Event of Default that is continuing, a Bank may make any
assignment or sell participations to any bank, financial institution or
commercial lender, whether an Eligible Assignee or not, and no consent
shall be required therefor.
(e) Notwithstanding any other provision in this Agreement, any US Bank may at
any time create a security interest in, or pledge, all or any portion of
its rights under and interest
<PAGE> 87
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in this Agreement in favour of any Federal Reserve Bank in accordance with
Regulation A of the FRB or US Treasury Regulation 31 CFR ss.203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in
any manner permitted under applicable law.
11.09 Confidentiality. Each Bank agrees to take and to cause its Affiliates to
take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by a
Borrower and provided to it by a Borrower or any Subsidiary, or by the Agents on
the Company's or such Subsidiary's behalf, under this Agreement or any other
Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with a Borrower or any Subsidiary; except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a nonconfidential basis from a source other than a Borrower,
provided that such source is not bound by a confidentiality agreement with a
Borrower known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (c) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agents,
any Bank or their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (H) as to any
Bank or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which a Borrower or any
Subsidiary is party or is deemed party with such Bank or such Affiliate; and (i)
to its Affiliates.
11.10 Set-off. In addition to any rights and remedies of the Banks provided by
law, if an Event of Default exists or the Loans have been accelerated, each Bank
is authorized at any time and from time to time, without prior notice to a
Borrower any such notice being waived by a Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the account
of a Borrower against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the applicable Agent or such
Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify a Borrower and the applicable Agent after any such set-off
and application made by such Bank; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
<PAGE> 88
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11.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall notify
the Agents in writing of any changes in the address to which notices to the Bank
should be directed, of addresses of any Lending Office, of payment instructions
in respect of all payments to be made to it hereunder and of such other
administrative information as the Agents shall reasonably request.
11.12 Counterparts. This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument.
11.13 Severability. The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.
11.14 No Third Parties Benefited. This Agreement is made and entered into for
the sole protection and legal benefit of each Borrower, the Banks, the Agents
and the Agent-Related Persons, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.
11.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE
THEREIN.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE PROVINCE OF ONTARIO, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS, THE
AGENTS AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS,
THE AGENTS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. EACH OF THE BORROWERS, THE AGENTS AND THE
BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ONTARIO LAW.
<PAGE> 89
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11.16 Entire Agreement. This Agreement, together with the other Loan Documents,
embodies the entire agreement and understanding among the Borrowers, the Banks
and the Agents, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Toronto by their proper and duly authorized
officers as of the day and year first above written.
ZEMEX CORPORATION, AS COMPANY
By:__________________________________
Title:_______________________________
ZEMEX U.S. CORPORATION,
AS US BORROWER
By:__________________________________
Title:_______________________________
<PAGE> 90
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BANK OF AMERICA CANADA,
AS CANADIAN AGENT
By:__________________________________
Title:_______________________________
By:__________________________________
Title:_______________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS US AGENT
By:__________________________________
Title:_______________________________
BANK OF AMERICA CANADA,
AS A CANADIAN BANK
By:__________________________________
Title:_______________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS A US BANK
By:__________________________________
Title:_______________________________
<PAGE> 91
SCHEDULE 2.01
-------------
COMMITMENTS
AND PRO RATA SHARES
-------------------
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- -----
<S> <C> <C>
Bank of America Canada $2,000,000 10%
Bank of America National
Trust and Savings
Association $18,000,000 90%
TOTAL $20,000,000 100%
</TABLE>
<PAGE> 92
LENDING OFFICES,
ADDRESSES FOR NOTICES
SCHEDULE 11.02 - PART I
-----------------------
Bank of America Canada
200 Front Street West
Suite 2700
Toronto, Ontario
M5V 3L2
Attention: Loans Department
- ----------------------------
Phone: 349-4100
Fax 349-4283
PART II
-------
Bank of America National Trust
and Savings Association
Agency Administrative Services #5596
1850 Gateway Boulevard, 5th Floor
Concord, California 94520
Attention: Corwin Lewis
Vice President
Phone: (925) 675-8365
Fax: (925) 675-8500
<PAGE> 1
ZEMEX U.S. CORPORATION
$35,000,000
7.54% Senior Secured Notes, Series A, due May 21, 2009
and
$15,000,000
7.76% Senior Secured Notes, Series B, due May 21, 2014
______________
NOTE PURCHASE AGREEMENT
_____________
Dated as of May 21, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION HEADING PAGE
SECTION 1. AUTHORIZATION OF NOTES.................................................................1
SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTY; ASSUMPTION.......................................1
Section 2.1. Sale and Purchase of Notes.............................................................1
Section 2.2. Guaranty Agreements....................................................................1
Section 2.3. Security for the Notes.................................................................2
SECTION 3. CLOSING................................................................................2
SECTION 4. CONDITIONS TO CLOSING..................................................................2
Section 4.1. Representations and Warranties of the Company..........................................3
Section 4.2. Representations and Warranties of Guarantors...........................................3
Section 4.3. Performance; No Default................................................................3
Section 4.4. Compliance Certificates................................................................3
Section 4.5. Guaranty Agreement.....................................................................4
Section 4.6. Security Documents, Etc................................................................4
Section 4.7. Filing.................................................................................4
Section 4.8. Intercreditor Agreement................................................................4
Section 4.9. Opinions of Counsel....................................................................4
Section 4.10. Discharge of Outstanding Debt; Release of Collateral...................................4
Section 4.11. Evidence of Insurance..................................................................5
Section 4.12. Purchase Permitted By Applicable Law, etc..............................................5
Section 4.13. Sale of Other Notes....................................................................5
Section 4.14. Payment of Special Counsel Fees........................................................5
Section 4.15. Private Placement Number...............................................................5
Section 4.16. Changes in Corporate Structure.........................................................5
Section 4.17. Proceedings and Documents..............................................................5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................5
Section 5.1. Organization; Power and Authority......................................................6
Section 5.2. Authorization, etc.....................................................................6
Section 5.3. Disclosure.............................................................................6
Section 5.4. Organization and Ownership of Shares of Subsidiaries...................................7
Section 5.5. Financial Statements...................................................................7
Section 5.6. Compliance with Laws, Other Instruments, etc...........................................7
Section 5.7. Governmental Authorizations, etc.......................................................7
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders..............................8
Section 5.9. Taxes..................................................................................8
Section 5.10. Title to Property; Leases..............................................................8
Section 5.11. Licenses, Permits, etc.................................................................8
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.12. Compliance with ERISA.................................................................. 9
Section 5.13. Private Offering by the Company........................................................10
Section 5.14. Use of Proceeds; Margin Regulations....................................................10
Section 5.15. Existing Debt; Future Lien.............................................................10
Section 5.16. Foreign Assets Control Regulations, etc................................................11
Section 5.17. Status under Certain Statutes..........................................................11
Section 5.18. Environmental Matter...................................................................11
Section 5.19. Computer 2000 Compliant................................................................11
SECTION 6. REPRESENTATIONS OF THE PURCHASER.......................................................11
Section 6.1. Purchase for Investment................................................................11
Section 6.2. Source of Funds........................................................................12
SECTION 7. INFORMATION AS TO PARENT GUARANTOR.....................................................13
Section 7.1. Certain Information....................................................................13
Section 7.2. Officer's Certificate..................................................................16
Section 7.3. Inspection.............................................................................16
SECTION 8. PREPAYMENT OF THE NOTES................................................................17
Section 8.1. Required Prepayments...................................................................17
Section 8.2. Optional Prepayments with Make-Whole Amount............................................17
Section 8.3. Allocation of Partial Prepayments......................................................18
Section 8.4. Maturity; Surrender, etc...............................................................18
Section 8.5. Purchase of Notes......................................................................18
Section 8.6. Make-Whole Amount......................................................................18
SECTION 9. AFFIRMATIVE COVENANTS..................................................................20
Section 9.1. Compliance with Law....................................................................20
Section 9.2. Insurance..............................................................................20
Section 9.3. Maintenance of Properties..............................................................20
Section 9.4. Payment of Taxes and Claims............................................................20
Section 9.5. Corporate Existence, etc...............................................................20
SECTION 10. NEGATIVE COVENANTS.....................................................................21
Section 10.1. Consolidated Net Worth.................................................................21
Section 10.2. Limitations on Consolidated Funded Debt................................................21
Section 10.3. Limitation on Consolidated Current Debt................................................21
Section 10.4. Limitation on Priority Debt............................................................21
Section 10.5. Interest Charges Coverage Ratio........................................................21
Section 10.6. Limitation on Liens....................................................................21
Section 10.7. Merger, Consolidation, etc.............................................................24
Section 10.8. Sales of Assets; Sale of Subsidiary Stock..............................................24
Section 10.9. Nature of Business.....................................................................25
Section 10.10. Transactions with Affiliates...........................................................25
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
Section 10.11. Post Closing Collateral................................................................26
Section 10.12. New Subsidiary Guarantors..............................................................26
Section 10.13. Further Assurances.....................................................................26
SECTION 11. EVENTS OF DEFAULT......................................................................26
SECTION 12. REMEDIES ON DEFAULT, ETC...............................................................29
Section 12.1. Acceleration...........................................................................29
Section 12.2. Other Remedies.........................................................................29
Section 12.3. Rescission.............................................................................29
Section 12.4. No Waivers or Election of Remedies, Expenses, etc......................................30
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................................30
Section 13.1. Registration of Notes..................................................................30
Section 13.2. Transfer and Exchange of Notes.........................................................30
Section 13.3. Replacement of Notes...................................................................31
SECTION 14. PAYMENTS ON NOTES......................................................................31
Section 14.1. Place of Payment.......................................................................31
Section 14.2. Home Office Payment....................................................................31
SECTION 15. EXPENSES, ETC..........................................................................32
Section 15.1. Transaction Expenses...................................................................32
Section 15.2. Survival...............................................................................32
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...........................32
SECTION 17. AMENDMENT AND WAIVER...................................................................33
Section 17.1. Requirements...........................................................................33
Section 17.2. Solicitation of Holders of Notes.......................................................33
Section 17.3. Binding Effect, etc....................................................................33
Section 17.4. Notes Held by Company, etc.............................................................33
SECTION 18. NOTICES................................................................................34
SECTION 19. REPRODUCTION OF DOCUMENTS..............................................................34
SECTION 20. CONFIDENTIAL INFORMATION...............................................................35
SECTION 21. MISCELLANEOUS..........................................................................36
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 21.1. Submission to Jurisdiction.................... 36
Section 21.2. Currency Rate Indemnity....................... 36
Section 21.3. Payments Free and Clear of Taxes.............. 36
Section 21.4. Successors and Assigns........................ 37
Section 21.5. Payments Due on Non-Business Days............. 37
Section 21.6. Severability.................................. 37
Section 21.7. Construction.................................. 37
Section 21.8. Counterparts.................................. 37
Section 21.9. Governing Law................................. 38
Signature.............................................................. 39
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C> <C>
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 4.16 -- CHANGES IN CORPORATE STRUCTURE
SCHEDULE 5.3 -- DISCLOSURE MATTERS
SCHEDULE 5.4 -- SUBSIDIARIES, AFFILIATES AND DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
SCHEDULE 5.5 -- FINANCIAL STATEMENTS
SCHEDULE 5.8 -- EXISTING LITIGATION
SCHEDULE 5.11 -- LICENSES, PATENTS, ETC.
SCHEDULE 5.15 -- EXISTING DEBT AND INVESTMENTS
SCHEDULE 10.6 -- EXISTING LIENS
SCHEDULE 10.11 -- DESCRIPTION OF POST CLOSING COLLATERAL
EXHIBIT 1(a) -- Form of 7.54% Senior Secured Note, Series A, due May 21, 2009
EXHIBIT 1(b) -- Form of 7.76% Senior Secured Note, Series B, due May 21, 2014
EXHIBIT 2 -- Form of Parent Guaranty
EXHIBIT 3 -- Form of Subsidiary Guaranty
EXHIBIT 4.9(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.9(b) -- Form of Opinion of Special Counsel for the Parent Guarantor
EXHIBIT 4.9(c) -- Form of Opinion of Special Counsel for the Purchasers
</TABLE>
-v-
<PAGE> 7
ZEMEX U.S. CORPORATION
Canada Trust Tower
BCE Place, 161 Bay Street, Suite 3750
Toronto, Ontario M5J2S1
7.54% Senior Secured Notes, Series A, due May 21, 2009
and
7.76% Senior Secured Notes, Series B, due May 21, 2014
Dated as of
May 21, 1999
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
ZEMEX U.S. CORPORATION, a Delaware corporation (the "Company"), agrees
with you as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of (i) $35,000,000 aggregate
principal amount of its 7.54% Senior Secured Notes, Series A, due May 21, 2009
(the "Series A Notes") and (ii) $15,000,000 aggregate principal amount of its
7.76% Senior Secured Notes, Series B, due May 21, 2014 (the "Series B Notes"
and together with the Series A Notes, the "Notes"). The term "Notes" shall
include any such notes issued in substitution therefor pursuant to Section 13
of this Agreement or the Other Agreements (as hereinafter defined). The Notes
shall be substantially in the form set out in Exhibit 1(a) and Exhibit 1(b),
respectively, with such changes therefrom, if any, as may be approved by you
and the Company. Certain capitalized terms used in this Agreement are defined
in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTIES; COLLATERAL.
Section 2.1. Sale and Purchase of Notes. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to you and you
will purchase from the Company, at the Closing provided for in Section 3, the
Notes in the principal amount specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof. Contemporaneously with
entering into this Agreement, the Company is entering into separate Note
Purchase Agreements (the "Other Agreements") identical with this Agreement with
each of the other purchasers named in Schedule A (the "Other Purchasers"),
providing for the sale at
<PAGE> 8
such Closing to each of the Other Purchasers of the Notes in the principal
amount specified opposite its name in Schedule A. Your obligation hereunder,
and the obligations of the Other Purchasers under the Other Agreements, are
several and not joint obligations, and you shall have no obligation under any
Other Agreement and no liability to any Person for the performance or
nonperformance by any Other Purchaser thereunder.
Section 2.2. Guaranty Agreements. The payment by the Company of all
amounts due with respect to the Notes and the performance by the Company of its
obligations under this Agreement will be unconditionally guaranteed by (i) the
Parent Guarantor under a Guaranty Agreement dated as of May 21, 1999 (the
"Parent Guaranty"), which Guaranty shall be in substantially the form attached
hereto as Exhibit 2, and (ii) the Subsidiary Guarantors under separate
Subsidiary Guaranty Agreements each dated as of May 21, 1999 (the "Subsidiary
Guaranties") which shall be in substantially the form attached hereto as
Exhibit 3.
Section 2.3. Security for the Notes. The Notes will be secured by certain
personal property of the Company and the Guarantors pursuant to the Security
Documents to be entered into by the Company and the Guarantors with Bank of
America Canada, as collateral agent (together with any successor collateral
agent under the Intercreditor Agreement the "Collateral Agent") for the benefit
of the holders of the Notes.
The Lien and security interest granted by the Company and the Guarantors
pursuant to the Security Documents shall rank pari passu with other existing
Liens that secure the outstanding Debt of the Company and the Guarantors under
the Bank Credit Agreement without preference, priority or distinction by virtue
of the time of filing any financing statement or registration or the difference
in time of incurrence of such Debt, and the enforcement of the rights and
benefits in respect of such Security Documents will be subject to an
Intercreditor Agreement dated as of May 21, 1999 (the "Intercreditor
Agreement") among the Collateral Agent, the Bank Lenders and the Purchasers.
Each Purchaser and each holder by its acceptance of a Note agrees that,
upon the occurrence of a Collateral Release Event, it will, or will direct the
Collateral Agent to, release the Lien of the Security Documents. For purposes
of this Section 2.3, a "Collateral Release Event" shall be deemed to have
occurred at such time that all of the following conditions shall have been
satisfied: (i) the Company shall have a written commitment from a bank or group
of banks to provide an unsecured revolving credit facility to the Company for
at least $25,000,000, (ii) no Default or Event of Default shall have occurred
and be continuing, (iii) the Collateral Agent shall have received the written
direction from all required parties (other than the holders of Notes) to
release the Lien of the Security Documents, and (iv) the Debt of the Company
under the Notes and this Agreement and the Debt of the Guarantors under the
Guaranty Agreements shall rank at least pari passu with all other Debt of the
Company and the Guarantors, respectively.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, at 10:00 A.M. Chicago time, at a closing (the
"Closing") on May 26, 1999 or on such other
-2-
<PAGE> 9
Business Day thereafter on or prior to May 30, 1999 as may be agreed upon by
the Company and you and the Other Purchasers. At the Closing the Company will
deliver to you the Notes to be purchased by you in the form of a single Note
(or such greater number of Notes in denominations of at least $500,000 as you
may request) dated the date of the Closing and registered in your name (or in
the name of your nominee), against delivery by you to the Company or its order
of immediately available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds to NationsBank, N.A., Nashville,
Tennessee (ABA #064000020) for credit to the account of the Company (account
number 0112985312). If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction (or waiver), prior
to or at the Closing, of the following conditions:
Section 4.1. Representations and Warranties of the Company. The
representations and warranties of the Company in this Agreement shall be true
and correct when made and at the time of the Closing.
Section 4.2. Representations and Warranties of Guarantors. The
representations and warranties of the Guarantors in the Guaranty Agreements
shall be true and correct when made and at the time of the Closing.
Section 4.3. Performance; No Default. The Company shall have performed
and complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by it prior to or at the Closing, and
after giving effect to the issue and sale of the Notes (and the application of
the proceeds thereof as contemplated by Section 5.14), no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by the covenants contained in
Section 10 of this Agreement had such covenants applied since such date.
Section 4.4. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.3 (as to the Company) and 4.16 (as to
the Company) have been fulfilled.
(b) Officer's Certificate of Guarantors. Each Guarantor shall have
delivered to you an Officer's Certificate of such Guarantor dated the date of
the Closing certifying that the conditions specified in Sections 4.2, (as to
such Guarantor) and 4.16 (as to such Guarantor) have been fulfilled.
-3-
<PAGE> 10
(c) Secretary's Certificate of each Guarantor. Each Guarantor shall have
delivered to you a certificate certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Guaranty Agreement to which such Guarantor is a
party.
Section 4.5. Guaranty Agreements. The Guaranty Agreements shall have
been duly authorized, executed and delivered by the Guarantors, shall
constitute the legal, valid and binding contract and agreement of the
Guarantors and shall be enforceable against the respective Guarantors in
accordance with their terms.
Section 4.6. Security Documents, Etc. The Security Documents shall have
been duly executed and delivered by the respective parties thereto and shall be
in full force and effect and such Purchaser shall have received true, correct
and complete copies of each thereof.
Section 4.7. Filing. The Security Documents shall have been filed in such
public offices as may be deemed necessary or appropriate by such Purchaser or
such Purchaser's special counsel in order to perfect the Liens granted or
conveyed thereby.
Section 4.8. Intercreditor Agreement. The Intercreditor Agreement shall
have been executed and delivered by the respective parties thereto and shall be
in full force and effect.
Section 4.9. Opinions of Counsel. You shall have received opinions in
form and substance satisfactory to you, dated the date of the Closing (a) from
Hogan & Hartson L.L.P., U.S. counsel for the Company, covering the matters set
forth in Exhibit 4.9(a) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request
(and the Company hereby instructs its counsel to deliver such opinion to you)
(b) from Stikeman, Elliott, Canadian counsel for the Parent Guarantor, covering
matters set forth in Exhibit 4.9(b) and covering such other matters incident to
the transactions contemplated hereby as you or your counsel may reasonably
request (and the Parent Guarantor hereby instructs its counsel to deliver such
opinion to you), and (c) from Chapman and Cutler, your special counsel in
connection with such transactions, substantially in the form set forth in
Exhibit 4.9(c) and covering such other matters incident to such transactions as
you may reasonably request.
Section 4.10. Discharge of Outstanding Debt; Release of Collateral. The
Collateral Agent shall have received (i) a pay out statement and irrevocable
direction regarding the release and discharge of all mortgages, security
interests, deeds and registrations against the Properties of the Company and
the Guarantors, except for any such Liens which are permitted pursuant to
Section 10.6, and (ii) evidence that all Debt of the Company and the Guarantors
owing to NationsBanc N.A. will be paid in full on the Closing Date and the
Credit Agreements in respect thereof have been terminated.
Section 4.11. Evidence of Insurance. Except to the extent that the
Company shall have elected to self-insure in accordance with the terms of the
applicable Security Documents, the holders shall have received certificates of
insurance evidencing the insurance policies and endorsements required by the
applicable Security Documents and evidencing the payment of all
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premiums due thereon and such certificates shall be otherwise satisfactory in
scope and form to you.
Section 4.12. Purchase Permitted By Applicable Law, etc. On the date of
the Closing your purchase of Notes shall (i) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction as to
the character of the particular investment, (ii) not violate any applicable law
or regulation (including, without limitation, Regulation U, T or X of the Board
of Governors of the Federal Reserve System) and (iii) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
Section 4.13. Sale of Other Notes. Contemporaneously with the Closing,
the Company shall sell to the Other Purchasers, and the Other Purchasers shall
purchase, the Notes to be purchased by them at the Closing as specified in
Schedule A.
Section 4.14. Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the
Closing the reasonable fees, charges and disbursements of your special counsel
referred to in Section 4.9 to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the Closing.
Section 4.15. Private Placement Number. A Private Placement number issued
by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
Section 4.16. Changes in Corporate Structure. Except as set forth in
Schedule 4.16, neither the Guarantors nor the Company shall have changed its
jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent
financial statements referred to in Schedule 5.5.
Section 4.17. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
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Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which
the failure to be so qualified or in good standing could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
The Company has the power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement and
the Other Agreements and the Notes and to perform the provisions hereof and
thereof.
Section 5.2. Authorization, etc. This Agreement, the Other Agreements and
the Notes have been duly authorized by all necessary corporate action on the
part of the Company, and this Agreement constitutes, and upon execution and
delivery thereof each Note will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
Section 5.3. Disclosure. The Company, through its agent, NationsBanc
Montgomery LLC, has delivered to the Purchasers a copy of a Private Placement
Memorandum, dated March, 1999 (the "Memorandum"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material
respects, the general nature of the business and principal properties of the
Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which
they were made. Except as disclosed in the Memorandum or as expressly
described in Schedule 5.3, or in one of the documents, certificates or other
writings identified therein, or in the financial statements listed in Schedule
5.5, since December 31, 1998, there has been no change in the financial
condition, operations, business or properties of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect
that has not been set forth herein, including in Schedule 5.3, or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization, and
the percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) the
Company's Affiliates, and (iii) of the Company's directors and senior officers.
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(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
Section 5.5. Financial Statements. The Company has delivered to each
Purchaser copies of the consolidated financial statements of the Parent
Guarantor and its Subsidiaries listed on Schedule 5.5. All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Parent Guarantor and its Subsidiaries as of the respective dates specified in
such Schedule and the consolidated results of their operations and cash flows
for the respective periods so specified and have been prepared in accordance
with GAAP consistently applied throughout the periods involved except as set
forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
Section 5.6. Compliance with Laws, Other Instruments, etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will
not (i) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, partnership agreement, or any other agreement or
instrument to which the Company or any Subsidiary may be bound or affected,
(ii) conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator
or Governmental Authority applicable to the Company or any Subsidiary, or (iii)
violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary, in each
case except where such breach, default, conflict or violation could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
Section 5.7. Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in
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connection with the execution, delivery or performance by the Company of this
Agreement or the Notes.
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by
any Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term of
any agreement or instrument to which it is a party or by which it is bound, or
any order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the
amount of which is not individually or in the aggregate Material or (ii) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Company and its Subsidiaries have
been determined by the Internal Revenue Service and paid for all fiscal years
up to and including the fiscal year ended December 31, 1988.
Section 5.10. Title to Property; Leases. The Company and its Subsidiaries
have good and sufficient title to their respective properties that individually
or in the aggregate are Material, including all such properties reflected in
the most recent audited balance sheet referred to in Section 5.5 or purported
to have been acquired by the Company or any Subsidiary after said date (except
as sold or otherwise disposed of in the ordinary course of business), in each
case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 5.11. Licenses, Permits, etc. Except as disclosed in Schedule
5.11,
(a) the Company and its Subsidiaries own or possess all Material
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict
with the rights of others;
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(b) to the best knowledge of the Company, no product of the Company
infringes in any Material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any
of its Subsidiaries.
Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans (as defined in Section 3 of ERISA),
and no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by the
Company or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
(b) The aggregate present value of the benefit liabilities under all of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plans' most recently ended plan years on the basis of the actuarial assumptions
specified for funding purposes in such Plans' most recent actuarial valuation
reports, did not exceed the aggregate current value of the assets of such
Plans. The term "benefit liabilities" has the meaning specified in section
4001 of ERISA and the terms "current value" and "present value" have the
meanings specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred any Material
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material or is disclosed
in the financial statements for the fiscal year ended December 31, 1998
referred to in Schedule 5.5.
(e) The execution and delivery of this Agreement and the issuance and sale
of the Notes will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975(c)(1)(A)-(D) of the Code; which, in either
event, could reasonably be expected to result in a Material Adverse Effect.
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The representation by the Company in the first sentence of this Section 5.12(e)
is made in reliance upon and subject to the accuracy of the representation of
the Purchasers in Section 6.2 as to the sources of the funds used to pay the
purchase price of the Notes to be purchased by the Purchasers.
Section 5.13. Private Offering by the Company. Neither the Company nor,
to the knowledge of the Company, anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than the Purchasers and not more than 35 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor, to the knowledge of the Company,
anyone acting on its behalf has taken, or will take, any action that would
subject the issuance or sale of the Notes to the registration requirements of
Section 5 of the Securities Act.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply
the proceeds of the sale of the Notes for general corporate purposes (including
the repayment of Debt of the Company and its Subsidiaries). No part of the
proceeds from the sale of the Notes will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
222), or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not constitute
more than 5% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 5% of the value of such assets. As used in
this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation U.
Section 5.15. Existing Debt; Future Liens. (a) Except as described
therein, Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Company and its Subsidiaries as of December 31, 1998,
since which date there has been no Material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the Debt of the
Company or its Subsidiaries. Neither the Company nor any Subsidiary is in
default and no waiver of default is currently in effect in the payment of any
principal or interest on any Debt of the Company or such Subsidiary having an
unpaid principal amount in excess of $5,000,000 and no event or condition
exists with respect to any Debt of the Company or any Subsidiary having an
unpaid principal amount in excess of $5,000,000 that would permit (or that with
notice or the lapse of time, or both, would permit) one or more Persons to
cause such Debt to become due and payable before its stated maturity or before
its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.6.
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Section 5.16. Foreign Assets Control Regulations, etc. Neither the sale
of the Notes by the Company nor its use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
Section 5.17. Status under Certain Statutes. Neither the Company nor any
Subsidiary is subject to regulation under the Investment Advisor Act of 1940,
as amended, the Public Utility Holding Issuer Act of 1935, as amended, the ICC
Termination Act of 1995, as amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matter. Neither the Company nor any
Subsidiary has knowledge of any Material liability or has received any notice
of any Material claim, and no proceeding has been instituted raising any
Material liability against the Company or any of its Subsidiaries or any of
their respective real properties now or formerly owned, leased or operated by
any of them or other assets, alleging any damage to the environment or
violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed to you in writing:
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any liability, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or
their use, except, in each case, such as could not reasonably be expected
to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them or has disposed of any Hazardous Materials, all
in a manner contrary to any Environmental Laws, in each case in any
manner that could reasonably be expected to result in a Material Adverse
Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
Section 5.19. Computer 2000 Compliant. The Company and its Subsidiaries
have implemented measures to have all critical business and computer systems
year 2000 compliant in a timely manner and the advent of the year 2000 and its
impact on said business and computer systems is not expected to have a Material
Adverse Effect.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1. Purchase for Investment. You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account
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of one or more pension or trust funds and not with a view to the distribution
thereof, provided that the disposition of your or their property shall at all
times be within your or their control. You further represent that you are an
institutional "accredited investor" within the meaning of Rule 501 of
regulation D as promulgated under the Securities Act. You understand that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that
the Company is not required to register the Notes.
Section 6.2. Source of Funds. You represent that at least one of the
following statements is an accurate representation as to each source of funds
(a "Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(a) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE")
95-60 (issued July 12, 1995) and there is no employee benefit plan or
plans, treating as a single plan all plans maintained by the same
employer or employee organization, with respect to which the amount of
the general account reserves and liabilities for all contracts held by or
on behalf of such plan, exceeds ten percent (10%) of the total reserves
and liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NAIC Annual Statement
filed with your state of domicile; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of the PTE
91-38 (issued July 12, 1991) and, except as you have disclosed to the
Company in writing pursuant to this paragraph (b), no employee benefit
plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM, and (ii) the names of all employee benefit plans whose
assets are included in such investment fund, have been disclosed to the
Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
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(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in a writing that
references this paragraph (e) and which is received by the Company no
less than five business days prior to Closing;
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA; or
(g) the Source is the assets of one or more employee benefit plans
which are managed by an "in-house asset manager," as that term is defined
in Part IV of PTE 96.23, the conditions of Part (I)(a), (b), (c), (d)-(h)
of such exemption have been met with respect to the purchase of the
Notes, and the name of all employee benefit plans whose assets are
included in the transaction have been disclosed to the Company in writing
pursuant to this clause (h).
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA and the term
"plan" has the meaning assigned to such term in Section 4975(e) of the Code.
SECTION 7. INFORMATION AS TO PARENT GUARANTOR.
Section 7.1. Financial and Business Information. The Company shall
deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Parent Guarantor
(other than the last quarterly fiscal period of each such fiscal year),
duplicate copies of:
(i) an unaudited consolidated balance sheet of the Parent
Guarantor and its subsidiaries as at the end of such quarter, and
(ii) unaudited consolidated statements of income, changes in
shareholders' equity and cash flows of the Parent Guarantor and its
subsidiaries for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the consolidated
financial position of the companies being reported on and their results
of operations and cash flows, subject to changes resulting from year-end
adjustments provided that delivery within the time period specified above
of copies of the Parent Guarantor's Quarterly Report on Form 10-Q (or
Quarterly Information Form to the extent that such form sets forth
financial and other information which is substantially similar to the
information required to be set forth
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in Form 10-Q) prepared in compliance with the requirements therefor and
filed with the Securities and Exchange Commission or the Ontario
Securities Commission, as the case may be, shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end of each
fiscal year of the Parent Guarantor, duplicate copies of,
(i) a consolidated balance sheet of the Parent Guarantor and
its subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Parent Guarantor and its
subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent certified
public accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all material
respects, the consolidated financial position of the companies being
reported upon and their results of operations and cash flows and have
been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the circumstances
provided that the delivery within the time period specified above of the
Parent Guarantor's Annual Report on Form 10-K (or Annual Information Form
to the extent that such form sets forth financial and other information
which is substantially similar to the information required to be set
forth in Form 10-K) for such fiscal year (together with the Company's
annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act or similar provisions of the Ontario Securities
Act, as the case may be, prepared in accordance with the requirements
therefor and filed with the Securities and Exchange Commission or the
Ontario Securities Commission, as the case may be, shall be deemed to
satisfy the requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy
statement sent by the Parent Guarantor or any subsidiary to public
securities holders generally, and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly
requested by such holder and excluding registration statements on Form
S-8), and each prospectus and all amendments thereto filed by the Parent
Guarantor or any subsidiary with the Securities and Exchange Commission,
the Ontario Securities Commission or the Toronto Stock Exchange and of
any press release of the Parent Guarantor or the Company generally made
available covering a Material development relating to the Parent
Guarantor, the Company or its Subsidiaries;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five Business Days after a Responsible Officer becoming
aware of the existence of any Default or Event of Default or that any
Person has given any notice or taken any action
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with respect to a claimed default hereunder or that any Person has given
any notice or taken any action with respect to a claimed default of the
type referred to in Section 11(g) of the Note Agreements, a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five Business
Days after a Responsible Officer becoming aware of any of the following,
a written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any Reportable Event for which
notice thereof has not been waived pursuant to such regulations as
in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to
have a Material Adverse Effect;
(f) Amendment of Bank Credit Agreement -- promptly following the
execution and delivery thereof, one copy of any amendment, waiver or
other modification of the Bank Credit Agreement;
(g) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Parent Guarantor, the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect; and
(h) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Parent Guarantor, the
Company or any of its Subsidiaries or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as from
time to time may be reasonably requested by any such holder of Notes.
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Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.8
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence);
(b) Reconciliation to U.S. GAAP -- in the event that the application
of generally accepted accounting principals as in effect in the United
States at the time of delivery of any such financial statements would
result in any material differences in the presentation of the financial
statements then being delivered to the holders, a reconciliation in
reasonable detail (including a description of the reasons therefore) of
the differences which would result if generally accepted accounting
principals then in effect in the United States were applied to such
financial statements;
(c) Parent Guarantor and Company Financial Statements Substantially
Identical -- a statement that the financial position and results of
operations of the Company and the Parent Guarantor as reflected in the
financial statements of the Parent Guarantor are substantially identical
except for the presentation of stockholders equity of the Parent
Guarantor which differs as a result of the Company's status as a
wholly-owned subsidiary of the Parent Guarantor; and
(d) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and of the Note Agreements and has made, or
caused to be made, under his or her supervision, a review of the
transactions and conditions of the Company and its Subsidiaries from the
beginning of the quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such review
shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or,
if any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of the
Company or any Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto.
Section 7.3. Inspection. The Company shall permit the representatives of
each holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
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Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary, all at such reasonable
times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company
and its Subsidiaries), all at such times and as often as may be
requested.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1. Required Prepayments. (a) On May 21, 2005 and on each May 21
thereafter to and including May 21, 2008, the Company will prepay $7,000,000
principal amount (or such lesser principal amount as shall then be outstanding)
of the Series A Notes at par and without payment of the Make-Whole Amount or
any premium. The entire outstanding principal amount of the Series A Notes
shall become due and payable on May 21, 2009. Upon any partial prepayment of
the Series A Notes pursuant to Section 8.2 or purchase of the Series A Notes
permitted by Section 8.5, the principal amount of each required prepayment of
the Series A Notes becoming due under this Section 8.1(a) on and after the date
of such prepayment or purchase shall be reduced in the same proportion as the
aggregate unpaid principal amount of the Series A Notes is reduced as a result
of such prepayment or purchase.
(b) On May 21, 2010 and on each May 21 thereafter to and including May 21,
2013, the Company will prepay $3,000,000 principal amount (or such lesser
principal amount as shall then be outstanding) of the Series B Notes at par and
without payment of the Make-Whole Amount or any premium. The entire
outstanding principal amount of the Series B Notes shall become due and payable
on May 21, 2014. Upon any partial prepayment of the Series B Notes pursuant to
Section 8.2 or purchase of the Series B Notes permitted by Section 8.5, the
principal amount of each required prepayment of the Series B Notes becoming due
under this Section 8.1(b) on and after the date of such prepayment or purchase
shall be reduced in the same proportion as the aggregate unpaid principal
amount of the Series B Notes is reduced as a result of such prepayment or
purchase.
Section 8.2. Optional Prepayments with Make-Whole Amount. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes of any series, in an amount not less
than 5% of the aggregate principal amount of the Notes of such series then
outstanding in the case of a partial prepayment, at 100% of the principal
amount so prepaid, plus the Make-Whole Amount determined for the prepayment
date with respect to such principal amount. The Company will give each holder
of Notes written notice of each optional prepayment under this Section 8.2 not
less than 30 days and not more
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than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date (which shall be a Business Day), the aggregate
principal amount of the Notes of the series to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the Company
shall deliver to each holder of Notes a certificate of a Senior Financial
Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
Section 8.3. Allocation of Partial Prepayments. In the case of each
partial prepayment of the Notes, the principal amount of the Notes of the
series to be prepaid shall be allocated among all of the Notes of the series to
be prepaid at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof not theretofore called for
prepayment.
Section 8.4. Maturity; Surrender, etc. In the case of each prepayment of
Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such
date and the applicable Make-Whole Amount, if any. From and after such date,
unless the Company shall fail to pay such principal amount when so due and
payable, together with the interest and Make-Whole Amount, if any, as
aforesaid, interest on such principal amount shall cease to accrue. Any Note
paid or prepaid in full shall be surrendered to the Company and canceled and
shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
Section 8.5. Purchase of Notes. The Company will not and will not permit
any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means, with
respect to a Note of any series, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of the Note of such series over the amount of such Called Principal,
provided that the Make-Whole Amount may in no event be less than zero. For the
purposes of determining the Make-Whole Amount, the following terms have the
following meanings:
"Called Principal" means, with respect to a Note of any series, that
portion of the principal of such Note that is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
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"Discounted Value" means, with respect to the Called Principal of
any Note of any series, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice and
at a discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.50% plus the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as "Page PX1" on the Bloomberg Financial
Markets Services Screen (or such other display as may replace Page PX1 on
Bloomberg Financial Markets Services Screen) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of such
time are not ascertainable (including by way of interpolation), the
Treasury Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations
to bond-equivalent yields in accordance with accepted financial practice
and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the maturity closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that
will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of a Note of any series all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes of such series then the amount of the
next succeeding scheduled interest payment will be reduced by the amount
of interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Sections 8.2 or 12.1.
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"Settlement Date" means, with respect to the Called Principal of any
Note of any series the date on which such Called Principal is to be
prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Compliance with Law. The Company will and will cause each of
its Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure
that non-compliance with such laws, ordinances or governmental rules or
regulations or failure to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 9.2. Insurance. The Company will and will cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
Section 9.3. Maintenance of Properties. The Company will and will cause
each of its Subsidiaries to maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance
is desirable in the conduct of its business and the Company has concluded that
such discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims. The Company will and will cause
each of its Subsidiaries to file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to
the extent such taxes and assessments have become due and payable and before
they have become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of the Company
or any Subsidiary, provided that neither the Company nor any Subsidiary need
pay any such tax or assessment or claims if (i) the amount, applicability or
validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP
on the books of the
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Company or such Subsidiary or (ii) the non-filing or nonpayment of all such
taxes and assessments in the aggregate could not reasonably be expected to have
a Material Adverse Effect.
Section 9.5. Corporate Existence, etc. Subject to Sections 10.7 and 10.8,
the Company will at all times preserve and keep in full force and effect its
corporate existence, and the Company will at all times preserve and keep in
full force and effect the corporate existence of each of its Subsidiaries
(unless merged into the Company or a Subsidiary) and all rights and franchises
of the Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and
effect such corporate existence, right or franchise could not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Consolidated Net Worth. The Company will not at any time
permit Consolidated Adjusted Net Worth to be an amount less than the sum of (a)
$65,000,000 plus (b) 50% of Consolidated Net Income (but in each case only if a
positive number) computed on a cumulative basis for each of the elapsed fiscal
quarters for which financial information is available ending on or after March
31, 1999.
Section 10.2. Limitations on Consolidated Funded Debt. The Company will
not at any time permit Consolidated Funded Debt to exceed 55% of Consolidated
Total Capitalization.
Section 10.3. Limitation on Consolidated Current Debt. The Company will
not, and will not permit any Subsidiary to, incur any Consolidated Current Debt
unless there shall have been during the immediately preceding twelve months a
period of at least 30 consecutive days on each of which there shall have been
no Consolidated Current Debt outstanding in excess of the amount of additional
Consolidated Funded Debt that the Company would have been permitted to (but did
not) have outstanding on such day under Section 10.2.
Section 10.4. Limitation on Priority Debt. The Company will not, and will
not permit any Subsidiary to, create, assume or incur or in any manner be or
become liable in respect of any Priority Debt, unless at the time of issuance
thereof and after giving effect thereto and to the application of the proceeds
thereof, Priority Debt shall not exceed the greater of $30,000,000 or 15% of
Consolidated Adjusted Net Worth.
Section 10.5. Interest Charges Coverage Ratio. The Company will not
permit the ratio of Consolidated Net Income Available for Interest Charges to
Interest Charges for the period of four consecutive fiscal quarters ending on
the last day of each fiscal quarter to be less than 2.5 to 1.0.
Section 10.6. Limitation on Liens. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly create, incur, assume
or permit to exist (upon the happening of a contingency or otherwise), any Lien
on or with respect to any Property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
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Company or any such Subsidiary, whether now owned or held or hereafter
acquired, or any income or profits therefrom, or assign or otherwise convey any
right to receive income or profits (unless it makes, or causes to be made,
effective provision whereby the Notes will be equally and ratably secured with
any and all other obligations thereby secured, such security to be pursuant to
an agreement reasonably satisfactory to the Required Holders and, in any such
case, the Notes shall have the benefit, to the fullest extent that, and with
such priority as, the holders of the Notes may be entitled under applicable
law, of an equitable Lien on such property) , except:
(a) Liens for taxes, assessments or other governmental charges which
are not yet due and payable or the payment of which is not at the time
required by Section 9.4;
(b) any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such stay;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens, in each
case, incurred in the ordinary course of business for sums not yet due
and payable or the payment of which is not at the time required by
Section 9.4;
(d) Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords', carriers', warehousemen's,
mechanics', materialmen's and other similar Liens) and Liens to secure
the performance of bids, tenders, leases, or trade contracts, or to
secure statutory obligations (including obligations under workers
compensation, unemployment insurance and other social security
legislation), surety or appeal bonds or other Liens incurred in the
ordinary course of business and not in connection with the borrowing of
money;
(e) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to the ownership of property or assets or the ordinary conduct
of the business of the Company or any of its Subsidiaries, provided that
such Liens do not, in the aggregate, detract from the value of such
Property in any material way;
(f) Liens incidental to minor survey exceptions and similar Liens,
provided that such Liens do not, in the aggregate, materially detract
from the value of such Property;
(g) Liens on Property or assets of Subsidiaries securing Debt owing
to the Company or any of its Wholly-owned Subsidiaries;
(h) Liens existing on the date of this Agreement and securing the
Debt of the Company and its Subsidiaries referred to in Schedule 5.15
hereto;
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(i) Liens existing on property of any business entity at the time of
acquisition of the capital stock or assets of such business entity or
merging with or consolidating with such business entity by the Company or
a Subsidiary, provided that (i) the Lien shall attach solely to the
property of the business entity so acquired or merged with or
consolidated with, (ii) at the time of acquisition of or merging with or
consolidating with such business entity, the aggregate amount remaining
unpaid on all Debt secured by Liens on the property of such business
entity, whether or not assumed by the Company or a Subsidiary, shall not
exceed an amount equal to the lesser of the total purchase price or fair
market value at the time of acquisition of or merging with or
consolidating with such business entity (as determined in good faith by
one or more officers of the Company or any Subsidiary, as the case may
be, to whom authority to enter into the transaction has been delegated by
the board of directors of the Company or any Subsidiary, as the case may
be), and (iii) the aggregate principal amount of all Debt secured by such
Liens shall be permitted by the limitations set forth in Section 10.2,
10.3 and 10.4;
(j) Liens given to secure the payment of the purchase price incurred
in connection with the acquisition or construction of property (other
than accounts receivable or inventory) useful and intended to be used in
carrying on the business of the Company or a Subsidiary, including Liens
existing on such property at the time of acquisition or construction
thereof, or Liens incurred within 270 days of such acquisition or the
completion of such construction, provided that (i) the Lien shall attach
solely to the property acquired, purchased or constructed, (ii) at the
time of acquisition or construction of such property, the aggregate
amount remaining unpaid on all Debt secured by Liens on such property,
whether or not assumed by the Company or a Subsidiary, shall not exceed
an amount equal to the lesser of the total purchase price or fair market
value at the time of acquisition or construction of such property (as
determined in good faith by one or more officers of the Company or any
Subsidiary, as the case may be, to whom authority to enter into the
transaction has been delegated by the board of directors of the Company
or any Subsidiary, as the case may be), and (iii) the aggregate principal
amount of all Debt secured by such Liens shall be permitted by the
limitations set forth in Section 10.2, 10.3 and 10.4;
(k) Liens created by the Security Documents and similar security
documents securing Debt outstanding under the Bank Credit Agreement and
related Subsidiary guaranties;
(l) any extensions, renewals or replacements of any Lien permitted
by the preceding subparagraphs (h) through (j), inclusive, of this
Section 10.6, provided that (i) no additional property shall be
encumbered by such Liens, (ii) the unpaid principal amount of the Debt
secured thereby shall not be increased on or after the date of any
extension, renewal or replacement, (iii) the weighted average life to
maturity of the Debt secured by such Liens shall not be reduced, and (iv)
at such time and immediately after giving effect thereto, such Debt shall
be permitted by applicable limitations set forth in Section 10.2, 10.3
and 10.4; and
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(m) in addition to the Liens permitted by the preceding
subparagraphs (a) through (l), inclusive, of this Section 10.6, Liens
securing Debt of the Company or any Subsidiary, provided that such Debt
shall be permitted by the applicable limitations set forth in Section
10.2, 10.3 and 10.4 at the time that the Lien securing such Debt is
created.
Section 10.7. Merger, Consolidation, etc. The Company will not, and will
not permit any of its Subsidiaries to, consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person (except that a
Subsidiary of the Company may (x) consolidate with or merge with, or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to, the Company or to a Wholly-owned Subsidiary of the
Company or (y) convey, transfer or lease all or substantially all of its assets
in compliance with the provisions of Section 10.8), provided that the foregoing
restriction does not apply to the consolidation or merger of the Company with,
or the conveyance, transfer or lease of substantially all of the assets of the
Company in a single transaction or series of transactions to, any Person so
long as:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the
case may be (the "Successor Corporation"), shall be a solvent corporation
organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes its
assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement (pursuant to such agreements and
instruments as shall be reasonably satisfactory to the Required Holders),
and the Company shall have caused to be delivered to each holder of Notes
an opinion of nationally recognized independent counsel, to the effect
that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms
hereof; and
(c) immediately after giving effect to such transaction:
(i) no Default or Event of Default would exist, and
(ii) the Successor Corporation would be permitted by the
provisions of Section 10.2 hereof to incur at least $1.00 of
additional Consolidated Funded Debt.
Section 10.8. Sales of Assets; Sale of Subsidiary Stock. (a) The Company
will not, and will not permit any Subsidiary to, sell, lease or otherwise
dispose of any substantial part (as defined below) of the assets of the Company
and its Subsidiaries; provided, however, that the Company or any Subsidiary may
sell, lease or otherwise dispose of assets constituting a substantial part of
the assets of the Company and its Subsidiaries if, at such time and after
giving effect thereto, no Default or Event of Default shall have occurred and
be continuing and an
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amount equal to the net proceeds received from such sale, lease or other
disposition during such fiscal year which shall be in excess of 15% of the book
value of Consolidated Total Assets, determined as of the end of the fiscal year
immediately preceding such sale, lease or other disposition shall be used
within 270 days of such disposition:
(1) to acquire (x) property, plant and equipment used or useful in
carrying on the business of the Company and its Subsidiaries, (y) the
capital stock of any Person which shall become a Subsidiary, or (z)
assets of a business entity which will be owned by the Company or a
Subsidiary and having a value at least equal to the value of such assets
sold, leased or otherwise disposed of; or
(2) to prepay or retire Senior Debt of the Company and/or its
Subsidiaries in which case the Notes will be prepaid ratably (in
accordance with the unpaid principal amount of all Senior Debt then
outstanding) pursuant to Section 8.2 of this Agreement.
As used in this Section 10.8, a sale, lease or other disposition of assets
shall be deemed to be a "substantial part" of the assets of the Company and its
Subsidiaries if the book value of such assets, when added to the book value of
all other assets sold, leased or otherwise disposed of by the Company and its
Subsidiaries (other than in transactions in the ordinary course of business and
Excluded Sale and Leaseback Transactions) during any fiscal year of the
Company, exceeds 15% of the book value of Consolidated Total Assets, determined
as of the end of the fiscal year immediately preceding such sale, lease or
other disposition.
(b) The Company will not permit any Subsidiary to issue or transfer any
Subsidiary Stock of such Subsidiary to any Person other than the Company or
another Subsidiary, except for the purpose of qualifying directors, or except
in satisfaction of the validly pre-existing preemptive rights of minority
shareholders in connection with the simultaneous issuance of stock to the
Company and/or a Subsidiary whereby the Company and/or such Subsidiary maintain
their same proportionate interest in such Subsidiary, unless such transfer is
permitted by clause (a) of this Section 10.8.
(c) The Company will not transfer any Subsidiary Stock of any Subsidiary
(except to qualify directors), and will not permit any Subsidiary to transfer
(except to the Company or a Subsidiary) any Subsidiary Stock of any other
Subsidiary, unless such transfer is permitted by clause (a) or (b) of this
Section 10.8.
Section 10.9. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the
business, taken on a consolidated basis, which would then be engaged in by the
Company and its Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Subsidiaries on the
date of this Agreement.
Section 10.10. Transactions with Affiliates. The Company will not and
will not permit any Subsidiary to enter into directly or indirectly any
Material transaction or Material group of related transactions (including
without limitation the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate (other than the
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Company or another Subsidiary), except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
Section 10.11. Post Closing Collateral. Concurrently with the execution
of documents pursuant to which the Post Closing Collateral shall be subjected
to Liens in favor of the Bank Lenders, the Company shall cause the Guarantors
listed on Schedule 10.11 to deliver the Security Documents pursuant to which
the Post Closing Collateral described in Schedule 10.11 shall be subjected to
the Lien of the Security Documents, together with opinions of counsel to the
Guarantors covering matters relating to such Security Documents which the
Required Holders of the Notes shall reasonably require and such other matters,
including the items described in Section 4.10 and 4.11 with respect to the Post
Closing Collateral, all in form and substance reasonably satisfactory to the
Required Holders of the Notes.
Section 10.12. New Subsidiary Guarantors. If at any time the Company or
the Parent Guarantor shall acquire or create a new Subsidiary (whether direct
or indirect), concurrently with the execution of any guaranty or other
obligation in favor of the Collateral Agent or any Bank Lender, the Company
shall cause such Subsidiary to deliver to each Noteholder a Subsidiary Guaranty
and such Security Documents as the Required Holders may reasonably request,
together with, opinions of counsel to such Subsidiary covering matters relating
to such Subsidiary Guaranty and such Security Documents which the Required
Holders of the Notes shall reasonably require and such other matters, including
items described in Section 4.11 (if required by the nature of such additional
Collateral), all in form and substance reasonably satisfactory to the Required
Holders of the Notes.
Section 10.13. Further Assurances. In the event the Collateral Agent
shall resign or be removed or the Intercreditor Agreement shall no longer be in
full force and effect, the Company will, and will cause each Guarantor to,
execute and deliver to the Noteholders such additional documents (including
amendments to the Security Documents) as the holders of the Notes shall
reasonably request so that there shall continue to be a Collateral Agent under
the Security Documents and to insure that the Lien of the Security Documents
shall continue to be in full force and effect.
The Company also agrees at its own expense to cause or use its best
efforts to cause the Security Documents and all supplements and amendments
thereto and all financing and continuation statements and similar notices
required by applicable law at all times to be kept, recorded and filed in such
manner and in such places to maintain the effectiveness of any original or
supplemental filings under the Uniform Commercial Code, the Personal Property
Security Act (Ontario), or comparable law in any relevant jurisdiction to
maintain, in full force and effect, the Lien and security interest granted by
the Company and the Guarantors to the Noteholders or the Collateral Agent for
the benefit of the Noteholders pursuant to the Security Documents.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
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(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Company defaults in the performance of or compliance with
any term contained in Section 10.1 through Section 10.8, inclusive,
Section 10.11 or Section 10.12; or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs
(a), (b) and (c) of this Section 11) and such default is not remedied
within 30 days after the earlier of (i) a Responsible Officer obtaining
actual knowledge of such default and (ii) the Company receiving written
notice of such default from any holder of a Note (any such written notice
to be identified as a "notice of default" and to refer specifically to
this paragraph (d) of Section 11); or
(e) any Guarantor defaults in any performance of or compliance with
any term contained in the applicable Guaranty Agreement or any Guaranty
Agreement ceases to be in full force and effect;
(f) any representation or warranty made in writing by or on behalf
of the Company or any Guarantor or any officer of the Company in this
Agreement or any officer of a Guarantor in the applicable Guaranty
Agreement or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any
Material respect on the date as of which made; or
(g) an event of default shall exist under any Security Document; or
(h) the Company, any Guarantor or any Subsidiary of the Company is
in default (as principal or as guarantor or other surety) (x) in the
payment of any principal of or premium or make-whole amount or interest
on any Debt having an unpaid principal amount aggregating in excess of 5%
of Consolidated Adjusted Net Worth beyond any period of grace with
respect thereto or (y) in the performance of or compliance with any term
of such Debt or any mortgage, indenture or other agreement relating
thereto, or any other condition exists, and as a consequence of such
default or condition such Debt has become, or has been declared (or one
or more Persons are entitled to declare such Debt to be), due and payable
before its stated maturity or before its regularly scheduled dates of
payment; or
(i) the Company, any Guarantor or any Subsidiary of the Company (i)
is generally not paying, or admits in writing its inability to pay, its
debts as they become due, (ii) files, or consents by answer or otherwise
to the filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation
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or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, (v) is adjudicated as insolvent or to be liquidated, or
(vi) takes action for the purpose of any of the foregoing; or
(j) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company, any Guarantor
or any Subsidiary of the Company, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition
in bankruptcy or for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company, any Guarantor or any Subsidiary
of the Company, or any such petition shall be filed against the Company,
any Guarantor or any Subsidiary of the Company and such petition shall
not be dismissed within 60 days; or
(k) a final judgment or judgments for the payment of money
aggregating in excess of 5% of Consolidated Adjusted Net Worth are
rendered against one or more of the Company, any Guarantor and any
Subsidiary of the Company and which judgments are not, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 60 days after the expiration of such stay; or
(l) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of intent
to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (iii) the
aggregate "amount of unfunded benefit liabilities" (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed 5% of Consolidated Adjusted Net
Worth, (iv) the Company or any ERISA Affiliate shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, or (vi) the Company or any Subsidiary
establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event
or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
As used in Section 11(l), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
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SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1. Acceleration. (a) If an Event of Default with respect to
the Guarantor or the Company described in paragraph (i) or (j) of Section 11
(other than an Event of Default described in clause (i) of paragraph (i) or
described in clause (vi) of paragraph (i) by virtue of the fact that such
clause encompasses clause (i) of paragraph (i)) has occurred, all the Notes
then outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it
or them to be immediately due and payable.
Upon any Note becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Note will forthwith mature and the entire
unpaid principal amount of such Note, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for), and that the provision
for payment of a Make-Whole Amount by the Company in the event that the Notes
are prepaid or are accelerated as a result of an Event of Default, is intended
to provide compensation for the deprivation of such right under such
circumstances.
Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become
or have been declared immediately due and payable under Section 12.1, the
holder of any Note at the time outstanding may proceed to protect and enforce
the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been declared
due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of
more than 50% in principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and
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Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of
Default or Default or impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all reasonable costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or
more Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note
at the principal executive office of the Company for registration of transfer
or exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by
the registered holder of such Note or its attorney duly authorized in writing
and accompanied by the address for notices of each transferee of such Note or
part thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) of an identical series in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall
be substantially in the form of the Note of such series originally issued
hereunder. Each such new Note shall be dated and bear interest from the date
to which interest shall have been paid on the surrendered Note or dated the
date of the surrendered Note if no interest shall have been paid thereon. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $500,000, provided that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $500,000. Any
transferee, by its acceptance of a Note registered
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in its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.
Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth equal to the greater of (x) the unpaid
principal amount of the Note which has been lost, stolen or destroyed or
(y) $10,000,000, such Person's own unsecured agreement of indemnity shall
be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note of an identical series, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
SECTION 14. PAYMENTS ON NOTES.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in Chicago, Illinois at the principal office of Bank of
America NT&SA in such jurisdiction. The Company may at any time, by notice to
each holder of a Note, change the place of payment of the Notes so long as such
place of payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.
Section 14.2. Home Office Payment. So long as you or your nominee shall
be the holder of any Note, and notwithstanding anything contained in Section
14.1 or in such Note to the contrary, the Company will pay all sums becoming
due on such Note for principal, Make-Whole Amount, if any, and interest by the
method and at the address specified for such purpose below your name in
Schedule A, or by such other method or at such other address as you shall have
from time to time specified to the Company in writing for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, you
shall surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1.
Prior to any sale or other disposition of any Note held by you or your nominee
you will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to
Section 13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional
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Investor that is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement relating to such Note
as you have made in this Section 14.2.
SECTION 15. EXPENSES, ETC.
Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all reasonable costs
and expenses (including reasonable attorneys' fees of one special counsel for
the holders of the Notes and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement, the Guaranty Agreements, the Security
Documents or the Notes (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement, the Guaranty Agreements, the Security
Documents or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement, the
Guaranty Agreements, the Security Documents or the Notes, or by reason of being
a holder of any Note, and (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of any
Guarantor, the Company or any Subsidiary or in connection with any work-out or
restructuring of the transactions contemplated hereby, by the Guaranty
Agreements and by the Notes. The Company will pay, and will save you and each
other holder of a Note harmless from, all claims in respect of any fees, costs
or expenses, if any, of brokers and finders (other than those retained by you).
Section 15.2. Survival. The obligations of the Company under this Section
15 will survive the payment or transfer of any Note, the enforcement, amendment
or waiver of any provision of this Agreement or the Notes, and the termination
of this Agreement and the Guaranty Agreements.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.
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SECTION 17. AMENDMENT AND WAIVER.
Section 17.1. Requirements. This Agreement and the Notes may be amended,
and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of
the Company and the Required Holders, except that no such amendment or waiver
may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (a) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or the rate, time of payment or method
of computation of interest or of the Make-Whole Amount on, the Notes, (b)
change the percentage of the principal amount of the Notes the holders of which
are required to (i) consent to any such amendment or waiver or (ii) accelerate
the Notes or rescind such acceleration, or (c) amend the interest rate on the
Notes.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently granted, on the same terms, ratably to
each holder of Notes then outstanding even if such holder did not consent to
such waiver or amendment.
Section 17.3. Binding Effect, etc. Any amendment or waiver consented to
as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any
obligation, covenant, agreement, Default or Event of Default not expressly
amended or waived or impair any right consequent thereon. No course of dealing
between the Company and the holder of any Note nor any delay in exercising any
rights hereunder or under any Note shall operate as a waiver of any rights of
any holder of such Note. As used herein, the term "this Agreement" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
Section 17.4. Notes Held by Company, etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes
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to be taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates or any Subsidiary
shall be deemed not to be outstanding.
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telefacsimile if the sender on the same day sends a confirming
copy of such notice by a recognized overnight delivery service (charges
prepaid), or (b) by registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of the President, or at such other
address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you or by the
Company by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and the parties to this Agreement may
destroy any original document so reproduced. You and the Company agree and
stipulate that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you or by the
Company in the regular course of business) and any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence. This Section 19 shall not prohibit you or the Company or any other
holder of Notes from contesting any such reproduction to the same extent that
it could contest the original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.
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SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly
known or otherwise known to such Purchaser prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or omission
by such Purchaser or any Person acting on its behalf, (c) otherwise becomes
known to such Purchaser other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to such Purchaser
under Section 7.1 that are otherwise publicly available. Each Purchaser will
maintain the confidentiality of such Confidential Information in accordance
with procedures adopted by such Purchaser in good faith to protect confidential
information of third parties delivered to such Purchaser, provided that such
Purchaser may deliver or disclose Confidential Information to (i) such
Purchaser's directors, trustees, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by such Purchaser's Notes), (ii)
such Purchaser's financial advisors and other professional advisors who agree
to hold confidential the Confidential Information substantially in accordance
with the terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which such Purchaser sells or offers to sell such
Note or any part thereof or any participation therein (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (v) any Person from which such
Purchaser offers to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over such Purchaser, (vii) the
National Association of Insurance Commissioners or any similar organization, or
any nationally recognized rating agency that requires access to information
about such Purchaser's investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to such
Purchaser, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which such Purchaser is a party or (z) if an
Event of Default has occurred and is continuing, to the extent such Purchaser
may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under such Purchaser's Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the
delivery to any holder of a Note of information required to be delivered to
such holder under this Agreement or requested by such holder (other than a
holder that is a party to this Agreement or its nominee), such holder will
enter into an agreement with the Company embodying the provisions of this
Section 20.
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SECTION 21. MISCELLANEOUS.
Section 21.1. Submission to Jurisdiction. The Company hereby consents to
the jurisdiction of any state or Federal court located within the County of
Cook, State of Illinois, and irrevocably agrees that all actions or proceedings
relating to this Agreement may be litigated in such courts, and the Company
waives (to the fullest extent permitted by law) any objection which it may have
based on improper venue or forum non conveniens to the conduct of any
proceeding in any such court and waives personal service of any and all process
upon it, and consents that all such service of process be made by first class
mail or messenger directed to it at the address of the Company set forth in
this Agreement and that service so made shall be deemed to be completed upon
the earlier of actual receipt or five Business Days after the same shall have
been posted to the Company's address, as the case may be, in accordance
herewith. Nothing contained in this section shall affect the right of any
holder of Notes to serve legal process in any other manner permitted by law or
to bring any action or proceeding in the courts of any jurisdiction against the
Company or to enforce a judgment obtained in the courts of any other
jurisdiction.
Section 21.2. Currency Rate Indemnity. To the extent permitted by law:
(a) the obligations of the Company to any holder hereunder shall,
notwithstanding any judgment in a currency (the "Judgment Currency")
other than United States Dollars (the "Agreement Currency"), be
discharged only to the extent that on the day following receipt by such
holder of any amount in the Judgment Currency, such holder may in
accordance with normal banking procedures purchase the Agreement Currency
with the Judgment Currency; and
(b) if the amount of the Agreement Currency so purchased is less
than the amount originally to be paid to such holder in the Agreement
Currency, the Company agrees, as a separate obligation and
notwithstanding such judgment, to pay the difference.
Section 21.3. Payments Free and Clear of Taxes. The Company, for the
benefit of the holders of the Notes agrees that in the event payments made by
the Company, hereunder or in respect of the Notes to any holder are subject to
any present or future tax, duty, assessment, impost, levy, withholding or other
similar charge (a "Relevant Tax") imposed upon such holder by the government of
any country or jurisdiction (or any authority therein or thereof) other than
any tax based on or measured by net income imposed on any holder by the country
in which such holder is domiciled (the "Domicile Country"), from or through
which payments hereunder or on or in respect of the Notes are actually made
(each a "Taxing Jurisdiction"), the Company, will pay to the holder such
additional amounts as may be necessary in order that the net amounts paid to
such holder pursuant to the terms of this Agreement or the Notes after
imposition of any such Relevant Tax shall be not less than the amounts
specified in this Agreement or the Notes to be then due and payable (after
giving effect to the exclusion for Relevant Taxes imposed by the government of
the Domicile Country), provided that, notwithstanding the provisions of this
Section 21.3, (1) in no event shall the Company be obligated to pay any
Relevant Tax with respect to any payment to any holder not resident in the
United States in excess of the amount which the Company would have been
obligated to pay if (i) authorization could have been
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<PAGE> 43
obtained under any income tax treaty between the United States and the Taxing
Jurisdiction in force at the relevant time for the Company to make such payment
either without deduction or withholding of Relevant Taxes or with deduction or
withholding of a lesser amount in respect of Relevant Taxes had the Notes held
by such holder been beneficially owned at all relevant times by persons who
were eligible in full for any benefits and exemptions available under such
treaty with respect to interest received from the Company, assuming that the
Company and such persons had made and obtained all relevant claims and
authorizations required under such treaty, and (ii) the Company had made the
minimum deduction or withholding of Relevant Taxes which it would have been
lawfully entitled to do pursuant to such authorization; and (2) no such
additional amounts shall be payable in respect of any Notes to a holder which
is liable for such Relevant Tax in respect of such Notes by reason of such
recipient not dealing at arms length with the Company for purposes of the
Income Tax Act (Canada) or being resident or being deemed to be resident in
such Taxing Jurisdiction or having a permanent establishment in such Taxing
Jurisdiction or carrying on business or being deemed to carry on business in
such Taxing Jurisdiction or having some other business connection with such
Taxing Jurisdiction other than the mere holding of such Notes or the receipt of
income therefrom.
Section 21.4. Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
Section 21.5. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or Make-Whole Amount or interest on any Note that is due on a date
other than a Business Day shall be made on the next succeeding Business Day
without including the additional days elapsed in the computation of the
interest payable on such next succeeding Business Day.
Section 21.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other
jurisdiction.
Section 21.7. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
Section 21.8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.
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Section 21.9. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the law of the State of Illinois excluding choice-of-law principles of the
law of such State that would require the application of the laws of a
jurisdiction other than such State.
* * * * *
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<PAGE> 45
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
ZEMEX U.S. CORPORATION
By _____________________________________
Its _______________________________
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<PAGE> 46
The foregoing is hereby agreed
to as of the date thereof.
[VARIATION]
By _____________________________________
Its _______________________________
<PAGE> 47
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person (other than
a Subsidiary), (a) any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is under
common Control with, such first Person, and (b) any Person beneficially owning
or holding, directly or indirectly, 10% or more of any class of voting or
equity interests of the Company or any Subsidiary or any corporation of which
the Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity interests.
As used in this definition, "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"Agents" shall mean Bank of America Canada, as Canadian Agent, and Bank of
America National Trust and Savings Association, as U.S. Agent, together with
any successor(s) thereto in such capacity, as agent for the Bank Lenders under
the Bank Credit Agreement.
"Bank Credit Agreement" shall mean the Credit Agreement dated as of May
21, 1999, entered into by and among the Company, the Parent Guarantor, the
Agents, and the Bank Lenders, as amended, restated, modified, extended or
renewed from time to time. The Bank Credit Agreement shall also include any
additional or replacement credit facility with the same or different Bank
Lenders and agents; provided that if such additional or replacement credit
facility shall be secured by a Lien on the Property of the Company and its
Subsidiaries, the Notes shall also be equally and ratably secured thereunder
pursuant to the Security Documents and such Bank Lenders shall have become
parties to the Intercreditor Agreement.
"Bank Lenders" shall mean the banks which are from time to time party to
the Bank Credit Agreement.
"Business Day" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Chicago, Illinois, or New York City are
required or authorized to be closed.
"Capital Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with GAAP.
SCHEDULE B
(to Note Purchase Agreement)
<PAGE> 48
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Closing" is defined in Section 3 of the Note Agreements.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" means the personal Property of the Parent Guarantor, the
Company and the Subsidiary Guarantors described in the Security Documents.
"Collateral Agent" is defined in Section 2.3.
"Collateral Release Event" is defined in Section 2.3.
"Company" means Zemex U.S. Corporation, a Delaware corporation.
"Confidential Information" is defined in Section 20.
"Consolidated Adjusted Net Worth" means, as of the date of any
determination thereof, Consolidated Net Worth, minus (a) minority interests (if
and to the extent included in Consolidated Net Worth) and (b) the excess, if
any, of (i) the aggregate amount of all outstanding Restricted Investments,
over (ii) 10% of Consolidated Net Worth.
"Consolidated Current Debt" means the total amount of Current Debt of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Consolidated Debt" means the total amount of all Debt of the Company and
its Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company and
its Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as
a cumulative whole), as determined in accordance with GAAP, after eliminating
all offsetting debits and credits between the Company and its Subsidiaries and
all other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP, provided that there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Company
or a Subsidiary, and the income (or loss) of any Person, substantially
all of the assets of which have been acquired in any manner, realized by
such other Person prior to the date of acquisition,
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(b) the income (or loss) of any Person (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest, except to
the extent that any such income has been actually received by the Company
or such Subsidiary in the form of cash dividends or similar cash
distributions,
(c) the undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary,
(d) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued
during such period,
(e) any aggregate net gain (but not any aggregate net loss) during
such period arising from the sale, conversion, exchange or other
disposition of capital assets (such term to include, without limitation,
(i) all non-current assets and, without duplication, (ii) the following,
whether or not current: all fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of
fixed assets, and all Securities),
(f) any gains resulting from any write-up of any assets (but not any
loss resulting from any write-down of any assets),
(g) any net gain from the collection of the proceeds of life
insurance policies,
(h) any gain or loss arising from the acquisition or disposition of
any Security, or the extinguishment, under GAAP, of any Debt, of the
Company or any Subsidiary,
(i) any net income or gain (but not any net loss) during such period
from (i) any change in accounting principles in accordance with GAAP,
(ii) any prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, (iii) any extraordinary items, or
(iv) any discontinued operations or the disposition thereof,
(j) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in
such Subsidiary,
(k) in the case of a successor to the Company by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets,
and
(l) any portion of such net income that cannot be freely converted
into United States Dollars.
"Consolidated Net Income Available for Interest Charges" for any period
shall mean the sum of (i) Consolidated Net Income during such period plus (to
the extent deducted in determining Consolidated Net Income), (ii) all
provisions for any Federal, state or other income
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taxes made by the Company and its Subsidiaries during such period, (iii)
depreciation, depletion and amortization, (iv) Interest Charges of the Company
and its Subsidiaries during such period and (v) all costs relating to the
operation of newly constructed facilities to the extent that such costs could
have been capitalized under generally accepted accounting principles in effect
in the United States in 1998. To the extent that Consolidated Net Income
Available for Fixed Charges in any fiscal year shall be increased by the
addition of any amount pursuant to clause (v) of the immediately preceding
sentence, such amount shall be deemed to be a capitalized cost which shall be
deducted from Consolidated Net Income Available for Fixed Charges in subsequent
fiscal years in accordance with generally accepted accounting principles in
effect in the United States in 1998.
"Consolidated Net Worth" means the total amount of shareholders' equity of
the Company and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Assets" means, as of the date of any determination
thereof, the total amount of assets of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" shall mean the sum of (i) Consolidated
Adjusted Net Worth, and (ii) and Consolidated Funded Debt.
"Current Debt" means, with respect to any Person, all Debt of such Person
(other than Funded Debt) which by its terms or by the terms of any instrument
or agreement relating thereto matures on demand or within one year from the
date of the creation thereof and is not directly or indirectly renewable or
extendible at the option of the obligor in respect thereof to a date one year
or more from such date.
"Debt" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of Property
acquired by such Person (excluding accounts payable and other accrued
liabilities arising in the ordinary course of business but including,
without limitation, all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any
such Property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any Property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all non-contingent liabilities in respect of reimbursement
agreements or similar agreements in respect of letters of credit or
instruments serving a
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similar function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for
borrowed money); and
(f) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (e) hereof.
Debt of any Person shall include all obligations of such Person of
the character described in clauses (a) through (f) to the extent such
Person remains legally liable in respect thereof notwithstanding that any
such obligation is deemed to be extinguished under GAAP.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes of the applicable series or (ii) 2% over the rate of
interest publicly announced by Bank of America National Trust and Savings Bank
in Chicago, Illinois as its "base" or "prime" rate.
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges
to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Sections 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Sale and Leaseback Transaction" shall mean any sale or transfer
of property owned by the Company or any Subsidiary to any Person within 270
days following the acquisition or completion of construction of such property
by the Company or any Subsidiary if the Company or a Subsidiary shall
concurrently with such sale or transfer lease such property, as lessee.
"Excluded Subsidiary" shall have the meaning set forth in the Bank Credit
Agreement.
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"Funded Debt" means, with respect to any Person, all Debt of such Person
which by its terms or by the terms of any instrument or agreement relating
thereto matures, or which is otherwise payable or unpaid, one year or more
from, or is directly or indirectly renewable or extendible at the option of the
obligor in respect thereof to a date one year or more (including, without
limitation, an option of such obligor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
one year or more) from, the date of the creation thereof.
"GAAP" means generally accepted accounting principles consistently applied
as in effect from time to time in Canada; provided that all amounts set forth
in financial statements and compliance with all covenants shall be denominated
in United States Dollars.
"Governmental Authority" means
(a) the government of
(i) Canada or any province or other political subdivision
thereof, or
(ii) the United States of America or any State or other
political subdivision thereof, or
(iii) any other jurisdiction in which the Company conducts all
or any part of its business, or which asserts jurisdiction over any
properties of the Company, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guarantors" means the Parent Guarantor and the Subsidiary Guarantors.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any indebtedness, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
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(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
"Guaranty Agreements" mean the Parent Guaranty and the Subsidiary
Guaranties.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyl's).
"Institutional Investor" means (a) any Purchaser, (b) any holder of a Note
holding more than $2,000,000 aggregate principal amount of the Notes and (c)
any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
"Intercreditor Agreement" shall have the meaning set forth in Section 2.3.
"Interest Charges" for any period shall mean on a consolidated basis all
interest charges on all Debt (including the interest component of Rentals on
Capital Leases and all amortization of debt discount and expense on any
particular Debt for which such calculation is being made) of the Company and
its Subsidiaries.
"Investments" means all investments, in cash or by delivery of property,
made directly or indirectly in any property or assets or in any Person, whether
by acquisition of shares of capital stock, Debt or other obligations or
Securities or by loan, advance, capital contribution or otherwise.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether the interest
is based on common law, statute or contract (including the security interest
lien arising from a mortgage, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes). The term
"Lien" shall not include minor reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions and other minor
title exceptions affecting Property, provided that they do not constitute
security for a monetary obligation. For the purposes of this Agreement, the
Company or a Subsidiary shall be deemed to be the owner of
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<PAGE> 54
any Property which it has acquired or holds subject to a conditional sale
agreement, financing lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes, and such retention or vesting shall be deemed to be a Lien.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the Notes, or (c)
the validity or enforceability of this Agreement and the Notes.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"Other Agreements" is defined in Section 2.1.
"Other Purchasers" is defined in Section 2.1.
"Parent Guarantor" means Zemex Corporation, a corporation organized under
the laws of Canada.
"Parent Guaranty" is defined in Section 2.2.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding three years, has been established or
maintained, or to which contributions are or, within the preceding three years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any material
liability.
"Priority Debt" means the sum of (a) all Debt of the Company and its
Subsidiaries secured by Liens (excluding Debt secured by Liens permitted by
Section 10.6(a) through (g) and Section 10.6(k) of this Agreement), and (b) all
unsecured Debt of Subsidiaries (excluding unsecured Debt owing to the Company
or another Wholly-Owned Subsidiary); provided that
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Debt of Subsidiary Guarantors to any Person shall be excluded so long as such
Person shall be a party to the Intercreditor Agreement and payments in respect
to such Debt shall be subject to the terms of the Intercreditor Agreement.
"Post Closing Collateral" shall mean the real and personal property
described in Schedule 10.11.
"Property" means, unless otherwise specifically limited, real or personal
property of any kind, tangible or intangible, choate or inchoate.
"Purchasers" means the purchasers of the Notes pursuant to this Agreement
and the Other Agreements.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"Rentals" means, and includes as of the date of any determination thereof,
all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or sublessee under
a lease of real or personal property, but shall be exclusive of any amounts
required to be paid by the Company or a Subsidiary (whether or not designated
as rents or additional rents) on account of maintenance, repairs, insurance,
taxes and similar charges. Fixed rents under any "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volumes or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Restricted Investments" means all Investments except the following:
(a) property to be used in the ordinary course of business of the
Company and its Subsidiaries;
(b) current assets arising from the sale of goods and services in
the ordinary course of business of the Company and its Subsidiaries;
(c) Investments in one or more Subsidiaries or any Person that
concurrently with such Investment becomes a Subsidiary;
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(d) Investments existing on the date of the Closing and disclosed in
Schedule 5.15 to this Agreement;
(e) Investments in direct obligations of the United States of
America or Canada or any agency or instrumentality of the United States
of America or Canada, the payment or guarantee of which constitutes a
full faith and credit obligation of the United States of America or
Canada, as the case may be, in each case, maturing within one year from
the date of acquisition thereof;
(f) Investments in tax-exempt obligations of any state of the United
States of America, or any municipality of any such state, in each case
rated "AA" or better by S&P, or "Aa2" or better by Moody's or an
equivalent rating by any other credit rating agency of recognized
national standing, provided that such obligations mature within one year
from the date of acquisition thereof;
(g) Investments in certificates of deposit and bankers' acceptances
maturing within one year from the date of issuance thereof, issued by
Bank of America National Trust and Savings Bank or any other bank or
trust company organized under the laws of Canada, the United States or
any State thereof having capital, surplus and undivided profits
aggregating at least $225,000,000; provided that at the time of
acquisition thereof by the Company or a Subsidiary, the senior unsecured
long-term debt of such bank or trust company or of the holding company of
such bank or trust company is rated "AA" or better by S&P or "Aa" or
better by Moody's;
(h) Investments in commercial paper of corporations organized under
the laws of the United States or any state thereof maturing in 270 days
or less from the date of issuance which, at the time of acquisition by
the Company or any Subsidiary, is accorded a rating of "A-1" or better by
S&P or "P-1" by Moody's;
(i) Investments in publicly traded shares of any open-ended mutual
fund, the aggregate asset value of which "marked to market" is at least
$225,000,000, which is managed by a fund manager of recognized national
standing, and which invests not less than 90% of its assets in
obligations described in clauses (e) through (h) hereof; provided that
any such Investments will be classified as current assets in accordance
with GAAP; and
(j) treasury stock.
As of any date of determination, each Restricted Investment shall be valued at
the greater of:
(x) the amount at which such Restricted Investment is shown on the
books of the Company or any of its Subsidiaries (or zero if such
Restricted Investment is not shown on any such books); and
(y) either
B-10
<PAGE> 57
(i) in the case of any Guaranty of the obligation of any
Person, the amount which the Company or any of its Subsidiaries has
paid on account of such obligation less any recoupment by the
Company or such Subsidiary of any such payments, or
(ii) in the case of any other Restricted Investment, the
excess of (x) the greater of (A) the amount originally entered on
the books of the Company or any of its Subsidiaries with respect
thereto and (B) the cost thereof to the Company or its Subsidiary
over (y) any return of capital (after income taxes applicable
thereto) upon such Restricted Investment through the sale or other
liquidation thereof or part thereof or otherwise.
As used in this definition of "Restricted Investments": "Moody's" means
Moody's Investors Service, Inc. and "S&P" means Standard & Poor's Ratings
Group, a division of McGraw Hill, Inc.
In valuing any Investments for the purpose of applying the limitations
set forth in clause (b) of the definition of "Consolidated Adjusted Net
Worth", at any time when an entity becomes a Subsidiary, all Investments
of such entity at such time shall be deemed to have been made by such
entity, as a Subsidiary, at such time.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Security Documents" means, collectively, the Guaranty Agreements, the
Intercreditor Agreement, the General Security Agreement dated as of May 21,
1999 from the Parent Guarantor in favor of the Collateral Agent for the benefit
of the Noteholders, the Security Agreements dated as of May 21, 1999 from the
Company and the Subsidiary Guarantors in favor of the Collateral Agent for the
benefit of the Noteholders, the Share Pledge Agreements dated as of May 21,
1999 from the Parent Guarantor to the Collateral Agent for the benefit of the
Noteholders, the Pledge Agreements, dated as of May 21, 1999 from the Company
and certain Subsidiary Guarantors to the Collateral Agent for the benefit of
the Noteholders, the Pledge Agreement dated as of May 21, 1999 from the Parent
Guarantor in favor of the Collateral Agent for the benefit of the Noteholders
pledging all shares of Inmet Inc. owned by the Parent Guarantor and all other
security agreements, mortgages, hypothec, deeds of trust, patent and trademark
assignments, lease assignments, guarantees and other similar agreements between
the Company, the Guarantors or any Subsidiary and the Noteholders or the
Collateral Agent for the benefit of the Noteholders now or hereinafter
delivered to the Collateral Agent or the Noteholders pursuant to or in
connection with the transactions contemplated hereby, and all financing
statements (or comparable documents now or hereafter filed in accordance with
the Personal Property Security Act (Ontario), the Uniform Commercial Code or
comparable law) against the Company, the Guarantors or any Subsidiary as debtor
in favor of the Noteholders or the Collateral Agent for the benefit of the
Noteholders as secured party, and any amendments, supplements, modifications,
renewals, replacements, consolidations, substitutions and extensions of any of
the foregoing.
B-11
<PAGE> 58
"Senior Debt" means all Consolidated Debt of the Company and its
Subsidiaries other than Subordinated Debt.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Company.
"Subordinated Debt" means all unsecured Debt of the Company which shall
contain or have applicable thereto subordination provisions providing for the
subordination thereof to other Debt of the Company (including, without
limitation, the obligations of the Company under this Agreement).
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Guarantors" shall mean the Subsidiaries of the Parent
Guarantor which are identified as Subsidiary Guarantors on Schedule 5.4.
"Subsidiary Guaranty" is defined in Section 2.2.
"Subsidiary Stock" means, with respect to any Person, the stock (or any
options or warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of any Subsidiary of such Person.
"Successor Corporation" is defined in Section 10.6.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred
percent (100%) of all of the outstanding Debt and equity interests (except
directors' qualifying shares) and voting interests of which are owned by any
one or more of the Company and the Company's other Wholly-Owned Subsidiaries at
such time.
B-12
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 735,000
<SECURITIES> 0
<RECEIVABLES> 19,940,000
<ALLOWANCES> (319,000)
<INVENTORY> 18,139,000
<CURRENT-ASSETS> 40,150,000
<PP&E> 139,267,000
<DEPRECIATION> (45,046,000)
<TOTAL-ASSETS> 156,405,000
<CURRENT-LIABILITIES> 13,725,000
<BONDS> 50,000,000
0
0
<COMMON> 8,819,000
<OTHER-SE> 76,995,000
<TOTAL-LIABILITY-AND-EQUITY> 156,405,000
<SALES> 57,411,000
<TOTAL-REVENUES> 57,411,000
<CGS> 39,641,000
<TOTAL-COSTS> 51,247,000
<OTHER-EXPENSES> 82,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,932,000
<INCOME-PRETAX> 4,150,000
<INCOME-TAX> 1,163,000
<INCOME-CONTINUING> 1,163,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,003,000
<EPS-BASIC> 0.36
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