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Exhibit (b)
October 25, 2000
Cangene Corporation
104 Chancellor Matheson Road
Winnipeg, Manitoba
R3T 5Y3
Dear Sir:
We confirm that subject to acceptance by you, The Bank of Nova Scotia
(the "Bank") will make available to Cangene Corporation (the "Borrower"), credit
facilities on the terms and conditions set out in the attached Terms and
Conditions Sheet and Schedule "A".
If the arrangements set out in this letter, and in the attached Terms
and Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us by the close of business on November
3, 2000, after which date this offer will lapse.
This Commitment Letter replaces all previous commitments issued by the
Bank to the Borrower.
Yours very truly,
/s/ K.J. Taylor /s/ R.B. Alexander
K.J. Taylor R.B. Alexander
Senior Account Manager Vice President
and Centre Manager
The arrangements set out above and in the attached Terms and Conditions
Sheet and Schedule "A" (collectively the "Commitment Letter") are hereby
acknowledged and accepted by:
CANGENE CORPORATION
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Name
By: /s/ Alex Glasenberg
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Title: Chief Financial Officer
Date: October 29, 2000
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TERMS AND CONDITIONS
CREDIT NUMBER: 02 AUTHORIZED AMOUNT:
$50,000,000
TYPE
Non-Revolving
PURPOSE
To assist with the acquisition of Chesapeake Biological Laboratories,
Inc. ("Chesapeake").
CURRENCY
Canadian dollars and/or U.S. dollar equivalent thereof
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced
by Demand Promissory Notes and/or Bankers' Acceptances in Canadian
dollars, in multiples of $500,000 and having terms of maturity of 30 to
180 days without grace at the Borrower's option.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 0.250% per annum
with interest payable monthly.
The Bank's U.S. Dollar Base Rate in Canada from time to time, plus
0.250% per annum with interest payable monthly.
The Bank's London Interbank Offer Rate (LIBOR), plus 1.625% per annum,
for periods of 1, 2, 3, 6 or 12 months, the rate to be established two
(2) business days prior to each drawdown or rollover (Interest
Adjustment Date) with interest payable at the end of the LIBOR period
or if the period is for more than 3 months, payable quarterly in
arrears.
ACCEPTANCE FEE
Bankers' Acceptance Fee of 1.625% per annum, subject to a minimum fee
of $500 per transaction, payable at the time of each acceptance.
FEES
Commitment Fee of $125,000, of which $75,000 is refundable should the
Credit not be availed.
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DRAWDOWN
The loan is to be fully drawn down by March 31, 2001.
REPAYMENT
Advances are repayable by periodic payments of principal, with a
minimum repayment of $25 million to occur within 12 months after the
loan has been fully drawn.
Subject to satisfactory review of Borrower=s FY 2001 financial
statements, and continued compliance with all conditions of the credit.
The Bank, at its sole option, may renew the facility at maturity date
for a term between 1 to 5 years. If the Bank does not extend the
facility, all amounts then outstanding, and interest accrued
thereunder, shall become due and repayable at maturity date.
PREPAYMENT
Prepayment is permitted without penalty at any time in whole or in
part.
Prepayments are to be applied against installments of principal in the
inverse order of their maturities.
SPECIFIC CONDITIONS PRECEDENT
The following conditions are to be met to the satisfaction of the Bank
and its solicitors prior to any advances or availments being made under
the Credit:
Copy of the executed Share Purchase Offer.
A minimum 51% of the Class A Common shares of Chesapeake are
to be tendered, and advances are not to exceed the redemption
amount of the tendered shares.
Evidence that regulatory approvals have been obtained
customary for the type of transaction proposed.
GENERAL SECURITY, TERMS, AND CONDITIONS APPLICABLE TO ALL CREDITS
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to
the Bank and registered or recorded as required by the Bank, is to be
provided prior to any advances or availment being made under the
Credits:
General Security Agreement over all present and future
personal property with appropriate insurance coverage, loss if
any, payable to the Bank.
Such priority or subordination agreements with other
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secured creditors of the Borrower as may be required to give
the Bank's security priority over the secured property.
Hypothecation of all the shares of Cangene U.S. Incorporated
beneficially owned by the Borrower.
Hypothecation of all the shares of Chesapeake Biological
Laboratories, Inc. beneficially owned by the Borrower.
Letter of Undertaking not to pledge, assign or permit any
encumbrances against the assets (excluding existing
encumbrances of Chesapeake Biological Laboratories Inc.
assets), including intellectual assets, without the Bank's
prior written consent.
Bankers' Acceptance Agreement
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been discharged
in full, the following conditions will apply in respect of the Credits:
The ratio of current assets to current liabilities is to be
maintained at all times at 1.10:1 or better.
The ratio of Debt (including deferred taxes) to Equity is not
to exceed 2:1.
Equity is defined as the sum of share capital, earned and
contributed surplus, retained earnings and postponed funds.
The ratio of Funded Debt to EBITDA, calculated on a rolling
four quarter basis, is to be maintained at all times at 4:1 or
better, and is to reduce to 3:1 by July 31, 2001.
Funded Debt is defined as all short term and long term
interest bearing debt (excluding Postponed Funds), plus
capital leases.
EBITDA is defined as net income before extraordinary and other
non-recurring items plus interest, income tax, depreciation
and amortization expenses during the period.
All of the above covenants are to be on a consolidated basis.
Without the Bank's prior written consent:
No change in majority ownership is permitted.
No mergers or change in the Borrower's line of
business are permitted.
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The Borrower and any subsidiary are not to incur any
liabilities or obligations except in the normal
course of business and assets are not to be further
encumbered.
For ongoing Credit Risk management purposes, all operating
accounts of the Borrower shall be maintained with the Bank as
long as the Borrower has any operating line facilities with
the Bank.
Additional terms and conditions in Schedule A are to apply.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credits have been discharged
in full, the Borrower will provide the Bank with the following:
Annual Audited Consolidated Financial Statements, within 120
days of the Borrower's fiscal year end, duly signed and
supported by unconsolidated Financial Statements prepared
under Compilation Engagement of the Borrower and all
wholly-owned and/or controlled subsidiary companies.
Quarterly Consolidated Interim Financial Statements within 45
days of period end.
A Statement of Security quarterly, to include information on
inventory, accounts receivable and accounts payable, within 45
days of period end.
A Quarterly Compliance Certificate signed by the Treasurer &
Controller of the Borrower stating that the Borrower is in
compliance with all conditions of the credit facility and that
there has been no breach of conditions of credit during the
quarter other than as outlined in the Compliance Certificate,
within 45 days of the end of each fiscal quarter of the
Borrower.
The Borrower is to fax a copy of all press releases to the
Bank.
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SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE
TO ALL CREDITS
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Calculation and Payment of Interest
1. Interest on loans/advances made in Canadian dollars will be calculated
on a daily basis and payable monthly on the 22nd day of each month
(unless otherwise stipulated by the Bank). Interest shall be payable
not in advance on the basis of a calendar year for the actual number of
days elapsed both before and after demand of payment or default and/or
judgment.
2. Interest on loans/advances made in U.S. dollars will be calculated on a
daily basis and payable monthly on the 22nd day of each month, (unless
otherwise stipulated by the Bank). Interest shall be payable not in
advance on the basis of a 360 day year for the actual number of days
elapsed both before and after demand of payment or default and/or
judgment. The rate of interest based on a 360 day year is equivalent to
a rate based on a calendar year of 365 days of 365/360 times the rate
of interest that applies to the U.S. dollar loans/advances.
Interest on Overdue Interest
3. Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue,
but shall be compounded monthly and be payable on demand, both before
and after demand and judgment.
Indemnity Provision
4.
If the introduction or implementation of, or any change in, or in the
interpretation of, or any change in its application to the Borrower
of, any law or any regulation or guideline issued by any central bank
or other governmental authority (whether or not having the force of
law), including, without limitation, any reserve or special deposit
requirement or any tax (other than tax on the Bank's general income)
or any capital requirement, has due to the Bank's compliance the
effect, directly or indirectly, of (i) increasing the cost to the Bank
of performing its obligations hereunder or under any availment
hereunder; (ii) reducing any amount received or receivable by the Bank
or its effective return hereunder or in respect of any availment
hereunder or on its capital; or (iii) causing the Bank to make any
payment or to forgo any return based on any amount received or
receivable by the Bank hereunder or in respect of any availment
hereunder, then upon demand from time to time the Borrower shall pay
such amount as shall compensate the Bank for any such cost, reduction,
payment or forgone return (collectively "Increased Costs") as such
amounts are calculated in a certificate reasonably prepared by the
Bank.
In the event of the Borrower becoming liable for such Increased Costs,
the Borrower shall have the right to prepay in full, without penalty,
the outstanding principal balance under the affected credit other than
the face amount of any
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document or instrument issued or accepted by the Bank for the account
of the Borrower, including, without limitation, a Letter of Credit, a
Letter of Guarantee or a Bankers' Acceptance. Upon any such
prepayment, the Borrower shall also pay the then accrued interest on
the amount prepaid and the Increased Costs to the date of prepayment
together with such amount as will compensate the Bank for the cost of
any early termination of its funding arrangements in accordance with
its normal practices, as such amounts are calculated in a certificate
reasonably prepared by the Bank.
Calculation and Payment of Bankers' Acceptance Fee
5. The fee for the acceptance of each Bankers' Acceptance will be payable
on the face amount of each Bankers' Acceptance at the time of
acceptance of each draft calculated on the basis of a calendar year for
the actual number of days elapsed from and including the date of
acceptance to the due date of the draft.
Calculation and Payment of Standby Fee
6. Standby fees shall be calculated daily and payable monthly on the basis
of a calendar year for Canadian dollar credits and on the basis of a
360 day year for U.S. dollar credits from the date of acceptance by the
Borrower of this Commitment Letter.
Environment
7. The Borrower agrees:
(a) to obey all applicable laws and requirements of any federal,
provincial, or any other governmental authority relating to
the environment and the operation of the business activities
of the Borrower;
(b) to allow the Bank access at all times to the business premises
of the Borrower to monitor and inspect all property and
business activities of the Borrower;
(c) to notify the Bank from time to time of any business activity
conducted by the Borrower which involves the use or handling
of hazardous materials or wastes or which increases the
environmental liability of the Borrower in any material
manner;
(d) to notify the Bank of any proposed change in the use or
occupation of the property of the Borrower prior to any change
occurring;
(e) to provide the Bank with immediate written notice of any
environmental problem and any hazardous materials or
substances which have an adverse effect on the property,
equipment, or business activities of the Borrower and with any
other environmental information requested by the Bank from
time to time.
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(f) to conduct all environmental remedial activities which a
commercially reasonable person would perform in similar
circumstances to meet its environmental responsibilities and
if the Borrower fails to do so, the Bank may perform such
activities; and
(g) to pay for any environmental investigations, assessments or
remedial activities with respect to any property of the
Borrower that may be performed for or by the Bank from time to
time.
If the Borrower notifies the Bank of any specified activity or change
or provides the Bank with any information pursuant to subsections (c),
(d), or (e), or if the Bank receives any environmental information from
other sources, the Bank, in its sole discretion, may decide that an
adverse change in the environmental condition of the Borrower or any of
the property, equipment, or business activities of the Borrower has
occurred which decision will constitute, in the absence of manifest
error, conclusive evidence of the adverse change. Following this
decision being made by the Bank, the Bank shall notify the Borrower of
the Bank's decision concerning the adverse change.
If the Bank decides or is required to incur expenses in compliance or
to verify the Borrower's compliance with applicable environmental or
other regulations, the Borrower shall indemnify the Bank in respect of
such expenses, which will constitute further advances by the Bank to
the Borrower under this Agreement.
Initial Drawdown
8. The right of the Borrower to obtain the initial drawdown under the
Credits is subject to the condition precedent that there shall not have
been any material adverse changes in the financial condition or the
environmental condition of the Borrower and/or Chesapeake Biological
Laboratories Inc.
Evidence of Indebtedness
9. The Bank's accounts, books and records constitute, in the absence of
manifest error, conclusive evidence of the advances made under this
Credit, repayments on account thereof and the indebtedness of the
Borrower to the Bank.
Acceleration
10. All indebtedness and liability of the Borrower to the Bank not payable
on demand, shall, at the option of the Bank, become immediately due and
payable, the security held by the Bank shall immediately become
enforceable, and the obligation of the Bank to make further advances or
other accommodation available under the Credits shall terminate, if any
one of the following Events of Default occurs and is not corrected
within 3 days:
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(i) the Borrower fails to make when due, whether on demand or at a
fixed payment date, by acceleration or otherwise, any payment
of interest, principal, fees, commissions or other amounts
payable to the Bank;
(ii) there is a breach by the Borrower of any other term or
condition contained in this Commitment Letter or in any other
agreement to which the Borrower and the Bank are parties;
(iii) any default occurs under any security listed in this
Commitment Letter under the headings "Specific Security" or
"General Security" or any material default occurs under any
other credit, loan or security agreement to which the Borrower
is a party;
(iv) any bankruptcy, re-organization, compromise, arrangement,
insolvency or liquidation proceedings for the relief of
debtors are instituted by or against the Borrower and, if
instituted against the Borrower, are allowed against or
consented to by the Borrower or are not dismissed or stayed
within 60 days after such institution;
(v) a receiver is appointed over any property of the Borrower or
any judgement or order or any process of any court becomes
enforceable against the Borrower or any property of the
Borrower or any creditor takes possession of any property of
the Borrower;
(vi) any material adverse change occurs in the environmental
condition of:
(A) the Borrower; or
(B) any property, equipment, or business activities of
the Borrower.
Costs
11. All costs, including legal and appraisal fees incurred by the Bank
relative to security and other documentation, shall be for the account
of the Borrower and may be charged to the Borrower's deposit account
when submitted.
